A phase two and three investment agreement between Xanadu Mines and Zijin Mining Group for Xanadu’s Mongolian copper-gold projects has been given the go ahead after the deal received final approval from China. The partnership will fully fund the ASX-listed Xanadu’s flagship Kharmagtai copper-gold project through the next phase of evaluation and exploration as it builds towards a decision to mine.
Xanadu will also use Zijin’s investment to continue exploration of its prospective Red Mountain project in addition to making a final investment decision on taking Kharmagtai to the construction phase.
Global mining company Zijin has notified Xanadu of the receipt of regulatory approvals from the Chinese government that completes the final part of the process to progress phase 2 and 3 of its partnership agreement.
The first phase of the deal involving Zijin investing $5.6m for a total of 139 million fully paid ordinary shares, giving it a 9.9 per cent minority stake in Xanadu has been completed. At phase two Zijin will invest another $7.2 million to increase its stake to 19.99 per cent with the issue of around 179.1 million shares at 4c per share.
Through the third phase Zijin will create a 50-50 joint venture with Khuiten Metals, currently wholly owned by Xanadu. The deal will include Zijin investing US$35 million that is already ear-marked to be used to complete the Kharmagtai pre-feasibility study in addition to continuing exploration and supporting ongoing expenditure at the site.
Importantly, Xanadu will be the operator of the joint venture and has an 18-month plan to complete its pre-feasibility study for the flagship project.
Once the pre-feasibility study is complete, Xanadu has options going forward including the opportunity to independently fund its share of the construction of Kharmagtai. It can either sell its share of the joint venture to Zijin for US$50 million or sell half its share for US$25 million plus a zero cash loan carry for the remaining 25 per cent to commercial production.
Xanadu Mines Executive Chairman and Managing Director, Colin Moorhead said: “After strong support from shareholders at the recent Xanadu extraordinary general meeting, it is pleasing to now have PRC regulatory approval, clearing the final hurdle to launch our partnership with Zijin. We look forward to working with Zijin to add real value to Kharmagtai, which is already a globally significant copper-gold project.”
Kharmagtai has a mineral resource estimate identified at a massive 1.1 billion tonnes for three million tonnes of contained copper and eight million ounces of gold. Based on Xanadu’s scoping study predictions for the first five years of production, Kharmagtai shows a diminutive strip ratio of just 0.9, an averaged milled copper grade of 0.29 per cent and the company expects to produce an average of 37,000 tonnes of copper per year.
Red Mountain is located within the Dornogovi Province of southern Mongolia, approximately 420km southeast of Ulaanbaatar and 70km west of the provincial centre of Sainshand. Previous exploration at the prospect has defined several broad zones of strongly mineralised quartz stockwork veining associated with high-grade gold and increasing alteration strength, with the mineralisation style suggesting strong potential for depth extensions.
With the final steps of the Zijin partnership approved, drill rigs in place and study work ready to begin immediately, the market will be excited to see what Xanadu can unearth at its Mongolian copper-gold projects in the near future.
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By Matt Birney
