Under the deal, the junior explorer will issue $A7.3 million of Xanadu shares to Noble at a price of 70c each – helping the stock rally 9.7% to 68c yesterday.

The placement is expected to occur on March 31.

Both parties have formed a “strategic alliance” to create 50:50 joint ventures over Xanadu’s coking coal, iron ore and ferro alloy opportunities, but formal agreements are yet to be executed.

“The strategic alliance with Noble is a significant step forward for Xanadu and an endorsement of our exploration expertise, in-country experience and knowledge, and the untapped potential that exists for energy and minerals in neighbouring markets, particularly China,” Xanadu chairman Brian Thornton said.

“The alliance, while focusing on coking coal, iron ore and ferro alloys, will also allow Xanadu to continue to advance its existing Galshar and Khar Tarvaga thermal coal projects and its copper-gold assets in the southeast Gobi.”

Xanadu fully acquired the Galshar thermal coal project in June and has set an exploration target of 175-225 million tonnes.

Low ash and sulfur seams up to 21 metres thick were identified at the project back in 1975.

A drilling program is on the cards this year. The project is about 65 kilometres east of the nearest Trans Mongolian railway spur at a fluorspar mine in Bor-Ondur.

Xanadu’s Hutag Uul copper project and Elgen-Zos gold project are both in southeastern Mongolia near the Chinese border.

The Mongolian government found iron ore occurrences within the exploration permit of the Khar Tarvaga thermal coal project in the early 1990s.

According to its November prospectus, Xanadu is on the hunt for “coking coals close to China”, but does not have any pure coking coal projects.

Noble acquired a 4.1% interest in Mongolian coking coal explorer Aspire Mining last month.