Zijin and Xanadu Transaction Completed and Kharmagtai PFS Underway
March 10 2023 - 7:56AM
Xanadu Mines Ltd (
ASX: XAM, TSX: XAM)
(
Xanadu or the
Company) is
pleased to announce the completion on 10 March 2023 of Phase 2 and
Phase 3 of its Strategic Partnership with Zijin Mining Group Co.,
Ltd. (
Zijin). This provides crucial funding for
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.
Xanadu also announces the appointment of Mr
Shaoyang Shen as a non-executive director, having been nominated by
Zijin in accordance with the Phase 2 Share Subscription
Agreement.
Highlights
- Completed A$7.164,645.28 million placement for
179,116,132 Xanadu shares at $0.04 per share, a 33% premium on the
latest market close price, increasing Zijin shareholding to 19.42%
of Xanadu.
- US$35 million invested directly into the Kharmagtai
project creating a 50/50 Joint Venture (JV) at the project
level.
- Kharmagtai Pre-Feasibility Study (PFS) and Discovery
Exploration have now commenced, with data acquisition drilling
underway.
- PFS will evaluate growth-focussed opportunities in
Mining & Processing Technologies and higher-grade focussed
Discovery Exploration, aimed at materially upgrading the base case
Scoping Study1.
- Xanadu is Operator of the JV with an 18-month plan to
complete the PFS (upon which operatorship will pass to
Zijin).
- 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.
- New, highly experienced non-executive Director
appointed to Xanadu’s Board
- 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, “We are pleased to
have money in the bank and PFS activities underway. We have already
started working successfully with our partners at Zijin and with Mr
Shen our new Director, who are fully aligned with our goal for
Kharmagtai to realise its potential as globally significant
copper-gold project. We expect to provide regular updates and
news-flow through the next 18-month PFS period.”
Strategic Partnership
The strategic partnership2 included 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 were
completed on 10 March 2023 and included a second placement of
ordinary shares at A$0.04 per share to increase Zijin’s total
shareholding in the Company to 19.42% (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 Study3 confirmed Kharmagtai as
a potential world class, low cost, long life mine with an estimated
20% IRR (range 16-25%), US$630 million NPV at 8% (range US$
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. It is
based on a JORC Compliant Mineral Resource of 1.1 billion tonnes
containing 3 million tonnes of copper, 8 million tonnes of gold and
100 million tonnes of higher grade zones at > 0.8% copper
equivalent grade.
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 Drilling: 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 and Zijin are targeting a real and sustained uplift
relative to the Scoping Study economics.
Xanadu is operator of the joint venture during
the PFS delivery period of 18 months, after which Zijin will become
operator for final engineering, construction and operation stages
of the project.
Appointment of Non-Executive
Director
Mr Shaoyang Shen has been appointed as a
non-executive director of Xanadu, having been nominated by Zijin in
accordance with the Phase 2 Share Subscription Agreement. Mr
Shaoyang Shen is the Deputy President for Corporate Development
& Overseas Operations of Zijin Mining Group. He has more than a
dozen years of operations management and investment (M&A)
experience in the mining industry. Prior to joining Zijin in 2014,
he held senior executive positions with Silvercorp Metals Inc.,
including as COO of the company and Vice President for China
Operations. He also served as a board member of Pretium Resources
Inc. from 2015 to 2018, and as a Managing Director of Barrick New
Niugini Limited from 2015 to 2019. Mr. Shen graduated from Xiamen
University with a bachelor’s degree in economy. He obtained an MBA
from the National University of Singapore and a Master of
Management & Professional Accounting (MMPA) from the University
of Toronto.
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 6 April 2022 – Scoping
Study – Kharmagtai Copper-Gold Project2 ASX/TSX Announcement 21
December 2022 - Investment Deal Signed with Zijin - Pathway to
Production3 ASX/TSX Announcement 6 April 2022 – Scoping Study –
Kharmagtai Copper-Gold Project. The material assumptions
underpinning production target and the forecast financial
information derived from the production target continue to apply
and have not materially changed.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/2e3bf58b-9acb-4c4b-97f3-fa464d4e011f
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