MONGOLIAMONGOLIAThe big tomorrow of miningThe big tomorrow of mining®®

Mr Brian Thornton, ChairmanJune 2010

Xanadu’s mascot “Marmot Khan” who made the original coaldiscovery hole at Khar Tarvaga in August 2006

Disclaimer

This Corporate Update is not a disclosure document nor does it constitute the provision of financial product advice.None of Xanadu Mines Ltd (“Xanadu”), its related bodies corporate, officers, employees and advisors makes or gives any representation, warranty or guarantee in relation to this Corporate Update (whether orally, in document form or in any form whatsoever) (“Information”) to the recipient of this Corporate Update (“Recipient”) or any of its related bodies corporate, officers,employees and advisors.The Information is provided expressly on the basis that the Recipient will carry out its own independent inquiries into the Information and make its own independent decisions about the affairs, financial position or prospects of Xanadu Mines Ltd. Xanadu reserves the right to update, amend or supplement the Information at any time in its absolute discretion (without incurring any obligation to do so).

Mongolia� The Opportunity

� The Challenges

� Mongolia and its Potential

� About Xanadu

� The Coal Opportunity

� Khar Tarvaga Coal

� Galshar Coal

� Why Mongolia?

Mongolia – the opportunity� 3,800kms border with China – the engine room of the

world

Mongolia – the opportunity� Multitude of walk up drill targets i.e. near surface

compared to Australia, and Canada

HutagHutag South (South (XanaduXanadu 100%)100%)

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Mongolia – the opportunity

� Has the mineral products China needs; coal, copper and uranium

Mongolia – the opportunity� Exploration relatively easy and inexpensive compared to

developed countries

Khar Tarvaga: drilling for coal in Winter

Mongolia – the opportunity� China becoming more dependent on foreign coal i.e. imports

of thermal coal this year expected to reach 100mt

Source: Bloomberg, 2010

Mongolia – the challenges� Limited infrastructure i.e. rail, roads, electricity networks� Rail capacity of Trans Mongolian an issue including Russian

ownership� Fuel supply – totally dependent on Russia for diesel, petrol and

avgas

Mongolia – the challenges� Water supply in the bottom half of the country is limited due to low

precipitation� Hence dependence on aquafers for major projects including wash

plants for coal� Mongolian on a steep learning curve to become part of the modern

world

MongoliaMongolia� Land area 1.56m km2 (c.f. Queensland 1.73, W.A.

2.5) � Minerals are the major sector: • Cu, Au, U, Mo, rare earths & coal• 10% of GNP of US $1billion• 56% of industrial production• 66% of exports� Total coal resources estimated at 150+ billion

tonnes� Favourable legal, investment and fiscal regime� Minerals Law 2006 based on Australian and

Canadian Mining Laws � Elected Parliamentary Democracy

Development PotentialDevelopment Potential

� Until Oyu Tolgoi discovered, Mongolia not on the exploration radar

� US$80m spent in 2009 on exploration activities� Mongolia has 2 of the world’s largest mining

projects:• Oyu Tolgoi 36m tonnes Cu + 45m Oz Au and• Tavan Tolgoi - 6 billion tonnes of coal

� Akin to Peru, Chile opportunity in 1970s and 1980s

� Estimated that 60-70% of Mongolia remains unexplored

““OyuOyu TolgoiTolgoi remains RIO remains RIO TINTOTINTO’’ss favouritefavourite projectproject””CEO, Tom AlbaneseCEO, Tom Albanese

About About XanaduXanadu MinesMines

� Operating in Mongolia since 2005� Established a 327mt JORC coal resource at Khar Tarvaga

near the Trans Mongolian railway� About to drill at Galshar coal project to confirm potential

coal resources of up to 200mt� Elgen-Zos gold project in SE Gobi has potential for a low

grade gold system� Projects strategically located to markets of China, Korea,

Japan and Russia� Close to infrastructure including rail, roads and power� Hence focus is China’s energy and metal needs

Current Mongolian ProjectsCurrent Mongolian Projects

“We will burn our coal and if we have to, we We will burn our coal and if we have to, we will burn your coal toowill burn your coal too””

HuHu JintaoJintao National Peoples CongressNational Peoples Congress

The coal opportunity

Voracious coal appetite next door

In 2009 China’s coal consumption was 3.3 billion tonnes; estimated to be 4 billion tonnes by 2016

2009 imports of 126mt – 1/5 of 600mt world seaborne coal consumption

China’s coal imports up 226% to 44.4mt in Q1 2010 i.e. annualised 178mt

April 2010 – benchmark thermal coal hit US$108 per tonne suggesting tightening supplies

