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Canberra OK's Chinese giant Zijin to pick up 20% in Xanadu Mines’ Mongolian copper-gold play

Mon 22 Aug 22, 11:48am (AEST)
A depiction of the Chinese flag and the Australian flag in close contact, representing a close relationship between both countries
Source: iStock

Key Points

  • Following key approvals from bureaucrats, Xanadu Mines will see China’s Zijin mining buy shares in the company through a Singaporean subsidiary
  • Now that the Foreign Investment Review Board (FIRB) has greenlit the move, Xanadu only needs shareholder approval
  • Chinese regulatory approvals are likely to go seamlessly, given Zijin’s stature in the jurisdiction

Xanadu Mines’ (ASX:XAM) shares have risen 6.25% in morning trade to 3.4c on the news Chinese mining giant Zijin has been approved to invest in the company as it progresses the Kharmagtai copper-gold play. 

Kharmagtai, located in Mongolia, was the subject of much success earlier this month, when Xanadu used a novel downstream separation method to recover 91% of gold in early stage ore tests using technology patented in Western Australia. 

Today’s approval from Canberra (to be specific, the FIRB) for Zijin to further invest in Xanadu Mines, picking up a 19.99% shareholding. 

Zijin to pick up another 10% stake

In April, the company saw Zijin pick up a 9.98% share in Xanadu through the acquisition of 139m ordinary fully paid shares at 4c for $5.56m. 

While a gentle relationship building process remains underway between the relatively new Albanese ALP government, and that of Xi Jinping’s, industrial collaboration between the Australian and Chinese private sectors remains robust as ever through 2022. 

Zijin is pouring millions into the copper-gold project, which boasts a strong ESG focus. That focus was what prompted the company to use a novel downstream refining technique that requires less liquid cyanide than usually utilised in gold operations. 

Xanadu notes negotiations surrounding the pending acquisition of a 10% stake remain ongoing. 

Summary look at Kharmagtai

Currently, mineralisation remains open in all directions on-site and ongoing drilling is underway to further define mineral resources. 

A four year payback is expected for the mine with initial capital expenditure valued at US$690m for an open pit development and associated processing infrastructure. 

The internal rate of return for Kharmagtai is tipped at 20% after tax across a thirty year mine life.

Australians in Mongolia 

It’s also worth noting that a growing number of Australian-listed companies are operating in Mongolia in recent years.

Xanadu Mines is joined in the jurisdiction (while unrelated) by a CSG energy partnership spearheaded by TMK Energy (ASX:TMK) along with Talon Energy (ASX:TPD)

Jade Gas (ASX:JGH) and Elixir Energy (ASX:EXR) both develop similar projects, while Rio Tinto (ASX:RIO) and private mining contractor Thiess also operate in the region. 

The Australian website for the Mongolian embassy notes over 50 Australian companies operate in Mongolia across all sectors.

The building of positive sentiment in Xanadu following its partnership with Zijin is evident in the company's three month share price performance chart
The building of positive sentiment in Xanadu following its partnership with Zijin is evident in the company's three month share price performance chart
Disclaimer: Market Index helps small-cap ASX listed companies connect with Australian investors through clear and concise articles on key developments. Xanadu Mines 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.

 

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Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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