Xanadu Mines has received Australian Foreign Investment Review Board approval for Chinese mining giant Zijin to acquire shares in the company to develop its Kharmagtai copper-gold project in Mongolia.
The board’s no-objection notification is the first of three approvals required for Zijin to continue its three-phase investment in Xanadu that was announced in April.
The deal still requires approval from the Chinese Government and Xanadu shareholders in order to be formalised.
However, Xanadu is confident both approvals are on track in addition to funding from the remaining two investment phases for the upcoming December quarter.
The first phase of the deal that has been completed involved 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.
At phase two Zijin will invest another $5.7 million to increase its stake to 19.99 per cent.
Through the third phase Zijin will create a 50-50 joint venture with Khuiten Metals, currently wholly owned by Xanadu.
Khuiten owns a 76.5 per cent stake in the Kharmagtai mine.
Zijin plans to acquire the Xanadu shares through its fully owned subsidiary Jinping Mining.
The investment includes US$20 million to fully fund a prefeasibility study and an additional US$15 million to fund continued exploration at Kharmagtai.
After the three phases of investment are completed, Xanadu will retain control and remain the operator of the project with any change of control requiring a post-deal offer from Zijin subject to shareholder approval.
Xanadu Mines Executive Chairman and Managing Director, Colin Moorhead said: “FIRB approval is an important step in finalising our agreement with Zijin, confirming the Australian Government’s approval of the transaction. This brings us one step closer to the funding we need to develop Kharmagtai to a decision to construct and continue to realise its potential.”
Xanadu’s Kharmagtai project has a mineral resource estimate identified at a massive 1.1b tonnes for three million tonnes of contained copper and eight million ounces of gold.
Based on the company’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.
Earlier this month Xanadu completed metallurgical recoveries of up to 91 per cent gold and 46 per cent copper from preliminary glycine and cyanide leach testing at the project.
The tests were performed on partially oxidised material from surface to 30m depth and returned head grades between 0.52 and 2.25 grams per tonne gold and from 0.12 up to 0.67 per cent copper.
Xanadu says the results show a potential treatment path for about 90 million tonnes of oxidised material treated as waste in the company’s scoping study due to low flotation recovery.
The leach tests aimed to determine metallurgical recovery of gold and copper and gauge the potential of additional glycine to enhance recovery and reduce cyanide consumption.
Xanadu says the results are the first step in evaluating a material uplift opportunity identified in the scoping study to generate additional cash flow by leaching partially oxidised, near-surface material.
The company also fully owns its Red Mountain project in southern Mongolia, where early exploration has defined broad zones of strong quartz stockwork veining and associated high-grade gold mineralisation of about 0.5 to more than 5 grams per tonne gold and 0.3 to 1.5 per cent copper.
Xanadu says it is positioning Kharmagtai as the “Cadia Hill of Mongolia”, a reference to the giant Newcrest Mining-owned copper-gold mine in NSW. Management says Kharmagtai stacks up well against Cadia Hill on strip ratio, scale and copper grade.
Moorhead is no stranger to Newcrest’s operations, having previously risen through the ranks to Executive Manager and been responsible for global exploration and resource development with the company from 2008 to 2015.
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By Matt Birney
