Golden Cross Resources : 2006 Annual Report

COMPANY PARTICULARS

DIRECTORS

Christopher Ryan, BEcon, MBA, FAusIMM

Chairman

Kim Stanton-Cook, BA (Geology and Geophysics)

MAIG, GSA, ASEG, SEG

Managing Director

Kerry McHugh, BCom (Hons)

Non-executive Director

David Timms, BSc (Hons), PEng, FAIG, FAusIMM Non-executive Director

Chris Torrey, MSc, MAIG, FSEG, RP Geo Non-executive Director

PRINCIPAL AND REGISTERED OFFICE

22 Edgeworth David Avenue

Hornsby NSW 2077

COMPANY SECRETARY AND ALTERNATE DIRECTOR

Daven Timms, BSc LLB (Hons), F Fin, AMPLA, MAusIMM

STOCK EXCHANGE LISTING

Golden Cross Resources Ltd's shares are listed on the Australian Stock Exchange (Listing Code GCR)

AUDITOR

Ernst & Young

Chartered Accountants

680 George Street

Sydney NSW 2000

SHARE REGISTER

Registries Limited

Level 2, 28 Margaret Street

Sydney NSW

Ph: +612 9290 9600

Dear Shareholder

Over the past year, Golden Cross has enjoyed considerable success with the drilling at its Copper Hill project. It was pleasing that in May 2006, the Company was able to announce a copper/gold resource of slightly in excess of 100 million tonnes and in August 2006, an increase to 136 million tonnes.

Throughout the coming year and beyond, much expertise and experience will be brought to bear to advance the project towards development and production. This annual report presents shareholders with a comprehensive project overview of the work done to date and planned.

Without question, the biggest determinant of the economic merit and value of the Copper Hill project will be the prices which can be obtained for its output. As the graphs to the right indicate, the recent hefty increases in the prices of copper and gold have created an encouraging environment for a project such as Copper Hill; however, it is too early to contemplate with any certainty the contract or spot prices which will apply. I am sure all those who are following the progress of the project will keep a close watch on these prices, and the global economic forces which materially influence them, over the coming year.

The question was put to me recently as to whether I thought Copper Hill was a company maker. My answer to that question was and remains a resounding "yes"; however, the answer depends to degree on what is meant by the term "company maker". Some would take it to mean that for the term to apply, the Company should be able to predict with some certainty that its future as a self-funded profitable producer is assured. If for no other reason than that the copper and gold price outlook is as uncertain as their recent prices have been volatile, it is too early to say that the Copper Hill project will deliver that outcome. We are hopeful it will.

5 Year Gold

5 Year Copper

CORPORATE OBJECTIVES

The Company's long-term objective is to participate in the discovery of one or more world-class mineral deposits. The short-term objective is to add value through exploration and development of mineral properties.

Value may be added through identifying and acquiring mineral properties in prospective locations, generating drill targets through sampling and innovative modelling, delineating resources, entering into significant farm-out or royalty arrangements with other companies, together with developing projects through to production, or acquiring advanced projects, to provide cash flow.

The Company is presently focusing on its Copper Hill Project near Molong in NSW, with the aim of mining the large, low grade, copper-gold resource. With this in mind, the Company has recently commenced a second 15,000m drilling program and initiated an economic scoping study.

RISK AND REWARD

The Company seeks to balance its quest for significant shareholder rewards with the prudent management of downside risk.

On the reward upside, the Company is constantly searching for new opportunities, both at the corporate and exploration level.

New mineral properties are actively sought in prospective locations, such as new or proven mineral fields or geologically-prospective terrain. Once a property is acquired, a detailed investigation is undertaken to ascertain its potential and whether the possible size and prospectivity of the mineral targets warrants sole funding by the Company or initial funding by others, through a farm-out.

Farm-outs are a tool used by the Company to manage downside risk, inherent in exploration, by sharing the exploration and development costs and the ownership of a project. Recent examples include the following:

• Broken Hill farm-out to Inco in June 2006 (can spend $2.4 million to earn 60%) and
• Broken Hill farm-out to JOGMEC in March 2006 (can spend $2 million to earn 51%)
• Wagga Tank farm out to Zinifex Australia (can spend $550,000 to earn 51%)

If a large deposit was brought into production with GCR holding a minority interest, it could be a "company- maker" for GCR, achieved with little risk to shareholders during the farm-in phase.

