Mongolian Resource Play

[Tackler]

QGX to begin drilling at Shuteen in November

2004-10-26 12:39 ET - News Release

Mr. David Anderson reports

QGX LTD.: 2 PORPHYRY TARGETS IDENTIFIED AT SHUTEEN--DRILLING TO COMMENCE IN NOVEMBER; SIGNIFICANT PORPHYRY ALTERATION DISCOVERED 25 KM ESE OF OYU TOLGOI

QGX Ltd. advises that recent exploration efforts at Shuteen and on a licence block 25 kilometres east-southeast of Oyu Tolgoi (OT East) have identified three new porphyry Cu-Au targets. Targets identified at Shuteen will be drilled starting in mid-November. The discovery of porphyry-style alteration at OT East occurred in the latter part of the field season and is considered significant, given its close proximity to the Ivanhoe Mines Ltd. Oyu Tolgoi porphyry copper-gold deposit.

David Anderson, chief executive officer of QGX Ltd., commented as follows: "I am pleased that our exploration team has been able to develop drill targets at Shuteen so quickly. It confirms our belief in the mineral potential of Shuteen. I am also pleased with the new prospect discovery at OT East. This property is at an early stage of exploration but the presence of widespread advanced argillic alteration at surface, its occurrence on the same regional gravity trend that hosts Oyu Tolgoi and its close proximity to Oyu Tolgoi give this prospect a high-priority rating."

Shuteen

The Shuteen property was originally acquired by QGX in 1997 and joint ventured to Ivanhoe Mines Ltd. in 2002. QGX regained control of the lease this past summer (see news in Stockwatch July 26, 2004). Under the new structure, QGX has an 80-per-cent interest in the Shuteen property, and Genghis Holding Company Ltd., owned jointly by Ivanhoe and Jinshan Gold Mines Inc., retains a 20-per-cent carried interest in the property. QGX has committed to expend $710,000 (U.S.) on Shuteen within 24 months.

The Shuteen prospect is located approximately 120 kilometres north-northeast of Oyu Tolgoi and occurs within the southern Mongolian mineralized belt hosting Oyu Tolgoi and the Kharmagtai/Ovoot Hyar properties that are subject to a separate joint venture between QGX and Ivanhoe. The three licences that form the Shuteen property cover approximately 220 square kilometres.

QGX initiated an extensive review of the historical data before commencing geophysical and geological surveys at Shuteen in early August of 2004. Over 200 kilometres of gradient array induced polarization lines and 20 kilometres of Insight induced polarization lines have been conducted to date. In addition, a gravity survey covering over 190 square kilometres of ground has been completed. These surveys have been conducted principally over four areas: Black Hills, Southwest Breccias, the southern portion of the Main alteration zone and the Taana veins. Two of these areas, Black Hills and Southwest Breccias, have been advanced to a drill-ready stage. Work continues on the south Main alteration zone and the Taana veins as well as other areas.

The following is an update on the two drill targets identified to date, the Black Hills and Southwest Breccias.

Black Hills

Black Hills consists of an approximately six-square-kilometre area located in the northeastern corner of the Shuteen licence. The area is characterized by favourable geology consisting of multiple porphyry dikes and plutons, as well as tourmaline breccia bodies, emplaced into andesitic flows and volcaniclastic rocks. Unidirectional solidification textures, which are magmatic-hydrothermal features observed in porphyry copper plutons worldwide, are present at Black Hills.

The favourable geology is also coincident with magnetic and induced polarization anomalies. The primary geophysical features of interest are a series of gradient-array induced polarization highs typically coincident with resistivity highs within a magnetic low. These anomalies occur over a distance of 2.2 kilometres along an 80-degree trend (one of the most prominent structural trends of the district) and are interpreted to represent the intrusive centres of the porphyry system. Past drilling by Czech geological teams in the perimeter areas of the Black Hills returned anomalous copper, including multiple intersections greater than 0.5 per cent Cu. QGX advises that the historical drilling completed by the Czechs was not made in compliance with current National Instrument 43-101 standards. Given the close proximity of the Czech holes to the current drill targets, QGX geologists believe the copper intersected by the Czechs was generated by the Black Hills porphyry plutons.

Geological mapping is continuing at Black Hills to uncover additional mineralized porphyry copper centres as well as to constrain the interpretation of the geophysical data.

Southwest Breccias

Previous trenching in the Southwest Breccias area by Ivanhoe yielded values of up to 800 parts per million copper, 1.7 parts per million gold, 100 parts per million arsenic, greater than 1,500 parts per million zinc and greater than 10 parts per million molybdenum. The mineralization is hosted within hydrothermal tourmaline breccia as well as tourmaline-replaced andesite and volcaniclastic sedimentary rocks. The mineralization is also coincident with a well-defined induced polarization resistivity high. This anomaly is localized by the intersection of two prominent structural trends striking northeast and west-northwest. The strongest response is associated with the northeast trend and has dimensions of approximately 300 metres long by 140 metres wide. The slightly lower amplitude anomaly trending west-northwest measures approximately 500 metres long by 260 metres wide.

Drilling at the Black Hills and Southwest Breccias areas is planned to commence in mid-November.

OT East

Reconnaissance mapping on the OT East licence block has identified a zone of silicification and advanced argillic alteration approximately 25 kilometres east-southeast of Ivanhoe's Oyu Tolgoi porphyry copper-gold deposit. The altered rocks are similar in age to the rocks that overlie the Oyu Tolgoi deposit and are located on the same regional gravity trend. Advanced argillic alteration is characteristic of the upper portions of many porphyry systems and is well developed in the Central Oyu zone of the Oyu Tolgoi deposit. The presence of similar alteration at OT East makes this a high-priority area for QGX. Additional mapping and geophysical programs are planned for the property.

Patrick Redmond, chief geologist of QGX Ltd., is the qualified person (as defined by National Instrument 43-101) who has reviewed and approved the technical information contained in this press release.