Managing Director
& CEO's Report

This year has been one of major transformation for Kingsgate during which our asset portfolio has been greatly enhanced. The merger with Dominion added a second gold mining operation at Challenger in South Australia and the takeover of Laguna Resources NL delivered a 70% interest in the Nueva Esperanza (formerly Arqueros) advanced silver/ gold project in the highly prospective Maricunga gold belt in central Chile. The major plant expansion at Chatree has progressed through to completion during the year with commissioning in October. Pleasingly, this expansion has remained on schedule and is likely to be more than 5% below the US$100 million EPCM contract amount that is an exceptional result considering the unusually heavy wet season this year and the pressure on major capital resource projects around the world.

Laguna subsequently acquired two strategic lease areas, Esperanza and Chimberos, which surround and enhance the overall project area and delivered an additional 20 million ounces of silver resources, major infrastructure and considerable surface rights. The combined project area is now known as Nueva Esperanza. The feasibility study for the project is well underway and expected to be completed early in 2012.

The acquisition of the Bowdens silver project near Mudgee in New South Wales complements Kingsgate’s current growth pipeline. Kingsgate has commenced a feasibility study that builds on the high quality work previously completed by Silver Standard Inc. A detailed exploration programme will be undertaken over the next few months to defi ne the full extent of the mineralisation. The feasibility and resource development work is expected to lead to a decision to mine towards the end of 2012.

This past year has set the platform for signifi cant growth in production, cash fl ow and earnings over the next three years and continues to support Kingsgate as a proven value creator.

Operations

Chatree

Chatree mine produced 76,248 ounces during the year. The decrease in gold production is largely due to mining and processing of lower grade ore while approval to access C North, where higher grade ore was scheduled to be mined during the June half of the year, was delayed. Mining was also impacted by restrictions imposed by a night time operating curfew during the March and June quarters. This resulted in a lack of fl exibility to access alternative high grade and less intrusive areas. These restrictions have subsequently been lifted. The heaviest wet season in a generation has had an impact on operating activities with major fl ooding disrupting most of Thailand.

Mining commenced at C North late in the June quarter and it is expected that high grade ore will be accessed in the December 2011 quarter once the laterite and clay overburden layers have been removed.

The Chatree North Expansion project is being constructed as a separate 2.7 million tonnes per annum (Mtpa) ore processing plant located besides the current 2.3 Mtpa Chatree processing plant. This will result in a combined total ore processing capacity of 5 Mtpa. Construction is on schedule for commissioning in October 2011 and the project is coming in around 5% under the original US$100 million budget. This is a signifi cant result in particular given the excessive rainfall over the past 12 months in Thailand.

In addition, the construction programme with over 1.2 million man hours has progressed without a Lost Time Incident.

Challenger

The Challenger mine produced 36,886 ounces for fi ve the months since ownership transferred to Kingsgate.

Production was lower than expected due primarily to the effects of unusually heavy rainfall during February and March. This prevented continuous road access with supplies of fuel, consumables and maintenance parts only intermittently delivered to the site. These disruptions resulted in low grade stockpiled ore supplementing scheduled higher grade underground ore leading to lower than planned production. In the June quarter, the mining operation was also impacted by both mine grade dilution and production rate caused by pillar failures in a number of stopes.

A new high grade shoot at Challenger West will be developed during the forthcoming year contributing to the total gold production expected to exceed 100,000 ounces.