Challenger

As of 8th February 2011, when Kingsgate Consolidated assumed management control of Dominion Mining Limited, Kingsgate's Australian key asset is the 100%-owned Challenger Gold Mine in South Australia. In addition, Kingsgate now has an extensive portfolio of gold and base metal exploration projects in Western Australia and South Australia.

The Challenger Project, located 740km north-west of Adelaide, is the first-ever major gold mine development in South Australia to come on stream outside of the Olympic Dam copper-gold-uranium operation. It is also the first commercial mine development in the Gawler Craton.

Construction and development of the Challenger mining complex by former owners Dominion Mining Limited, was completed during 2002, on schedule and on budget.

Infrastructure at the site includes a processing plant, a laboratory, power station, borefield and other services, as well as a mine village and airstrip.

Open pit mining operations commenced in October 2002 and the open pit phase of the operation concluded in April 2004 with the project making the transition during second half of the year to a wholly underground mining operation. Full-scale underground production commenced in the first quarter of 2005.

To 30 June 2010, Challenger has produced 647,205 ounces of gold, at an average cost of $399 per ounce.

Gold production of 80,570 ounces at an estimated cash operating cost of $697 per ounce. Production for the first six months of the 2011 year forecast at 50,000 ounces.

Resources at the end of the 2010 financial year was 950,220 ounces of gold containing reserves of 421,650 ounces. The resource position, as at 30 June 2010 represents a downgrade from the previous year primarily due to the unexpected decrease in the endowment of the M1 shoot below the 500m RL.

The current ore reserves are sufficient to underpin a 7-year mine life based on current annual production levels of around 100,000 ounces.

Capital and Development

A total of $22.83 million was spent on infrastructure and underground development during the year, with the decline extended down to the 320 level, approximately 875 metres below surface.

In addition, further capital expenditure of $22.80 million was incurred relating primarily to the plant expansion including a second ball mill and the installation of a thickener, completion of the underground ventilation upgrade, an additional tailings storage facility and increased underground power supply.

Bowdens

Kingsgate entered into an agreement in August 2011 to purchase the Bowdens silver project in Lue, New South Wales, from a wholly-owned subsidiary of Silver Standard Resources Inc., subject to the satisfaction of certain conditions precedent.

Bowdens, located some 240 km west of Sydney, is an epithermal silver deposit with a resource of approximately 100 Moz silver reported in line with JORC guidelines. Bowdens has the potential to be a robust project with the possibility of increasing the resource base.