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Introduction

The interest in the Masbate Gold Project was acquired by CGA in March 2007 and is now the largest operating gold project in the Philippines. It has been successfully developed by CGA in less than 2 years since acquisition, having first poured gold on 12 May 2009.

In the first year of operations, the project produced in excess of 150,000 ounces of gold and has a total indicated resource base of 4.55 million ounces, total inferred resources of 3.22 million ounces and a probable mining reserve of 3.03 million ounces of gold. In a steady state, the project is forecast to produce in excess of 200,000 ounces per annum, with a further expansion planned in the 2011 calendar year.

CGA also believes that the project has very good exploration potential, both from the further conversion of existing resource ounces to reserves, and the potential to further expand the existing 7.7 million ounce resource base of the project. Prior to CGA’s ownership, the project was held by parties who had limited financial resources and the focus was simply on proving up enough reserves and resources to enable a commitment to development.

The Philippines is rich in natural resources, with large scale gold, copper and nickel deposits attracting investment from a number of major international mining companies including Anglo American, BHP Billiton, Xstrata, Sumitomo and Anglo Gold.

The Philippines Government has been very supportive of the development of natural resources within the country and offer many attractive incentives including an initial 6 year income tax holiday (with a possibility to extend by a further 2 years) for projects of this nature. The excise tax rate is 2% on gross revenue.
Location

The Masbate Project is located on the island of Masbate approximately 350 kilometres south of the State capital, Manila. The project can be accessed by a daily commercial airline service to Masbate city (population of 350,000) and a 70 kilometre drive on partially sealed road to the project site. Alternate access to site from Masbate city is via a 1 hour boat ride. The site is equipped with a barge loading jetty where equipment and consumables during operations can be delivered and offloaded.
Previous Operation

The Masbate Project was originally operated for 14 years (1980 – 1994) by Atlas. The previous operations included open pit and underground mining of oxide, transition and fresh material with subsequent processing using CIL and heap leach processing. A total of 17.4 million tonnes were processed at a grade of 2.12g/t resulting in gold production of 1,078,326 ounces of gold and 944,474 ounces of silver. Overall plant recovery of 86% was achieved during the operating period. It is evident from the records of past production that CIL metallurgical recovery was closely related to the grade of ore mined i.e. increase in grade resulted in increased recovery. The operation reportedly closed due to the forced closure of the Atlas group operations as a result of falling commodity prices, and the inability of Masbate to cover group overheads from other operations of the company at the time.

The Masbate Project was a brownfield site with established infrastructure including an airstrip, dedicated jetty, roads, accommodation, offices, clubhouse, workshops, assay laboratory, bunker fuel tanks and general reticulation. The mine is readily accessible by sea and materials and supplies can be barged in via Manila or other large ports. The existing infrastructure allowed construction to start relatively quickly and reduced capital expenditure requirements relative to those of a greenfield site.
Geology

Gold mineralisation is located within quartz veining in the form of fracture filling and silification of the host rock. Sulphides are not abundant but are found within the veins and selvidges. Gold can be associated with the sulphides. The gold is finely distributed (grain size 5 micron to 20 micron).

The depth of weathering is dependant on the lithology and varies from zone to zone e.g. 20m - 40m in the main vein zone, 50m - 60m in the Colorado zone. The massive quartz veins are not subject to weathering other than in areas of brecciation.
Reserves and Resources

As set out in the NI 43 – 101 compliant technical report dated 20 May 2008 prepared by Mining Associates (“MA”) the resources of the project are as follows:

Indicated Resources of 135.33mt @ 0.96g/t containing 4.55m oz
Inferred Resources of 127.15mt @ 0.79g/t containing 3.22m oz

Both of the above were calculated at a 0.36g/t cut-off based on a US$750 / ounce gold price and represents an overall increase of 62% in resources since CGA first acquired the project.

Lower Quartile Solutions Pty Ltd (“LQS”) prepared a NI 43 – 101 compliant technical report dated 20 October 2008 in which it stated the total mineral reserve at the Masbate Project.

