Mr. Colin Moorhead reports

COMPELLING COARSE ORE FLOTATION RESULTS INDICATE THROUGHPUT UPSIDE FOR KHARMAGTAI

Xanadu Mines Ltd. has provided an update on metallurgical test work for the Kharmagtai copper-gold project in Mongolia, being developed with the company's joint venture partner, Zijin Mining Group Co. Ltd.

The Eriez HydroFloat test work for evaluating coarse ore flotation has demonstrated excellent results for one of the key uplift scenarios defined in the Kharmagtai scoping study. It has effectively improved upfront processing efficiencies, producing a coarse reject of up to approximately 44 per cent by mass for the main mineralized sulphide orebody.

Highlights:

• Test work for assessing coarser grind options (P80 grind sizes ranging between 150 microns and 450 microns for Kharmagtai sulphide mineralization, using HydroFloat, achieved compelling results:
  • Up to 94 per cent copper (Cu) and 92 per cent gold (Au) recovered in the HydroFloat stage;
  • Enabling a peak coarse reject of 43.8 per cent by mass, at 450 micrometres;
  • Rougher recoveries of 91 per cent for copper and 83 per cent for gold, at 250 micrometres.
• Coarse ore flotation may offer numerous benefits for Kharmagtai, including:
  • Reduced power and water intensity per tonne of ore processed;
  • Increased mill capacity and overall plant capacity for an increased production rate;
  • Reduction in consumables, such as grinding media and reagents;
  • Significant improvement in tailings stability with the production of coarser tails, as well as water recycling at the back end of the plant.
• HydroFloat provides the opportunity for Kharmagtai to recover valuable minerals in the 150-to-200-micrometre range that processing through conventional flotation alone is unable to perform.
• More than 70 HydroFloat units are commercially used in global operations, including Australia. The pilot program to date has demonstrated significant potential for HydroFloat, with further mineralogy and pilot tests to be conducted as new samples become available.

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

"These results provide strong support for our scoping study uplift scenario using coarse ore flotation to improve overall project economics. This uplift is achieved through increasing throughput, and accelerating mining and processing rates, which ultimately accelerate revenue generation at Kharmagtai.

"It also promises to enhance the environmental sustainability aspects of Kharmagtai through the early separation of barren material and a coarser grind size, allowing for significant reduction in power and water requirements, and better tailings management. Given this separation method has been used successfully by bulk miners for over 20 years, we intend to leverage those learnings at Kharmagtai. We are now working with DRA, our process design engineers, to determine the optimal timing to include HydroFloat in the processing flowsheet, and maximize its beneficial impact for Kharmagtai."

Coarse ore flotation metallurgical test work program

Summary

The existing conventional flowsheet involves crushing and grinding ore to a P80 size of 150 micrometres for stage 1 (15 Mtpa (million tonnes per annum) in scoping study) and 212 micrometres for stage 2 (30 Mtpa in scoping study).

Test work to investigate coarser grind options was completed at ALS's laboratory in Perth and was supervised by Eriez Australia using Eriez HydroFloat pilot equipment, returning HydroFloat rougher recoveries of:

• 91-per-cent Cu recovery and 83.2-per-cent Au recovery at 250 micrometres; and
• 88.4-per-cent Cu recovery and 77.7-per-cent Au recovery at 350 micrometres.

Description

Composite samples were prepared from core drilled at each of the Stockwork Hill, White Hill and Copper Hill deposits at Kharmagtai. Sample preparation consisted of combining samples, as received, into a single 200-kilogram (kg) composite, crushing to 3.35 millimetres (mm), followed by rotary blending and splitting, and then grinding individual samples to 150 micrometres (finer), 250 micrometres, 350 micrometres and 450 micrometres (coarser).

Eriez supplied the CrossFlow classifier (XF), rotary drum and HydroFloat (HF) units used for laboratory testing at the ALS facility. The Eriez Laboratory CrossFlow is a hydraulic classifier that separates particles according to size, shape and specific gravity. Samples were classified in the CrossFlow to remove the fines and slimes with a target split size of 90 micrometres, and the CrossFlow underflow was used as the feed for the coarse-particle flotation into the HydroFloat unit. Prior to that, the HydroFloat feed was polished and conditioned with collector reagent in a rotating drum before being pumped into the HydroFloat. The entire HydroFloat overflow and HydroFloat underflow streams were collected, split and subsampled before assay analysis for primarily copper and gold. Combined CrossFlow overflow and HydroFloat overflow from the 250-micrometre and 350-micromere tests were tested by flotation to produce a rougher concentrate, after grinding to 75 micrometres.

