Mr. Grant Edey reports

KHAN COMPLETES PRIVATE PLACEMENT OF SHARES

Khan Resources Inc. has closed the first tranche of its private placement of common shares. Closing of the first tranche of the offering resulted in the issuance of 4.1 million common shares at a price of 40 cents per common share for gross proceeds of $1.64-million. The common shares issued are subject to usual resale restrictions until Sept. 30, 2015. No fees or commissions were paid as part of the financing. The company expects the second and final tranche of the offering to close shortly.

Use of funds

Khan intends to use the proceeds of the offering to: (i) advance proceedings to enforce the collection of a $104-million (U.S.) arbitration award rendered in March, 2015, in favour of Khan and against the government of Mongolia; and (ii) for general corporate purposes.

Related-party transaction

The offering is considered a related-party transaction for the purposes of Multilateral Instrument 61-101 (protection of minority securityholders in special transactions) because of the participation of certain insiders of the company. The interest in the offering and anticipated effect on securityholdings of related parties following the offering are as set out in the attached table.

                      INTEREST IN OFFERING AND SECURITYHOLDINGS

                                                  Postclosing
                                                    number of
                                                       common
                                                       shares,
                                                  directly or
                                                   indirectly,  Postclosing
                Relationship                     beneficially percentage of
                      to the   Interest in the       owned or common shares
Name                 company      offering         controlled       of Khan
                              Amount $    Shares
Camac Partners
LLC through
two of its                10%
funds            shareholder  $400,000 1,000,000   11,252,321         13.67%
West Face
Capital Inc.,
through one of            10%
its funds        shareholder  $300,000   750,000   13,108,000         15.93%

According to MI 61-101, a related-party transaction requires formal valuation and minority shareholder approval unless exempt. The offering is exempt from the formal valuation and minority approval requirements due to: (1) the issuer not being listed on selected markets as set out in Section 5.5 (b); and (2) the fair market value of the offering not being more than $2.5-million as set out in Section 5.7 (b) of MI 61-101. A committee of independent directors reviewed the offering and determined that as a Canadian Securities Exchange issuer, Khan is not listed on a specified market, the issue price of 40 cents is reasonable in the circumstances of Khan and the fair market value of the offering, in so far as it involves related parties, is not more than $2.5-million. Accordingly, the offering is exempt from minority shareholder approval and formal valuation requirements of MI 61-101.

The offering is closing in fewer than 21 days due to the company's need to have funds available to advance proceedings to enforce the collection of the award, which shorter period is both reasonable and necessary in the circumstances. MI 61-101 requires that if a material change report is filed fewer than 21 days before the expected date of the closing of the transaction, an explanation is to be provided as to why the shorter period is reasonable or necessary in the circumstances.

To the knowledge of the company, after reasonable inquiry, none of the related parties have knowledge of any material information concerning the company or its securities that has not been generally disclosed.

We seek Safe Harbor.