Peninsular Gold Ltd Security Cover As At June'23 2005

E L E C T R O N I C P R O O F

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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about the contents of this document or as to the action you should take, you should consult an independent professionaladviser authorised under the Financial Services and Markets Act 2000 (the ‘‘FSMA’’) who specialises in advising on the acquisition of shares andother securities.

Application has been made for the entire issued Ordinary Share capital and to be issued Ordinary Share capital to be admitted to trading on AIM.AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to longer or moreestablished companies. AIM securities are not admitted to the Official List of the United Kingdom Listing Authority (the ‘‘Official List’’).

A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after carefulconsideration and, if appropriate, consultation with an independent financial adviser. Your attention is drawn in particular to the section entitled ‘‘RiskFactors’’ in Part 3.

The rules of AIM are less demanding than those of the Official List. London Stock Exchange plc has not itself examined or approved the contents ofthis Admission Document.

This document is an admission document drawn up in accordance with the AIM Rules and where relevant the Public Offers of SecuritiesRegulations 1995, as amended (‘‘POS Regulations’’) and has been issued in connection with the application for Admission. This document doesnot constitute a prospectus drawn up in accordance with the POS Regulations and has not been delivered to the Registrar of Companies inEngland and Wales in accordance with the POS Regulations.

It is expected that Admission will become effective and dealings in the Ordinary Shares will commence on AIM on or about 23 June 2005.

Peninsular Gold Limited(Incorporated and registered in Jersey with company registration number 89895)

Introduction of 33,951,596 ordinary shares of no par valueand

Admission to trading on AIM

Nominated AdviserNabarro Wells & Co. Limited

BrokerHichens, Harrison & Co plc

Share Capital on AdmissionAuthorised Issued and fully paid

Numberan unlimited number of

Ordinary Shares of no par valueOrdinary Sharesof no par value 33,951,596

an unlimited number ofPreference Shares of no par value

Preference Sharesof no par value 0

*No application has been made for the listing or quotation of the Preference Shares on AIM.

To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the informationcontained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. TheDirectors, whose names appear on page 9 of this document, accept responsibility accordingly, including individual and collective responsibility forthe information contained in this document and for compliance with the AIM Rules. In connection with this document, no person is authorisedto give any information or make any representations other than as contained in this document.

Nabarro Wells & Co. Limited (‘‘NW’’) is the Company’s nominated adviser for the purpose of the AIM Rules and is regulated by the FinancialServices Authority. Its responsibilities as the Company’s nominated advisor under the AIM Rules are owed solely to the London Stock Exchangeplc and are not owed to the Company or to any Director or any other person. NW will not be responsible to such persons for providingprotections afforded to customers of Nabarro Wells nor for advising them in relation to the arrangements described in this document.No representation or warranty, express or implied, is made by NW as to any of the contents of this document (without limiting the statutoryrights of any person to whom this document is issued).

Hichens, Harrison & Co plc (‘‘Hichens Harrison’’) is the Company’s broker and is regulated by the Financial Services Authority. It is acting for theCompany and no one else in connection with the proposed arrangements described in this document. It will not regard any other person as itscustomer nor be responsible to any other person for providing protections afforded to the clients of Hichens Harrison nor for providing advice toany other person in connection with the arrangements described in this document. No representation or warranty, express or implied, is made byHichens Harrison as to the contents of this document (without limiting the statutory rights of any person to whom this document is issued).

This document does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such offer. Thedistribution of this document in jurisdictions other than the United Kingdom may be restricted by law, and therefore persons into whosepossession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictionsmay constitute a violation of the securities laws of any such jurisdiction.

Copies of this document will be available free of charge during normal business hours on any weekday (except public holidays) at the offices ofNabarro Wells & Co. Limited, Saddlers House, Gutter Lane, London EC2V 6HS from the date of this document for the period of one monthfrom Admission.

Nothing in this document or anything communicated on behalf of the Company to shareholders or potential shareholders is intended toconstitute or should be construed as advice by the Company on the merits of the purchase of or subscription for Ordinary Shares or the exerciseof any rights attached thereto or otherwise as investment advice for the purposes of the Financial Services (Jersey) Law 1998, as amended.

The Jersey Financial Services Commission (the ‘‘Commission’’) has given, and has not withdrawn, its consent under Article 4 of the Control ofBorrowing (Jersey) Order 1958, as amended, to the issue of the Ordinary Shares by the Company. A copy of this document has been delivered tothe registrar of companies in accordance with Article 5 of the Companies (General Provisions) (Jersey) Order 2002, and he has given, and hasnot withdrawn, his consent to its circulation. It must be distinctly understood that, in giving these consents, neither the registrar of companiesnor the Commission takes any responsibility for the financial soundness of the Company or for the correctness of any statements made, oropinions expressed, with regard to it.

An investment in the Company is only suitable for sophisticated investors who understand the risks involved in acquiring such an investment andneither the Company nor the activities of any functionary with regard to the Company are subject to all the provisions of the Financial Services(Jersey) Law 1998, as amended. No investment should be made in the Company without an understanding of the nature and extent of the miningrights held by the Group and the manner in which they are dependent upon a substantial shareholder of the Company. Your attention is drawn inparticular to the paragraphs headed ‘‘Restrictions in Mining Rights’’ in the ‘‘Risk Factors’’ section in Part 3.

If you are in any doubt about the contents of this document you should consult your stockbroker, bank manager, solicitor, accountant or otherfinancial adviser.

It should be remembered that the price of the Ordinary Shares and the income from them can go down as well as up.

The Ordinary Shares may not be offered to, sold to, or purchased by persons resident for income tax purposes in Jersey (other than FinancialInstitutions in the normal course of business). For these purposes a ‘‘Financial Institution’’ includes, without limitation, a bank, finance house,insurance company, investment trust or fund, mutual fund or society, pension fund and other institution of a like nature.

The whole of this document should be read and your attention is drawn to the ‘‘Risk Factors’’ in Part 3.

17 June 2005

TABLE OF CONTENTS

Definitions 3Admission Statistics 5Expected Timetable 5Corporate Directory 6

Part 1: Information on the Company 8Introduction 8Group Structure 8Group Strategy and Future Prospects 8The Market 9Directors 9Personnel 10Mineral Properties 11Related Party Contracts 15Reasons for the Admission 15Admission to Aim and Dealings 15Dealing Arrangements and CREST 16Orderly Market Arrangements 16Dividend Policy 16Corporate Governance 16Taxation 16Further Information 17

Part 2: Competent Person’s Report 18

Part 3: Risk Factors 83General Economic Risks 83Trading and Liquidity in the Company’s Shares 83Raising of Future Funds and Growth of the Group 83Related Party Contracts 84Labour 84Reliance on Key Personnel 84Foreign Exchange 84Competition 84Exploration and Production Risks 84Payment Obligations 85Litigation 85Environmental Risk 85Country Risk 86Enforcement of Judgments 86City Code on Takeovers and Mergers 87Legislative Changes 87Retention of Key Business Relationships 87Restrictions in Mining Rights 87Uninsured Risks 88Property Rights 88Forward Looking Statements 89General 89

Part 4: Accounting Information on the Group 90Independent Accountants Report 90Illustrative pro forma statement of consolidated net assets 115

Part 5: Additional Information 1171. The Company 1172. Group Structure 1173. Share Capital 1174. Articles of Association 1205. Principal Offices 1276. Directors’ and Other Interests 1277. Directors’ Service Agreements 1288. Related Party Contracts 1299. Material Contracts 13010. Contracts for the Sale of Gold 13311. Overview of the Mining Regulatory Framework in Pahang 13312. Details of the Group’s Mining Certificates, Leases and Prospecting Permits & Licences 13313. Litigation 13714. Working Capital 13715. Taxation 13716. Consents 13917. General 139

Part 6 Glossary 141

2

c92113pu010 Proof 6: 23.6.05 B/L Revision: 0 Operator MilV

DEFINITIONS

The following terms apply in this document unless the context requires otherwise:

‘‘Admission’’ admission of the Ordinary Shares to trading on AIM and suchadmission becoming effective in accordance with the AIM Rules

‘‘AIM’’ the Alternative Investment Market of the London Stock Exchange

‘‘Akay Holdings’’ Akay Holdings Sdn. Bhd., a private limited company incorporated

in Malaysia (Company Number 160758-U)

‘‘Akay Venture’’ Akay Venture Sdn. Bhd., a private limited company incorporatedin Malaysia (Company Number: 335764-X)

‘‘AIM Rules’’ The rules for companies governing admission to and trading on

AIM published by the London Stock Exchange

‘‘Andrew Kam Guarantees’’ Personal guarantees and pledge over fixed deposits given by Dato’

Andrew Tai Yeow Kam, and a fixed legal charge over the 1669

Mining Lease given by Akay Holdings, all granted as security forcertain credit facilities granted to RAGM and Serem by Southern

Bank

‘‘Articles’’ The Articles of Association of the Company

‘‘Block 8 Area’’ The area identified as the ‘‘Prospecting Areas’’ in an agreement

dated 9 July 1990 and entered into between Pahang SEDC, Serem

and Perak Motor Company, and illustrated in the form of a map

appearing in the section of this document entitled ‘‘MineralProperties’’

‘‘BNM’’ Bank Negara Malaysia, the central bank of Malaysia

‘‘Board’’ or ‘‘Directors’’ The directors of the Company at the date of this document

‘‘Broker’’ Hichens Harrisons & Co plc, broker to the Company

‘‘Bumiputras’’ The indigenous population of Malaysia

‘‘CIL Plant’’ The 1.1 million tonne per annum treatment capacity carbon-in-

leach plant proposed to be constructed at the site of RAGM’s

existing processing facilities

‘‘City Code’’ The City Code on Takeovers and Mergers

‘‘Combined Code’’ The code of best practice, including the principles of good

governance titled the ‘‘Combined Code on Corporate

Governance’’ published by the Financial Reporting Council in

July 2003 and appended to, but not forming part of, the Listing

Rules of the UK Listing Authority

‘‘Company’’ or ‘‘PG’’ or ‘‘PGL’’ Peninsular Gold Limited

‘‘Companies Law’’ The Jersey (Companies) Law 1991, as amended

‘‘Competent Person’’ A.C.A. Howe International Limited of 254 High Street,

Berkhampstead, Hertfordshire HP4 4BN

‘‘CREST’’ The computerised settlement system, operated by CRESTCo

Limited, which facilitates the transfer of title to shares in

uncertificated form

‘‘CREST Regulations’’ The Uncertificated Securities Regulations 2001 (SI 2001 No. 01/

3755)

‘‘Department of Land and Mines’’ The Department of Land and Mines of the State of Pahang,

Malaysia

‘‘Directors’’ The directors of the Company as at the date of this document

‘‘ECM Notices’’ Exchange Control of Malaysia notices issued pursuant to the

Exchange Control Act, as amended

‘‘Exchange Control Act’’ The Malaysian Exchange Control Act 1953, as amended

‘‘FIC’’ Foreign Investment Committee, Malaysia

3


‘‘FSC’’ The Financial Services Committee of Jersey

‘‘FSA’’ The Financial Services Authority

‘‘FSMA’’ or ‘‘Financial Services

and Markets Act’’

The Financial Services and Markets Act 2000

‘‘Group’’ The Company and its subsidiary companies

‘‘Hichens Harrison’’ Hichens, Harrison & Co. plc

‘‘London Stock Exchange’’ London Stock Exchange plc

‘‘Malaysian Securities Exchange’’ Bursa Malaysia Securities Berhad, the successor entity to the Kuala

Lumpur Stock Exchange, a recognised stock exchange under the

Malaysian Securities Industry Act 1991 as amended

‘‘MC511 Land’’ Land encompassing 93 acres situated at Tersang, Mukim Batu

Talam, District of Raub, State of Pahang, Malaysia

‘‘Mining Enactment’’ Mining Enactment 1929 and subsidiary legislation issued

thereunder as amended

‘‘Mining Rights Agreement’’ The Mining Rights Agreement entered into between Akay Holdings

and the Company, details of which are set out in paragraph 8(d) of

Part 5 of this document

‘‘MITI’’ Ministry of International Trade and Industry, Malaysia

‘‘Nabarro Wells’’ Nabarro Wells & Co Limited, nominated adviser to the Company

‘‘Official List’’ The Official List of the UK Listing Authority

‘‘Offshore Investors’’ Granite Peak Limited, Bondstar Investment Limited and Innopilot

Group Limited

‘‘Ordinary Shares’’ The ordinary shares of no par value in the capital of the Company

‘‘Ordinary Shareholders’’ Holders of Ordinary Shares

‘‘Pahang SEDC’’ Perbadanan Kemajuan Negeri Pahang, the Pahang State Economic

Development Corporation, Malaysia alternatively described as the

Pahang State Development Corporation

‘‘Panel’’ The Panel on Takeovers and Mergers

‘‘Perak Motor Company’’ Perak Motor Company Sdn. Bhd., a private limited company

incorporated in Malaysia

‘‘POS Regulations’’ The Public Offers of Securities Regulations 1995, as amended

‘‘Preference Shares’’ The redeemable convertible cumulative non voting preference

shares of no par value in the capital of the Company

‘‘Preference Shareholders’’ Holders of Preference Shares

‘‘RAGM’’ Raub Australian Gold Mining Sdn. Bhd., a private limited

company incorporated in Malaysia (Company Number 374745-K)

‘‘RBC’’ Royal Bank of Canada Trust Corporation Limited

‘‘RM’’ Ringgit Malaysia, the lawful currency of the Federation ofMalaysia

‘‘RMDC’’ Raub Mining & Development Company Sdn. Bhd. a privatecompany incorporated in Malaysia (Company number: 4708-A)

‘‘RMDC Land’’ means a portion of certain agricultural land known as Lot 6023,

Mukim of Gali, District of Raub, State of Pahang covering an area

of approximately 207 acres in respect of which application for a

mining lease has been made

‘‘Serem’’ S.E.R.E.M. Malaysia Sdn. Bhd. a private limited company

incorporated in Malaysia, (Company Number: 7684-U)

‘‘Share Subscription Agreements’’ The agreements entered into between the Company and the

Offshore Investors dated 17 June 2005 details of which are set

out in paragraph 8(b) of Part 5 of this document

4


‘‘Share Swap Agreement’’ The agreement entered into between Akay Holdings, Akay

Venture, Dato Mohamed Moiz Bin JM Ali Moiz and the

Company dated 17 June 2005 details of which are set out in

paragraph 8(a) of Part 5 of this document

‘‘Southern Bank’’ Southern Bank Berhad, a bank licensed under the Malaysian

Banking and Financial Institutions Act 1989

‘‘UK’’ The United Kingdom of Great Britain and Northern Ireland

‘‘UK Listing Authority’’ The FSA acting in its capacity as the competent authority for the

purposes of Part VI of the Financial Services and Markets Act

‘‘1669 Mining Lease’’ A mining lease expiring on 31 December 2017 over land

encompassing 303 acres situated at Lot 17478 PA 79770,

Mukim Gali, District of Raub, State of Pahang, Malaysia

Admission Statistics

33,951,596 Ordinary Shares in issue at Admission 33,951,596

Expected Timetable* Admission and dealings commence on AIM 23 June 2005* CREST account credited (as applicable) by 23 June 2005* Dispatch of definitive share certificates (as applicable) by 7 July 2005

