Final Regulatory Approval Funds Kharmagtai Pre-Feasibility Study and Exploration
February 27 2023 - 06:00AM
Xanadu Mines Ltd (
ASX: XAM, TSX: XAM)
(
Xanadu or the
Company) is
pleased to announce that Zijin Mining Group Co., Ltd.
(
Zijin) has advised Xanadu of the receipt of
regulatory approvals from the People’s Republic of China
(
PRC), which completes the final key regulatory
approval required to progress Phase 2 and Phase 3 of the Strategic
Partnership1 between Xanadu and Zijin. The Strategic Partnership
will fully fund the Company’s flagship Kharmagtai Copper-Gold
Project (
Kharmagtai) through the next phase of
project evaluation and exploration, leading to formal Decision to
Mine. It will also provide funding to Xanadu for activities outside
of Kharmagtai such as our second project at Red Mountain. The
Company will now proceed to finalise arrangements with Zijin to
progress to completion.
Highlights
-
Final hurdle cleared to execute Strategic Partnership and
50-50 Joint Venture (JV) with Zijin in the Kharmagtai copper-gold
project.
-
Remaining A$7.2 million to be invested in Xanadu, at
company level.
-
Additional US$35 million to be invested directly in
Kharmagtai project.
-
Kharmagtai Pre-Feasibility Study (PFS) and Discovery
Exploration to commence March 2023.
-
PFS will evaluate growth-focussed opportunities in Mining
& Processing Technologies and higher-grade focussed Discovery
Exploration, aimed at materially upgrading the base case Scoping
Study2.
-
Xanadu is Operator of the JV with an 18-month plan to
complete the PFS.
-
Post PFS, Xanadu has options to a) independently fund its
share of construction, b) sell its 50% share of the JV to Zijin for
US$50M, or c) sell half its share of the JV (25%) to Zijin for
US$25M plus a zero cash loan carry for the remaining 25% to
commercial
production1.
-
Upcoming near term announcements will outline detailed
Kharmagtai PFS program of work, targeting value enhancement,
Resource Definition Drilling and Discovery
Exploration.
Xanadu’s Executive Chairman & Managing Director,
Colin Moorhead said, “After strong support from
shareholders at the recent Xanadu Extraordinary General Meeting3,
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. The team is
ready to go with drill rigs in place and study work ready to start
immediately. We expect to provide regular updates and news-flow
through the next 18-month PFS period.”
Strategic Partnership
The strategic partnership4 includes three phases
of investment. The first phase (Phase 1 Placement)
was completed on 27 April 2022, raising A$5.56 million via a
subscription by Zijin to 139 million fully paid ordinary shares in
Xanadu at A$0.04 per share to provide Zijin with a 9.9%
shareholding in the Company. The two subsequent phases (which were
subject to further negotiation, entry into formal documentation and
the remaining approvals above) include 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), for a cash investment of US$35 million.
Following the 18 month PFS, Xanadu has the
option to fund its share of construction, sell it’s 50% of the
Phase 3 JV to Zijin for US$50 million or sell half of its share of
the Phase 3 JV (25%) to Zijin for US$25 million plus a loan carry
for Xanadu’s remaining share of costs until commercial
production.
PFS to Evaluate Upside in Scoping
Study
The 2022 Scoping Study5 confirmed Kharmagtai as
a potential world class, low cost, long life mine with an estimated
20% IRR (range 16-25%), US$630 million NPV @ 8% (range US$
405-850 million) and 4-year payback (range 4-7 years) over 30 year
mine life. This included first quartile all in sustaining
costs and projected production ranges from 30-50ktpa copper and
50-110kozpa gold production during the first five years.
The Scoping Study outlined a conventional, low
technical complexity open pit and process plant with low 0.9:1
strip ratio for the first five years. However, it also identified
growth-focussed upside opportunities which could materially upgrade
the economics of the project, all of which will be investigated
during the PFS:
-
Oxide Processing: Top 20-30 metres of partially
oxidised mineralisation cannot be processed through flotation and
is conservatively treated as waste in the Scoping Study. The PFS
will evaluate the use of glycine-cyanide leach technology to
convert this pre-strip waste into cash generating ore.
-
Mining Technology: Use of electrified haulage and
in-pit crush & convey technology could significantly reduce
mining costs as well as Scope 1 emissions. This has the potential
to deepen and extend current pit shells, incorporating additional,
deep zones of high-grade ore, adding to the valuation and enhancing
life of the mine.
-
Processing Technology: PFS will evaluate coarse
ore flotation and beneficiation technologies, targeted at reducing
energy requirements and operating cost per tonne of ore
processed.
-
Exploration: Kharmagtai Mineral Resource remains
open at depth and along strike. Deeper drilling at Stockwork Hill
completed after the 2021 Mineral Resource has already confirmed
continuation of the higher-grade bornite mineralisation at depth.
There is also significant potential to grow White Hill Resource and
new discoveries across the tenement. These will be investigated as
a matter of priority and could prove transformational for
Kharmagtai project economics.
During the PFS, Xanadu and its partner Zijin
will complete all major project trade-off decisions and refine
capital and operating cost estimates to +/-15-25%, leading to
selection of a single go-forward option for final engineering and
construction. With the study and inclusion of upside opportunities
above, Xanadu is targeting a real and sustained uplift relative to
the Scoping Study economics.
About Xanadu Mines
Xanadu is an ASX and TSX listed Exploration
company operating in Mongolia. We give investors exposure to
globally significant, large-scale copper-gold discoveries and
low-cost inventory growth. Xanadu maintains a portfolio of
exploration projects and is operator of the globally significant
Kharmagtai copper-gold project.
For further information on Xanadu, please visit:
www.xanadumines.com or contact:
Colin MoorheadExecutive Chairman & Managing DirectorE:
colin.moorhead@xanadumines.com P: +61 2 8280 7497 |
Spencer ColeChief Financial OfficerE: spencer.cole@xanadumines.com
P: +61 2 8280 7497 |
This Announcement was authorised for release by
Xanadu’s Board of Directors.
1 ASX/TSX Announcement 21 December 2022 - Investment Deal Signed
with Zijin - Pathway to Production2 ASX/TSX Announcement 6 April
2022 – Scoping Study – Kharmagtai Copper-Gold Project3 ASX/TSX
Announcement 7 Feb 2023 – Results of Extraordinary General Meeting4
ASX/TSX Announcement 21 December 2022 - Investment Deal Signed with
Zijin - Pathway to Production5 ASX/TSX Announcement 6 April 2022 –
Scoping Study – Kharmagtai Copper-Gold Project
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/729d0626-ac03-47cb-8242-2bced50481c5
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