Annual Report 2008 Responsible Delivery Responsible Delivery GREAT BASIN GOLD A GLOBAL MINING COMPANY CONTENTS OUR CULTURE 02 CORPORATE PROFILE 04 OVERVIEW 05 PERFORMANCE SUMMARY 06 CHAIRMAN’S LETTER 08 CHIEF EXECUTIVE OFFICER’S REVIEW 11 LEADERSHIP DEVELOPMENT 15 HEALTH AND SAFETY 16 PEOPLE 18 CORPORATE SOCIAL RESPONSIBILITY 20 ENVIRONMENTAL MANAGEMENT 26 REVIEW OF OPERATIONS: BURNSTONE 31 REVIEW OF OPERATIONS: HOLLISTER 41 REVIEW OF OPERATIONS: OTHER MINES 57 DIRECTORS & EXECUTIVES 60 CORPORATE GOVERNANCE 66 STRATEGIC RISKS 71 CONSOLIDATED FINANCIAL STATEMENTS 76 GLOSSARY 166 l GREAT BASIN GOLD l ANNUAL REPORT 2008 1 Responsible Delivery OUR CULTURE We are committed to customer-driven quality and a plan-do-check-act way of working. We engage in process thinking, where we view our everyday work as a series of activities rather than as individual, unrelated occurrences. We manage through the use of facts and data, not intuition, and we are constantly seeking improvement in our processes and results. Ferdi Dippenaar, Chief Executive Officer 2 l GREAT BASIN GOLD l ANNUAL REPORT 2008 OUR CULTURE What We Think, Say, Do We are responsible to all our stakeholders. We build high performance teams focused on delivery. Our approach is problem elimination based on high levels of employee engagement and commitment. An open, honest and diverse environment encourages mutual respect. We get involved to make a difference. We focus on ideas, growth, development and creating value. We value honesty, integrity, respect and trust. Our leaders engage, communicate, develop and deliver. l GREAT BASIN GOLD l ANNUAL REPORT 2008 3 Great Basin Gold – A Global Mining Company CORPORATE PROFILE reat Basin Gold (hereafter “Great Basin Gold” or “the Company”) is a mineral exploration and development G company that is currently focused on delivering two advanced-stage projects: the Hollister gold project, which covers about 5% of the Hollister property on the Carlin Trend in Nevada, USA; and the Burnstone gold project in the Witwatersrand goldfields in South Africa. The Company, currently recognised as an emerging producer, will migrate to the ranks of the junior gold producers as these two projects commence full commercial gold production. Over and above exploration being conducted at these two properties, greenfields exploration is being undertaken in Tanzania, Mozambique and the Island of Kurils in Russia, though much of this has been suspended until the economic environment improves. 4 l GREAT BASIN GOLD l ANNUAL REPORT 2008 Responsible Delivery OVERVIEW The current global economic crisis which has UÊ ,i`ÕV}ÊiÝ«À>ÌÊÕ`iÀÌ>iÊ>ÌÊ impacted on the availability of capital in the Hollister as well as at Burnstone – equity and financial markets has required exploration continues at Hollister and will management to re-assess the development be focused on in-fill drilling and the Hatter schedule of both advanced-stage projects and Graben area, while exploration drilling at planned exploration. Burnstone is now focused on underground delineation and evaluation of the initial Management has implemented a strategy of mining areas; cash preservation to ensure that Great Basin UÊ ,i«>}ÊÌ iÊ/>â>>ÊiÝ«À>ÌÊ Gold is able to meet contractual obligations projects for 2009, based on the and preserve shareholder value. availability of funding; and This strategy entails: UÊ *>V}Ê}À>ÃÃÀÌÃÊiÝ«À>ÌÊ«ÀiVÌÃÊ>ÌÊ Tsetsera (Mozambique) and Kurils on hold UÊ ÌÕ}ÊÜÌ ÊÌ iÊ`iÛi«iÌÊvÊÕÀÊ until free cash flow is available to continue. Hollister and Burnstone projects to ensure that they are completed as planned and Since the fourth quarter of 2008 and early within budget; 2009, Great Basin Gold has launched various UÊ ÃÕÀ}ÊÌ >ÌÊ«À`ÕVÌÊÌ>À}iÌÃÊ>ÀiÊiÌÊ fundraising initiatives to ensure adequate cash (which will deliver the necessary cash flow resources for project development. The strategy to finance operating and development entailed a three-phase approach comprising activities); a combination of debt and equity, taking into account the availability of funding in the market UÊ «ÀÛ}ÊVÃÌÊ>>}iiÌÊ«ÀVi`ÕÀiÃÊ as a result of the global economic crisis. l GREAT BASIN GOLD l ANNUAL REPORT 2008 5 Responsible Delivery PERFORMANCE SUMMARY 6 l GREAT BASIN GOLD l ANNUAL REPORT 2008 PERFORMANCE SUMMARY PERFORMANCE SUMMARY: BURNSTONE UÊ ÊÌÌ>ÊvÊ£Ç]Óä{vÌÊ­x]Ó{ήÊvÊ underground development has been The following milestones were reached: completed, of which 6,099ft (1,859m) UÊ "Ê"VÌLiÀÊÓn]ÊÓään]ÊÌ iÊ i«>ÀÌiÌÊ was directed at exposing the veins. Total of Minerals & Energy (DME) granted the development to December 31, 2008 is New Order Mining Right to mine for gold 22,132ft (6,746m). and silver in the project area. UÊ / iÊ«iÀÌÊvÀÊ>À}iÀÃV>iÊÌiÃÌÊ}Ê UÊ ÌÊÌ iÊi`ÊvÊ iViLiÀÊÓään]ÊÌ iÊÛiÀÌV>Ê activities was granted by the Nevada shaft reached a depth of 538ft (164m). Division of Environmental Protection to UÊ >Õ>ÀÞÊÓääÊÃ>ÜÊÌ iÊVÃÌÀÕVÌÊvÊÌ iÊ extract up to 275,000 tons of ore per year. permanent head gear. UÊ ÊÕ«`>Ìi`Ê Ê{Σä£ÊÌiV V>ÊÀi«ÀÌÊ UÊ / iÊÕ`iÀ}ÀÕ`Ê`iViÊ>`Û>Vi`ÊÌÊ was filed in March 2009. 