Xanadu Mines : Kharmagtai Resource Grows to 1.1 Billion Tonnes- updated

ASX/TSX ANNOUNCEMENT

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Updated Announcement

KHARMAGTAI RESOURCE GROWS TO 1.1 BILLION TONNES, CONTAINING 3Mt Cu and 8Moz Au

8 December 2021

ASX Markets Announcement Office

Exchange Centre

20 Bridge Street

Sydney NSW 2000

BY ELECTRONIC LODGEMENT

Updated Announcement

Kharmagtai Resource grows to 1.1 Billion Tonnes, containing 3Mt Cu and 8Moz

Further to the Announcement issued this morning, Xanadu Mining Ltd has identified two errors which have been corrected in the attached updated Announcement:

1. Table 1: the Contained Metal CuEq (kt) Inferred for 2021 has been changed to 2,330 from 1,600
2. 3rd Dot Point of page 2: the rate that Xanadu has grown the Resource since the 2018 Resource has been changed to 100Mlbs from 11Mt CuEq per month.

	-ENDS-
For further information, please contact:
Andrew Stewart	Spencer Cole
Chief Executive Officer	Chief Financial Officer
M: [phone]	M: [phone]
E:[e-mail]	E:[e-mail]
W:www.xanadumines.com

About Xanadu Mines Ltd:

Xanadu is an ASX and TSX listed Exploration company operating in Mongolia. We give 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 who control an emerging Tier 1 copper-gold deposit in our flagship Kharmagtai project. For information on Xanadu visit: www.xanadumines.com

This Announcement was authorised for release by Xanadu's Board of Directors.

AUSTRALIA	MONGOLIA	Xanadu Mines Ltd ACN 114 249 026
c/o Company Matters Pty Limited	Suite 23, Building 9B
Level 12, 680 George Street	Olympic St, Sukhbaatar District	www.xanadumines.com
Sydney NSW 2000	Ulaanbaatar, Mongolia
T: [phone]	T: [phone]

ASX/TSX ANNOUNCEMENT

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onlyKHARMAGTAI RESOURCE GROWS TO 1.1 BILLION TONNES, CONTAINING 3Mt Cu AND 8Moz Au

use8 December 2021

Xanadu Mines Ltd (ASX: XAM, TSX: XAM) (Xanadu, XAM or the Company) is pleased to report an updated Mineral Resource Estimate (Resource, Mineral Resource or MRE) for its flagship copper-gold project at Kharmagtai, in the South Gobi region of Mongolia (Table 1).

The Company has successfully delivered its stated aspirational target to grow the Kharmagtai Resource to >1.0Bt including a higher-grade component of >100Mt. This updated Resource positions Kharmagtai as one of the largest undeveloped copper assets held by a listed junior globally.

Highlights

• Significant increase in Kharmagtai Resource to 1.1Bt containing 3Mt Cu and 8Moz Au representing a >50% increase in contained copper (Cu) and >80% increase in contained gold metal (Au).

personal	Table 1:		(% CuEq)					(Mt)		CuEq		Cu		Au		CuEq	CuEq	Cu (kt)			Au
			Comparison 2021 vs 2018 Resource1
		Resource			Cutoff			Classification			Tonnes				Grades							Contained Metal
										(%)		(%)			(g/t)			(Mlbs)		(kt)						(koz)
			2021			0.2 (OC)		Indicated	487		0.4	0.3		0.2		4,375	1,980	1,330	3,900
					0.3 (UG)
							Inferred	664		0.3	0.2		0.2		5,140		2,330		1,680	4,100
For					0.3 (OC)			Indicated			129			0.5		0.4			0.4			1,570		710			480			1,500
	2018
			0.5 (UG)			Inferred			469			0.4		0.3			0.2			4,350		1,970			1,500			2,930

1 ASX/TSX Announcement 18 December 2018 - Technical Report Released to Support Kharmagtai Mineral Resource Estimate

AUSTRALIA	MONGOLIA	Xanadu Mines Ltd ACN 114 249 026
c/o Company Matters Pty Limited	Suite 23, Building 9B
Level 12, 680 George Street	Olympic St, Sukhbaatar District	www.xanadumines.com
Sydney NSW 2000	Ulaanbaatar, Mongolia
T: [phone]	T: [phone]

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ASX/TSX ANNOUNCEMENT

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• Updated Mineral Resource is classified as Indicated and Inferred, and notionally constrained with open pit mineralisation commencing from surface, and underground starting below 720m RL; depth constraint is specific for each deposit.
• Material upgrade of higher-gradecore to 100Mt @ 0.8% copper equivalent (CuEq) at a 0.55% CuEq cut off.
• Since 2018 Resource update2, the Company has completed 120 diamond drill holes for 69,479 metres and has grown the resource at a rate of approximately 100MlbsCuEq per month.
• Scoping study underway to model the project, leveraging key advantages of Kharmagtai such as:
  o Cohesive higher-grade zones to drive early payback of initial capital and strong project economics
  o Lower relative capital intensity driven by low-altitude, flat topography, easy access and good nearby infrastructure including water, power, road and rail transport
  o Potential very competitive timeframe to first production due to low population density, strong community relations and favourable environmental, social and governance (ESG).
  o Located close to markets, with probable high quality copper concentrate product with strong gold credits and no deleterious elements (including arsenic) based on test-work to date.
• Strong exploration upside remains, with mineralisation open to the north and at depth, and updated Resource covering only 30% of the 8km long Kharmagtai Intrusive Complex.

