Mr. Colin Moorhead reports

DRILLING UNDERWAY AT RED MOUNTAIN PROJECT

Xanadu Mines Ltd. has begun an initial 5,000-metre diamond drilling program to test five main target areas at the highly prospective 100-per-cent-owned Red Mountain copper and gold project in the South Gobi region of Mongolia, with drilling expected to be completed by mid-May, and all assays available by the end of June.

Highlights:

• Exploration drilling focused on discovery of shallow high-grade gold and copper-gold deposit, akin to the shallower parts of the Northparkes copper-gold porphyry deposits in New South Wales, Australia.
• Systematic diamond drilling program designed to test five high-priority targets, following up on more recent trenching and previous drilling -- compelling results from the latter are highlighted, below.
• First results from the drilling program are anticipated late April.

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

"Drilling has commenced at our 100-per-cent-owned Red Mountain copper and gold project with an initial 5,000 m diamond hole program targeting five of our highest-priority targets. Red Mountain offers a rare opportunity to access a large, underexplored mineral district. We are conducting a systematic exploration program, including diamond drilling, that we expect will provide a new perspective on the mineral potential of the Red Mountain district. Xanadu is entering an exciting period of new opportunities for discovery and growth."

Exploration program design

Five thousand metres of drilling has been designed to test five shallow high-grade gold and copper-gold targets across the Red Mountain lease. Drilling is targeting:

• Shallow gold at Target 33;
• High-grade copper sulphide lodes at Target 10; and
• Shallow porphyry targets at Nowie, Stockwork and Bavuu.

Target 33 -- shallow epithermal gold mineralization

Target 33 is a 1,000-metre-long and 100-metre-wide zone of alteration and anomalous gold mineralization associated with an east-west-trending intrusion. Trenching and limited reverse circulation drilling in 2017 encountered significant widths of gold mineralization.

Previous results include:

• OURC043: 40 metres at 1.06 grams per tonne (g/t) gold (Au) from 26 m, including:
  • 22 m at 1.82 g/t Au from 40 m; and
  • 10 m at 3.7 g/t Au from 50 m.
• OURC055: 30 m at 0.68 g/t Au from surface, including:
  • Four m at 2.82 g/t Au from surface;
  • Eight m at 0.39 g/t Au from four m;
  • 16 m at 1.13 g/t Au from 42 m, including:
    • Eight m at 1.7 g/t Au from 42 m.

Current drilling progra: Five shallow diamond drill holes have been planned to test a 300 m strike across the centre of the gold anomalism at Target 33. Follow-up drilling will be planned once interpretation of the initial results has been completed.

Target 10 -- high-grade copper (Cu) and porphyry Cu-Au target

Target 10 was first identified in 2017 as a copper-and-gold-in-soil anomaly with a molybdenum halo and coincident bullseye magnetic feature. Two diamond drill holes were drilled into the magnetic feature, returning:

• OUDDH089: 6.2 m at 4.24 per cent Cu and 1.9 g/t Au, from 128 m, including:
  • 0.9 m at 22.1 per cent Cu and 8.27 g/t Au, from 129 m; and
  • 79.5 m at 0.26 per cent Cu and 0.21 g/t Au, from 198.5 m.
• OUDDH090: 138 m at 0.27 per cent Cu and 0.25 g/t Au, from 200 m.

Current drilling program: Three shallow drill holes and one deeper drill hole are planned to follow up on these results. Shallow holes are targeting around the high-grade copper intercept in OUDDH089 and are designed to determine the orientation of this zone, with the aim of delivering further expansion. A single deeper hole is planned to scissor the broad porphyry intercept in OUDDH090, testing the theory that this is associated with a south-dipping structure, clearly visible in the magnetics.