5


CORPORATE DIRECTORY

Directors Dato’ Andrew Tai Yeow Kam (Chairman and Chief Executive)

Jon Starink (Executive Director)

Dato’ Mohamed Moiz JM Ali Moiz (Non Executive Director)Dr. Yves Fernand Marcel Cheze (Non Executive Director)

all of

First Island House

Peter Street

St Helier

Jersey JE2 4SP

Channel Islands

Company Secretary First Island Secretaries Limited

First Island House

Peter Street

St Helier

Jersey

JE2 4SP

Channel Islands

Registered Office First Island House,

Peter Street,

St Helier,

Jersey

JE2 4SP

Channel Islands

Nominated Adviser Nabarro Wells & Co. LimitedSaddlers House

Gutter Lane

London EC2V 6HS

Broker Hichens, Harrison & Co. plc

Bell Court House

Bloomfield Street

London EC2M 1LB

Competent Person A.C.A. Howe International Limited

254 High Street

Berkhamsted

Hertfordshire HP4 1AQ

Reporting Accountants Moore Stephens

St. Paul’s HouseWarwick Lane

London EC4M 7BP

Auditors Moore Stephens

St. Paul’s House

Warwick Lane

London EC4M 7BP

6


Legal advisers to the Company As to Jersey Law

Mourant du Feu & Jeune

4 Royal Mint Court

London EC3N 4HJ

As to Malaysian Law

Wong & Partners(A Member of Baker & McKenzie International)

Level 41 – Suite A, Menara Maxis

Kuala Lumpur City Centre

50088 Kuala Lumpur

Malaysia

As to English Law

Baker & McKenzie LLP

100 New Bridge Street

London EC4V 6JA

Registrars Capita Registrars

Victoria Chambers

Liberation Square

No 123 Esplanade

St. Helier

Jersey JE4 0FF

Channel Islands

Bankers In Malaysia

HSBC Bank Malaysia Berhad

2 Leboh Ampang

50100 Kuala Lumpur

Malaysia

Southern Bank Berhad

Ground Floor

Wisma Genting

28, Jin Sultan Ismail

50200 Kuala LumpurMalaysia

In Jersey

Deutsche Bank International LimitedPO Box 727

St Paul’s Gate

New Street

St Helier

Jersey

Channel Islands

7


PART 1

INFORMATION ON THE COMPANY

Introduction

Peninsular Gold Limited was incorporated on 8 April 2005 as a public company under the laws of

Jersey, to acquire the whole of the issued capital of RAGM and Serem, which hold gold mineral

exploration rights and conduct mining activities. It has also entered into an agreement with Akay

Holdings to acquire certain rights to explore and conduct mining activities on the RMDC Land. The

Group’s mining and exploration areas are located in the vicinity of Raub, in the Central Highlands in

the State of Pahang, Malaysia astride the Raub-Bentong Suture. It is believed that the area has been

mined during various periods over the last several hundred years.

Raub is a historic mining centre that has produced approximately 872,000 oz with an average ROM

grade of 8.80 gpt between 1889 and 1954 with an additional 78,400 oz between 1954 and 1961 from

underground operations.

The Group has approximately 183,000 oz of proven reserves in a large tailings deposit immediately

adjacent to the Company’s existing plant, which is also the location for its proposed carbon-in-leach

expansion project. It also has identified inferred resources at Raub and its Tersang-Tenggalan-Chenua

project areas are estimated to contain approximately 592,000 ounces.

Details of the Group’s interests are more fully contained in the Competent Person’s Report set out in

Part 2 of this document.

The Group has financed its activities through private funding to date. It is intended that the Groupwill continue to process the large tailings reserve and continue the appraisal of the Group’s

exploration interests.

The Directors are of the opinion that they and the Personnel (as set out below in the section of this

document with such heading) have extensive experience in exploration, development and financing of

natural resources projects.

Group Structure

On 17 June 2005, pursuant to the Share Swap Agreement, the Company acquired all of the issued

share capital of RAGM and Serem resulting in the following Group Corporate Structure:

Peninsular Gold Limited

S.E.R.E.M Malaysia Sdn.Bhd.

100% 100%

Raub Australian Gold Mining Sdn.Bhd

Group Strategy and Future Prospects

The Group corporate plan is to achieve the discovery of a minimum of 5 million ounces of gold in

Malaysia. Specifically, the Company aims to add between one to two million oz of gold from the

well-defined Raub and Tersang targets to the existing reserves and inferred resources and to identify

regional gold exploration targets and develop them to the reserves definition stage. The Group’s

exploration interests have progressed beyond the stage of assembling and interpreting the geological

and geophysical data for the purposes of defining drill testing targets across the licensed areas. The

Company intends to advance its exploration programme with plans to commence drilling four priority

targets by the end of 2005.

The main objective at Raub is to define additional proved reserves of at least 100,000 – 200,000 oz ofgold and at least 500,000 oz resources of gold from primary ore to be mined by open pit. The second

objective is to define additional reserves of primary ore at depth and along the strike.

At Tersang the first objective is to conduct sufficient follow-up drilling to define a minimum indicated

resource of 500,000 oz of gold contained in a single ore body to be mined by open pit and to add

proximal reserves of high grade ore at Chun Chok. The second aim in this area is to establish

8


additional and similar resources from the same deposit and from satellite prospects at Tenggelan,

Tenggelan North and Chenua.

The Group has completed all the necessary steps to permit it to construct the CIL Plant at Raub.

While the Directors are of the opinion that the working capital available to the Group following

Admission will be sufficient for its present requirements, that is for at least 12 months from the date

of Admission, the realisation of each of the aims and objectives set out above is dependent on

securing sufficient levels of additional funding. The Company seeks to raise the additional funding at

the earliest possible opportunity.

The Market

In 2004, world gold production was approximately 2,466 tonnes per annum, while total demand was

about 3,497 tonnes a year. There is currently a nominal 1,000 tonne supply deficit which is currently

being supplied by central and bullion bank sales.

The 1970’s saw an inflationary spiral related to the energy crisis, particularly with oil and gas prices

rising sharply and unrest in the Middle East. During the 1980’s the price of gold increased to over

US$800 per ounce. Then the gold price bottomed in September 1999 and made a further double

bottom in 2001. Since then there has been a strong upward movement.

There is a strong belief by the Board that the history of the 1970’s is being repeated. There have

been major increases in energy and commodity prices and significant unrest in the Middle East. Gold

on the other hand has been lagging in price and is now catching up.

The weakness in gold prices particularly from 1996 to 2001 caused significant reductions in world

exploration for gold. At the same time the Chinese and Indian economies moved along expansionary

paths resulting in increased demand for gold. The US dollar on a trade weighted basis, peaked at the

end of January 2002 and has lost almost a third of its value since then. The gold price has reacted by

staying in a strong up trend and the Directors believe that this situation will continue over the next

few years.

In the light of these factors and in particular in the context of the developing economies of China,

India and South East Asia, it is expected that demand for gold is likely to be strongly underwritten

for some years to come.

Directors

The Board comprises 4 Directors. The Directors are seeking to strengthen the Board with several new

executive appointments.

Dato’ Andrew Tai Yeow Kam (age 43)Chairman and Chief Executive

Dato’ Andrew Tai Yeow Kam, a Malaysian citizen, was educated in England having attended

Millfield School in Somerset and the University of Buckingham where he graduated with a law

degree. He was admitted to the Malaysian Bar in 1988. He practices at Kam Woon Wah &

Company, Kuala Lumpur. Apart from his legal practice, he has extensive entrepreneurial and

management experience. In 1991 he was involved, as a founding director and shareholder in thedevelopment of a 440MW independent power plant in Port Dickson, Malaysia. In Raub, in addition

to the gold mining business, his businesses include the development and completion of the district’s

largest township and the management of a successful palm oil mill together with an oil palm

plantation. Further, he has experience in the quarrying industry. He is a Justice of the Peace.

Dato’ Mohamed Moiz Bin JM Ali Moiz (age 45)Non Executive Director

Dato’ Mohamed Moiz Bin J M Ali Moiz is a Malaysian. He graduated with a Bachelor of Science

degree in Business Administration and International Finance in 1985. He joined Timbco Sdn Bhd, a

company involved in the timber trading, processing and forestry management as Project Managerfrom 1985 to 1986. In 1987, he was appointed as the Chief Executive Officer of the Tradium Group

of companies, which have interests in property development, fashion retailing, manufacturing, food

and beverage and equity investments. In 1999, he was appointed Chief Executive Officer of Effective

Capital Sdn Bhd, a company which successfully undertook the migration of the central limit order

book or ‘CLOB’ securities traded in an over the counter market in Singapore from the Central

9


Depository (Pte) Ltd to the Kuala Lumpur Stock Exchange (the predecessor entity of the Malaysian

Securities Exchange) in June 2000.

Currently, he is the non-independent non-executive chairman of Bandar Raya Developments Berhad,

a company listed on the Malaysian Securities Exchange. He also sits on the Boards of MiecoChipboard Berhad and several other private companies.

Dr. Yves Fernand Marcel Cheze (age 55)Ph.D, B.Sc. and M.Sc

Non Executive Director

Dr Yves Cheze, a French citizen, studied geology at the University of Clermont-Ferrand and has

almost 30 years worldwide experience in most aspects of mineral exploration, mainly in Western and

Eastern Africa, South-East Asia (including several years in Irian Jaya, Indonesia and more than 10

years in Malaysia) and Papua New Guinea, as well as in North and South America. Whilst with the

French company BRGM, he was responsible for large international exploration projects that led tothe discovery of major gold deposits including the Ariab Gold Belt in Sudan; he was also Project

Manager for a feasibility study of a 50 million Euro progamme in Papua New Guinea, for the

European Commission. Dr Cheze resigned from BRGM in 2001 and subsequently set up his own

geological consulting company in Malaysia.

Jon Starink (age 54)BSc(Honsl), BChemE(Hons l), MApplSc.

FAusIMM, FIEAust, FIChemE, MRACI, MTMS, CPEng, CChem, CSci

Executive Director

Mr Starink, a Dutch/Australian citizen, studied science and engineering at the University of Sydney.He has 30 years experience in the Mining Industry. This includes R&D and project management,

technical and financial project evaluation, corporate finance and provision of strategic business

development advice, investment risk management and corporate management and governance.

He worked for eight years with McSweeney & Partners where he held senior R&D management and

project management positions before being appointed as principal engineering consultant and client

representative with responsibility for process and plant design, technical audit and financial feasibility

and environmental and other regulatory compliance. Subsequently he was appointed as the

Partnership’s General Manager.

He has fifteen years experience in private practice, providing professional services ranging from R&Dand innovation management through to negotiation and documentation of acquisitions and joint

ventures and providing corporate advice generally to domestic and international corporations. For a

period of four years, he was engaged by UBS Warburg’s Corporate Finance Department in

Melbourne, Australia to provide advice relating to corporate finance, corporate strategy, mergers and

acquisitions, asset disposals and corporate and project evaluation.

He was Managing Director of an Australian gold mining and exploration company between October

1996 and March 1999, where he was responsible for securing the company’s successful IPO, including

preparation and publishing of the Prospectus, negotiation of all agreements, preparation of all

relevant legal documentation and securing underwriting and sub-underwriting. Following successfullisting and until his resignation, he assumed direct responsibility for all aspects of corporate

governance and operational management of the company.

Personnel

The Directors believe the Group now has the financial and human resources to achieve its strategy.

Led by Dato’ Andrew Tai Yeow Kam, the management team has extensive experience of minerals

projects and includes:

* Mr Ir.Wan Anuar Bin Haji Ibrahim, Mine Manager. Mr. Wan is a mining engineer qualified bythe Camborne School of Mines. He also has a Diploma in Petroleum & Natural Gas

Engineering from the University Technology Malaysia and is a Member of the Malaysian

Institute of Quarrying and of the Malaysian Institute of Minerals Engineering. He has been a

mining engineer for over 20 years in Malaysia including tin, bauxite and gold mining and he has

worked for RAGM since 2002.

10


* Ms Geraldine Ng Kim Lee, who is the chief financial officer, graduated with a Bachelor of

Accounting (First Class Honours) from the University of Malaya. She has over 10 years

working experience and has worked for companies listed on the Kuala Lumpur Stock Exchange.

She has been involved in financial matters including group accounting, management accounting,group tax planning and internal audit. She has also worked in the finance departments of

companies involved in trading, education and information technology.

The day to day operations are managed from the Malaysian offices, as set out in paragraph 5 of Part

5 of this document and integrates practitioners from Australia with local experts, although Board

decisions are made outside Malaysia. In addition to the foregoing ‘‘front-line’’ members of the

management team, the Company has the support of specialist consultants and advisers such as Time

Mining (Pty) Ltd. of South Africa.

Mineral Properties

Following the consolidation of exploration and mining interests, the Company intends to operate a

cash-generative tailings retreatment project, carry out exploration for extensions to the mineralised

ground at Raub and at the Chun Chok prospect in the Tersang-Tenggelan-Chenua (‘‘TTC’’) project

area, carry out major exploration of known mineralised ground at Raub and in the TTC project area

and explore for new deposits elsewhere.

The Company’s projects are all centred on Raub which is about 110 km from Kuala Lumpur.

Its most developed projects are at Raub and in the TTC project area, which is centred approximately

35 kilometres north of Raub.

The Group has received approval for the grant of 6 Prospecting Licences/Permits and has applied for

a further 6 Prospecting Licenses/Permits, ranging in size from 38 to 9,227 hectares. It also applied for

three mining leases, in addition to rights over the 1669 Mining Lease and the mining certificate in

respect of the MC511 Land which it presently holds. Two of these applications were approved and

offers of mining leases were made by the Pahang State Government. These offers have not beenaccepted and they have since lapsed. The Directors are of the opinion that it may be possible to

apply for and obtain a fresh offer upon substantially similar terms. The acceptance of an offer for a

mining lease entails the payment of various fees. In total the Company’s current and prospective

mining and exploration interests encompass an area of approximately 22,000 hectares.

The Company’s mining and exploration interests are all located in Malaysia’s central gold belt, which

consists of a deeply eroded fold and thrust belt composed of Permo-Triassic marine and continental

shelf sediments. This belt hosts including the Raub, Selinsing and Penjom gold mines and the Cheroh

and Tersang deposits.

The central gold belt is bounded to the west by the north-south trending Raub-Bentong Suture,

which forms a zone up to 20 kilometres wide, extending along the entire backbone of Peninsular

Malaysia and into Thailand, Cambodia and Laos to the north. The known deposits in the region

have a number of features in common with mesothermal lode gold deposits worldwide, such as the

Bendigo-Ballarat district in Australia, the Mother Lode district in California and the Meguma districtin Canada. These deposits are often characterised by considerable vertical extent and high grade ore

shoots.

At Raub, the areas designated for exploration are comprised of two titles, covering approximately

206 hectares (511 acres) and encompassing approximately 2,300 meters of the Central and Eastern

Lode of the Raub System, which has a known 6,000-meter strike. The Company’s tailings reserves

and existing crushing grinding and gravity recovery plant are located here.

