Xanadu on mission to become Mongolia’s next copper producer

Xanadu Mines boss Colin Moorhead says funding security from the company’s strategic partnership with Chinese giant Zijin Mining fosters a strong investment case for production at its Kharmagtai copper-gold project in Mongolia.

Just last month, the company tabled a staggering resource estimate upgrade for Kharmagtai, jumping to 1.3 billion tonnes with 3.4 million tonnes of contained copper and 8.5 million gold ounces. The updated estimate represents a 12 per cent increase in tonnes, a 15 per cent surge in contained copper and a 9 per cent jump in contained gold.

Last year, Xanadu completed two phases of its strategic partnership with Zijin, providing access to funding for its recent exploration blitz at the operation. The deal saw Zijin invest US$35 million (AU$52 million), which will also be used to complete the Kharmagtai prefeasibility study (PFS).

A 50:50 joint venture (JV) has been created between the two partners at a project level, with Xanadu the operator on the ground. The partnership has allocated 18 months to knock over the PFS, while an earlier scoping study identified several upside opportunities that could materially upgrade the economics of the project.

In a recent interview with international industry analyst Global Business Reports, Moorhead said that unlike many other exploration juniors, the company’s project funding had already been secured.

Xanadu Mines managing director and chief executive officer Colin Moorhead said: “Our strategic partnership with Zijin provides funding certainty through to commercial production. Kharmagtai is strongly positioned to become Mongolia’s next large-scale copper mine, amongst a handful of new global mines delivering copper within the next four years.”

Moorhead said the project had no “fatal flaws” or environmental, social and governance (ESG) barriers. He believed it had the ability to escalate quickly towards commercialism, with first concentrate production expected by the fourth financial quarter of 2027.

He also outlined the company’s “three-horizon” strategy aimed at driving the development of its operations in Mongolia.

“Horizon one is to deliver a high-quality PFS for Kharmagtai, leading to a conversation with Zijin regarding the next steps,” he said.

“Horizon two is to continue exploring, primarily at Kharmagtai, but also at our 100 per cent-owned Red Mountain project, located to the east near the town of Sainshand. Comparatively, Red Mountain is at an earlier stage, but is a very attractive porphyry copper-gold system.

“Horizon three is to build our portfolio in Mongolia, a largely unexplored country with significant geological potential.”

He pointed out that Xanadu had recently secured an earn-in right for up to 80 per cent in Sant Tolgoi – a highly-prospective magmatic copper and nickel sulfide project in Western Mongolia. Exploration at Sant Tolgoi, which hosts multiple shallow copper-nickel targets over several kilometres of strike, is planned to start next month.

Management believes the operation boasts a real opportunity for the discovery of magmatic copper and nickel mineralisation, with signs of several systems in both historical and recent drilling.

In what would prove a significant boost for Xanadu’s copper aspirations, Moorhead believes demand for the resource will increase as the world progresses towards decarbonisation, while Kharmagtai’s gold credits act as a significant sweetener for prospective smelters.

“Currently, we are going through a slow period in the global economy, largely driven by geopolitical events,” he said.

“Despite this, market expectations for copper concentrate supply tightness are lifting, as witnessed by the recent first price drop since 2021 for annual copper smelter fee negotiations.  

“Gold and copper tend to act as a natural hedge. Therefore, big copper deposits with elevated gold are very attractive.

“Kharmagtai will produce a very clean copper concentrate with few impurities, but its strong gold content is attractive for smelters, which are currently competing for limited supply.” 

The company is now about half-way towards producing its 18-month PFS, which is expected to be delivered in September this year and will be quickly followed by an investment decision.

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