Quarterly Report October – December 2008

Key Points

• Production nearly doubles to 9180 oz gold
• Cash balance increases by $2 million to $45 million
• Employee numbers increase by 9%
• Two new reefs discovered

Summary

Rod Hanson, Managing Director & CEO comment: “The trial mining phase at Bendigo is continuing very successfully with gold production almost double that achieved last quarter. The result was delivered by an increase in mining and processing rates combined with the continuation of very good head grades from Gill reef,  which averaged 10 g/t gold.

“We have completed six months of successful trial mining in Bendigo. If this performance continues, our plan will be supported by Gill reef for at least another 12  months. An increase to more commercial rates of production requires the discovery of additional large reefs to provide increased availability and flexibility of ore  sources. With this goal in mind, I am pleased to report that we discovered two new reefs this quarter, Nankervis and Dunlop reefs, both having potential to be included in our near term mine plan. Drilling to test for  extensions of these reefs is underway.

“We are benefiting from the strong A$ gold price, with gold sales generating $11 million of revenue for the quarter. The combination of a strong gold price and high head grade helped generate positive cashflow of $2 million during the quarter and increased our cash balance to $45 million. It was a great quarter where production, exploration and cashflow were all positive. Our substantial cash balance in the present climate provides us with plenty of flexibility to grow” said Mr Hanson.

Operations

• Ore treated of 32,011 t at 9.8 g/t gold for 9180 oz gold.
• Gill reef head grade averaged 10 g/t, with ore blocks ranging from 3.6 g/t gold to the bonanza grade block of 28.9 g/t gold.
• Underground cut and fill stoping commenced within Gill reef.
• The success of the program to date has supported the move to increase  employee numbers by nine to optimise trial production.
• The exploration program is entirely focussed on defining mineable reefs close to existing workings.
• The first modern day test of the Nell Gwynne line, located west of the Kangaroo Flat mine workings, successfully discovered the Nankervis reef.  Drill testing of a shallow target on the Deborah line discovered the Dunlop reef. Further drill testing is in progress.

Corporate

• Revenue generated of A$11.0 million included the sale of 9189 oz of gold at an average price of A$1189/oz.
• Cash in bank at 31 December 2008 was $44.9 million and in addition $3.5 million of gold dore held at year end was sold in early January (cash as at 30 September 2008 was $42.7 million).