Existing China coal resources remotely located i.e. Xinjiang and Inner Mongolia

Deeper and more expensive with increasing environmental and safety standards

New taxes in China (Shanxi) have added RMB20–30/ tonne to coal production costs

China has less than 45 years of coal supplies based on its current consumption rates; hence looking to third party supplies

China’s coal resources

Energy Reserves to Consumption RatioEnergy Reserves to Consumption Ratio

KharKhar TarvagaTarvaga Coal Coal

� Flagship project - Xanadu 100%� JORC resource of 327mt� About 200kms SE of Ulaanbaatar� 320km2 licences � Within 37kms of railway � Number of near surface, shallow dipping coal

seams� Plus additional 20mt at our nearby Tugrug

project

KharKhar TarvagaTarvaga CoalCoal

� Marmot discovery hole August 2006� Aircore drilling Dec 2006, infill drilling Jan - May

2007� JORC coal resource 327m tonnes certified by SRK� Low sulphur 1%, ash 12% and a calorific value of

4,800 kcal/kg energy (washed)� Similar to General Blend No. 1 ex Bohai gulf ports� Suitable for:

• power generation• coal to liquids or• gasification to urea/ fertilisers

KharKhar TarvagaTarvaga CoalCoal

Near surface coal at nearby Bayanjargalan

KharKhar TarvagaTarvaga Coal Coal -- MarketsMarkets

� Coal to Liquids (CTL)• Mongolia completely dependent on imported

fuel – diesel, petrol, avgas • Xanadu’s KT coal deposit of 330mt potentially

converts to 480m bbls of liquids (diesel, jet fuel, etc)

• Nexant Inc. of China completed a technology scoping study of KT coal project November 2009

KharKhar TarvagaTarvaga Coal Coal -- MarketsMarkets

� Discussions ongoing with potential Korean and Chinese JV partners

Shenhua’s Erdos CTL Plant April 2009

KharKhar TarvagaTarvaga Coal Coal -- MarketsMarkets

� Mine mouth power station• Mongolian Government strategy is to become a

supplier of electricity by wire to China• In lieu of supplying raw coal to burgeoning

China market• Major financiers/ developers in discussions with

the Government to develop these options• A value adding proposition for Mongolia

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Galshar Coal Project100% ownership of 230mt Galshar thermal coal resource in SE Gobi

Located 200kms from China border / 65kms from railway

One main thick coal seam and several thinner seams with average thickness of 21m

Coal quality in excess of 6,000kcal/kg

Potential for large scale open pit operation with low stripping ratio

Resource open to north, east and potentially south

Power and unpaved road infrastructure in place

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Galshar GeologyGalshar Coal deposit located within Eastern Mongolia Choyr-Nyalga coal basin

Hosted within a sequence of lower Khashaat Khudag Cretaceous fine, grained sediments

Three distinct coal zones at Galshar:

Anticline – thick coal sequence east/west trending. Well defined (50-200m spaced drilling). Strike length 1.4kms with an average 21m thickness and max 46.6m. Open to the east.

Northern Limb – 3.4km coal sequence. Extends north of the Anticline zone. Deposit remains open to northeast. Less defined (1km spaced drilling).

Southern Limb zone – 1.8kms thin shallow coal seam. Extends south of the Anticline zone. Remains open.

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Major coal basins

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Galshar Coal Resources

Estimated in-situ resource of 230mt of coal*

**Qdaf Value

(kcal/kg) Total (mt)

5000-5999 42.5

6000-6499 100.3

6500-8807 87.8

TOTAL 230.6**

*Not to JORC or NI43-101 code standards

**Daf – dried ash free

***resource remains open to the north, east and potentially south

SummarySummary� Mongolia a frontier opportunity for energy and minerals� Xanadu has early mover advantage� Focused on energy related minerals i.e. coal to China� Exposure to copper and gold in SE Gobi� A JORC compliant energy coal resource of 327mt at KT� Acquired coal resource at Galshar of 200mt (June 2010)� Close to main rail corridor and end user markets� World’s largest new copper project being developed at Oyu Tolgoi� Independent democratically elected government, run by well

educated and highly intelligent people� Xanadu committed to an equitable sharing of benefits with

Mongolians as part of its licence to operate

“The China moment has arrived

particularly for coal”

MONGOLIAMONGOLIAThe big tomorrow of miningThe big tomorrow of mining®®

Xanadu’s mascot “Marmot Khan” who made the original coal discovery hole at Khar Tarvaga in August 2006