Microsoft word - 478-1preliminary egudzer report 27july12.docx
William Gunter, PG
Mr. Surenbaatar Nergui General Manager Business Development Division Monnis International LLC Monnis Tower – 14th Floor Chinggis Avenue-15 Ulaanbaatar 14210, Mongolia Surenbaatar.email@example.com Subject: Preliminary Report on The Site Visit To The Egudzer W-Mo Project Erdenetsagaan And Ulaanbaatar, Mongolia 16-29 June, 2012 Dear Mr. Surenbaatar:
During the last two weeks of June 2012, Norwest Corporation’s (Norwest) senior associate geologist, Mr. William Gunter, traveled to Mongolia to conduct a site visit of the Egudzer W-Mo Project. The primary purpose of this trip was to evaluate the current exploration drilling program as a preliminary step to a possible NI 43-101 report. While in Mongolia, Mr. Gunter had the opportunity to meet with Monnis executives to discuss their objectives with the Egudzer project. Mr. Gunter was also afforded the opportunity to visit the laboratory being used for analytical work and the drilling company carrying out the core drilling. This letter report presents Norwest’s observations, findings, and recommendations.
INTRODUCTION Monnis International, Inc. (Monnis), is a Mongolian based
company that wishes to further diversify into mining. Monnis currently controls two properties in Mongolia: an early evaluation stage rare earth property in Western Mongolia, and the Egudzer W-Mo property in Eastern Mongolia which is in a mid to advanced stage of evaluation. Monnis is seeking to share the investment and risk in developing the Egudzer project by bringing it to the international investor community through a NI 43-101 report. The property may have potential to be a mid-tier producer of tungsten
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S A L T L A K E C I T Y / C A L G A R Y / D E N V E R / G O L D E N / V A N C O U V E R / C H A R L E S T O N W V / P I T T S B U R G H / B E I J I N G
with possible credits for molybdenum, beryllium and bismuth over a 20 year mine life. Although significant historic drilling has been conducted at the property, the data appear unverifiable as analytical results were obtained by numerous laboratories, QA/QC reports are not available and no sample pulps are known to exist which could verify previous analytical value. Monnis has contracted Norwest Corporation to visit the property and evaluate the current program of definition drilling as a preliminary step to a possible NI 43-101 report.
The Egudzer project is located about 720 km southeast of
Ulaanbaatar and about 70 km from the China border in the Suhbaatar Province. Access from Ulaanbaatar is provided by paved road about half the distance and improved to unimproved unsealed gravel and dirt road the second half. One way travel time from Ulaanbaatar to the project by sturdy vehicle is approximately 14 hours. The closest airport is at Baruun-Urt, the capital of Suhbaatar Province located about 200km northwest of the property. The property is located in the steppes of south eastern Mongolia which are principally rolling grass lands. The closest community to the property is Erdenetsagaan, population around 5,000, which lies 2km west of the property. The principal employment in that community is herding, retail sales, and employment at a coal mining operation located about 50km east of the town.
From 1943 to 1945 Soviet and Mongolian workers mined
BACKGROUND wolframite and molybdenite as ferroalloys for war time use.
Mineralization was hand cobbed from quartz veins within the sediments and metasediments that overly greisen hosted tungsten mineralization. The property was intermittently active following the war. 56 drill holes totaling 7,000 meters were reported drilled from 1943 through 1956. In the 1970s and 1980s more thorough investigations included mapping, drilling, and constructing exploratory shafts, minor underground drifting and several adits than are now caved. Twenty drill holes totaling 2,745 meters were reported between 1971 and 1973. From 1974 to 1977, 120 drill holes totaling 13,151 meters were completed. Although the shafts and underground workings intercepted the tungsten mineralized greisens, the focus of current Monnis evaluation efforts, Soviet activities continued to focus exploit on the
high grade quartz veins. No production records are known from this era. The Soviet researchers did calculate a greisen hosted tungsten resource using a half distance polygonal method based upon their drill results.
