Hugo North Extension (Cu-Au)

Project Summary

Hugo North Extension is one of the world's richest porphyry copper-gold deposits.  It is located in the South Gobi desert of Mongolia, approximately 570 km south of the capital city of Ulaanbaatar and 80 km north of the border with China.  Hugo North Extension is part of the Oyu Tolgoi mining complex being developed by Ivanhoe and its partner, Rio Tinto.  Entrée retains a 20% carried interest in the mineral resources of the deposit.

Access to the property from Ulaanbaatar is possible by an unpaved road, via Mandalgovi, or by air.  A 2000 m long gravel airstrip was constructed at the site and is used routinely.  Road infrastructure to China is being upgraded and an additional railway line is planned.

Hugo North Extension was first detected through a geophysical anomaly in 2004 and later confirmed by drilling in 2005 by project operator Ivanhoe.  The Entrée-Ivanhoe Joint Venture was formed in 2008 and covers an area of 39,864 hectares which also includes the Heruga deposit.

Underground mining plans for Hugo North Extension are included in the two main mining scenarios of Ivanhoe's 2010 Integrated Development Plan, reflecting the near and long term importance of the deposit to the mine development.

Milestones

Links to Technical Reports 

Joint Venture with Ivanhoe Mines

Entrée's joint venture with Ivanhoe Mines (through its subsidiary Oyu Tolgoi LLC) provides that Entrée holds a 20% interest in any mineralization lying below a depth of 560 metres and a 30% interest in any mineralization occurring from surface to a depth of 560 metres.  Entrée may choose to be carried through to production by way of debt financing from Ivanhoe Mines with interest accruing at prime plus 2%.  This debt can be repaid in whole or in part from time to time or repayable by Entrée monthly from (and only from) 90% of the available cash flow arising from the sale of its share of products as defined within the joint venture agreement.  This arrangement ensures that Entrée cannot be diluted from its 20% or 30% position.

Oyu Tolgoi Investment Agreement

In October 2009, Ivanhoe Mines Mongolia Inc. (now Oyu Tolgoi LLC) and Rio Tinto International Holdings Ltd. signed the Investment Agreement with the Mongolian government.  The Investment Agreement regulates the relationship between these parties and stabilizes the long term tax, legal, fiscal, regulatory and operating environment to support the development of the Oyu Tolgoi mining complex.  The contract area defined in the Investment Agreement includes the Javhlant and Shivee Tolgoi mining licences, including Shivee West which is 100%-owned by Entrée and not currently subject to the Entrée-Ivanhoe Joint Venture.  Satisfaction of conditions precedent within 6 months of the signing date was specified within the Investment Agreement and was completed March 31, 2010.  With removal of the conditions precedent, the Mongolian government holds a 34% interest in Oyu Tolgoi LLC, which in turn holds (as a participant) an 80% interest in the Entrée-Ivanhoe Joint Venture.

Mine Development Plan

The Integrated Development Plan 2010 for the Oyu Tolgoi mining complex and its implication on Entrée's Hugo North and Heruga deposits are explained in the following news releases:

May 11, 2010  First Mineral Reserves for Hugo North Extension Included in Inititial Underground Mining
June 15, 2010 Entrée Files Technical Report on Hugo North Extension and Heruga Development Options

North-South Profile of Hugo Dummett, Southern Oyu and Heruga Deposits (Looking West)
(Courtesy of Ivanhoe Mines with modifications by Entrée Gold Inc.)

Geology and Mineralization

Porphyry-style mineralization at Hugo North and other Oyu Tolgoi Deposits is genetically linked to Late Devonian quartz monzodiorite to monzodiorite intrusions, which form the most voluminous intrusions in the deposit area.  These intrusions are texturally and compositionally varied, and several distinct phases can be distinguished within the deposits.  They are typically phenocryst-crowded, with >40% plagioclase phenocrysts up to 5 mm long, and 10-15% biotite and hornblende.  Quartz monzodiorite contacts are irregular, but overall show a preferred easterly dip, subparallel to stratification in the enclosing rocks. 

The quartz monzodiorite is contemporaneous with alteration and mineralization, and at least three varieties are distinguished on the basis of alteration characteristics and position within the deposit.  Three such varieties are: 1) an intensely quartz-veined phase with approximately 90% veining; 2) a gold-rich phase, restricted to the western part of the main intrusion in the Hugo North Extension Deposit and 3) the main intrusive body, which typically has lower vein density and lower copper and gold grades.  Cross-cutting relationships between the different phases are ambiguous, and it is uncertain whether they represent distinct intrusive events or simply variations in alteration intensity related to position within the deposit.

Alteration through the mineralized quartz monzodiorite is dominated by late muscovite overprinting.  Advanced argillic is common but more so in the augite basalt and overlying dacite tuff with less in the quartz monzodiorite.  Muscovite likely predates advanced argillic alteration. 

The deposit consists of a high-grade, quartz vein-rich (90%) core which typically averages over 2% Cu enclosed in a lower-grade marginal zone with lesser quartz-veining and alteration.  The high-grade core is mainly within quartz monzodiorite but in the southernmost part of the extension it crosses into adjacent augite basalt.  Elevated gold grades occur within the up-dip western portion of this core and within a steeply-dipping lower zone with less veining that cuts through the western part of the quartz monzodiorite and is characterized by red feldspar alteration (albite alteration with fine hematite).  A peripheral low grade zone to the east is contained mainly in augite basalt and to a lesser extent in dacite tuff.  Alteration intensity drops abruptly at the upper contact of this package. 

Bornite is the dominant copper mineral in the highest grade parts of the deposit that average around 3% to 5% Cu. It is commonly intergrown with lesser chalcopyrite. This is zoned outward to high-grade chalcopyrite dominant mineralization that averages around 2% Cu.  At grades of <1% Cu, chalcopyrite +/- enargite, tennantite, bornite occurs with rare chalcocite, pyrite and covellite.

The high-grade zone is bounded on the west by the West Bat fault system which juxtaposes it against either unmineralized, stratigraphically higher rocks or more weakly mineralized quartz monzodiorite bodies.  The West Bat Fault is part of a district scale structure that extends south through Oyu Tolgoi and to Heruga where it is known as West Bor Tolgoi Fault. The eastern limit of the high-grade zone coincides with either an intrusive or faulted eastern contact of the quartz monzodiorite.  Another significant regional structure is the Contact Fault that occurs between the contact of the dacite tuff and the unmineralized overlying cover sequence.  It is a bedding parallel fault the marks the upper limit of the strong alteration associated with the Hugo North Extension deposit. 

Last Updated: April 20, 2011