Fig.1. Location map showing the Baruun Naran coal project.

Property Description and Overview

Location and Ownership

The Baruun Naran coal project is located in Tsogt-Tsetsii Soum of the South-Gobi Aimag (Province) in the Gobi Desert (see Figure 1). The project is approximately 500 km south of Ulaanbaatar and 200 km north of the Chinese-Mongolian border. QGX acquired a 100% interest in the Baruun Naran license in 2002.

Previous Work

The coal deposit occurs within a NE-SW striking basin consisting of Permian sedimentary rocks. The Russian data indicate that coal is contained within 12 seams with the four thickest seams each measuring 10 m wide or wider.

The Russians and Mongolians originally explored Baruun Naran in 1983 and 1990. The Russian-Mongolian team identified coal seams over an area 1.5 km by 10.5 km in size (see Figure 2). In this area, they drilled a total of 21 holes and intersected coal in 15 of the holes.

In early 2005, QGX discovered coal in two latrines dug at their campsite located 700 m to the south-southeast of the main coal area. Coal is also known to occur in a second, un-drilled area of Permian sedimentary rocks highlighted in the powder-blue pattern shown in Figure 2.

Fig.2. Map showing the distribution of coal within the eastern portion of QGX's license. (Click for enlarged PDF)

Dave Anderson, QGX CEO, commented as follows: “Baruun Naran appears to host a significant coal deposit consisting of bituminous and metallurgical coal. The license is on strike with Tavan Tolgoi and within the same Permian sedimentary basin. The 10.5 km strike length along this trend suggests a significant resource may be present. Given the high demand for thermal and metallurgical coal in China, QGX is moving rapidly to determine the size and physical properties of the coal.”

Coal Deposits Located Near Baruun Naran

There are two notable operating coal mines in southern Gobi: Tavan Tolgoi (Energy Resources) and Naraan Sukhait (MAK). Both operations export coal to China by truck. A rail line is now under construction from China to the border near Naraan Sukhait. A rail line is currently being contemplated to connect Tavan Tolgoi and the Ivanhoe Mines copper-gold project at Oyu Tolgoi to northern China (see Figure 3).

Fig.3. Map showing the location of Baruun Naran with respect to infrastructure and other coal projects in southern Mongolia. (Click for enlarged PDF)

QGX Work Program

QGX began its initial field program at Baruun Naran in April. QGX initially deployed three backhoes to dig trenches to expose the near-surface coal seams that are typically concealed between 1-10 m of cover. QGX geologists mapped the coal seams exposed in the trenches and used these data, in part, to target coal seams for drilling.

Fig.4. Photograph of thick coal seam exposed in Trench 4.

Fig.5. Comparison between the first three QGX drill holes and the three “twinned” Russian drill holes. Click for PDF

QGX announced on July 13th that the next eight holes, BN05004-11, intercepted 35 coal intercepts (@ 2-m coal seam cutoff) containing 195 m of net coal (estimated true thickness). These eight holes, together with the first three holes drilled by QGX, confirm the presence of multiple coal seams over a minimum of 8 km of strike distance. In addition, four of these drill holes cut six large coal intercepts, each in excess of 12 m estimated true thickness (see Table 1 below for a summary of drill-hole results).

In light of this success, QGX has expanded the exploration program at Baruun Naran. A second drill rig commenced drilling on June 27th and two additional drill rigs arrived in September. In addition, a geophysical program to test for coal seams and structural features beneath 1-10 m of cover began in early July and has yielded positive results (for more information on the geophysical survey, please see below).

The drill-hole intercepts for BN05001-137 are listed below in Table 1a. Norwest Corporation has reviewed and approved the data presented in Table 1a.

Table 1a - Drill-Hole Results for BN05001 to BN05137

Table 1b - Location & Orientation of Drill-Holes BN05001 through BN05137

Figure 6 below presents a map showing the location of the drill holes listed in Table 1a.

QGX has engaged Norwest Corp. to provide consulting services regarding the exploration and evaluation of Baruun Naran. Norwest, based in Salt Lake City, has extensive coal experience in Mongolia, including having completed a feasibility study on the Tavan Tolgoi coal project.

Fig.6. Drill-hole location map for Baruun Naran. Click for PDF

Fig.7a. Geologic cross section for 37,200E. Click for PDF

Fig.7b. Geologic cross section for 36,900E. Click for PDF

Fig.7c. Geologic cross section for 36,600E. Click for PDF

Fig.7d. Geologic cross section for 36,300E. Click for PDF

Fig.7e. Geologic cross section for 36,000E. Click for PDF

Fig.8. Geologic cross section for 34,000E. Click for PDF

Fig.9. Geologic cross section for 33,900E. Click for PDF

Gradient-Array Resistivity Survey at Baruun Naran

QGX has completed a gradient-array resistivity geophysical survey over the eastern portion (5.7 km strike length) of the 10+ km long Baruun Naran coalfield (see Fig. 10). The survey will be extended this fall to cover the entire area of interest (see Fig. 11). Prior to initiating the survey, QGX conducted a series of tests on Section 37200E where good geologic control was available through previous drilling. On the basis of these tests, the survey parameters were optimized to highlight the thicker, near-surface coal seams that are concealed below shallow cover. The test results showed clearly that coal, a resistor, could be detected within the conductive Permian host rocks (see Fig. 12).