The property remained inactive until the mid-2000s when a consortium of Mongolian and Chinese companies attempted to produce a wolframite gravity concentrate from the old Soviet era workings and waste piles. The attempt proved financially unsuccessful and was abandoned in 2008. Shortly after, Global Energy Company acquired the property and employed an Australian based company, Micromine Proprietary Limited, to calculate a resource estimate for the property using geostatistical methods applied to historic Soviet era drill data. The resource estimate was in close agreement with earlier polygonal calculations of the Soviets.
Monnis acquired the property in 2011 and began an active drilling program in April, 2012 to further evaluate the mineralized greisens. The original drilling proposal was for 25,000 meters to re-drill the entire property on 50meter centers to obtain a verifiable data base, but budget constraints allowed funding of only 8,000 meters. To optimize drilling effectiveness, the western high grade portion of the property was nominally drilled on 50mx50m spacing, using some historic holes to infill the grid. The eastern lower grade portion of the deposit was drilled on 50mx100m spacing, again using limited historic drill hole data to supplementing the grid drilling. The current phase of drilling was completed at the end of June, 2012 and included two fences containing 3 angle holes each to determine the presence of fault zones that might displace mineralization.
The Egudzer Project is developed within and beneath a sequence of deformed Ordovician clastic sediments that are intruded and variably metamorphosed by early Mesozoic potassium leucogranites. Extensive metasomatism resulted in formation of greisens in the roof zones of the granites. Greisenization has pervaded the overlying metasediments, and mineralization there typically occurs as subhorizontal quartz veins containing wolframite, molybdenite, tourmaline, and other accessory minerals.
The underlying greisen is developed in a highly altered granite protolith and contains abundant white muscovite. Wolframite occurs as coarse stringers cross cutting matrix material and as disseminated spots and small crystals within the matrix. Molybdenite, chalcopyrite, and other minor sulfides are present, typically as disseminations. Pale green beryl and purple fluorite are occasionally noted. At depth the greisen grades into relatively unaltered leucocratic granite.
Prior to the site visit at Egudzer, Mr. Gunter met with Mr. Surenbaatar
(Project Manager and General Manager of Investment),
ULAANBAATAR Mr. Bat-Erdene (Exploration and New Minerals Project Development),
and Ms. Erdenetuya (Manager of Investment) at Monnis’ office in Ulaanbaatar. The discussion included generalities about the Egudzer W-Mo deposit, project objectives and the upcoming site visit. Relevant points discussed include: 1. The Egudzer mining concession covers 79 hectares (.79 sq.km)
and the license is valid for 60 years. A competitor company owns the concessions surrounding the Monnis license area. A preliminary open pit design suggests that a Monnis pit would require access to the competitor’s concession to the north for an adequate open pit layback. Monnis maintains that the competitor’s concession contains unknown amounts of W-Mo mineralization whose value would be enhanced by a Monnis processing facility. The two parties have been in amicable discussions and have concluded some sort of a written agreement regarding future development of the property.
2. Monnis considers the Egudzer project as an early stage
exploration program due to the unverifiable nature of historic drilling activity. When Monnis acquired the property about a year ago some data of past Soviet activity was also acquired but has yet to be translated.
3. The top of the Egudzer deposit lies 30-100 meters below the
surface, gradually deepening from east to west. The highest grade and most continuous mineralization lies in the western part of the deposit.
4. The 2012 Egudzer drilling program (8,000m) is intended to
5. Once drilling is completed to optimal spacing (50mx50m in the
western area of Measured Resources) and 50mx100m in the
eastern area of Inferred Resources (Eastern extension of deposit), the data can be submitted to the Mongolian Resource Committee to apply for the right to conduct a Feasibility Study.
6. Once the Feasibility Study is completed and accepted, the
Mongolian Resource Committee can grant a Mining License.
