Mr. Colin Moorhead reports

FURTHER HIGHER-GRADE INFILL DRILLING RESULTS AT STOCKWORK HILL

Xanadu Mines Ltd. and its joint venture partner Zijin Mining Group Co. Ltd. have delivered further higher-grade drill results during phase 1 infill drilling at the Kharmagtai copper and gold project, in preparation for the prefeasibility study (PFS).

Highlights:

• New infill drilling conducted in preparation for the PFS has returned strong higher-grade results from the Stockwork Hill deposit. Best downhole intersects include:
  • KHDDH649 -- 424 metres at 0.36 per cent copper equivalent (0.26 per cent Cu and 0.21 gram per tonne gold) from 126 m, including 72.2 m at 0.72 per cent CuEq (0.41 per cent Cu and 0.60 g/t Au) from 126 m and 30.2 m at 0.89 per cent CuEq (0.50 per cent Cu and 0.76 g/t Au) from 168 m and six m at 0.96 per cent CuEq (0.86 per cent Cu and 0.19 g/t Au) from 348 m and 18 m at 0.66 per cent CuEq (0.54 per cent Cu and 0.23 g/t Au) from 466 m;
  • KHDDH650 -- 131 m at 0.70 per cent CuEq (0.35 per cent Cu and 0.67 g/t Au) from six m, including 76 m at 0.96 per cent CuEq (0.45 per cent Cu and one g/t Au) from 26 m, including 38.5 m at 1.24 per cent Cu (0.51 per cent Cu and 1.44 g/t Au) from 58 m and 29 m at 1 per cent CuEq (0.92 per cent Cu and 0.14 g/t Au) from 185 m and 41.7 m at 0.94 per cent CuEq (0.53 per cent Cu and 0.81 g/t Au) from 347 m;
  • KHDDH660 -- 421.25 m at 0.48 per cent CuEq (0.33 per cent Cu and 0.28 g/t Au) from 152.75 m, including 105 m at 0.84 per cent CuEq (0.47 per cent Cu and 0.72 g/t Au) from 168 m, including 62 m at 1.05 per cent CuEq (0.56 per cent Cu and 0.97 g/t Au) from 196.75 m;
  • KHDDH653 -- 6.2 m at 2.08 per cent CuEq (1.42 per cent Cu and 1.31 g/t Au) from 183.8 m and 14 m at 0.83 per cent CuEq (0.15 per cent Cu and 1.32 g/t Au) from 202 m;
  • KHDDH655 -- 370 m at 0.55 per cent CuEq (0.41 per cent Cu and 0.28 g/t Au ) from 236 m, including 106 m at 0.80 per cent CuEq (0.56 per cent Cu and 0.48 g/t Au) from 386 m and 46 m at 0.85 per cent CuEq (0.69 per cent Cu and 0.32 g/t Au) from 544 m, including 12 m at 1.35 per cent CuEq (1 per cent Cu and 0.69 g/t Au) from 578 m.
• Completed phase 1 drilling has defined and expanded the volume of higher-grade mineralization within the Stockwork pit, indicating both grade uplift and resource expansion potential.
• Building on recent infill drilling success, these newly identified higher-grade zones are expected to enhance the 2021 mineral resource estimate (MRE), currently an inferred and indicated resource of 1.1 billion tonnes containing three million tonnes Cu and eight million ounces Au (1.98 Mt CuEq indicated, 2.33 Mt CuEq inferred).
• Interim MRE update to be completed early Q4 calendar year 2023, in preparation for final PFS MRE during Q4 CY 2023, which will include results from phase 2 (now under way).
• Growth-focused discovery exploration drilling at Kharmagtai also continues with two diamond rigs; the company expects to provide further shallow results, plus first ever deep drilling results during Q3 CY 2023.

Xanadu's executive chairman and managing director, Colin Moorhead, said: "Our infill drilling program to support the PFS has progressed safely and efficiently and is continuing to demonstrate results in line with or materially better than the 2021 MRE. Results from this phase 1 have continued to show upside to the existing resource that formed the basis for the 2022 PEA and scoping study. Pleasingly, we've intersected new higher-grade zones at Stockwork Hill within the existing resource boundary, which supports the potential to expand and increase the near-surface high-grade tonnes; a significant value-driver for the open-pit project going forward. Hole KHDDH649 is extremely encouraging, intersecting a high-grade, steeply dipping tourmaline breccia, adding at least 120 m vertical extension of known higher-grade zones. Not only does it highlight potential for significant grade boosts relative to the existing MRE, but also has dragged high-grade mineralization closer to surface.

"Phase 2 drilling, currently under way, is focused on Golden Eagle, Zephyr and West White Hill, and will also address any outstanding issues arising from phase 1. Phase 2 results will then be combined with the interim MRE to produce a final PFS mineral resource update in Q4 CY 2023."

Infill drilling results to date

The phase 1 infill drilling program for Stockwork Hill, White Hill and Copper Hill is complete. All infill drilling assay results have now been returned for Stockwork Hill. These results demonstrate that the high-grade tourmaline breccia body within the resource is larger than previous modelling predicted. Several holes encountered materially better grade relative to resource grade. Significant drill intersections from Stockwork Hill include:

KHDDH649 was drilled to expand upon the recently identified extensions of the tourmaline breccia zone (see Australian Securities Exchange/Toronto Stock Exchange news release dated June 7, 2023). KHDDH649 intersected a significant interval of 424 m at 0.36 per cent CuEq (0.26 per cent Cu and 0.21 g/t Au) from 126 m, which:

1. Broadened the shallow, gold-rich southern Stockwork zone relative to the 2021 MRE, with 72.2 m at 0.72 per cent CuEq (0.41 per cent Cu and 0.60 g/t Au) from 126 m;
2. Expanded the higher-grade tourmaline breccia zone, with six m at 0.96 per cent CuEq (0.86 per cent Cu and 0.19 g/t Au) from 348 m and 18 m at 0.66 per cent CuEq (0.54 per cent Cu and 0.23 g/t Au) from 466 m.

