Wedderburn

SEBASTIAN PROJECT

Inglewood

SEBASTIAN JV St. Arnaud

TARNAGULLA PROJECT

Tarnagulla Bendigo

Dunolly

Maldon

Maryborough CASTLEMAINE PROJECT

Castlemaine Chewton Avoca

Kyneton

Creswick

Ballarat

CASTLEMAINE GOLDFIELDS LIMITED 2009 ANNUAL REPORT Corporate Contents Directory

CASTLEMAINE GOLDFIELDS LIMITED Item Page ABN 45 073 531 325 ASX CODE CGT Chairman’s and Managing Director’s Report 1 REGISTERED & CORPORATE OFFICE 113 Adelaide Street Review of Activities and Tenements 3 PO Box 57 Chewton, Victoria 3451 Directors’ Report 10 Ph: (03) 5472 3411 Fax: (03) 5472 3002 Auditor’s Independence Declaration 20 Email: [email protected] Web: www.cgt.net.au Corporate Governance 21

SHARE REGISTRY Financial Report – 31 December 2009 24 Computershare Investor Services Pty Ltd Yarra Falls Independent Audit Report to the Members 57 452 Johnston Street Abbotsford, Victoria 3067 Shareholder Information – 28 February 2010 59 Ph: 1300 850 505 (Investor Enquiries) Fax: 61 3 9473 2500 Web: www.computershare.com

AUDITORS PricewaterhouseCoopers Chartered Accountants 2 Southbank Boulevard Southbank Melbourne, Victoria 3006

LAWYERS Baker & McKenzie Level 19, CBW, 181 William Street, Melbourne, Victoria 3000

BOARD OF DIRECTORS John C. Goudie Non-Executive Chairman Gary F. P. Scanlan Managing Director and CEO Peter L. McCarthy Non-Executive Director

SENIOR MANAGEMENT Wessley B. Edgar Exploration Manager Oliver A. Halliwell Administration Manager John W. Jennings Company Secretary and Chief Financial Officer

Annual General Meeting The Annual General Meeting of the members of Castlemaine Goldfields Limited will be held at the offices of Baker & McKenzie, Level 19, CBW, 181 William Street, Melbourne at 10.00am on Tuesday 4 May 2010. The full notice of meeting and proxy form are enclosed with this report.

Cover image: Gold occurrances within the Bendigo- Ballarat Zone which has produced over 64 million ounces of gold since 1851. Background is a grey-scale image of magnetic field showing granite boundaries and tertiary basalt distribution. Right: Engine House, Duke of Cornwall Mine, Fryerstown. Chairman’s & Managing Director’s Report

In the lead up to the 2009 year, the company had successfully carried out over 26,000 metres of diamond drilling resulting in the release of the JORC code Inferred Resource of 686,000 ounces of gold for the Chewton Deposit and associated remnant Wattle Gully material and had identified three premier project areas along the central corridor of the Castlemaine gold field. Tarnagulla had been farmed out with the expectation that significant expenditure would be injected into the project by the new party. Limited activity occurred at Sebastian while the focus was on Castlemaine.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 1 Chairman’s & Managing Director’s Report

With the events of the global financial crisis targeted at defining the next resource drill- at A$50m. The sale is conditional on and the fall in the Australian stock market out project which, in turn, would dictate shareholders approving the issue of new in the first quarter of 2009, expenditure was the development access to the Chewton equity to raise a minimum of A$20m. curtailed across all facets of the business. Deposit. The possibilities remain to access On the same day the company announced Drilling was cut back and corporate Chewton either from within the mining its intention to raise between A$20m and overheads were reduced wherever possible. licence or from the pine plantation in the A$40m in new equity by way of a placement To this end, directors’ fees were halved north of the exploration licence, using a to institutions and sophisticated investors. and the managing director went on to successful Quartz Hill discovery to spread These funds will be used to complete the reduced hours while activities centered development costs over both projects. acquisition, carry out exploration and with on a complete review and upgrade of the In the December quarter, the company success, development and reopening of exploration data base and refinement of the undertook a review of a possible project the mine, ongoing exploration on existing modelling for the Castlemaine gold field. acquisition that would complement the company licences and general working The Sebastian freehold property was also existing suite of gold projects in Central capital. sold during the year. Victoria. This would bring forward the likely The scene is set for an exciting year ahead. While it was regretful that a number of timing of gold production and deliver first Our advancements have occurred through positions were let go at this time, it is class surface milling capacity and related the talent and persistence of the team and pleasing to report that there were no infrastructure to support ongoing mining the ongoing support from shareholders significant safety or environmental incidents operations. A small capital raising was during the most difficult market conditions at all throughout the year and the core made in December to keep working capital experienced since the floating of the exploration team remained intact. Time was at an adequate level while this evaluation company in 2005. We are now poised to well spent further validating the integrity of took place. take the company on a major step forward. all new and pre-existing data and planning On 4 March 2010 the company entered the drilling programs for when exploration in into a binding conditional sale agreement the field recommences. with Lihir Gold Limited (LGL) to acquire The June quarter of the year saw the release the Ballarat Gold Project in Victoria. of an independent mining scoping study The company will pay LGL A$4.5m in John Goudie on the Chewton Deposit. This study, based cash, assume rehabilitation bonds for Chairman on a standalone assessment, evidenced $4.1m plus a 2.5% royalty interest in a robust project. Drilling in 2010 will be possible future production, capped

Gary Scanlan Capital allocation (since incorporation) $16.5m – ($000) Managing Director and Chief Executive Officer

Exploration $12,226 – 74%

Capex $315 – 1.9% Corporate $3,484 – 21% Indirect Expenditure $409 – 2% Sebastian $1,976 – 12% Security deposits $80 – 0.5% Tarnagulla $1,198 – 7% Castlemaine $9,052 – 55%

2 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 2km

Line of Reef Gold Mine - Major Gold Mine - Minor Shellback open pit Alluvial/Fluvial assessment Existing drillholes Diamond holes drilled South Fortuna since Jan 2008 PINE CAPPERS Diamond holes previously PROJECT drilled by CGT PLANTATION RC holes (2008) Cappers 3D Target Gentle Model in progress Annie

Fiddlers Review of CASTLEMAINE Nimrod North Quartz Hill QUARTZ HILL PROJECT Manchester 3D Target Model Garfield Mines generated. Drill design ready Activities Chewton Post Office Hill

WATTLE GULLY MINE Eureka (1934 - 1989) 375,300ozs produced Chewton Deposit: CASTLEMAINE PREMIER PROJECTS ADVANCED (1.1Mt @ 10.3g/t Au) JORC Inferred Resource 574,000 ozs Wattle Gully Tailings A number of complementary activities have taken place this year to Assessment. 14 aircore holes Chewton Deposit completed. Sampling ongoing Mine Scoping Study advance the three premier projects (Refer Figure 1) identified as having high potential for a large gold resource at Castlemaine. The drill database Wattle Gully Mine: Remnant Gold Inferred CWG upgrade, results analysis and geological interpretation have been and Resource 112,000 ozs PROJECT continue to be used to build new enhanced 3D models of the mineralised 3D Target Model of CWG in progress systems at Chewton-Wattle Gully (CWG), Quartz Hill and Cappers projects. The outcome of this work is the fully planned and detailed drill designs for each project.

New Era Shicer Fault Shicer Spring Gully Fryerstown Castlemaine Goldfields Limited Figure 1. Castlemaine goldfield showing the CASTLEMAINE (Leases MIN4470, EL3242 G O L D F I E L D S EL4235, EL4372, EL5166, MIN5378) L I M I T E D location of the 3 premier project areas.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 3 Review of Activities

Chewton-Wattle Gully Project quartz volumes and gold contents which South Wattle Gully prospect currently (CWG) have potential in the SWG area to host a exists as a single drill hole (CGT_041) The detailed and comprehensive 3D new gold resource at relatively shallow containing two gold bearing fault zones. modelling of the CWG project is nearing depths from surface. The upper zone is now modelled to have completion. Emphasis is being given The objectives of the CWG modelling are: approximately 700m of strike potential at depths of less than 200m from to interpretation of the data-rich areas • Define the South Wattle Gully & South surface (see Figure 2). Gold grades up surrounding the Wattle Gully Gold Mine Chewton targets, to 17g/t have already been intersected that, between 1934-89, produced • Determine the validity of targets within the upper mineralised zone which 375,300ozs from 1.1Mt @ 10.3g/t. In June north of the Wattle Gully Cross Fault occurs as three intervals of high quartz 2008 a remnant JORC Inferred Resource of by modelling gold bearing structures contents which exhibit strong stylolitic 112,000ozs was estimated for Wattle Gully across this fault and defining the together with the Chewton Deposit JORC textures, high arsenopyrite alteration fault displacement from stratigraphic Inferred Resource of 2.1-3.1Mt @ 6.0- and presence of base metal sulphides. knowledge, and 9.1g/t Au (574,000ozs). Very little exploration drilling has occurred • Determine if South Chewton has outside the shallow Phillips Reef targets A number of validation corrections were potential to expand the existing at either the southern or northern ends of made to historical drill data being used in resource estimation with additional the old Wattle Gully mine. Only two deep the South Wattle Gully prospect (SWG) and drilling. West Wattle Gully anticline interpretations holes exist to the south, both of which Using the completed model, design drill (located in Figures 2 and 3). were targeted at the deeper Wattle Gully programs to: The fault associated with mineralisation in Fault Zone (“Lower mineralisation” in • Find the northern boundary to the hole CGT_041 at SWG is now correlated CGT_041). Neither hole intersected the Chewton Deposit, which is currently to faulting, which was the focus of mining West Wattle Gully anticline at locations open, works in 1992, to the immediate north where it could be mineralised. • Increase the resource confidence of the within the Wattle Gully decline (then owned At the northern end of the Wattle Gully mine Chewton Deposit, by Central Victorian Mines). Referred to at is the Phantom Lode. This was the deepest that time as the West Wattle Gully (WWG) • Target high grade shoots within the and most northern lode mined in the later mineralisation, it was based on quartz Chewton Deposit which can become years of production and recorded average found in holes WGD6 (Newmont, 1988) the focus of further mining feasibility gold grades of over 20g/t. Based around and WGD93-2 (CVM, 1993). The WWG studies, the Phantom Fault, this lode was somewhat mineralisation was never mined as financial • Test the Bicentennial target and other different from others mined being located and other circumstances related to CVM northern extensions to the CWG fault on a footwall splay to the main series of saw the decline abandoned. and vein arrays, and Wattle Gully faults that host the other major The old drill holes intersecting the • Test the South Wattle Gully (SWG) gold lodes. CGT believes that the Phantom WWG mineralisation were relogged for prospect to a resource drill out Fault and associated mineralisation is an consistency of interpretation ahead of 3D decision. example of what can be found further into modelling and target identification. This The last of these drill objectives offers the footwall of the Wattle Gully Fault Zone work has provided further confidence as the shallowest, high potential target of which could easily have been overlooked by to the high degree of faulting, significant significant size on the goldfield at present. previous miners and explorers.

Figure 2. Long projection looking west. This SOUTH NORTH section shows the northerly plunge of the gold INCOMPLETE DECLINE WATTLE GULLY lodes at Wattle Gully compared with the southern 1993-95 MAIN SHAFT 400m plunge at Chewton. Also illustrated are the differences in depth from surface for the South Wattle Gully and Bicentennial prospects and relative locations to the conceptual decline design.

700m NB. Apart from holes CGT_041 at SWG and WDG3 at Bicentennial all existing drill traces are omitted SOUTH WATTLE GULLY CHEWTON DECLINE 00m TARGET (upper) DESIGN for clarity.

PHANTOM LODE (green) BICENTENNIAL TARGET CHEWTON DEPOSIT INFERRED RESOURCE -400m

4 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Review of Activities

POSSIBLEPOSSIBLE DECLINE DECLINE ACCESS ACCESS TOTO CHEWTON CHEWTON DEPOSIT DEPOSIT

WATTLEWATTLE GULLY GULLY MINEMINE LODES LODES

SWGSWG TARGET TARGET

BICENTENNIALBICENTENNIAL TARGETTARGET

CHEWTONCHEWTON WESTWEST WATTLE WATTLE GULLY GULLY DEPOSITDEPOSIT ANTICLINEANTICLINE

Figure 3. Two oblique 3D images of the South Wattle Gully drill section relative to the Wattle Gully mine and Chewton Deposit resource. These two images illustrate the opportunity to drill resource discoveries from an underground decline (light green design hole traces) compared with surface drilling of the same targets (magenta hole traces). NB. All existing drill traces are omitted for clarity except holes CGT_041 at SWG and WDG3 at Bicentennial.

Newmont Australia drilled two diamond approach to the mineable tonnage and length longhole stopes between levels. holes north of Wattle Gully in the 1980’s. that the Inferred Resource average head This assessment by M1 is based on a Both intersected gold mineralisation at the grade of 8.3g/t could be achieved through review of core photos supplied by the Wattle Gully Fault Zone and also quartz toll treatment of the ore. M1 were given a company and is consistent with conditions veining at a footwall fault known as the relatively high metallurgical recovery rate in the adjacent Wattle Gully mine. Bicentennial fault. Only one of these holes, of 92.5% by the company due to the known Capital and operating costs were estimated high gravity, free milling characteristics of WGD3, was to the northern side of a major by M1, using their experience with similar this type of ore. cross fault, called the Wattle Gully Cross Victorian gold mines. Pre-production Course, where it located gold mineralisation M1 developed a mine design, schedule capital costs are expected to be $28.2M, at the Wattle Gully Fault Zone and the and cost model for the ore body at the with sustaining capital of $32.9M for a deeper Bicentennial Fault. No significant requested scoping study confidence level of total capital cost of $61.1M. This equates gold mining occurred to the north of the not better than plus/minus 30%. to a life of mine capital cost of $182 per Cross Course, nor were the intersections in The outcome was a mine that can produce recovered ounce. Negative cash peaks at WGD3 ever followed up. at 270,000 tonnes/annum of ore at 8.3g/t just under $33M (undiscounted) before a CGT believes there is substantial resource for 335,000 ounces recovered over a mine steady state level of production/income is potential north of the Cross Course upon life of 8 years, inclusive of the development achieved in the first half of year 4. M1 did both the Chewton and Wattle Gully folds. period. The total cost per ounce was not include allowance for any contingencies The faulting, quartz and gold mineralisation estimated at A$647 with an operating cut in these capital cost estimates. off grade of 3.2 g/t. At the modelled gold detected in hole WDG3 is evidence of Only infill drilling and grade control this potential. Failure by previous miners price of A$1,200/oz and a 15% discount exploration costs were incorporated to recognize the down-dip displacement rate, the discounted, pre tax cash flow was into the model, on the basis that further upon the Cross Course and potential for calculated by M1 at A$66M. confirmatory drilling will be completed at footwall faults and splays to host high grade The conceptual mine has been designed CGT’s discretion before a decision is made mineralisation offer CGT an excellent target with a decline access, using longhole to commit to mine development. close to the Chewton gold resource and its open stoping, with a recovery of 50% While limited by the level of accuracy possible decline access. of the resource tonnes per level across inherent in this type of scoping study and the deposit of up to 700m in length. the need to make assumptions in relation The project has a long development Chewton deposit scoping study phase with first ore not scheduled until to the Inferred Resource, this scoping study In the second quarter of the year, Mining the second half of year 3. Geotechnical shows the potential that lies within the One Pty Ltd (M1), independent consulting conditions have been assumed as poor Chewton Deposit discovery. mining engineers, were engaged to in the mineralisation which would require Studies of how to increase the geological complete a scoping study for a standalone fibrecrete in development, however the confidence in the Chewton Deposit assessment of the Chewton Deposit. M1 footwall and hanging wall are assumed ahead of underground mine access are were instructed to assume a conservative as good by M1, allowing for short strike ongoing. Further surface drilling will be

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 5 Review of Activities

required to define resource boundaries and optimise initial and long term access into high grade shoots. Detailed geotechnical assessment is also of fundamental importance to ensure that the appropriate mining method is adopted. The scoping study plans for the old Wattle Gully mine workings to be partially dewatered and existing shafts used for initial ventilation to progress the decline. However, no account has yet been taken of remnant material that exists within the old Wattle Gully mine. The Inferred Resource released last year also included 610,000t of Wattle Gully material at an average gold Figure 4b. Quartz Hill geological model showing the different mineralised target horizons and volumes grade of 5.7 g/t. tested to date (green). A target is built around the intersection of a LQ with the major west dipping faults This scoping study was conducted to in the model. support the justification for the next which covers a distance of approximately grit hosted targets being better developed round of drilling on the Chewton deposit. 1.5km. These were used to build digital with quartz veins and higher gold grades. The standalone assessment does not wireframes of lithological units, contacts Also modelled during this process were take into account cost saving synergies and key features such as laminated quartz the volumes of “tested area” around that the stated “Pathway to Production” veins (LQs), faults and mineralisation drillhole or mine intersections. The total strategy along the central corridor of the targets. Each target intersection between potential mineralised target volume was Castlemaine goldfield seeks to deliver. a prospective west dipping fault and an also estimated from the 3D model with LQ was then modelled across the project only 3.8% of that volume currently drill or historically mine tested. It is estimated that Quartz Hill Project area and defined as a volume (see Figure 4b). Each LQ was defined as Shale- a further 16.4% will be tested by designed The Quartz Hill 3D model was completed in hosted, Sand/Grit-hosted or Grit-hosted drillholes. By optimizing drill directions the June quarter with detailed drill design and the target mineralised volumes into the model targets it is encouraging finalised based on targets defined in the similarly separated on a host rock basis. that most targets to be tested will be model and analysis of gold bearing veins within the more prospective Grit host discovered there to date. A set of detailed Analysis of gold intersections discovered rock (about 70% of planned intersections) section interpretations has been generated to date reveals a bias towards the sand/ which will increase the probability of higher grade shoot discoveries. QUARTZ HILL Analysis of vein & gold intersections (green volumes in Figure 4c) shows SOUTH QUARTZ HILL MINE 400m 400m that 28 prospective model targets were

QUARTZ HILL MINE intersected by drilling to date, and of those

1.5m @ 0.5g/t 10 contained significant gold assays for a 200m 200m success ratio for anomalous gold in a target 035 0.9m @ 15.3g/t 0.8m @ 22.5g/t 0.9m @ 0.2g/t of about 35%. This is very similar to that 0.75m @ 0.3g/t 003 obtained from early drilling at the Chewton 00m 015 DD82-CM1 00m Deposit. We extrapolate that by drill testing 026 0.8m @ 0.4g/t

0.8m @ 4.9g/t 002 a volume four times larger, a total of 140 0.8m @ 8.4g/t QHD_002 -200m 0.7m @ 4.7g/t QHD_004 016 5,895,400mN modelled targets can be tested yielding 5,895,200mN 0.8m @ 0.3g/t 5,895,000mN 0.8m @ 121.2g/t -200m approximately 40 significant gold intercepts 5,894,800mN 1.5m @ 0.6g/t 256,200mE 0.5m @ 0.8g/t 0.8m @ 0.4g/t 5,894,600mN of which around 20 can be expected to be 0.6m @ 0.6g/t 0.8m @ 0.5g/t 5,894,400mN 256,000mE 1.4m @ 0.3g/t appreciably high in grade. 5,894,200mN

5,894,000mN CASTLEMAINE Analysis of the drill data and construction G O L D F I E L D S L I M I T E D of 3D geological models is compounding Figure 4a. Quartz Hill Project with drill results and cross sections at the North Quartz Hill prospect. This figure illustrates the large amount of untested potential between the old mines and the deeper gold understandings about the controls on mineralisation. The purple area on cross section represents the Quartz Hill Fault Zone and comprises a mineralisation in the goldfield which have number of major and minor west dipping faults. been gained over the past 4 years.

