Dr. Andrew Stewart reports

MULTIPLE NEW BREAKTHROUGH ACHIEVEMENTS FOR KHARMAGTAI DISCOVERY DRILLING

Xanadu Mines Ltd. has provided an update on deep and shallow exploration drilling currently under way at the Kharmagtai project in Mongolia, being undertaken with the company's joint venture partner, Zijin Mining Group Co. Ltd. Xanadu's experienced exploration team is currently operating three diamond drill rigs which are focused on delivering new discoveries outside the current mineral resource estimate (MRE) at the Kharmagtai copper and gold project.

Highlights:

• New discovery drilling intersected mineralization across multiple largely unexplored porphyry clusters, including high-density stockwork, breccia and gold-only mineralization.
• The first of four planned deep diamond drill holes targeting mineralization below White Hill, the largest deposit delineated to date at Kharmagtai, expanded the mineralized system by over 600 metres:
  • KHDDH648 -- 1,080 metres at 0.21 per cent copper equivalent from 491 m.
• Shallow drilling at cluster 2 extended mineralization 800 m along strike from the current MRE limit. Given proximity to the high-grade Stockwork Hill deposit, it could represent a mineralized porphyry stockwork offset:
  • KHDDH786 -- 144 m at 0.34 per cent CuEq from 117 m:
    • Including 12 m at 0.63 per cent CuEq from 144 m;
    • Including 12.3 m at 0.54 per cent CuEq from 168 m.
• Multiple new broad zones of gold-rich tourmaline breccia mineralization delivered over a two-kilometre strike, at cluster 5.
• Extensive discovery drilling continues with regular news flow to continue throughout 2023, focused on extensions to known deposits and new porphyry copper gold systems.

Xanadu's executive vice-president of exploration, Dr. Andrew Stewart, said: "Following the completion of more than 52,000 metres of infill and extensional drilling at Kharmagtai, our focus has shifted to the very exciting deep and shallow discovery drilling, aimed at making new economic discoveries outside the current MRE. Following successful delivery of higher-grade mineralization from the infill and extensional drilling program, this purposeful program represents our most-significant exploration pursuit in recent years.

"The first of four currently planned deep drill holes, KHDDH648, intercepted an impressive (greater than one kilometre) porphyry zone, expanding the White Hill mineralized system more than 600 m down dip. Importantly, this hole has provided important vectors required to target higher-grade mineralization at depth; 3-D [three-dimensional] geological modelling is under way to refine these vectors, in anticipation for high-priority drilling.

"These deep drill holes could prove to be a major Kharmagtai value driver, as they are designed to test for high-grade, large-scale systems at depth, as seen at the nearby Olu Tolgoi mine.

"Discovery of shallow, broad intercepts of mineralization along strike from the Stockwork Hill deposit is also very encouraging, with drill hole KHDDH786 intersecting a strong and wide (144 m) mineralized zone approximately 800 m west of Stockwork Hill. Importantly, this intercept includes a coherent zone of greater than 0.6 per cent CuEq, providing optimism towards discovering another high-grade deposit similar to Copper Hill and Stockwork Hill.

"The good strike rate of significant intercepts in these holes provides us confidence that more shallow, high-grade deposits will be discovered at Kharmagtai. As drilling progresses, we look forward to providing additional updates advancing our important exploration activities at our flagship Kharmagtai project."

About the shallow exploration drilling

Shallow exploration drilling at Kharmagtai is targeting additional porphyry copper-gold deposits outside the currently defined MRE. This program also serves to inform future infrastructure location decisions associated with the potential development of the Kharmagtai project into a large-scale mining operation.

An additional 9,000 m of diamond drilling have been conducted in 41 shallow (200 m) diamond drill holes since the last update (see attached tables). Twenty-four of the 41 new drill holes have returned significant intercepts, with two holes assays pending.

New shallow drilling results

Drilling at cluster 2 targeted previous shallow porphyry stockwork mineralization and was prioritized given the area is adjacent to existing planned open pits and planned infrastructure. Drill hole KHDDH786 targeted a previous porphyry intercept and encountered a broad zone of porphyry mineralization above the resource cut-off grade, including a cohesive zone greater than 0.6 per cent CuEq. The result is significant, as it may represent the faulted offset of Stockwork Hill. More drilling is planned to expand this exciting new target.

