Xanadu Mines Ltd (
ASX: XAM,
TSX:XAM) (
Xanadu or the
Company) is pleased to announce a strategic
partnership (
Agreement) with Zijin Mining Group
Co., Ltd (
Zijin) to progress the Company’s
flagship Kharmagtai Copper-Gold Project
(
Kharmagtai) through its next phase of project
evaluation and decision on future development.
Under the Agreement, Zijin will invest in both
the Xanadu corporate level and the Kharmagtai project level through
a series of transactions commencing with the subscription of 139
million fully paid ordinary shares in Xanadu (New
Shares) to provide Zijin with a 9.9% shareholding in the
Company (Phase 1 Placement). The
Phase 1 Placement will be conducted at an issue price of A$0.04 per
share, representing approximately a 38% premium to Xanadu’s last
traded price of A$0.029, and will raise approximately A$5.56
million.
Two subsequent phases are then proposed (subject
to formal documentation) including a second placement of ordinary
shares at A$0.04 per share to increase Zijin’s total shareholding
in the Company to 19.99% (Phase 2 Placement) and
the creation of a 50/50 Joint Venture in Khuiten Metals Pte. Ltd.,
the entity currently 100% owned by Xanadu that holds a 76.5%
effective interest in Kharmagtai (Phase 3 JV)1,
for a cash payment of US$35 million.
Executive Chairman & Managing
Director, Colin Moorhead, said, “We are delighted to have
attracted Zijin, a global top 10 copper producer and highly capable
mine developer as our partner, and we look forward to finalising
negotiations to move Kharmagtai forward and realise its potential
on an accelerated path. This partnership is a good outcome for our
shareholders, for Mongolia and for a world looking to fill a global
copper supply gap.”
Highlights
-
Partnership with Zijin Mining Group, a global mining
company and top 10 copper producer.
-
Staged investment by Zijin to inject up to approximately
A$11 million1 into Xanadu and up
to a further US$35
million1,2
into the Kharmagtai project.
-
Phase 1 and Phase 2 Placements to be priced at A$0.04 per
share, approximately a 38% premium to Xanadu’s last traded share
price of A$0.029.
-
Phase 1 Placement expected to settle by no later than
Wednesday, 27 April 2022 with a four-month exclusivity period to
negotiate and finalise terms for the two remaining phases, subject
to Australian Foreign Investment Review Board (FIRB) approval,
People’s Republic of China (PRC) regulatory approvals, Xanadu
shareholder and other regulatory approvals.
-
Following completion of all
phases1, Kharmagtai will be well
funded for its next phase of development, leading to a decision to
construct.
About Zijin Mining Group
Zijin is a multinational mining group dedicated
to exploration and development of gold, copper, zinc and other
mineral resources globally, as well as associated refining,
processing, trading and other businesses. Its operations include
projects and operations in 14 provinces in the People’s Republic of
China (PRC) as well as 13 overseas countries
across Europe, Central Asia, Africa, Oceania and South America. It
is one of the largest Chinese mining companies distinguished by its
significant domestic and international copper and gold resource,
reserves and production.
Figure 1: Zijin’s Mining Operations in
China is available
at https://www.globenewswire.com/NewsRoom/AttachmentNg/5f0e1346-8b2d-4c25-84b1-8d83c38a0b84
Figure 2: Zijin’s Offshore Mining
Operations is available
at https://www.globenewswire.com/NewsRoom/AttachmentNg/21a0b730-9a09-4d33-8643-789940296078
Phase 1 Placement Details
New Shares issued to Zijin (by way of Jinping
(Singapore) Mining Pte. Ltd., a wholly owned indirect subsidiary of
Zijin) under the Phase 1 Placement will be issued pursuant to the
Company’s existing placement capacity under ASX Listing Rule 7.1
and will rank pari-passu with the existing fully paid ordinary
shares currently on issue. Zijin will subscribe for a total of 139
million fully paid ordinary shares at an issue price of A$0.04 per
New Share.
The issue price of A$0.04 per share
represents:
- a 37.9% premium to Xanadu’s last
close on 14 April 2022 of A$0.029 per share.
- a 37.9% premium to the 7-day VWAP
of A$0.029 per share; and
- a premium of 33.3% to the 30-day
VWAP of A$0.030 per share.
The proceeds of the Phase 1 Placement, together
with the Company’s existing cash resources, will be applied towards
working capital during the exclusive negotiation period prior to
commencement of the Pre-Feasibility Study (PFS) at
the Kharmagtai copper-gold project. Remaining cash at that point
will be used to fund Xanadu’s share of the Kharmagtai PFS.
The Placement is scheduled to settle on
Wednesday, 27 April 2022 with trading to occur on Thursday, 28
April 2022.
Following completion of the Phase 1 Placement,
the Company has granted Zijin the right to a reasonable opportunity
to participate in future capital raisings of the Company, subject
to a number of limitations and conditions (Limited and
Conditional Participation Right).3 Under the Limited and
Conditional Participation Right, the Company will notify Zijin on a
strictly confidential basis of its intention to undertake a capital
raising and Zijin will then have a very short period in which to
indicate whether it wishes to participate in that capital raising
(subject to receipt of any relevant FIRB, PRC or other required
regulatory approvals). The Limited and Conditional Participation
Right is subject to compliance with the ASX Listing Rules and
ceases where Zijin disposes of its interests in the Company to a
position below 5% and remains below that threshold for a period of
more than 20 consecutive trading days.
Xanadu and Zijin have also entered into a
four-month period of exclusivity to negotiate the second and third
phases of the strategic partnership. The relevant exclusivity deed
contains terms and conditions considered standard for an
arrangement of this nature, including no-talk, no due diligence and
notification provisions (each of which is subject to a fiduciary
carve-out), together with a break fee A$340,000 that may be payable
to Zijin in the event of the completion of a competing proposal or
where Xanadu commits a material breach of the exclusivity deed.
