Strategic Partnership with Zijin Mining Group

In April 2022, Xanadu Mines entered into a strategic partnership with Zijin Mining Group Co., Ltd (Zijin) to progress the Company’s flagship Kharmagtai Copper-Gold Project through its next phase of project evaluation and decision on future development¹.

Under the Agreement, Zijin has invested in both the Xanadu corporate level and the Kharmagtai project level through a series of transactions. The Phase 1 Placement was completed on 27 April 2022², and the Phase 2 and 3 Placements were completed on 10 March 2023^{3 4}.

The significant cash investment by Zijin provides funding for the Pre-Feasibility Study for Kharmagtai (Kharmagtai PFS) which commenced in early 2023 and will take the project to a potential Final Investment Decision (FID) as early as 2024. These funds will also drive Xanadu’s exploration growth program, which will target high-grade mineralisation at depth, higher-grade deposit extensions, and new discoveries within the 66.5 square kilometre tenement.

Under the Strategic Partnership, Zijin invested at both the Xanadu corporate level and Kharmagtai project level through a series of transactions:

• Phase 1 Placement already completed; Zijin acquired a 9.84% interest in Xanadu, with the issue of 139 million shares at A$0.04/share.
• Phase 2 Placement will increase Zijin’s shareholding in Xanadu to 19.99%, with the issue of approx. 179.1 million shares at A$0.04/share (an approx. 43% premium relative to Xanadu’s share price at 19 December 2022).
• Phase 3 JV (or Kharmagtai JV) will result in the parties establishing a 50:50 incorporated joint venture in Khuiten, the entity currently wholly owned by Xanadu which holds a 76.5% effective interest in the Kharmagtai project, in return for Zijin injecting US$35M into Khuiten to support the Kharmagtai PFS and associated expenditure on the project’s next phase.

Zijin’s total investment in the Strategic Partnership with Xanadu is estimated at approx. A$64 million³, of which approx. A$12.8 million will be invested in Xanadu shares and approx. A$51.5 million (US$35 million) directly into Kharmagtai.

The Kharmagtai PFS and discovery exploration have commenced⁵. Xanadu will remain operator of the Kharmagtai JV with an 18-month plan to complete the PFS, upon which operatorship will pass to Zijin. After the completion of the 18 month PFS, Xanadu has the option to:

• Fund its share of construction;
• Sell its 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.

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.

References:

1. ASX/TSX Announcement 19 April 2022 – Strategic Partnership with Zijin Mining and Placement
2. ASX/TSX Announcement 22 August 2022 – Foreign Investment Review Board Approves Zijin Investment in Xanadu
3. ASX/TSX Announcement 10 March 2023 – Zijin and Xanadu Transaction Completed and Kharmagtai PFS Underway
4. ASX/TSX Announcement 21 December 2022 – Investment Deal Signed with Zijin; Pathway to Kharmagtai Production
5. ASX/TSX Announcement 13 April 2023 – Kharmagtai Pre-Feasibility drilling off to a flying start