The Castlemaine goldfield is thought to have multi-million ounce potential for the following reasons:-

• The depth potential of the large field was never properly explored in the 1800's where some 4.5 million ounces were won from alluvial sources alone.
• We know from research why limited early underground mining was not successful.
• While we are unsure where the present erosion level is placed within the total depth of the regional fault system, there is no evidence to suggest that we are anywhere close to the bottom. [cf. Bendigo mines are down 1.4km.]
• The Wattle Gully mine [1934-1989] is a great example of how early underground mining at Castlemaine never tapped into the potential of the field, being only 300m deep.
• The Wattle Gully exploration model has been enhanced to better define exploration targets and is proving successful.
• The 2008 discovery of the Chewton Deposit lying adjacent to Wattle Gully is further evidence of the overall depth potential of the Castlemaine goldfield.
• The substantial inaugural JORC inferred resource for the Chewton Deposit contains 2.1 million tonnes at a grade ranging between 6.0 and 9.1 g/t Au plus an additional 610,000 tonnes from remnant Wattle Gully mine areas with a grade range of 4 to 7 g/t Au.
• Structural drilling has generated some 33 separate fault reef targets across the field.
• The Chewton Deposit is evidence that major blind new resources can be discovered in the field at all depths.
• Recent drilling evidences that high grade gold can also be discovered near surface.
• From the establishment of the 3D model in 2006, 26,559m of diamond drilling (Oct '06 - Dec '08) and $7.6m have been spent directly on exploration within the Castlemaine goldfield.
• We have now defined 3 substantial project areas within the Castlemaine field
  • CWG (Chewton, Wattle Gully)
  • Quartz Hill, and
  • Cappers.
• The Castlemaine Diggings Heritage National Park that covers a large area of the central and southern part of the exploration and mining licences delivers a well defined process of work plan application and approval.
• We have a substantial and favourable land position at Castlemaine
• The commercial pine plantation in the north of the field has many logistical advantages.
• The absence of any significant historical underground workings limits complications encountered elsewhere.
• There is mill capacity within the district to enable at least initial toll treating of ore reducing front end capital costs.
• All necessary infrastructure is at hand.

Exploration activities to date have been focused on two programs of work;

1. Drilling and resource estimation studies of the Chewton Anticline prospect which culminated with the release of the JORC Code Inferred Resource estimation for the Chewton Deposit in June 2008. See Chewton Resource Statement.
2. Broad regional-scaled structural drilling based upon the goldfield scale 3D exploration model generated in 2006. This program has identified new high priority resource targets which will be the basis for future resource drilling and studies

The structural analysis of the mineralisation model performed in 2007 generated some 33 prominent linear fault reef targets of various strike lengths that accumulated to over 57km of prospective targets. These targets have been significantly increased with inclusion of those within the pine plantation now that sub-surface information exists there.

Structural drilling identified a number of prospects along the central mineralised corridor that stretches some 12km from Fryerstown in the south to the pine plantation in the north. Of these, 3 project areas are recognised as having high potential to meet our goal of locating >2 million ounces of resources. A total of 16,900 metres of diamond drilling and 671 metres of RC percussion drilling were performed in 2008 at Castlemaine. This more than doubled the number of metres drilled on the project the previous year and culminates to a grand total of 26,550m drilled since October 2006 when the historical research was validated with drill success at Chewton.

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Long projection of the central Castlemaine gold field looking west. Significant advance in geological knowledge at depth along the goldfield is illustrated by the spread of modern holes drilled by CGT since 2005 and their average depth from surface. CGT has now drilled more than 30,000m of core at Castlemaine (average depth~451m per hole), which is some 12,000m more than all previous surface drilling(204m/hole). With a typical inclination of -55o deeper structural holes fully test across entire anticline fold limbs and in places across more than one fold axis.