The Mineral Resource Estimate was prepared by independent consultants Spiers Geological Consultants (SGC) and is reported in accordance with the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2012) and National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101).

Xanadu's Chief Executive Officer, Dr Andrew Stewart, said "This is a major milestone for Xanadu and positions Kharmagtai as one of the largest undeveloped copper and gold resources on ASX, and one of the biggest globally. Importantly, we have now successfully delivered our medium-termaspirational targets for Kharmagtai with total Resource growth to >1.0Bt, including the higher-gradecomponent of >100Mt.

The higher-grade zones (>0.8% CuEq) have grown from approximately 58Mt in the previous estimate to just on 100Mt with this update. This could be a real game-changer for project economics, with better defined and larger high-grade zones, setting the project apart from similarly sized orebodies, with the higher-grade component potentially unlocking project scenarios that could pave the way to put Kharmagtai into production. A significant increase in gold to copper ratios, has resulted in a greater than 80% increase in contained gold, which means higher by-product credits that will be reflected in lower all-in sustaining costs. The high-grade core and high gold to copper ratios of the Kharmagtai system are likely to be very important to future project economics, as they provide a degree of optionality for mine development that is not often seen in mining projects of this nature.

Many of the largest copper projects worldwide, peers to Kharmagtai, have logistical and social challenges, leading to significant delays and increased capital costs. Some projects have been stuck in red tape for so long that their

2 ASX/TSX Announcement 31 October 2018 - Major increase in Kharmagtai Open Cut Resource to 1.9Mt Cu & 4.3Moz Au

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impact on future copper supply is now in doubt. By comparison, Kharmagtai has advantages in both areas. Logistically the South Gobi is flat terrain with ready access to industrial water, nearby power, rail and road infrastructure, and proximity to the largest consumers of copper in Asia. Socially Xanadu has a strong social license to operate and Kharmagtai is in a very low population area. Further, the Mongolian regulators support mining development; it's important to remember that the Oyu Tolgoi pit was able to move from discovery to production in approx. 5 years, an incredible outcome given the time it takes large mining projects to get off the ground elsewhere.

Importantly, however, the discovery journey is not over. The updated Resource covers only approx. 30% of the 8km strike length of the Kharmagtai Mineralised Complex. The known deposit is open to the north and at depth, and recent drilling has already intercepted high-grade bornite outside the Resource. Step-out drilling continues down- plunge.

Given the scale of the system, gold credits, infrastructure, logistics and social advantages, Kharmagtai clearly has the potential to become a leading global supplier of copper and a part of the solution to the looming global copper shortage, as the world electrifies and moves towards a carbon neutral future."

INTERIM MINERAL RESOURCE ESTIMATE OVERVIEW

Xanadu engaged independent consultants, Spiers Geological Consultants (SGC), to prepare an updated Resource for Kharmagtai. The Resource has been reported in accordance with the JORC Code 2012 and NI 43-101, is effective as of 8 December 2021, and is shown in full in Tables 2 and 3.

This Resource is the first update to the Resource announced on 31 October 20183 with 120 diamond drill holes and 69,479 metres of drilling completed since 2018. The open pit resources are reported above nominated meters Relative Level (mRL), which is unique to each deposit area. Levels are based on preliminary optimisation analysis and a 0.2% CuEq cut-off grade. The underground Resource is reported below the nominated mRL's levels based on preliminary optimisation analysis and a 0.3% CuEq cut-off grade.

SGC considers that data collection techniques are consistent with industry best practice and are suitable for use in the preparation of a Resource to be reported in accordance with JORC Code 2012 and NI 43-101. Available quality assurance and quality control (QA/QC) data supports the use of the input data provided by Xanadu.

The Resource is considered to have reasonable prospects for eventual economic extraction (RPEEE) on the following basis:

• the deposit is located in a favourable mining jurisdiction, with no known impediments to land access or tenure status; and
• the volume, orientation and grade of the Resource is amenable to mining extraction via traditional open-pit and underground methods;

3 ASX/TSX Announcement 31 October 2018 - Major increase in Kharmagtai Open Cut Resource to 1.9Mt Cu & 4.3Moz Au

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The Resource models are well understood and there is substantial upside potential to be realised by better understanding the economics of the deposit. As demonstrated in the images below, significant volumes of mineralisation have been modelled that fall outside of the constraining pit wireframe. These parts of the model will be targeted for further investigation through economic studies to assess if more of this material can be brought into the Mineral Resource.

Figure 1: Plan view of the Kharmagtai district, displaying the Mineral Resource Estimate.

Figure 2: Long-section of the Kharmagtai district, displaying the Mineral Resource Estimate extents in relation to drilling, showing notional 720mRL split between potential open pit and underground.