EXPLORATION ON GOLDEN CROSS PROPERTIES DURING 2006

Exploration expenditure on GCR properties (Fig 1) during 2006 was in excess of $4 million.

Once again GCR's exploration expenditure was focused on drilling key projects, with over 20,000m of drilling completed during 2006 on GCR properties.

COPPER HILL SUMMARY

• 136 million tonne resource (Indicated and Inferred)
• 455,000 tonnes contained copper
• 1.4 million ounces contained gold
• New zone discovered at Copper Hill North
• Standard Crush-Grind-Flotation process
• Good metallurgical recovery
• Low strip ratio
• Railway to site
• Close to 132 KVa power

ROYALTIES

GCR holds five royalties, described on page 10, including the Mt Boppy 3% gross royalty, which will provide GCR with revenue expected to be in excess of provide GCR with revenue expected to be in excess of $500,000 over the next few years

$500,000 over the next few years.

Figure 1. GCR Tenement Locations

REVIEW OF EXPLORATION Copper Hill

The Copper Hill copper-gold deposit is located adjacent to the Mitchell Highway about 5 km north of the town of Molong in NSW and about four hours drive from Sydney. Molong is just over 30 km from the regional centre of Orange and 45 km from the large Cadia Valley Operation comprising several gold-copper mines owned and operated by Newcrest Mining Limited (Fig 2). Cadia Valley and Copper Hill are the two largest known porphyry- related deposits located within the Molong Volcanic Belt, a magmatic complex of intrusive and volcanic rocks of Ordovician age. GCR controls 100% of Copper Hill under a 93 square kilometre Exploration Licence.

Figure 2. Copper Hill Location

Copper Hill has been the main focus of GCR's exploration activities during the past year. It was recognised by GCR as the project that offered the best potential for development as a large bulk tonnage operation. Starting from a 20-year historical base of some 27,000m of percussion, reverse-circulation (RC) and core drilling, GCR embarked on a major program of RC and core drilling to better define the extent of the deposit, infill existing drilling and test outlying prospects that could contribute to the overall resource.

New zones of mineralisation have been discovered in the past year and the main deposit now extends over a strike length of 1.5 km and has a width of over 400m. Resource blocks have been defined to depths of over 300m. Discrete zones of higher grade mineralisation have been discovered and these contribute favourably to the project's economics. The most recent discovery of massive and disseminated chalcopyrite in a potassic porphyry at North Copper Hill demonstrates the project's potential.

The success of these programs has been a direct result of GCR's growing understanding of the geological controls on mineralisation and the systematic approach to drill evaluation.

Resource Estimation

In August 2006 a resource estimate was conducted and determined a JORC compliant Indicated and Inferred Resource estimate of 105 million tonnes at grades of 0.33% copper and 0.33 g/t gold using a 0.2% copper cutoff. Subsequent GCR drilling totalling 10,400m has served to increase the resource to 136 million tonnes containing 455,000 tonnes of copper and 1.4 million ounces gold at a 0.2% copper cutoff (see Table 1 and Table 2 below)

Table 1. Copper Hill Resource - August 2006 and May 2006 - 0.2% copper cut-off

Table 2. Copper Hill Resource Estimates - August and May 2006 - 0.2% copper cut-off

*Gold Equivalent: Gold grade g/t + (copper % grade x 2.3), using a gold price of US$400 and copper price of US$3000/ tonne) with no allowance for differential metal recoveries. Quoted significant figures should not be interpreted to denote precision.

Preliminary Mining Studies

Preliminary modelling, based on a 10 million tonnes per annum production rate, indicate initial head grades for Year 1 would be 0.41% copper and 0.34 g/t gold. This could yielld20,300tonneses ofofcoppperandand45,600ouncesouncesof gold,of gold,assumingassuming85%85%recovecoveryforybothfor.bothInYear.In5,Year0.23%5,

copper.23%0 andcopper0.20andg/t 0gold.20 couldg/tgoldyieldcould16,900yieldtonnes16,900of ctonnppesr andofcopper45,650andounces45,650of goldounces.Figuresof gold3and. 4Theseshow theproductionpossibleratesproductionare basedratesonfromverythepreliminarystudiesstudy andusingtheconservativeresults are costsummarisedand priceinassumptionsTable 3.