When veteran geologist Colin Moorhead took up the invitation to chair Xanadu Mines in late 2019, the veteran geologist was under no illusions.
The company, which owns a controlling interest in the massive Kharmagtai project in Mongolia - hosting 4.7 million tonnes of copper and 11 million ounces of gold - needed a major reset if it was ever going to generate a solid return for shareholders.
After Xanadu acquired 76.5 per cent of Kharmagtai in 2014, the market was buzzing at the prospect of a minnow getting its hands on a discovery credited to Canadian-listed Ivanhoe Mines, led by legendary mining entrepreneur Robert Friedland.
For a few years Xanadu was flying high. The share price jumped 10-fold to 30 cents by 2018 before the sheer size of funding required to develop the project on the back of the junior mining company’s modest bank balance eventually proved too much.
The message was crystal clear. Shareholders were demanding a fresh set of eyes, pushing the seasoned rock kicker to change the narrative.
Rather than developing up a small oxide deposit to start with – a strategy flawed by low grades, poor recoveries and high strip ratios – Xanadu would need to focus its attention instead on growing the resource through systematic drilling programs.
Within six months, the company’s senior ranks were bolstered with the addition of Spencer Cole – another ex-Newcrest executive – as chief financial officer.
By the end of 2020, a new plan had been hatched.
If Xanadu could unlock enough value in Kharmagtai’s copper potential to draw the interest of some major mining houses, there was an even money chance management could trigger a liquidity event.
Backed to the tune of $12 million in fresh capital from new institutions and cornerstone investors, Xanadu immediately set about peppering the deposit with 20 kilometres of drill testing.
The deposit steadily grew and on the back of a positive scoping study in early 2022, Xanadu convinced the $100 billion Chinese mining giant, Zijin Mining Group, to step up to the plate and back the project with a funding deal.
The two-pronged agreement involved Zijin sinking $12.8M into Xanadu in exchange for 19.99 per cent of the company. But the real muscle came in the form of a US$35M (A$55M) cash injection into a newly minted joint venture (JV).
The JV structure elevated Zijin’s funding of Kharmagtai to project level, allowing it to complete a pivotal prefeasibility study.
Xanadu and Zijin own an even split in the JV through Khuiten Metals, which controls 76.5 per cent of the project, effectively providing Xanadu with a 38.25 per cent interest in the mammoth copper-gold project.
After sealing the landmark deal, the joint venture revealed Kharmagtai’s jaw-dropping global resource.
A whopping 730Mt of that bounty now sits in the reserve category, packing in 1.6Mt of copper and 4M ounces of gold at grades of 0.21 per cent and 0.17 grams per tonne (g/t), respectively.
But the serious sizzle lies in high-grade core – punching well above its weight with 100Mt at a copper equivalent grade of 0.8 per cent. This rich centrepiece could drive early returns and fast-track Kharmagtai’s transformation into a globally significant producer.
Late last year the long-awaited feasibility study was also handed down on Kharmagtai revealing a net present value of US$930M (A$1.45B) using an 8 per cent discount rate against a capital cost of US$890M (A$1.4B) to produce an annual EBITDA of US$293M (A$458M).
With a forecast production of up to 80,000t per annum of copper and 170,000 ounces of gold at a cost of 70c per pound copper, the project is forecast to wash its face within four years. It has a staggering 29-year mine life.
The release of the prefeasibility study did more than just outline the economics - it also opened a pathway for the final stage of the original funding agreement with Zijin.
Xanadu finds itself sitting in the box seat, armed with not one, but three strategic levers that could unlock serious value for shareholders.
The company’s first option is to simply roll up the sleeves and co-fund its 50 per cent share of project construction alongside Zijin, which would involve sourcing north of A$700M in fresh funding.
Option two gives Xanadu the right - but not the obligation - to cash in half of its remaining stake in the JV for a cool US$25M. Zijin would also foot all of Xanadu’s construction bill via an interest-bearing loan to be repaid out of future project revenues.
The third - and boldest - option on the table is to sell the lot. If Xanadu chooses to offload its full remaining 50 per cent stake, it would walk away with a war chest of US$50M in cold, hard cash.
Faced with these various alternatives, Xanadu’s board picked option two, which still lets the company ride the upside without having to raise a dime upfront. The board was then due to hold an extraordinary meeting on April 11 to gain shareholder approval.
However, in a dramatic twist worthy of a corporate thriller, Xanadu Mines hit the pause button on the key shareholder meeting - just as the final stage of its game-changing deal with Zijin Mining was set to be rubber-stamped.
Instead, the company has inked a Deed of Variation with Zijin, pushing back the expiry of a lucrative 25 per cent put option by at least 30 days after their current exclusivity period lapses.
The move, cloaked in secrecy, has been made to allow both parties more time to thrash out a range of potential corporate manoeuvres, hinting that something far bigger could be brewing behind the scenes.
Under the terms of the extension, Zijin retains exclusivity through a classic ‘no shop, no talk, no due diligence’ clause, preventing Xanadu from entertaining any rival suitors - for now.
But the delay has sparked speculation that the original deal terms with Zijin might be on the negotiating table, with room for a sweeter outcome. By keeping its cards close to its chest, Xanadu may have also just re-lit the spark for other interested players who once considered the deal done and dusted.
Whether it’s about extracting a better price, negotiating new terms, or attracting fresh bids, one thing is clear: Moorhead appears to have had his wish granted. Xanadu has seized the upper hand in the chess match, which with any luck, will land a big payday for shareholders. The clock is ticking and punters will be watching every move.
By James Pearson

Published Date:2025-04-18