Highlights of the June 2008 Release

• Inferred Mineral Resource of 2.1 million tonnes at a grade of 8.3 g/t Au amounting to 574,000 ounces at the Chewton Deposit.
• The Chewton Deposit is unconstrained both to the north and south.
• An additional 610,000 tonnes of Inferred Mineral Resource at a grade of 5.7 g/t Au for 112,000 ounces in remnant areas of the adjacent Wattle Gully gold mine.
• Potential for further discovery beneath Wattle Gully.
• Chewton Discovery cost of just over $4/oz.
• Evidence of the multi-million ounce potential of the Castlemaine goldfield.

Castlemaine Goldfields Limited (ASX Code: CGT) was pleased to announce results of the inaugural estimation of Mineral Resources for gold mineralisation at the Chewton Deposit within the Castlemaine goldfield in Central Victoria. The resource estimate was jointly undertaken by CGT and independent consultants, Snowden Mining Industry Consultants Limited ("Snowden"), to be compliant with the 2004 JORC Code for reporting mineral resources.

CGT has taken a strong geological approach to estimation based on experience gained from the Wattle Gully Mine and expertise of the Competent Persons. The process has also incorporated the knowledge of other geological and mineral resource experts with substantial experience. The Competent Persons and other experts have an 80 year plus track record within Victoria's gold sector, including work in the Bendigo, Tarnagulla, Wattle Gully and Ballarat goldfields. The Managing Director & CEO, Mr. Gary Scanlan said "The release of this Chewton Deposit resource estimate places us firmly on track to meet our first objective of discovering at least 2 million ounces of resource within the Castlemaine goldfield.

Drilling on the Chewton Deposit and at other prospects along the central corridor clearly evidences that our geological modelling has brought a new understanding to this under-explored and under-developed, yet historically prolific goldfield.

We will now move forward to drill define other prospects to ascertain our quickest route to an initial cash flow. Particular focus with be on the northern part of the goldfield where gold has been discovered within 14m from surface in the Pine Plantation".

The announcement of this initial resource, combined with the highly promising drilling results released to the market on 22 April 2008 on other prospects along the central corridor, provides clear evidence to support the strongly held conviction that Castlemaine will again be a multi-million ounce goldfield.

Table 1. Inferred Mineral Resources - May 2008.

Rounding differences may occur.
Bulk Density: 2.65 g/cm3
¹ Australasian Code for Reporting of Mineral Resources and Ore Reserves, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), 2004.

Table 2 Grade sensitivity for remnant gold resource within Wattle Gully mine

Table 3 Grade sensitivity for inferred gold resources at the Chewton Deposit

Increased tonnes at the high grade outcome for the Chewton Deposit are due to inclusion of spur and reef lodes now above the 5 g/t Au cut off.

Geology and Mineralisation

Information gained from drilling at the Chewton Deposit has shown the Cemetery Fault Zone to comprise a significant set of major west-dipping structures with strike continuity of at least 700 m. The Cemetery Fault Zone consists of a stacked set of closely spaced mineralised faults in the east limb of the Chewton anticline, similar to those mined on the nearby 600m long Wattle Gully Fault Zone where historical gold production exceeded 400,000 ounces.

Gold mineralisation occurs as free grains in massive or laminated quartz reef on west dipping faults, or as bedding discordant spur quartz veins. Mineralised quartz exhibits stylolitic "laminated" textures with pyrite, arsenopyrite, base metal sulphides and numerous incidents of visible gold.

The fault structures, similar to Wattle Gully, converge towards the north with the eastern limb of the Chewton anticline fold becoming narrower in that direction. A number of west dipping linking faults are suggested from structural measurements as are east dipping faults and quartz veins. Key to the generation of the quartz reefs and surrounding spur stockwork is the development of a parasitic fold towards the north on the western limb of the anticline. This parasitic fold takes off mid-way along the resource at a section of high structural complexity and is known from the shallow Wattle Gully South #3 mine to cause a flattening of the fold nose and change in plunge to the fold axis.

