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Zijin Mining and Xanadu Mines Sign Share Subscription Agreement to Jointly Develop a Copper-Gold Project in Mongolia

Zijin News - On April 20, Zijin Mining announced that it has signed an agreement with Xanadu Mines Ltd. (“Xanadu”). Zijin Mining plans to acquire a 19.9% interest in Xanadu and a 50% interest in Xanadu’s subsidiary Khuiten Metals Pte. Ltd. (“Khuiten Metals” or the “Joint Venture”) through a phased investment arrangement, which will allow Zijin to ultimately own a 45.9% stake in the Kharmagtai copper-gold project.

Kharmagtai, an advanced exploration project, is located in the South Gobi region of Mongolia and is Xanadu’s flagship asset. The project has a mineral resource estimate of 1.1 billion tonnes, containing about 2.93 million tonnes of copper, and 7.8 million ounces (243 tonnes) of gold.

The mine’s deposit is large and thick, with the main orebody still having extensive unexplored areas along the strike and in the down-dip extension, giving it significant potential to add more reserves. Meanwhile, the project is close to border-crossings between China and Mongolia, and has mature logistics and sales channels.

According to its scoping study, the Kharmagtai project has an estimated US$ 630 million NPV, a 20% IRR and a 4-year payback, based on conventional open-pit mining and sulphide flotation. An additional US$20 million will be invested to complete its pre-feasibility study in 18 months, to produce a JORC compliant mineral reserve estimate.

Zijin Mining see Kharmagtai as a project that has a large amount of resources, one that requires a moderate total investment and holds significant potential for development. However, the mine has low overall grades and faces a challenging environment for development, such as water shortages and the potential to encounter the difficulties faced by its neighboring mining projects.

Zijin’s involvement will facilitate the project’s development, given the group’s rich experience and leading technological expertise in developing and utilizing low-grade resources. Through phased investment and in-depth research on the project, Zijin will be able to manage the investment risks that the project entail.

According to the agreement, Zijin will make a three-phased investment in Xanadu and the Kharmagtai Copper-gold Project.

Phase 1: Zijin will subscribe for 139 million ordinary shares of Xanadu at an issue price of A$0.04 per share through its wholly-owned subsidiary in Singapore. Following completion of the Phase 1 placement, Zijin Mining will hold a 9.9% interest in the Xanadu, which is worth about A$5.56 million, or approximately RMB26.06 million.

Phase 2: Zijin will continue to acquire a 10% interest in Xanadu at A$ 0.04 per share, increasing its stake to 19.9% with the right to appoint one director to the Board of Xanadu Mines.

Phase 3: Zijin will subscribe for shares of Khuiten Metals, a 100% owned subsidiary of Xanadu, by way of share placement for a cash payment of US$35 million. Once the subscription is completed, Zijin and Xanadu will each hold a 50% stake in Khuiten Metals, the entity that owns 76.5% of the Kharmagtai copper-gold project in Mongolia. In respect of the operatorship of the joint venture, Xanadu remains the operator of the JV until a decision to construct is made. At the point of a future construction decision, Zijin will then become the operator of the Khuiten JV and lead the development of the mine.