Xanadu Mines has transitioned operatorship of its flagship Kharmagtai project to Zijin Mining, delivered key feasibility milestones, and is now exploring strategic funding and corporate options amid a solid cash position.
- Kharmagtai Pre-Feasibility Study and Maiden Ore Reserve delivered, triggering JV operatorship transfer to Zijin
- Xanadu holds two put options to sell part or all of its Kharmagtai interest, currently under exclusivity discussions with Zijin
- Completed placement of over 26 million shares to Zijin’s subsidiary, strengthening strategic partnership
- Well-funded with A$3.73 million cash as of March 31, 2025, preparing for Bankable Feasibility Study
- Ongoing exploration planned at Red Mountain and Sant Tolgoi projects with potential JV funding
Kharmagtai Milestones and JV Transition
During the March 2025 quarter, Xanadu Mines Ltd marked significant progress at its Kharmagtai Copper-Gold Project in Mongolia. The delivery of a comprehensive Pre-Feasibility Study (PFS) and a Maiden Ore Reserve in late 2024 triggered pivotal contractual events under the joint venture agreement with Zijin Mining Group Co. Ltd. Notably, operatorship of the joint venture transitioned fully to Zijin, positioning the Chinese mining giant to lead the project into its next development phase.
The PFS outlined a robust project with a 29-year mine life, annual production of 75,000 tonnes of copper and 165,000 ounces of gold, an internal rate of return of 21%, and a net present value of US$890 million. These metrics underpin the project’s potential as Mongolia’s next major copper mine, a sentiment echoed by Xanadu’s Executive Chairman and Managing Director, Colin Moorhead.
Strategic Funding and Put Options
With Zijin now operator, Xanadu is actively reviewing strategic options to fund its 50% share of the Kharmagtai Joint Venture. Central to this is a six-month Put Option Exercise Period, which commenced in October 2024, granting Xanadu the right to sell either its entire interest or half of it back to Zijin under predefined terms. The company has publicly recommended exercising the option to sell half its stake for US$25 million plus a loan carry arrangement, which an independent expert has deemed fair and reasonable for shareholders.
However, in a recent development, Xanadu and Zijin agreed to extend the exclusivity period for these put options, allowing further negotiations on a range of potential corporate transactions. This move reflects a cautious but constructive approach to unlocking value, balancing liquidity needs with strategic partnership considerations.
Corporate Developments and Capital Position
To solidify its partnership with Zijin, Xanadu completed a placement of over 26.5 million fully paid ordinary shares to Zijin’s wholly owned subsidiary at A$0.055 per share. This capital injection, alongside prudent financial management, leaves Xanadu well-funded with A$3.73 million in cash at the end of March 2025. The company also held an Extraordinary General Meeting in April 2025, ratifying prior share issues and refreshing its capacity to raise funds if needed.
Looking ahead, Xanadu is preparing to commence a Bankable Feasibility Study (BFS) at Kharmagtai, a critical step toward a Final Investment Decision. The BFS will address key project derisking elements such as confirming power and water supplies and securing an investment agreement with the Mongolian government, which has recently signaled a more pragmatic stance toward mining investments.
Exploration and Regional Projects
Beyond Kharmagtai, Xanadu continues to advance exploration at its Red Mountain Copper-Gold and Sant Tolgoi Copper-Nickel projects. Field programs are planned for the summer season, with ongoing discussions to secure joint venture partners or alternative funding to accelerate these assets. Notably, Sant Tolgoi requires additional exploration expenditure to meet earn-in obligations, with environmental conditions influencing timing.
These regional projects complement Xanadu’s portfolio, offering potential for further resource growth and diversification beyond the flagship Kharmagtai JV.
Financial Overview and Outlook
Financially, Xanadu reported exploration expenditures consistent with advancing its project pipeline, alongside corporate administration costs. The company’s cash flow reflects a temporary increase in outflows related to joint venture payments and advisory fees ahead of the April EGM. Importantly, multiple funding pathways remain in place, including equity, debt, and hybrid instruments, supported by advisors Bacchus Capital.
Management expresses confidence in sustaining operations and meeting business objectives, emphasizing the flexibility afforded by the put options, potential corporate transactions with Zijin, and a refreshed capacity for equity raising if required.
Bottom Line?
Xanadu’s next moves on Kharmagtai funding and JV negotiations will be pivotal in shaping its path to production and shareholder value.
Questions in the middle?
- Will Xanadu exercise its put options or pursue alternative corporate transactions with Zijin?
- How will the Bankable Feasibility Study outcomes influence the Final Investment Decision timeline?
- What funding arrangements will be secured for advancing Red Mountain and Sant Tolgoi projects?