RGN | Xanadu Mines

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On the cusp of defining a Tier 1 copper asset in


ADU NES

n Mongolia’s underexplored South Gobi Desert

MINING | XANADU MINES


At the start of December 2021, Xanadu Mines announced a significant update to its Kharmagtai copper-gold project in Mongolia. After completing 120 diamond drill holes for 69,479 metres since the last resource upgrade in 2018, the new mineral resource estimate (MRE) exceeded 1 billion tonnes – an aspirational target maintained by the ASX and TSXlisted company since it began exploring the 40km2 porphyry district in the vast South Gobi Desert several years prior. The current 1.1 billion tonnes mineral resource contains 3 million tonnes (Mt) of contained copper and 8 million ounces (Moz) of contained gold, with a notable 100 Mt higher grade core at 0.8% copper equivalent. At the time, CEO Andrew Stewart said the MRE positioned Kharmagtai as one of the largest undeveloped copper and gold resources on the ASX, and one of the biggest globally. Speaking to RGN in the new year, he highlighted the importance of the high-grade core: “When you see these copper systems, they can be big and low grade. But it’s the ones that have that goldrich core that are interesting, and we saw that at Kharmagtai. We knew the system would get past those hurdles of what we see is a Tier 1 asset and we are very pleased to hit that upgrade after all the drilling we’ve done over the last three to four years.”

The key benefit of having a high-grade core in a large, low grade porphyry system like Kharmagtai is derived in project economics, Stewart explains. This type of project is intrinsically high capex, but a strong gold to copper ratio can reduce the payback period and improve the financial model. “If you can get your gold credits into early production, that allows you to bring back that payback period, which is critically important for any copper project around the world and it’s a key differentiator for our Kharmagtai project.”

Developing a Tier 1 project The mention of a ‘Tier 1 asset’ is all too common in the mining sector these days, however the phrasing looks appropriate in the case of Kharmagtai. Going by Mark Bristow’s definition of a Tier 1 asset as having 5 Moz in contained gold or 5 Mt in contained copper, Xanadu’s


MINING | XANADU MINES


flagship project is well on the way to achieving Tier 1 status. While the short-term focus will fall on growing the high-grade core to improve the economics of the initial open pit mine, there exists significant upside potential at depth. The company has identified drilling below 400 metres as an opportunity to link porphyry deposits, building out the underground development which will follow the multi decade open pit at Kharmagtai. Stewart is confident that Xanadu can make further gains to the mineral resource and feels the project is ready to be fleshed out with clearer economics. A scoping study is currently underway with a view to it being gated towards a pre-feasibility study. The scoping study will evaluate key advantages of the project including the high-grade zones, low capital intensity, favourable ESG factors and close proximity to markets.


MINING | XANADU MINES

“We were busily working on optimisations before Christmas and hope to see a big chunk of the 1 billion tonnes resource sitting within the open cut. We’re looking to report on the first phases of that work before the end of Q1 this year,” says Stewart.

Code red for copper The smooth delivery of Xanadu’s Tier 1 project draws added importance from the gaping supply-demand dynamics taking hold in the copper market. Rapidly building demand from the renewable energy and electric vehicle (EV) segments of the global clean energy push has been met by an unprecedented paucity of greenfield copper discoveries over the last decade. Markets have already responded to this escalating global supply crisis, with the copper price breaching US$10,000 per tonne last year. More recently, global copper


inventories dropped to just

lot of demand for copper right

little to worry about when it

over 200,000 ounces - barely

now. I only see that growing

comes to ESG risk. This has

enough to cover three days of

because we’re not effectively

not stopped the company

worldwide consumption.

replacing the copper that’s

from doing what it should

being used today,” Stewart

in terms of broad-based

stresses.

