Excellent Oxide Gold Recoveries at Kharmagtai Complement Existing Copper-Gold Resources

TORONTO, March 20, 2019 - Xanadu Mines Ltd. (ASX: XAM, TSX: XAM) (“Xanadu” or “the Company”) is pleased to report that preliminary testwork on diamond core from shallow oxide gold mineralisation at the Kharmagtai copper-gold project in Mongolia has returned excellent results (Figure 1). Gold mineralisation at Golden Eagle is hosted in the oxide cap above a deeper and significantly larger copper-gold porphyry (Xanadu’s ASX announcement – 16 January 2017). A new Exploration Target and metallurgical tests confirm the presence of significant, leachable oxide gold at Golden Eagle, one of eight zones known to contain significant shallow oxide gold mineralisation.

HIGHLIGHTS

• Excellent gold recoveries up to 92.56% achieved in gravity and leach tests for Golden Eagle;
  
  
• The Exploration Target confirms the presence of a substantial oxide gold system measuring ~500m in strike and up to 375m in width at surface, which is mineralised to at least 200m depth and remains open;
  
  
• Seven other zones also contain significant shallow oxide gold mineralisation and provide project optionality and support for the company’s ongoing exploration strategy at Kharmagtai;
  
  
• Oxide gold may provide additional and or alternative options for the development of the project;
  
  
• Further development of metallurgical performance will be targeted with additional testwork.

Xanadu’s Managing Director & Chief Executive Officer, Dr Andrew Stewart, said “These early stage gravity and bottle roll results on composite samples from Golden Eagle are outstanding. The above average results, achieved at a moderate grind size, indicate high gold recoveries. Standard crushing, grinding and leaching is all that will be required to extract gold from the oxide cap mineralisation at Golden Eagle.

While further drilling is required across the resource as the project advances, previous intersections of significant widths of shallow oxide mineralisation in bedrock drilling highlight the potential and show that we have literally just scratched the surface in terms of the broader resource potential. Further, it represents the opportunity for a low cost, high-value gold leach operation which could be run early in the development life of Kharmagtai, injecting significant cash into the project to offset the cost of developing a large-scale copper-gold mine.

These positive metallurgical test results provide more confidence, with drilling underway to expand the resource by targeting shallow gold mineralisation above the current copper and gold resources”.

METALLURGICAL TEST RESULTS RETURNED FOR GOLDEN EAGLE

Results of metallurgical testing on three composite samples taken from Golden Eagle at Kharmagtai have now been finalised. The aim of this test program was to assess the suitability of Golden Eagle mineralisation for gravity concentration and/or cyanidation processes. Three composite samples were selected for the work, based on grade ranges across a variety of rock types within a conceptual ~20Mt open pit. Each composite consisted of 10 individual two-metre sample intervals of drill core and coarse reject material from previous assays representing mineralisation of the following grades (2.35g/t Au, 1.32g/t Au and 0.5g/t Au).

Composites were submitted to MAK, Technological Research Centre in Ulaanbaatar for comminution, gravity concentration and bottle roll cyanidation tests at different grinds. Table 1 shows the head grades measured for each composite.

Table 1: Composite Head Grades

Gold Recovery Testwork

Each composite was submitted for bottle roll cyanidation before and after gravity concentration – as shown in the flowsheet below:

Bottle roll cyanidation of each composite sample was conducted over 48 hours at three different grinds, namely 80% -150 µm, 80% -100 µm and 80% -70 µm. A 1kg charge and a 2:1 liquid:solid ratio was used for all tests. pH was maintained at 10-11 and cyanide was added throughout the test to maintain 1.0 gpl concentration.

Table 2: Cyanidation Results – No Gravity

A gravity concentration test was conducted on each composite using a Knelson MD3 laboratory-scale concentrator to produce an intermediate gravity concentrate which was subsequently cleaned on a laboratory scale Wilfley table. Gravity tests used a 10kg subsample from each composite that had been ground to 80% -150 µm in a laboratory ball mill. The flowsheet for this work can be found in Figure 4. Integrated gravity results from the three composites can be found in Table 3.