6,867ft (2,093m) of its 7,590ft (2,314m) UÊ ÊvÕÀÌ iÀÊ{]{ÈävÌÊ­£x]äÇx®ÊvÊ planned length by December 31, 2008. underground delineation and exploration The total length achieved, including all drilling on the Gweniviere-Clementine vein secondary pre-development, is 9,702ft system was completed. (2,957m). The reef will be intercepted at UÊ / iÊ>ÌÌiÀÊÀ>LiÊÛiÊÃÞÃÌiÊÜ>ÃÊ 7,218ft (2,200m). discovered to the east of the Hollister UÊ ÊÕ«`>Ìi`Ê Ê{Σä£ÊÌiV V>ÊÀi«ÀÌÊ project area. was filed in March 2009. UÊ -ÕÀv>ViÊiÝ«À>ÌÊ`À}Ê`ÕÀ}ÊÓäänÊ PERFORMANCE SUMMARY: CORPORATE involved a further 31 boreholes, totalling The following milestones were reached: 80,106ft (24,415m) drilled on Areas 1, 3 UÊ / iÊf£xäÊÊ­1-f£ÓÎÊ®ÊiµÕÌÞÊ and 4. The drilling has confirmed further unit offering was successfully completed areas of mineralisation in Area 1, as well in March 2009, with the proceeds to be as increased channel thickness, spreading used to bring the Burnstone project into into Area 4. commercial production. PERFORMANCE SUMMARY: HOLLISTER UÊ iViLiÀÊÓäänÊÃ>ÜÊÌ iÊÃÕVViÃÃvÕÊ placement of 51,500 Senior Secured Notes The following milestones were reached: >ÌÊf£]äääÊ­1-fnÓ£®Êi>V ]ÊÌÊw>ViÊ UÊ xä]£È£ÊÌÃÊvÊÀiÊqÊ>ÌÊ>Ê>ÛiÀ>}iÊ}À>`iÊ the acquisition and refurbishment of the of 1,61 equivalent gold oz/ton – were Esmeralda mill and continue the funding of extracted from trial mining activities. both the Hollister and Burnstone projects. UÊ ÎÎ]nÎäÊÌÃÊvÊÀiÊÜiÀiÊÌÊÌÀi>Ìi`]Ê UÊÊ À}Ê«À}À>iÃÊ>ÌÊ ÕÜiÃ]ÊÜiÀÕÊ thereby advancing metallurgical test work. and Lubando prospects in Tanzania were UÊ / iÊ ÃiÀ>`>Ê«À«iÀÌÞÊ>VµÕÃÌÊÜ>ÃÊ completed. completed, thereby securing an in-house UÊ ÊÎÎ iÊ`>`Ê`À}Ê«À}À>iÊ milling solution for Hollister ore. was completed in Kurils, eastern Russia. l GREAT BASIN GOLD l ANNUAL REPORT 2008 7 Responsible Delivery CHAIRMAN’S LETTER Dear Fellow Shareholder It should have been a time when gold investing was at the fore, but the stress was so great 2008 was an astonishing year, and we will that everything was simply sold. It was a time be talking about it for years to come. of liquidation, not valuation. Mining companies around the world were tremendously stressed We shifted from a position of confidence and and had to react immediately, implementing stability in the first half, to unprecedented drastic measures to ensure survival and economic capitulation and panic in the latter. long-term viability. At Great Basin Gold, we The downturn came quickly and ferociously, were also stressed as we were in the process eliminating any liquidity in the equity markets of building two mines – one in South Africa and banking sector, affecting virtually every and the other in Nevada, USA. I am pleased segment of the economy and industry, with to report that in times of stress we really found commodity markets severely hit. our “true mettle”. I am confident that we will not only survive but we will thrive as we move forward in building our Company. Ronald W Thiessen, Chairman of the Board 8 l GREAT BASIN GOLD l ANNUAL REPORT 2008 CHAIRMAN’S LETTER The Company needed to respond quickly to Hollister ore and will significantly reduce our the changed conditions in order to preserve total costs of production. liquidity, reassess our development plans and schedule, and put together financing and Burnstone reached a number of milestones, contingency plans in the event that funds could including the construction of the permanent not be raised. In short, we have been successful head gear, advancement of the vertical shaft in that we have been able to raise the and underground decline and the granting necessary capital to preserve our development of the New Order Mining Right by South plans and schedule. I know many companies Africa’s DME. faced the prospect of drastic measures during these times, and those with committed On the corporate front, the Company received management were able to persevere. significant support and confirmation of our projects’ value in the form of successful While it is still too early to state that the financial transactions. Great Basin Gold was global recession has bottomed, we have seen able to complete several large financings, decisive action from major governments to which include: inject liquidity into capital markets. Panic has UÊ f£xäÊÊ­1-f£ÓÎÊ®Êequity subsided or, perhaps more appropriately, offering, with proceeds to be used to bring been replaced by caution. The gold sector the Burnstone project into commercial reacted positively in the early part of 2009 production; and and gold equities have recovered to an extent from their lows in the latter part of 2008.