Annual exploration report for ERL 130 Esmeralda (Union Reefs Project) year ended 16 November 2006

Abstract

The Esmeralda tenement (ERL130) is situated 170 km SE of Darwin, NT, and 8 km north east of Pine Creek. GBS Gold P/L acquired the lease in April 2006 as part of a take over and acquisition of the companies that ran the Burnside Joint Venture. The project assets had been previously owned by Acacia Resources and later AngloGold (Ashanti) Ltd, who carried out mining and milling operations at Union Reefs prior to closure in July 2003. At Esmeralda previous exploration by Cyprus Gold Corporation and Acacia Resources had outlined two significant adjacent and sub parallel gold resources (A and B) some 4 km south of the Union Reefs mill. The Zone A deposit is the better of the two and AngloGold estimated that subject to ore continuity, yet to be defined by grade control density drilling and the cost of relocating the adjacent Darwin gas pipeline, 18,000 oz gold may be economically mined. They estimated that the two deposits, at 0.7g/t cut off, contain a combined inferred resource of 1.26Mt @ 1.62g/t Au. (50,000oz) During the 2004-2005 report period the Burnside Joint Venture conducted an in-depth mining/geological review of the two deposits. In September 2005 an agreement was set in motion that would see Northern Gold NL acquire 100% of the Burnside JV assets. In turn, Northern Gold was subject to a friendly takeover by GBS Gold. During 2006, expenditure focused on developing sufficient gold ores from first rank deposits at Pine Creek. During 2007 the economics and feasibility of exploring and/or mining Target A, adjacent to the Darwin gas pipeline will be addressed. In the event of a favourable outcome, a programme of infill drill evaluation and trenching has been recommended. No field work was completed on ERL130 during the report period.