Table 3. Gravity Test Results – Whole Ore

Three comparative bottle roll tests were then conducted on each composite, using 1kg charges of Knelson tailing material taken from the gravity concentration testing using similar conditions to the cyanidation testing of primary mineralization samples. Results for this comparative work are summarised in Tables 4 and 5. Table 5 displays the integrated gravity separation and leach results.

Table 4: Cyanidation – Gravity Tailing

Xanadu notes that the recovery data given in Table 4 relates only to the recovery of gold remaining in the gravity test tailings. If the gravity test results are combined with the gravity tailing cyanidation results, then the performance of an integrated gravity + cyanidation flowsheet is implied. The integrated results are given in Table 5.

Table 5: Integrated Gravity Concentration and Cyanidation Results

These preliminary metallurgical testwork results provide a very good indication of the viability of a simple and efficient gold recovery process at Golden Eagle using SAG or ball milling to a grind of approximately 80% -100µm whilst using gravity concentration to recover the larger gold grains and then using cyanidation (Carbon in Pulp) to extract the finer gold. The testwork suggests gold recoveries in the range of 76% to 92%.

Comminution Testing

Bond abrasion tests and Bond ball mill work index tests were completed on all three composites to determine the crushing and grinding properties of mineralisation at Golden Eagle.

Bond abrasion testing was conducted on -19.0 + 12.5 mm sized composite samples. Table 6 summarizes the test results, along with an interpretation of abrasivity.

Table 6: Bond abrasion results for Golden Eagle

All samples were found to have low abrasion indices, with only GE-01 being slightly abrasive.

Bond ball mill work index testing was conducted on -3.35 mm sized composite samples using the sieve with opening size 106µm. Table 7 displays the results of these tests, along with an interpretation of hardness.

Table 7: Bond Mill Work Index results for Golden Eagle

With BWi results in the 15-20 kWh/t range, all samples were found to be hard.

SHALLOW GOLD POTENTIAL AT KHARMAGTAI – EXPLORATION TARGETS DEVELOPED

A review of the shallow gold potential of the Kharmagtai lease has been conducted with the aim of assessing the potential for a low-cost, high-value gold project to deliver cash into the early stages of a larger scale copper-gold development.

Eight gold targets across the lease have been reviewed in detail and exploration targets developed for each of these prospects. This work informs a decision point for drilling and further metallurgical work. These targets include sparsely drilled oxide gold above the existing resources at Copper Hill and Stockwork Hill, oxide gold potential above Golden Eagle, disseminated free gold and electrum within Golden Eagle and numerous carbonate base metal epithermal gold veins previously drilled while targeting porphyry mineralisation (Table 8). The location of each target is summarised in Figure 5.

The Exploration Target is conceptual in nature as there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource under the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2004). The Exploration Target is not being reported as part of any Mineral Resource or Ore Reserve.

Table 8: Kharmagtai oxide gold exploration targets

1* - Each style of gold mineralisation will manifest (size, shape, gangue minerals) differently and perform differently within metallurgical plant
2* - Length of the exploration target is defined as a conservative maximum and minimum length estimation based off the distances over which drill intercepts are observed and geological or geophysical characteristics associated with the mineralisation are observed
3* - Width of the exploration targets is taken from drill intercepts and expressed as a range
4* - Depth information is gained from drill intercepts. The oxide/weathering zone is often taken from geochemical data from drilling, i.e. sulphur often helps define the base of oxidation as it is readily weathered and does not commonly exist in the weathering profile. The base of oxidation is interpreted to be the depth that sulphur appears within the drill hole
5* - Density data is taken from drilling or assumed to be the average rock density in the Kharmagtai dataset (2.75)
6* - Tonnage range is estimated as a calculation of the maximum and minimum length, width and depth.
7* - Grade range is taken directly from drill results
8* - Metallurgical factor is either taken from existing metallurgical results or assumed to be 85%.
9* - Potential Oz range is estimated from a calculation of tonnage ranges and grade ranges. Larger tonnage with lesser grade range and smaller tonnage with higher grade range.