6 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Review of Activities

Castlemaine Goldfield Exploration & Mine Development Plan During the year considerable time was spent refining the exploration budget plan relevant to possible mine development scenarios to achieve the company’s path to gold production. The initial objective is to efficiently drill each of the critical premier project targets in order to be able to decide which prospect will provide the next gold resource upon the field. With the knowledge of where a resource scaled drill out is required, it can then be determined whether underground decline access to the Chewton Figure 4c. Quartz Hill geological model with just the grit unit LQ-Fault targets shown. Blue drill traces are the design drillholes with yellow regions the volume of target to be tested. A total of 140 new targets will Deposit is likely from the Wattle Gully mine be tested by this drill design. lease or from within the pine plantation at the northern end of the goldfield. Each model will be used to prioritise Cappers Prospect (Refer Figure 5). diamond drilling based upon: 3D modeling has commenced for the Shicer If developed from within the Wattle Gully • The locations where Laminated Quartz Fault and Shellback Reef target areas within mining lease, development would be via an veins intersect major west-dipping the Cappers Project to the north within initial 700m exploration decline into the faults, the pine plantation. Quartz veining is now South Wattle Gully mineralisation which • Fault strength and degree of quartz vein modelled between the Cappers mines and could be readily drilled and trial mined development, prospects to the north at the Specimen ahead of larger scales of mining and gold Gully mine and slate quarry. Diamond drill • Change in fold plunge; particularly production. To date it is this discovery testing in target areas between the two gold changes in gradients like those scenario which has been shown to yield occurrences is expected in 2010. modelled at Quartz Hill and Chewton the earliest gold production and cash flow Anticline, Previous RC and diamond drilling upon two for CGT. It is also then the fastest and shallow quartz vein prospects within the • Preferred host rock types such as the most cost effective path to mining the pine plantation revealed narrow high grade ‘grit’ unit at Quartz Hill and Chewton resource. gold veins at depths of less than 50m. Conversely, superior exploration success • Depth to target and other mine The Shellback Reef prospect contained economic criteria. at the Quartz Hill Project would yield the sufficient gold intersections to be of next most favorable production outcome The enhanced definition given to gold ongoing interest. with underground access into the possible targets at Quartz Hill by the modelling The economic assessment for the Shellback resource occurring in 2012 following a process has increased confidence that Reef prospect showed potential to make period of resource drilling, estimation, mine this project will supply a significant gold a modest return from a possible mine with evaluation and permitting. Anticipated discovery which will become part of the total production of <15,000 ozs. However, a depths would require a decline from within company’s future production pathway. high degree of exploration risk is associated the pine plantation of about 2,100m in Unlike other gold mineralisation styles, fault with drill definition of this spurry style of length. Such a decline begun in mid 2011 reef deposits cannot be effectively grid mineralisation as a single pit, with a high could be continued southwards to access pattern drilled. These detailed 3D models cost per ounce most likely. the Chewton resource whilst being used provide greater target definition and thus Future drilling at Cappers could well provide for exploration drilling of known prospects promise increased drill success rates. additional shallow targets en-route to the adjacent to Quartz Hill, Wattle Gully and The high number of targets to be tested known deeper targets along the Shicer Chewton (see Figure 5). at Quartz Hill and greatly enhanced Fault. Should the Shicer Fault at Cappers Project definition of their spatial locations, plus provide the best resource potential it would mineralisation host and form, are added be critically prioritised against the gross evidence that the three premier projects potential of the Chewton resource. The far on the goldfield have been given the northern location of Cappers in the pine priority status that they deserved. plantation provides no logistical benefit for accessing the southern resources around CWG/Chewton without a Quartz Hill

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 7 Review of Activities

5,886,000mN 5,888,000mN 5,890,000mN 5,892,000mN 5,894,000mN 5,896,000mN 5,898,000mN SOUTH NORTH

1000mRL EXPLORATION LICENCE EL 3242 EXPL LICENCE EL 5166

MINING LEASE MIN 4470 PINE PLANTATION ALTERNATE QUARTZ SOUTH WATTLE GULLY HILL DECLINE EXPLORATION DECLINE 500mRL (700m) Quartz Specimen Gully Fryerstown Wattle Gully Hill

SOUTH Diggings National Heritage Park Boundary WATTLE -100m from surface GULLY 00mRL SHICER FAULT

ENGLISHMAN’S MERTHYRN CAPPERS CHEWTON DECLINE DECLINE (3,500m) NORTH Chewton QUARTZ HILL Deposit QUARTZ HILL DECLINE -500mRL NORTH CHEWTON DECLINE (2,100m) (3,500m)

CWG Underground workings (Chewton - Wattle Gully) QUARTZ HILL CAPPERS -1000mRL Pre 2005 drilling (EOH) PROJECT PROJECT PROJECT Post 2005 drilling AXD/CGT (EOH) Potential Resources 2 km 1:2.5 Vertical Exaggeration CASTLEMAINE G O L D F I E L D S L I M I T E D

Figure 5. Long projection of the central gold corridor at Castlemaine looking west. The figure illustrates what development scenarios could be employed to access the Chewton Deposit given exploration success in either the northern field (Quartz Hill Project- North Quartz Hill potential resource) or within the existing mining lease at Wattle Gully (via South Wattle Gully potential resource). The Company aims to drill test prospects within each of the three project areas and determine thereafter which development path into Chewton is optimal and provides the earliest cash flow

resource bridging the gap. However with concentrates built up over many years Earlier aircore drilling upon the sulphide Quartz Hill and Cappers being successful, called “Middling’s” and assayed about tails dam has been found to be a common decline access from the pine 10g/t Au pre-treatment in the Wattle Gully unrepresentative due to poor sample plantation could be used to optimize CIP/CIL plant. Processed in the 1990’s volumes and recoveries which produced a costs. The least is known about cost and with very poor recoveries, recent sampling severe sampling bias. Recovery bias caused time schedules under this exploration of these “Middling’s” or “Blue tailings” a loss of heavy particles (sulphide contents) and development scenario, due to the indicates that gold grades between and thus reduced associated gold grades. relatively low current knowledge of potential 6g/t and 8g/t Au are still contained in the Duplicate drilling of the Aircore holes using resource dimensions and other likely mining pyrite rich tailings. This is consistent with hand auger methods in the third quarter parameters at Cappers. production reports for this material that produced excellent sample volumes and recorded recovered grades of just 2g/t Au recoveries and have confirmed historical Wattle Gully Tailings and expected grades for the tailings. The or less. An economic study of the potential to re- average gold grade using auger sample data process gold in tailings at the Wattle Gully At that time, there was no processing is around 4.9g/t Au from all the sulphidic mine concluded that a viable operation option to pre-oxidize sulphide ores available portions of the tailings with average sulphur is possible with head grades greater than in Victoria. However, since that time other contents of over 9.1% for all sulphide tails 0.6g/t Au. Historical tailings drilling and processing options have been developed intersected. metallurgical data suggest average gold including the development of biological These assay results strongly suggest an grades for the Lower West Dam could range oxidation (BIOX) processing plants which economic resource of limited size is between 0.42g/t Au (Askew & Associates, use sulphide eating bacteria to oxidize the possible. Critical to earning short term 1993) and 0.81g/t Au (Newmont Australia, high sulphide ores. Samples of the Wattle cash from this possible resource is the 1990). A limited aircore drill program Gully tailings have been externally tested availability of an appropriate metallurgical was performed in late June to confirm the for total gold and sulphur contents and plant to economically extract the sulphide historical data and gain better definition have undergone preliminary BIOX trials for hosted gold. of gold grades, depths and metallurgical amenability and recovery characteristics. Estimation of likely resource tonnage characteristics. Assays performed on two samples at the cannot be concluded until further auger It is known that approximately 10,000 independent metallurgical test lab confirm drilling and field work is completed. tonnes of high sulphide, high gold-grade the high grade potential of the tailings This work will be scheduled if a suitable tailings were processed late in the history with grades averaging 7.9g/t Au and total time frame for possible processing can of the mine. These came from battery sulphur of 8.1% S. be defined.

8 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Review of Activities

TARNAGULLA PROJECT TENEMENTS No meaningful exploration activities Project areas, tenement licences and interests as at 28 February 2010. occurred upon the project this year. The farm-in agreement with Reef Gold Tenement Location Interest % Mines, entered into in 2008, expired Castlemaine project in November 2009 with full control of EL 3242 Castlemaine 100 exploration reverting back to CGT and EL 4235 Eureka/Vineyard 100 Tarnagulla returning to be a wholly EL 4372 Fryerstown/New Era 100 owned project. Work programs are EL 5166 Harcourt 100 being developed for diamond drilling MIN 4470 Wattle Gully 100 at the Poseidon prospect. The lower MIN 5378 Wattle Gully 100 un-mined (2E block) of mineralisation Tarnagulla project below the Nick O’ Time mine will be EL 3640 Tarnagulla 100 reassessed together with other potential EL 4214 Timor/Kingower 100 that may exist along the Poverty Reef. EL 4541 Corfu/Sandstone 100 EL 4542 Cambrian 100 SEBASTIAN PROJECT EL 4992 Tarnagulla 100 MIN 4756 Tarnagulla 100 A program of aircore drilling was conducted in late December 2009 to test the northern Sebastian project extensions of the Frederick the Great EL 3105 Sebastian 75 mineralisation 8km north of the Sebastian EL 4536 Sebastian 100 mines. Past exploration drilling by CRAE in EL 4974 Sebastian 100 the 1980’s using the inferior RAB technique EL 4982 Sebastian 100 was able to identify the gold bearing ELA 5266 Raywood/Tandarra 100 Frederick the Great corridor in broad terms. Subsequent aircore drilling by Metex in the 1990’s confirmed the northern strike The Castlemaine and Sebastian licences are held in the name of Castlemaine Goldfields potential by producing a number of gold and Limited and the Tarnagulla licences held in the name of Ironbark Mining Pty Ltd., a wholly arsenic anomalies, particularly from holes owned subsidiary of Castlemaine Goldfields Limited. drilled along Gunns Road approximately 4kms south of December’s drilling location. Although drilled at a broad hole spacing, high quality structural information was gained from the aircore allowing for 2 fold axes to be identified. The Frederick the Great Fault Zone does not appear to have been directly intersected, although the hole spacing would not preclude it’s presence. A number of prospective quartz intervals were intersected with low gold, arsenic and base metal grades being reported. Further drill programs are planned in 2010 for similar regional targets identified from this drilling along with existing high priority prospects at Frederick the Great and Gunns Road. Reconnaissance mapping and surface sampling during the quarter show that expanded drilling programs to the eastern side of the project along strike from prominent Bendigo gold structures is warranted.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 9 Directors’ Report

Your directors present their report on the consolidated entity (referred to hereafter as the group) consisting of Castlemaine Goldfields Limited and the entity it controlled during the year ended 31 December 2009. DIRECTORS The following persons were directors of Castlemaine Goldfields Limited during the whole year and up to the date of this report, unless otherwise indicated: John (Ian) C. Goudie Non-executive chairman Gary F. P. Scanlan Managing director and chief executive officer Peter L. McCarthy Non-executive director Robert H. R. Adamson Non-executive director, resigned 14 January 2009 PRINCIPAL ACTIVITY The principal activity of the economic entity during the year ended 31 December 2009 was exploration for gold in central Victoria. DIVIDENDS – CASTLEMAINE GOLDFIELDS LIMITED No dividends have been declared or paid during or since the end of the financial year.

10 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Directors’ Report

Operating and Financial Review The loss of the group for the year ended 31 December 2009 after income tax amounted to $720,053 (2008 - $972,140). The 2008 loss, previously reported as $846,208 has been restated following changes in accounting policies primarily in regard to capitalisation of exploration and evaluation expenditure. Information on the operations and financial position of the group and its business strategies and prospects are set out in the chairman’s and managing director’s report and the review of activities in the annual report. Significant changes in the state of affairs Significant changes in the state of affairs of the group during the financial year were as follows: (a) Exploration expenditure for the year of $968,202 was down on previous years due to decisions taken to conserve cash in times of global financial uncertainty. Corporate overheads were also reduced. (b) The carrying value of exploration and evaluation expenditure of the group was written down by $6,080,376, net of related deferred income tax liabilities and non-controlling interests. The charge has been made retrospectively to accumulated losses for the year ended 2007. Under the new policy for the 2009 and 2008 years expenditure totalling $5,411,400 in respect of the Castlemaine project has been capitalised, whereas the expenditure of $287,565 at Sebastian and Tarnagulla has been expensed. Under the new policy expenditure is capitalised when specific prospect targets are identified. The Castlemaine project has been subjected to significant targeted exploration, resulting in a JORC Code Inferred Resource of 686,000 ounces of gold which was announced in June 2008. The exploration programmes at Sebastian and Tarnagulla are not yet sufficiently advanced to identify specific targets warranting capitalisation of the expenditure. (c) In December 2009, $465,000 was raised through a placement of 11,625,000 shares at 4 cents per share to three major shareholders. (d) The Tarnagulla joint venture lapsed in November 2009 due to the joint venture partner not spending exploration expenditure within the prescribed farm-in period. (e) The Sebastian freehold property was sold in October 2009 for $250,000 before costs, $50,000 greater than book written down value. Matters subsequent to the end of the financial year Other than noted below, no matters or circumstances have arisen since 31 December 2009 that have significantly affected, or may significantly affect: (a) the company’s operations in future financial years, or (b) the results of those operations in future financial years, or (c) the company’s state of affairs in future financial years. On 4 March 2010, the company entered into an agreement to acquire the Ballarat Gold Project from Lihir Gold Ltd. The consideration for the purchase of the property, plant, equipment and tenements is $4.5 million in cash, the assumption of rehabilitation bonds of $4.1 million and a royalty capped at $50 million. A share placement is proposed to raise up to $40 million to fund the acquisition, carry out exploration and if successful develop and reopen the mine at Ballarat, continue exploration at existing company projects and for general working capital purposes. The purchase is conditional upon shareholders approving the issue of new equity to raise a minimum of $20 million. The intention is to put the necessary resolutions to shareholders at the Annual General Meeting planned for 4 May 2010. Likely developments and expected results of operations The successful acquisition of the Ballarat Gold Project and the raising of the necessary funds will see exploration across the expanded suite of tenements. The financial position of the company will be substantially improved through the planned capital raising. As at 31 December 2009 the group had working capital of $770,410. If the acquisition of the Ballarat Gold Project does not go ahead, even without additional capital the directors believe that the group can continue to operate as a going concern for at least the next twelve months from the date of this report. Environmental regulations The group’s operations are subject to significant environmental regulation under laws of the Commonwealth and State Governments. The directors are conscious of the obligations imposed on the group and believe that all exploration activity conducted during the year was in compliance with environmental regulations. Approved work plans exist for all exploration activity undertaken. The work plans are submitted to and approved by the Earth Resources Division of the Department of Primary Industries, Victoria prior to the commencement of exploration activity. There is also regular communication with Parks Victoria and Heritage Victoria relating to ongoing exploration activity and the maintenance of heritage listed sites located at the old Wattle Gully mine. Where exploration licences are subject to native title legislation, appropriate agreements have been obtained and ongoing liaison with the relevant authorities is maintained.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 11 Directors’ Report

Information on directors John (Ian) C. Goudie Chairman (non-executive) Qualifications Bachelor of Science in Geology, Aberdeen University, Scotland, and Master of Science in Exploration & Mining Geology, Townsville University, Queensland. Experience and expertise Ian has over thirty five years of experience working in exploration, mining and senior executive roles, including that of chief executive officer of New Guinea Mining Limited. During his varied professional career, he completed the Advanced Management Program at Harvard University, and is a past president of the Minerals Council of Australia – Victorian Division. Professional memberships include Fellow of the Australasian Institute of Mining and Metallurgy, and Fellow of the Australian Institute of Company Directors. Other current directorships None Former directorships in last three years None Special responsibilities Chairman of the board Interests in shares and options 2,575,800 ordinary shares 1,400,000 unlisted options to purchase fully paid ordinary shares. Details are set out in the accompanying remuneration report.