The exploration strategy was again reviewed after the Chewton Deposit resource estimation was finalised and structural drilling concluded. The "pathway to production" was released in mid-2008 with drilling equally split between the Quartz Hill and Cappers project areas during the second half of that year and into 2009. The high potential targets such as North Quartz Hill which have the potential to be at least "Wattle Gully size" (> 0.5 million ounces) have yet to be tested to a first decision point.

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Long projection of the central Castlemaine gold field looking west showing the 3 high potential project areas.

The company remains confident in the adopted exploration strategy to achieve the goal of building a new multi-million ounce goldfield and with the continued successes at shallow depths in the pine plantation to bring forward the start date for gold production from the field.

Cappers Project

In the northern portion of the Castlemaine goldfield lies a substantial-sized, privately owned pine plantation which abuts the Castlemaine Diggings National Heritage Park. As this area is of low cultural or environmental value, and is sufficiently away from the community, it is considered an appropriate possible site to position mining infrastructure. A preliminary engineering and community impact study was performed in 2006 to assess if this pine plantation would be suitable for locating a potential mine access and/or processing plant. Conclusions of this study were that the site would be feasible from both engineering and permitting aspects.

It was at Specimen Gully in 1851 that gold was first discovered in the goldfield, although little is known about the hard rock mining of the area. Mines such as Cappers produced high gold grades from small tonnages at very shallow depths (<30m). Records detail that 109 ozs was won from 11 tons of one lode and 93 ozs from 148 tons from the main lode which was between "2 and 3 feet wide and easily worked" .¹

Five diamond holes were completed within the Moonlight Pine Plantation in the March Quarter of 2008. These are the first exploration holes to be drilled in the northern goldfield region which strikes over 3 km north to south. Historical knowledge suggests the miners at Cappers were developing on saddle reefs and associated "leg" veins with production from at least 3 eastern legs in the mine. These eastern legs or laminated quartz veins were drill targeted where interpreted to intersect the regional scale Shicer Fault. Significant encouragement was gained from a section of three holes drilled adjacent to Specimen Gully where visible gold was intersected in hole CGT_023 at the Shicer fault (2.5m @ 71.9g/t Au from 337.4m).

In the December quarter of 2008, exciting results were achieved at shallow depth. This exploration focus on the unexplored northern part of the field has generated potential for an early source of cashflow from shallow deposits as well as broader mineralisation potential at greater depth along the major Shicer fault. A program of both RC and diamond drilling has revealed two areas, Shellback Reef and East Cappers, where narrow high grade gold veins occur at shallow depths less than 50m. Being within the pine plantation and at these depths each may be amenable to a number of mining methods with continued exploration success.

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Plan view of target areas and drill locations at the Cappers Project. Only selected results from RC drilling are shown from the Shellback drilling for clarity - see text below and Figures 8, 9 & 10 for assay detail for diamond drilling at Shellback. The plan illustrates how little strike testing of shallow and deep targets has taken place to date. At East Cappers only two cross sections exist, whereas at the deeper Shicer Fault target the only three intersections (CGT_023, PPD_004 and CGT_021) all report gold over a tested strike length of 120m which is open along strike.

Mining in the 1800's at Cappers was focused on the near surface saddle reefs, but drilling by CGT in holes CGT_023 and PPD_004 (visible gold) has located gold bearing vein stockworks where a sand unit intersects the Shicer Fault to the east and some 300m deeper than the old workings. This mineralisation has now been found across 120m of strike between the two drill sections drilled thus far. All prospects identified at Cappers to date have unknown and open strike lengths.

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Composite cross section of drilling at Cappers. Shallow RC and diamond holes have been removed for clarity.

This new gold discovery upon the Shicer Fault is located in an interval of intense silica altered sediments and comprises a 12.5m zone with >65% quartz veining that contained grades up to 184.6g/t Au. The gold is intimately associated with arsenopyrite which is seen in patches across the fault and vein interval. Strong gold indicator sulphides, sphalerite and galena were also found in this interval.

