Mr. Colin Moorhead reports

KHARMAGTAI WATER SUPPLY DRILLING PROGRAM RECOMMENCES

Xanadu Mines Ltd.'s hydrological drilling program has recommenced for the Kharmagtai prefeasibility study (PFS), which is being developed with the company's joint venture partner Zijin Mining Group Co. Ltd. Water supply is a core input to the study; a key driver to maximize processing throughput for the project.

Highlights:

• A hydrological drill program has recommenced with two diamond drill rigs, following a pause during winter months.
• Fieldwork comprises three key components, with oversight by SRK Consulting:
  • Geophysical investigation;
  • Monitoring bore, piezometer installations and testing;
  • Production bore, installation and testing.
• Approximately 3,700 metres of hydrology drilling will deliver 18 monitoring bores, and a further 1,350 metres of drilling will deliver four production bores, to be completed in May, 2024. The final PFS water report is expected to be completed in July, 2024.
• Data will be compiled into a hydrology database for use in site water balance for final PFS design, which is assessing ultimate growth of up to 40-million-tonne-per-annum (Mtpa) processing throughput.
• Post-PFS, early works will include full drillout and registration of production reserve during H1 calendar year 2025, to support subsequent approval of final mining permit.

Xanadu's executive chairman and managing director, Colin Moorhead, said:

"Water is a critical input to the Kharmagtai PFS project, and the study team is aggressively driving this program forward, following a pause during the cold winter months. We are confident in this field program and aim to demonstrate that, to a PFS standard, there is an adequate supply of water for Kharmagtai, to ensure its successful delivery as Mongolia's next major copper-gold mine in the South Gobi region of Mongolia."

Hydrological objectives

The hydrological program has six key objectives to provide water supply for Kharmagtai operations. The program will separately test and characterize individual aquifers to:

• Establish hydraulic parameters and groundwater heads;
• Initiate regular monitoring of groundwater levels;
• Examine responses in individual aquifers to external stresses (permeability tests);
• Establish regular monitoring of groundwater quality;
• Collect sufficient data to update the conceptual understanding and aquifer yield estimates.

The overall program is designed to meet PFS confidence requirements under both the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012) and the National Instrument 43-101 Standards of Disclosure for Mineral Projects. SRK Consulting is providing technical oversight.

The Kharmagtai PFS seeks to maximize water recycling through the use of industry best practices, including efficient process design, modern tailings dam design and thickened tailings to reduce water loss. The study has benchmarked against similar operations, including other large operations in the South Gobi, and estimates a makeup water requirement of approximately 200 litres per second for a process rate of 15 Mpta. This corresponds to stage 1 in Kharmagtai's scoping study/PEA which includes full payback of establishment capital for the project. The Kharmagtai PFS envisages a stage 1 process rate of 20 Mtpa to 26 Mtpa using a two-by-20-megawatt SABC (semi-autogenous ball mill crusher) circuit, with stage 2 following capital payback expanding by one- or two-by-20 MW SABC circuit(s).

The Kharmagtai study is designing for growth up to 40 Mtpa processing throughput for stage 2 expansion; the water resource Xanadu is drilling is expected to make sufficient inroads toward meeting this elevated requirement to a PFS standard.

2024 drilling program

Drilling and other fieldwork will be conducted in the Zagiin Usnii Khudag (ZUK) basin and designed to upgrade and expand the existing ZUK reserve to meet project water requirements to PFS-level confidence. The ZUK basin covers approximately 223 square kilometres, and at its nearest point is approximately six km northeast from the current Kharmagtai exploration camp.

The planned 2024 program includes 3,700 metres of drilling to deliver 18 observation bores and 1,350 m of drilling to deliver four production bores used in pump testing. Bores will range from 60 m to 450 m in depth. The order of monitoring bore drilling will change as the field program progresses, including progress of production bore drilling.

The planned 2024 fieldwork program comprises two drilling, installation and testing components to be carried out in parallel:

• Monitoring piezometer installations and testing in monitoring bores;
• Production bore installation and testing.

Permeability will be tested during the drilling of monitoring bores using a combination of airlift tests, falling head tests and shut-in pressure tests. A final permeability test will be conducted on each hole using the installed monitoring piezometer.

SRK personnel will oversee the 2024 drilling and field program.

During 2023, preliminary geophysical investigations were conducted. This included gravity, vertical electrical sounding, transient electromagnetic method and downhole geophysical logging. Using this information, five boreholes were drilled to depths greater than 300 m targeting potential deep aquifer units. These boreholes will be retested as part of the 2024 fieldwork program, with results incorporated into the 2024 ZUK hydrological model.

Existing water resource

The Kharmagtai project holds an existing water reserve of 69.1 litres per second, established for Kharmagtai in 2013 by Rio Tinto, located in the ZUK basin directly adjacent to the Kharmagtai project, within six km of the existing exploration camp at its nearest point. The purpose of the limited 2013 reserve was to enable registration of the Kharmagtai mining licence and did not fully explore the capacity of the ZUK basin.

Hydrological drilling and groundwater assessments were undertaken in 2009, 2010 and 2012. During this period at least 22 boreholes were drilled over this period to a maximum depth of 178 m, 18 of which fall within the current ZUK permit area. Historical assessments were also completed in the 1980s by joint Mongolian-Russian researchers. The combined data from the historical works, as well as the 2013 water reserve, form the basis for the current PFS hydrological exploration program.

Future hydrological drilling

After completion of the PFS, and during the final stage of development, the Kharmagtai project will undertake a comprehensive drill, test and construction program to bring its target water sources to a full production standard, which is required to register a Mongolian production reserve, for extraction during mine operations. To ensure Kharmagtai is ready to commence prestripping and ore mining in early 2027, the Mongolia production reserve is targeted for completion in the first half of CY 2025 to support mining permit approvals by end 2025. Execution of this future program is outside the scope of the PFS; however, the planning for this program will be undertaken prior to commencing early works.

About Xanadu Mines Ltd.

Xanadu is an Australian Securities Exchange- and Toronto Stock Exchange-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 that jointly control 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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