Gary F. P. Scanlan Managing director & chief executive officer Qualifications Associate Chartered Accountant Experience and expertise Gary has a strong mining finance and accounting background having worked with Price Waterhouse & Co for ten years followed by over twenty years direct experience in the evaluation, development, financing and administration of mining projects in Australia and overseas. Other professional memberships include Fellow of the Australasian Institute of Mining and Metallurgy and member of the Minerals Council of Australia – Victorian Division. Other current directorships Non-executive director of Red 5 Limited, an Australian public company developing a gold prospect in the Philippines and as of 19 December 2009, a non-executive director of Citadel Resource Group Limited an Australian public company developing copper and gold projects in Saudi Arabia. Former directorships in last three years None Special responsibilities Chief executive officer Interests in shares and options 2,662,612 ordinary shares 4,500,000 unlisted options to purchase fully paid ordinary shares. Details are set out in the accompanying remuneration report.

Peter L. McCarthy Non-executive director Qualifications Bachelor of Science (Mining Engineering), (University of NSW), and Master of Geoscience (Macquarie University). Experience and expertise Peter has over forty years of experience in the mining industry. His wide ranging mining experience includes consultancy, management of mining contractors and the management of several feasibility studies for successful projects over the past two decades. Professional memberships include Fellow of the Australasian Institute of Mining and Metallurgy (CP), member of the Society of Mining Engineers and member of the Australian Institute of Company Directors. Peter was president of the Australasian Institute of Mining and Metallurgy for 2007 and 2008. Other current directorships Chairman (non-executive) Bendigo Mining Limited. Managing director of AMC Consultants Pty Ltd, a prominent mining consultancy group. Director of the Australasian Institute of Mining and Metallurgy. Former directorships in last three years None Special responsibilities None Interests in shares 1,600,000 ordinary shares

Mr John W. Jennings, consultant, is the chief financial officer and company secretary. John is an Associate Chartered Accountant and an Associate Chartered Secretary, and has held senior finance and accounting roles with public and private companies in a range of industries, including mining and base metals.

12 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Directors’ Report

Meetings of directors The number of meetings of the company‘s board of directors and of the audit committee held during the year ended 31 December 2009, and the number of meetings attended by each director were: Full meetings of Meetings of non-executive directors directors A B A B John C. Goudie 10 10 1 1 Gary F. P. Scanlan 10 10 n/a n/a Peter L. McCarthy 10 10 1 1 Robert H. R. Adamson - - - - A = Number of meetings held during the time the director held office or was a member of the committee during the year B = Number of meetings attended As the company currently has only two non-executive directors including the chairman, the functions of the audit committee have been assumed by the board of directors. Retirement, election and continuation in office of directors Non-executive directors retire by rotation with one third of the non-executive directors retiring at each annual general meeting. John (Ian) C. Goudie is due to retire at the forthcoming annual general meeting and offers himself for re-election. Remuneration report The Remuneration report is set out under the following sections: (a) Principles used to determine the nature and amount of remuneration (b) Details of remuneration (c) Service agreements (d) Share-based compensation (e) Additional information The information required under headings (a)–(e) includes remuneration disclosures that are required under Accounting Standard AASB 124 Related Party Disclosures and the Corporations Act 2001. The information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001. (a) Principles used to determine the nature and amount of remuneration The objective of the group’s executive reward framework is to ensure reward for performance is competitive, transparent and appropriate for the results delivered. The framework seeks to align executive reward with the achievement of strategic objectives and the creation of value for shareholders consistent with market best practice. External comparisons are made as part of this process. Remuneration currently includes salaries, superannuation contributions and the grant of options over the company’s shares. No component of remuneration is at risk under current remuneration arrangements. The company’s overall financial performance is not a particularly important factor while its sole focus is exploration. Remuneration policies are reviewed from time to time to ensure that the policies are competitive with those of similar companies and are in keeping with the company’s financial circumstances. The framework for remuneration seeks to ensure that the group: • focuses on sustained growth in shareholder wealth, as well as focusing its executives on key non-financial drivers of value, • attracts and retains high caliber executives, and • provides reward for outstanding executive performance. Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit which is currently set by the constitution of the company at $250,000. The pool limit can be changed by shareholders in general meeting. The fees and payments are reviewed annually by the board and are not linked to the performance of the group. Directors receive a superannuation guarantee contribution of 9% of the base fee, but do not receive any other retirement benefits. Fees and payments to individual non-executive directors reflect the responsibilities and demands of the respective roles, taking into consideration market comparisons for comparable companies and the company’s financial circumstances at the time. The fees are inclusive of committee work and any other duties. Cash remuneration paid to directors is valued at the cost to the group and expensed over the service period. The value of unlisted options, last granted to the managing director in April 2008, has been brought to account over the period from grant date to vesting date. Board members, and the managing director and chief executive officer took reduced fees and salary during the year in recognition of the reduction in exploration activity.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 13 Directors’ Report

The board has determined that fees will be returned to the previous level from January 2010 or as set out in section (c). The fee for the non- executive director has been reset at $40,000 per annum plus statutory superannuation (b) Details of remuneration Detailed amounts of the remuneration of the directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of Castlemaine Goldfields Limited and its group are set out in the following tables. The key management personnel of Castlemaine Goldfields Limited and its group include the directors as per page 12 and the following executive officers, who after the managing director and chief executive officer are the highest paid executives of the company and the group. Wessley B. Edgar – Exploration manager Oliver A. Halliwell – Administration manager John W. Jennings – Chief financial officer and company secretary Oliver A. Halliwell has assumed inter alia the administrative duties previously performed by John W. Jennings, resulting in a reduction in the hours of work and fees of the latter.

Short-term Post- Share-based Total Options benefits employment payments % of Total benefits Name Cash salary Super- Options and fees annuation $ $ $ $ % 2009 Non-executive directors John C. Goudie (Chairman) 40,000 3,600 - 43,600 - Robert H.R. Adamson 1,250 113 - 1,363 - Peter L. McCarthy 20,000 1,800 - 21,800 - Sub-total non-executive directors 61,250 5,513 - 66,763 - Managing director and chief executive officer Gary F. P. Scanlan 210,000 18,900 31,227 260,127 12.0 Other key management personnel Wessley B. Edgar 183,500 16,515 19,184 219,199 8.8 Oliver A. Halliwell 50,130 4,512 - 54,642 - John W. Jennings 42,953 - - 42,953 - Total key management personnel compensation 547,833 45,440 50,411 643,684 7.8

2008 Non-executive directors John C. Goudie (Chairman) 80,000 7,200 - 87,200 - Robert H.R. Adamson 30,000 2,700 - 32,700 - Pieter W. Greeff 9,462 851 - 10,313 - Peter L. McCarthy 30,000 2,700 - 32,700 - Sub-total non-executive directors 149,462 13,451 - 162,913 - Managing director and chief executive officer Gary F. P. Scanlan 250,250 22,523 72,362 345,135 21.0 Other key management personnel Wessley B. Edgar 178,750 16,088 34,525 229,363 15.1 Oliver A. Halliwell 35,256 3,173 - 38,429 - John W. Jennings 100,000 - - 100,000 - Total key management personnel compensation 713,718 55,235 106,887 875,840 12.2 The percentage value of the remuneration consisting of options is based on the fair value of options expensed during the year. No cash bonuses, non-monetary benefits or retirement benefits have been paid.

14 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Directors’ Report

(c) Service agreements Formal service agreements are held with two directors. Key terms and conditions include: John C. Goudie, Non-executive chairman Term – Not fixed. Base salary - Effective 1 January 2010, $80,000 per annum plus statutory superannuation. (Refer section A for further details). Notice period – Two months by either party. Termination payment – Nil. Gary F. P. Scanlan, Managing director & chief executive officer Term – Not fixed. Base salary – Effective 1 January 2010, $305,000 per annum plus statutory superannuation. Notice period – Three months notice by either party. Termination payment – Nil. There are no other formal service agreements with other key management personnel or directors. (d) Share-based compensation Options No options were granted during the year. Unlisted options Unlisted options can be granted under the Castlemaine Goldfields Limited Employees and Contractors Option Plan of 25 February 2005 and as amended on 3 March 2006 (the plan). The company’s directors have the discretion to invite full-time employees and permanent part-time employees, directors, alternate directors, the company secretary and independent contractors of the company to participate in the plan. Under the plan options are granted free of consideration at strike prices and on terms and conditions specified by the directors, but carry no dividend or voting rights. When exercised each option is converted into one ordinary fully paid share. At any particular point of time the total aggregate number of options which may be on issue under the plan shall not exceed or be capable of exceeding 5% of the total number of shares on issue in the capital of the company calculated on the basis that all shares and other securities convertible into shares had been converted. In addition to options granted under the plan, subject to shareholder approval, the directors may grant other unlisted options. The terms and conditions of such options are set out in the particular notice of meeting to shareholders at which shareholder approval is sought. Copies of past notices are available on the company’s and ASX websites. The term and conditions of each grant of unlisted options affecting remuneration in the previous, this or future reporting periods are set out in the tables in section E. This includes the number of options granted during the year and the number of options that vested during the year. Fair value of options The assessed fair value at grant date of options granted to the individuals is allocated over the period from grant date to vesting date, and is included in the accompanying remuneration tables. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. (e) Additional information Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance. Given the nature of its activities it is imperative that the company attracts experienced and dedicated personnel and remunerates them well in the short term. In addition to cash remuneration, statutory entitlements and short term bonuses, directors believe that share-based compensation is an appropriate means of rewarding and retaining key personnel. None of the options, last granted to directors and key management personnel in April 2008, are subject to performance hurdles or service criteria. Option holders are prohibited from limiting their exposure to risk in relation to the unvested shares or other rights. Consistent with the policy of the past four years performance hurdles are not considered appropriate given the current nature of the group’s activities. Details of the options granted as remuneration. Unlisted options are used for this purpose. The details of each grant of options as remuneration are set out on the following tables. The value of options at grant date has been calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 15 Value of options - during year during - options of Value Granted Expired Vested Exercised $ $ $ $ $ - - - - - Grant Grant yet to be be to yet valuation valuation expensed in in 2010 25,000 1,917 - - - - Non Non vested 125,000 1 At 31 Dec 2009 Dec 31 At Vesting Vested & Vested exercisable year during during Vested Vested 2009 31-Dec 31-Dec Balance Balance Number of options of Number year during during Expired Expired year during during Granted Granted 2009 1-Jan 1-Jan Balance Balance 5,000,000 -500,000) ( 4,500,000 2,500,000 4,500,000 - - - - 32,000 108,000 - 7,950,000 -500,000) ( 7,450,000 2,875,000 6,825,000 625,000 375,000 10,267 - 32,000 139,750 - 1,500,000 - - 1,500,000 375,000 875,000 625,000 375,000 10,267 - - 31,750 - at date grant option option Value of Value per cise price Exer- cents cents share Date Grant Grant Vesting Expiry 8/5/07 8/5/07 19/3/10 22 7.9 500,000 - - 500,000 - 500,000 ------8/5/07 8/5/07 19/3/09 21 6.4 500,000 -500,000) ( ------32,000 - - 26/4/06 26/4/10 26/4/11 20 18.4 125,000 - - 125,000 - - 26/4/06 26/4/09 26/4/11 20 18.4 125,000 - - 125,000 125,000 125,000 - - - - - 23,000 - 26/4/06 26/4/08 26/4/11 20 18.4 125,000 - - 125,000 - 125,000 ------26/4/06 26/4/07 26/4/11 20 18.4 125,000 - - 125,000 - 125,000 ------22/4/08 31/12/11 31/12/12 30 3.9 250,000 - - 250,000 - - 250,000 - 5,284 - - - - 22/4/08 31/12/10 31/12/12 26 3.3 250,000 - - 250,000 - - 250,000 250,000 3,066 - - - - 22/4/08 31/12/09 31/12/12 23 3.5 250,000 - - 250,000 250,000 250,000 - - - - - 8,750 - 22/4/08 22/4/09 22/4/13 50 3.7 1,000,000 - - 1,000,000 1,000,000 1,000,000 - - - - - 37,000 - 22/4/08 22/4/09 22/4/12 40 3.3 500,000 - - 500,000 500,000 500,000 - - - - - 16,500 - 28/11/05 28/11/09 28/11/10 20 8.0 500,000 - - 500,000 500,000 500,000 - - - - - 40,000 - 28/11/05 28/11/08 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------28/11/05 28/11/07 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------28/11/05 28/11/06 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------Other key personnel personnel key Other Edgar B. Wessley 22/4/08 31/12/08 31/12/12 20 3.9 250,000 - - 250,000 - 250,000 ------(i) The fair value of options is independently determined using the Black-Scholes option pricing model as described in section (d). section in described as model pricing option Black-Scholes the using determined independently is options of value fair The (i) expensed. be to yet value fair the is vest to yet options of value minimum The (ii) John W. Jennings W. John 22/12/06 22/12/07 21/12/11 20 9.9 50,000- - 50,000 - 50,000- Managing director & chief executive officer officer executive chief & director Managing Scanlan P. GaryF. 22/4/08 22/4/09 22/4/11 30 2.9 500,000 - - 500,000 500,000 500,000 - - - - - 14,500 - Directors Chairman Goudie C. John 1/7/05 1/7/07 1/7/10 25 4.5 1,400,000 - - 1,400,000 - 1,400,000 ------Directors’ Directors’ Report personnel management key and directors by held Options 2009