The gradient-array survey identified multiple resistivity anomalies (highlighted in pink and red on the Gradient Array Resistivity Map—see Fig. 10). Based on the survey, Seams “H” (formerly Seam “M”) and “T”, the two known coal seams previously returning metallurgical-grade results (See press releases dated August 3rd & September 14th 2005), are interpreted to be continuous for at least 3.5 and 2.75 km, respectively (Seam “T” remains open to the west where the survey is ongoing). In addition, many other resistivity targets are continuous on strike for several km and are interpreted to reflect coal seams.

In addition to mapping the coal seams, the gradient-array survey provided insight into the structural elements influencing the distribution and geometry of seams. The survey demonstrated that the package of Permian rocks containing the coal seams (the Tavan Tolgoi Formation) constitutes a cohesive and persistent structural block of largely uninterrupted stratigraphy along strike. The recognition of an intact structural block is likely to be favorable for mining and will facilitate the construction of an ore reserve model for Baruun Naran. The survey also suggests that the Tavan Tolgoi Formation is folded into a large and persistent syncline. If so, then many of the folded coal seams may have two limbs located near surface that may be amenable to open-pit mining.

Fig. 10. Gradient-array resistivity map for eastern portion of Baruun Naran Click for PDF

Fig. 11. Work program for gradient-array resistivity survey Click for PDF

Fig. 12. Gradient array resistivity map (looking west) showing correlation between resistors (shown in bright pink and red) and coal seams (shown in grey on cross section 37,200E). Click for PDF

Stratigraphy of the Baruun Naran Coalfield

Introduction

Ongoing exploration work at the Baruun Naran coal project has defined ten thick coal seams with average true thicknesses of 5-20 m. Drill-hole, trench and geophysical data indicate that individual seams have minimum strike lengths of 1500-4000 m and that the coal seams are still open along strike. Coal is known to occur over at least 2 x 10 sq. km in the Baruun Naran valley.

Coal at Baruun Naran is hosted in a thick sequence of Upper Permian clastic sedimentary rocks known as the Tavan Tolgoi Formation. The stratigraphic thickness of this formation within the Baruun Naran valley is at least 800 m. This same formation also hosts Asia’s largest undeveloped metallurgical (“coking”) and thermal (“steaming”) coal deposit at Tavan Tolgoi, located approximately 20 km to the NE of Baruun Naran. At Tavan Tolgoi, the coal-bearing formation has a stratigraphic thickness of ~965 m containing 16 coal seams.

Stratigraphy of the Baruun Naran Valley

Individual coal seams at Baruun Naran have been labeled alphabetically from oldest to youngest. Figure 13 presents a stratigraphic column showing the ten identified coal seams. Table 2 provides the seam characteristics. Note that gaps have been inserted into the alphabetic sequence to allow for new seams to be added as step-out drilling continues. The stratigraphy outlined here is based largely on the work completed in the eastern half of the Baruun Naran coalfield. A more complete stratigraphy will be presented once the entire 10-km-long valley has been delineated by gradient-array geophysical surveys and drilling.

Seams “M”, “N”, and “O” (see press releases of August 30th, September 14th and 21st, 2005) have been renamed Seams “H”, “G”, and “F”, respectfully.

The two dominant coal seams remain Seam “H” (formerly called Seam “M”) in the east and Seam “T” in the central portion of the coalfield. In addition to these two ~15 to 20-m-thick seams, two seams average greater than 10 m in thickness (Seams “P” and “V”) and another six seams (Seams “F”, “G”, “I”, “O”, “R” and “U”) average 5-10 m in thickness.

Fig. 13. Stratigraphic column for Baruun Naran. Click for PDF

Table 2. Geologic characteristics of coal seams at Baruun Naran, Mongolia

 
Click for PDF

Correlation of Coal Seams to Gradient-Array Geophysical Results

Results from the drilling show that distinct resistive zones in the geophysical data correspond closely to coal seams in the subsurface. Individual resistive zones that correlate with known coal seams exposed by trenching and drilling have been mapped for several km and provide compelling evidence that the coal seams are continuous along strike (see press release of September 21, 2005). Figure 14 presents a plan map showing the surface projection of the ten known coal seams plotted on top of gradient-array resistivity data. QGX estimated the strike lengths for the individual coal seams presented in the Table 2 on the basis of gradient-array resistivity data as well as drill-hole intercepts and trench data.

Fig. 14. Distribution of coal seams at Baruun Naran, Mongolia. Click for PDF

top