ASX microcap partners with China’s 3rd biggest miner—and China just approved the JV

The People’s Republic of China (PRC) just approved its third largest miner, Zijin Mining Group, to proceed with a JV alongside ASX-listed microcap Xanadu Mines (ASX: XAM) on Friday. 

Zijin notified Xanadu management the company has now cleared its final regulatory hurdle to progress the Kharmagtai copper-gold project in Mongolia, meaning Xanadu and Zijin’s 50/50 JV is now legally ratified. 

“It is pleasing to now have PRC regulatory approval, clearing the final hurdle to launch our partnership with Zijin,” Xanadu chief Colin Moorhead said. 

The mine is in the same jurisdiction as Rio Tinto’s (ASX: RIO) flagship Oyu Tolgoi copper-gold mine. Rio recently boosted its stake in that project to 66%, and it expects to double copper production by 2030.

PRC approval follows raise

Xanadu raised $1.1m in capital to finalise the approvals process last month. The company also reported a “remaining $7.2m [will be] invested into Xanadu at the company level.”

“The company will now proceed to finalise arrangements with Zijin to progress to completion,” Xanadu wrote on Friday. 

Xanadu Mines will act as operator of the JV. The governments of both companies’ registered jurisdictions are on board, with Canberra approving the project back in August last year. 

Background context

The partnership will fully fund the Kharmagtai project through its next round of pre-development stages. First and foremost, the project requires a Pre-Feasibility Study (PFS). 

That PFS is essentially guaranteed to make it across the line, given that Zijin will pay Xanadu $35m to fund the study. 

The PFS is expected to take 18 months to complete (read: due in 2HCY24). New exploration drilling is set to commence in March.

“The team is ready to go with drill rigs in place and study work ready to start immediately. We expect to provide regular updates and news-flow through the next 18-month PFS period,” Moorhead added.

Discovery exploration and the PFS process will both kick off next week. 

Adding to Scoping Study 

Pre-development progress at Kharmagtai is well underway. The company posted the results of its Scoping Study for the project in 2019, with an updated version was released in April last year.

Now the PFS, ready for 2024, will further enhance some of the metrics around the latest version of the Scoping Study, which boasts the following key takeaways: 

• Open pit mine in Mongolian minerals province

• Producing up to 50,000 tonnes of copper per annum (50ktpa) in first five years 

• Producing up to 110kozpa gold in first five years 

• Range of 20% for Internal Rate of Return (16-25%)

• Net value of US$630m (range US$405m-$850m) 

• Four year payback

• Thirty year Life of Mine (LOM)

Areas of interest for PFS

In particular, the PFS will look at alternative processing solutions for oxidised mineralisation present on-site in the first twenty metres of earth overlying sulphide gold and copper. 

If feasible, the company could turn what is effectively waste rock into cash generating ore. 

The study will also examine electrification of key assets on-site to reduce overall Scope 1 emissions and further evaluate low-complexity processing technology solutions. 

The mineral resource for the project also remains open at depth and along strike, meaning that further exploration is on the cards on-site. 

“[Targets] will be investigated as a matter of priority and could prove transformational for Kharmagtai project economics,” the company wrote on Friday.

“Xanadu is targeting a real and sustained uplift relative to the Scoping Study economics.”

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Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Xanadu was a client at the time of publishing. All coverage contains factual information only and should not be interpreted as an opinion or financial advice.