16 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 16 Value of options - during year during - options of Value year during - options of Value Granted Expired Vested Exercised Granted Expired Vested Exercised $ $ $ $ $ $ $ $ $ $ - - - - - ,667 - - - - Grant Grant Grant yet to be be to yet be to yet valuation valuation valuation expensed expensed in in in 2010 2009 25,000 1,917 - - - - Non Non Non vested vested 125,000 - 7 125,000 1 At 31 Dec 2009 Dec 31 At Vesting 2008 Dec 31 At Vesting Vested & Vested & Vested exercisable exercisable year year during during during Vested Vested Vested 2009 2008 31-Dec 31-Dec 31-Dec Balance Balance Balance Number of options of Number options of Number year year during during during Expired Expired Expired year year during during during Granted Granted Granted - 250,000 - 250,000 - - 250,000 - 7,926 9,750 - - - - 250,000 - 250,000 - - 250,000 - 6,132 8,250 - - - - 250,000 - 250,000 - - 250,000 250,000 5,170 8,750 - - - - 250,000 - 250,000 250,000 250,000 - - - 9,750 - 9,750 - - 1,000,000 - 1,000,000 - - 1,000,000 500,000 11,423 37,000 - - - - 500,000 - 500,000 - - 500,000 500,000 5,094 16,500 - - - - 500,000 - 500,000 - - 500,000 500,000 4,477 14,500 - - - 2009 2008 1-Jan 1-Jan 1-Jan 500,000 1,000,000 0 1,500,000 375,000 500,000 1,000,000 375,000 29,451 36,500 - 32,750 - Balance Balance Balance 3,000,000 2,000,000 - 5,000,000 500,000 2,500,000 2,500,000 1,550,000 31,226 68,000 - 40,000 - 5,000,000 -500,000) ( 4,500,000 2,500,000 4,500,000 - - - - 32,000 108,000 - 7,950,000 -500,000) ( 7,450,000 2,875,000 6,825,000 625,000 375,000 10,267 - 32,000 139,750 - 4,950,000 3,000,000 - 7,950,000 875,000 4,450,000 3,500,000 1,925,000 60,677 104,500 - 72,750 - 1,500,000 - - 1,500,000 375,000 875,000 625,000 375,000 10,267 - - 31,750 - at at date date grant grant option option option Value of Value of Value per per cise cise price price Exer- Exer- cents cents cents cents share share Date Date Grant Grant Vesting Expiry Grant Vesting Expiry 8/5/07 8/5/07 19/3/10 22 7.9 500,000 - - 500,000 - 500,000 ------8/5/07 8/5/07 19/3/10 22 7.9 500,000 - - 500,000 - 500,000 ------8/5/07 8/5/07 19/3/09 21 6.4 500,000 - - 500,000 - 500,000 ------8/5/07 8/5/07 19/3/09 21 6.4 500,000 -500,000) ( ------32,000 - - 26/4/06 26/4/10 26/4/11 20 18.4 125,000 - - 125,000 - - 26/4/06 26/4/10 26/4/11 20 18.4 125,000 - - 125,000 - - 26/4/06 26/4/09 26/4/11 20 18.4 125,000 - - 125,000 - - 125,000 125,000 2,556 - - - - 26/4/06 26/4/09 26/4/11 20 18.4 125,000 - - 125,000 125,000 125,000 - - - - - 23,000 - 26/4/06 26/4/08 26/4/11 20 18.4 125,000 - - 125,000 125,000 125,000 - - - - - 23,000 - 26/4/06 26/4/08 26/4/11 20 18.4 125,000 - - 125,000 - 125,000 ------26/4/06 26/4/07 26/4/11 20 18.4 125,000 - - 125,000 - 125,000 ------26/4/06 26/4/07 26/4/11 20 18.4 125,000 - - 125,000 - 125,000 ------22/4/08 31/12/11 31/12/12 30 3.9 22/4/08 31/12/11 31/12/12 30 3.9 250,000 - - 250,000 - - 250,000 - 5,284 - - - - 22/4/08 31/12/10 31/12/12 26 3.3 22/4/08 31/12/10 31/12/12 26 3.3 250,000 - - 250,000 - - 250,000 250,000 3,066 - - - - 22/4/08 31/12/09 31/12/12 23 3.5 22/4/08 31/12/09 31/12/12 23 3.5 250,000 - - 250,000 250,000 250,000 - - - - - 8,750 - 22/4/08 22/4/09 22/4/13 50 3.7 22/4/08 22/4/09 22/4/13 50 3.7 1,000,000 - - 1,000,000 1,000,000 1,000,000 - - - - - 37,000 - 22/4/08 22/4/09 22/4/12 40 3.3 500,000 - - 500,000 500,000 500,000 - - - - - 16,500 - 22/4/08 22/4/09 22/4/12 40 3.3 28/11/05 28/11/09 28/11/10 20 8.0 500,000 - - 500,000 - - 500,000 50,000 10,232 - - - - 28/11/05 28/11/09 28/11/10 20 8.0 500,000 - - 500,000 500,000 500,000 - - - - - 40,000 - 28/11/05 28/11/08 28/11/10 20 8.0 500,000 - - 500,000 500,000 500,000 - - - - - 40,000 - 28/11/05 28/11/08 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------28/11/05 28/11/07 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------28/11/05 28/11/07 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------28/11/05 28/11/06 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------28/11/05 28/11/06 28/11/10 20 8.0 500,000 - - 500,000 - 500,000 ------Other key personnel personnel key Other Edgar B. Wessley 22/4/08 31/12/08 31/12/12 20 3.9 Other key personnel personnel key Other Edgar B. Wessley 22/4/08 31/12/08 31/12/12 20 3.9 250,000 - - 250,000 - 250,000 ------(i) The fair value of options is independently determined using the Black-Scholes option pricing model as described in section (d). section in described as model pricing option Black-Scholes the using determined independently is options of value fair The (i) expensed. be to yet value fair the is vest to yet options of value minimum The (ii) page. previous the on (ii) and (i) notes foot Refer John W. Jennings W. John 22/12/06 22/12/07 21/12/11 20 9.9 50,000- - 50,000 - 50,000- Jennings W. John 22/12/06 22/12/07 21/12/11 20 9.9 50,000- - 50,000 - 50,000------Managing director & chief executive officer officer executive chief & director Managing Scanlan P. GaryF. 22/4/08 22/4/09 22/4/11 30 2.9 500,000 - - 500,000 500,000 500,000 - - - - - 14,500 - officer executive chief & director Managing Scanlan P. GaryF. 22/4/08 22/4/09 22/4/11 30 2.9 Directors Chairman Goudie C. John 1/7/05 1/7/07 1/7/10 25 4.5 1,400,000 - - 1,400,000 - 1,400,000 ------Directors Chairman Goudie C. John 1/7/05 1/7/07 1/7/10 25 4.5 1,400,000 - - 1,400,000 - 1,400,000 ------Options held by directors and key management personnel management key and directors by held Options 2009 Directors’ Report personnel management key and directors by held Options 2008

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 17 Directors’ Report

Options held by directors and key management personnel - additional information 2009 2008 Year % Options vest Value of grant % Options vest Value of grant yet to vest yet to vest granted Vested Forfeited %Year Min. Max. Vested Forfeited %Year Min. Max. Directors Chairman John C. Goudie 2005 100 - -- -- 100 - -- -- Managing director & chief executive officer Gary F.P. Scanlan 2008 100 ------100 2009 - 68,000 2007 100 50 -- -- 100 - -- -- 2005 100 - -- -- 100 - 25 2009 - 40,000 Other key personnel Wessley B. Edgar 2008 50 - -- -- 25 - -- -- 2008 ------25 2009 - 8,750 2008 -- 25 2010 - 8,250 -- 25 2010 - 8,250 2008 -- 25 2011 - 9,750 -- 25 2011 - 9,750 2006 75 - 25 2010 - 23,000 50 - 25 2009 - 23,000 2006 ------25 2010 - 23,000 John W. Jennings 2006 100 - -- -- 100 - -- --

Loans to directors and executives There were no loans made to directors and executives during the year. Shares under option Unissued ordinary shares of Castlemaine Goldfields Limited under option at the date of this report are as follows:

Date options granted Expiry date Issue price of shares Number under Cents option 1/7/05 1/7/10 25 1,400,000 28/11/05 28/11/10 20 2,000,000 26/4/06 26/4/11 20 500,000 22/12/06 21/12/11 20 250,000 8/5/07 19/3/10 22 500,000 22/4/08 31/12/11 30 500,000 22/4/08 31/12/12 40 500,000 22/4/08 31/12/13 50 1,000,000 22/4/08 31/12/12 20 350,000 22/4/08 31/12/12 23 350,000 22/4/08 31/12/12 26 350,000 22/4/08 31/12/12 30 350,000 8,050,000

(i) no options over shares have been granted since 31 December 2009, (ii) no option holder has any right under the options to participate in any other share issue of the company or any other entity, and (iii) to date none of the company’s unlisted options over shares have been exercised. Insurance of officers During the financial year, Castlemaine Goldfields Limited paid a premium of $13,820 to insure the directors and officers of the company. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities of the group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the

18 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Directors’ Report

improper use by the officers of their position or of information to gain advantage for them or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001. Auditor PricewaterhouseCoopers continues in office in accordance with section 327 of theCorporations Act 2001. Non-audit services The company may decide to employ an auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important. Details of the amounts paid to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out in note 20 of the financial report. The board has considered the position and is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed to ensure they do not impact the impartiality and objectivity of the auditor • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards. In the current year no non-audit services were provided by the auditor. Auditor’s independence declaration A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 20.

This report is made in accordance with a resolution of directors.

Gary F.P. Scanlan Managing director Melbourne 12 March , 2010

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 19 Auditor’s Independence Declaration

PricewaterhouseCoopers ABN 52 780 433 757

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331 MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999 Auditor’s Independence Declaration

As lead auditor for the audit of Castlemaine Goldfields Limited for the year ended 31 December 2009, I declare that to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Castlemaine Goldfields Limited and the entities it controlled during the period.

htimsdloGmiT enruobleM rentraP 0102hcraM21 PricewaterhouseCoopers

Liability limited by a scheme approved under Professional Standards Legislation

20 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Corporate Governance

The board of Castlemaine Goldfields Limited is committed to the highest standards of ethical behaviour and a corporate governance policy framework commensurate with the company’s size and the nature of its operations. The board has adopted several charters and a number of policies which are reviewed and updated on a regular basis and which appear on the company’s web site at www.cgt.net.au as follows: • Board charter • Audit committee charter • Equal opportunity, anti-discrimination, harassment and bullying policy • Code of conduct • Securities trading policy and • ASX continuous disclosure In addition, the company is a member of the Minerals Council of Australia and a signatory to “Enduring Values – the Australian Minerals Industry Framework for Sustainable Development”.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 21 Corporate Governance

ASX CORPORATE GOVERNANCE the results of which are confidentially general meeting of members and must then PRINCIPLES AND summarised and distributed for discussion retire. After providing for the foregoing, one RECOMMENDATIONS and subsequent action by the board. third of the remaining directors (excluding The board has assessed the company’s Day to day management of the group’s the managing director) must retire at each compliance with each particular affairs and the implementation of the annual general meeting of members. recommendation and in accordance with corporate strategy and policy initiatives All directors of the company have direct ASX Listing Rule 4.10.3 reports the extent are formally delegated by the board to access to the management of the company. to which these recommendations have been the managing director and chief executive The duties of a Nomination Committee are followed during the reporting year. officer who is supported by a small team of undertaken by the board as a whole. executives. The exploration and operating The board does not believe that, at its Principle 1 – Lay solid strategy is agreed as part of the annual current size, a Nomination Committee is foundations for management budget and is modified with agreement of necessary. and oversight the board from time to time. The board believes that the company is The principle requires the formulation The performance of the managing director compliant with the intent of Principle 2 and disclosure of the respective roles and chief executive officer is reviewed at but acknowledges that, for the reason and responsibilities of the board and least annually and includes agreement on stated above, it does not comply with management as well as the disclosure key performance measures for the Recommendation 2.4 that the board should of the process for evaluating the following year. establish a Nomination Committee. performance of senior executives. Monthly reporting by the managing director Principle 3 – Promote ethical The board is accountable to shareholders and chief executive officer includes an and responsible decision- for setting goals and policies for the assessment of the company’s performance making operation of the company, overseeing against key risk factors. As a matter of The principle requires that the board management with clear lines of policy all but minor environmental and should actively promote ethical and accountability, reviewing performance safety incidents are immediately reported to responsible decision making. and generally monitoring the affairs of the the chairman. company. The relationship between the The board has adopted a Code of Conduct The board believes that the company is that seeks to set a standard of ethical board and senior management is recognised compliant with Principle 1. behaviour for directors and employees. as being critical to long term success. The code sets out guidelines on a variety The size, absence of complexity and the Principle 2 – Structure the board to add value of matters including, occupational health ownership structure of the company and safety, the environment, drug and The principle requires the company to enables the board to adopt a simple alcohol use, equal opportunity, harassment, have a board of effective composition, structure to manage the company’s confidentiality, personal information and size and commitment to adequately operations. The board comprises three privacy, continuous disclosure, use of discharge its responsibilities and duties. directors, inclusive of the managing company resources and conflict of interest. director. Details of the members of The board comprises three members, The Code of Conduct is posted on the the board, their experience, expertise, a non-executive chairman, managing company’s website (pathway: www.cgt. qualifications and terms of office are set out director and chief executive officer and net.au/About us/Governance/Code of in the director’s report under the heading one other non-executive director. Each conduct). “Information on directors”. The board meets of the directors has a personal financial The board has adopted a Securities on a regular basis to fulfil its responsibilities. interest in the company, the details of Trading Policy for directors, employees and Meetings may be preceded by confidential which are contained in the directors’ report contractors, which is also posted on the meetings of non-executive directors. of this annual report under the heading of company website. At the commencement of each board information on directors. The board believes that the company is meeting directors are required to declare Mr. Ian Goudie, the chairman, and Mr Peter compliant with Principle 3. any conflicts of interest. If necessary, the McCarthy are independent directors. relevant director(s) will abstain from voting Each director has the right to request Principle 4 – Safeguard integrity on matters which are or may be subject to independent professional advice at the in financial reporting conflict. It is the chairman’s responsibility to expense of the company, which request is The principle requires that the company ensure that conflicts are properly disclosed not to be unreasonably withheld. has a structure to independently verify and do not prejudice the exercise of sound The directors’ terms of appointment and safeguard the integrity of the business judgement. are governed by the constitution of the company’s reporting. The board conducts an assessment of its company. A director appointed as a result The chief executive officer of the company performance from time to time. Directors of a casual vacancy, or as an addition to and the chief financial officer, who is complete an agreed questionnaire, the board, only holds office until the next also the company secretary, are required

22 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Corporate Governance

to state in writing to the board that the The external auditor attends the annual superannuation contributions. company’s financial reports present a true general meeting and is available to answer Non-executive directors do not receive and fair view, in all material respects, of the shareholder questions about the conduct performance based remuneration company’s financial condition and operating of the audit and the preparation of and The board believes that the company is results and are in accordance with relevant content of the auditor’s report. compliant with Principle 8, notwithstanding accounting standards. The board believes that the company is that it has not established a remuneration Due to the reduced size of the board, compliant with Principle 6. committee. the role of the audit committee has been Principle 7 – Recognise and assumed by the full board. manage risk The company has put in place a process to The principle requires that the board ensure the independence and competence establish a sound system of risk of the company’s external auditors. oversight and management and internal The audit charter includes the review of any control. non-audit work to ensure that it does not conflict with audit independence. The task of identifying, assessing, In addition the board retains the services monitoring and managing risk is the of an independent chartered accountant to responsibility of management. It is the advise and assist as and when required. responsibility of the board to ensure that The board believes that the company is investors are informed of material changes compliant with the intent of Principle 4 but to the company’s risk profile. acknowledges that it does not comply with Risk management is integrated into all Recommendation 4.1 and 4.2 because of facets of the business and is an integral the present composition of the board. part of decision making. All material risks are identified and objectively assessed Principle 5 – Make timely and against appropriate criteria. Items identified balanced disclosure as key risks are reported on by the The principle requires that the company managing director to the board each month. promote timely and balanced disclosure of all material matters concerning the The board believes that the company is company. compliant with Principle 7. The company has an obligation under ASX Principle 8 – Remunerate fairly Listing rules to ensure that all investors and responsibly have equal and timely access to factual The principle requires that the level material information concerning the and composition of remuneration is company, presented in a clear and balanced sufficient and reasonable and that its way. The company has a Continuous relationship to corporate and individual Disclosure Policy which includes procedures performance is defined. designed to ensure compliance with ASX The board has not established a Listing Rules disclosure requirements. remuneration committee due to the relative The board believes that the company is fully small size of the company. compliant with Principle 5. The constitution of the company provides Principle 6 – Respects the rights that the aggregate remuneration of all of shareholders directors, in their capacity as non-executive The principle requires that the company directors, must not exceed $250,000 per respects the rights of shareholders annum, or such other sum as the company and facilitates the effective exercise of in general meeting may approve. This those rights. amount is to be apportioned amongst the ASX announcements, annual reports, directors in such a manner as the directors quarterly and half yearly reports, corporate agree and in the default of agreement governance policies, presentations to apportioned equally. No additional amounts shareholders and related material are are paid for any committee work. There are available for shareholders and investors on no arrangements currently in place for both the company’s website and its filings payment of retirement benefits to non- on the ASX website. executive directors, other than statutory

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 23 Contents Financial Report Statements of Comprehensive Income 25 Statements of Financial Position 26 Statements of Changes in Equity 28 Cash Flow Statements 30 Notes to the Financial Statements 31 Directors’ Declaration 56 Independent Audit Report to the Members 57 Shareholder Information 59

These financial statements cover both the separate financial statements of Castlemaine Goldfields Limited as an individual entity and the consolidated financial statements for the consolidated entity consisting of Castlemaine Goldfields Limited and its subsidiary (collectively referred to as the group). The financial statements are presented in Australian currency. Castlemaine Goldfields Limited is a company limited by shares, incorporated and domiciled in Australia. The location of its registered office and principle place of business appears in the corporate directory included on the inside front cover of the annual report. A description of the nature of the consolidated entity’s operations and its principal activities is included in the directors’ report which is not part of financial report. The financial statements were authorised for issue by the directors on 12 March 2010. The directors have the power to amend and reissue the financial statements. Through the use of the internet, we have ensured that our reporting is timely and complete. All our ASX announcements, press releases, financial reports and other information are available on our website: www.cgt.net.au. Annual Financial Report 31 December 2009

24 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Statements of Comprehensive Income For the year ended 31 December 2009

Consolidated Parent entity 2009 2008 2009 2008 Notes $ $ $ $ Interest income 60,582 234,071 53,552 219,328 Other income 5 56,750 181,290 56,750 90,381 Interest expense (5,873) (19,578) (5,873) (19,578) Employee benefits expense (249,850) (305,183) (249,850) (305,183) Share-based compensation expense 17 (54,762) (113,796) (54,762) (113,796) Corporate expenses (291,798) (568,475) (291,587) (568,474) Indirect exploration and evaluation expenses (8,208) (25,066) (3,816) (20,368) Exploration and evaluation expenditure expensed 9 (161,633) (125,932) (95,405) (76,167) Provision for doubtful debts 8 (1,992) (23,039) (1,992) (23,039) Provision for loss on exploration and evaluation expenditure loan to subsidiary company 10 - - (61,079) 30,541 Depreciation 11 (63,269) (85,425) (63,269) (85,425) Impairment expense freehold property 11 - (121,007) - (121,007) Loss before income tax (720,053) (972,140) (717,331) (992,787) Income tax expense 6 - - - - Loss for the year (720,053) (972,140) (717,331) (992,787) Loss for the year is attributable to: Owners of Castlemaine Goldfields Limited 17 (718,879) (937,702) (716,157) (958,349) Non-controlling interests 25 (1,174) (34,438) (1,174) (34,438) (720,053) (972,140) (717,331) (992,787)

Loss for the year (720,053) (972,140) (717,331) (992,787) Other comprehensive income Gain on revaluation of freehold land, net of tax 17 - 8,400 - 8,400 Other comprehensive income for the year, net of tax - 8,400 - 8,400 Total comprehensive loss for the year (720,053) (963,740) (717,331) (984,387) Total comprehensive loss for the year is attributable to: Owners of Castlemaine Goldfields Limited (718,879) (929,302) (716,157) (949,949) Non-controlling interests (1,174) (34,438) (1,174) (34,438) (720,053) (963,740) (717,331) (984,387) Earnings per share for loss from continuing operations attributable to the ordinary equity holders of Castlemaine Goldfields Limited Cents Cents Basic (loss) per share 29 (.33) (.63) Diluted (loss) per share 29 (.33) (.63)

The above statements of comprehensive income should be read in conjunction with the accompanying notes.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 25 Statements of Financial Position As at 31 December 2009

Consolidated 2009 2008 2007 Notes $ $ $ ASSETS Current assets Cash and cash equivalents 7 950,270 1,949,802 5,276,879 Other current assets 8 9,724 413,362 66,698 Total current assets 959,994 2,363,164 5,343,577

Non-current assets Exploration and evaluation 9 7,625,896 6,819,327 2,214,495 Other financial assets 10 349,000 349,000 667,124 Property, plant and equipment 11 179,152 437,685 535,617 Total non-current assets 8,154,048 7,606,012 3,417,236

Total assets 9,114,042 9,969,176 8,760,813

LIABILITIES Current liabilities Trade and other payables 13 85,799 405,958 378,096 Commercial bank bill payable 14 - 274,500 - Provision for annual leave 15 103,785 112,092 102,903 Total current liabilities 189,584 792,550 480,999

Non-current liabilities Commercial bank bill payable 14 - - 274,500 Deferred tax liabilities 12 15,000 15,000 11,400 Rehabilitation and preservation provision 15 402,000 402,000 402,000 Total non-current liabilities 417,000 417,000 687,900

Total liabilities 606,584 1,209,550 1,168,899

Net assets 8,507,458 8,759,626 7,591,914

EQUITY Contributed equity 16 17,117,151 16,655,202 14,641,732 Reserves 17 519,292 496,530 379,284 Accumulated losses 17 (9,128,985) (8,442,106) (7,509,354) Capital and reserves attributable to equity holders of Castlemaine Goldfields Limited 8,507,458 8,709,626 7,511,662 Non-controlling interests 25 - 50,000 80,252 Total equity 8,507,458 8,759,626 7,591,914

The above statements of financial position should be read in conjunction with the accompanying notes.

