Citigold : 29 July 2016 Quarterly Report June

Quarterly Report

For the period ending 30 June 2016

• Continued planning for the development of the Charters Towers project, centred on the Central Mine, to become a strong, high-grade, ultra-low cost producer of gold.

• Major project funding discussions continued with potential interested strategic partners to expand the Group's production ready Charters Towers Gold Project into a strong gold producer.

• Environmental monitoring and sampling continued to increase the base data to assist planned growth in harmony with the local community through maintaining a relatively small environmental footprint and harnessing renewable and recycling techniques.

• Dr Sibasis Acharya joins Citigold as Non Executive Director. Dr Acharya is an active technical consultant with over 15 years experience in metallurgy, material science and mineral processing across several countries.

• Capital raising of $105,000 during the quarter was used for working capital, confirming the continued support of investors and shareholders.

The underground mining operations at the Company's Charters Towers 'Central' and 'Imperial' mining areas, together with the processing plant, remained on active care and maintenance during the Quarter. No gold production operations were undertaken during the quarter.

Resumption of mining at Charters Towers is contingent on capital financing, but active planning and scheduling continued during the Quarter in readiness. The main Central Mine underground is the first area planned to be reopened and is scheduled to expand into a 220,000 ounce annual producer of gold once funding is finalised. An outline of the mining plan for the Central Mine has been given in previous Quarterly Reports. The early development plan is, in summary:

• The Central Decline (access tunnel) is to be extended from its current point at a vertical depth of 201 metres from surface to initially junction again with the Brilliant

Block Shaft at a vertical depth of 238 metres for fresh air intake, and then continue some 700 metres roadway length to the King Shaft, intersecting it at a vertical depth of 585 metres.

• The first gold reefs (lodes) scheduled to be opened are the C03W, C38 and C39 and then move on to C05E. Access tunnels (ramps and crosscuts) to the C03W, C38 and C39 will come off the Central Tunnel extension, and gold reef access tunnels (drives) will be driven at nominal 20 metre vertical levels along the length of the reefs to provide closely-spaced grade control samples. Gold ore extraction (stoping) will commence once these levels are developed and the King Shaft ventilation and emergency second exit (egress) are established.

Citigold has a deep and informed knowledge of the assets, which was taken into account in assessing the project's future growth building upon the existing developed infrastructure and $200 million investment to date. A detailed and comprehensive Technical Report dated 18 May 2012 was prepared, listing the Mineral Reserves and Ore Resources of the Charters Towers Gold Project (Project). This report, in compliance with JORC reporting requirements, was prepared in the format of the Canadian NI 43-101 report because it conforms to a very detailed and structured format to the report. This report was able to draw upon the technical and operational information from the project's trial mining operation by Citigold. This information was a strong foundation to build into the go-

forward development plan to see the project, once funding is finalised, grow to a 220,000 ounce per year producer with low operating costs. Some of the mining and economic factors considered and assessed were :

1. property description and location;

2. geological factors in detail;

3. types of mineral tenures and identifying numbers already granted and production ready;

4. mineral processing and metallurgy including the processing plant which is built, established and has previously operated successfully;

5. mineral resource estimates, wherein among other things a discount of 70% of the overall tonnage of the pre-mineral resource estimate was applied. Further to this, in the business plan used by Citigold, there is a further discount of 30% applied to this figure. This produced a very conservative estimate of gold ounces to be recovered in the determination of the revenue for the Project;

6. mining methods including processing, development capital costs, production schedule, operating costs and gold price.

   Citigold's has already been mining at the Project since 1994 and therefore has actual data from experience in the mines. It has determined and operated trial mining methods, especially in the main producing period from 2006 to 2014. The Technical Report contains photographs of the different drives and stopes after extraction, together with diagrams of the planned mining methods proposed for Central area. ;

7. recovery methods;

8. project infrastructure on surface is essentially already built;

9. market studies and contracts;

10. environmental studies, permits and social or community impact with a successful long-term harmonious relationship with the local community already developed;

11. capital and operating costs derived from actual mining from 2006 to 2014, and;

12. economic analysis.

With this solid data foundation to build on, the remaining project funding will be mainly

used for underground development of the Central mine. The Central access tunnel is already at a depth of over 201 metres vertical and from this point will be extended deeper. As the tunnel progresses deeper, branch tunnels (cross-cuts, ramps and drives) will access the several adjacent reefs referred to above. Once the reefs have been accessed, several kilometres of small tunnels (level drives) will be excavated along the reefs in preparation to extract the

ore. The plan is to have up to 15 working areas that ore can be extracted from at the one time, ensuring sufficient tonnage to meet predictions.

In the past trial mining phases (1994-2000 and 2006-2014), with the constrained and incomplete capital funding, it was not possible to open up sufficient working areas to get critical mass and sustainability. Often only one or two areas were available, restricted by the capital cost of access drives. With adequate funding the extensive capital works can be completed and ensure gold production output grows sustainably.

Currently, once the project funding is in place, the lead- time is 10 months to initial gold production. Production is

then planned to grow, in general terms, by 50,000 ounces extra each year over the next four years to the total target 220,000 ounces of gold.

No new exploration drilling was undertaken during the Quarter, with staff focused on consolidating geological data including surface and drill hole samples in preparation for the upcoming period of mine planning together with intensive exploration and expansion of both its inferred and indicated resources.

Research and development work continued on preparing three-dimensional interpretations of the host structures at the Imperial mine site in order to provide a sound basis for mine planning, ground condition prediction and production scheduling. The updated structural models will also aid in planning future exploration for new structures and extensions of known structures.

New untested targets were defined on the Mineral

Development Licenses using the updated geological data and model of the mineralisation.