ABOUT GOLDEN EAGLE

Golden Eagle was discovered in early 2017 when drilling the first geochemical target generated from the top of basement drilling program returned a significant intercept of high-grade gold (Xanadu’s ASX announcement – 16 January 2017). KHDDH395 returned 220m grading 0.64g/t Au and 0.15% Cu from 42m, which included a shallow zone of supergene gold enrichment of 26m grading 2.27g/t Au from a depth of 42m. A total of 4,965.1m of diamond drilling and 1,837.5m of shallow PCD drilling has been completed at Golden Eagle, mostly targeting large scale Au-Cu porphyry mineralisation.

Gold and copper mineralisation at Golden Eagle is hosted by a series of monzodiorite dykes intruding a hornblende, plagioclase phyric monzodiorite stock. Mineralisation occurs as free gold and electrum grains, within and on the margins of pyrite and chalcopyrite grains disseminated throughout the rock mass. Higher grade mineralisation appears to occur associated with uni-directional solidification textures “UST” which typically form in the carapace of a crystallising porphyry intrusion at the palaeosurface within the basement, where supergene enrichment has occurred (Figures 6, 7 and 8).

OXIDE POTENTIAL OF COPPER HILL AND STOCKWORK HILL

Drilling at Copper Hill and Stockwork Hill has been focused on sulphide mineralisation and not shallow oxide gold potential. During the recent resource upgrade and the preliminary economic assessment currently underway this material was highlighted as being sparsely drilled, despite the presence of free gold in the soil above both deposits. This gap in drill data is driven by the need to drill diamond drill holes at a dip of 60 to 70 degrees, meaning holes need to be stepped back from the top of the orebody to best intersect mineralisation further down. Figures 9 and 11 show the oxide cap potential and drill spacings at Copper Hill and Stockwork Hill respectively, demonstrating the lack of drilling and Figure 10 shows core trays from Copper Hill demonstrating the type of material found with high grade free gold.

EPITHERMAL GOLD AT KHARMAGATAI

Epithermal gold veins have been encountered regularly at Kharmagtai while drilling for porphyry mineralisation. These veins take the form of carbonate base metal veins or breccias where free gold is disseminated throughout a gangue of dolomite, calcite, chalcopyrite, galena and sphalerite (Figure 12). In the oxide zone these gangue minerals are weathered leaving iron oxides and free gold. Veins range from 30cm to 5m wide, run between 1/g/t Au to 200g/t Au and can extend for kilometres as they are hosted within large scale contiguous faults crossing the Kharmagtai lease. These faults represent the same plumbing system used by the porphyry systems and during the cooling phase of porphyry mineralisation epithermal gold has been deposited. Figure 13 shows the epithermal gold exploration targets defined to date with the data used to classify their dimensions and grades.

The epithermal potential of Kharmagtai has never been assessed systematically as the focus for exploration has been for large scale porphyry mineralisation. When the surface geochemical data (rockchip data) is assessed there are many opportunities for additional epithermal systems that are yet to be prioritised for drilling (Figure 14).

Photos accompanying this announcement are available at:

http://www.globenewswire.com/NewsRoom/AttachmentNg/d4dc7f75-6fd2-4f6a-97c9-a660bb3f6cd5

http://www.globenewswire.com/NewsRoom/AttachmentNg/d900a125-4fab-4b77-9a46-18724d95bbcd

http://www.globenewswire.com/NewsRoom/AttachmentNg/d71a1599-f5d7-426c-b15a-2898f9156d39

http://www.globenewswire.com/NewsRoom/AttachmentNg/5c5e6094-d1c5-4292-a1a8-8e758a6a1836

