Provides the Independant Experts' and Valuation Reports for the Kharmagtai Copper-Gold Project in Mongolia
Provides the Independant Experts' and Valuation Reports for the Kharmagtai Copper-Gold Project in Mongolia
Hong Kong, Mar 31, 2014 AEST (ABN Newswire) - Xanadu Mines Ltd (ASX:XAM) (OTCMKTS:XANAF) provides the independant experts' and valuation reports for the Kharmagtai copper-gold project in Mongolia.

KHARMAGTAI INDEPENDENT EXPERT'S AND VALUATION REPORTS HIGHLIGHTS

- An Independent Expert's Report and Independent Valuation Report have been finalised to accompany the Notice of Meeting for the Kharmagtai transaction.

- The Independent Expert has concluded the transaction is fair and reasonable to nonassociated shareholders.

- The Independent Valuation Report has estimated a preferred valuation range of US$15.0 to 29.0 million for the Kharmagtai project.

- The Independent Valuation Report notes that three historic mineral resource estimates have been undertaken at Kharmagtai. These historic resource estimates provide support to Xanadu's Exploration Target.

- Xanadu's exploration activities have commenced including core re-logging, magnetic acquisition and alteration analysis.

- Preparations are underway for a diamond drilling campaign to commence upon completion of the Transaction.

INTRODUCTION

Xanadu Mines Ltd ("Xanadu") notes that Xanadu shareholder approval is a condition precedent to completing the acquisition of a 90% interest in Oyut Ulaan LLC ("Oyut Ulaan"), which in turn owns 100% of the Kharmagtai copper-gold project, by Mongol Metals LLC ("Mongol Metals") (the "Transaction"). Xanadu's non-interested directors engaged Grant Thornton Corporate Finance ("Grant Thornton") as an Independent Expert to prepare an Independent Expert's Report to express an opinion the fairness and reasonableness of the related party components of the Transaction. At the request of Grant Thornton, Mining Associates Pty Ltd ("Mining Associates") was commissioned as Independent Technical Expert to prepare an Independent Valuation Report for inclusion in the Independent Expert's Report.

Both the Independent Expert's Report and Independent Valuation Report have been finalised and are attached. These Reports will accompany the Notice of Meeting which is currently being reviewed by the Australian Securities & Investments Commission ("ASIC") for the purposes of the section 218 of the Corporations Act ("Notice"). Subject to the timing of ASIC's approval, Xanadu expects to release the complete Notice during the week beginning 7 April 2014.

INDEPENDENT EXPERT'S REPORT

Grant Thornton has concluded that the Proposed Transaction is fair and reasonable to Xanadu's non-associated shareholders. In preparing their report, Grant Thornton note that the present value of the total consideration to be paid by Mongol Metals falls towards the low end of the valuation range of the Oyut Ulaan shares as set out in the following table:
---------------------------------------------
                    Valuation Range (US$'000)
                     Low    Preferred   High
---------------------------------------------
Oyut Ulaan shares    9,500   15,750   30,000
Present value of 
consideration       12,109   12,109   12,109
Difference         (2,609)    3,641   17,891
---------------------------------------------
Grant Thornton has also concluded that the guarantee of the Mongol Metals' obligations to pay deferred consideration and the free carry of a portion of Lkhagvasuren Ganbayar's interest prior to the decision to mine are fair and reasonable to the non-associated shareholders.

INDEPENDENT VALUATION REPORT

As the Independent Technical Expert, Mining Associates estimated a preferred valuation range of US$15.0 to 29.0 million for the Kharmagtai project as summarised in the link below.
---------------------------------------------
                    Valuation Range (US$'000)
                           Minimum    Maximum
---------------------------------------------
Market Approach             16,700     19,000
Cost Approach               14,000     29,000
Empirical Approach           9,000     17,000
Preferred Valuation         15,000     29,000
---------------------------------------------
The Mining Associates valuation considered Xanadu's exploration target for the Kharmagtai project as set out in the ASX release dated 3 February 2014 which continues to apply and is repeated in the following table ("Exploration Target"):
----------------------------------------------------------
               Tonnes (000's)      Gold (g/t)   Copper (%)
----------------------------------------------------------
Exploration 
Target         200,000 to 450,000  0.25 to 0.30 0.25 to 0.30
----------------------------------------------------------
High-grade 
Target           50,000 to 80,000  0.60 to 0.80 0.40 to 0.50
----------------------------------------------------------
The potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration to estimate a Mineral Resource under the JORC 2012 Code and it is uncertain if further exploration will result in the estimation of a Mineral Resource.

In its Report, Mining Associates noted that three historic mineral resource estimates have been undertaken at Kharmagtai, the first in 2005 by Ivanhoe Mines Mongolia Inc ("Ivanhoe"), again in 2007 by Ivanhoe and lastly in 2012 by AMC Consultants Pty Ltd.

None of the estimates were publicly released. The estimates do not comply with the JORC 2012 Code. However, Mining Associates notes that these historic resource estimates provide support to the defined Exploration Target. The later two estimates were prepared in accordance with NI43-101 guidelines and a summary is included below.
----------------------------------------------------------
             2007 Resource Estimate 2012 Resource Estimate
                  tonnes Au   Cu        tonnes Au   Cu
                (000's) (g/t) (%)     (000's) (g/t) (%)
----------------------------------------------------------
Measured        13,952  0.66  0.45   33,572  0.63  0.48
Indicated       23,449  0.35  0.31   17,593  0.46  0.48
Inferred       147,686  0.17  0.32   81,933  0.24  0.29
Total          185,087  0.23  0.33  133,098  0.37  0.36
----------------------------------------------------------
Mining Associates does not directly use the historic mineral resource estimates in its valuation as the estimates do not comply with the JORC 2012 Code. Mining Associates note that the "valuation methodology of mineral properties is exceptionally subjective. If an economic reserve or resource is subsequently identified then this valuation will be dramatically low relative to any later valuations."

EXPLORATION ACTIVITIES

Xanadu has access to the Kharmagtai project campsite during the interim period up to completion of the Transaction. Xanadu has commenced non-invasive exploration activities including visual re-logging, hand-held magnetic acquisition and alteration studies.

Xanadu is preparing for drilling to commence as soon as possible upon completion of the Transaction.

To view the Independent Expert and Valuation Report, please visit:
http://media.abnnewswire.net/media/en/docs/76833-ASX-XAM-790674.pdf


About Xanadu Mines

Xanadu Mines Ltd is a Mongolian exploration company founded in 2005 and listed on the ASX on 21 December 2010 (ASX:XAM).

Xanadu maintains a dual exploration strategy for base metals (porphyry copper and gold) and coal (coking and thermal), given the unique opportunity presented by Mongolia's world class geological endowment. The country has a vast cache of walk-up drill targets many of which have never before been subjected to modern or advanced high technology exploration.

 


Contact

Xanadu Mines
George A. Lloyd
Managing Director
T: +852-6397-3308
george.lloyd@xanadumines.com
WWW: www.xanadumines.com



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