Golden Cross Resources : 2010 Annual Report

COMPANY PARTICULARS

DIRECTORS

Chris Torrey, MSc, MAIG, FSEG, RP Geo

Chairman

Kim Stanton-Cook, BA (Geology and Geophysics)

MAIG, GSA, ASEG, SEG

Managing Director

Xiaoming Li, BA(Comm), MBA

Non-Executive Director

Xun (Suzanne) Qiu

Non-Executive Director

David Timms, BSc (Hons), PEng, FAIG, FAusIMM

Non-Executive Director

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

MAusIMM

Alternate Director for David Timms

Yan Li, MBA

(since 5 July 2010)

Alternate Director for Xiaoming Li

Jingmin Qian, BEc, MBA, CFA, GAICD

(nominated for election at the 2010 annual general meeting)

Non-Executive Director

COMPANY SECRETARY,

GENERAL COUNSEL,

AND CHIEF FINANCIAL OFFICER

Simon Lennon BSc, LLB, MCom, MBA, ACIS

PRINCIPAL AND REGISTERED OFFICE

22 Edgeworth David Avenue

Hornsby NSW 2077

Australia

STOCK EXCHANGE LISTING

Golden Cross Resources Ltd shares and 2011 options are listed on the Australian Stock Exchange (Listing Codes GCR and GCRO)

AUDITORS

Ernst & Young

Chartered Accountants

680 George Street

Sydney NSW 2000

SHARE REGISTER

Registries Limited

Level 7, 207 Kent Street

Sydney NSW 2000

REVIEW OF OPERATIONS

Golden Cross Resources is a diversified mineral explorer, focusing on copper and gold in Australia and Panama. The flagship Copper Hill project is in central New South Wales.

Figure 1: Golden Cross Resources' wholly owned Projects and Prospects

COPPER HILL, NEW SOUTH WALES

Copper-Gold (Golden Cross 100%)

Copper Hill is well located with respect to other copper-gold developments in the Ordovician Macquarie Arc of NSW (Figure 2). It is the Company's most advanced project, with currently defined resources containing 535,000 tonnes of copper and 1.47 million ounces of gold. During the past year studies were aimed at reducing the estimated capital costs of the project and increasing the projected revenue by maximising the recoveries of all the economic elements (copper, gold and sulphur) from the deposit.

Figure 2: Copper Hill Project and Cargo Prospect -

Regional Location

Resource and Economics

The Copper Hill Resource, at a 0.2% copper cut-off grade (as announced on 13 October 2010), is summarised in the following table.

Table 1: Copper Hill JORC-Compliant Resources,

0.2% Cu cut-off, October 2010

Economically positive development attributes include improved copper and gold prices, a low waste to ore ratio, and ready access to excellent road, rail and power infrastructure. There is also a supportive local community.

Capital Cost Reduction

Efforts are being made to reduce capital costs by identifying the best value processing equipment suppliers in China. This is being assisted by Golden Cross' major shareholder, China United Mining Investment Corporation, which continues to provide valuable commercial introductions to other Chinese organizations including China National Automation Control System Corporation (CACS).

In its role as lead consultant on the Copper Hill feasibility study, China National Automation Control System Corporation (CACS) continues to examine the supply, costs and quality of the capital equipment required for a fully integrated mill and processing plants for Copper Hill. CACS is a member of the large China National Machinery & Equipment Corporation Group (Sinomach)

Increasing Project Value

In a conventional flotation process, pyrite is suppressed to maximise copper in the concentrate output for sale to smelters. At Copper Hill, where a significant proportion of the gold content of the deposit is contained in pyrite, the pyritic tails will have to be returned to the circuit after re-grinding. This process will add some inefficiencies and costs but may be an acceptable start-up option, with the benefit of reducing initial capital costs.

Golden Cross management asked its consultant metallurgists to examine alternative process paths whereby all the sulphide minerals would be recovered into a lower grade concentrate; a metallurgically simpler and lower cost process. The concentrate, with a much higher sulphur grade, would allow autogenous roasting with copper recovered from the roaster calcine by solvent extraction and electro-winning(SX-EW) and gold recovered by a standard CIP/CIL circuit.

This revised metallurgical process has significant potential to maximise value by extracting more copper, gold and sulphur from the Copper Hill ores. Sulphuric acid, heat, and iron oxide are potentially saleable by-products from the process. The process also has environmental benefits in a reduction of pyritic rock to waste dumps at the mine site and in the production of cleaner tailings.

A preliminary, simplified flowchart for the roasting and SX-EW stages is shown in Figure

3. The additional processing circuits present low technical risk as they are proven technologies in general use world-wide.

Figure 3: Copper Hill Processing Option

Metallurgy

Laboratory test work is continuing at Metcon to determine the flotation response of a composite sample representing typical Copper Hill mineralisation using a range of grind sizes, acidity levels (pH) and reagents. Initial results are within expectations, with 85% copper and 77% gold recovery to a bulk sulphide concentrate of suitable grade for self- sustaining roasting.

Recent drilling, core examination and consequent geological interpretations suggests

clear potential for further improvement in these results by tailoring the flotation conditions and reagent suite to better match the mineralogy of the ore as it arises rather than masking this typical variation by compositing into one bulk sample. An additional 2-5% recovery for both metals at this stage in the flow-sheet would essentially report to the bottom line. Based on porphyry copper ores elsewhere, it is a realistic target for such optimisation studies.

Initial bench-scale roasting tests demonstrated that both copper and gold can be recovered to an acceptable extent from the roasted products. Larger scale test-work is required.

An alternative approach producing marketable copper concentrate has been tested briefly as the focus has been on the bulk recovery and metal production. A concentrate of 24-25% copper grade at 70% copper and 42% gold respective recoveries was achieved from a few early exploratory tests. The low gold recovery suggested better returns from the bulk sulphide route. No leaching tests for gold recovery were run from the flotation tail as the gold price at the time was too low. The returns from such a tail leach today would be undoubtedly superior and this option is being carefully re-examined.

Desktop studies are continuing on the economics of marketable by-products. Golden Cross has also conducted preliminary investigations into sharing the plant operating and capital costs with holders of similar sulphide deposits.

Resource Development and Exploration

In 2010 a total of 3,902 metres of drilling was completed in 15 reverse circulation percussion and cored drill holes. The drill holes were designed to increase resources by testing strike and depth extensions of previously intersected mineralisation.

The most significant result in terms of grade, length, and exploration potential was returned in GCHR298, drilled to test the 400RL- 300RL level beneath previously intersected near- surface mineralisation at Buckley's Hill (Figure 4). The intercept in GCHR298 generates down- -dip,down-plunge and strike extension targets that will be followed up with further drilling.