At Tersang, the TTC project area covers approximately 79.42 square kilometres (7,942 hectares or

19,625 acres). Located within the TTC project area are the Tersang, Tenggelan, Tenggelan North,

Chenua and Chun Chok prospects, each defined by significant soil and/or geophysical anomalies and

other prospects, defined by stream sediment anomalism.

Between Raub and the TTC project area, the Bukit Kajang Prospecting License application covers

approximately 30.51 square kilometres (3,051 hectares or 7,540 acres) defined by regional stream

sediment anomalism whilst to the south of Raub three Prospecting License applications cover an

additional 107.40 square kilometres (10,740 hectares or 26,540 acres) likewise defined by regional

stream sediment anomalism.

11


This map and caption are replicated from the Competent Person’s Report. The foregoing map shows

the Company’s region of interest and highlights the location of the Group’s interests in tenements,

comprised of mining certificates and leases (as the case may be) and prospecting permits and licences

and its applications for tenements.

12


1. Identified Target Areas

The Company has a number of well defined exploration targets within its tenement portfolio.

The proposed exploration program has four distinct objectives. These are:

(a) to define additional resources and reserves in areas the Directors believe are topographically

favourable areas amenable to early development as satellite mining areas for the Raub treatment

plant following completion of the proposed CIL Expansion project;

(b) to systematically evaluate by drilling the major mineralised Raub system, with a view to definingvery significant resources within the Central Lode amenable to long-term open-pit and

underground mining;

(c) to systematically evaluate by drilling the major mineralised TTC system, with a view to defining

sufficient resources at Tersang, Tenggelan, Tenggelan North and Chenua to permit thestand-alone development of a major open-pit mining operation; and

(d) to systematically follow-up regional stream sediment anomalism by the application of systematic

soil sampling and ground geophysics.

The target areas where the Company will be seeking to fulfil objective (a) above are:

(i) the Eastern Lode System at Raub in the vicinity of Bt Malacca and Ward where surface

exploration identified a zone up to 160 metres wide of lower grade mineralised ground and

where shallow drilling (to 50 metres) defined an inferred resource estimated to contain

59,830 ounces of gold. The Directors are of the opinion that the topographic disposition of this

mineralised ground is particularly favourable for a low stripping ratio open-cut mine, occupying

the top and western slopes of north trending low hills within 1,000 metres of the Raub plant

location; and

(ii) the Chun Chok prospect which is located within the TTC area lying approximately 2 kilometres

south of the Tersang Prospect. This prospect is largely obscured by alluvial deposits, however

limited outcrop of silicified metasediments returned between 0.12 and 12.3 gpt. The Directors are

of the opinion that the potential for higher grade material favourably located at or near surface

make the Chun Chok prospect an excellent target for a small-scale satellite mining operation toprovide additional reserves for the Raub CIL project.

The target area where the Company will be seeking to fulfil objective (b) above is the Raub Central

Lode, where the program will target:

(i) the Central Lode, near surface oxidised ore located along strike from the major historic

workings at Bt Koman, between Bt Derrick and Ward, an area the Directors believe is

characterised by favourable geochemistry and geophysics targeting areas which the Directors

believe contain potentially unexploited high grade shoots and their lower grade envelopes;

(ii) the Central Lode, below the Bt Koman open pit, targeting open-pit mineralisation surrounding

the previously exploited high grade shoots, the target being defined by the extent of historic

underground workings;

(iii) the Central Lode, targeting down-dip extension of known high grade shoots, and the Directors

believe, mineralised envelopes amenable for underground mining, below historic working in the

Bt Koman area, and

(iv) the Central Lode, targeting areas which the Directors believe have potential high grade shoots

and mineralised envelops that are amenable to underground mining at depth between Bt Derrick

and Ward.

The target area where the Company will be seeking to fullfil objective (c) above is the TTC project

area, where the program will target the Tersang, Tenggelan, Tenggelan North and Chenua prospects

to build upon the 528,000 ounces inferred resource already outlined at the Tersang Prospect.

The program will comprise progressive systematic drill-testing of all of the anomalies identified,focussing initially on conducting sufficient initial drilling to enable estimation of indicated resources at

Tersang.

The targets are:

(i) the Tersang Prospect, which is defined by a 3,000 meter long coincident 4100 ppb gold &

arsenic soil anomaly.

13


The Directors are of the opinion that the portion of the Tersang anomaly thus far tested by

reconnaissance drilling occupies the top and western side of a 1.4 kilometre north trending hill

capped by the sill. Reconnaissance drilling of the sill outlined an inferred resource of

aproximately 528,000 ounces.

The Directors are of the opinion that the sill is underlain by graphitic shales containing well-

developed quartz veining and stockwork. This footwall zone has not been tested by drilling.

The Directors are of the opinion that the topographic location of the mineralised material isparticularly favourable for the possible development of a low stripping ratio low-cost open pit

mining operation;

(ii) the Tenggelan Prospect, located around 6,000 meters north of the Tersang Prospect;

(iii) the Tenggelan North Prospect, located around 1,500 meters north of the Tenggelan Prospect;and

(iv) the Chenua Prospect is located around 3,000 meters east of the Tersang Prospect.

The target area where the Company will be seeking to fulfil objective (d) above are the targetsdefined by regional stream sediment anomalism. The target areas include the Bukit Kajang area

located between the Raub and TTC project areas, and the Kelau-Bilut, Sempalit and Tras areas

located along strike, to the south of the Raub area.

2. Exploration Strategy

The Group proposes, subject to securing sufficient levels of additional funding, to conduct an

exploration program that is comprised predominantly of systematic Reverse Circulation (‘‘RC’’)

drilling and Diamond Drilling (‘‘DD’’) of already defined targets.

The proposed drilling program calls for a total of 85,450 meters of drilling to be conducted over

three years comprising 23,950 meters of DD and 61,500 of RC drilling. The Company plans to drill

41,500 meters at Raub and 42,000 meters in the TTC project area, with the balance allocated to

reconnaissance drilling of such targets in the regional prospects as may be identified by systematic

exploration employing surface geochemistry and geophysics.

3. Taxation

Pioneer status is granted to companies in respect of income derived from promoted activities orpromoted products by the Ministry of International Trade and Industry (‘‘MITI’’).

In 1997, RAGM was awarded a Manufacturing licence by MITI, with the consent of the Ministry of

Finance. In 1998 RAGM received approval to apply for Pioneer Status. RAGM has submitted an

application for pioneer status in the eastern corridor. If approved, RAGM would receive tax relief of

up to 100% for a period of up to 15 years.

4. Mining Laws

The Directors believe that Malaysia has a modern and robust mining law that provides security of

tenure. There is a strong tradition and culture of mining in Malaysia, and mining, especially tin

mining, has been an important contributor to national wealth in the past.

5. Access and infrastructure

The Directors believe that Peninsula Malaysia is served by a network of well-maintained highways.

The area of interest is served with a modern infrastructure, good communications and access to

power from the national electricity grid, local engineering services, trained labour and contractsuppliers of earthmoving and trucking.

The Directors believe that Malaysia provides an internationally competitive, low operating cost

environment, particularly in respect of the costs of fuel, electric power and labour.

6. Restrictions in Mining Rights

The Group does not have proprietary interest in all its mining tenements and is dependent on its

substantial shareholder Akay Holdings for the right to mine certain of its mining tenements. Atpresent, the Group has interests in two mining tenements, namely the sub-lease of the MC511 Land

and the permit to mine the 1669 Mining Lease. The MC511 Land is the subject of a mining

certificate held by Abdul Aziz Bin Othman who has in turn granted a sub-lease to Serem to mine the

land for a period expiring on 28 February 2007 (the details of which are set out in paragraph 12 of

part 5 of this document). Approval for the extension of the mining certificate and the sub-lease until

14


28 February 2017 has recently been granted. Serem’s right to mine the MC511 Land is a proprietary

interest under the provisions of the National Land Code of Malaysia (‘‘NLC’’).

The mining certificate held by Abdul Aziz bin Othman is subject to a number of conditions, including

the requirement that not more than one-third of the share capital of the holder of the mining

certificate may be owned by non-Malaysians or non-Malaysian corporations. Under section 18 of the

Mining Enactment, the implied and express covenants and conditions imposed on any mining lease orcertificate are, by operation of law, also binding on the sub-lessee of such mining lease or certificate.

Following Admission, if non-Malaysian citizens or corporations own more than one-third of theCompany, this condition will be breached and may render the mining certificate liable to forfeiture by

the government of the State of Pahang. The Company is seeking a waiver of this condition.

The 1669 Mining Lease is held by Akay Holdings. Akay Holdings has granted RAGM two permitsto mine the land forming the subject of the 1669 Mining Lease (the details of which are set out in

paragraph 12 of part 5 of this document). Akay Holdings’ interest in the 1669 Mining lease is

proprietary and registered under the provisions of the NLC. However, RAGM’s right to mine is a

contractual and not proprietary right. It is subject to the terms of the permits to mine and may be

terminated in certain circumstances (as more particularly described in paragraph 12 of part 5 of this

document).

As the permits to mine are contractual in nature and RAGM does not have a proprietary interest in

the 1669 Mining Lease, RAGM’s rights to mine are limited and may be at risk in certain

circumstances as set out in the paragraphs headed ‘‘Restrictions in Mining Rights’’ in the ‘‘Risk

Factors’’ section in Part 3 of this document.

The Company has entered into the Mining Rights Agreement in order to secure rights over a portion

of RMDC land of approximately 207 acres. Pursuant to the Mining Rights Agreement, Akay

Holdings is to procure from RMDC a sub-lease of a mining lease over part of the RMDC Land.Akay Holdings is in turn required to grant to RAGM or an entity nominated by the Company

(‘‘Relevant Entity’’), a permit to mine in respect of such land. RMDC is in the process of applying

for the necessary approvals from the Pahang State Government to obtain the relevant mining lease. If

the approvals are obtained and the mining lease issued, the Relevant Entity will be reliant on the

contractual rights which are similar in nature to the permits to mine over the 1669 Mining Lease

granted to RAGM. The risks and limitations set out in the paragraphs headed ‘‘Restrictions in

Mining Rights’’ in the ‘‘Risk Factors’’ section in Part 3 of this document in respect of RAGM’s right

to mine the 1669 Mining Lease would equally apply to the rights of the Relevant Entity in respect ofthe relevant portion of the RMDC Land.

Related Party Contracts

The Company is controlled by its primary shareholders, Dato’ Andrew Tai Yeow Kam (through

Akay Holdings and Akay Venture) and Dato’ Mohamed Moiz Bin JM Ali Moiz, who as at 17 June

2005 (the latest practicable date prior to the publication of this document) beneficially own or havean interest in over 99% of the Company’s shares. The Company has entered into a number of

transactions with these related parties, which are described in the ‘‘Group Restructuring and Related

Party Contracts’’ section of Part 5. Although the Board believes that the transactions were on terms

reflecting then prevailing market conditions, the Company cannot be certain that the terms of these

transactions were as favourable as the terms that could have been obtained in similar transactions

with unrelated third parties. See ‘‘Related Party Contracts’’ at Section 8 of Part 5.

Reasons for the Admission

The Company is seeking Admission to AIM in order that funds might be raised to pursue the

Group’s strategy as set out under the heading ‘‘Group Strategy and Future Prospects’’ in this Part 1.

Also, the Directors believe that the higher profile afforded by an AIM listing should help to make

the Ordinary Shares an attractive currency for acquisitions.

Admission to AIM and Dealings

Application has been made for the Ordinary Shares to be admitted to trading on AIM. Dealings in

the Ordinary Shares are expected to commence on 23 June 2005. No applications have been or will

be made for the Preference Shares and any share options to be admitted to trading on AIM.

15


Dealing Arrangements and CREST

CREST is a computerised paperless settlements system, which allows securities to be evidenced

otherwise than by certificate and transferred via electronic means, without the need for a writteninstrument of transfer in accordance with the CREST Regulations.

Participation in CREST is voluntary and shareholders who wish to hold share certificates may do so.

They will not, however, then be able to settle their Ordinary Shares through CREST and will have

their holding recorded on the Company’s share register in Jersey.

Application has been made by Capita Registrars for the Ordinary Shares to be admitted to CREST

on Admission.

Orderly Market Arrangements

At Admission the Directors and persons connected with them will own 33,951,596 Ordinary Shares

representing all of the Ordinary Shares. The Directors and substantial shareholders have entered intoan orderly market agreement with the Company, Nabarro Wells and Hichens Harrison. A summary

of the orderly market agreement is set out in paragraph 9(g) and 9(h) of Part 5.

Dividend Policy

The Directors do not envisage declaring a dividend on the Ordinary Shares in the short to medium

term. However, if or when sufficient distributable reserves are available, the Directors intend to

pursue a progressive dividend policy. The Preference Shares are entitled to a fixed dividend.

Corporate Governance

The Directors intend that the Company will comply with the main provisions of the Combined Code

in so far as it is appropriate for a company of its size. The Company has appointed two

non-executive directors with relevant sector experience to complement the executive directors and to

provide an independent view to the Board. In due course, the Company will be seeking to appoint an

appropriately qualified Finance Director.

An Audit Committee, comprising two non-executive Directors, has been established by the Company

to operate from Admission. The Audit Committee will be chaired by Dato’ Mohamed Moiz bin JM

Ali Moiz and will meet at least twice each year. The Audit Committee will be responsible for

ensuring that appropriate financial reporting procedures are properly maintained and reported on and

for meeting with the Group’s auditors and reviewing their reports on the accounts and the Group’s

internal controls.

The Company has in addition established a Remuneration Committee, comprising two non-executiveDirectors, to operate from Admission. The Remuneration Committee will be chaired by

Dr. Yves Cheze. The Remuneration Committee will be responsible for reviewing the performance of

the executives, setting their remuneration, determining the payment of bonuses and, in particular, the

price per share and the application of performance standards which may apply to any such grant.

The Company has in addition established a Risks Committee, comprising two non-executive Directors

to operate from Admission. The Risks Committee will be chaired by Dato’ Mohamed Moiz Bin JM

Ali Moiz. The Risks Committee will be responsible for reviewing the compliance with regulatory andindustry standards for environmental performance and occupational health and safety of personnel

and the communities affected by the Company.

The Board intends regularly to review key business risks including the financial risks facing the

Group in the operation of its business.

The Company will operate a share dealing code to prevent Directors and applicable employees from

dealing in Ordinary Shares and Preference Shares during close periods in accordance with Rule 21 of

the AIM Rules.

Taxation

Information regarding taxation is set out in paragraph 15 of Part 5. The details are based on the lawand understanding of the practice of tax authorities in the UK and Jersey at the date of this

document. The comments do not apply to certain categories of shareholder, such as persons owning

Ordinary Shares as securities to be realised in the course of a trade. All persons are advised to obtain

their own professional advice on the tax implications of acquiring, owning and/or disposing of

Ordinary Shares.

16


Ordinary Shareholders who are in any doubt as to their tax position should consult their professional

advisers immediately.

Further Information

Your attention is drawn to the additional information set out in Part 5 of this document.

