Citigold Corporation - Gold Mine Operations

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Gold Mine Operations

The goldfield at Charters Towers covers a large area and therefore is being developed through accessing the ore bodies in several areas and interconnecting the mines where possible. There is a common management and equipment infrastructure that is available to the mines.

The first commercial gold production area is on the Reef Structure 5 and is the Warrior mine.

In addition to the Warrior mine Citigold also has substantial development works in the Brilliant mine area including a 238 metre deep production decline, two ventilation shafts and dewatering facilities. This mine has not yet reached target depth of 450 metres and is expected to resume going deeper in 2009.

Citigold is self-sufficient in water due to reclcling. The Company dewaters the whole goldfield from its submersible pump located into the historic mine workings and the water is recycled into the gold extraction plant. The water is good quality meeting stock quality drinking water standards with a neutral pH 7 and drainage into the mine workings from rainwater averages a modest 10 litres a second. The water level has been maintained about 200 metres below the City surface for the past 10 years by pumping for a few days each week.

Warrior part of Major East-West Reef Structure

The Warrior mine is on one of five large east-west mineralised structures that run sub-parallel to the historically large gold producing Brilliant and Day Dawn reef mines on Reef structure 1.

Citigold's previous trial mining was on several cross reefs (striking generally north-south) such as The No. 2 Cross Vein, Washington and Stockholm reefs. Cross reefs historically were high grade and associated with the large east-west reefs but produced less gold.

The Warrior is the first east-west gold reef Citigold has mined and appears very similar to the large east-west structures further north that hosted the Large bonanza grade Day Dawn, Mexican, Brilliant and Sunburst mines. Citigold is in a fortunate position of having existing infrastructure to minimise the cost of expanding production. The gold processing plant is capable of 340,000 tonnes of ore per year and is designed to have the capacity increased if need arises.

The Warrior mine will initially access into the eastern side of the Warrior gold deposits east-west strike line of the Reef Structure 5. The deposit has an overall length of 2 kilometres and has been tested to a depth of 300 metres. The overall Inferred Mineral Resource for Warrior deposit is 1.9 million tonnes @ 14 g/t Au containing 840,000 ounces of gold (rounded to 2 significant figures) (see Table 8 on Page 59 of the Report on the Inferred Mineral Resources for the Charters Towers Gold Project May 2005). Within the overall resource, head-grades and widths of the specific mining areas are expected to vary.

Update on Mining Operations

For an update on current mining operations see the Quarterly Activity reports and other Announcements released to the ASX. These Announcements are also on this web site and can be accessed from the Home page or the Investors section.

Mining Method

Mining operations at Charters Towers are by underground mining methods. The gold deposits are hosted in very strong granodiorite rock that has a compressive strength of 150m.p.a. or five times stronger than commercial grade concrete. This makes for good mechanised mining conditions.

The gold deposits are accessed by two Declines (downward sloping tunnels). The size is usually 5 metres wide by 5 metres high. This size allows access for all the mobile mining equipment that is used to extract the gold ore.

Mining method is modern drill and blast technique. The blast-hole drilling work is carried out by large machines with single or dual drilling booms depending on the size of the work area. They drill holes that are loaded with specially formulated high impact explosives to break the rock. The broken rock is moved by large front end loading machines (Load-Haul-Dump units or LHD's) that move about 10 tonnes of rock each bite. The rock is loaded into 40 tonne capacity trucks and hauled to the surface.

Separate sacrificial tunnels are then excavated through the gold ore body at different levels. Holes are then drilled up between the levels for blasting to break the gold bearing rock ready for excavation and haulage to the surface. The underground tunnel system is complex and requires careful design and engineering based on the geological mine design setting out where the valuable ore is located.

The technical mining method is mechanised (long-hole open stoping on 15 metre sub-levels, trackless diesel haulage) which allows for low-cost operations. Operating costs target A$350 per ounce and the current gold sales revenue is strong at an Australian gold price around A$1000 per ounce.

Gold bearing ore is hauled from the surface of the treatment plant by road trains on the approved City public heavy haulage road route to the gold extraction plant.

The Future

Increase in Planned Gold Production

As announced previously Citigold is currently expanding the Charter Towers Warrior mine towards gold out put of 100,000 ounces per year.

Planning is continuing for the Central (Sunburst) reefs to be developed following the Warrior expansion. This increase at Warrior and the Central reefs targets overall growth to 300,000 ounces per year and will be brought about by the following two factors –

1.	Higher head grades: Now that the gold ore body has been exposed underground over several hundred metres and, given the high gold grades being encountered, it is probable that gold production will be higher than originally planned as a result of the higher than expected ore grades and widths.
2.	Increased Production Tonnes: The increased production tonnes will come from accessing the extensions of the east/west and adjacent reefs thereby opening up multiple mining areas.

The initial work program will include increased diamond core drilling around the ore zones to ensure that the development of these adjacent deposits is done in the most effective and efficient manner. Citigold's aim is to ensure the maximum amount of profitable gold is extracted. This drilling will also assist to increase Citigold's current gold reserves.

The upgrade in gold production, from the current about 16,000 ounce per year rate, is expected to be focused around additional underground tunnels and development work, not building new mines. This means that the minimal capital expenditure is required to achieve increased gold output. Citigold continues its focus of undertaking capital development of operations in an expenditure efficient manner.

Brilliant Gold Reef Project

The Brilliant Gold Reef Project joint venture is in existence and is a mining exploration project within the overall Charters Towers gold project. The Brilliant Project was structured to give special taxation benefits to new investors. The initial investors contributed about $2.5 million and received the benefits. A drilling program was successfully undertaken with the funds invested. The 3.25 square kilometer sublease over a small part of our mineral tenements is held about 4% by investors other than Citigold. Investors participated via a Managed Investment Scheme whose founding member is a company of the Citigold Group. The Project had an Australian Taxation Office Product Ruling (PR2001/85) confirming 100% tax deductibility for participants. This was the first, and only, Product Ruling for a gold exploration project.

(Page updated August 2008)