26 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Statements of Financial Position As at 31 December 2009

Parent 2009 2008 2007 Notes $ $ $ ASSETS Current assets Cash and cash equivalents 7 945,094 1,941,269 5,263,948 Other current assets 8 9,046 413,319 66,698 Total current assets 954,140 2,354,588 5,330,646

Non-current assets Exploration and evaluation 9 7,625,895 6,819,326 2,214,495 Other financial assets 10 240,670 235,521 510,125 Property, plant and equipment 11 168,468 427,001 524,933 Total non-current assets 8,035,033 7,481,848 3,249,553

Total assets 8,989,173 9,836,436 8,580,199

LIABILITIES Current liabilities Trade and other payables 13 159,469 474,479 378,096 Commercial bank bill payable 14 - 274,500 - Provision for annual leave 15 103,785 112,092 102,903 Total current liabilities 263,254 861,071 480,999

Non-current liabilities Commercial bank bill payable 14 - - 274,500 Deferred tax liabilities 12 15,000 15,000 11,400 Rehabilitation and preservation provision 15 250,000 250,000 250,000 Total non-current liabilities 265,000 265,000 535,900

Total liabilities 528,254 1,126,071 1,016,899

Net assets 8,460,919 8,710,365 7,563,300

EQUITY Contributed equity 16 17,117,151 16,655,202 14,641,732 Reserves 17 519,292 496,530 379,284 Accumulated losses 17 (9,175,524) (8,491,367) (7,537,968) Capital and reserves attributable to equity holders of Castlemaine Goldfields Limited 8,460,919 8,660,365 7,483,048 Non-controlling interests 25 - 50,000 80,252 Total equity 8,460,919 8,710,365 7,563,300

The above statements of financial position should be read in conjunction with the accompanying notes.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 27 Statements of Changes in Equity For the year ended 31 December 2009

Attributable to owners of Castlemaine Goldfields Limited Contrib- Non- uted Reser- Accum- controlling Total equity ves ulated losses Total interests equity Notes $ $ $ $ $ $ Consolidated Balance at 1 January 2008 14,641,732 379,284 (1,428,978) 13,592,038 520,949 14,112,987 Adjustment on change in accounting policy, net of tax 17 - - (6,080,376) (6,080,376) (440,697) (6,521,073) Restated total equity at the beginning of the financial year 14,641,732 379,284 (7,509,354) 7,511,662 80,252 7,591,914 Total comprehensive income for the year as reported in the 2009 financial statements - 8,400 (937,702) (929,302) (34,438) (963,740) Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 16 2,013,470 - - 2,013,470 - 2,013,470 Share option reserve increase 17 - 113,796 - 113,796 - 113,796 Share option reserve write back 17 - (4,950) 4,950 - - - Cash calls contributed by joint venture partner for exploration and evaluation expenditure 25 - - - - 4,186 4,186 2,013,470 108,846 4,950 2,127,266 4,186 2,131,452 Balance at 31 December 2008 16,655,202 496,530 (8,442,106) 8,709,626 50,000 8,759,626

Total comprehensive income for the year as reported in the 2009 financial statements - - (718,879) (718,879) (1,174) (720,053) Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 16 461,949 - - 461,949 - 461,949 Share option reserve increase 17 - 54,762 - 54,762 - 54,762 Share option reserve write back 17 - (32,000) 32,000 - - - Forfeiture of interest by joint venture partner in freehold property 25 - - - - (50,000) (50,000) Cash calls contributed by joint venture partner for exploration and evaluation expenditure 25 - - - - 1,174 1,174 461,949 22,762 32,000 516,711 (48,826) 467,885 Balance at 31 December 2009 17,117,151 519,292 (9,128,985) 8,507,458 - 8,507,458

The above statements of changes in equity should be read in conjunction with the accompanying notes.

28 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Statements of Changes in Equity For the year ended 31 December 2009

Attributable to owners of Castlemaine Goldfields Limited Contrib- Non- uted Reser- Accum- controlling Total equity ves ulated losses Total interests equity Notes $ $ $ $ $ $ Parent Balance at 1 January 2008 14,641,732 379,284 (1,414,759) 13,606,257 520,949 14,127,206 Adjustment on change in accounting policy, net of tax 17 - - (6,123,209) (6,123,209) (440,697) (6,563,906) Restated total equity at the beginning of the financial year 14,641,732 379,284 (7,537,968) 7,483,048 80,252 7,563,300 Total comprehensive income for the year as reported in the 2009 financial statements - 8,400 (958,349) (949,949) (34,438) (984,387) Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 16 2,013,470 - - 2,013,470 - 2,013,470 Share option reserve increase 17 - 113,796 - 113,796 - 113,796 Share option reserve write back 17 - (4,950) 4,950 - - - Cash calls contributed by joint venture partner for exploration and evaluation expenditure 25 - - - - 4,186 4,186 2,013,470 108,846 4,950 2,127,266 4,186 2,131,452 Balance at 31 December 2008 16,655,202 496,530 (8,491,367) 8,660,365 50,000 8,710,365

Total comprehensive income for the year as reported in the 2009 financial statements - - (716,157) (716,157) (1,174) (717,331) Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 16 461,949 - 461,949 461,949 Share option reserve increase 17 - 54,762 54,762 54,762 Share option reserve write back 17 - (32,000) 32,000 - - Forfeiture of interest by joint venture partner in freehold property 25 - - - - (50,000) (50,000) Cash calls contributed by joint venture partner for exploration and evaluation expenditure 25 - - - - 1,174 1,174 461,949 22,762 32,000 516,711 (48,826) 467,885 Balance at 31 December 2009 17,117,151 519,292 (9,175,524) 8,460,919 - 8,460,919

The above statements of changes in equity should be read in conjunction with the accompanying notes.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 29 Cash Flow Statements For the year ended 31 December 2009

Consolidated Parent Entity 2009 2008 2009 2008 Notes $ $ $ $ Cash flows from operating activities Payments to suppliers and employees (483,168) (910,871) (484,324) (906,173) Interest received 63,136 223,198 62,500 208,499 Interest paid (5,873) (19,971) (5,873) (19,971) Other income 7,014 98,833 7,014 7,925 Net cash outflow due to operating activities 28 (418,891) (608,811) (420,683) (709,720)

Cash flows from investing activities Exploration and evaluation expenditure (1,287,768) (4,704,079) (1,221,540) (4,654,313) Advances (to) from subsidiary company, net - - (61,079) 30,541 Purchases of property, plant and equipment 11 (4,736) (109,621) (4,736) (109,621) Proceeds from the sale of property, plant and equipment 248,740 102,778 248,740 102,778 Security deposits with banks 10 - (25,000) - - Net cash outflow due to investing activities (1,043,764) (4,735,922) (1,038,615) (4,630,615)

Cash flow from financing activities Proceeds from the issue of shares 16 465,000 2,190,418 465,000 2,190,418 Payments in respect of capital raising costs 16 (3,051) (176,948) (3,051) (176,948) Contributions received from joint venture partner 25 1,174 4,186 1,174 4,186 Security deposit for commercial bank bill released 274,500 - 274,500 - Commercial bank bill paid 14 (274,500) - (274,500) - Net cash inflow from financing activities 463,123 2,017,656 463,123 2,017,656

Net increase (decrease) in cash and cash equivalents (999,532) (3,327,077) (996,175) (3,322,679) Cash and cash equivalents at the beginning of financial year 7 1,949,802 5,276,879 1,941,269 5,263,948 Cash and cash equivalents at the end of financial year 7 950,270 1,949,802 945,094 1,941,269

The above cash flow statements should be read in conjunction with the accompanying notes.

30 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Castlemaine Goldfields Limited as an individual entity and the consolidated entity consisting of Castlemaine Goldfields Limited and its subsidiary (collectively referred to as the group). (a) Basis of preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. (i) Compliance with IFRSs The consolidated financial statements of Castlemaine Goldfields Limited and the separate financial statements of Castlemaine Goldfields Limited also comply with International Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Early adoption of standards The company has not elected early adoption of any of the new standards set out in note 1(t) to the annual reporting period beginning 1 January 2009. (iii) Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available for sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment. (iv) Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3. (v) Going concern The consolidated entity has incurred a loss of $720,053 for the year ended 31 December 2009, and had working capital of $770,410 as at that date. The financial statements have been prepared on the basis of going concern which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. As outlined in the directors’ report and in note 26, on 4 March 2010, the company entered into an agreement to acquire the Ballarat Gold Project from Lihir Gold Ltd. The consideration for the purchase of the property, plant, equipment and tenements is $4.5 million in cash, the assumption of rehabilitation bonds of $4.1 million and a royalty capped at $50 million. The purchase is conditional upon shareholders approving the issue of new equity to raise a minimum of $20 million. The ability of the consolidated entity to continue as a going concern and meet its debts and commitments as they fall due is dependent on obtaining additional funding. The company has announced its intention to raise between $20 million and $40 million through placements to institutions and sophisticated investors to fund the acquisition of the Ballarat Gold Project and to carry out exploration, and if successful develop and reopen the mine at Ballarat, continue exploration at existing company projects and for general working capital purposes. The directors will put the necessary resolutions to shareholders at the Annual General Meeting planned for early May 2010. If the company is unable to implement its plans, it could be forced to modify, curtail, or cease operations. As a result of these matters, there is significant uncertainty whether the company will continue as a going concern and therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. However, the directors believe that the company will be successful in the above matters and accordingly have prepared the financial statements on a going concern basis. At this time, the directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is recorded in the financial statements at 31 December 2009. Accordingly, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of the asset carrying amount or the amount and classification of liabilities that might be necessary if the company is unable to continue as a going concern. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of the subsidiary of Castlemaine Goldfields Limited (‘’company’’ or ‘’parent entity’’) as at 31 December 2009 and the results of the subsidiary for the year then ended. Castlemaine Goldfields Limited and its subsidiary together are referred to in this financial report as the group. Subsidiaries are all those entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 31 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies (b) Principles of consolidation (continued) Subsidiaries are fully consolidated from the date on which control is transferred to the economic entity. They are de consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group (refer note 1(f)). Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively. Investments in subsidiaries are accounted for at cost in the individual financial statements of Castlemaine Goldfields Limited. (ii) Joint ventures The economic entity operates an exploration and evaluation venture with another party as an unincorporated joint venture in which it holds a 75% interest and has ultimate control over the activities. Transactions with the joint venture partner are described in the financial statements as transactions with non-controlling interests. The liabilities and other assets of the joint venture activities have been incorporated in the financial statements under the appropriate headings. Details are set out in note 24. Non-controlling interests in jointly incurred exploration and evaluation expenditure, assets and liabilities are recorded as part of equity. (c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the managing director. Change in accounting policy The group has adopted AASB 8 Operating Segments from 1 January 2009. AASB 8 replaces AASB 114 Segment Reporting. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The adoption of this new standard has not resulted in an increase in the number of reportable segments presented. (d) Revenue Revenue is measured at the fair value of the consideration received or receivable. Interest revenue is recognised on a time proportion basis using the effective interest rate method. (e) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Castlemaine Goldfields Limited and its wholly-owned Australian controlled entity have not elected to adopt income tax consolidation.

32 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies (continued) (f) Business combinations The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their fair value as at the acquisition date based on the best available evidence of the price at which the instruments could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the company’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the company’s share of the fair value of the identifiable net assets of the business acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. (g) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. (h) Cash and cash equivalents For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand and in cash management accounts and deposits held at call with banks, which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (i) Other current assets Goods and services tax receivable, and bank and other interest receivable are included in other current assets. (j) Exploration and evaluation expenditure Exploration and evaluation expenditure incurred is accumulated at cost in respect of each identifiable area of interest. Costs incurred in respect of generative, broad scale exploration activities are expensed in the period in which they are incurred. Costs incurred for each area of interest where defined drill-out targets have been identified are capitalised. The costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area, or where further work is to be performed to provide additional information, until activities in the area have reached a stage that permits reasonable assessment of the existence of resources. Accumulated costs in relation to an abandoned area will be written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest will be amortised over the life of the area according to the rate of depletion of the reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Indirect exploration and evaluation expenses are administrative and field support expenses that are not identifiable by or readily allocable to tenements or project areas. Change in accounting policy The capitalisation policy of exploration and evaluation expenditure has been reviewed resulting in the restatement of expenditure capitalised for the 2008 and prior years. Under the policy, capitalisation of expenditure takes effect when specific prospect targets are identified. In accordance with the amended accounting policy expenditure in respect of the Castlemaine project for the 2007, 2008 and 2009 years has been capitalised. This project currently has a JORC code resource of 686,000 ounces of gold. The earlier preliminary expenditure in

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 33 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies (j) Exploration and evaluation expenditure (continued) respect of the Castlemaine project together with all expenditure at Sebastian and Tarnagulla has been expensed resulting in a retrospective write off in the 2007 year to retained earnings of $6,665,642 ($4,620,664 – parent company). Expenditure in respect of the Sebastian and Tarnagulla projects has been expensed in the 2009 and 2008 years, resulting in restatement of the 2008 year. The directors believe this change in accounting policy will make the financial statements more reliable and relevant to the users of the financial statements as exploration and evaluation expenditure is now capitalised on a more definitive basis compared to the previous accounting policy. The impact of change is set out hereunder. Part of the capitalisation related to deferred income tax liability arising on consolidation of the subsidiary company. The adjustments made to the financial statements are summarised in the extracts hereunder: Consolidated 2007 Increase 2007 (decrease) Restated Balance sheet (extract) Note $ $ $ Exploration and evaluation 9 8,880,136 (6,665,641) 2,214,495 Deferred tax liabilities 12 155,969 (144,569) 11,400 Net assets 14,112,987 (6,521,073) 7,591,914

Accumulated losses 17 (1,428,978) (6,080,376) (7,509,354) Non-controlling interests 25 520,949 (440,697) 80,252 Total equity 14,112,987 (6,521,073) 7,591,914

2008 Increase 2008 Statement of comprehensive income (extract) (decrease) Restated Exploration and evaluation expenditure expensed 9 - 125,932 125,932 Loss for the year 846,208 125,932 972,140

Earnings per share Cents Cents Cents Basic loss attributable to the ordinary equity holders of the company .55 .08 .63 Diluted loss attributable to the ordinary equity holders of the company .55 .08 .63

Parent entity 2007 Increase 2007 (decrease) Restated Balance sheet (extract) $ $ $ Exploration and evaluation 9 6,835,159 (4,620,664) 2,214,495 Other financial assets 10 2,453,367 (1,943,242) 510,125 Net assets 14,127,206 (6,563,906) 7,563,300

Accumulated losses 17 (1,414,759) (6,123,209) (7,537,968) Non-controlling interests 15 520,949 (440,697) 80,252 Total equity 14,127,206 (6,563,906) 7,563,300

2008 Increase 2008 Statement of comprehensive income (extract) (decrease) Restated Exploration and evaluation expenditure expensed 9 - 76,167 76,167 Provision for loss on loan to subsidiary company 10 - (30,541) (30,541) Loss for the year 947,161 45,626 992,787

(k) Other financial assets As outlined in note 10, other financial assets include short term deposits to support bank guarantees in favour of the Minister for Energy and Resources. The investment in subsidiary in the separate financial statements of Castlemaine Goldfields Limited is accounted for at cost less a provision for diminution. As recoverability of the investment is uncertain the provision is equal to the purchase cost.