17


PART 2

COMPETENT PERSON’S REPORT

A C A HOWE INTERNATIONAL LIMITED

Geological and Mining Consultants

254 High Street, Berkhamsted, Hertfordshire, HP4 1AQ, UK Tel: (01442) 873398Fax: (01442) 865710

E-mail: [email protected]

The Directors The Directors

Peninsular Gold Limited Nabarro Wells & Co Limited

First Island House Saddlers House

Peter Street Gutter Lane

St Helier London

Jersey JR2 4SP EC2V 6HS

Channel Islands United Kingdom

17 June 2005

Dear Sirs

COMPETENT PERSONS’ REPORT

At the request of the Directors of Peninsular Gold Limited (‘‘Peninsular’’) and Nabarro Wells & Co

Limited (‘‘Nabarro’’), A.C.A. Howe International Limited (‘‘Howe’’) has prepared a Competent

Persons’ Report for Peninsular’s proposed tailings retreatment programme and their regional

exploration projects located in Pahang State, Malaysia. Howe retained GBM Minerals Engineering

Consultants Limited (‘‘GBM’’) to review the metallurgical test work and CIL Plant capital and

operating cost budget generated by Time Mining Pty Ltd’s (‘‘Time Mining’’) metallurgical tests and

the 2005 update of an earlier 1996 Fluor Daniel bankable feasibility study.

Howe has also conducted an independent valuation of RAGM’s proposed CIL Expansion Project

based on RAGM’s tailings reserve of approximately 183,000 ounces of gold based on the Net PresentValue of forecast Discounted Cash Flows for the project.

Howe understands that this Competent Person’s Report is in relation to the issue of an AdmissionsDocument with regard to a proposed application by Peninsular for admission of its ordinary shares

to trading on the Alternative Investment Market of the London Stock Exchange plc (‘‘AIM’’) and

will be included in the Admission Document to be dated on or about 23rd June 2005.

Yours faithfully,

D J Patrick

A.C.A. Howe International Limited

Geological and Mining Consultants

Directors: A C A Howe - C W Armstrong PhD - D J Patrick PhD Registered in England No. 1363028

18


PENINSULAR GOLD LIMITED

REVIEW OF PROPOSED CIL PLANT

OPERATIONS AND THE EXPLORATION

POTENTIAL OF MINERAL PROPERTIESLOCATED IN THE STATE OF PAHANG

MALAYSIA

for

Peninsular Gold Limited

by

ACA Howe International Limited

June, 2005 Berkhamsted

Herts, UK

19


EXECUTIVE SUMMARY

A.C.A. Howe International Limited (‘‘Howe’’) has been retained by Peninsular Gold Limited

(‘‘Peninsular’’) and Nabarro Wells & Co Limited (‘‘Nabarro’’) to complete a Competent Personsreport (‘‘Report’’) for Peninsular’s proposed tailings retreatment programme and their regional

exploration projects located in Pahang State, Malaysia.

Peninsular has informed Howe that the company will have acquired immediately prior to listing, two

100 % owned subsidiaries, namely Raub Australian Gold Mining Sdn Bhd (‘‘RAGM’’) and

S.E.R.E.M. Malaysia Sdn Bhd (‘‘SEREM’’). Akay Holdings Sdn Bhd (‘‘Akay’’) has rights over a 207

acres mining lease application (the ‘‘Plantation MLA’’) lying North and adjacent to ML 1669 made

by Raub Mining Development Company Sdn Bhd (‘‘RMDC’’), approval of which application is still

pending. Peninsular will be granted rights to mine by Akay Holdings in respect of the PlantationMLA.

Peninsular intends to carry out several parallel gold related activities in Pahang State in Malaysia;

comprising the consolidation of exploration and mining title, operating a cash-generative tailings

retreatment project, based on historic tailings reserves at the old Raub gold mine (Carbon-in-Leach

treatable), brownfield exploration for vein system extensions at Raub and major greenfield exploration

for new and known gold deposits.

Peninsular plans to explore an aggregated area of approximately 219 square kilometres (km2) of

approved and pending exploration and mining title in the vicinity of and along strike from the Raubgold mine in the State of Pahang in Malaysia (Figure 1). This area sits astride a 60 kilometre long

length of the highly prospective Raub - Bentong Suture.

The ground holding position of the subsidiaries that Peninsular will have acquired at listing is that

only some exploration title has been granted to SEREM (6 of 12 applications covering 67 km2)

subject to the payment of fees (see Table 3), whilst approval of the balance of the exploration title is

expected shortly. The subsidiaries currently hold two areas of mining title (see Table 4), namely ML

1669 (held by RAGM at Raub) and MC 511 (held by SEREM at Tersang). A further two mining

lease applications at Tersang and Tenggelan have been approved subject to payment of the leasepremium quit rent, registration fees and deposits by SEREM and the renewal of the offers to grant

such mining leases as more particularly described in the ‘‘Additional Information’’ section of

Peninsular’s Admission Document. A third mining lease application at Raub covering known

mineralised lode extensions, the RMDC application for the Plantation MLA, is pending approval (see

Table 4). Further information on the status of Peninsular’s subsidiaries’ groundholdings is given in

the ‘‘Additional Information’’ section of Peninsular’s Admission Document.

The largest gold deposit in the region was the Raub underground mine which closed in 1961. The

mine worked a 6 km long lode strike, part of the northern half of which (some 2,300 m) is held byRAGM, with the remainder being under urban and plantation development to the south. Later (1978-

1995) surface mining showed that further mineralisation in the form of parallel lodes (East Lode

Zone) were present in addition to the main or Central Lode. This parallel, hangingwall mineralisation

was confirmed by follow-up drilling carried out by RAGM in 2004.

The Raub deposit has produced more than 1.0 million troy ounces (Moz) of gold between 1889 and

2004. This production came largely from underground operations and some surface mining prior to

1961, from low grade surface strip mining after 1978 and to a lesser extent from gravity tailingsoperations since 1999. In aggregate, an estimated 7.52 million tonnes (Mt) of ore and tailings at an

estimated average head grade of approximately 4.14 grams per tonne (g/t) has been treated to the end

of 2004. The gold production is known to be significantly under-reported (see Table 2) as no gold

production figures are available for surface strip mining carried out in the period between 1978 to

1995.

The Raub orebodies are low-sulphide, quartz veins in fissile, partly graphitic shales. Local, rich pay-

shoots on the Central Lode structural trend are surrounded by lower grade stockworks and parallel

veins. The gold deposit is of the well known mesothermal, turbidite-hosted gold sub-type, similar innature to the deposits in Victoria, Australia (Bendigo-Ballarat) and New Zealand (Reefton).

The 2004 Reverse Circulation (RC) drilling in the vicinity of the old mine has outlined 2.17 Mt of

sub-1 g/t inferred resources and mineralised ground. Howe considers that, for a variety of reasons,

this material requires further drilling to bring it into the indicated resource category and ultimately in

part into the probable reserve class of ore.

20



21



Peninsular’s stated intention is to target low grade, mass mining, weathered mineralisation targets.

Earlier regional exploration of the Block 8 area by SEREM in the 1990’s located numerous stream

sediment gold anomalies. This regional work was halted in favour of more detailed work on the

deposits in the Tersang, Tenggelan and Chenua areas (the ‘‘TTC’’ area) in the northeast portion ofthe Block 8 area. Here a large area, some 37 km2 in size, was shown to contain anomalous gold

values in streams and soils.

SEREM’s work in the TTC area was halted by budget cut-backs and SEREM was acquired by Akay

Venture Sdn Bhd (‘‘Akay Venture’’) in 1997. However, before halting work, scout diamond drilling in

1994 on the Tersang prospect outlined large quantities of mineralised ground. SEREM’s field estimate

of this resource at that time (1994) was 25.9 Mt at an average grade of 0.57 g/t and containing14,686 kg of gold (472,154 oz). SEREM’s present estimate of these inferred resources is 18.9 Mt at

an average grade of 0.87 g/t at a cut-off of 0.6 g/t and containing 528,000 oz or 16,422 kg of gold.

SEREM will become a 100 % subsidiary of Peninsular immediately prior to listing.

Apart from the tailings project’s reserve estimate, Peninsular has not as yet generated any resource

estimates that are acceptable under either the IMMM or JORC definitions of either Measured or

Indicated Resources, though potential for economic recovery has been shown at both Tersang andMalacca South. There appears little doubt that reserves of the type being sought by Peninsular should

be found by Peninsular, probably both at Raub and in the TTC area.

The proposed exploration programme will target both brownfield (Raub mine and Tersang) and

greenfield sites. The overall budget for the proposed programme has been estimated by Peninsular at

US $6.9 million. The proposed work programmes have been reviewed by Howe. The project timeline

charts shows that much detailed planning has gone into the designs of each of the three mainprogrammes, that there are no obvious timing inconsistencies and that numerous data analysis and

progress decision points have been included.

The drilling budgets are predicated on grid drilling for resource purposes in the TTC and Raub mine

areas. These grids, particularly the second phase of RC drilling and the follow-up diamond drilling,

may or may not be drilled to completion depending on field results.

The budgets presented to Howe appear to comprehensively cover the likely costs of the elements of

this programme. The estimated exploration expenditure of US $6.9 million will be underpinned by the

tailings treatment programme – a carbon-in-leach (‘‘CIL’’) plant treating 8 Mt of Raub mine tailings

over a planned life of 7 years. The tailings reserve estimate was originally done to a high standard by

McDonald Speijers (1994). Though later tailings processing for coarse gold recovery by gravity

methods has complicated the original tailings dispositions, gold balance calculations correct for this.

RAGM Tailings Reserve Volume Tonnes Grade Content kg Content Oz

Adj. Reserves - 31/12/04 6,259,000 m3 8,026,000 t 0.71 g/t 5,689 kg Au 182,900 oz Au

Note: Updated from Table in Section 7 of Cowan, 2004 and later reconciliations.

The tailing reserves are estimated to currently grade an average 0.71 grams of gold per tonne (g/t)

and to contain 182,900 oz of gold.

Some 4.47 Mt of the tailings in reserve have already been partially retreated by RAGM between 1999

and 2004 using Knelson gravity concentrators to recover 38,548 oz of fine gold. The overall gravity

gold process yield of 0.26 g/t is low because the process was not fully efficient and some ‘coarse’

gold, as well as the fine gold remains to be recovered. The new tailings treatment plant has beendesigned to treat an average of 130,000 tonnes per month (‘‘tpm’’) of tailings with the CIL circuit

treating 90,000 tpm of fine material amenable to cyanidation. A cyanide detoxification circuit is

included in the circuit, however if detoxification is not required, this can be converted to a CIL tank

to increase either the plant’s throughput or leach residence time.

Peninsular plans to progressively displace the CIL plant’s tailings feed with higher grade oxidised

surface material if such material is found within trucking distance (about 35 km) of the Raub CILplant. This is one of the primary objectives of the brownfield exploration programme.

Discounted cashflow modelling shows the tailings project is most sensitive to head grade, followed by

gold price. The modelled present day value (‘‘NPV’’) of the project is US $17.2 million at a gold

22



price of US $420 per ounce and a discount rate of 10 %. The NPV at US $435 per ounce is US

$19.0 million.

Howe’s view is that the most important operational aspects of potential opencast mining of the low

grade gold deposits in the TTC Area and the Raub East Lode Zone is the relatively low cost of

doing so. This is because the most expensive portions of the mining cycle have either been eradicated

or greatly reduced because the local, deep saprolitic weathering has removed the bulk of the silica

from the ore whilst leaving the quartz veins. Because of this, it is likely that this ’free-dig’ materialwill require only very minor drilling and blasting of large weathering core stones and that only minor

proportions of the ore will require intensive crushing and grinding. These lower mining, crushing and

milling costs will offset the expected low grades.

In addition, the study of the regional exploration model also indicates that other discrete, highergrade vein mineralisation could also be found within the Peninsular target areas.

Howe concludes that Peninsular’s proposed operations fall into three distinct categories, namely:

* Brownfield exploration for low grade extensions to known deposits,

* Greenfields exploration for new gold deposits, and;

* Tailings retreatment by CIL, based on the tailings reserves of an old, major gold mine.

Howe believes that, given the known brownfield targets at Raub and Tersang and the greenfield

exploration targets in the TTC area, Peninsular is likely to be successful in fulfilling its stated

intention of discovering low grade weathered surface bodies of mineralisation suitable for treatment.

The discovery of non-oxidised, lower tonnage, higher grade (around 4 to 5 g/t) vein system

mineralisation (as at Raub and nearby Penjom) should not be discounted.

Concerning the proposed CIL tailings treatment plant at Raub, Howe concludes that:

* The appropriate processing method has been selected and is based on adequate and

appropriate testwork.

* The proposed production rates and gold recoveries are reasonable and should be

achievable.

* The capital and operating costs are reasonable and have been estimated in accordance with

industry standards for an accuracy of -5% +10%.

* The production figures, capital and operating costs used in the financial model

appropriately reflect the proposed process.

* The operation of the CIL plant should provide a post-royalty and post-tax discounted

cashflow whose NPV is estimated to be US $17.2 million.

23



LIST OF CONTENTS

EXECUTIVE SUMMARY

1.0 INTRODUCTION

1.1 GENERAL

1.2 TERMS OF REFERENCE

1.3 SCOPE AND PERSONNEL

1.4 UNITS

1.5 SOURCES OF INFORMATION AND DISCLAIMER

2.0 COUNTRY AND PROJECT BACKGROUND

2.1 MALAYSIA – GENERAL BACKGROUND

2.2 PROJECT LOCATION AND PHYSIOGRAPHY

2.3 CLIMATE

2.4 INFRASTRUCTURE, SERVICES AND UTILITIES

3.0 HISTORICAL EXPLORATION AND MINING ACTIVITY

3.1 INTRODUCTION

3.2 ALLUVIAL GOLD PRODUCTION

3.3 RAUB GOLD MINE PRODUCTION

3.3.1 RAUB MINE PAST PRODUCTION

3.3.2 RAUB MINE PRODUCTION HISTORY

4.0 MINERAL TITLE AND OPERATIONAL PERMITTING

4.1 MALAYSIAN MINERAL TITLE

4.2 BLOCK 8 AREA TITLE

4.3 PROSPECTING PERMITS AND LICENCES

4.4 MINING CERTIFICATE AND MINING LEASES

4.5 OPERATIONAL PERMITTING AND AGREEMENTS

4.5.1 ENVIRONMENTAL PERMITTING

4.5.2 OTHER PERMITS, LICENCES AND PERMISSIONS

5.0 GEOLOGY AND MINERAL DEPOSITS

5.1 REGIONAL GEOLOGY

5.1.1 REGIONAL GEOLOGY AND METALLOGENY

5.1.2 STRATIGRAPHY

5.1.3 SAPROLITIC WEATHERING HORIZON

5.1.4 THE RAUB GROUP

5.2 INDIVIDUAL DEPOSIT GEOLOGY

5.2.1 RAUB GOLD MINE

5.2.2 OTHER REGIONAL GOLD DEPOSITS

5.2.3 OTHER NEARBY DEPOSITS IN PAHANG STATE

5.3 CONCEPTUAL DISTRICT GOLD DEPOSIT MODEL

5.3.1 KNOWN DEPOSIT SIZES AND GRADES

5.3.2 DEPOSIT DEFINING GEOLOGY AND STRUCTURE

5.3.3 DISTRICT MINERALISATION MODEL

6.0 EXPLORATION

6.1 EXPLORATION HISTORY

6.1.1 INTRODUCTION

6.1.2 HISTORICAL EXPLORATION

6.2 RAGM’S 2004 EXPLORATION

6.2.1 DRILLING IN THE RAUB AREA

6.2.2 TERSANG SAMPLING

6.3 PROPOSED EXPLORATION PROGRAMME

6.3.1 INTRODUCTION

6.3.2 GENERAL EXPLORATION METHODOLOGIES

6.3.3 TTC PROJECT AREA

6.3.4 RAUB ML 1669 AND PLANTATION MLA AREA

6.3.5 REGIONAL EXPLORATION OF OTHER TARGETS

6.3.6 RAUB TAILINGS DRILLING

6.3.7 EXPLORATION CONCLUSIONS

7.0 MINERAL RESOURCES AND RESERVES

7.1 TAILINGS RESOURCE AND RESERVE ESTIMATES

7.1.1 MCDONALD SPEIJERS 1995 TAILINGS RESERVE ESTIMATE

7.1.2 TONNAGE WORKED AND TAILINGS RESERVE ESTIMATE

7.1.3 RAGM 2004 TAILINGS RESERVE ESTIMATE

7.2 RAUB OXIDISED OPEN-CAST RESOURCE ESTIMATES

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7.2.1 EASTERN LODE ZONE BULK DENSITIES