KHDDH650 was also drilled to expand upon the recently identified extensions of the tourmaline breccia zone. The results from KHDDH650 have broadened the shallow, gold-rich southern Stockwork zone, delineating:

1. An area of high-grade tourmaline breccia with 29 m at 1 per cent CuEq (0.92 per cent Cu and 0.14 g/t Au) from 185 m, where the previous MRE reported 0.1 per cent CuEq;
2. A deeper zone of gold-rich stockwork mineralization with 41.7 m at 0.94 per cent CuEq (0.53 per cent Cu and 0.81 g/t Au) from 347 m, where the previous MRE estimated 0.2 to 0.3 per cent CuEq.

KHDDH660 was also drilled to expand upon the recently identified extensions of the tourmaline breccia zone. The results from KHDDH660 have broadened the shallow, gold-rich southern Stockwork zone, delineating an area of high-grade tourmaline breccia with 62.25 m at 1.05 per cent CuEq (0.56 per cent Cu and 0.97 g/t Au) from 196.75 m, where the previous MRE reported 0.2 to 0.3 per cent CuEq.

KHDDH653 was drilled on the far eastern edge of the 2022 PEA-designed open pit. This hole returned a series of narrow high-grade gold and copper intercepts showing mineralization remains open along from the current MRE:

1. 6.2 m at 2.08 per cent CuEq (1.42 per cent Cu and 1.31 g/t Au) from 183.8 m;
2. 14 m at 0.83 per cent CuEq (0.15 per cent Cu and 1.32 g/t Au) from 202 m.

KHDDH655 was drilled to the east of the tourmaline breccia zone, and successfully extended this zone, delivering:

1. Broad intercept of high-grade tourmaline breccia with 106 m at 0.80 per cent CuEq (0.56 per cent Cu and 0.48 g/t Au) from 386 m;
2. Importantly a much deeper zone of high-grade tourmaline breccia extending directly below the planned pit, with 46 m at 0.85 per cent CuEq (0.69 per cent Cu and 0.32 g/t Au) from 544 m, including 12 m at 1.35 per cent CuEq (1 per cent Cu and 0.69 g/t Au) from 578 m.

Extension of higher-grade zones at Stockwork Hill continues

Significantly, drill hole KHDDH649, drilled into the central portion of Stockwork Hill, has encountered higher-grade zones of tourmaline breccia mineralization, adding vertical extension to known higher-grade zones. Principally, drilling intercepted a highly encouraging zone grading 30.2 m at 0.50 per cent Cu and 0.76 g/t Au (0.89 per cent CuEq) from 168 m, significantly exceeding the 2021 MRE block model prediction for 0.3 per cent CuEq mineralization. This intercept is approximately 120 m above the closest high-grade tourmaline breccia drilled in this area, highlighting potential for significant grade boosts relative to the existing MRE. Additional drilling is now planned to test for further extensions of these higher-grade zones and aimed for inclusion in the upcoming MRE update.

Next steps

Four diamond drill rigs are currently focused on Kharmagtai infill drilling, with the overarching objective to target areas with potential for future mineral resource to ore reserve conversion.

The phase 1 infill drilling program for Stockwork Hill, White Hill and Copper Hill is complete, with 80 holes completed for a total of 33,212 m. All results from infill drilling have now been returned for Stockwork Hill. Remaining assay results from White Hill and Copper Hill are expected late August. These results are being interpreted and detailed 3-D geological models being updated to provide the basis of an interim mineral resource update. The objective of the interim MRE is to identify any additional drilling requirements, with the aim of maximizing conversion of inferred to indicated resource category, and subsequently maximizing conversion to a maiden ore reserve, to underpin the PFS.

Phase 2 infill drilling is currently under way at Golden Eagle, Zephyr and White Hill West; it is expected to complete mid-August, 2023. These results will then be combined with the interim MRE, with a final PFS mineral resource update reported Q4 CY 2023.

About the infill drilling program

Kharmagtai currently has an inferred and indicated resource of 1.1 Bt containing three Mt Cu and eight Moz Au. As part of the Kharmagtai PFS, the aim of the infill drilling is to target an upgrade off all currently inferred material to indicated resource classification, enabling a maiden, JORC compliant ore reserve to be reported. Additionally, the infill drilling program is designed to upgrade and extend strike length of the shallow open-pit resource areas and selected deeper high-grade zones, including investigation of near-mine, higher-grade extensions.

About Xanadu Mines Ltd.

Xanadu is an ASX- and TSX-listed exploration company operating in Mongolia. It gives investors exposure to globally significant, large-scale copper-gold discoveries and low-cost inventory growth. Xanadu maintains a portfolio of exploration projects and remains one of the few junior explorers on the ASX or TSX which jointly controls a globally significant copper-gold deposit in its flagship Kharmagtai project. Xanadu is the operator of a 50-50 JV with Zijin Mining Group in Khuiten Metals Pte. Ltd., which controls 76.5 per cent of the Kharmagtai project.

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