Quarterly Activities Report May 01, 2023 07:00 ET | Source: Xanadu Mines Ltd.

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Overig advies 01/05/2023 13:31
March 2023 Quarter Highlights
During the quarter ended 31 March 2023 (March Quarter), Xanadu Mines Ltd (Xanadu or the Company) completed its landmark investment deal with Zijin Mining Group Co. Limited (Zijin), following shareholder approval at the Extraordinary General Meeting1 (EGM) and Zijin receiving regulatory approval from the People’s Republic of China.2 This included the Phase 2 placement resulting in Zijin as 19.4% shareholder in Xanadu and the Phase 3 Joint Venture (JV) resulting in a 50-50 JV in Khuiten Metals, the Xanadu subsidiary which controls the Kharmagtai Copper-Gold project (Kharmagtai). This Strategic Partnership is a transformational step for the Company, providing crucial funding to bring Kharmagtai to a formal Decision to Mine and realise its value potential.


Kharmagtai value uplift progressing on all fronts.
Pre-Feasibility Study (PFS) underway focused on data acquisition including infill drilling and metallurgical characterisation, water reserve exploration and scenario modelling.
Infill Drilling commenced with 4 diamond drill rigs including 30,000 metres of planned drilling and a comprehensive geometallurgical programme.3
Discovery exploration drilling underway with 1 diamond drill rig targeting significant exploration upside remaining on the tenement.3

Completed investment deal with Zijin Mining Group and cash received on 10 March 2023.
Receipt of approval from Xanadu Mines Shareholders at 7 February 2023 EGM.
Receipt of regulatory approvals from the People’s Republic of China.
A$7,164,645.28 million Phase 2 placement for 179,116,132 Xanadu shares at $0.04 per share, a 33% premium to previous market close, increasing Zijin shareholding to 19.42% of Xanadu.4
US$35 million Phase 3 investment directly into the Kharmagtai project, creating a 50/50 Joint Venture (JV) in Khuiten Metals, which controls Kharmagtai.
Appointment of Non-Executive Director from Zijin, Mr Shaoyang Shen.4
Completed bridging placement on 18 January 2023, issuing 41,887,844 fully paid ordinary shares at an issue price of $0.027 each, raising $1,130,971 (before costs).5
Xanadu is well funded with $6.2 million in funding at the corporate level and US$34 million in the Khuiten Metals JV which controls the Kharmagtai project.
Mr. William Hundy appointed Company Secretary upon retirement of Mr. Philip Mackey.6
Executive Chairman & Managing Director, Colin Moorhead, said: “The March Quarter marked a significant milestone in the history of Xanadu, where the company finalised a strategic partnership with Zijin Mining, a global gold and copper mining major with the balance sheet and capabilities required to build and operate a large scale open pit copper mine such as Kharmagtai. This marks the culmination of our 2020 Strategy, which had three horizons to a) Upgrade the Kharmagtai Resource, b) Deliver a Scoping Study that Demonstrates the Kharmagtai Value Proposition, and c) Bring in a Funding Partner to Develop Kharmagtai. The successful delivery of this strategy is good for Xanadu, for our Shareholders, for Zijin our partner, and for Mongolia.

With the final stage of our 2020 Strategy delivered, the Company has cash in the bank and is moving forward to generate real value at Kharmagtai, with the PFS, Infill Drilling and Discovery Exploration all underway. As the Operator of the Kharmagtai Joint Venture, we are working effectively with our partners at Zijin Mining and appreciate their technical contributions to deliver a high quality PFS and bring Kharmagtai to a Decision to Mine. We look forward to providing regular updates as the work program advances over the next 18 months.”

Chairman & MD Colin Moorhead standing on White Hill with drill rigs in background.

Figure 1. Chairman & MD Colin Moorhead standing on White Hill with drill rigs in background.

Kharmagtai Copper-Gold Project

During the March Quarter, the Company commenced its PFS, Infill Drilling and Discovery Exploration activities which are funded by US$35 million from the JV with Zijin.

Pre-Feasibility Study – Building on a Successful Scoping Study

The 2022 Scoping Study7,8 confirmed Kharmagtai as a potential world class, low cost, long life mine with an estimated 20% IRR (range 16-25%), US$630 million NPV at 8% (range US$ 405-850 million) and 4-year payback (range 4-7 years) over 30 year mine life. This included first quartile all in sustaining costs and projected production ranges from 30-50ktpa copper and 50-110kozpa gold production during the first five years. It is based on a JORC compliant Mineral Resource of 1.1 billion tonnes containing 3 million tonnes of copper, 8 million tonnes of gold and 100 million tonnes of higher grade zones at > 0.8% copper equivalent grade.

The Scoping Study outlined a conventional, low technical complexity open pit and process plant with low 0.9:1 strip ratio for the first five years. However, it also identified growth-focussed upside opportunities which could materially upgrade the economics of the project, all of which will be investigated during the PFS. These included:

Oxide Processing: Top 20-30 metres of partially oxidised mineralisation cannot be processed through flotation and is conservatively treated as waste in the Scoping Study. The PFS will evaluate the use of glycine-cyanide leach technology to convert this pre-strip waste into cash generating ore.
Mining Technology: Use of electrified haulage and in-pit crush & convey technology could significantly reduce mining costs as well as Scope 1 emissions. This has the potential to deepen and extend current pit shells, incorporating additional, deep zones of high-grade ore, adding to the valuation and enhancing life of the mine.
Processing Technology: PFS will evaluate coarse ore flotation and beneficiation technologies, targeted at reducing energy requirements and operating cost per tonne of ore processed.
Exploration Drilling: Kharmagtai Mineral Resource remains open at depth and along strike. Deeper drilling at Stockwork Hill completed after the 2021 Mineral Resource has already confirmed continuation of the higher-grade bornite mineralisation at depth. There is also significant potential to grow White Hill Resource and new discoveries across the tenement. These will be investigated as a matter of priority and could prove transformational for Kharmagtai project economics.
Xanadu is operator of the joint venture during the PFS delivery period of 18 months, after which Zijin will become operator for final engineering, construction and operation stages of the project.

During the PFS, Xanadu and its partner Zijin will complete all major project trade-off decisions and refine capital and operating cost estimates to +/-15-25%, leading to selection of a single go-forward option for final engineering and construction. With the study and inclusion of upside opportunities above, Xanadu and Zijin are targeting a real and sustained uplift relative to the Scoping Study economics.

Pre-Feasibility Study – Infill Drilling

Kharmagtai currently has an Inferred and Indicated Resource of 1.1Bt containing 3Mt Cu and 8Moz Au.9

As part of the PFS, sufficient drilling will be completed to upgrade that part of the Kharmagtai Mineral Resource that is considered to be mineable via open pit to at least Indicated classification and, subject to the study outcomes, will enable reporting of a Maiden Ore Reserve. To achieve this, approximately 30,000 metres of infill drilling has been designed to upgrade and extend strike length of the shallow open pit resource areas and selected deeper high-grade zones (Figure 2).

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