7.2.2 MALACCA SOUTH FREE DIG OXIDE RESOURCES

7.2.3 WARD FREE DIG OXIDE RESOURCES

7.2.4 COMMENT ON DRILLING RECOVERIES AND SAMPLE STATISTICS

7.2.5 TERSANG RESOURCE ESTIMATES

7.3 RESOURCE CONCLUSIONS

8.0 TAILINGS DUMP PROCESSING

8.1 INTRODUCTION

8.2 METALLURGICAL TESTWORK

8.3 RAGM GRAVITY PLANT OPERATIONAL RESULTS

8.4 PENINSULAR’S PROPOSED TAILINGS TREATMENT

8.4.1 PROCESS OVERVIEW

8.4.2 COMMENTS ON PROPOSED OPERATIONS AND DESIGN

8.5 PROPOSED PROCESSING OF OPEN-CAST MATERIAL

8.6 TAILINGS TREATMENT COMMENTS AND CONCLUSIONS

9.0 VALUATION OF CIL PLANT OPERATIONS

9.1 KEY ASSUMPTIONS, RISKS AND LIMITATIONS

9.2 DISCOUNTED CASHFLOW VALUATION

9.3 VALUATION DISCUSSION AND CONCLUSIONS

10.0 COMMENTS AND CONCLUSIONS

References

LIST OF TABLES

TABLE 1. MODERN GOLD MINING HISTORY OF BLOCK 8

TABLE 2. GLOBAL ESTIMATE RAUB MINE GOLD PRODUCTION AND RESOURCES

TABLE 3. CURRENT PENINSULAR EXPLORATION TITLE APPLICATIONS

TABLE 4. PENINSULAR MINING TITLE AND APPLICATIONS

TABLE 5. STRATIGRAPHY OF THE RAUB AREA

TABLE 6. ESTIMATE OF REGIONAL GOLD PRODUCTION & KNOWN RESOURCES

TABLE 7. HISTORICAL GOLD EXPLORATION IN THE RAUB-TERSANG AREA

TABLE 8. RAGM’S 2004 RC DRILLING PROGRAMME

TABLE 9. PENINSULAR GOLD PLANNED EXPLORATION EXPENDITURE

TABLE 10. PENINSULAR GOLD PROPOSED DRILLING IN THE TTC AREA

TABLE 11. MCDONALD SPEIJERS / FLUOR DANIEL PROVED TAILINGS RESERVES

TABLE 12. MCDONALD SPEIJERS INFERRED TAILINGS RESOURCES

TABLE 13. MCDONALD SPEIJERS INFERRED FILL RESOURCES

TABLE 14. RAGM TAILINGS RESOURCE BALANCE AS AT END 2003

TABLE 15. DECLARED RAGM TAILINGS RESERVES (* ADJUSTED)

TABLE 16. CIL LEACH TEST RESULTS

TABLE 17. R4 BANKA SAMPLE CIL LEACH TESTS

TABLE 18. CIL RECOVERY TESTS

TABLE 19. RAGM ANNUAL GRAVITY FINE GOLD PRODUCTION TO END 2004

TABLE 20. RAGM CAPITAL COST ESTIMATE

TABLE 21. RAGM OPERATING COST ESTIMATES

TABLE 22. SINGLE PARAMETER SENSITIVITY TABLE (IN US $ MILLIONS)

TABLE 23. SCENARIO SENSITIVITY TABLE (IN US $ MILLIONS)

25



LIST OF FIGURES

FIGURE 1. PENINSULAR GOLD PROJECT LOCATION MAP

FIGURE 2. PENINSULAR GOLD MINERAL TITLE MAP

FIGURE 3. PENINSULAR MALAYSIAN METALLOGENIC BELTS

FIGURE 4. GENERAL GEOLOGY OF THE RAUB REGION

FIGURE 5. RAUB GOLD MINE LOCATION PLAN

FIGURE 6. LODE CROSS-SECTIONS IN THE RAUB DEPOSIT

FIGURE 7. SKETCH OF TERSANG FOOTWALL SHALE MINERALISATION

FIGURE 8. STREAM AND SOIL GOLD ANOMALIES IN THE TTC AREA

FIGURE 9. RAGM TAILINGS PONDS AND DRILL SAMPLING LOCATIONS

FIGURE 10. RAGM CASHFLOW SENSITIVITY CURVES

26



1.0 INTRODUCTION

1.1 GENERAL

A.C.A. Howe International Limited (‘‘Howe’’) has been retained by Peninsular Gold Limited

(‘‘Peninsular’’) and Nabarro Wells & Co Limited (‘‘Nabarro’’) to complete a Competent Persons

report (‘‘Report’’) for Peninsular’s proposed tailings retreatment programme and its regional

exploration projects located in the State of Pahang in Malaysia.

Following completion of the acquisition of its Malaysian subsidiaries, Peninsular’s assets will be held

within two 100 % owned subsidiaries whose operations will be as follows:

* S.E.R.E.M. Malaysia Sdn Bhd (‘‘SEREM’’) which will carry out brownfield and greenfield

exploration in the Tersang-Tenggelan-Chenua (‘‘TTC’’) Project area and elsewhere in the

‘‘Block 8’’ area, and

* Raub Australian Gold Mining Sdn Bhd (‘‘RAGM’’) which will carry out brownfield

exploration and operate the CIL plant based on tailings situated on an existing mininglicence and a mining lease application (Plantation MLA) over the northern portion of the

old Raub mine, north of the town of Raub.

It is Howe’s understanding that this Report will be used in conjunction with Peninsular’s application

to join AIM, a component market of the London Stock Exchange.

1.2 TERMS OF REFERENCE

RAGM and SEREM initially approached Howe to complete a summary evaluation report of the

RAGM tailings project in August, 2004 and subsequently a further summary evaluation report of the

Block 8 area ground holdings in November, 2004. Subsequently, this Competent Person’s report was

prepared for inclusion in an Admission Document with regard to the Admission of Peninsular to the

Alternative Investment Market (‘‘AIM’’) of the London Stock Exchange Plc.

Howe’s technical review of the project comprised a gravity plant and exploration project site visit in

November, 2004 and a review of information made available by RAGM and SEREM. To

complement the site visit Howe utilised the expertise of GBM Minerals Engineering Consultants

Limited (‘‘GBM’’) to review the metallurgical test work and CIL Plant capital and operating cost

budget generated by Time Mining Pty Ltd’s (‘‘Time Mining’’) metallurgical tests and their 2005

update of the earlier 1996 Fluor Daniels Pty Limited (‘‘Fluor’’) feasibility study (Fluor, 1996).

Howe is an international geological and mining consulting firm which provides a wide range of

geological and mining consulting services to the international mining industry. The firm’s services are

provided through offices in Berkhamsted, UK and Toronto, Canada.

Neither Howe nor any of the authors of this Report have any business relationship, other than acting

as independent consultants, with Peninsular or any associated company, nor with any company

mentioned in the Report which is likely to materially influence their impartiality or create the

perception that the credibility of the Report could be compromised or biased in any way. The viewsexpressed herein are genuinely held and deemed independent of Peninsular.

Moreover, neither the authors of the Report nor Howe have any financial interest in the outcome of

any transaction involving the properties considered in this Report, other than the payment of normal

professional fees for the work undertaken in their preparation (which are based upon standard

charge-out rates and the reimbursement of expenses). The payment of such fees is not dependent

upon the content or the conclusions of either this Report, or any consequences of any proposed

transaction.

1.3 SCOPE AND PERSONNEL

The Report has been prepared principally by Mr. Andrew Phillips, MSc CEng, Senior Associate

Geologist with Howe and Mr. Christopher Stinton, MSc CEng, Senior Metallurgist with GBM, who

conducted an office study of metallurgical documentation, as construction of the proposed CIL plant

has not commenced.

The preparation of the Report was carried out in consultation with Dr. D. Patrick, PhD CEng, a

director of Howe. Dr Patrick has over 30 years experience in the international mining industry

including extensive experience in international mineral exploration and deposit evaluations. Mr.

27



Phillips has over 30 years experience in the mining industry, including experience in the evaluation of

gold exploration and mining projects throughout the world. Mr. Stinton has over 20 years experience

in the extractive metallurgical industry that includes extensive experience in gold extraction from ores

in deposits throughout the world.

Peninsular has accepted that the qualifications, expertise, experience, competence, and professional

reputation of Howe’s Principals, Senior Associate Geologists and Metallurgical Engineers are deemed

appropriate and relevant for the preparation of this Report. Peninsular has also accepted that Howe’s

principals are members of professional bodies that are appropriate and relevant for the preparation of

this Report.

1.4 UNITS

All units of measurement used in this report are metric unless otherwise stated. Gold values are

reported in g/t and gold content in both kilograms (kg) and troy ounces (oz). The U.S. dollar (US $)

is used throughout this Report, unless otherwise stated.

1.5 SOURCES OF INFORMATION AND DISCLAIMER

In preparing this Report, Howe reviewed geological reports and maps, miscellaneous technical papers,

company documentation and other public and private information as listed in the ‘‘References’’

section at the end of this report. Howe has assumed that all of the information and technical

documents reviewed and listed in the ‘‘Sources of Information’’ are accurate and complete in all

material aspects. Howe has not been asked to verify mineral title, compliance with Malaysian laws

and regulations or the underlying inter-company agreements and title transfers. Though Howe hascarefully reviewed the available information, Howe has not concluded any extensive independent

investigation or any sampling to verify its accuracy and completeness.

Mr. Andrew Phillips, accompanied by Dr. Yves Cheze, a consulting geologist and former director of

SEREM, carried out a site visit to the Northern portion of the old Raub Mine Area, the current

Phase 1 gravity plant and the Tersang and Chun Chok prospects during the period 25th to 27th

November, 2004.

Peninsular and its subsidiaries have warranted that a full disclosure of all material information in its

possession or control has been made to Howe. Peninsular has agreed that neither it nor its associateswill make any claim against Howe to recover any loss or damage suffered as a result of Howe’s

reliance upon the information provided by Peninsular or its proposed subsidiaries for use in the

preparation of this Report. Peninsular has also indemnified Howe against any claim arising out of the

assignment to prepare this Report, except where the claim arises as a result of any proved wilful

misconduct or negligence on the part of Howe. This indemnity is also applied to any consequential

extension of work through queries, questions, public hearings or additional work required arising

from Howe’s performance of the engagement.

Peninsular has reviewed draft copies of the Report for factual errors. Hence, the statement andopinions expressed in this document are given in good faith and in the belief that such statements

and opinions are not false and misleading at the date of this Report.

Howe’s opinion is provided solely for the purposes outlined in Section 1.1 and Howe consents to the

inclusion of this report in Peninsular’s Admission Document. Howe reserves the right to, but will not

be obligated to, revise this Report and conclusions thereto if additional information becomes known

to Howe subsequent to the date of this report.

The volume of information available for the RAGM tailings project is large and includes a

comprehensive feasibility study conducted by Fluor Daniel Pty Limited in 1996, in which a milling

and carbon-in-leach (CIL) treatment plant was proposed (Fluor, 1996). Malaysian, Australian andSouth African consultants were and are still used extensively for geology and mineral resource

evaluation, mine design and ore reserve estimation.

2.0 COUNTRY AND PROJECT BACKGROUND

2.1 MALAYSIA – GENERAL BACKGROUND

The Malaysian peninsula is located in the heart of South East Asia, bordering Thailand to the north,

Indonesia to the west and south, Singapore to the south and Borneo/Kalimantan to the east.

28



Historically Malaysia has been influenced by waves of immigrants from the North and Sumatra (8-

13th Centuries) and was also subject to later Indian and Islamic influences. The indigenous trading

empire centred at Malacca fell to the Portuguese in the early 16th Century. They were ousted in turn

by the Dutch in 1641 and the British obtained control of the peninsula in 1824 following theNapoleonic War. Malaysia became a federation in 1948 and became independent from Britain in

1957.

Malaysia has a bicameral parliamentary democracy and is a constitutional monarchy, with 9 states

(including Pahang) headed by Sultans and hereditary Rulers who rotate the kingship every 5 years.

The legal system is based on English Common Law. The British retained the local state structures

during their presence, leading to local legal variations. The country covers an area of 329,758 squarekilometres (km2) and has a population of approximately 25.5 million people. Ethnically the

population is mixed, being composed largely of Malays (approximately 58 %), Chinese (approximately

24 %) and Indians (approximately 10 %). English is widely spoken and is now a compulsory school

subject, with science and mathematics being taught in English. Kuala Lumpur is the commercial and

business capital of Malaysia, it has a population of approximately 1.5 million and has grown from an

alluvial tin mining centre.

The local currency is the Malaysian Ringgit (‘‘RM’’), which has been pegged to the US Dollar at a

rate of RM 3.8 per US Dollar (US $) since 2nd September, 1998.

2.2 PROJECT LOCATION AND PHYSIOGRAPHY

The RAGM tailings operation is located 3 km north of the town of Raub in westernmost-central

Pahang State in the Malaysian peninsula, near the centre of Peninsular’s extensive regional

exploration area. Raub is 110 km (approximately 1.5 hours and approximately 75 km direct) from

Kuala Lumpur by motorway and bituminised regional roads. RAGM’s gravity recovery plant lies

directly north of and bounds the village of Bukit Koman (see Figure 1).

The physiography of the region is a broad, northerly trending, flat-lying valley some 10 to 20 kms

wide between the Main Granite Range of mountains to the west and the Benom Mountains to the

east. Drainage in the region is generally from west to east, before turning northward into the South

China Sea, due to the intervening Benom Mountains in the east.

2.3 CLIMATE

The project area is located close to the Equator (48 North) with a hot and humid equatorial climate.

There are two annual monsoon seasons in Malaysia, namely the southwest or ‘‘dry’’ monsoons (May

to September) and the northeast or ‘‘wet’’ monsoons (November to March), with a wet season peak

in December to January. Annual rainfall in the Raub area is approximately 2,200 mm per annum.Temperatures vary daily between 238 and 378 throughout the year, with Relative Humidity remaining

in the low to mid 80 percents.

