TORONTO - Xanadu Mines Ltd (ASX: XAM, TSX: XAM) (Xanadu, XAM or the Company) is pleased to provide an update on metallurgical testwork for the Kharmagtai Copper-Gold Project (Kharmagtai) in Mongolia, being developed with the Company's joint venture partner, Zijin Mining Group Co., Ltd. (Zijin).

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 Study1. It has effectively improved upfront processing efficiencies, producing a coarse reject of up to 44% by mass for the main mineralised sulphide orebody.

Highlights

Testwork for assessing coarser grind options (P80 grind sizes ranging between 150 to 450 microns (-microm) for Kharmagtai sulphide mineralisation, using HydroFloat achieved compelling results: Up to 94% copper and 92% gold recovered in the HydroFloat stage; Enabling a peak coarse reject of 43.8% by mass, at 450-microm and Rougher recoveries of 91% for copper and 83% for gold, at 250 -microm.

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 and 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-microm 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.

Xanadu's Executive Chairman and Managing Director, Colin Moorhead 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 maximise its beneficial impact for Kharmagtai.'

Coarse Ore Flotation Metallurgical Testwork Program

Summary

The existing conventional flowsheet involves crushing and grinding ore to a P80 size of 150-microm for Stage 1 (15Mtpa in Scoping Study) and 212-microm for Stage 2 (30Mtpa in Scoping Study)2.

Testwork to investigate coarser grind options was completed at ALS' laboratory in Perth and was supervised by Eriez Australia using Eriez HydroFloat pilot equipment, returning HydroFloat rougher recoveries of: 91% Cu recovery and 83.2% Au recovery at 250-microm and 88.4% Cu recovery and 77.7% Au recovery at 350-microm.

Description

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

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-microm 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 sub-sampled before assay analysis for primarily copper and gold. Combined CrossFlow overflow and HydroFloat overflow from the 250 and 350-microm tests were tested by flotation to produce a rougher concentrate, after grinding to 75-microm.

HydroFloat Results

The coarse ore flotation evaluation included head grade analysis and rougher flotation recovery testwork on a composite sample taken from varying deposits, depths, sulphide and alteration types to test coarser grind options.

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

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% Cu to 1.24% Cu and from 0.97g/t Au to 1.70g/t Au, demonstrating improved liberation at the finer sizes. The HydroFloat underflow grade (final tailings) reduce from 0.08% Cu to 0.03% Cu and 0.08g/t Au to 0.06g/t Au as the sizing gets finer.

About Xanadu Mines

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 jointly control a globally significant copper-gold deposit in our 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% of the Kharmagtai project.

Contact:

Colin Moorhead

Executive Chairman and Managing Director

Tel: +61 2 8280 7497

Email: colin.moorhead@xanadumines.com

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, 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.

The information in this Announcement that relates to metallurgy and metallurgical testwork 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.

Forward-Looking Statements

Certain statements contained in this Announcement, including information as to the future financial or operating performance of Xanadu and its projects may also include statements which are 'forward-looking statements' that may include, amongst other things, statements regarding targets, estimates and assumptions in respect of mineral reserves and mineral resources and anticipated grades and recovery rates, production and prices, recovery costs and results, capital expenditures and are or may be based on assumptions and estimates related to future technical, economic, market, political, social and other conditions. These 'forward-looking statements' are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Xanadu, are inherently subject to significant technical, business, economic, competitive, political and social uncertainties and contingencies and involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in such forward-looking statements.

Xanadu disclaims any intent or obligation to update publicly or release any revisions to any forward-looking statements, whether as a result of new information, future events, circumstances or results or otherwise after the date of this Announcement or to reflect the occurrence of unanticipated events, other than required by the Corporations Act 2001 (Cth) and the Listing Rules of the Australian Securities Exchange (ASX) and Toronto Stock Exchange (TSX). The words 'believe', 'expect', 'anticipate', 'indicate', 'contemplate', 'target', 'plan', 'intends', 'continue', 'budget', 'estimate', 'may', 'will', 'schedule' and similar expressions identify forward-looking statements.

All 'forward-looking statements' made in this Announcement are qualified by the foregoing cautionary statements. Investors are cautioned that 'forward-looking statements' are not guarantee of future performance and accordingly investors are cautioned not to put undue reliance on 'forward-looking statements' due to the inherent uncertainty therein.

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