7. Monnis plans a small mining operation and hopes to have the
Egudzer property in production within 2 years producing 100,000 metric tonnes of ore during year one; 300,000 metric tonnes during year 2; and 500,000 metric tonnes for the balance of the projected 20 year mine life.
8. Ore will be concentrated on site and the concentrates will
9. Monnis plans to be the major shareholder and operator of the
10. The area has access to a 35kv power source from China.
11. Early hydrological studies need to be revisited and possibly
redone to assure that an adequate supply of water is available to support operations.
12. Metallurgical studies also need to be conducted. Earlier studies
have been questioned and it is hoped that recoveries can be improved by newer technology. Monnis is currently discussing metallurgical studies and bench tests with a Chinese company familiar with these types of ores.
13. Environmental studies will be required at some stage of the
14. A paleontological study is required.
16. A NI 43-101 report may allow Monnis to go to the
international market to raise funds for development or seek a JV partner.
The author visited the Egudzer project for five days from June 20-24, housed in a driller camp at the project site organized and maintained by Tanan-Impex, LLC (TI), a Mongolian based drilling company contracted to conduct core drilling on the property. The intent of the field visit was to observe the manner in which the current evaluation effort was being conducted. The author met the geologic staff on site. Mr. Tsend-Ayush, the senior geologist in charge has been working on the project for about a year. Several
contract geologists from “Sapphire Geo” Co., Ltd. including Mssrs. Batnyan and Mendbileg have been associated with the project since April, 2012 and conduct drilling logistics, core logging, data posting and sample processing. An initial property tour was conducted by the site geologists and Monnis personnel from Ulaanbaatar. The group examined mineralized rock samples and core, visited old Soviet era workings and waste dumps, and examined driller activity and procedures. At the time of the visit there were 4 HQ drills operating on the property. Drill crews seemed professional, well organized and have reportedly achieved >95% recoveries. TI boasts an impressive safety record during its 10 years of operations. The rigs were drilling vertical holes that varied from 100m-200m in depth. These had not been surveyed for drift, but it was determined that a number of previous vertical holes had been surveyed with only minor deflection measured. It was also noted that no angle holes had been drilled in the deposit. This was a concern because significant gouge zones had been noted in some vertical core holes. As a result, Norwest recommended two fences of three angle holes each to help identify possible zones of post-mineral fault offset. It was also recommended that these holes be surveyed to determine drift. During subsequent days the author walked the entire property photographing the license boundaries (License MV-010224), observed surface geology, observed core logging methods, sample cutting, sample handling and transmittal. Considerable time was spent examining core and observing the nature of alteration and mineralization. Soviet era geology maps and cross sections were examined from the 1970s and 1980s. The highest grade part of the deposit is located in the western portion of the license area and underlies a positive topographic feature which should help lessen the ultimate strip ratio (estimated from 6:1-8:1). This western area was the focus of intermittent Soviet era mining and considerable workings and waste dumps remain on the property. With the current drilling program geologic logging is conducted by several (4-6) contract geologists on the property. Logging is done in the Mongolian language and in a rather free form style of verbal descriptions. This results in difficulties when attempting to convert the drill logs into a digital format for later construction of cross and long sections; and for resource modeling. A meeting with Mr. Tsend-Ayush and Mr. Mendbileg was held to discuss the need to