Sampling confirms the Chewton Deposit is a typical Central Victorian coarse gold bearing reef system. The distribution of gold particles is likely to be erratic and leads to a high "Nugget Effect" in drill core samples. This is similar to Wattle Gully where profitable mining included small tonnages of extremely high gold grades.

Wattle Gully Mine Studies

The main period of production was between 1934 and 1969 with total recorded hardrock production of 1.1 million tonnes for a recovered grade of 10.3 g/t Au or 375,346 ounces. This does not include shallow production from the Phillips Reef which is the upward continuation of the Wattle Gully Fault Zone. Reprocessing of mine tailings in the 1980-90's allows estimation that the head grade from the mine was probably 12 g/t Au or greater.

The Chewton Deposit resource estimate has been made from knowledge gained of the grade distribution and coarse gold behaviour at the adjacent Wattle Gully gold mine for which detailed underground mining, survey and assay data have been modelled and analysed. Analysis has shown how drill hole grades severely under-estimate the true grades when compared to mill reconciled or weighted average truck samples grades which were taken on a daily basis during mining. There is robust evidence that the smaller volume diamond drill samples under estimate gold grades by up to six times that of the truck grades and the mine's head grades.

The Wattle Gully gold mine was never drilled from surface for resource estimation purposes, nor did it ever have a resource and reserve calculation performed during the early production years. Miners would use quartz textures, sulphide contents and previous gold occurrences within a reef to make mining decisions and allocate ore and waste. Underground diamond drilling was done primarily to explore for new lodes or locate existing ones ahead of mining. Often the diamond core was not assayed regardless of the quartz found.

For modelling purposes, the Wattle Gully Fault Zone has been subdivided into 7 west dipping reef lodes each associated with individual faults that show continuity from section to section and level to level. The Wattle Gully fault lodes were a mixture of reef (65% by volume) and spur (35% by volume) quartz. A 3D model of these lodes was then constructed and the tonnage and grade estimated for each using a combination of underground drill hole and truck sampling data. Trucking assay data from stopes is available for 29% of the total mined tonnes.

Analysis of this stope assay data details how, from level to level, it was typical that less than 10% of the mined tonnes contained 50% or more of the gold produced. This provides key evidence that approximately 50% of the gold inventory is contained within bonanza zones of grades potentially around 2 ounces per tonne (~60 g/t Au). Analysis of the coarse fraction of assayed samples from the Chewton diamond core suggests that this "nuggetty" distribution to the gold grades will be very similar to Wattle Gully.

Wireframe modelling of all lodes in the Wattle Gully Fault Zone, which is restricted to the upper faults of the greater Wattle Gully fault system (see Figure 1), has estimated the pre-mining in-situ gold inventory of 3.0 million tonnes at 5.2 g/t Au using the known mine production, estimated remnant resource and a grade of approximately 0.5 g/t for the undefined mineralisation between the remnant resource areas and that mined. The total in-situ gold mineralisation at Wattle Gully is estimated to have been 500,000 ounces.

Remnant Gold Resources in Wattle Gully Mine

In 1992 the previous operator of Wattle Gully completed an estimate of the remnant gold resource located within and adjacent to the dormant mine. The estimate was completed by a geologist with over 14 year's experience of the Wattle Gully Mine (Potter, 1992). The estimate was based on experience gained from mill reconciliation and observation of quartz vein textures, alteration and indicator minerals such as sphalerite and galena to estimate grade into a series of ranges.

Tonnages and grade ranges compiled in 1992 have been reviewed and validated against the original mine data currently available to CGT and the competent persons. This data is considered a valid base from which to estimate the remnant mineralisation and produce a JORC Code compliant resource. Portions within 100m from surface (within the Castlemaine Diggings National Heritage Park) have been removed as un-minable. In addition portions previously classified as Indicated Mineral Resources have been downgraded to Inferred Mineral Resources due to higher uncertainty related to the data and since the Wattle Gully mine is flooded.

