Chinese miner Zijin Mining Group has agreed to make a phased investment to acquire a 19.9% stake in Xanadu Mines, a Mongolian copper and gold exploration company.
The firm also agreed to purchase a 50% stake in Xanadu’s subsidiary Khuiten Metals for $35m.
According to the agreement, Zijin will invest in both Xanadu and the Kharmagtai copper and gold project through a series of transactions.
Under phase I, Zijin will subscribe to 139 million fully paid ordinary shares in Xanadu to provide it with a 9.9% shareholding in the latter. The Phase 1 placement is planned to be conducted at an issue price of A$0.04 per share.
Furthermore, Zijin will subscribe to a second placement of ordinary shares to increase its stake in Xanadu to 19.99%, by investing up to A$11m.
Xanadu executive chairman and managing director Colin Moorhead said: “We are delighted to have attracted Zijin, a global top ten copper producer and highly capable mine developer as our partner, and we look forward to finalising negotiations to move Kharmagtai forward and realise its potential on an accelerated path.
“This partnership is a good outcome for our shareholders, for Mongolia and for a world looking to fill a global copper supply gap.”
Zijin will also create a 50/50 joint venture with Khuiten Metals, which is currently 100% owned by Xanadu.
Khuiten Metals owns a 76.5% stake in the Kharmagtai mine in Mongolia.
A four-month period of exclusivity has been agreed upon by Xanadu and Zijin to negotiate the second and third phases of the strategic partnership.
In a press statement, Xanadu said: “The proceeds of the Phase 1 placement, together with the company’s existing cash resources, will be applied towards working capital during the exclusive negotiation period prior to commencement of the pre-feasibility study (PFS) at the Kharmagtai copper-gold project.
“Remaining cash at that point will be used to fund Xanadu’s share of the Kharmagtai PFS.”
Xanadu selected Jefferies as its financial adviser while HopgoodGanim will serve as the legal adviser for this process.
The Kharmagtai project has a mineral resource estimate of 1.1 billion tonnes, containing three million tonnes of copper and eight million ounces of gold.