2.4 INFRASTRUCTURE, SERVICES AND UTILITIES

The Raub area is generally well served with respect to modern infrastructure, communications and

road links. The Malaysian railway, from Singapore, passes through Kuala Lipis, some 50 km north

of Raub. The primary industry in the area is agricultural, being based on commercial palm oil,

rubber and timber plantations. Mining was important in the recent past, based on alluvial tin

extraction and the Raub gold mine. Light engineering works are present in Raub for fabrication and

repair purposes.

Peninsular’s CIL plant will use hydraulic mining, with adjunct load and haul mining methods. Labour

experienced in alluvial mining and earth moving techniques is available in the district. Additionally,

earth moving contractors, using fleets of locally assembled, 10 tonne ‘‘Ghost’’ trucks can provide

cheap bulk material transport.

Electricity is obtained from an 11 kV High Tension spur line off the 132 kV National Grid, supplied

by Suruhanjaya Tenaga Nasional Berhad, the State Power Supply company. A 2,000 kVA Low

Tension transformer is currently installed on site and 3-phase, 440 V power is available to a

maximum of 2,000 amps. This transformer will be retained for the crushing and milling circuit

following the installation of a new, higher duty unit for the CIL plant.

29



Water is currently obtained from the open-pits created during the 1978-1995 mining campaigns by

local tributors. These also act as settling ponds for clear water return to the Koman River.

Additional water supplies can be obtained from the underground workings of the Raub mine or from

boreholes, if required. Process water will be recycled from the CIL plant thickener and the tailingsponds.

Peninsular, through RAGM, has been granted access to and the use of the surface of what is termed

(by Howe) the ‘‘Plantation Block’’ by the Raub Mining and Development Company Sdn Bhd

(‘‘RMDC’’). This block of alienated (i.e. privately owned) ground is contiguous with and lies to the

north of RAGM’s mining lease (‘‘ML 1669’’). This area is a portion of a commercial oil palm

plantation which is underlain by the northernmost Sections of the old Raub Gold Mine, namely theMalacca North, Ward and Sungai Agas sections (see later). RMDC has recently applied for a mining

lease over the southern portion of the Plantation Block (see later) and will grant to Akay Holdings

the right to explore and conduct mining operations on this mining lease once it has been approved

and granted. Akay Holdings will in turn enter into an agreement with Peninsular to provide

Peninsular or a person or entity nominated by Peninsular with the right to explore and conduct

mining operations on this to-be approved mining lease. Additional information on the surface right,

exploration and mining agreements is given in the ‘‘Additional Information’’ section of Peninsular’s

Admission Document.

3.0 HISTORICAL EXPLORATION AND MINING ACTIVITY

3.1 INTRODUCTION

The known gold exploration and mining history of the Block 8 geographic area is shown sequentiallyin Table 1 and discussed in part below and elsewhere.

Table 1. MODERN GOLD MINING HISTORY OF BLOCK 8

Company Period Activity

Raub Australian Gold Mining Limited 1889 – 1942 Original exploration and exploitation

1947 – 1961 Post World War Two (‘‘WWII’’) exploitation

Alluvial dredger on Raub River 1927 – 1931 Produced 1,775 oz of 931 fine gold

Tersang and Chun Chok Alluvials 1933 – 1938 Produced 2,312 oz of 962 fine gold

Cheroh Prospect Pre 1939 3 levels on brecciated aplite dyke

Raub Mining and Development Company 1962 – 1965 Reclamation and surface mining

Kim Yew Lee opencast mine (ML 483) 1978 – 1985 Exploitation of weathered surface material

Kim Chuan opencast mine 1991 – 1995 Exploitation of stope-fill and surface material

Tersang open-pit (MC 511) 1994 – 2003 Mechanically dug open-pit

RAGM (ML 1669) 1999 – Current Tailings treatment and bulk surface sampling

New ML Application 2004 Delineation of free-dig oxide material

Note: Data taken largely from Richardson, 1939, Lee Ah Kow et al, 1986 and Cowan, 1994 & 2004. Tin exploration and mining alsotook place, especially in the Southwest and West of Block 8.

3.2 ALLUVIAL GOLD PRODUCTION

Data on alluvial gold [and tin] production in the Block 8 Area relates largely to the pre-WWII era

(Richardson, 1939). Old alluvial workings are normally a useful field guide to underlying and adjacent

hard rock gold deposits, e.g. as at Raub, Tersang, Chun Chok and Chenua.

30



Production records from a suction-cutter dredge that worked the Raub River between 1927 and 1931

showed production of 1,652 oz (51.37 kg) of fine gold from 9,500 cubic metres (m3) of material

worked. The average quoted grade was 5.41 grams/m3 and the gold averaged 931 fine.

The Tersang alluvials occur under an alluvial flat in the Sungai Tersang, a tributary of the Sungei

Lipis River, immediately west of the Tersang primary gold deposit. Data for the period 1933 to 1938

shows production of 2,205 oz (68.59 kg) of fine gold from the Tersang alluvial flat. The gold was 962

fine. A quoted grade of 4.66 g/yd3 or 6.09 g/m3 was given for the 1936 production. Bedrock was a

pyritic, graphitic shale (Richardson, 1939). Production from nearby Chun Chok was 19.38 oz (0.60

kg) in 1937. No information is available apart from the bedrock being graphitic shale. The alluvial

workings surround the known mineralised outcrop. No data is available on the extensive Chenua

alluvials which lie east of Tersang. These cover an area of several km2 and obscure a potassicradiometric anomaly.

Banka drilling was carried out in 2004 by RAGM for R3 tailings pond reserve estimation and also

for R1, R3 and R4 tailings pond metallurgical test purposes. The drilling and sampling logs show

what could be alluvial sediments with sporadic +1 g/t values below the tailings.

3.3 RAUB GOLD MINE PRODUCTION

3.3.1 RAUB MINE PAST PRODUCTION

Gold has been mined at Raub since prehistoric times. The deposit was re-discovered in 1885 and

operations commenced in 1889. The mine was not worked from 1942 to 1946 during the Japanese

occupation of Malaysia, and underground operations finally ceased in 1961 due to the fixed gold

price (then US $35 per ounce).

The available data regarding production, reserves and resources in and adjacent to the old Raub gold

mine are summarised in Table 2 below. The old Raub mine grades and sources of tailings are

discussed in some detail because of their important contribution to the district mineralisation model

for exploration and Peninsular’s proposed CIL plant.

It is obvious that both the actual tonnes mined and in particular, the actual gold recovered are

under-reported at differing stages in the life of the Raub mine. This is especially relevant when

considering the large opencast working along the mine outcrop and further north which was dug

between 1978 to 1995, where only partial, early data is available (Lee Ah Kow et al, 1986).

3.3.2 RAUB MINE PRODUCTION HISTORY

Known mine production from the Raub mine between 1889 and 1995 was 7.520 Mt from all sources,

at a recovered grade of approximately 4.14 g/t to produce 31.18 tonnes of gold or 1.002 Moz.

The underground mine ran at particularly high grades between 1889-1900 and 1925-1933, with grades

in the order of 17 g/t. Its long term annual yield varied between 6 to 26 g/t and prior to WWII it

averaged about 11 g/t. The mine’s grade fell steadily during its final years and was around 8 g/t in

1954, prior to closure in 1961.

The mine also produced significant surface material which occurs between and adjacent to the high

grade quartz veins. For example, 550,000 t at 2.7 g/t was mined on surface in the Malacca Section

between 1905-1919, with corresponding underground grades of about 11 g/t (Richardson, 1939). The

availability of cheaply won surface ore to replace lower grade underground ore (during inter-payshoot

development periods) was a factor in the mine’s long life. Peninsular plans to drill for further surface

material as part of their brownfield exploration programme.

The next significant phase in the mine’s life was the operation of opencast mines by local tributorsbetween 1978 and 1985 (Kim Yew Lee Mine) and between 1991 and 1995 (Kim Chuan Mine).

The Kim Yew Lee (‘‘KYL’’) mine treated ‘‘free-dig’’ material by scrubber, trommel and palong

sluicing. The mine deposited its tailings over the old Raub mine tailings in tailings ponds R1, R2, R3,

R4, R5 and R7 (Cowan, 1994 & 1997). The material was neither crushed nor milled and any

entrained gold would not have been recovered (see Figure 9 for pond locations).

31



Table 2. GLOBAL ESTIMATE RAUB MINE GOLD PRODUCTION AND RESOURCES

Raub Gold Mine – By Date and Source of Known Production

Source Tonnes Grade Kgs Troy Ounces

Raub Mine: 1889 to 1954* 3,077,000 8.80 27,078 870,564

Raub Mine: 1955-1961 n.a. n.a. 2,439 78,404

RMDC:1962-1965 n.a. n.a. 323 10,383

Raub Open-cast 1978-1995 4,400,000 n.a. +77 +2,463

Raub E Zone (RAGM) 40,000 2.00 64 2,057

Raub Tailings: 1999-2004 4,474,000 0.26 1,199 38,548

Bukit Malacca: 2003 3,700 0.24 1 32

Raub Overall +7,520,700 ~4.14 +31,181 +1,002,451

Raub Gold Mine – Reserves and All Resources (including Mineralised Ground)

Tailings 8,026,000 0.71 5,689 182,878

Malacca South: Inferred 1,062,000 0.63 669 21,510

Ward: Mineralisation 1,117,000 0.52 581 18,674

Reserves and Resources 10,205,000 0.68 6,939 223,062

Assumed 90% Recovery# Est. of Yield 0.61 6,245 200,755

Raub Gold Mine – Total ‘‘Yield’’ Based Production, Reserves and Resources

Total and Average +10,250,000 3.66+ +37,424 +1,203,206

Note: * Raub mine tonnage and grades given in original McDonald Speijers table are assumed to be long tons and in pennyweights perlong ton (dwt/lt) reflecting Australian usage (Cowan, 1994). Totals and averages will not compute due to rounding and truncation.Production figures are yield based while reserve and resource figures are head grades. The symbol # denotes that assumptions have beenmade with regard to the figures shown, which may not be wholly valid. Data Sources: Richardson, 1939, McDonald Speijers (1995),Cowan (1994 & 1997) and Lee Ah Kow et al., 1986.

The Kim Chuan (‘‘KC’’) mine was a more sophisticated operation which worked near-surface stope

fill and remnant crown pillar and outcrop material, largely in the Koman and Derrick areas. Oversize

material was milled and gold was again recovered by sluicing. Tailings were deposited over the earlier

tailings in ponds R5 and R6 (Cowan, 1994 & 1997) and form part of the project reserves.

There are effectively no production records for this extended period of working so Cowan (1994) used

digital terrain models (DTMs) based on different ages of aerial photography and land surveys to

estimate that approximately 4.4 Million tonnes (Mt) of material were excavated during this period.

The tailings produced during this period of the mine’s life form part of the CIL plant’s reserves.

The sequence of mining has led to a complicated tailings stratigraphy, with older dark grey,

unoxidised underground mine tailings (which are higher grade, in some part cyanided and also

include minor oxidised surface material) being overlain by one or two generations of buff coloured,

younger, generally oxidised tailings. Additionally, waste and rubble tailings containment dam walls arepresent, which can be internal to as well as external to the tailings ponds. RAGM has itself

mechanically mined some 50 % of the tailings from almost all of the ponds between 1999 and 2004.

The resultant, partially coarse gold depleted tailings have been re-deposited into available voids within

the tailings pond system. Only two tailings ponds (R3 and R4) remain undisturbed, because they are

predominantly composed of fine grained material not suitable for gravity recovery.

32



RAGM have demonstrated through drilling in 2004 at the Koman, Malacca and Ward Sections that

significant ‘‘brownfield’’ resources remain to be located east of, adjacent to, and within the Central

Lode.

4.0 MINERAL TITLE AND OPERATIONAL PERMITTING

4.1 MALAYSIAN MINERAL TITLE

Howe has not been asked to carry out legal due diligence or to verify mineral title, compliance with

laws and regulations or the underlying inter-company agreements and title transfers. The information

shown below and in Table 4.1 was obtained from Akay Holdings, RAGM, SEREM and Peninsular.

The relevant Federal Malaysian Law under which mining title and permissions are granted and

regulated is the Mining Enactment and The National Land Code 1965. A review of the Mining

Enactment has been undertaken by the Malaysian Government and new legislation has been proposed

to replace the Mining Enactment, including the Mineral Development Act (Act 525 of 1994), together

with the Pahang State Mineral Enactment regulations (2001). Though extant, this new legislation has

not yet been gazetted and is not in force. Malaysia published a National Minerals Policy in 1998

which devolved mineral affairs and their regulation to the various State governments, in this case to

the Minerals and Geoscience Department of Pahang State located at 11th Floor, Wisma Persekutuan,Jalan Gambut, 25000 Kuantan, Pahang, Malaysia.

Mineral rights in Malaysia belong to the State. With respect to ‘‘private land’’ alienated from State

ownership, mining title cannot be granted without the consent of the landowner. This is relevant in

the case of the new mining lease application over agricultural land immediately north of ML 1669

(the ‘‘Plantation MLA’’), where the landowner and applicant for the Mining Lease is RMDC. Two

types of mining title are issued, namely Prospecting Permits and Licenses which confer the right to

search for minerals and Mining Certificates (unsurveyed) and Mining Leases (surveyed) which conferthe right to mine identified mineral occurrences. Mining can however only commence once an

‘‘Authority to Mine’’ has been issued by the relevant State authority.

4.2 BLOCK 8 AREA TITLE

In order to attract mineral exploration funds into the mining sector, the Pahang State Government

introduced a block system in 1990 wherein large blocks of ground containing State land were

tendered to companies in joint venture with the Pahang State Economic Development Corporation

(‘‘PKNP’’). A prospecting and mining agreement covering the Block 8 ‘‘Prospecting Area’’ was signedby SEREM and Perak Motor Company Sdn. Bhd. (Perak Motors) with PKNP on the 9th July, 1990

(‘‘1990 Agreement’’). SEREM was then a subsidiary of BRGM, the French State mining and

exploration company.

SEREM’s work in the Block 8 area was halted following BRGM scaling down its worldwide

operations. Akay Venture Sdn Bhd (‘‘Akay Venture’’) entered into a sales agreement with SEREM in

1997 and SEREM became a wholly owned subsidiary of Akay Venture in 1999. SEREM will becomea 100 % subsidiary of Peninsular immediately prior to the listing of Peninsular.

An agreement between SEREM and the Perak Motor Company, dated 26th December 1989, grants

an option to the Perak Motor Company to purchase up to 5% of the paid-up capital of any

company incorporated to undertake the mining operation for all minerals in hard rock in those areas

subject to the 1990 Agreement.

Though nominally only having a 5 year term, PKNP has apparently confirmed in a letter dated 31st

December, 2004 that the terms and conditions of the 1990 agreement are still valid. This agreement is

complex and its terms are discussed in the ‘‘Additional Information’’ section of the Peninsular

Admission Document and only some points are mentioned briefly here. The original 1990 agreement

committed the Pahang Government to grant SEREM access to and the exclusive right to prospect for

minerals to all of the approximately 111,265 hectares of Pahang State land within Block 8. SEREM

carries all costs and operates under an agreed exploration programme and budget with PKNP, who

have full access to all data generated. Annual relinquishment provisions apply to any prospectingpermits and licenses granted within the block.