Any mining or bulk sampling at the Chewton Deposit which is deeper than the old Wattle Gully mine will involve infrastructure establishment and de-watering of the Wattle Gully mine. This is likely to make remnant resources more economic. The accessible remnant Inferred Mineral Resource is estimated as 610,000 tonnes at 5.7 g/t Au for 112,000 ounces of gold. The expected grade variability in this estimate is in the range 4 to 7 g/t Au (see Table 2). A density of 2.65 g/cm3 was used to estimate this tonnage, based on rock density measurements taken from diamond core at the Chewton Deposit.

Chewton Deposit Drilling Data

The Chewton Deposit resource estimate is based on information from diamond drilling completed between 2005 and 2008 and comprises 17 holes in total across a strike length of 700m. Spacing between drill sections is nominally 100m. Quartz reef and spur intervals were sampled using half cut core with analysis for gold using screen fire assay (SFA), fire assay and Leachwell accelerated cyanide leach methods.

All assay techniques, quality control assurances and sample collection methods are of suitable standard for estimation purposes. Quality control standard and blank samples were used to assess laboratory performance. Other measures such as duplicate sampling of half cut core, pulp repeat umpire analysis, multiple fire assay to extinction and multiple screen-size SFA assays were used to further confirm assay quality. CGT recognises however, that drilling, sampling and assaying within a high-nugget coarse-gold environment is challenging and generally leads to an understatement of gold grade. This issue has been addressed during the following resource estimation process.

All diamond core was consistently logged by one geologist, Ms Meagan Andrea (MAIG) using detailed sequence stratigraphic logging techniques used to correlate marker sequences across fault and fold structures. Fold limb width at surface is taken from published GeoScience Victoria maps. The inter-limb distances beneath the Cemetery Fault Zone are assumed to be of similar distance.

Rock density (specific gravity or "SG") measurements were obtained from whole core samples using a water immersion method. Average SG values for sediments and quartz are 2.69 g/cm3 and 2.63 g/cm3 respectively. An SG of 2.65 g/cm3 was used for tonnages at the Chewton Deposit.

Resource Estimation

The resource model is based on the interpretation that the Chewton Deposit is the structural analogue of the Wattle Gully fault system with the two gold bearing systems forming a pair of deposits with syngenetic gold timing and fault histories.

The method used by mine geologists at Wattle Gully to estimate gold grade has been used in this estimate. It involves using textural and geochemical proxies to estimate a grade range for an interval of quartz veining. This includes dilution of the quartz vein by low grade or barren wallrock sediments. Proxies used from diamond core logging are; intensity of stylolitic texture (indicates over-pressurising by gold-bearing fluids of the quartz and multiple vein reactivation and gold precipitation), proportion of coarse gold to total gold, volume of quartz, and the presence of sphalerite and galena sulphide minerals in the quartz.

The definition of such "indicators" or "proxies" has been used previously in the Central Victorian Goldfields and in other high nugget systems worldwide to provide support to the definition of likely reef gold grade. The high nugget effect of such systems results in drill core assays being unreliable. An experienced based classification tool permits a more effective definition of reef grade potential. Assay data was used to detect the presence of gold and assess the degree of coarse gold in the quartz intersections. Coarse gold is defined as samples with >10% of the total gold present being larger than 150 microns in size. The current drill spacing is insufficient to resolve local grade continuity, which reflects the relatively small tonnages of bonanza grade reefs that are likely to occur in the Chewton Deposit, but does define the global geological continuity of the system. The number of coarse gold particles found in the diamond core samples, along with accessory sphalerite and galena sulphides does indicate that similar bonanza grade areas will be present in the Chewton Deposit.

The grade ranges that were applied at the Wattle Gully mine for the remnant resource estimate were also adopted for the Chewton estimate. Each quartz lode intersection was allocated a grade range based on the gold proxy information and this was used to length weight the grade of each lode. Lodes were separated into either "reef" or "spur set" depending on the quartz vein type present. Each was then wireframe modelled as independent lodes associated with its respective fault structure.

Estimates of low, mean and high grade outcomes have been made (Refer Table 3). The difficulty of grade estimation from drilling means that the Chewton Deposit is unlikely to be upgraded to a higher JORC category of Mineral Resource with additional diamond drilling. The true grade of the lodes will only be known from underground bulk sampling and/or trial mining.

