Can you explain the latest developments at Kharmagtai?

Following Kharmagtai PEA publication in 2022, we created a joint venture with Zijin Mining Group, comprising a US$35 million direct project investment to fund the PFS, as well as growth-focused discovery exploration. The PFS features both drilling, which has improved confidence in the resource, and metallurgical testwork for detailed process engineering, to determine optimum ore throughput and end-product specifications. Beyond that, we need to understand our people and infrastructure requirements, how we efficiently manage waste and tailings, as well as permitting. The recently upgraded MRE is 1.3 billion t, containing 3.4 million tons copper and 8.5 million oz gold. Our 66.5 square km mining lease hosts a big system, comprising multiple porphyry events and accented by highergrade components. It works on scale, good gold credits and low stripping ratio, so mining cost is relatively low and all in sustaining cost globally competitive. Our current base case concept is 50,000 t/y copper and 110,000 oz/y gold production for 30 years of openpit mining.

Furthermore, the system remains open in all directions; as such, the full system extent is expected to evolve over time. Given encouraging deeper exploration drilling results, there is potential for future underground operations too. What is Xanadu’s three-horizon strategy?

Our initial strategy was to explore and define a solid MRE and create a base case PEA to attract a funding partner. We have ticked all the boxes. Now, our Horizon 1 is to deliver a high-quality PFS for Kharmagtai, leading to a conversation with Zijin regarding the next steps. Horizon 2 is to continue exploring; primarily at Kharmagtai, but also our 100% owned Red Mountain project, located to the east, near the town of Sainshand. Comparatively, it is at an earlier stage, but is a very attractive porphyry copper-gold system. We intend to recommence drilling soon. Horizon 3 is to build our portfolio in Mongolia, a largely unexplored country with significant geological potential. In this regard, we recently secured earn-in rights for up to 80% in Sant Tolgoi, a highly prospective magmatic copper and nickel sulphide project in Western Mongolia. Exploration is planned to start in March 2024. In summary, our 3 Horizon strategy aims to maximise share price performance during 2024, and potentially beyond. How do you read current copper and gold fundamentals?

As world decarbonizes, copper demand will increase to address insufficient copper production in the pipeline to meet demand going forward. Currently, we are going through a slow period in the global economy, largely driven by adverse geopolitical events. 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 product supply. What areas of improvement do you see in Mongolia to attract more mining investment?

Our experience operating in Mongolia has been very good. What I would say to the government is that without juniors to advance projects, they will struggle to attract majors to invest billions. The government recognizes the issues that make it difficult for junior companies to invest here and is working towards addressing these. This includes guaranteeing more certainty around the fiscal regime. The government is a young democracy, but I believe they recognize that to be globally competitive changes are necessary to attract investment. What is the investment case for Xanadu Mines and Kharmagtai?

We are a great investment proposition; we have a large copper mine that we are shaping into the best it can be. Furthermore, unlike other juniors, our project funding has been secured. Our strategic partnership with Zijin provides funding certainty through to commercial production. Also, the project has no fatal flaws or ESG barriers. It can deliver production rather quickly; first concentrate production expected 4Q 2027. It is strongly positioned to become Mongolia’s next large-scale copper mine, plus amongst only a handful of new global mines delivering copper within the next four years.