Quarterly Report October – December 2007

Key Points

• Gill reef infill drilling confirms continuity
• Gill reef extended by 150 metres to the south
• Access development commenced to Gordon reef
• New regional targets assessed and programs developed

Summary

Rod Hanson, Managing Director & CEO comment: “The first phase of infill drilling into the Gill reef has confirmed the predicted location and size of the reef. Further infill drilling will be completed before development is planned to intersect the reef at the end of the March 2008 quarter. Our goal is to commence trial mining at a  modest scale by June 2008, with trial production to commence in the second half of the year.

“The Gill reef is our primary target, so it is important to note that drilling extended the reef by 150 metres to the south, with the reef now defined over a strike length of 720 metres.

“We have also commenced the second access development into the Garden Gully line to enable infill drilling of the Gordon reef. From this development we also plan to access the previously discovered high-grade Dale reef as a second trial mining location.

“Regionally we have defined some excellent targets to the north and west of the goldfield that require drill testing. This will be the first exploration conducted for lateral extensions of the 22 million ounce Bendigo goldfield. Our goal is to locate high grade deposits at depths of less than 500 metres that can be economically mined and processed at our Kangaroo Flat plant.”

Exploration & Development

• 531 metres of underground development completed, including 320 metres of the Gill reef access development. Orders have been placed for smaller mechanised mining equipment in preparation for trial mining.
• Initial infill drilling results into Gill reef display good geological continuity. Drilling to the south extended the defined length of the reef by 150 metres to 720 metres.
• Drilling to the south of the Gordon reef has provided strong indicators for a new reef position. Drill testing to be conducted next quarter.
• Gordon reef access development has commenced to enable infill drilling of Gordon and access to Dale reef. The high-grade Dale reef is likely to be included in the trial mining program.
• Regional target generation commenced with strong targets identified north of the Kangaroo Flat Mine, at Eaglehawk on the New Chum line, and to the west, on the Nell Gwynne line.

Corporate

•  Cash in bank at 31 December 2007 was $58.1 million ($62.6 million last quarter).
• Sufficient funds on hand to commence trial production.
• Mr David Ransom appointed as Non-Executive Director