Future

Gold production from Challenger for the 2006/07 financial year is forecast to be in the order of 100,000 ounces at an average site cash operating cost of approximately $335/ounce with capital and development expenditure of around $128 per ounce.

The Company’s objective in designing exploration programs targeting the established M1, M2 and M3 orebodies, is to establish reserves to replace, at a minimum, gold production in any current year.

Production from the M3 orebody significantly outperformed the reserve in the upper levels between the 1035 and 1075 levels. No reserves are currently included below this level.

The M2 orebody has not yet been stoped underground but the presence of many high grade intersections in this lode augurs well for future production. Following the 30 June 2006 reserve update, 62,300 ounces are now contained within reserves from the M2 Shoot.

Other isolated intersections of high-grade gold have been encountered and exploration of further lodes commenced during the year. Minimal exploration has been conducted at depth at any significant distance from the decline and underground exploration will be expanded in the year ahead to assess the potential for shoot continuity and the possibility of mining further narrow high-grade lodes.

A major exploration program will continue during 2007 at Challenger. The initial focus of this program is to delineate depth extensions of the M1 shoot and further test the M2 and M3 shoots in areas not currently included in the resource and reserve model.

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