devise a simplified coding system for current and future drilling activities at the project. Agreement was reached to incorporate: Rock type, Alteration, Mineralization, and Structure; into a coding system. Norwest provided a coding system as a model for what is needed and stressed the need to begin capturing basic RQD data on future drilling. The issue of quality control was examined. The Egudzer project does not use a set of internal standards when cut core samples are submitted to the analytical laboratory in Ulaanbaatar. Monnis geologists acknowledge that internal standards would be beneficial, but maintain that standards for W and Mo are impractical to prepare and prohibitively expensive to acquire. Instead, MNAS labs in UB (now owned by ALS) provides the standards and analyzes duplicate splits on every 10th sample submitted. Monnis geologists plan to submit some pulps prepared by ALS to another facility for check analysis. However, the issue of matrix interference during analysis of standards still favors that the project constructs standards made from sample rejects. Internal standards will be critical when the project reaches production. The author spent several hours with Mr. Mendbileg reviewing core holes drilled in 2012 to ascertain the presence and mode of occurrence of wolframite in core holes expected to intercept significant intervals of mineralization. Core from holes #486, #500, and #2 (a twin of previous hole 2) were examined. Wolframite appears in several modes. There are rare zones of high grade mineralization, very rarely semi-massive, typically only a cm or more wide but locally up to 30 cm, characterized by stringery, anastomosing veinlets that appear to cut through the greisen matrix. More commonly disseminated wolframite occurs as isolated blebs or small crystalline clusters typically <0.5mm across. Some areas display single crystals disseminated in the matrix which are <0.1 mm across. Lastly there are fine black dustings which could not be positively identified as wolframite. Wolframite is most abundant in the greisen areas associated with abundant secondary muscovite. Only trace molybdenite (MoS2) was observed in the three holes inspected. Chalcopyrite was also present in trace amounts. One hole (#486) contains strong purple fluorite in a healed breccia from 154-170m.
CORE AND SAMPLE
Core and sampling procedures are as follows:
Drilling services are performed by TI. Drillers operate in a
professional manner and reportedly achieve excellent production with core recoveries >95%. TI constructed and staffs a man camp for the project immediately adjacent to the Egudzer project area. The camp consists of 14 gurs for housing, 2 gurs and a trailer for cooking and eating facilities, a shower house and latrine facilities.
TI uses self-propelled Chinese made CORTECH wireline core
drills, capable of drilling vertical and angle holes. All core drilled during the 2012 campaign was HQ size.
Four drill rigs of two capabilities were used: The YDX 3L is
capable of penetrating 300-400 meters; the YDX 3G2 is capable of reaching depths of 500-700 meters.
HQ core is transported from the drill rig to the camp site at the
end of each drill shift by the drillers. If a hole is completed mid shift, the last portion of the hole is transported to the site camp before the drill is moved to the next hole.
At the driller camp, a stake marked with the drill hole is driven
into the ground and the wooden core boxes are arranged in order behind the respective stake.
Geologists mark the meter depth on the edge of the 4 meter
The core is then photographed using a 12 megapixel digital
camera and the images are digitally stored for later retrieval
All digital data are relayed to a central server at the Monnis
An initial geological log is performed by one of the site
geologists. During this exercise yellow tags are placed in the core boxes with information on the intervals to be cut and the sample number that corresponds to that interval. Sample intervals are normally 1.0-1.5m.
Cumulative core recovery is calculated for the entire hole, but
A cut sheet is prepared by the geologist with the sample
number and from-to meters for each interval to be cut and ultimately analyzed. Typically unaltered sediments are not cut and analyzed.
Technicians then cut the core for the respective intervals and
place the cut material back in the core boxes. If metallurgical
samples are to be collected, half of the core is again halved (quarter core).
A site geologist then re-logs the core, adding to or altering the
earlier logging form using the flat cut surface to acquire additional visual information regarding alteration and mineralization.
Two sampling geologists then place the cut intervals into
sturdy sample bags with the sample number clearly marked on the outside of the bag. Again, these sample numbers correspond with the intervals on the cut sheets. No sample tag is placed inside the bag.
The sample bags are then placed into large sample sacks, each
sack holding about 15 samples and stored on site awaiting pickup.
Depending on the number of samples, but typically every two
weeks, a trucking contractor from Ulaanbaatar travels to site to pick up the samples and transport them back to the analytical lab in Ulaanbaatar.
Monnis does not have internal standards on site and relies
solely on the ALS lab Ulaanbaatar to provide analytical quality control.
