Asian Battery Metals (ASX:AZ9) - BHP-Validated Mongolia Cu-Ni-PGE Play Targets 20-50kt Metal Output

Key Concepts

• Asian Battery Metals: A company focused on the exploration and development of critical minerals, particularly copper and copper-nickel projects, in Mongolia.
• Critical Minerals/Battery Metals: Minerals essential for modern technologies, especially those used in batteries for electric vehicles and renewable energy.
• Central Asian Orogenic Belt: A geological structure extending through Kazakhstan, Northwest China, and parts of Russia, known for hosting copper deposits, and which also extends into Mongolia.
• Magmatic Mafic Intrusive Related Copper Nickel Porphyry System: A type of geological formation where copper and nickel mineralization is associated with intrusions of mafic (dark-colored, magnesium and iron-rich) igneous rocks.
• Volcanic Massif Sulfide System: A geological system associated with volcanic activity that hosts copper and gold mineralization, as well as massive sulfide deposits.
• Disseminated Ore: Mineralization where sulfide minerals are spread out as individual grains within the host rock.
• Net-Textured Ore: Mineralization where sulfide minerals form a network or mesh-like texture within the host rock.
• Massive Sulfide Ore: Mineralization where sulfide minerals are present in large, contiguous masses.
• VMS (Volcanogenic Massive Sulfide): A type of hydrothermal mineral deposit formed on or below the seafloor, often associated with volcanic activity.
• BHP Explore: A global early-stage exploration accelerator program organized by BHP, which Asian Battery Metals participated in.
• Downhole EM (Electromagnetic Survey): A geophysical survey technique used to measure the conductivity of the ground, often employed in mineral exploration.
• Host Lithologies: The types of rocks that host mineral deposits.
• Feeder System/Conduit: The geological pathway through which mineralizing fluids migrate from a source to form a deposit.
• Aeromagnetic Anomaly: A localized variation in the Earth's magnetic field that can indicate the presence of certain geological structures or mineral deposits.
• VMS Prospects: Areas identified as having the potential to host Volcanogenic Massive Sulfide deposits.
• Drill to Kill: A colloquial term referring to the strategy of drilling with a clear objective to either confirm economic viability or abandon a project.
• Centralized Processing Plant: A single facility designed to process ore from multiple nearby mining projects.
• Off-takes: Agreements to purchase future production of a commodity.

Company and Leadership Introduction

Gana Zuren, Managing Director of Asian Battery Metals, introduces himself and the company's focus on critical minerals and battery metals in Mongolia, particularly copper and copper-nickel projects. He has over 20 years of experience in the mining industry, with education in mining engineering from Canada and Mongolia, and a Master's in Finance. His career includes work in exploration and gold mining operations in Mongolia, as well as experience with Aspire Mining (ASX-listed) and a two-year tenure on the board of Oyu Tolgoi, Mongolia's largest copper mine operated by Rio Tinto. Zuren left the Oyu Tolgoi board in 2022 to lead Asian Battery Metals full-time, a company he founded with like-minded investors recognizing Mongolia's potential as a critical mineral hub near China.

The board of Asian Battery Metals includes experienced individuals:

• David Paul: Former Managing Director of Aspire Mining for 10 years, with operational experience in Mongolia.
• Neil Young: Former CEO of Edexio Energy (ASX-listed), a pioneer in CBM exploration in Mongolia.
• Christine Livermore: Former Australian Parliament member and leader of the Australian-Mongolian bilateral government program in Mongolia.

Mongolia as a Mining Investment Jurisdiction

Mongolia emerged on the global mining market in the late 2000s and early 2010s. Over the past 15 years, significant improvements have been observed in both infrastructure and the legal framework. The legal framework has matured to encompass a multidisciplinary approach to mining, considering environmental laws, water usage, and stakeholder/community engagement. This maturity is evidenced by the opening of 20-30 new mid-to-large-sized mining operations in Mongolia over the last 15 years, averaging nearly two new mines per year. This indicates a stable and evolving regulatory environment conducive to mining investment.

