Xanadu Mines (ASX:XAM) is considering several strategic options for the development of the Kharmagtai Copper-Gold Project in Mongolia, with its joint venture partner Zijin Mining Group (SHA:601899).
In September 2024, delivery of a Prefeasibility Study (PFS) for the project triggered a six-month negotiation period with Zijin to determine the best way to take Kharmagtai forward.
During this period, which notionally ends in late March 2025, Xanadu is considering its strategic options for the project. These include securing funding for its 50% interest in the project until the next major decision point in the project (FID) – via a process being managed by Bacchus Capital.
It also includes a selldown of the project (either at Xanadu or project level) to a third party, and exercising one of the two put options under the originally negotiated JV agreement with Zijin, or alternative negotiated outcome.
Both companies are expected to meet in China early next month to discuss the scope, budget, and schedule of the project’s development. The budget for the next stage of work cannot be approved without Xanadu having a viable funding solution in place.
The Bacchus Capital option is progressing and several groups are currently in the data room conducting due diligence. Discussions with parties are ongoing with an aim to provide clarity on funding for the Bankable Feasibility Study (BFS) in the coming months.
Xanadu, which has a market capitalisation of $86 million, is also considering exercising one of the two put options under the originally negotiated joint venture agreement with Zijin, or an alternative negotiated outcome.
These include selling Xanadu’s 50% share in the project to Zijin for US$50 million ($79.67 million) cash or selling half of its shares in the project for US$25 million and being loan carried on commercial terms while retaining 19.125% of the project.
Xanadu says the second option is materially superior to option one, as it would create liquidity for the company in the short term, as well as allow it to maintain an interest in Kharmagtai.
Managing Director Colin Moorhead says Zijin has been pushing forward with preparing for the project’s next phase through to the final investment decision.
“We were also grateful to see Zijin’s support for the company’s recent capital raising, with both of these events validating Zijin’s strong support for the Kharmagtai Project,” Moorhead says.
Through the joint venture, both partners hold a 38.25% beneficial interest in the project with an estimated post-tax net present value at an 8% discounted rate calculated at US$930 million.
Moorhead adds that the Kharmagtai PFS described the project as a low-cost, low complexity, open pit mining operation that delivers 165,000 tonnes of copper and 75,000 ounces of gold per annum over 29 years.
“Furthermore, the deposit has significant upside potential needing more work in the next stage such as oxide leaching and accounting for the significant amount of silver reporting to the concentrate,” he says.
“Significant exploration potential also remains as the deposits remain open at depth, with real potential to further grow over time as is common for other porphyries of similar nature.”
Xanadu Mines is an ASX and TSX dual-listed copper and gold explorer operating in Mongolia.
Zijin Mining Group is a multi-national mining company headquartered in China. The company is engaged in exploring and extracting copper, gold, zinc, lithium, and silver.
Write to Aaliyah Rogan at Mining.com.au
Images: Xanadu Mines