ESG compliance (its annual

Investment bank Goldman Sachs was even compelled to

sustainability report was first

warn of an ‘extreme scarcity

“We remain reliant on a couple

published in 2020), in spite

episode’ by the end of the year,

of very old, very deep mines

of the ESG-friendly project

while reiterating its bullish

in Chile, and we know it takes

fundamentals.

forecast for copper to average

a long time and a lot of capital

$11,875 a tonne in 2022, rising

to build these projects. So, we

“We are looking at a project

steadily to $15,000 during 2025.

see that copper price being

where we have built a

stronger for longer until these

strong relationship with

“We’re seeing a market that is

new projects like Kharmagtai

the community we work

incredibly strong and there’s a

come online.”

around. We have a shallow,

XAN A DU M IN ES AT A G L A N C E

Low ESG risk

conventional mine with conventional metallurgy and

The global copper supply

no arsenic. We have very well

pipeline has also been

developed water resources and

impacted in recent years by

power nearby.”

new projects being slowed

STOCK TICKER: ASX:XAM, TSX:XAM MARKET CAPITALISATION: US$23.7 MILLION (as of February 16, 2022) aj

down – or even halted

Stewart also highlights the

entirely – by local and

speed of project development

federal complaints, typically

in Mongolia, referencing

with regards to social and

the nearby Oyu Tolgoi

environmental issues.

mine discovered by Robert Friedland in the early

However, in a sparsely

2000s. By 2013, Rio Tinto

populated country like

– in partnership with the

Mongolia, and with a

Mongolian government - had

simple open pit project like

advanced the mega-project

Kharmagtai, Xanadu has

into production.


MINING | XANADU MINES

“I don’t know too many other projects in the world that have advanced that rapidly,” he says. After the recent resolution of an economic dispute with the government, Rio is moving forward with the $6.93 billion underground expansion project at Oyu Tolgoi. “In the next few years, we’ll see one of the largest copper projects in the world developed, and that’s happened in relatively quick time. It’s great to see.” Xanadu’s own fully permitted mining licence with 30 years tenure provides a strong basis for the company to begin rapidly advancing Kharmagtai through the feasibility stages.

God’s gift to explorers Xanadu recently took part in the Future Minerals Forum in Saudi Arabia, a new industry event that aims to shine a light on the opportunities available in ‘frontier’ mining DR ANDREW STEWART, XANADU MINES MANAGING DIRECTOR AND CEO

jurisdictions stretching from Africa to the Middle East and


central Asia. In a corporate

And after the huge success of

being operated by listed

pitch at the event, Stewart

the Oyu Tolgoi development,

mining and exploration

described Mongolia as ‘god’s

the Mongolian government

companies seeking the next

gift to explorers’ – a nod to the

has realised the economic

big discovery.

opportunity for discoveries in

potential that lays dormant

the underexplored terrain of

in its substantial mineral

“We can only draw attention

the Gobi Desert.

reserves, and is actively

to what’s happening in this

supporting explorers and mine

part of the world, and there’s

Put simply, the chances of

developers who can deliver

certainly a lot happening

similar greenfield discoveries

substantial local employment

in terms of infrastructure

in mature exploration settings

opportunities.

projects. It’s an exciting place

like Australia or South America

to be, a good place to have

are significantly smaller, and

A favourable 25% corporate

discoveries and it goes back to

miners there are typically

income tax regime has

that ESG footprint.

compelled to dig deeper

encouraged foreign direct

into existing deposits at ever

investment into the country,

“We’re in the most sparsely

increasing costs.

with 27 projects currently

populated country in the


MINING | XANADU MINES

world. There’s very little

“We have the ability to move

to get the globally significant

vegetation in the South Gobi,

quickly, drill holes and

copper-gold project off the

good water resources and

there’s no bureaucracy in the

ground.

you’re on the doorstep of the

exploration process. I think

world’s biggest consumer in

it’s a real advantage for a small

“In my experience when you

China.”

company. We have a very large

have this type of discovery,

copper-gold project and our

it creates interest and people

drilling costs are a fraction

line up to see them and

of what you get around the

certainly fund them,” Stewart

world.”

confidently concludes.

The next step in the journey Looking back over the last decade during which Xanadu has operated in Mongolia,

And after the latest upgrade to

Stewart reflects on the ups and the mineral resource, Stewart downs that are to be expected

believes that the Kharmagtai

in any frontier environment

project possesses all the

before expressing an overall

ingredients coveted by a larger

contentment with the

player that could provide the

company’s position in one

funding assistance required

of the world’s most exciting geological districts.


Published by Anderson Murray Media Ltd

To tell the resource market your story, contact: editorial@resourceglobalnetwork.com

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