Bavuu porphyry -- porphyry Cu-Au target

Bavuu porphyry was first identified in 2016 as a large-scale copper and gold soil anomaly. Trenching completed in 2016 returned very broad porphyry intercepts of copper and gold mineralization:

• OUCS030A: 188 m at 0.24 per cent Cu and 0.18 g/t Au, including:
  • 52 m at 0.36 per cent Cu and 0.22 g/t Au.
• OUCS030B: 220 m at 0.15 per cent Cu and 0.16 g/t Au.

Two shallow reverse circulation drill holes were drilled under OUCS030A, with the deeper hole returning:

• OURC032: 168 m at 0.22 per cent Cu and 0.25 g/t Au from surface, including:
  • 32 m at 0.31 per cent Cu and 0.4 g/t Au from 132 m.

Current drilling program: Two diamond drill holes have been designed to test behind this intercept and along strike to the west.

Nowie porphyry -- porphyry Cu-Au target

No work has previously been conducted at Nowie by Xanadu. However, multiple drill hole collars and trenches from previous explorers are visible at surface. Soil sampling at Nowie has defined a 500 m long copper-in-soil anomaly greater than 0.1 per cent Cu and 0.25 g/t Au. Geological mapping has identified strong oxide copper at surface associated with porphyry veining.

Current drilling program: Three diamond drill holes have been designed to test beneath the 500 m strike of surface mineralization.

Stockwork porphyry -- porphyry Cu-Au target

Limited work has previously been conducted at Stockwork by Xanadu. However, like the Nowie propsect, multiple drill hole collars and trenches from previous explorers are visible at surface. Soil sampling at Stockwork has defined a 650 m long copper-in-soil anomaly greater than 0.05 per cent Cu. Geological mapping has identified strong oxide copper at surface associated with intense porphyry veining and a reinterpretation based on this mapping has suggested an alternative orientation to drill test for the system at Stockwork.

Current drilling program: Three shallow diamond drill holes have been designed to test this target.

About Red Mountain

The 100-per-cent-owned Red Mountain project, located within the Dornogovi province of southern Mongolia, is approximately 420 kilometres southeast of Ulaanbaatar.

The project covers approximately 57 square kilometres in a frontier terrane with significant mineral endowment and has a granted 30-year mining licence. Red Mountain comprises a cluster of outcropping mineralizing porphyry intrusions which display features typically found in the shallower parts of porphyry systems where narrow dikes and patchy mineralization branch out above a mineralized stock. This underexplored porphyry district includes multiple porphyry copper-gold centres, mineralized tourmaline breccia pipes copper-gold/base metal skarns and high-grade epithermal gold veins.

Existing porphyry mineralization at Red Mountain is hosted within narrow stockwork zones that have been focused around several narrow structurally controlled monzonite porphyry dikes. Emplacement of mineralization appears to be controlled by intersection of northeast- and north-northwest-trending structures. The quartz-chalcopyrite-bornite stockwork mineralization is associated with strong reddening albite-sericite-biotite-magnetite (potassic) alteration assemblage in the host lithology. The thin nature of the mineralizing dikes, their irregular intrusion geometry and the patchy distribution of stockwork mineralization are all features typically found in the shallower parts of porphyry systems, where narrow dikes and patchy mineralization branch out above a mineralized stock. Similar orebody geometries are found in the shallower parts of the Northparkes porphyry copper-gold deposits in New South Wales, where porphyry mineralization has also been tightly focused along a controlling structure adjacent to a felsic pluton. Like Northparkes, there is the potential for further mineralization along the main structures at Diorite Hill and Stockwork Hill, and the likelihood that mineralization extends (and could amalgamate) at depth.

About Xanadu Mines Ltd.

Xanadu is an Australian Securities Exchange and Toronto Stock Exchange listed exploration company operating in Mongolia. The company 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 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 announcement that relates to exploration results is based on information compiled by Dr. Andrew Stewart, who is responsible for the exploration data, comments on exploration target sizes, quality assurance/quality control, and geological interpretation and information. Dr. Stewart, who is an employee of Xanadu and is 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 National Instrument 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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