Xanadu Mines is one step closer to finalising its phase two and three investment agreement for its Mongolian projects with Zijin Mining Group after the formal documentation for the deal was executed.
Once approvals have been met, Xanadu will use Zijin’s investment to continue exploration of its prospective Red Mountain project in addition to making a final investment decision on taking its Kharmagtai project to the construction phase.
The first phase of the deal has been completed 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.
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. This 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.
Zijin’s total investment in the partnership with Xanadu is estimated at around $64 million with $12.8 million to be invested in Xanadu shares and $51.5 million directly into Kharmagtai. The finalisation of both phases of the agreement will be subject to both government and shareholder approvals.
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’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.
Xanadu Mines Chairman and Managing Director, Colin Moorhead said: “We are pleased to have finalised these agreements, achieving a mutually beneficial, long-term partnership with Zijin, an experienced international developer and top 5 operator of large scale, open-pit copper-gold projects.”
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.
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.
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