34 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies (k) Other financial assets (continued) Castlemaine Goldfields Limited provides advances to the subsidiary company to finance its exploration and evaluation activities. As the related expenditure has been expensed by the subsidiary the advances are not considered recoverable and have been fully provided for. The impact of this provisioning is set out hereunder. The numbers should be read in conjunction with note 1(j) above.

Parent entity 2007 Increase 2007 (decrease) Restated Balance sheet (extract) Note $ $ $ Shares in subsidiary company at cost 10 862,000 (862,000) - Amount due from subsidiary company 10 1,081,242 (1,081,242) - 1,943,242 (1,943,242) - Other financial assets 2,453,367 (1,943,242) 510,125

(l) Property, plant and equipment Land is stated at directors’ valuation and is revalued when there is a significant difference between the carrying amount and the fair value based on observable market prices of similar properties. Plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the diminishing value basis to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives. The annual depreciation rates are as follows: • Plant and equipment 10 – 25% • Motor vehicles 20% • Office equipment and furniture 25 – 40% The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. (m) Trade and other payables These amounts represent liabilities for goods and services provided to the company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (n) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables and are measured at the amounts expected to be paid when the liabilities are settled. (ii) Long service leave At the date of this report no provision for long service leave has been recognised. A provision will be created as and when employees become entitled to pro-rata payment of long service leave entitlements. The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Share-based payments Share-based compensation benefits are provided to employees, consultants and contractors of Castlemaine Goldfields Limited via its Employees and Contractors Option Plan and other grants of unlisted options approved by the board of directors. The fair value of options granted is recognised as an employee, consultant and contractor benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the recipient becomes unconditionally entitled to the options.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 35 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies (n) Employee benefits (continued) The fair value is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The fair value of options granted is adjusted to reflect market vesting conditions, but excludes the impact of non-market vesting conditions (for example, favourable assay results and increased resource estimates). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises the estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised in each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the statement of comprehensive income with a corresponding adjustment to equity. Where options lapse or expire within the terms and conditions of the option, the credit arising on reversal is taken to accumulated losses. (o) Rehabilitation and preservation provisions Rehabilitation of new exploration sites occurs as each individual site is concluded and the cost is included in the costs of that stage. The estimated costs of future site restoration and heritage preservation associated with previous mining activity are provided for when exploration commences and are included in the costs of that stage. These costs include the dismantling and removal of any plant, equipment and building structures and rehabilitation, where such work is deemed appropriate by the relevant government authorities and the cost of making safe any remaining aspects of the previous mining operation. Any changes in the estimates for the costs are accounted on a prospective basis. Such costs have been determined based on estimates of future costs, current legal requirements and technology. Given the short term nature of the exploration permits the provision is based on the costs being incurred at the expiry of the licence agreements. (p) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds. (q) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date. (r) Earnings per share (i) Basic Earnings per Share Basic earnings per share is calculated by dividing the profit (loss) attributable to the owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted Earnings per Share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. (t) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2009 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below. AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-Settled Share-based Payment Transactions [AASB 2] (effective from 1 January 2010). The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a group share- based payment arrangement must recognise an expense for those goods or services regardless of which entity in the group settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based payment arrangement should be measured, that is, whether it is measured as an equity or a cash-settled transaction. The group will apply these amendments

36 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 1 – Summary of significant accounting policies (t) New accounting standards and interpretations (continued) retrospectively for the financial reporting period commencing on 1 January 2011. There will be no impact on the group’s or the parent entity’s financial statements. AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues [AASB 132] (effective from 1 February 2010). In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation which addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The group will apply the amended standard from 1 January 2011. As the group has not made any such rights issues, the amendment will not have any effect on the group’s or the parent entity’s financial statements. AASB 9 Financial Instruments and AASB 2009-11. Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013). AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The group is yet to assess its full impact. However, initial indications are that it may affect the group’s accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. The group has not yet decided when to adopt AASB 9. Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011). In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies the definition of a related party. The group will apply the amended standard from 1 January 2011. When the amendments are applied, the group and the parent will need to disclose any transactions between its subsidiaries and its associates. However, it has yet to put systems into place to capture the necessary information. It is therefore not possible to disclose the financial impact, if any, of the amendment on the related party disclosures. AASB Interpretation 19 Extinguishing financial liabilities with equity instruments and AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19 (effective from 1 January 2011). AASB Interpretation 19 clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor (debt for equity swap). It requires a gain or loss to be recognised in profit or loss which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. The group will apply the interpretation from 1 January 2011. It is not expected to have any impact on the group or the parent entity’s financial statements since it is only retrospectively applied from the beginning of the earliest period presented (1 January 2010) and the group has not entered into any debt for equity swaps since that date. AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement (effective from 1 January 2011). In December 2009 the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The amendment removes an unintended consequence of the interpretation related to voluntary prepayments when there is a minimum funding requirement in regard to the entity’s defined benefit scheme. It permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding requirements. The group does not make any such prepayments. The amendment is therefore not expected to have any impact on the group’s or the parent entity’s financial statements. The group intends to apply the amendment from 1 January 2011. Note 2 – Financial risk management Risk management is carried out by the managing director and chief executive officer in consultation with the chief financial officer within the policy parameters set by the board. The exploration activities are being funded by equity and do not expose the group to significant financial risks. There are no speculative or financial derivative instruments. Financial assets include cash balances, receivables and security deposits with banks. Cash balances have a modest interest rate exposure. Funds are invested with domestic banks for various short term periods to match forecast cash flow requirements. Financial liabilities include trade and other creditors. Security deposits with banks of $349,000, classified as non-current assets comprise term bank deposits to secure bank guarantees in favour of the Minister for Energy and Resources equivalent in value to amounts prescribed as rehabilitation bonds.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 37 Notes to the Financial Statements 31 December 2009

Note 2 – Financial risk management (continued) Set out below is a table summarising the group’s and parent entity’s financial assets and financial liabilities. Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Financial assets Cash and cash equivalents 950,270 1,949,802 945,094 1,941,269 Goods and services tax receivable 6,717 80,292 6,717 80,292 Bank interest receivable 1,912 6,458 1,234 6,415 Security deposit to secure bank bill payable - 274,500 - 274,500 Secured loan to joint venture partner - 50,000 - 50,000 Security deposits with banks (non-current) 349,000 349,000 167,000 167,000 1,307,899 2,710,052 1,120,045 2,519,476 Financial liabilities Trade and other payables 85,799 405,958 85,799 405,958 Commercial bank bill payable - 274,500 - 274,500 85,799 680,458 85,799 680,458

The aggregate net fair values and carrying amounts of financial assets and liabilities are disclosed in the balance sheet and in the notes to the accounts. (a) Market risk The group does not have any foreign exchange risk but has minimal interest rate risk arising from its cash and security deposits. If at 31 December 2009, interest rates had changed from +/- 50 bases points from actual rates with all other variables held constant, the post tax loss for the year would have been $6,497 lower/higher (2008: $12,867 lower/higher). (b) Credit risk The group uses two major national banks. Currently, deposit funds are with one bank, whilst security deposits are held with both banks. When the group has significant funds on hand it looks to spread deposit risks with a number of banks. As set out in note 8 the secured loan to the Sebastian joint venture partner of $50,000 as at 31 December 2008, net of a provision for doubtful debts was derecognised during the year, resulting in a corresponding decrease of the same amount in non-controlling interests, because the debt was not repaid on the due date in August 2009. (c) Liquidity risk The group has cash and bank deposits of $950,270, $935, 616 of which is at call in a cash management account. Security deposits with banks are held in addition to this amount. Security deposits with banks of $349,000 that secure bank guarantees in favour of the Minister for Energy and Resources cannot be liquidated until the related exploration or mining licences are satisfactorily surrendered. Recoverability of the amount due from the wholly owned subsidiary company is dependent upon the successful development of its exploration projects. (d) Equity risk As the group has no operating income it is dependent upon equity raisings to finance its exploration and evaluation activities and administrative overheads. Exploration and evaluation activities are largely project driven and form the basis of equity raisings which generally are in the form of share placements or rights issues to existing shareholders. While in the past shareholders have generally been supportive, the ability of the group to successfully raise additional equity is dependent on the group’s exploration prospects and results thereof, the state of equity markets and the market outlook for gold. (e) Fair value estimation The fair value of the financial assets and financial liabilities is or is approximately the carrying amounts set out in the balance sheet and as summarised in the above table.

38 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 3 – Critical accounting estimates and judgments The directors evaluations, estimates and judgments incorporated into the financial report are based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Exploration and evaluation expenditure has been carried forward in accordance with policy note 1(j) on the basis that exploration and evaluation activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable resources and active and significant operations in relation to the area are continuing. In the event that significant operations cease and/or economically recoverable resources are not assessed as being present, this expenditure will be expensed to the statement of comprehensive income. As set out in note 1(o) provision has been made for rehabilitation and preservation of previous mining sites. The provision is based upon directors’ estimates of the future cost of restoration and heritage preservation. Note 4 – Segment information The economic entity operates in one business area within one geographical location, namely exploration for gold in central Victoria. Management has determined and presented operating segments based on the reports reviewed by the managing director, who is the group’s chief operating decision maker in terms of allocating resources and assessing performance. The group has one reportable segment, being the exploration, evaluation and development of gold in central Victoria. The managing director allocates resources and assesses performance, in terms of expenses incurred and assets employed, on a consolidated basis. Information is presented to the managing director in a manner consistent with the presentation in these financial statements. Note 5 – Other income Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Net gain on disposal of property, plant and equipment 48,740 89,657 48,740 89,657 Fees received from Tarnagulla joint venture partner - 90,909 - - Sundry income 8,010 724 8,010 724 56,750 181,290 56,750 90,381

Note 6 – Income tax expense

Consolidated Parent Entity 2009 2008 2009 2008 Restated Restated $ $ $ $ (a) Numerical reconciliation of income tax expense to prima facie tax payable Loss from operations before income tax expense (*) (720,053) (972,140) (717,331) (992,787)

Tax benefit at the Australian tax rate of 30% (2008 - 30%) 216,016 291,642 215,199 297,836 Tax effect of amounts which are not assessable (deductible) taxable in calculating taxable income: Share-based compensation options expenses (16,429) (34,139) (16,429) (34,139) Provision for loss intercompany loan - - (18,324) 9,162 Impairment expense - (36,302) - (36,302) 199,587 221,201 180,446 236,557 Tax benefit for allowance for share issue expenses included in equity 915 80,576 915 80,576 Future tax benefit in respect to tax losses not recognised (200,502) (301,777) (181,361) (317,133) Income tax expense - - - -

(b) Amounts recognised directly in equity - 3,600 - 3,600 - 3,600 - 3,600

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 39 Notes to the Financial Statements 31 December 2009

Note 6 – Income tax expense (continued) Consolidated Parent Entity 2009 2008 2009 2008 Restated Restated $ $ $ $ (c) Tax losses Unused tax losses not recognised in note 12 and for which no deferred tax asset has been recognized 9,434,639 8,465,622 8,211,916 7,307,362 Potential tax benefit @ 30% 2,830,392 2,539,687 2,463,575 2,192,209 The future income tax benefit attributable to these losses has not been brought to account because the benefit is not reasonably certain of realisation. The potential future income tax benefits which may arise from these losses will only be realised if: • The group derives future assessable income of a nature and sufficient amount to enable the benefit of the losses to be realised; • The group continues to comply with the conditions of deductibility imposed by the law; and • No changes in tax legislation adversely affect the group in realising the benefit from the deduction for the losses. The group has not elected to implement income tax consolidation legislation. (*) Loss from operations before income tax expense has been restated as a result of the change in accounting policy described in note 1(j). Note 7 – Current assets - Cash and cash equivalents Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Cash at bank and in hand 14,654 54,852 9,478 46,319 Short-term bank deposits 935,616 1,894,950 935,616 1,894,950 Balance per statement of cashflows 950,270 1,949,802 945,094 1,941,269 (a) Cash at bank and in hand Cash at bank and in hand includes working cash balances in cheque and cash management accounts. (b) Short-term bank deposits $935,616 (2008 - $1,394,950) is at call in a cash management account at an effective annual interest rate of 4.00%. In 2008 an additional amount of $500,000 was on short term deposit. (c) Interest risk exposure Equity raisings are used to finance exploration and evaluation expenditure, and as set out in note 2 cash balances are invested for short terms with banks with minimal interest rate risk. Note 8 – Current assets - Other Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Goods, and services tax receivable 6,717 80,292 6,717 80,292 Sundry debtor and prepayments 1,095 2,112 1,095 2,112 Bank interest receivable 1,912 6,458 1,234 6,415 Interest due from joint venture partner 6,406 4,414 6,406 4,414 Less provision for doubtful debts (6,406) (4,414) (6,406) (4,414) - - - - Security deposit with bank - 274,500 - 274,500 Loan to joint venture partner, secured - 68,625 - 68,625 Less provision for doubtful debt (note 2) - (18,625) - (18,625) - 50,000 - 50,000 9,724 413,362 9,046 413,319

40 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 8 – Current assets - Other (continued) The secured loan to the Sebastian joint venture partner of $50,000 as at 31 December 2008, net of a provision for doubtful debts was derecognised during the year, resulting in a corresponding decrease of the same amount in minority interest. The original loan of $68,625 to the joint venture partner formed part of a two year financing arrangement to enable the joint venture to purchase the freehold property The company borrowed $274,500 under a commercial bank bill payable secured by a bank security deposit of the same amount. In August 2009 the security deposit was used to pay out the commercial bank bill payable on the due date. In accordance with the joint venture agreement the joint venture partner’s failure to repay the loan and associated interest resulted in the property ceasing to be a joint venture asset. The joint venture partner forfeited its interest in the property and the property has since been sold.

Note 9 – Non-current assets - Exploration and evaluation Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Expenditure brought forward at the beginning of the year 6,819,327 2,214,495 6,819,326 2,214,495 Expenditure during the year 968,202 4,730,764 901,974 4,680,998 Expenditure written off (161,633) (125,932) (95,405) (76,167) Expenditure carried forward at the end of the year 7,625,896 6,819,327 7,625,895 6,819,326

Exploration and evaluation expenditure relates to the economic entity’s gold exploration projects at Castlemaine, Sebastian and Tarnagulla. EL3105, part of the Sebastian project, is the subject of a joint venture agreement, the details of which are set out in note 24. The Tarnagulla project is owned by wholly owned subsidiary company, Ironbark Mining Pty Ltd. EL5113 with project to date expenditure of $4,050 which formed part of the Tarnagulla project area was surrendered during the year. Tenement details for each project are set out in the annual report. Details of the change in the capitalisation policy and restatement are set out in note 1(j).

Note 10 – Non-current assets - Other financial assets Consolidated Parent Entity 2009 2008 2009 2008 Note $ $ $ $ Security deposits with banks (a) 349,000 349,000 167,000 167,000 Shares in subsidiary company at cost (b) - - 862,000 862,000 Provision for diminution (862,000) (862,000) - - Amount due from subsidiary company (c) - - 1,185,450 1,119,222 Provision for loss (1,111,780) (1,050,701) - - 73,670 68,521 349,000 349,000 240,670 235,521

(a) Security deposits with banks are term bank deposits to secure bank guarantees in favour of the Minister for Energy and Resources equivalent in value to amounts prescribed as rehabilitation bonds. The deposits are for periods of up to four months earning an effective annual interest of approximately 4.00%. The term of future investment periods will take into account relative interest rates. (b) Shares in the subsidiary company at cost is the parent entity’s interest in its subsidiary as described in note 1(k). A provision for diminution equating to the investment has been made in recognition that all exploration and evaluation expenditure to date has been expensedf. The provision, retrospectively created as at December 2007, follows the review and change in the exploration and evaluation capitalisation policy as outlined in note 1(j). (c) The amount due from the subsidiary company relates to advances made to finance exploration and evaluation expenditure. As the related expenditure has been expensed by the subsidiary company the amount due has been provided for as non recoverable to the extent of amounts owed to the subsidiary as per note 13. Details of the restatement are set out in note 1(k). (d) Note 2 sets out an assessment of the risk management issues relating to these financial assets.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 41 Notes to the Financial Statements 31 December 2009

Note 11 – Non-current assets - Property, plant and equipment Freehold Plant Motor Office Total land and vehicles equipment equipment $ $ $ $ $ Consolidated At 1 January 2008 Cost 331,692 1,006,812 64,672 122,610 1,525,786 Revaluation surplus 37,999 - - - 37,999 Accumulated depreciation - (935,733) (19,585) (72,850) (1,028,168) Net book amount 369,691 71,079 45,087 49,760 535,617

Year ended 31 December 2008 Opening net book amount 369,691 71,079 45,087 49,760 535,617 Additions - 81,321 - 28,300 109,621 Disposals - - (13,121) - (13,121) Revaluation surplus 12,000 - - - 12,000 Impairment loss (121,007) - - - (121,007) Depreciation charge - (46,204) (6,842) (32,379) (85,425) Closing net book amount 260,684 106,196 25,124 45,681 437,685

At 31 December 2008 Cost 331,692 847,433 39,570 150,910 1,369,605 Revaluation surplus 49,999 - - - 49,999 Impairment loss (121,007) - - - (121,007) Accumulated depreciation - (741,237) (14,446) (105,229) (860,912) Net book amount 260,684 106,196 25,124 45,681 437,685

Year ended 31 December 2009 Opening net book amount 260,684 106,196 25,124 45,681 437,685 Additions - - - 4,736 4,736 Disposals (200,000) - - - (200,000) Depreciation charge - (39,719) (4,710) (18,840) (63,269) Closing net book amount 60,684 66,477 20,414 31,577 179,152

At 31 December 2009 Cost 10,685 822,433 39,570 148,047 1,020,735 Revaluation surplus 49,999 - - - 49,999 Accumulated depreciation - (755,956) (19,156) (116,470) (891,582) Net book amount 60,684 66,477 20,414 31,577 179,152

Land is carried at directors’ valuation and was last revalued at 31 December 2008. As at 31 December 2009 there was no significant difference between the carrying value and the approximate fair value. If the company had not revalued land, the carrying amount as at 31 December 2009 would have been $10,685 (2008 - $210,685). The impairment loss of $121,007 in 2008 resulted from the write down of a property held by the Sebastian joint venture. The revaluation of land relates to a block of land at Chewton.