Phase 2 Placement and Phase 3
JV
The Phase 2 Placement will involve Zijin
subscribing for an additional tranche of ordinary shares in Xanadu
to increase its total shareholding in Xanadu to approx. 19.99%. The
Phase 2 Placement will also be made at an issue price of A$0.04 per
share and will be accompanied with a right for Zijin to appoint one
Director to the Board of Xanadu Mines Ltd (subject to Zijin
maintaining at least 10% of Xanadu (other than a result of the
dilution of Zijin by Xanadu)). The Phase 2 Placement will be
subject to FIRB approval, PRC regulatory approval, Xanadu
shareholder approval as well as other required regulatory
approvals.
The third and final stage of the partnership
(Phase 3 JV) will involve Zijin and Xanadu
establishing a 50-50 JV in Khuiten Metals Pte. Ltd.
(Khuiten), the entity which effectively owns 76.5%
of the Kharmagtai project, along with 13.5% minority holder
Ganbayar Lkhagvasuren (an Executive Director at Xanadu), and 10.0%
minority holder QGX Ltd. Under the non-binding terms agreed with
Zijin, Zijin will subscribe for shares equal to 50% of Khuiten by
way of share placement for a cash payment of US$35 million, with
Xanadu remaining the operator of the JV until a decision to
construct is made. At the point of a future construction decision,
Zijin will then become the operator of the Khuiten JV and take
leadership of the development of the mine.
The Phase 1 Placement Agreement provides that
the parties will negotiate in good faith formal documentation for
the Phase 2 Placement and Phase 3 JV. These further transactions
are subject to regulatory and shareholder approval and the parties
agreeing formal documentation. Xanadu cautions investors to not
place undue reliance upon the successful completion of Phase 2 and
Phase 3, as there can be no guarantee that formal transaction
documents will be agreed or ultimately consummated.
Xanadu has appointed Jefferies as its financial
adviser and HopgoodGanim as its legal adviser for this process.
Further updates on the finalisation of the Phase
2 Placement and Phase 3 JV transactions will be announced over
coming periods in accordance with the Company’s continuous
disclosure obligations.
Update on Kharmagtai Copper-Gold
Project
Kharmagtai is Xanadu’s flagship project, located
in the South Gobi region of Mongolia and has a Mineral Resource
Estimate4 of 1.1 billion tonnes, containing 3 million tonnes of
copper and 8 million ounces of gold. Xanadu recently released its
Kharmagtai Scoping Study5, using a conventional and low risk open
pit mine and sulphide process plant, which demonstrated a US$630
million net present value (NPV), 20% investment
rate of return (IRR) project, with a 4-year
payback, operating as a first quartile costs producer for its first
five years of operation. Multiple upside opportunities were
reported for evaluation during Pre-Feasibility Study
(PFS). Gating to PFS stage was approved by the
Board pending funding.
The next step of development at Kharmagtai will
complete a PFS and a JORC Compliant Ore Reserve, which is
anticipated to require 18 months and cost US$20 million to
complete.
Once the second and third stages of investment
by Zijin are agreed and committed, Xanadu will be well funded for
its share of the Kharmagtai PFS. Xanadu will also be funded to
progress exploration at its second project, Red Mountain, also
located in the South Gobi Desert of Mongolia.
Figure 3: Xanadu Project Locations
is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/464dea9b-b2d5-4007-a5d9-bbac01f3bd27
For further information, please contact:
Colin
Moorhead |
|
Spencer
Cole |
Executive Chairman & Managing Director |
|
Chief Financial Officer & Chief Development Officer |
E: colin.moorhead@xanadumines.com |
|
E: spencer.cole@xanadumines.com |
P: +61 2 8280 7497 |
|
|
W: www.xanadumines.com |
|
|
This Announcement was authorised for release by
Xanadu’s Board of Directors.
All dollar amounts are in Australian dollars
unless otherwise indicated.
Not an offer in the United
StatesThis announcement has been prepared for publication
in Australia and may not be released to US wire services or
distributed in the United States. This announcement does not
constitute an offer to sell, or a solicitation of an offer to buy,
securities in the United States or any other jurisdiction. Any
securities described in this announcement have not been, and will
not be, registered under the US Securities Act of 1933 and may not
be offered or sold in the United States except in transactions
exempt from, or not subject to, the registration of the US
Securities Act and applicable US state securities laws.
_____________________________________________________________________________________________________________________________________________
1 The Phase 1 Placement Agreement provides
that the parties will negotiate in good faith formal documentation
for the Phase 2 Placement and Phase 3 JV. These further
transactions are subject to regulatory and shareholder approvals
and the parties agreeing formal documentation.2 Assuming
AUD/USD exchange rate of $0.74.3 The Limited and Conditional
Participation Right only applies where ASX Listing Rule 10.11 does
not apply (or ceases to apply) to the issue of securities to Zijin
or the Company is required to seek shareholder approval in respect
of the relevant capital raising (in which case, the participation
by Zijin will also be put to shareholders for
consideration).4 ASX/TSX Announcement Kharmagtai Resource
Grows to 1.1 billion Tonnes - 8 December 2021. Xanadu is not aware
of any new information or data that materially affects the
information included in the relevant market announcement and, that
all material assumptions and technical parameters underpinning the
estimates continue to apply and have not materially changed.5
ASX/TSX Announcement Scoping Study Kharmagtai Copper-Gold Project -
6 April 2022. Xanadu is not aware of any new information or data
that materially affects the information included in the relevant
market announcement and, that all material assumptions and
technical parameters underpinning the estimates continue to apply
and have not materially changed.
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