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https://stockhead.com.au/resources/will-xanadu-be-the-next-copper-and-gold-explorer-to-attract-the-majors/

Special report: BHP’s arrival on the Solgold register has given rise to expectations of a takeover battle breaking out over the smaller player — with its Cascabel copper and gold discovery in Ecuador as the prize.

Coming up against BHP would be Australia’s largest gold miner, Newcrest Mining, which outlaid $23 million for an initial 10 per cet stake in Solgold in 2016 — and has since become the company’s largest shareholder with 14.5 per cent.

There is a possibility BHP and Newcrest could team up to mount a joint bid for Solgold.

But the more likely scenario is that one of the parties misses out on Cascabel and is left to look elsewhere for exposure to copper and gold assets with genuine tier one potential.

The competitive tension in the chase for Cascabel rightly suggests that there isn’t a surfeit of options in the tier one category.

But one that could appear on the radars of hungry majors like BHP and Newcrest, if it hasn’t already, is Xanadu Mines’ Kharmagtai Project in Mongolia’s South Gobi Desert.

Kharmagtai isn’t dissimilar in terms of scale and grade to Cascabel. Both deposits are also characterised by high gold-to-copper ratios, which helps greatly with economics.

But what Kharmagtai has in its favour is it sits at surface and infrastructure is readily available.
Why Kharmagtai?

According to Xanadu, the deposits that make up the current Kharmagtai resource will be mined in an open pit scenario at a grade of greater than 0.5% copper equivalent for at least 20 years.

In an underground mining scenario like that envisaged at Cascabel – large-scale block caving – a grade of at least 1% copper equivalent is typically needed for a project to be viable, which represents a significant hurdle.

Like Solgold is currently doing at Cascabel, Xanadu (ASX:XAM) is in the process of preparing a new resource estimate for Kharmagtai that is expected to add significantly to the maiden resource of 1.5 million pounds of copper and 2.2 million ounces of gold announced in March 2015.

Xanadu anticipates publishing the new resource at the end of October and says it will follow shortly thereafter with the results of a preliminary economic assessment (PEA) on a starter pit project for Kharmagtai.

Solgold is progressing a PEA on a much larger, underground development at Cascabel and is scheduled to release the findings in the March quarter next year.

The release of the Cascabel study is tipped as a potential catalyst for the anticipated corporate action, particularly if it confirms a net present value for the project in excess of $4 billion, as Solgold chief executive officer Nick Mather says it will.

Given the similarities between Cascabel and Kharmagtai, it is not difficult to mount an argument that Xanadu is undervalued.

CONT

Incentivising exploration is the newly-opened Northern Gas Pipeline (NGP) which connects the NT and Queensland gas networks for the first time. Theoretically, this enables a producer to pipe gas north to Darwin LNG, east to LNG export facilities in Queensland, or further south to eastern Australia's demand centres.

The NT government recently revived its Gas Task Force and created a five-point gas strategy to help incentivise investment and growth in onshore reserves. One of the NT's least explored regions, the onshore South Nicholson Basin, is in particular focus as Geoscience seeks to shed more light through seismic surveys on the underlying resources base.

But a sticking point to development could be tougher restrictions on LNG exports to aid eastern Australia's tightening gas market. The threat of this policy, which could be more onerous if Labour wins the next general election, is making developers wary.
Seeking clarity

"If there's one thing investors dislike more than anything else, it is uncertainty," says Samuel. "Investors and producers message repeatedly that clarity on energy policy and regulation stability are critical ingredients for investment decisions. Heightened energy policy and regulation risks in Australia are dampening investor appetite. A decision to invest in Australia is far from clear-cut despite the underlying resource potential."

Investing in Australian LNG has become increasingly discretionary, given the ramp-up in international supply competition. Australian LNG is up against Qatar, the US and increasingly Russia, all competing for spoils in the lucrative Asian market.

Inpex, which is poised to play a long-term role in Darwin's LNG export sector, backs more consistent and stable policy and regulatory settings, which promote the safe development of the nation's likely vast unconventional oil and gas resources.

"Exploring for gas and developing gas projects are expensive and high-risk activities," Bill Townsend, head of External Affairs and Joint Venture at Inpex, told Petroleum Economist.

"There is a risk that regulatory frameworks, which restrict where and how gas can be sold, will inevitably deter the very investment needed to develop Australia's abundant gas reserves," Townsend added.

end

http://www.petroleum-economist.com/articles/politics-economics/asia-pacific/2018/australian-shale-play-faces-rocky-ride

Australian shale play faces rocky ride
The Northern Territory, a key LNG centre, holds huge reserves of shale gas. But will regulations stifle development?

On a low-lying peninsula just south of Australia's largest tropical city, Darwin, lie two liquefied natural gas export facilities, signifying the leading role the Northern Territory (NT) plays as a global LNG exporter.

At Bladon Point, the Inpex-Total joint venture Ichthys LNG project is poised to go live this year, liquefying gas and condensate sourced from the Browse Basin brought onshore via an 890km (553-mile) pipeline. At Wickham Point, the ConocoPhillips-operated Darwin LNG facility processes gas from the Bayu Undan field in the Timor Sea, and is looking at expanding capacity to include supply from the Barossa-Caldita fields.

But this isn't all that the NT has to offer. The region also holds vast onshore shale gas reserves with the potential to supply additional exports through Darwin or east through the Queensland LNG export terminals.

Geoscience Australia estimates the NT holds over 200 trillion cubic feet of onshore shale gas, 70% of which lies in the Beetaloo Sub-basin of the McArthur Basin-a resource larger than North West Shelf conventional gas resources and comparable to several US shale gas basins. Beetaloo's Velkerri shale rock formation alone is estimated to hold over 118 trillion cf, enough to power Australia for over 90 years at current consumption rates.

"The volume of the potential gas at play is huge, with latest estimates of 500 trillion cubic feet mentioned," says Alan Samuel, director of Strategy & Operations at Deloitte Australia, adding that current total proved reserves in the whole of Australia are estimated at 128 trillion cf.

"Gas production companies have drawn parallels with the Marcellus region in the US, currently producing about four times the total Australian domestic gas demand… Aside from supplying the east coast domestic markets, production growth could potentially double LNG train export capacity by 2030," Samuel adds.
Seeking foreign investment

After lifting a temporary ban on onshore fracking earlier this year following a lengthy scientific inquiry, the NT is now one of the few Australian states which allow unconventional gas to be extracted. Indeed, the NT government is now moving to attract foreign investment into the region as it seeks to trigger a US-style shale boom to meet burgeoning domestic and future export gas demand.

Incentivising exploration is the newly-opened Northern Gas Pipeline (NGP) which connects the NT and Queensland gas networks for the first time. Theoretically, this enables a producer to pipe gas north to Darwin LNG, east to LNG export facilities in Queensland, or further south to eastern Australia's demand centres.

cont

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