Xanadu Mines Ltd (ASX: XAM, TSX:XAM) (Xanadu or the Company) is pleased to announce the execution of formal documentation for Phases 2 and 3 of the transaction with Zijin Mining Group Co., Limited (Zijin)1. This entails Zijin subscribing for additional shares in Xanadu to increase its corporate shareholding to 19.99% and the formation of a 50:50 Kharmagtai Joint Venture (Kharmagtai JV) through Xanadu's 100% owned subsidiary Khuiten Metals Pte. Ltd. (Khuiten), which holds a 76.5% effective interest in the Kharmagtai copper-gold project (Kharmagtai). The significant cash investment by Zijin provides funding for the Pre-Feasibility Study for Kharmagtai (Kharmagtai PFS) which will commence in early 2023 and 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.
Highlights * Key documents executed include a Subscription Agreement for the placement in Xanadu (Phase 2 Placement) together with a Subscription Agreement and Joint Venture Shareholders' Agreement with respect to Khuiten (Phase 3 JV), creating a binding partnership with Zijin, the fifth largest global copper mining company2. * Completion of the Phase 2 Placement will raise approx. A$7.2 million for Xanadu (before costs) and increase Zijin's shareholding in Xanadu to 19.99% with the issue of approx. 179.1 million shares at A$0.04 per share. The funds raised in the Phase 2 Placement will be used for (a) the exploration of Xanadu's highly prospective Red Mountain project; (b) new project generation in southern Mongolia; and (c) corporate regulatory and administrative costs. * Under the Phase 3 JV, Zijin will invest US$35 million into the Kharmagtai project in return for the formation of a 50:50 joint venture through Xanadu's 100% owned subsidiary Khuiten. The US$35 million will be used to complete the Kharmagtai PFS, continue exploration and support associated expenditure on the project's development. * Upon delivery of the Kharmagtai PFS, Xanadu will have certain rights to partially or fully selldown its project interest in Kharmagtai to Zijin. These rights (structured as put options) provide flexibility for Xanadu to manage its exposure to future funding requirements of the project as well as provide optionality to potentially realise value for shareholders after the economics of the project development are better defined.
Executive Chairman & Managing Director, Colin Moorhead, said, 'We are pleased to have finalised these agreements, achieving a mutually beneficial, long term partnership with Zijin, an experienced international developer and top 5 operator of large scale, open-pit copper-gold projects. Once completed, Xanadu will be in a very strong financial position, fully funded to take Kharmagtai to a decision to construct and capitalised to accelerate exploration programs across its highly prospective Kharmagtai and Red Mountain tenements. The deal structure enables us to deliver value for our shareholders in the future, irrespective of the prevailing market conditions. We're looking forward to unlocking the full potential of both the world-class Kharmagtai project and our exciting Red Mountain advanced exploration project, during a period when we believe prices will be well supported given the global aggressive shift to electrification to achieve decarbonisation goals.'
For Xanadu to be entitled to be able to exercise either of the put options, the Kharmagtai PFS delivered by the Company must support an Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012) compliant Ore Reserve or National Instrument 43-101 (NI 43-101) compliant Mineral Reserve with a life of mine for the Kharmagtai Project of at least 20 years (using economic input parameters consistent with the Scoping Study conducted by the Company dated 6 April 20226 and the NI43- 101 Preliminary Economic Assessment Technical Report prepared by the Company dated 20 June 20227), with an internal rate of return of at least 20% and a payback period of less than 6 years. Xanadu will also have to receive all required shareholder approvals pre-exercise of the put option
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
About the Kharmagtai Copper-Gold Project
Kharmagtai is Xanadu's flagship project, located in the South Gobi region of Mongolia and has a Mineral Resource Estimate8 of 1.1 billion tonnes, containing 3 million tonnes of copper and 8 million ounces of gold. Xanadu recently released its Kharmagtai Scoping Study9, 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 future studies, and gating to pre-feasibility stage was approved by the Board pending funding. The next step of development at Kharmagtai will complete the Kharmagtai PFS, including delivery of a JORC Code, 2012 Compliant Ore Reserve and all Mongolian permitting and regulatory approvals to commence construction. This is anticipated to require 18 months and cost US$20 million to complete.
Contact:
Colin Moorhead
Executive Chairman & Managing Director
E: colin.moorhead@xanadumines.com
Spencer Cole
Chief Financial Officer & Chief Development Officer
E: spencer.cole@xanadumines.com
P: +61 2 8280 7497
W: www.xanadumines.com
XANADU MINES LIMITED 