Company Focus and Project Portfolio

Asian Battery Metals' primary focus is on critical minerals, with a particular emphasis on copper, given Mongolia's rich geological endowment in this metal. The company's operations are concentrated in the southwest region of Mongolia, which is geologically an extension of the Central Asian Orogenic Belt, a region known for copper deposits in Kazakhstan, Northwest China, and Russia.

The company holds several tenements in this region, including:

• Oval: The flagship copper-nickel project, located in the same tenement as Copper Ridge.
• Copper Ridge: A copper-nickel project.
• Makhangul: Located approximately 8 km from Oval, this project hosts copper-gold mineralization and a volcanic massif sulfide system.

The company views these projects as having potential for infrastructure consolidation, offering economic synergies for future development.

Oval Project: Exploration and Mineralogy

The Oval project was developed from a concept stage. Asian Battery Metals identified the project in the southwest region based on regional geological analysis. In 2023, the company was selected as one of seven companies (and the only one in Asia) out of 250 participants in BHP's global early-stage exploration accelerator program, "BHP Explore." This program provided $500,000 USD, which was used to discover the project and prove the concept of a magmatic mafic intrusion-related copper-nickel porphyry system. The company subsequently listed on the Australian Stock Exchange.

Extensive exploration has been conducted at Oval, including drilling and geophysics. The company has spent approximately AUD 6-8 million on exploration across all its projects, with a significant portion dedicated to Oval and surrounding areas. Three phases of drilling have been completed, along with ground EM and downhole EM surveys.

Mineralogical Characteristics: Initial metallurgical test results have been announced. Three types of ore have been tested: disseminated, net-textured, and massive sulfide.

• Disseminated and Net-Textured Ore: Recoveries of 89-95% of copper are achievable, producing a copper concentrate grade of 18-24%, which is considered marketable. Nickel recovery is currently lower, and optimization is ongoing.
• Massive Sulfide Ore: Final processing results are expected within the year. The presence of deleterious elements is still being assessed as part of the ongoing processing. Potential byproducts like Platinum Group Elements (PGEs) are also being considered.

Geological Model and Sulfide Placement: The mineralization at Oval is hosted in mafic to ultramafic rocks, ranging from gabbro to olivine-rich amphibole cumulates. Mineralization occurs in a layered fashion: disseminated at the top, net-textured in the middle, and massive sulfide towards the bottom.

A significant discovery was made at the MS1 prospect, located 6 km south of Oval. Here, similar host rocks with visual sulfide mineralization were intercepted, suggesting a potential sulfide-hosting nickel intrusion system. The geophysical signature of MS1 is potentially larger than Oval. New ground acquired south of MS1 covers a large aeromagnetic anomaly, believed to be the source or a larger intrusion system related to Oval.

Drilling and Depth Potential: The mineralization at Oval appears to be a dyke system, potentially a brecciated dyke system that has emplaced and enriched the area. The mineralization starts from the surface and gently dips southeast, with drilling reaching depths of 200-220 meters. A significant intersection of massive sulfide mineralization was encountered in drill hole OVD 32 at a depth of 290 meters, suggesting a deeper part of the feeder system. The company is actively working to identify the conduit feeder and potential chambers or enlarged areas with further mineralization.

Geochemical and Metal Ratios: The company utilizes various metal ratios, including copper-nickel, copper-cobalt, and platinum ratios, to aid in exploration. They collaborate with global consultants and universities (e.g., University of Tasmania, University of Leicester) for their work. Metallurgical work is primarily conducted in Japan and Australia. The team is in the process of modeling the flow direction and potential source direction of the mineralization, which will inform next year's exploration program.

Drill Spacing and Resource Definition: At Oval, continuous mineralization has been established over approximately 800 meters on the surface and in drilling, with widths ranging from 50 to 80 meters. Mineralization is shallow at the surface and deepens to the southeast, reaching depths of 200-250 meters before becoming narrower.

For resource definition and structural testing, drill spacing varies. In areas with higher-grade massive sulfides, drilling is closer spaced. Wider spacing is used for broader exploration. The next stage will involve deeper and more spaced-out drilling. The company anticipates moving into resource drilling in the following year, with this year's drilling focused on exploration to understand the geological extent of the gabbro intrusion.