42 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 11 – Non-current assets - Property, plant and equipment (continued) Freehold Plant Motor Office Total land and vehicles equipment equipment $ $ $ $ $ Parent entity At 1 January 2008 Cost 321,008 977,351 64,672 122,610 1,485,641 Revaluation surplus 37,999 - - - 37,999 Accumulated depreciation - (906,272) (19,585) (72,850) (998,707) Net book amount 359,007 71,079 45,087 49,760 524,933

Year ended 31 December 2008 Opening net book amount 359,007 71,079 45,087 49,760 524,933 Additions - 81,321 - 28,300 109,621 Disposals - - (13,121) - (13,121) Revaluation surplus 12,000 - - - 12,000 Impairment loss, net (121,007) - - - (121,007) Depreciation charge - (46,204) (6,842) (32,379) (85,425) Closing net book amount 250,000 106,196 25,124 45,681 427,001

At 31 December 2008 Cost 321,008 817,972 39,570 150,910 1,329,460 Revaluation surplus 49,999 - - - 49,999 Impairment loss, net (121,007) - - - (121,007) Accumulated depreciation - (711,776) (14,446) (105,229) (831,451) Net book amount 250,000 106,196 25,124 45,681 427,001

Year ended 31 December 2009 Opening net book amount 250,000 106,196 25,124 45,681 427,001 Additions - - - 4,736 4,736 Disposals (200,000) - - - (200,000) Depreciation charge - (39,719) (4,710) (18,840) (63,269) Closing net book amount 50,000 66,477 20,414 31,577 168,468

At 31 December 2009 Cost 1 792,972 39,570 148,047 980,590 Revaluation surplus 49,999 - - - 49,999 Accumulated depreciation - (726,495) (19,156) (116,470) (862,121) Net book amount 50,000 66,477 20,414 31,577 168,468

Details of the impairment loss are set out on the previous page, and details of the revaluation surplus are set out in note 17.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 43 Notes to the Financial Statements 31 December 2009

Note 12 – Deferred tax balances Consolidated Parent Entity 2009 2008 2009 2008 Restated Restated $ $ $ $ (a) Non-current assets - Deferred tax assets The balance comprises temporary differences attributable to: Rehabilitation and preservation provision 75,000 75,000 75,000 75,000 Employee benefits – annual leave 31,135 33,628 31,135 33,628 Other provisions 7,967 16,611 7,967 16,611 Tax losses recognised (*) 2,173,427 1,922,720 2,173,427 1,922,720 Set – off of deferred tax balances (2,287,529) (2,047,959) (2,287,529) (2,047,959) - - - - (*) The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences. Movements: Opening balance 1 January - - - - Tax losses recognised 250,706 1,372,544 250,706 1,372,544 Employee benefits – annual leave (2,492) 2,757 (2,492) 2,757 Other provisions (8,645) 6,204 (8,645) 6,204 Set – off of deferred tax balances (239,569) (1,381,505) (239,569) (1,381,505) Closing balance 31 December - - - - (b) Non-current liabilities – Deferred tax liabilities The balance comprises temporary differences attributable to: Exploration and evaluation 2,287,769 2,045,798 2,287,769 2,045,798 Depreciation (240) 2,161 (240) 2,161 Asset revaluation reserve 15,000 15,000 15,000 15,000 Set – off of deferred tax balances (2,287,529) (2,047,959) (2,287,529) (2,047,959) 15,000 15,000 15,000 15,000 Movements: Opening balance 1 January 15,000 11,400 15,000 11,400 Exploration and evaluation 241,970 1,381,450 241,971 1,381,450 Depreciation (2,401) 55 (2,401) 55 Asset revaluation reserve - 3,600 - 3,600 Set – off of deferred tax balances (239,569) (1,381,505) (239,569) (1,381,505) 15,000 15,000 15,000 15,000

Deferred tax liabilities to be settled after more than 12 months 15,000 15,000 15,000 15,000

Net deferred tax liability balance 15,000 15,000 15,000 15,000

All movements in deferred tax balances, except for movement in the deferred tax balance attributable to the asset revaluation reserve which has been credited to equity, have been charged or credited through the profit and loss. Refer note 1(j) for the changes in the opening balances as a result of the change in accounting policy for exploration and evaluation expenditure.

44 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 13 – Current liabilities - Trade and other payables Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Trade payables 27,014 324,859 27,014 324,859 Other payables 58,785 81,099 58,785 81,099 Amount due to subsidiary company - - 73,670 68,521 85,799 405,958 159,469 474,479 The amount due to the subsidiary company represents advances by the subsidiary from receipts of bank interest and other income less sundry expenses. Amounts due by the subsidiary for exploration and evaluation works are set out in note 10.

Note 14 – Current liability – Commercial bill payable Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Commercial bank bill payable - 274,500 - 274,500 - 274,500 - 274,500 The commercial bank bill was repaid from the proceeds of a related bank security deposit in August 2009.

Note 15 – Provisions Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Current liability Provision for annual leave 103,785 112,092 103,785 112,092

Non current liability Provision for rehabilitation and preservation 402,000 402,000 250,000 250,000 505,785 514,092 353,785 362,092

The provision for rehabilitation and preservation is to cover the likely costs of land rehabilitation and preservation as a result of past mining activities at Castlemaine and Tarnagulla. There were no movements during the year.

Note 16 – Contributed equity Parent Entity Parent Entity 2009 2008 2009 2008 Shares Shares $ $ (a) Share capital Ordinary shares, fully paid 230,666,814 219,041,814 17,117,151 16,655,202

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 45 Notes to the Financial Statements 31 December 2009

Note 16 – Contributed equity (continued) (b) Movements in ordinary share capital Date Details Number of Issue shares Price Cents $ 1 January 2008 Balance 146,027,876 14,641,732 17 December 2008 Non-renounceable rights issue 48,343,621 3 1,450,309 19 December 2008 Non-renounceable rights issue, underwritten shortfall 24,670,317 3 740,109 Less: Transaction costs arising on share issue - (176,948) Net contributions of equity 73,013,938 2,013,470 31 December 2008 Balance 219,041,814 16,655,202 1 December 2009 Placement (i) 11,625,000 4 465,000 Less: Transaction costs arising on share issue (ii) - (3,051) Net contributions of equity 11,625,000 461,949 31 December 2009 Balance 230,666,814 17,117,151

(i) In December 2009 the company made a share placement to three existing shareholders for the purpose of maintaining an adequate cash balance while project evaluations continue. (ii) The cost of the share placement has been offset against equity. (c) Ordinary shares Castlemaine Goldfields Limited, formerly Alexander Resources Limited listed on the ASX on 3 March 2005. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (d) Unlisted options Unlisted options to acquire ordinary shares have been granted to directors, staff and contractors and consultants. No voting or other rights are attached to the options. 8,050,000 (2008 – 8,550,000) of the options are current of which 7,225,000 (2008 – 4,750,000) have vested. 500,000 (2008 – nil) expired during the year. Details are set out in note 30. (e) Capital risk management The company’s equity management is determined by funds required to undertake exploration activities and meet its corporate and other costs. Where joint venture partners participate in particular projects, the partners contribute monthly cash calls in proportion to their respective interests.

Note 17 – Reserves and accumulated losses Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ (a) Reserves Property, plant and equipment revaluation reserve 34,999 34,999 34,999 34,999 Share option reserve 484,293 461,531 484,293 461,531 Balance 31 December 519,292 496,530 519,292 496,530

Property, plant and equipment revaluation reserve Balance 1 January 34,999 26,599 34,999 26,599 Freehold land revaluation - 8,400 - 8,400 Balance 31 December 34,999 34,999 34,999 34,999

46 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 17 – Reserves and accumulated losses (a) Reserves (continued) The revaluation reserve relates to a block of freehold land which was acquired for one dollar under a call option at the time the company became publicly listed. The directors have revalued the land to its fair value, resulting in a revaluation surplus to date of $34,999 net of income tax of $15,000. Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Share option reserve Balance 1 January 461,531 352,685 461,531 352,685 Option costs accrued including those under the Employees’ and Contractors’ Option Plan 54,762 113,796 54,762 113,796 Reversal of options reserve - expired and lapsed unlisted options (32,000) (4,950) (32,000) (4,950) Balance 31 December 484,293 461,531 484,293 461,531

(b) Accumulated losses Consolidated Parent Entity 2009 2008 2009 2008 Restated Restated $ $ $ $ Balance 1 January (8,442,106) (7,509,354) (8,491,367) (7,537,968) Loss for the year (718,879) (937,702) (716,157) (958,349) Items of other comprehensive income recognised directly in accumulated losses - - - - Reversal of options reserve – expired and lapsed unlisted options 32,000 4,950 32,000 4,950 Balance 31 December (9,128,985) (8,442,106) (9,175,524) (8,491,367)

Accumulated losses – opening reconciliation at 1 January 2008 The reconciliation below summarises the accounting adjustments made to accumulated losses as at 31 December 2007. As outlined in notes 1 (j) and 9 the group has changed its accounting policy in regard to capitalisation of exploration and evaluation expenditure. The policy change results the restatement of opening accumulated losses as at 1 January 2008. As capitalised exploration and evaluation expenditure incurred by the subsidiary company, Ironbark Mining Pty Ltd has been expensed as at 31 December 2007, provisions have been made for losses of the investment and of the advances made to fund the exploration and evaluation expenditure as at the same date.

Consolidated Parent Entity $ $ As reported 31 December 2007 (1,428,978) (1,414,759) Adjustments due to change in accounting policy Write off of capitalised exploration and evaluation (6,665,642) (4,620,664) Write back of non-controlling interests relating to capitalised exploration and evaluation expenditure now expensed 440,697 440,697 Write back of deferred income tax liability relating capitalised exploration and evaluation expenditure acquired as part of the acquisition of Ironbark Mining Pty Ltd 144,569 - Provision for diminution – investment in Ironbark Mining Pty Ltd - (862,000) Provision for loss on advances to Ironbark Mining Pty Ltd - (1,081,242) As adjusted 31 December 2007 (7,509,354) (7,537,968)

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 47 Notes to the Financial Statements 31 December 2009

Note 17 – Reserves and accumulated losses (continued) (c) Nature and purpose of reserves (i) Property, plant and equipment revaluation reserve The property, plant and equipment reserve is used to record increments and decrements on the revaluation of non-current assets as described in note 1(l). The balance standing to the credit of the reserves may only be used to satisfy the distribution of bonus shares to shareholders and is only available to pay cash dividends in limited circumstances as permitted by Australian law. (ii) Share option reserve The share option reserve is used to recognise the fair value of options issued to purchase shares in the company. The reserve is relieved when shares are issued or when options expire or lapse. Currently the reserve covers the cost of unlisted options issued to employees, contractors and consultants. Note 18 – Dividends No dividends have been paid or are payable. Note 19 – Key management personnel disclosures (a) Directors The following persons were directors of the parent entity during the financial year: John C. Goudie Non-executive chairman Gary F. P. Scanlan Managing director and chief executive officer Peter L. McCarthy Non-executive director Robert H.R. Adamson Non-executive director, resigned 14 January 2009 (b) Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the goup, directly or indirectly, during the financial year. Wessley B. Edgar Exploration manager Oliver A. Halliwell Administration manager John W. Jennings Chief financial officer and company secretary (c) Key management personnel and directors compensation Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Short-term employment benefits 547,833 713,718 547,833 713,718 Post-employment benefits 45,439 55,235 45,439 55,235 Share-based payments 50,411 106,887 50,411 106,887 643,683 875,840 643,683 875,840 Detailed remuneration disclosures are provided in sections A to C of the remuneration report which forms part of the accompanying directors’ report. (d) Equity instrument disclosures relating to key management personnel (i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in sections D and E of the remuneration report which forms part of the accompanying directors’ report. (ii) Option holdings The numbers of unlisted options over shares in the company held during the financial year by each director of Castlemaine Goldfields Limited and other key management personnel of the group including their personally related parties, are set out below.

48 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 19 – Key management personnel disclosures (d) Equity instrument disclosures relating to key management personnel (continued)

Name Balance Movements during year Balance Vested and Unvested start of Granted Exercised Expired end exerciseable year of year 2009 Chairman - non-executive director John C. Goudie 1,400,000 - - - 1,400,000 1,400,000 - Managing director and chief executive officer Gary F. P. Scanlan 5,000,000 - - (500,000) 4,500,000 4,500,000 - Other key management personnel Wessley B. Edgar 1,500,000 - - - 1,500,000 875,000 625,000 John W. Jennings 50,000 - - - 50,000 50,000 -

2008 Chairman - non-executive director John C. Goudie 1,400,000 - - - 1,400,000 1,400,000 - Managing director and chief executive officer Gary F. P. Scanlan 3,000,000 2,000,000 - - 5,000,000 2,500,000 2,500,000 Other key management personnel Wessley B. Edgar 1,500,000 - - - 1,500,000 500,000 1,000,000 John W. Jennings 50,000 - - - 50,000 50,000 - (iii) Share holdings The number of shares in the company held during the financial year by each director of the company and other key management personnel of the group, including their personally related parties, are set out below. There were no shares granted during the year as compensation.

2009 Balance start of Movements Balance end of year year Name Purchases Other changes Non-executive directors John C. Goudie 2,575,800 - - 2,575,800 Robert H.R. Adamson 35,885,974 - (35,885,974) - Peter L. McCarthy 1,600,000 - - 1,600,000 Managing director and chief executive officer Gary F. P. Scanlan 2,613,612 49,000 - 2,662,612 Other key management personnel Wessley B. Edgar 399,999 - - 399,999 Robert H.R. Adamson resigned as a director during the year. No purchases or movements are the result of the exercise of options.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 49 Notes to the Financial Statements 31 December 2009

Note 19 – Key management personnel disclosures (d) Equity instrument disclosures relating to key management personnel (continued)

2008 Balance start of Movements Balance end of Name year Purchases Other changes year Non-executive directors John C. Goudie 362,200 2,213,600 - 2,575,800 Robert H.R. Adamson 20,233,788 15,652,186 - 35,885,974 Pieter W. Greeff 148,412 - (148,412) - Peter L. McCarthy 1,000,000 600,000 - 1,600,000 Managing director and chief executive officer Gary F. P. Scanlan 682,408 1,931,204 - 2,613,612 Other key management personnel Wessley B. Edgar 209,152 190,847 - 399,999 Pieter W. Greeff resigned as a director during the year. No purchases or movements are the result of the exercise of options. (e) Loans to key management personnel No loans were made to or are payable by management personnel. (f) Other transactions with key management personnel Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Rental accommodation costs included in corporate expenses - 13,200 - 13,200 In 2008 rental accommodation costs, on an arm’s length basis, were paid to an entity in which managing director and chief executive officer, Gary F. P. Scanlan held a financial interest. There were no other transactions with key management personnel. Note 20 – Remuneration of the auditors During the year the following fees were paid or are payable for services provided by the auditor: The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the economic entity are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit services provided during the year are set out below. No non-audit services were provided during the year.

Consolidated 2009 2008 $ $ Audit services Audit and review of financial reports and other audit work under the Corporations Act 2001 26,000 26,500 Total remuneration audit services 26,000 26,500

Note 21 – Commitments (a) Exploration and mining expenditure requirements The group holds exploration and mining licences that have annual minimum expenditure obligations. Variation to these tenement obligations can be negotiated where circumstances allow. The terms and conditions attached to the licences are subject to variation upon renewal. The individual licence periods range from one to five years. Generally, application is made to renew the licences at renewal date throughout the entire life of the related exploration project. The licences have an annual expenditure requirement of approximately $755,000. Total required future expenditure for all licences currently held is approximately $1,032,000, none of which relate to periods beyond five years. (b) Capital commitments The economic entity had capital commitments of $Nil at 31 December 2009 (2008 - $36,600). As set out in note 26 additional commitments have arisen since 31 December 2009 as the result of the company entering into a purchase contract to acquire the assets of the Ballarat Gold Project.