HydroFloat results

The coarse ore flotation evaluation included head grade analysis and rougher flotation recovery test work on a composite sample taken from varying deposits, depths, sulphide and alteration types to test coarser grind options. Results for the Cross Flow stage at the tested P80 grind sizes are shown in the table entitled "Mass split in cross flow."

As the grind size gets coarser, less fines are produced and hence the XF overflow mass reduces from 52.9 per cent by weight at 150 micrometres to 36.6 per cent at 450 micrometres. In a full-scale flowsheet, the XF overflow would join the HydroFloat (HF) overflow for downstream conventional rougher and cleaner flotation.

The results from the HydroFloat stage are shown in the table entitled "HydroFloat recovery and mass pull results." Both Cu and Au recoveries increase as the grind size becomes finer, and, at the same time, the HydroFloat overflow Cu and Au grades increase from 0.88 per cent Cu to 1.24 per cent Cu and from 0.97 gram per tonne (g/t) Au to 1.70 g/t Au, demonstrating improved liberation at the finer sizes. The HydroFloat underflow grade (final tailings) reduce from 0.08 per cent Cu to 0.03 per cent Cu and 0.08 g/t Au to 0.06 g/t Au as the sizing gets finer.

The combined XF overflow (minus 90 micrometres) and the HydroFloat overflow represent the downstream feed in the process flowsheet. For each of the 250-micrometre and 350-micrometre laboratory tests, the XF and HF overflows were combined and ground to 75 micrometres for rougher flotation. The results of this step, plus the HydroFloat (HF) results, are combined in the table entitled "Combined results of HydroFloat test products for rougher flotation compared to standard rougher test," and compared with results from the conventional flowsheet.

These results demonstrate that the 250-micrometre HydroFloat test, followed by a 75-micrometre grind for rougher flotation, produced similar results to a conventional flotation test at 150 micrometres. Furthermore, improved rougher concentrate grade and recovery were achieved:

• 5.95 per cent Cu grade and 91-per-cent recovery for HydroFloat, versus 4.64 per cent Cu grade and 90.1-per-cent recovery for conventional flotation.

However, Au grade and recovery are both less favourable for HydroFloat versus conventional flotation.

Results indicate that use of Eriez HydroFloat for Kharmagtai ore achieved a high recovery while rejecting coarse, barren ore.

Significance to Kharmagtai

The results achieved in these preliminary tests provide sufficient encouragement to conduct further studies. Since the comminution circuit is the major source of energy consumption, investigating ways to reduce this through a coarser grind warrants further work. This will take the form of mineralogical studies to determine the liberation of sulphides at coarse grinds, followed by further pilot testing on new samples, as they become available.

Sample selection and preparation

Metallurgical sample locations, zones and assayed head grades are detailed in the table entitled "Combined results of HydroFloat test products for rougher flotation compared to standard rougher test."

Next steps

The next step for coarse ore flotation is PFS (prefeasibility study) process flow sheet modelling and engineering design by DRA, the engineering firm leading process design and engineering for the study.

Coarse ore flotation is a subset of the broader Kharmagtai metallurgical test work program. The comprehensive metallurgy program during the prefeasibility study includes comminution properties of the mineralization and alteration styles at Kharmagtai to determine the optimum flowsheet and generate inputs for engineering design. This will also generate data to inform the copper and gold recovery models, and allow operating costs estimates to be calculated. Concentrate samples will also be generated for marketing studies as part of the broader metallurgy program.

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 statements

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 (QA/QC), 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 the 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.

The information in this announcement that relates to metallurgy and metallurgical test work has been reviewed by Graham Brock, BSc (Eng), ARSM. Mr. Brock is not an employee of the company but is employed as a contract consultant. Mr. Brock is a fellow of the Australasian Institute of Mining and Metallurgy; he has sufficient experience with the style of processing response and type of deposit under consideration, and to the activities undertaken, to qualify as a competent as defined in the 2012 edition of the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves, and the National Instrument 43-101. Mr. Brock consents to the inclusion in this report of the contained technical information in the form and context as it appears.

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