Satellite Target Exploration: The company is actively exploring satellite targets like MS1 and MS2, and Quartz Hill. Drilling has commenced on these targets, which are considered blind targets. While the economic grade is not yet confirmed, the presence of the expected host rock with visual copper mineralization and potential PGEs is highly encouraging and indicates proximity to mineralization. The focus is on understanding the geology and identifying trap zones for enrichment.

Next Year's Drilling Program: Asian Battery Metals plans to announce its drilling program for the upcoming year around January.

Makhangul Project: Exploration and Mineralization

Makhangul is a neighboring asset to Oval, known for base metal sulfide (BMS) mineralization starting from the surface. It offers relatively easy access from the company's current operations. Historical drilling in the area encountered massive sulfides. Asian Battery Metals has an exclusive agreement to acquire the project within the next four months and is conducting technical due diligence, including drilling and geophysics.

The company believes there is significant untapped potential at Makhangul, leveraging their extensive geological data for the region. Recent announcements indicate the visual encounter of over 20 meters of massive sulfide copper mineralization, confirming historic results of over 1.7% copper and close to 1 g/t gold.

Twinning and Historic Data: A hole was twinned to confirm the location and validity of historic data. The twinning confirmed expectations, with two distinct mineralization zones:

1. Shallower Gold Mineralization: Located at approximately 30 meters from the surface, historically intersecting 6 meters of mineralization with over 15 g/t gold. This is believed to be related to a breccia zone with iron oxides and potentially enriched by supergene enrichment.
2. Massive Sulfide Mineralization: Located at approximately 130-140 meters depth.

Both zones are stacking up well geologically and appear to confirm a VMS model suggested by the alteration.

Next Stages and Gold Mineralization: The next steps involve understanding the lateral and depth extension of the massive sulfide mineralization and conducting structural modeling to account for any faulting that might have shifted the mineralization. The gold mineralization, with its high grade and significant interval, makes the project more exciting. Further exploration is needed to fully understand and assess this mineralization.

Additional Exploration and VMS Systems: The company plans to conduct one more hole to understand the geological direction of the massive sulfide mineralization. They are also looking at surface sampling and visual assessment. The key focus is on the massive sulfide mineralization and understanding its extent.

The region is geologically analogous to the Rudny Altai mountain range in Kazakhstan, which hosts numerous VMS systems. This parallel geological trend extends into southwestern Mongolia, suggesting potential for VMS projects in the area. Several other VMS prospects exist around the Makhangul area, some of which could be extensions of the Makhangul deposit at depth. Historic results from other companies in the region indicate a significant and consistent geological event that formed these mineralizations, providing valuable direction for future exploration.

Internal Thresholds and Strategic Goals

Asian Battery Metals aims to define economically viable resources that can become future mines. Key considerations for project evaluation include accessibility, infrastructure development, ease of mining and development, and the potential financial burden. As a relatively small company with a market capitalization of approximately $30 million, the company prioritizes higher-grade components in projects for greater margins.

The company's strategy involves developing projects in clusters, with the potential for a centralized processing plant in the future. Their strategic goal is to define economic resources exceeding 20 million tons, potentially producing 20,000-50,000 tons of metals annually in some form.

Access to Capital and Funding Mechanisms

Mongolia offers diverse funding mechanisms for mining projects. Over the past 15 years, numerous mines have been built with funding from international financial institutions, domestic banks, and Chinese institutions. The maturation of the mining sector in Mongolia means various components can be utilized, including contractor mining, which has significant capacity due to coal mining development. Proximity to the Chinese market also facilitates easier access to funding related to off-takes.

The significant growth in Mongolia's coal exports (from approximately 5 million tons to over 80 million tons annually) demonstrates the country's capacity to develop commercially viable and cost-competitive projects, even for commodities like brown coal, which are not widely exported globally. This suggests that if a project is economically viable and competitive against Chinese domestic producers, it has a strong merit to become a mine in Mongolia.