RESOURCEStocks: You recently announced results of new drilling on White Hill at Kharmagtai, including 282m grading 0.44% copper and 0.16g/t gold (0.55% copper-equivalent) from 560m depth, within a wider intercept of 850m grading 0.32% copper and 0.2g/t gold (0.45% copper-equivalent) from surface. The hole probed below existing (resource-calculation) intercepts, and on a different orientation. What were the aims, vis-à-vis the depth/orientation/target zone, and how did the results equate with those aims?

Andrew Stewart: We believe Kharmagtai represents one of the most promising copper and gold discoveries globally at the moment, and the recent resource extension drilling around the maiden shallow resources at Copper Hill, Stockwork Hill and now White Hill has delivered some exceptional results. This new drilling has defined significant extensions to high-grade mineralisation at all three deposits now, which is sure to lead to an increase in the resource. We are especially excited by results in drill hole KHDDH430 drilled beneath the White Hill deposits as it has significantly extended the zone of known mineralisation. The company has spent a considerable amount of time and resources building an extremely comprehensive geological model. This work identified a zone of undrilled down-dip mineralisation that has added a significant volume of mineralisation and expanded mineralisation south of, and down-dip of the current resource, adding over 380m of previously unknown mineralisation. We know these types of gold-rich porphyry systems have mineralised vertical extents of over a kilometre and this new extension drilling is showing that the deposits at Kharmagtai are fully preserved and that what we are seeing at surface is just the tip of the iceberg. We expect the area of mineralisation to get bigger and bigger over the next year.

RS: You highlighted the intersection of bornite and "extensive potassic alteration" in the deeper White Hill hole. Xanadu has previously talked about three styles of mineralisation at Kharmagtai - does this denote a fourth?

AS: Previous wide-spaced drilling at White Hill had defined a large medium-grade porphyry with stockwork mineralisation covering an area of 850m by 550m. This shallow copper-gold mineralisation is hosted within narrow stockwork zones that have been focused around several narrow structurally controlled diorite porphyry dykes, features typically found in the shallower parts of porphyry systems, where narrow dykes and patchy mineralisation branch out above a mineralised stock. The deeper parts of KHDDH430 contained significant potassic alteration and bornite mineralisation suggesting this hole is vectoring towards deeper, higher grade porphyry copper and gold mineralisation. Additionally, 3D magnetic inversions at White Hill show a compelling picture of a deep seated magnetic anomaly, interpreted to be a mineralised polyphase intrusive stock, feeding the shallower mineralisation at White Hill.

RS: You indicated the bornite and potassic alteration could be a precursor to finding a "higher-grade system adjacent to the established resources". Why is this the case?

AS: Relogging of White Hill in 2017 discovered that only narrow, mineralising dykes were intersected in the previous drilling and that the bulk of the mineralisation within the defined resource is within a pre-mineral host diorite. The recent success in targeting down-dip extension to mineralisation from the narrow dykes indicates the potential for a larger causative intrusive body at depth. The fact that only narrow fingers of mineralised intrusive have been intersected also indicates that the system remains well preserved. The drilling is now focusing on defining the deeper, potassic higher-grade zone of the known resource.

RS: Given the drilling depth/cost associated with such deep drilling from surface, what is the follow-up plan, and when will the next phase of work start?

AS: Xanadu Mines has been able to negotiate a very competitive drilling contract at Kharmagtai. Follow-up drilling has already commenced, and it is the company's intention to invest the money raised through the recent share placement into the ground. In fact, the Kharmagtai drilling fleet is expanding to four drills this month.

RS: Where does that White Hill follow-up sit in your broader plans for the next 6-12 months: where will the focus be, and why?

AS: Drilling is currently following up the down-dip extension to mineralisation recently intersected at White Hill. Follow-up drilling based on the reinterpretation of historic work and the targeting of deeper porphyry mineralisation will remain a focus for White Hill and the other Kharmagtai prospects for the next 12 months. Late copper associated with the tourmaline breccia mineralisation that has been superimposed on the porphyry systems has been recognised as an important part of the growing metal inventory at Kharmagtai.

RS: How would you characterise the progress made at Kharmagtai in 2017/what would you say have been the main highlights or milestones?

AS: Through the use of industry experience and good science, Xanadu has been able to make significant progress in the understanding and targeting of mineralisation at Kharmagtai. One of the biggest advances we have made is the understanding that a significant part of the copper and gold metal budget in the currently defined resource is a late event which is superimposed on earlier porphyry mineralisation. Much of this late mineralisation is hosted in tourmaline breccias. On a district scale, bedrock drilling has successfully defined numerous new porphyry targets under shallow cover exploration across the entire Kharmagtai tenement, and numerous shallow high-priority targets already tested have proven to be mineralised.

RS: What are three things you're aiming to do in 2018 that could fundamentally change the Xanadu value case?

AS: We are looking to accelerate Kharmagtai drilling on multiple targets. We will maintain our dual drill strategy of expanding known mineralisation through exploration of tourmaline breccia hosted mineralisation below the current resources and drill test all shallow high-priority porphyry copper-gold and gold targets under-cover. Discovery of a new blind porphyry centre at Kharmagtai will have the greatest impact on the project economics. In order to deliver results more rapidly, Xanadu is in the process of mobilising a fourth rig to Kharmagtai. Xanadu is focussing on the high-grade mineralisation at Kharmagtai.

RS: What are you seeing in the (copper) equity space that gives you particular encouragement heading into the new year?

AS: What we have seen over the last six months is a general increase in the share prices of small cap mining and exploration companies. However, it's clear that there is a real shortage of quality projects and management teams that are delivering discoveries. Therefore, demand is exceeding supply. Due to this we are seeing a clear increase in M&A activity globally. Xanadu is in a privileged position in that it is developing what looks to be a genuine world-class project and this is the opportunity that has come from a bear market. Now is the time to be leveraged to discovery upside.

RS: And the copper (metal) market … the price is obviously improved of late, but what has got your attention in the market that is relevant to the sort of development window you are seeing for Xanadu and its flagship project?

AS: Investors are looking at the early stage exploration projects because what the industry is lacking now is quality, new discoveries. New discoveries are extremely valuable and rare and will demand a premium for the companies that control them - and that is the place the smart investors want to be positioned. It's all about new, sizable discoveries, deposits large enough and of high enough grade to attract a corporate buy-out. The doom and gloom of the past five or so years has meant there have been few discoveries of note. The majors have been sitting on their hands for the past decade and have done almost no exploration. These companies are now looking to rebuild their project pipelines and that's where we will be with Xanadu.