We have a Mini in our armory at work that has been red lined because the barrel is horribly shot out. It keyholes at 25 yards leaving a beautiful sillouette of a bullet in the paper. Groups at 25 yards are about 12". Heavier bullets will do this too.
It could be a lot of things. Take it to a good gunsmith and have him check it out thoroughly before deciding. On my AR 15 that was keyholing badly it ended up being the flash suppressor being incorrectly mounted. Once it was fixed it shot great.
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