A total of 6 fault reef lodes and 10 spur lodes were modelled within the 700m of known fault structures. Tonnages were estimated for each lode as was the length weighted grade range of each lode's drill intersection. Cumulatively this resulted in a total lode tonnage of 7Mt which, at the average estimated grade for each lode, contains approximately 937,000 ounces at 4.1g/t Au. This total mineralisation tonnage was then cut to 5 g/t Au which was a historically discriminated cut off level used in the Wattle Gully mine. This is a payability factor of 30% which is very similar to the 34% for the Wattle Gully mine.

Using a 5g/t Au cut off has the effect of removing all spur lodes and two of the hangingwall reef lodes. As a measure of the sensitivity to grade ranges the higher and lower grade outcomes were also estimated and are reported in Table 3. The Chewton resource contains approximately 74,000 more ounces than the Wattle Gully deposit despite the elimination of all of the spur material by the 5 g/t Au cut-off. This is a reflection of the greater dimensions of the Chewton system.
These resources have been discovered at a cost of just over $4/oz comprising all expenditure on the Chewton anticline prospect since the listing of the company in 2005.

Additional Potential

With underground exploration, bulk sampling and further drill information, potential exists to include extensive areas of spur vein and spur stockwork lodes into the gold resource inventory. These areas have been broadly quantified during the resource estimation process, but cannot be included in the current resource due to uncertainty in geological continuity.

It is noteworthy that the mineralisation is open to both the north and the south. The last hole drilled on the Chewton Deposit (Hole CGT_027) returned very positive gold results with a 12.7m down hole intersection of the footwall fault lode which suggests strong potential for extended mineralisation to the north. Similarly to the south, holes CGT_017 and CGT_019 have intersected two faults which are developing shallower, stronger reef and spur quartz veins towards the south.

In addition, the recognition of the Chewton Deposit as the structural twin to the Wattle Gully mineralisation also offers considerable potential for increased resources between the two major controlling faults and a continuum of gold bearing faults between the two systems. This understanding of the geology beneath Wattle Gully indicates the lower faults beneath the bottom of the mine have been under explored.

Conclusions

In summary

• The Chewton Deposit has a gold inventory of similar character to the Wattle Gully mine with overall greater resource dimensions and contained gold which has a reasonable expectation to be mined.
• An inaugural JORC Code compliant Inferred Mineral Resource of 2.1 million tonnes at a grade of 8.3 g/t Au amounting to 574,000 ounces of gold has been estimated for the Chewton Deposit.
• There is an additional 610,000 tonnes of JORC Code compliant Inferred Mineral Resource at a grade of 5.7 g/t for 112,000 ounces in remnant areas of the adjacent Wattle Gully gold mine.
• Knowledge of the grade distribution, high-grade gold proxies and structure at Wattle Gully has provided the basis for resource estimation of the Chewton Deposit.
• Substantial potential exists to expand the resource from :-
• The possible inclusion of Spur material,
• Extension of the fault reef systems, both north and south, and/or
• Successful exploration between Wattle Gully mine and the Chewton Deposit.

The Competent Persons believe that the Chewton Inferred Mineral Resource has reasonable prospects for economic extraction, but are unable to quantify the likely level of conversion to Ore Reserves. There is some risk that part or parts of the deposit may not ultimately be mineable.

The report complies with the requirements of the JORC Code (2004 edition) and as such determines Mineral Resources suitable for release to the Australian Stock Exchange by the "Competent Persons"

• Mr Brian W. Cuffley MAusIMM MAIG, Senior Consultant Geologist, Castlemaine Goldfields Limited
• Dr Simon C. Dominy FAusIMM(CP) MAIG, General Manager & Principal Geological Engineer, Snowden Mining Industry Consultants Limited
• Mr Wessley B. Edgar MAusIMM, Exploration Manager, Castlemaine Goldfields Limited.

For those technically minded seeking more information about the entire resource estimation report Click here to download the full resource report (PDF 8MB) or contact the company at info@cgt.net.au