Bastion wins Zijin backing for Xanadu bid in takeover twist

The takeover battle for ASX and Toronto-listed junior Xanadu Mines has been thrown into overdrive after Chinese mining giant Zijin Mining - a 15.7 per cent shareholder in Xanadu - accepted Bastion Mining’s 8 cents-a-share off-market offer. 

Zijin is also Xanadu’s 50:50 joint venture partner in the company’s flagship Kharmagtai copper-gold project in Mongolia – a stake it will retain.

Zijin’s move to accept the bid for all of its Xanadu shares has significantly bolstered Bastion’s hand. It now holds a 29.67 per cent relevant interest in Xanadu, thanks to a combination of its existing 12.5 per cent stake and acceptances received to date.

Backed by Singapore-based investment outfit Boroo Pte Ltd and current Xanadu director Ganbayar Lkhagvasuren, Bastion tabled its bid for Xanadu in mid-May. 

The proposal came hot on the heels of a fizzled control deal with Zijin Mining. After the clock ran out on an exclusivity period the two companies had been using to hammer out terms, Bastion pounced. 

The endorsement by Xanadu’s biggest shareholder and key joint venture partner would appear to leave little doubt about which way the wind is blowing. 

Following Zijin’s acceptance, Xanadu’s independent takeover board committee quickly stepped up to reaffirm its recommendation that shareholders accept the Bastion offer without delay, so long as no superior bid emerges.

The takeover offer is set to close on July 1, unless it is extended. Bastion has committed to declaring the bid unconditional when it hits the 50.1 per cent shareholding threshold to secure majority control.

The flagship Kharmagtai copper-gold project in Mongolia’s South Gobi region is at the heart of the Xanadu story. The scale of the resource is eye-watering, with 730 million tonnes of ore containing 1.6 million tonnes of copper and 4 million ounces of gold.

A recent feasibility study slapped a hefty US$930M (A$1.43B) net present value on Kharmagtai, based on a capital investment of US$890M (A$1.36B). The project is tipped to pump out 80,000t of copper and 170,000 ounces of gold a year, with a razor-sharp operating cost of just 70 cents per pound copper.

The numbers stack up fast, with Kharmagtai expected to pay for itself in four years and keep the cash flowing for almost three decades. It has a projected EBITDA of US$293 million (A$450 million) a year.

A last-minute twist in the story for control of the monster Mongolian project is always possible, but Xanadu’s independent directors say punters holding out for a white knight may be out of luck, with a higher bid now looking unlikely. 

With Zijin backing the play and the deal now appearing to be all done bar the shouting, Bastion is looking well placed to walk away with the prize.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au