Mining title areas selected by SEREM will be applied for by PKNP at SEREM’s expense, but in

PKNP’s name and PKNP will then issue a mining sub-lease to SEREM, who undertake to keep it in

33



good standing. SEREM is also required to make various mineral title related, staged payments and in

return for the effective exclusive right to mine granted by this agreement, SEREM is required to pay

2 % of the gross value of gold extracted from primary deposits and 6 % of alluvial and eluvial gold

gross value to PKNP. These tributes are subject to minimum payments and various other costs andbenefits apply. SEREM is also required to pay the gazetted ad valoram tax of 5 % of gold value to

the Pahang State Government. The gazetted gold price is currently valued at RM 890 or US $235 per

ounce.

34



266

268

269

270

212

2005

217

216

215

265

267

218

MLA

97

243

RAUB

GOLD

MINE

MC 511

S E L A N G O R

P E R A K

P A H A N G

Raub

Cheroh

ML 1669

TERSANG

GOLD DEPOSIT

Track

Road

State Boundary

Town

Perak Motor Corp Agreement Areas

Other State Lands

Gold Mine or Deposit

Peninsula Prospecting Titles & Applications[with Application / Title Name or Number]

Peninsula Mining Titles & Applications[with Application / Title Name or Number]

Block 8 Boundary

LEGEND

FIGURE 2: THE PENINSULA GOLD PROJECT MINING &PROSPECT TITLES

A C A Howe International Limited

Scale in Kms

151050

Howe has reviewed the various prospecting and mining agreements discussed above in as far as they

may influence the technical status and development of Peninsular’s assets. Further information on the

agreements discussed above is given in and should be read together with the ‘‘Additional

Information’’ section of Peninsular’s Admission Document.

4.3 PROSPECTING PERMITS AND LICENCES

Prospecting Permits (‘‘PP’’) generally cover smaller areas for shorter periods than do Prospecting

Licences (‘‘PL’’), which are issued for larger areas (maximum 20,000 acres), for longer tenures

(maximum 10 years) and which enable mining rights to be granted. It is understood by Howe that all

prospecting permit (‘‘PP’’) and license (‘‘PPL’’) title applications that have been applied for will be

granted under the original conditions pertaining to the 1990 Agreement, as outlined above. It shouldbe noted that the prospecting licence applications are for five years, while the applications for

prospecting permits have three year validities in terms of the 1990 Agreement. Prospecting licenses

can be issued for up to 10 years and prospecting permits normally only have a one year term. The

new areas under application and the areas for renewal of old lapsed title (now largely approved) are

shown in Table 3 and in Figure 2; no new prospecting title applications have been granted as at the

date of writing, though their approval is expected shortly.

Table 3. CURRENT PENINSULAR EXPLORATION TITLE AND APPLICATIONS

Land Parcel Location

Land Office

File No.

Area in

Acres/Hectares Target Area Type, Period & Status

Prospecting Permit and Prospecting Licence Applications North of Raub

HS Tersang, Telang Lipis1 PTL 9/002/2005 6,433 / 2,603.3 Regional PP, 3 yrs, Approved*

HS Tersang, Sega, Raub PTR 1/04/S/0212 8,991 / 3,638.5 Regional PP, 3 yrs, Approved*

Sg Tersang, Batu Talam, Raub2 PTR 1/04/BT/0215 928 / 375.5 Tersang PL, 5 yrs, Approved*

HS Tersang, Batu Talam, Raub PTR 1/04/BT/0216 458 / 185.3 Tersang PP, 3 yrs, Approved*

HS Tersang, Batu Talam, Raub4 PTR 1/04/BT/0217 896 / 362.6 Tersang PP, 3 yrs, Approved*

HS Tersang, Semantan, Raub PTR 1/04/SU/0218 411 / 166.3 Regional PP, 3 yrs, Approved*

Sg Tersang, Batu Talam, Raub3 PTR 1/04/BT/0265 94.2 / 38.14 Chun Chok PLA, Application, 5 yrs

Sg Tersang, Batu Talam, Raub3 PTR 1/04/BT/0267 165 / 66.7 Chun Chok PLA, Application, 5 yrs

Bukit Kajang, Mukim Gali, Raub PTR 1/04/G/0266 7,538 / 3,050.5 Regional PLA, Application, 5 yrs

Sub-total – All: — 25,914/10,487 North of Raub —

Sub-total Approved: TTC Area 18,117 / 7,332

35




Land Office

File No.

Area in Acres/

Hectares Target Area Type, Period & Status

Prospecting License Applications South of Raub

Kelau-Bilut, Mukim Tras, Raub PTR 1/04/T/0268 22,800/9,226.8 Regional PLA, Application, 5 yrs

Sempalit, Mukim Gali, Raub PTR 1/04/G/0269 1,250/505.8 Regional PLA, Application, 5 yrs

Tras, Mukim Tras, Raub PTR 1/04/T/0270 2,490/1,007.6 Regional PLA, Application, 5 yrs

Sub-total: — 26,540/10,740 South of Raub —

All Applications and Renewals: — 52,454/21,227 All —

Note: * These prospecting permits and or licences were renewed on the 19th May, 2005, subject to fee payments. The remainder are stillunder application at the date of this report. Mineral title overlaps are shown by corresponding superscript numbers that may span bothexploration and mining title tables. The areas shown are based on SEREM documentation as at 1st April, 2005; the exact areas will beconfirmed on title issuance by the Pahang State authorities. The area, type, status and period of prospecting title shown may differ from thetitle to be granted by the Pahang State Authorities.

There are some prospecting title overlaps within the TTC area due to different dates and application

basis. These also include overlaps of prospecting title with mining title and total approximately 607

hectares (ha). The area covered by approved prospecting title applications in this area is 18,117 acres

or 7,331 hectares (ha), which is reduced to approximately 6,724 ha because of these overlaps.

Additional information on the prospecting rights applied for and to be held by Peninsular is given in

the ‘‘Additional Information’’ section of Peninsular’s Admission Document.

4.4 MINING CERTIFICATE AND MINING LEASES

Mining Certificates (‘‘MC’’) and Mining Leases (‘‘ML’’) can be applied for at any time after the

granting of a prospecting license. Both grant the right given to carry out mining activities in specificareas for extended periods. Subject to satisfying all the necessary provisions of the Mining Enactment,

an Authority to Mine would be issued which would allow mining operations to commence. Outline

details of applied-for mining leases (‘‘MLA’’) and mining title granted to Peninsular are given in

Table 4 and additional detail is given below the table. The mining title locations are shown in Figure

2.

Table 4. PENINSULAR MINING TITLE AND APPLICATIONS


Land Office

File No. Acres/Hectares Deposit Type, Period & Status

Sg Tersang, Batu Talam Raub#2, 4 PTR 1/04/BT/0243 606/245.2 Tersang

ML, 10 years,

Approved*

Sg. Tenggelan, Telang, Lipis1 PTL PL 03/97 550/222.5 Tenggelan ML, 5 years, Approved*

Tersang, Batu Talam, Raub#2 MC 511 93 / 37.6 Tersang

MC, to 28/02/07, issued

10 year renewal

approved

P. Lot 17478, Bukit Koman,

Mukim Gali, Raub ML 1669 304 / 123.0 Raub ML, to 31/12/17, issued

P. Lot 6023, Mukim Gali, Raub PTR 1/04/G/0263 207 / 83.8 Raub MLA, application

Total Areas: — 1,760 / 712.1 All —

Note: # MC511 is located wholly within the boundaries of application PTR 1/04/BT/0243 (MLA243). The area specified above in Table3 for application PTR 1/04/BT/0243 (MLA243) excludes MC 511. Other overlaps with prospecting title are shown by correspondingsuperscript numbers in Table 3. * Two mining lease applications have been approved, subject to the payment of lease premium, quit rent,registration fees and deposit by SEREM and the renewal of the offers to grant such mining leases as more particularly described in the‘‘Additional Information’’ section of Peninsular’s Admission Document.

A brief overview of the individual mining title areas is given below. Additional information is given

in the ‘‘Additional Information’’ section of Peninsular’s Admission Document.

36



ML 1669: This mining lease was originally granted on 01/01/1966 as MC 483 and was transferred to

Akay Holdings in 1987. It was originally issued for a 32 year period and was converted to a mining

lease in 1999. The present mining lease will expire on 31/12/2017, at which time application can be

made for a further extension. It covers an area of 122.984 hectares (approximately 303.9 acres) and isdescribed as Lot 17478, Mukim Gali, Raub District. Its boundaries encompass portions of the

Koman, Derrick, and Malacca South Sections of the Central Lode system, the Eastern Lode Zone

and the Tailings Lode Zone and the majority of the tailings ponds (except R3, R4 and Malacca).

Annual permission to mine has been granted to RAGM by Akay Holdings upon terms a summary of

which are described in the ‘‘Additional Information’’ section of Peninsular’s Admission Document.

PLANTATION MLA: This new Mining Lease application (PTR 1/04/G/0263) lies on the Southern

edge of RMDC’s palm oil Plantation Block and is contiguous with RAGM’s ML 1669 to the South.It is termed the ‘‘Plantation MLA’’ for discussion purposes and the application was made by RMDC.

Akay Holdings is in the process of securing a sub-lease of the mining rights to the Plantation MLA

from RMDC. Once the MLA has been approved, Akay Holdings will grant a permit to mine to

Peninsular or a person or entity nominated by Peninsular. The mining lease application covers an

area of 83.725 hectares (206.890 acres) and forms part of land parcel Lot 6023, Mukim Gali, Raub

District. It encompasses portion of the Malacca South, the Malacca North and the Ward Sections of

the Raub Central Lode, Eastern Lode Zone and the Tailings Zone Lodes (see lode zone descriptions

below) and the R3, R4 and Malacca tailings ponds. Application for a mining lease was made on 08/07/2004 and approval is pending.

MC 511: This mining certificate covers an area of 37.6 hectares (approximately 93 acres) and it lies

over the south-eastern portion of the Tersang mineralisation where mining was carried out in 1994 to

2003. It was previously renewed on 01/03/1997 for a period of 10 years, expiring on 28/02/2007. A

mining agreement was entered into between SEREM and the present lease owner for a sublease until

28th February 2007. An application for a further 10 year period was lodged by the present lessor on

12th May, 2004. Approval for lease renewal has been granted (on 20th May, 2005), valid to 28thFebruary, 2017, pending payment of the lease premium and other relevant fees. Once the lease

premium and relevant fees have been paid and renewal approval is granted, approval will be sought

to transfer the interest in the mining certificate to SEREM.

TERSANG MLA ‘‘243’’: This Mining Lease application (PTR 1/04/BT/0243) covers an area of 606

acres (245.2 Ha) over the part-prospected Tersang deposit. This application excludes the 93.6 acre

area of MC 511, which lies entirely within the boundary of MLA 243. An offer for the mining lease

was made by the Pahang State Government in 1997, but has since lapsed due to the non-payment of

the lease premium, quit rent, registration fees and deposit by SEREM. Although the offer hasexpired, the Directors are of the opinion that it may be possible to seek a fresh offer in respect of the

land on generally similar terms. There is no assurance that a fresh offer will be made if sought.

Tenggelan MLA ‘‘03/97’’: This Mining Lease application (PTL PL 03/97) covers an area of 550 acres

(225.5 Ha) over the partially prospected Tenggelan deposit. An offer for the mining lease was made

by the Pahang State Government in 1999, but has since lapsed due to the non-payment of the lease

premium, quit rent, registration fees and deposit by SEREM. Although the offer has expired, the

Directors are of the opinion that it may be possible to seek a fresh offer in respect of the land ongenerally similar terms. There is no assurance that a fresh offer will be made if sought.

Together with the approved and pending Prospecting Permits and Licences shown in Table 3, the

approved mining lease applications and MC 511 almost completely cover the known prospects and

targets in the TTC area and their possible extensions. Two small Prospecting Licenses (PLA 265 and

PLA 267) were recently applied for to complete the coverage. An area of approximately 77 km2 will

be held by Peninsular if the mining rights described above are granted and taken up. The fee and

lease payments for the prospecting and mining titles that have been approved, remain to be paid.Additional information on the mining rights applied for, granted and to be held by Peninsular is

given in the ‘‘Additional Information’’ section of Peninsular’s Admission Document.

4.5 OPERATIONAL PERMITS AND AGREEMENTS

Various permits and agreements pertaining to gold extraction were seen during Howe’s site visit to

RAGM’ gravity gold operation at Raub. Many of these Government documents were issued

37



personally in RAGM’s Mine Manager’s name (Mr Wan Anuar Bin Ibrahim), as the person

responsible in law.

4.5.1 ENVIRONMENTAL PERMITS

The relevant Federal Malaysian Law under which environmental affairs are governed is theEnvironmental Quality Act (Act 127 of 1974) and subsidiary legislation. RAGM’s Environmental

Impact Assessment (EIA) was approved (with conditions) on 13/01/1997.

The plant’s EIA was produced by Konsultan Jurutera Melombong Yeow (Yeow, 1996) and included

the assessment of risks associated with the then project. He noted that the area comprised disturbed

mining land and that no rare species of flora or fauna exist in the project area. Compliance ismonitored by an external consultant and by Government officials, whose visits and visit purposes are

kept in a register. Certificates of analysis regarding water quality and noise pollution were noted. On

an operational note, the plant roads are constantly sprayed by water trucks to eliminate the fine

airborne saprolitic (clay) dust.

RAGM originally obtained EIA approval for its proposed CIL plant from the Ministry ofEnvironment in 1997. This was necessitated as aqueous solutions containing cyanide are considered to

be scheduled wastes under the regulations governing the Environmental Quality Act. A letter from the

Ministry of Environment, dated 23 June 2004, has apparently confirmed that the original EIA

Approval status remains in good standing (letter not seen by Howe).

4.5.2 OTHER PERMITS, LICENCES AND PERMISSIONS

Various other permits, licences and permissions relate to RAGM’s activities:

* A permit to purchase, store and use sodium hydroxide. This chemical falls under

poisonous substance legislation and this permit is issued by the Pahang State Ministry of

Health to the Mine Manager. It is automatically renewed annually by one month pre-

application. Although the permit seen in November (Reg. No. CP 082/2004) lapsed on 31/

12/2004, at that time application for renewal had already been submitted. RAGM have

confirmed (J. Starink, pers comm) that this permit has been renewed till 31/12/2005 (Reg.

No. CP089/2005).

* A Licence for Transformer Installation issued for the plant’s main 2,000 Kva transformer

by Suruhanjaya Tenaga, the State-owned central power authority.

* A Blasting Licence. Though this 1 year licence (issued to RAGM) expired on 17/11/2003,

its renewal is likely to be automatic on application if any blasting should be required.

RAGM does not have an explosives powder magazine license and explosives can be

delivered onto site within an hour from Raub if needed.

* A Permit to operate plant and machinery granted by the Department of OccupationalHealth and Safety (DOSH) in terms of the 1967 Factories and Machinery Act. Annual

inspections of plant and machinery are carried out and RAGM won a National DOSH

Health and Safety competition under the Mining Category in 2001.