http://www.globenewswire.com/NewsRoom/AttachmentNg/31761d56-1000-4e8e-831c-00fae6307adb

http://www.globenewswire.com/NewsRoom/AttachmentNg/912dfdc9-a5e9-4c3c-8546-7047b9aca302

http://www.globenewswire.com/NewsRoom/AttachmentNg/ed4295fa-ef93-47ab-b568-305fbb15e8a2

http://www.globenewswire.com/NewsRoom/AttachmentNg/df1da827-0443-4357-b1ec-ce0af4c811c0

http://www.globenewswire.com/NewsRoom/AttachmentNg/4d603c0c-bc93-4401-b1a2-c14217a38990

http://www.globenewswire.com/NewsRoom/AttachmentNg/2a528f0e-615a-4e03-9313-e95565ac37a2

http://www.globenewswire.com/NewsRoom/AttachmentNg/5bac603c-0cb9-4dbf-8230-f0f3d40ab03b

http://www.globenewswire.com/NewsRoom/AttachmentNg/e55c5624-2277-497f-8c1c-d52c0189da23

http://www.globenewswire.com/NewsRoom/AttachmentNg/67bccc79-6b58-4140-8dc5-840cae664fe9

http://www.globenewswire.com/NewsRoom/AttachmentNg/0ed9aa43-b5ab-4eeb-9c99-b555b4d561a4

COMPETENT-QUALIFIED PERSON STATEMENT

The information in this announcement that relates to metallurgical testwork is based on a summary of results compiled by Andrew Holloway who is responsible for metallurgical and process engineering aspects of the project. Mr. Holloway, who is a principal of AGP Mining Consultants Inc. (Toronto, Canada) and is a Professional Engineer in Ontario, Canada, has sufficient experience relevant to the style of mineralisation 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. Mr Holloway 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 exploration results is based on information compiled by Dr Andrew Stewart who is responsible for the exploration data, comments on exploration target sizes, 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 mineralisation 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.

COPPER EQUIVALENT CALCULATIONS

The copper equivalent (CuEq) calculation represents the total metal value for each metal, multiplied by the conversion factor, summed and expressed in equivalent copper percentage. Grades have not been adjusted for metallurgical or refining recoveries and the copper equivalent grades are of an exploration nature only and intended for summarising grade. The copper equivalent calculation is intended as an indicative value only. The following copper equivalent conversion factors and long-term price assumptions have been adopted: Copper Equivalent Formula (CuEq) = Cu% + (Au (ppm) x 0.6378). Based on a copper price of $2.60/lb and a gold price of $1,300/oz.

CAUTIONARY STATEMENTS REGUARDING EXPLORATION TARGETS

The Exploration Target is conceptual in nature as there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource under the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2004). The Exploration Target is not being reported as part of any Mineral Resource or Ore Reserve.

For further information, please contact:

Andrew Stewart
Managing Director & Chief Executive Officer
T: +612 8280 7497
M: +976 9999 9211
Andrew.stewart@xanadumines.com
www.xanadumines.com

APPENDIX 1: KHARMAGTAI TABLE 1 (JORC 2012)

1.1 JORC TABLE 1 – SECTION 4 ESTIMATION AND REPORTING OF ORE RESERVES

Set out below is Section 1 and Section 2 of Table 1 under the JORC Code, 2012 Edition for the Kharmagtai project. Data provided by Xanadu. This Table 1 updates the JORC Table 1 disclosure dated 31 July 2018.

1.2 JORC TABLE 1 - SECTION 1 - SAMPLING TECHNIQUES AND DATA

1.3 JORC TABLE 1 - SECTION 2 - REPORTING OF EXPLORATION RESULTS

1.4 JORC TABLE 1 – SECTION 3 ESTIMATION AND REPORTING OF MINERAL RESOURCES

1.5 JORC TABLE 1 – SECTION 4 ESTIMATION AND REPORTING OF ORE RESERVES

Ore Reserves are not reported so this is not applicable to this report.