Mr. Gunter attended a second meeting at Monnis’ office
following the site visit to Egudzer. Messrs. Bat-Erdene,
Surenbaatar, Erdenetuya, Enkhbuyan (GIS specialist), and Saruul
(Mining engineer) participated in the meeting Monnis’ President and CEO, Chuluunbaatar Baz made a brief introductory appearance. The topics of discussion were recommendations about improved field operations that will help advance the Egudzer project; and material required to move toward a NI 43-101 report. Drill log coding system is needed but has not been devised.
Basic RQD data is now being collected on all new drilling
Recommendations were made to prepare internal standards
using rejects from the 2012 drill campaign.
Petrographic (or QEMSCAN) studies have not occurred; but
Monnis reports that samples are being collected for that purpose.
Monnis is still looking for a lab to conduct metallurgical
studies. One company in China appears to be the best choice to date.
The process of producing new cross and long sections will
begin once the current drilling campaign is over.
Recommendations that an updated surface geologic map be
Norwest indicated that the amount of future drilling required to convert resources to reserves will largely depend on the results of the 2012 program and analysis of those results. Several historic holes were twinned during 2012, but because of the large number of analytical labs used historically (8?), even successful twined holes will do little to validate the entire data set. Future drilling may also be needed to determine the possible influence of major structures on the distribution of mineralization.
Relevant topics were discussed during the meeting pertaining to preparation of a NI 43-101 Technical Report. It will be advantageous for Monnis to prepare and assemble much of the preliminary and background information for the Qualified Person (QP). However, it is important to understand that the QP has ultimate responsibility for the content of a NI43-101 report.
Bat-Erdene, Surenbaatar, and Mr. Gunter met with Mr. Odbileg
Shirnen, the Managing Director of the ALS laboratory in Ulaanbaatar, for a tour of the analytical facility. The laboratory supervisor, Ms. Tseco, also answered some technical questions. The laboratory was established in Ulaanbaatar in 2003 by Stewart Mongolia, LLC and called MNAS. It originally provided sample preparation services only. In 2008 the laboratory installed an ICP-OES instrument and became a geochemical and coal analytical laboratory. The Stewart holdings were recently acquired by ALS and the process of changing names, protocols, and upgrading equipment is currently underway. In 2011 the laboratory was re-accredited as complying with International Standard ISO/IEC 17025:2005 (MNS ISO/IEC 17025:2007). The date of first accreditation was 2009.
The laboratory is housed in a building formerly used as the Communist Party headquarters. The facilities are rather cramped and ALS is in the process of relocating to a larger space with a floor plan more amenable to sample processing activity. The following is a flow sheet of sample handling at the present facility:
Samples are delivered by a contract trucking company from the
Samples of sawn half core (typically about 5 kg) arrive with
sample transmittal sheets and the Egudzer project also transmits an electronic version to the laboratory.
The samples are checked to determine that the shipment
matches the transmittal sheet. Bar codes are printed that correspond to the sample numbers. These bar codes are attached to the sample bags.
The samples are weighed then dried at 105°C overnight.
Samples are crushed in a two stage crusher to 70% <2mm. The
rejects are stored for 90 days then discarded if unclaimed by the client.
A riffle splitter is used to obtain a sample of about 500 grams.
Every 10th sample, two splits are obtained and two pulps are prepared for duplicate analysis.
The crushed 500 gram samples are placed in a disc pulverizer
and reduced to 90% < 75 um. After each sample is pulverized, the equipment is cleaned with brush and compressed air. After each hole has been pulverized, geochemically blank gravel is pulverized and the equipment is cleaned with brush and compressed air.
Samples are analyzed by two methods:
- ICP-AES—4-Acid digestion of 0.2 grams of sample are
placed on a hotplate and the acid slowly evaporated. The residue is then taken into solution with dilute aqua regia, made up to volume with distilled water and analyzed by ICP. This provides a quantitative analysis of 44 base metals and major elements including Mo and Bi.
