Mongolia may take a 34% stake in Xanadu Mines Ltd.’s Kharmagtai copper-gold project after a proposal to classify the asset as a strategic deposit was submitted to the government, according to Government’s Plenipotentiary Representative Batzandan Jalbasuren. The move, announced on April 15, could bring the ASX-listed explorer’s flagship asset under partial state ownership if approved.

Strategic deposits in Mongolia are defined as mineral resources critical to national economic and developmental interests. Under existing law, the government can acquire a 34% to 50% stake in such deposits without compensation. Of the 16 deposits currently designated as strategic, seven are state-owned. Lawmakers are now pushing to expand the list to include high-potential assets such as Kharmagtai, and authorities are working to formalize and enforce these rights more actively.

Plenipotentiary Representative Batzandan, appointed to lead the initiative, is focused on expanding the strategic deposit list and determining the appropriate level of state ownership in each case.

Zijin Mining, which owns 19.4% of Xanadu and holds a 50% stake in the Kharmagtai joint venture, had been expected to increase its involvement through a proposed transaction. However, that plan now appears to be on hold as discussions continue.

Under Mongolia’s Mineral Law, no entity may hold more than 34% of the shares in a company that owns a strategic deposit, either directly or through related parties. If Kharmagtai is classified as strategic, this restriction could complicate the existing partnership between Zijin and Xanadu.

According to Batzandan, the proposal includes a total of eight deposits for strategic designation. Alongside Kharmagtai, the list features Bayan Khundii and Altan Nar – two projects owned by Toronto-listed Erdene Resource Development.