At cluster 3, a scissor hole was drilled to investigate the previously reported high-grade result from KHDDH622 (15 m at 1.26 per cent Cu, including 5.95 m at 2.97 per cent Cu). The objective of drill hole KHDDH759 was to determine both the dip and strike of the structure hosting high-grade copper in KHDDH622. KHDDH759 encountered the mineralized structure in two sections: (i) between 16 m and 22 m; and (ii) a secondary narrow mineralized structure between 106.2 m and 108.5 m, containing 2.3 m at 1.3 per cent Cu.

The mineralized structure near surface was well within the weathering zone, and copper is depleted relative to the deeper sulphide zone. Additional drilling is planned along strike, targeting the extensions of the higher-grade sulphide zone.

Drilling at cluster 5 targeted strong copper anomalism at the top of basement approximately 30 m below surface and has successfully defined a two km long zone of gold-rich tourmaline breccia. Follow-up drilling is planned to test this large-scale target.

Drill holes KHDDH761, KHDDH762, KHDDH764 and KHDDH783 at cluster 5 encountered broad zones of gold-dominated tourmaline breccia and porphyry mineralization, providing evidence of a very-large-scale tourmaline breccia. Follow-up drilling is planned to test this exciting large-scale target.

Several isolated drill holes, distal to defined clusters, have encountered broad zones of peripheral porphyry and tourmaline breccia mineralization; two new high-priority targets have been identified.

Drill holes KHDDH793 and KHDDH795 were drilled targeting shallow top-of-basement copper geochemical anomalies.

KHDDH793 intercepted a zone of tourmaline breccia approximately one km along strike from the Stockwork Hill tourmaline breccia. Follow-up drilling is planned to expand this shallow intercept and target high-grade tourmaline breccia between KHDDH973 and Stockwork Hill.

KHDDH795 intercepted a broad zone of low-grade porphyry mineralization approximately 1.5 km southwest of the Golden Eagle deposit. There is very little drilling in this area, and such a broad intercept of mineralization suggests the presence of a large-scale porphyry in this area. Follow-up drilling is planned to expand this shallow intercept.

Large-scale, high-grade exploration program

Existing geochemical, geological and geophysical data sets point to known mineralization at Kharmagtai representing a shallow surface expression of a much-larger porphyry system at depth.

Deep drill holes have been designed to ensure that a potential high-grade, large-scale and deeper Oyu Tolgoi-style deposit is discovered early in the prefeasibility study process, allowing optimal infrastructure decisions to be made, without sterilizing what could be the major value driver at Kharmagtai.

Drill hole KHDDH648 was designed to test for a large-scale, high-grade extension beneath White Hill. KHDDH648 intercepted a very large (greater than one km) zone of porphyry mineralization, expanding the White Hill mineralized system more than 600 m down dip. This hole has provided the vectors required to target higher-grade mineralization at depth. Three-dimensional geological modelling is under way to refine these vectors for further high-priority drilling.

About Xanadu Mines Ltd.

Xanadu is an exploration company operating in Mongolia. Xanadu 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 Australian Securities Exchange or Toronto Stock Exchange that jointly controls a globally significant copper-gold deposit in its flagship Kharmagtai project. Xanadu is the operator of a 50/50 joint venture with Zijin Mining Group in Khuiten Metals Pte. Ltd., which controls 76.5 per cent of the Kharmagtai project.

Competent person statement

The information in this release that relates to mineral resources is based on information compiled by Robert Spiers, who is responsible for the mineral resource estimate. Mr. Spiers is a full-time principal geologist employed by Spiers Geological Consultants and is a member of the Australian Institute of Geoscientists. He has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity he is undertaking to qualify as the qualified person, as defined in CIM (Canadian Institute of Mining, Metallurgy and Petroleum) guidelines and National Instrument 43-101, and as a competent person under JORC code 2012. Mr. Spiers consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

The information in this release that relates to exploration results is based on information compiled by Dr. Andrew Stewart, who is responsible for the exploration data and comments on exploration target sizes, quality assurance/quality control, and geological interpretation and information. Dr. Stewart, who is an employee of Xanadu and a member of the Australasian Institute of Geoscientists, has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity he is undertaking to qualify as the competent person, as defined in the 2012 edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves, and NI 43-101. Dr. Stewart consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

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