- ICP-BF—A 0.1 gram sample of pulp is placed in a graphite
crucible with 0.08 grams of lithium metaborate flux. The samples are fused in a furnace at 1000°C for 50 minutes, then cooled and dissolved in a solution of 100ml 4% HN03 + 2% HCl on a shaking table for 12 hours. The samples are then analyzed by ICP-OES for 11 major oxide elements including tungsten and beryllium
- Samples are run in batches of 60. Of these, 51 samples are
from the project site, 5 samples are pulps made from duplicate splits of the submitted samples (every 10th sample), and 4 are internal lab standards.
Messrs. Bat-Erdene, Surenbaatar and Gunter were greeted by
Mr. Ganbaatar, the General Engineer for TI. TI has been operating For 10 years and currently has 300 permanent and 100 temporary employees. Drilling is typically conducted for seven months of the year, May–November, but can be extended depending on client needs and weather conditions. The company claims only one death (highway related) and four lost time injuries during its 10 years of operation. They have a HSE staff of 10 and documented safety procedures. They have met the qualifications of the major mining operations SGS and Rio Tinto to operate on their properties for the next three years.
The Egudzer Project appears to have good potential to be developed into a viable W-Mo mining operation. Though the deposit has a long history, much of the previous information is unverifiable or inadequate. The current exploration activities being carried out by Monnis are addressing the deficiencies so that this deposit can be developed. Based on the site visit conducted by Mr. Gunter, Norwest has made the following recommendations to improve and maximize efforts of the current drilling program and ultimately address key items necessary to satisfy public reporting of mineral resources/reserves:
Promptly post all data from drilling program as results and data
Provide elevated core logging tables for geologists during
future drilling campaigns. This greatly improves efficiency over logging on the ground.
Develop uniform coding system for important geologic criteria
related to drill logs for simplified data posting.
Provide a binocular microscope at the project site to assist core
Consider a simplified but meaningful system for numbering
drill samples submitted to the analytical laboratory. For example, instead of using an arbitrary numbering sequence use
the hole number plus the beginning meters for the interval. E.g. Hole 484 from 50.5m - 52.0m would be 484-50.5. The next interval would be 484-52.0 etc.
Collect basic RQD data with all future drilling.
Develop a simplified (computerized) logging technique for
Update cross sections, long sections and surface geologic
Analyze QA/QC data from ALS ascertaining that standards and
Prepare internal standards for future drilling using reject
Initiate petrographic/QEMSCAN studies of mineralized core in
conjunction with metallurgical testing and ore processing.
Moving forward Norwest recommends completing a geostatistical analysis of the recent drilling data to determine continuity of mineralization and optimum drill spacing for delineating the resources and reserves. This analysis should also include a preliminary resource estimate using only verifiable drill data. The results of the geostatistical analysis and the preliminary resource estimate will identify the future drilling needed for full economic valuation and will support efforts for resource estimates presented in a NI 43-101 report.
As exploration advances, it is important to initiate hydrological, environmental, cultural and other baseline studies as required under Mongolian statutes. This information is often a requisite with international financing.
Norwest is prepared to provide continued support to Monnis’ Egudzer Project. At Monnis’ discretion, Norwest can prepare work orders to address:
Conduct a geostatistical analysis of current drill data and
prepare preliminary resource estimates to address mineral and resource continuity and future exploration criteria.
Assist in implementing recommended field procedures and
assisting in evaluating QA/QC procedures. Organize petrographic and QEMSCAN studies of ore samples.
Follow up with second visit in the Fall of 2012 to review
results of the 2012 drilling campaign and assist in a going forward strategy.
Development of a detailed geologic model for resource
Preparation of a NI 43-101 Technical Report.
Initiate and organize baseline studies for project advancement.
Norwest appreciates the opportunity to assist in this important mineral project and looks for to providing continued support to Monnis and to help advance this project as possible.
Yours sincerely, NORWEST CORPORATION
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