Xanadu, Zijin JV completes crucial funding phases of Mongolian copper-gold project

Copper and gold explorer Xanadu Mines (ASX: XAM) has closed the final phases of a strategic partnership with China’s Zijin Mining.

Providing crucial funding for the flagship copper-gold project, the completion of phase 2 and phase 3 include the following milestones:

• $7.16 million placement of more than 179 million Xanadu shares at 4 cents a share – a 33% premium to the company’s latest closing price, bumping Zijin’s shareholding to 19.42%

• US$35 million invested in the Kharmagtai project, creating a 50/50 joint venture at the project level

• Xanadu is the operator of the JV, with an 18-month plan to complete the Kharmagtai pre-feasibility study

• Appointment of Mr Shaoyang Shen as a non-executive director of Xanadu, as nominated by Zijin under the Phase 2 Share Subscription Agreement.

“We are pleased to have money in the bank and PFS activities underway,” said Colin Moorhead, Xanadu’s executive chairman and managing director.

“We have already started working successfully with our partners at Zijin and with Mr Shen our new director, both fully aligned with our goal for Kharmagtai to realise its potential as a globally significant copper-gold project. We expect to provide regular updates and news flow through the next 18-month PFS period.”

Source: Market Index

Strategic Partnership

Three phases of investment underpin the strategic partnership between Xanadu and Zijin:

• Phase 1 Placement: completed on 27 April 2022, raised $5.56 million via Zijin’s subscription to 139 million fully paid ordinary shares, providing a 9.9% shareholding

• Phase 2 and 3 Placement: Completed on 10 March 2023, they provide a second placement at 4 cents a share to increase Zijin’s shareholding to 19.42%, and

• Creation of a 50/50 joint venture in Khuiten Metals, owned 100% by Xanadu, which holds a 76.5% interest in Kharmagtai, for a US$35 million cash investment

PFS to build on previous Scoping Study

The PFS will investigate several growth-focused upside opportunities, which follow on from the 2022 Scoping study. This confirmed Kharmagtai as a potential world-class long-life mine with 20% initial rate of return, US$630 million net present value at 8% (ranging between US$405 million andUS$850 million) and four-year payback over a 30-year mine life.

In addition, the scoping study demonstrated first-quartile all-in sustaining costs and projected production ranges from 50-110 kozpa of gold and 30-50 ktpa of copper over the first five years. This is based on a JORC-compliant mineral resource of 1.1 billion tonnes, containing 3 million tonnes of copper, 8 million tonnes of gold and 100 million tonnes of higher-grade zones of copper, with a grade of more than 0.8% or equivalent (This is considered a medium- to high-grade deposit, according to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC)).

PFS goals

• Oxide processing, which will evaluate the use of glycine-cyanide leach technology to convert the top 20 to 30 metres of partially oxidised mineralisation into cash-generating ore.

• Mining technology, using electrified haulage and in-pit crush and convey technology to reduce mining costs and Scope 1 emissions significantly. This will potentially deepen and extend pit shells and incorporate additional zones of high-grade ore, adding more value and enhancing mine life.

• Processing technology, evaluate coarse ore flotation and other technologies with the aim of reducing energy requirements and improving project efficiencies

• Exploration drilling of White Hill resource, with significant potential for new discoveries here, following the confirmed higher-grade bornite mineralisation finds after deeper drilling at Stockwork Hill in 2021.

What’s next?

After completion of the PFS, Xanadu has the option to: A) Independently fund its share of construction B) Sell is 50% share of the JV to Zijin for US$50 million C) Sell its half-share (25%) to Zijin for US$25 million plus a zero-cash loan carry for the remaining 25%

All major project trade-off decisions and capital refinement and operating costs estimates to within 15-25% will be completed by Xanadu and its partner Zijin during the PFS. This will lead to a single go-forward option for final engineering and construction.

Xanadu is the operator of the joint venture during the PFS delivery period of 18 months, after which Zijin will become the operator for the final engineering, construction and operation stages of the project.

Disclaimer: Market Index helps small-cap ASX-listed companies connect with Australian investors through clear and concise articles on key developments. Xanadu Mine (ASX: XAM) 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.