Annual exploration report for period ending 15 July 2006, Pine Creek, Burnside project NT

Abstract

The Pine Creek tenement group is located approximately 220km SE of Darwin NT, and around the western side of the Pine Creek township boundary. The tenement group was managed by the Burnside JV from 2002, which comprised 50% Territory Goldfields NL (a Northern Gold NL subsidiary) and 50% Buffalo Creek Mines Pty Ltd (a Harmony Gold subsidiary). In 2005, GBS made a successful takeover of Northern Gold, and entered an agreement to purchase Harmony's 50% share of the Burnside JV, giving GBS 100% of the project as of April 2006. Historically, the tenements have been the focus of sporadic alluvial and bedrock mining activity since 1869. More recently, Pine Creek Goldfields mined its flagship deposit 'Enterprise' until late 1994, with a recorded 744,000oz Au produced from open pit operations. In August 2004 the Burnside JV purchased the Union Reefs mill, and an exploration programme began to outline potential ores for treatment at the Union Reefs mill. Initially this involved data acquisition, and a drilling database review, followed by RC drilling. This allowed an update of the computer models showing residual mineralisation. The Czarina primary mineralisation was subjected to metallurgical testing that suggested only 70% recovery was achievable from the transition to fresh material. A review of resource potential by Bill Makar (August 2004) indicated there was potential to prove up a body of economic mineralisation through programmes of infill RC drilling and further pit shell optimisation studies. In January 2005 a Total Indicated and Inferred Resource of 1,844,559t @ 1.72g/t Au for 102,062oz Au was outlined at Czarina, using a 1.0g/t Au cutoff. Drilling the downplunge mineralised component at South Enterprise in November 2004 intersected the best mineralisation below the zone of oxidation, with recovery expected to be similar to Czarina. Infill drilling was planned for the 2005/2006 year at South Enterprise, with some costeaning around previously identified prospects at Kohinoor, Jensens, Republic, Bahsi Bazouk, but this was not carried out. The focus of GBS in the past year has centred on feasibility studies at Cosmo Howley, Zapopan, Princess Louise and North Point as initial sources of ore feed for the Union Reefs Mill. The Pine Creek resources have a significant refractory component, and so work has been delayed in the short term while the Burnside deposits are developed. Further exploration and infill RC drilling to upgrade the South Enterprise mineralisation is planned for the next year. During this year rehabilitation of drillsites from the previous round of drilling was completed.