CHALLENGER GOLD MINE

Gold production at Challenger was 21,893 ounces. March performance was restricted by poor underground equipment availability and an unpredicted shortage of experienced operators in January and February resulting in a shortfall of 190m of development advance during the quarter.

Mined ore grade reconciled at the mill achieved 4.32 g/t during the quarter.

Total cash operating costs for the quarter were US$955/oz (including royalties), compared to US$612/oz in the December quarter.

A total of 1,561 metres of development was achieved during the quarter. Decline development continues to focus on crossing the ‘79 Fault’ as well as developing on levels 800 and 780 at Challenger West. The Challenger West development included driving on the lode confirming high grade continuity over a strike length of 120 metres as well as a second high grade narrow structure some 50 metres further west. Trial mining of this area will occur during the June quarter.

Drilling from the 280 drill drive continued to delineate the Main Shoots on the eastern side of the fault indicating that the M2 feature continues as expected. Additional drilling is planned from the 215 level to define the Challenger West shoot at the base of the existing development.

The total reconciliation continues to remain positive on completed levels, predominantly within the M2 Shoot, which accounts for 70% of all of the ore feed. The last two completed levels in the M2 Shoot, 340 and 320 levels, average 60% above reserve ounces. The impact of the ‘79 Fault’ is expected to affect total level reconciliations until a fully extended level can be reestablished on the other side of the fault. On a positive note diamond drilling has confirmed that the M2 extends further above the anticipated cross over level of 210 level which was not in the current design plan.

The predominant sources of production came from the 320, 300 and 280 levels of the M2 shoot.

Resource Development

A number of targets have been evaluated with both underground and surface drilling. Several significant intersections have been returned (see Appendix A).

M1-M2 Shoot System below the ‘79 Fault’

One exploratory hole has been drilled from the 280 exploration drive, targeting the M2 Shoot between 250 and 230 levels, below the ‘79 Fault’. This hole has returned significant intercepts, including 1.5m @ 157.9 g/t gold and visible gold up to twenty vertical metres above the current M2 resource model. Additional drilling on

this target has occurred from the 260 level with numerous significant intersections, including 2.0m @ 69.4 g/t and 4.0m @ 11.3 g/t gold, being returned.

Challenger West

The Challenger West Shoot below the current mining level continues to be a focus of underground drilling. This includes a vertical fan of holes from the 640 level, targeting the shoot between 550 and 470 levels and from the 215 level, targeting Challenger West on the 210 Level. This drilling is designed to extend the current resource model. Results are pending.

The Challenger West structure has now been defined
over a vertical length of 1,000 metres and remains
open at depth.

South East Zone (SEZ)

A series of high grade intersections on both the 1025 and 280 levels, were reported in the previous quarter. These results, from levels 745 metres apart, have significantly upgraded the potential for the SEZ to host localised high grade shoots within a well-defined structural corridor that has received little or no previous evaluation.

Follow up drilling on the 1025 level with three flat fans of drill holes is designed to determine the vertical extent of the mineralisation. Results are pending.

The south westerly extension of the SEZ, identified adjacent to the 280m exploration drive, has been targeted with a horizontal fan of holes. An initial intersection of 2.0m @ 14.1 g/t gold from the first hole completed demonstrates encouraging continuity of high grade mineralisation. All other results are pending.

Challenger South West

The Challenger South West prospect has been targeted with eleven surface RC holes. This programme in filled previous drilling (last drilled in 1998) which had intersected extensive gold mineralisation, including intersections of 6m @ 13.5 g/t and 2.0m @ 21.0 g/t gold. Two relatively high grade intersections, 3.0m @ 9.0 g/t and 3.0m @ 9.5 g/t gold were returned within a broad zone of lower grade mineralisation. Recent and historic data is currently being evaluated.

SAFETY, ENVIRONMENT AND COMMUNITY

There were no Lost Time Injuries recorded during the quarter at Challenger.