Indicated Reserves of 92.2Mt @ 1.0g/t containing 3 m oz

The reserve is based on a selling price of US$750/oz. This represents a 53% increase in reserves from the figure reported in the Technical Report dated 30 April 2006 prepared by IMC Consultants Pty Ltd.
Exploration Potential

The exploration prospectivity of both the MPSA and surrounding exploration permit areas is considered high as limited funds have historically been directed to resource and reserve expansion. Focus will be given to both infill drilling to convert further resources to reserves and new resource and reserve delineation.

The topographic features hosting the Masbate resources are repeated along strike to the south east where artisanal miners are working the near surface material. These areas are contained within a 6,000 hectare (approximately 8 kilometres x 7 kilometres) Exploration Permit held by Filminera.

A 2009 helicopter geophysical survey (magnetics and radiometrics) identified that the known Masbate mineralization (Main Vein, Colorado etc) has a direct radiometric (potassium) and magnetic response.

Using this signature, a large 4km strike length potassium anomaly and associated magnetic vein responses has been highlighted directly east of Main Vein and shows great potential to host additional gold mineralization. A number of additional targets also occur in the south of tenement.
Ownership of the Project

CGA indirectly owns the Masbate Gold Project through its 100% ownership of Philippine Gold Ltd, 40% of Filminera and 100% of PGPRC. The remaining 60% of Filminera is owned by a Philippine registered company, Zoom Mineral Holdings Inc, in which CGA has a 40% interest. CGA also has an option to acquire the remaining 60% of Zoom Mineral Holdings Inc, in accordance with Philippine law and nominate a new holder.

Filminera holds the mineral tenements that include the Masbate gold deposit. The mining claims and applications cover an area of approximately 8,316 ha.

PGPRC has developed and owns the process plant and is responsible for the sale of all gold. PGPRC and Filminera have a contractual relationship, which includes PGPRC purchasing ore from Filminera whilst maintaining joint financial and legal liability for the social and environmental obligations under Philippine law.

Masbate Ownership
Construction

The construction of the 4Mtpa Masbate Mine plant by Leighton Contractors (Asia) Limited, a wholly owned subsidiary of Leighton Holdings Limited ("Leighton") was completed on schedule in February 2009 for a total capital expenditure in the order of US$178M, without one lost time injury.

Leighton is Australia's largest project development and construction group with a market capitalisation of A$12.2 billion, 25,000 employees and current work in progress of A$21 billion, with A$6.8 billion in the mining and resources sector. Leighton, through its various operating subsidiaries has been involved in the mining and resources sector since the 1940's and operating in Asia since 1975. Annual revenue for the Asian region alone is over US$300 million, with almost 2,500 employees.
Mining Contractor

The mining contract was awarded to Leighton Contractors (Asia) Limited. Leighton has provided the full mining fleet and associated equipment and are providing contract mining services for the project. They are working under an alliance agreement which has been successfully applied at a number of other mines. The alliance agreement is designed to maintain unlimited flexibility with all aspects of mining, total transparency of costs and provide the safest and lowest mining cost per tonne.

Leighton has been operating in Asia since 1975, and has a unique combination of local knowledge and extensive international experience which has made them the region’s international contractor of choice.

Today, Leighton is also the world’s leading contractor miner, mining in excess of 100 million tonnes of iron ore and 100 million tonnes of coal each year, across Australia and Asia. They operate and maintain a fleet of owned and leased mining plant and equipment, currently worth over US$1.5 billion.
Project Debt Financing

In June 2008 CGA secured project finance of US$80.3 million for the Masbate Project through a BNP Paribas arranged facility. The facility has been fully drawn with repayment over a 4.5 year term to 31 December 2013. The project finance facility includes typical terms for a facility of this nature including the build up of debt service reserve accounts for 6 months and principal and interest, satisfactory completion of 90 day performance testing based on criteria established by the banking syndicate and satisfaction of various ratios and representations on an ongoing basis.
Power Station

The power station which is providing power for the entire project, was designed by Poyry Energy Inc, a specialist firm of electrical engineers, with Leighton awarded the contract to install the 5 engines and generators plus associated ancillary equipment and storage facilities for the power station. Leighton achieved practical completion of the power station on 3 April 2009 with the commissioning of the power station and its ongoing operations and maintenance being undertaken by Wartsila Philippines Inc.
Operations

For quarterly updates to the progress of operations, please refer to the ASX and TSX releases of The Quarterly Results and Management Discussion and Analysis.