50 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 22 – Related party transactions (a) Parent entity The parent entity within the group is Castlemaine Goldfields Limited. (b) Subsidiary Interest in the subsidiary is set out in note 23. (c) Key management personnel Disclosures relating to key management personnel are set out in note 19(c). (d) Transactions with related parties Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Exploration expenditure incurred on behalf of subsidiary - - 66,228 49,766 Other transactions, net of payments made by subsidiary to parent entity - - (5,149) (80,307) Amount due from subsidiary (i) - - 1,185,450 1,119,222 Amount due to subsidiary (i) - - 73,670 68,521 Underwriting and associated management fees included in transaction costs arising on share issue (ii) - 109,521 - 109,521 (i) Net amount fully provided for as non recoverable. (ii) In 2008 underwriting and associated management fees were paid to RFC Corporate Finance Limited, a company in which former director, Robert H. R. Adamson held a financial interest. Note 23 – Subsidiary The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 1(a):

Country Percentage Owned (%) of Incorporation 2009 2008 Ironbark Mining Pty Ltd Australia 100 100 On 1 April 2005 the parent entity acquired 100% of the shares in Ironbark Mining Pty Ltd which owns the exploration and mining licences for the Tarnagulla project. The related exploration and evaluation expenditure is incurred and accounted for in the accounts of Ironbark Mining Pty Ltd in accordance with the accounting policy set out in note 1(j). Note 24 – Interests in joint ventures Sebastian joint venture The group holds a 75% interest in the unincorporated Sebastian joint venture, covering EL3105. As set out in note 9 all exploration and evaluation expenditure to date has been expensed. Accordingly, the non-controlling interest which is accounted for in the balance sheet is nil. Cash calls received from the joint venture partner, 25% of all exploration and development expenditure, are credited directly to equity and are offset against the related losses attributable to non-controlling interests. Further details of the joint venture accounting policy are set out in note 1(b). In addition, the joint venture owned a freehold property which was sold during the year. In the prior year the joint venture partner’s $50,000 share of the property was shown as “non-contolling interests” as part of “equity”. As set out in note 8 the secured loan to the Sebastian joint venture partner of $50,000 as at 31 December 2008, net of a provision for doubtful debts was derecognised during the year, resulting in a corresponding decrease of the same amount in non-controlling interests, because the debt was not repaid on the due date in August 2009 and the joint venture partner forfeited its interest in the Sebastian property. At that time the property ceased to be part of the joint venture and has since been sold.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 51 Notes to the Financial Statements 31 December 2009

Note 24 – Interests in joint ventures Sebastian joint venture (continued) The interests of the economic entity in the joint venture is as follows:

Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ The economic entity’s interest in assets employed are included in the Balance Sheet as follows: Freehold land and buildings - 321,007 - 321,007 Less impairment write down (refer note 10) - (121,007) - (121,007) Less non-controlling interests - (50,000) - (50,000) Interest held - 150,000 - 150,000 Tarnagulla joint venture The Tarnagulla joint venture lapsed in November 2009. The joint venture was formed in August 2008 by wholly owned subsidiary Ironbark Mining Pty Ltd with Reef Gold Mines Limited. Under the agreement Reef Gold Mines Limited was required to spend qualifying exploration expenditure of $2m within 15 months to earn a 20% interest in the project. No significant expenditure was incurred by Reef Gold Mines Limited during the qualifying period. The project comprised ML 4756 and ELs 3640, 4992, 4214, 4541, 4542, and EL5113 until its surrender in February 2009. Note 25 – Non-controlling interests - Sebastian joint venture Consolidated Parent Entity 2009 2008 2009 2008 Restated Restated $ $ $ $ Exploration and evaluation Cash calls received and offset against related joint venture exploration and evaluation expenditure Cash received during the year 1,174 4,186 1,174 4,186 Share of related exploration and evaluation expenditure included in loss for the year (1,174) (4,186) (1,174) (4,186) Closing balance - - - - Joint venture interests in freehold property Opening balance 50,000 80,252 50,000 80,252 Forfeiture of joint venture partner’s non-controlling interest following sale of freehold property (50,000) - (50,000) - Provision for impairment loss - (30,252) - (30,252) Closing balance - 50,000 - 50,000 The restatement of the December 2008 balance is set out in notes 1(j) and 17(b). The forfeiture of the joint venture partner’s non-controlling interest in the joint venture property is explained in notes 2, 8 and 24. Note 26 – Events occurring after balance sheet date On 4 March 2010, the company entered into an agreement to acquire the Ballarat Gold Project from Lihir Gold Ltd. The consideration for the purchase of the property, plant, equipment and tenements is $4.5 million in cash, the assumption of rehabilitation bonds of $4.1 million and a royalty capped at $50 million. A share placement is proposed to raise up to $40 million to fund the acquisition, carry out exploration and if successful develop and reopen the mine at Ballarat, continue exploration at existing company projects and for general working capital purposes. The purchase is conditional upon shareholders approving the issue of new equity to raise a minimum of $20 million. The intention is to put the necessary resolutions to shareholders at the Annual General Meeting planned for 4 May 2010. Under the sale agreement a deposit of $450,000 is to be held in trust and paid to the vendor upon completion, unless completion of the agreement does not occur for any reason other than default by the company and the company lawfully terminates the agreement, in which case the deposit is to be returned to the company. Associated with the above purchase the company acquired a new subsidiary company, Balmaine Gold Pty Ltd (ACN 45 073 531 325) to purchase the assets of the Ballarat Gold Project.

52 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 27 – Ongoing exploration and evaluation As at 31 December 2009 the group had working capital of $770,410. Additional capital will be required to maintain exploration activity at its present level. As set out in note 1 (a) the directors believe that the group can continue to operate as a going concern for at least the next twelve months from the date of this report.

Note 28 – Reconciliation of loss after income tax to net cash outflow from operating activities Consolidated Parent Entity 2009 2008 2009 2008 Restated Restated $ $ $ $ Loss for the year (*) (720,053) (972,140) (717,331) (992,787) Exploration expenditure expensed 161,633 125,932 95,405 76,167 Provision for employee annual leave (8,307) 9,189 (8,307) 9,189 Non-cash employee benefits expense -share based payments 54,762 113,796 54,762 113,796 Provision for doubtful debts 1,992 23,039 1,992 23,039 Provision for loss on loan to subsidiary company - - 61,079 (30,541) Depreciation 63,269 85,425 63,269 85,425 Impairment expense freehold property - 121,007 - 121,007 Profit on sale of property, plant and equipment (48,740) (89,657) (48,740) (89,657) Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries Increase (decrease) in receivables, sundry debtors and prepayments 77,145 (26,578) 77,780 (26,534) Increase (decrease) in trade and other payables (320,159) 27,861 (320,159) 27,861 Movements in exploration and evaluation creditors 319,567 (26,685) 319,567 (26,685) Net cash outflow from operating activities (418,891) (608,811) (420,683) (709,720)

(*) Loss for the year has been restated as a result of the change in accounting policy described in note 1(j).

Note 29 – Earnings per share Consolidated 2009 2008 Restated Cents Cents (a) Basic earnings per share Loss attributable to the ordinary equity holders of the company .33 .63 (b) Diluted earnings per share Loss attributable to the ordinary equity holders of the company .33 .63 Refer note 1 (j) for the changes in previously reported earnings per share as the result of a change in accounting policy for exploration and evaluation expenditure. (c) Reconciliation of earnings used in calculating earnings per share $ $ Basic earnings per share Loss attributable to the ordinary equity holders of the company used in calculating basic earnings per share 718,879 929,302 Diluted earnings per share Loss attributable to the ordinary equity holders of the company used in calculating diluted earnings per share 718,879 929,302

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 53 Notes to the Financial Statements F31 December 2009

Note 29 – Earnings per share (continued)

(d) Weighted average number of shares used as the denominator Consolidated No. of Shares 2009 2008 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 220,029,143 148,621,269 Adjustments for calculation of diluted earnings per share: Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 220,029,143 148,621,269 Options Unlisted options over ordinary shares could potentially dilute earnings per share, but have been excluded from the calculation of diluted earnings per share because of the uncertainty that the option will be exercised.

Note 30 – Share-based payments (a) Option Plans Unlisted options can be granted under the Castlemaine Goldfields Limited Employees and Contractors Option Plan of 25 February 2005 and as amended on 3 March 2006 (the plan). The company’s directors have the discretion to invite full time employees, permanent part-time employees, directors, alternate directors, the company secretary and independent contractors of the company to participate in the plan. Under the plan options are granted free of consideration at strike prices and on terms and conditions specified by the directors, but carry no dividend or no voting rights. When exercised each option is converted into one ordinary fully paid share. At any particular point of time the total aggregate number of options which may be on issue under the plan shall not exceed or be capable of exceeding 5% of the total number of shares on issue in the capital of the company calculated on the basis that all shares and other securities convertible into shares had been converted. In addition to options granted under the plan, subject to shareholder approval, the directors may grant other options. Set out below are summaries of unlisted options granted.

Date Exercise Number of Options – Movements/Balance Grant Expiry price Start year Granted Exercised Expired/other End Year (cents) Balance Exercisable Consolidated and parent entity – 2009 (i) Employees and contractors option plan 1/07/05 1/07/10 25 1,400,000 - - - 1,400,000 1,400,000 26/04/06 26/4/11 20 500,000 - - - 500,000 375,000 22/12/06 21/12/11 20 300,000 - - - 250,000 250,000 22/04/08 31/12/12 20 350,000 - - - 350,000 350,000 22/04/08 31/12/12 23 350,000 - - - 350,000 350,000 22/04/08 31/12/12 26 350,000 - - - 350,000 - 22/04/08 31/12/12 30 350,000 - - - 350,000 - Total 3,550,000 - - - 3,550,000 2,725.000 Weighted average price – cents 23.8 - - - 23.8 23.0 (ii) Other unlisted options 28/11/05 28/11/10 20 2,000,000 - - - 2,000,000 2,000,000 8/05/07 19/03/09 21 500,000 - - (500,000) - - 8/05/07 19/03/10 22 500,000 - - - 500,000 500,000 22/04/08 22/04/11 30 500,000 - - - 500,000 500,000 22/04/08 22/04/12 40 500,000 - - - 500,000 500,000 22/04/08 22/04/13 50 1,000,000 - - - 1,000,000 1,000,000 Total 5,000,000 - - (500,000) 4,500,000 4,500,000 Weighted average price –cents 29.3 - - 21.0 30.2 30.2 Total 8,550,0000 - - (500,000) 8,050,000 7,225,000 Weighted average price – cents 27.0 - - 21.0 27.4 27.5

54 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Notes to the Financial Statements 31 December 2009

Note 30 – Share-based payments (a) Option Plans (continued)

Date Exercise Number of Options – Movements/Balance Grant Expiry price Start year Granted Exercised Expired/other End Year (cents) Balance Exercisable Consolidated and parent entity – 2008 (i) Employees and contractors option plan 1/07/05 1/07/10 25 1,400,000 - - - 1,400,000 1,400,000 26/04/06 26/4/11 20 500,000 - - - 500,000 250,000 22/12/06 21/12/11 20 300,000 - - (50,000) 250,000 250,000 22/04/08 31/12/12 20 - 350,000 - - 350,000 350,000 22/04/08 31/12/12 23 - 350,000 - - 350,000 - 22/04/08 31/12/12 26 - 350,000 - - 350,000 - 22/04/08 31/12/12 30 - 350,000 - - 350,000 - Total 2,200,000 1,400,000 - (50,000) 3,550,000 2,250,000 Weighted average price – cents 23.2 24.8 - 20.0 23.8 23.1 (ii) Other unlisted options 28/11/05 28/11/10 20 2,000,000 - - - 2,000,000 1,500,000 8/05/07 19/03/09 21 500,000 - - - 500,000 500,000 8/05/07 19/03/10 22 500,000 - - - 500,000 500,000 22/04/08 22/04/11 30 - 500,000 - - 500,000 - 22/04/08 22/04/12 40 - 500,000 - - 500,000 - 22/04/08 22/04/13 50 - 1,000,000 - - 1,000,000 - Total 3,000,000 2,000,000 - - 5,000,000 2,500,000 Weighted average price –cents 20.5 42.5 - - 29.3 20.6 Total 5,200,000 3,400,000 - (50,000) 8,550,000 4,750,000 Weighted average price – cents 21.6 35.2 - 20.0 27.0 21.8

No options were granted or exercised during the year. The weighted average remaining contractual life of the options outstanding at the end of the period was 1.63 years (2008 – 2.49 years). Fair value of options granted The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. (b) Expenses arising from share-based payment transactions Consolidated Parent Entity 2009 2008 2009 2008 $ $ $ $ Options issued Under employees and contractors option plan 23,536 41,435 23,536 41,435 Other options 31,226 72,361 31,226 72,361 54,762 113,796 54,762 113,796

Note 31 – Contingencies The economic entity has no contingent liabilities or contingent assets as at 31 December 2009.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 55 Directors’ Declaration

In the directors’ opinion : (a) the financial statements and notes set out on pages 24 to 55 of the Financial Report of Castlemaine Goldfields Limited are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2009 and of their performance for the financial year ended on that date: and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and (c) at the date of this declaration, there are reasonable grounds to believe that the members of the economic entity identified in note 23 on page 51 will be able to meet any obligations or liabilities to which they are, or may become liable for.

The directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

Gary F. P. Scanlan Managing director & chief executive officer

Melbourne 12 March 2010

56 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Independent Audit Report

PricewaterhouseCoopers ABN 52 780 433 757

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331 MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Independent auditor’s report to the members of Facsimile 61 3 8603 1999 Castlemaine Goldfields Limited

Report on the financial report

We have audited the accompanying financial report of Castlemaine Goldfields Limited (the company), which comprises the statement of financial position as at 31 December 2009 , and the statement of comprehensive income, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Castlemaine Goldfields Limited and Castlemaine Goldfields Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evalu ating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Liability limited by a scheme approved under Professional Standards Legislation

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 57 Independent Audit Report

Independent auditor’s report to the members of Castlemaine Goldfields Limited (continued)

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

(a) the financial report of Castlemaine Goldfields Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2009 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Significant Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 1 in the financial report which indicates that the ability of the company to continue as a going concern is dependent on obtaining additional funding to finance its investment activities and working capital. Accordingly, there is significant uncertainty as to whether the company will continue as a going concern and, therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financi al report.

Report on the Remuneration Report

We have audited the remuneration report included in pages 13 to 18 of the directors’ report for the year ended 31 December 2009. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion

In our opinion, the remuneration report of Castlemaine Goldfields Limited for the year ended 31 December 2009, complies with section 300A of the Corporations Act 2001.

PricewaterhouseCoopers

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58 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009 Shareholders Information at 28 February 2010

Fully paid ordinary shares Number of shareholders 618 Total number of fully paid ordinary shares 230,666,814 Percentage of shareholdings held by the 20 largest shareholders 77.28% Shareholders with less than a marketable parcel of 12,500 shares 131

Distribution schedule of fully paid ordinary shares Distribution 1 - 1,000 10 1,001 - 5,000 34 5001 - 10,000 76 10001 - 100,000 369 100,001 - and over 129 Total 618

Voting rights Every member present personally or by proxy or attorney shall, on a show of hands, have one vote and on a poll shall have one vote for every share held. Holders of options do not have voting rights.

ANNUAL REPORT 2009 CASTLEMAINE GOLDFIELDS LIMITED 59 Shareholders Information at 28 February 2010

Twenty largest shareholders of fully paid ordinary shares at 28 February 2010 Number held Percentage INTERNATIONAL COMMODITY FINANCE LIMITED 56,044,843 24.30% ALCHEMY SECURITIES PTY LTD 31,087,632 13.48% BOND STREET CUSTODIANS LIMITED 14,161,000 6.14% NATIONAL NOMINEES LIMITED 12,096,145 5.24% ARMCO BARRIERS PTY LTD 10,000,000 4.34% J P MORGAN NOMINEES AUSTRALIA LIMITED 8,750,000 3.79% LAGUNA BAY CAPITAL PTY LTD 7,696,779 3.34% GREENSTONE PROPERTY PTY LTD 6,666,666 2.89% BT PORTFOLIO SERVICES LIMITED 6,354,000 2.75% HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 3,711,500 1.61% GURRAVEMBI INVESTMENTS PTY LTD 3,212,000 1.39% J NICOLIS PTY LTD 2,919,612 1.27% MR GARY FRANCIS PAUL SCANLAN + MRS JEAN SCANLAN 2,662,612 1.15% PERMIAN HOLDINGS PTY LTD 2,580,021 1.12% MR JOHN CHARLES GOUDIE + MS CYNTHIA JEAN GOUDIE 2,575,800 1.12% MR RICHARD KELLER 2,000,000 0.87% RAPTOR SECURITIES PTY LTD 1,700,000 0.74% MR RICHARD KELLER 1,500,000 0.65% Mr MALCOLM AUSTIN HUTTON 1,300,000 0.56% MECHANISED MINING SERVICES PTY LTD 1,236,229 0.54% Total 178,254,839 77.28%

Substantial shareholders as at 28 February 2010 International Comodity Finance Limited 56,044,843 24.30% RFC Group Limited (*) 35,885,974 16.38% Robert Henry Richard Adamson and Anna Louise Adamson (*) 35,885,974 16.38% David Christopher Baker 15,436,000 7.05% Accorn Capital Limited 15,000,000 6.85% Richard Keller 13,625,000 6.22%

The percentages are as notified and do not take account of subsequent share issues. (*) one holding

60 CASTLEMAINE GOLDFIELDS LIMITED ANNUAL REPORT 2009