NB: Assay method used is 50g Fire Assay except for the samples marked * # and ^ which were via 1000g Screen Fire Assay.
Fire assay results for sample marked # were 45.74g/t Au which was repeated at 48.71g/t Au
Fire assay results for sample marked ^ were 144.48g/t Au which was repeated at 166.09g/t Au

The Shicer Fault prospect offers the highest potential for a large sized resource at Cappers.

The widths of quartz and gold mineralisation found at the Shicer Fault are very encouraging with continuity of mineralisation of at least 120m indicated. A significant program of diamond drilling is required to define the dimensions and grade distribution of the Shicer Fault target sufficient for resource estimation studies to be considered.

It is now established that the Shicer Fault and adjacent eastern fold limb have high potential to host shallow gold mineralisation and that at least two further gold bearing quartz vein targets occur. The multiple targets found at Cappers warrant a higher density of drill testing within this eastern fold limb and major regional fault. It is extremely encouraging that gold has been found so close to surface in the pine plantation as this area represents the most logistically advantageous location to drill test, bulk sample, and mine any resource which can be defined.

Chewton - Wattle Gully Project (CWG)

Work performed as part of studies into the geology and gold mineralisation at Wattle Gully and the Chewton Deposit has recognised the potential for the surrounding area to host similar sized discoveries. This realisation has prompted the company to drill test to the south where a single traverse of 4 diamond holes across three prospective major west dipping faults (Whitehorse, Cemetery and Wattle Gully faults) was conducted in 2008.

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Plan view showing the location of the Wattle Gully mine, Chewton Deposit and the South Wattle Gully mineralisation in CGT_041. Also shown are CGT_043 which targeted southern extensions to the Whitehorse Fault, and CGT_042 & CWG_001 which were drilled into Chewton Anticline South.

Results for CGT_041, the first of the four holes drilled across the traverse, were highly successful in intersecting anomalous gold grades in quartz veining associated with the Wattle Gully fault zone. Drilled approximately 800m south of Wattle Gully the hole intersected very strong quartz quantities and desirable textures at faults intersecting both the West Wattle Gully and Wattle Gully anticline axes. This evidences the potential for a southern continuation of the Wattle Gully mineralisation and particularly it's largely untested potential in the southern portions of the West Wattle Gully anticline. At these depths, the South Wattle Gully prospect offers an extremely attractive target for future drill testing.

The only drill test to date for gold mineralisation to the north of the Wattle Gully Cross Course was a single surface hole (WGD3 - Figure below) drilled by Newmont in 1988, and four historical underground bore holes drilled in the 1930's immediately after the discovery of the high grade Wattle Gully gold mineralisation in 1934. The underground holes would have been drilled at a time when very limited knowledge of the Wattle Gully fault system and mineralisation was available and as such were poorly targeted resulting in insignificant results.

WGD3 did intersect significant gold results and importantly, also the Wattle Gully Fault Zone with visible gold seen in three parts of the hole. Although recommended for further drill testing at the time, Newmont Australia eventually withdrew from the project without doing any additional drilling in the North Wattle Gully area. The lowest fault intersected in WGD3 is seen as a very strong fault with 1.7m of quartz reef veining with visible gold and is thought to correlate with a structure 150m below the Wattle Gully Fault Zone which hosts a formerly unknown 4.5m downhole intersection of quartz 180m below the mine to the north. This quartz reef was named the "Bicentennial Lode" and from the evidence at the time it was deduced that the "Bicentennial Lode" is a west-dipping fault reef in the east limb of the Wattle Gully Anticline.

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Long projection looking west which illustrates the potential for new discoveries south and north of the Wattle Gully mine (CGT_041; CGT 2008 and WGD3; drilled in 1988). Results are also shown for CGT_042 and CWG_001 which test the southern area of the Chewton Anticline for shallow gold mineralisation. No drill testing has ever occurred on the Chewton Anticline to the north of the Wattle Gully Cross Course (Fault).

