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Xanadu Mines negotiates reduction in balance owing for Kharmagtai

Xanadu Mines (ASX:XAM) has negotiated a reduction in the remaining balance owing to acquire the Kharmagtai copper-gold project in Mongolia by over US$1 million.

Previous outstanding balance of the deferred consideration payable to Toronto listed Turquoise Hill Resources (NYSE:TRQ) was US$3.84 million by July 2016.

The reduction is subject to the remaining balance of US$2.8 million (A$4 million) being paid by Xanadu by March 2016.

Xanadu raised $A8.8 million in December 2015 from a placement and share purchase plan.

Under the original agreement between Xanadu and JV company Mongol Metals LLC and Turquoise Hill Resources it struck a deal to acquire a 90% interest in Kharmagtai.

Under the joint venture terms, Xanadu has the right to earn an 85% interest in the Kharmagtai project, equivalent to a 76.5% effective interest, by funding deferred acquisition and exploration costs.

Kharmagtai is shaping as one of the more promising copper-gold projects in Asia. The project boasts a JORC resource of 203 million tonnes containing 1,500,000 pounds of copper and 2.2 million ounces of gold, although this looks a certainty to rise given ongoing exploration.

The reduction in deferred consideration sees Xanadu with full repayment at less than budget with its main asset fully secured and an improved balance sheet.

Large resource in the offing at Kharmagtai

The resource base currently contains 1,500,000 pounds of copper and 2.2 million ounces of gold. Tellingly, the resource represents the results of exploration over only a small portion of the porphyry complex at Kharmagtai to date.

Hence the potential exists to host a large scale high-grade copper-gold mineralisation and potentially shallow high-grade epithermal-style gold mineralisation.

Exploration recommences

Exploration drilling and field activities recommenced at Kharmagtai in December. A technical review identified new porphyry drill targets and potentially significant high-grade carbonate-base metal gold mineralisation was identified.

With a strongly supported capital raising under the belt, Xanadu can now step up the pace at Kharmagtai given its improved understanding of the structural controls on mineralisation.

This provides the means for the potential of the highly mineralised and underexplored porphyry copper-gold district to show its mantle as one of the most promising copper-gold projects in Asia.

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