The Chewton and Wattle Gully gold systems offer new exciting targets to the north and south of the old mine. It is possible that these targets can be most efficiently drilled from underground should a mine access into the Chewton Deposit be developed as part of the exploration and economic assessment of the gold deposit.

Quartz Hill Project

The North Quartz Hill prospect has high potential to develop into a Fault Reef style of resource with significant size (ie Wattle Gully or Chewton Deposit ~500,000 ounces at grades around 8-10g/t Au.

Initially drilled with hole CGT_015 in December 2007 a further hole from the same site was designed to intersect both Milliken's and Francis Ormond faults adjacent to the anticline axis which is known from the North Quartz Hill underground workings. Hole CGT_016 was drilled very steeply to the west and intersected large volumes of stylolitic quartz veining containing quartz-carbonate-chlorite and trace sphalerite were found from about 340m associated with the interpreted Milliken's fault. Encouragingly, patches of coarsely crystalline arsenopyrite were found typically adjacent to the quartz veining in carbonaceous shales. Some lesser amounts of arsenopyrite and pyrite (as large very crystalline cubic form) were also seen within quartz veining. These textures and the presence of trace sphalerite are similar to that seen at the Chewton Anticline at the time.

Once assays from CGT_016 confirmed the presence of gold, and with the recognition that multiple fault and veins could be found at North Quartz Hill three sections, each with at least 3 holes, of step-out and infill diamond drilling were planned to scope the prospect for a large gold resource. This program, begun in the latter half of 2008, was reduce to just two holes with the additional strategic focus on shallow targets at Cappers.

Both step-out holes QHD_002 and QHD_004 contained multiple fault structures and associated quartz veins with gold grades including intervals >10g/t confirming the potential of the prospect across a strike of >290m and a stacked height of about 300 vertical metres. This limited exploration has enhanced potential for a significant sized fault-reef style resource.

Other prospects drilled within the Quartz Hill project include Merthyrn (CGT_032), Francis Ormond (CGT_035), Nimrod (QHD_001) and Englishman's (CGT_030, CGT_031 and CGT_034). Of these the hole at Merthyrn holds highest potential for gold resources with two intervals of minerlaisation found at the Post Office Hill (1.5m @ 2.7g/t Au, showing visible gold) and Whitehorse Faults (up to 0.9g/t). The Englishman's Fault is found to contain gold grades up to 1.9g/t Au amongst other separate vein intervals across a strike length of about 400m. At Nimrod a single hole was drilled primarily to test the Shicer Fault some 2km south of it's mineralised location at Cappers. The hole intersected the Shicer Fault without significant quartz, and also the Post Office Hill and Whitehorse faults before that. Appreciable quartz veining occurs between 447.5m and 450.6m although the quartz form is very weakly stylolitic with very diffuse boundaries and low to no sulphides within the veins. The Whitehorse fault was intersected in the western bedded limb of t eh Whitehorse anticline and would offer a high potential target up dip in the eastern limb. However at that target location depths from surface would be less than 100m (thus within the CDNHP) and encroaching the historical mine workings.

Other Prospect Areas at Castlemaine

Outside Cappers and CWG (Chewton-Wattle Gully) a large number of earlier stage exploration prospects are identified which at this time are prioritised lower than the premier high potential prospects of South Wattle Gully, Shicer Fault and North Quartz Hill. Successful past producing mines such as Spring Gully and Eureka remain relatively untested by modern exploration drilling as does the mines of Fryerstown (New Era, Herons, Duke of Cornwall and Ferrons amongst others).

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At Castlemaine work is progressing to test the 3 premier prospects at South Wattle Gully, Shicer Fault and North Quartz Hill with the aim of proving new gold resources which will define the future production of the field. The high gold endowment of the region, prospective geological setting and mineralisation styles plus recognition of a high potential economic style such as that mined at Wattle Gully, make this an exciting gold project with multi-million ounce possibilities.