* Annual permit to mine granted to RAGM by Akay Holdings. The current annual

permission has a nominal fee of RM 10,000 and is dated 31/07/2004 and remains valid to30/07/2005.

* Authority to mine on ML 1669 (Lot 17478 Mukim Gali, Raub District), Licence No. 12/

2004 granted 31/07/2004 to 30/07/2005. This Authority to Mine is issued by the

Department of Minerals and Geoscience, Pahang. The conditions attached to the Authority

appear straight-forward and are set (and can be varied) by the State’s Senior Inspectors ofMines.

* RAGM currently has permission to dump gravity processed tailings on ponds R3 and R4

(i.e. outside ML 1669 on the Plantation MLA) on approximately 50 hectares (ha) of

agricultural land described as portion of Lot 6023 of Mukim Gali, Raub District.

* RAGM had a permit to keep small quantities of cyanide for laboratory purposes, but this

has been allowed to lapse through lack of use.

38



Finally, RAGM has applied for a new Letter of Authority to mine and process tailings through the

proposed new CIL plant. This Authority, in the opinion of RAGM’s operational staff, is unlikely to

be withheld.

5.0 GEOLOGY AND MINERAL DEPOSITS

5.1 REGIONAL GEOLOGY

The geology of the region has only been studied in moderate detail by the Malaysian Geological

Survey and its predecessors. More recent joint work by the Malaysian and British Geological Surveys

has focussed on understanding the gold deposits in the area (Gunn et al, 1993a/b and Henney, 1995a/

b). Local universities have a programme of geology dissertation projects, several of which haveapparently taken place in the area.

5.1.1 REGIONAL GEOLOGY AND METALLOGENY

The Malaysian peninsula consists of three main geological and metallogenic domains striking parallel

to the peninsula axis, comprising the Western Tin Belt, the Central Gold Belt and the Eastern Tin

Belt (after Scrivenor, 1928, in Cowan, 1997). The Central Gold Belt hosts the majority of the

Malaysian peninsula’s gold occurrences, including the Raub, Selinsing and Penjom gold mines. Later

work by Yeap (1993) showed that there are actually a number of gold belts associated with crustalfractures in the area as shown in Figure 3.

The Central Gold Belt consists of a deeply eroded fold and thrust belt composed of Permo-Triassicaged marine and continental shelf (fore-arc) sediments. It is bounded by the Lebir Fault Zone to the

east and by the Raub-Bentong Suture to the west.

The Raub-Bentong Suture marks the tectonic boundary or collision zone between two terranes

(Metcalfe, 2000). It was formed during the late Triassic collision of the East Malaya Terrane (part of

Cathaysia) with the western Sibumasu Terrane (part of Shan-Thai Terrane) (Metcalfe, 1998). The

Sibumasu Terrane is represented by Triassic granitic rocks of the Western Tin Belt. These include the

Sn-W bearing granites of the Main Range Granite Batholith.

The suture is poorly defined due to limited outcrop and deep weathering. It forms a zone of up to 20

kms wide consisting of a tectonic melange incorporating meta-sedimentary cherts and limestones of

Upper Devonian to Upper Permian age and serpentinised mafic-ultramafic intrusions. The suture

exhibits strike-slip movement resulting in numerous splays running along the Central Gold Belt.

5.1.2 STRATIGRAPHY

A description of the stratigraphy of the region (which features poor outcrop and a complicated

tectonic history) is summarised in Table 5, after Richardson (1939), Alexander (1968) and Gunn

(1993b). Discussion is limited to the Raub Group, in which the gold mineralisation occurs. The

generalised regional geology of the Raub area is shown in Figure 4.

39



Table 5. STRATIGRAPHY OF THE RAUB AREA

Stratigraphic Unit Age Description

Recent/Pleistocene Recent/Pleistocene Soils, including development of saprolite.

Middle Pleistocene rhyolitic ash

Dolerites Tertiary —

Main Range Granites Triassic

(207 – 230 Ma, peak at

~210 Ma)

Occur to the west of Raub. Syntectonic pluton made up

of composite batholiths. Composed of predominately

biotitic porphyritic granite, commonly tourmalinised.

Muscovitic finer grained facies also occur. Main Tin

deposit of Malaysia.

Bukit Kajang Triassic (?) Elongated north-trending granite porphyry intrusive,

immediately west of and to north of Raub.

Benom Granites Triassic (?) Occur east of Raub. Granite porphyry and quartz

porphyry. Intrudes Benom Complex. Considered

contemporaneous with the Main Range Granite. No tin

deposits.

Benom Complex Triassic

(~207 Ma)

Occur east of Raub. Igneous complex comprising highly

variable suite of syenitic, monzonitic and gabbroic

rocks.

Serpentinites Triassic Minor intrusives in the Raub-Bentong Suture Zone.

Pahang Volcanics Permian to Triassic Largely rhyolitic tuffs; abundant in Lipis and Upper

Raub Groups, comparatively rare in older Bentong

Group.

Lipis Group Permian Composed of argillaceous, arenaceous, conglomeratic

and cherty facies. Infolded into the Raub Group.

Previously known as the Upper or Younger Arenaceous

Series.

Raub Group Permian Predominantly calcareous shale and siltstone, with

subordinate limestone and marble. Previously known as

the Calcareous Series.

Bentong Group Palaeozoic Mixed sequence of argillaceous and predominantly

arenaceous sediments containing pebbly lenses.

Previously known as the Lower or Older Arenaceous

Series.

40


41


100º

100º

101º

101º

102º

102º

103º

103º

104º

6º6º

5º5º

4º4º

3º3º

2º2º

104º

TH

AI L A

ND

S I N G A P O R E

Ea

st

er

nT

in

Be

lt

Ea

ste

rn

Tin

Be

lt

We

st

er

nT

in

Be

lt

Ce

nt

ra

lG

old

Be

lt

ST

RA

IT

OF

MA

LA

CC

A

SO

H

UT

CH

IN

A

SE

A

Selinsing

Penjom

CherohTersang/TTC

Raub

After E.B Yeap, 1993

0 50 100Miles

FIGURE 3: PENINSULAR MALAYSIAN METALLOGENIC BELTS A C A Howe International Limited

LEGEND

Primary Gold Deposits

Primary Gold Prospects

Primary Gold Deposits & Prospectscited in report

Subsidiary Gold Belts

}

Key to Symbols:

42


~

~

~

~

~

~

~

~

~

~

~

~

~

~

~

~~~

V

V

V

V

V

V

V

V

V

V

V

VV

V

Bentong

Raub

Cheroh

Benta

BenomComplex

Bt. KajangGranite

Rau

b-

Ben

ton

gS

utu

re

Raub

-B

ento

ng

Sutu

re

Tersang

Pahang

Sela

ngor

Pahang

Perak

LEGEND

Acid intrusives (undifferentiated)

Intermediate intrusives (undifferentiated)

Basic intrusives, mainly gabbro

Ultrabasic intrusives, commonly altered toserpentinite, within Raub - Bentong Suture

Stratigraphy:

Other Symbols:

Rock Type Symbols:

Interbedded Sandstone, Siltstone & Shale;widespread volcanics

Triassic

Phyllite, slate & shale with subordinatesandstone & schist. Limestone developmentthroughout succession & widespread volcanics

Permian

Phyllite, shcist & slate. Localised limestone& sanstone. Some interbeds of conglomerate,chert & rare volcanics

Devonian

Schist, phyllite, slate & limestone. Minor inter-calations of sandstone & volcanics

Silurian-Ordovician

Phyllite, slate, shale & sandstone.Localised limestone development & volcanics

Carboniferous

Intrusives

Town

Fault

Road

Raub-Bentong Suture(Translucent Overlay)

Sandstone

Schist~Shale, mudstone, siltstone, phyllite, slate& hornfels

Acid - Intermediate volcanicsV

Main RangeGranites

Block 8 Outline

Gold Deposit

Raub GM

Cheroh

400,000 mN

425,000 mN

450,000 mN

45

0,0

00

mE

42

5,0

00

mE

400,0

00

mE

0 5 10

Scale in Kms

15

FIGURE 4: GENERAL GEOLOGY OF THE RAUB REGION A C A Howe International Limited

5.1.3 SAPROLITIC WEATHERING HORIZON

The soil profile in the Raub mine area and elsewhere is deeply lateritised, though the lateritic

duricrust is generally missing. Soils tend to be thin (4 1 m) over the meta-sediments on the

undulating hill slopes and far thicker (4 6 m) in the alluvium filled valley floors. The general lack of

unweathered outcrop and a deep saprolitic weathered transition to fresh rock (5 40 m in places)

partially hampers traditional mapping and trenching. Metre-scale core stones of less weathered and

unweathered shale have been shown by drilling to occur within the basal portions of the weatheringprofile (e.g. Ward and Malacca South Areas). However, transition to fresh rock at the base of the

saprolite can also be very sharp (Cheze, 2004).

5.1.4 THE RAUB GROUP

The known gold deposits in the region lie within shaley and calcareous metasediments of the Raub

Group, which was formerly known as the Calcareous Series (Richardson, 1939).

The Raub Group is of marine origin and unconformably overlies the terrestrial Bentong Group.

Recent faunal correlations in the Cheroh area 10 kms north of Raub suggest that the Raub Group

rocks are of Wordian or Middle Permian age (Sole, 2001). The group consists of mixed argillaceous

and calcareous facies (Richardson, 1939). The argillaceous facies is composed of shales, which are

graphitic in part, and calcareous shale, with rare cherts. The calcareous facies are largely limestone

with subordinate shales. The limestones are occasionally pure, particularly east of Raub.

Igneous rocks are not prominent in the Raub Group, but are commonly associated with the

mineralisation (see below). They include rhyolitic tuffs of the Upper Pahang Volcanics within the

Raub Group sediments and fine grained felsic rocks of probable igneous origin, known locally as

felsites, but identified as porphyritic microgranites by Gunn (1993b). The intrusive Bukit Kajang

Granite Porphyry is 11 km long and 2 km wide at its maximum and lies west of Raub, between

Raub and Cheroh, some 10 km to the north. It trends north-south and is oriented parallel to regional

strike trends. Contact metamorphism adjacent to the Main Range Granites (SEREM’s Hornfels

mapping unit) has converted the Raub Group rocks into amphibolite, tremolite and epidotehornfelses and schists.

5.2 INDIVIDUAL DEPOSIT GEOLOGY

5.2.1 RAUB GOLD MINE

5.2.1.1 Introduction

The original mining company’s name reflected the mine’s location and that the company was ofAustralian origin, i.e. the Raub Australian Gold Mines Limited. It operated from 1889 to 1961. The

Japanese invasion and a fire in the mine offices in 1961 destroyed the bulk of this company’s original

documents and plans, resulting in the present poorly documented nature of the old mine.

The closest analogue to the Raub gold deposit appears to be the Phanerozoic aged, mesothermal gold

deposits of the Victoria Goldbelt in Australia which are of the turbidite hosted type. Similar deposits

are known from North Island in New Zealand, where the gold mineralisation is accompanied by

antimony and tungsten (Foster, 1993), which are used in the Raub area as pathfinder elements.

The Raub mine lodes have traditionally been described in documents and the literature as the West

and the more economically important East lode. Following the recent discovery of two more discretesites of mineralisation, RAGM have decided to rename the lode systems [from west to east] as

follows:

Old Nomenclature: * West Lode * East Lode [Not named] [Not named]

New Nomenclature: * West Lode * Central Lode * Eastern Lode * Tailings ‘‘Lodes’’

This naming convention is followed in this report. All of these lode horizons will be targeted during

Peninsular’s proposed exploration programme (see Section 6.3). The geology of the Raub mine is

given in some detail as deposits of this type form one of the major target types of the proposed

regional exploration programme.

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5.2.1.2 Mine Wallrocks and Gross Structure

The shales hosting the gold mineralisation are generally calcareous and dark grey-green to black in

colour, especially where graphitic. They are fissile in nature (Gunn, 1993b). Potential tuff marker

horizons are present. Disseminated epigenetic pyrite is widespread, whilst earlier pyrite also occurs as

bedding laminae. Multiple phases of irregular and bedded quartz and carbonate veinlets are present

and thin interbedded sills of ‘‘felsite’’, with metre scale thickness occur in the hangingwall sediments

east of the Central Lode, within the Eastern Lode Zone mineralisation.

The Raub gold mine lies east and southeast of the elongated Bukit Kajang porphyritic graniticintrusive which outcrops largely north of the mine.

The mine’s principal vein system, the Central Lode, extends over 6 kms in a northerly direction,dipping steeply eastwards. Essentially it is a higher grade quartz vein system enveloped in a lower

grade sheeted, parallel fractured quartzose zone, as evidenced by RAGM’s recent drilling on this lode

system’s northerly extensions in the Koman, Malacca and Ward areas (see Figure 5). The 6 km strike

length is offset and was formed by the combination of a shallow (approximately -15o to -208),northward plunging oreshoot, being progressively up-faulted in a northerly direction by oblique faults

that trend northeast and dip southeast.

The dislocated vein portions between these oblique faults formed natural mining Section divisions,

named from the south as Raub Village (under southern Raub town), Raub Hole (under northern

Raub town), the Golf Course Section (Nibong and Hitam), the Bukit Koman Village Section(Anderson, Stope and Lilbourne), Derrick, Malacca, Ward and Sungai Agas in the far north.

The northern portion of Bukit Koman and Derrick lie within ML 1669. The Malacca and Ward

Sections are in the Plantation MLA. Geochemical soil gold anomalies and old workings on the

Eastern Lode mineralisation continue north of the Ward Section into the Sungai Agas area.

5.2.1.3 Raub Mine Fracture Systems

There are four main fracture orientations within the Raub Mine, namely the lode structures, the

oblique faults, mineralised tensional fractures and a second set of oblique fractures (Richardson,

1939).

The Lode Structures

The West Lode structure is poorly documented as it was seldom mined. It lies approximately 300 m

to the west of and parallel to the Central Lode system and has a known strike length of at least 2

km. It is best developed in the Derrick Section of the old Raub mine to the west of and outside

RAGM’s ML 1669.

The Central Lode system has been mined down to a depth of 335 m (1,100’) in the Bukit Koman

North Shaft on the southernmost portion of ML 1669. The down plunge extent of individual highgrade shoots was ‘limited’ by the Oblique Faults (see below).

The Central lodes are generally steep, west of north trending swarms of quartz filled fractures, whichdip east at angles of +658 near surface, shallowing to 508 in depth (Richardson, 1939). The fractures

are largely coincident with and parallel to fold axes of the near-isoclinally folded sediments, though

they are also in part conformable with the enclosing sediments, as shown in Figure 6. Classic fold

nose veins or saddle reefs also occur (Cowan, 1997). The folded sediment axes pitch shallowly

northwards at angle of approximately 158, which orientation is near paralleled by the plunge of the

payshoot(s).

44



45



ML 1669

Bukit KomanVillage

Oblique Fault >

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Oblique Fault >

Malacca Pond >

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LEGEND

Central or Main Lode

Felsite Dykes

Road

Malacca VLF axis

Faults

Quartz veining

Trenches

RAGM 2004 RC Holes

RAGM ML 1669

RAGM MLA

Placex Soils Sampling

}

FIGURE 5: RAUB GOLD MINE LOCATION PLAN A C A Howe International Limited

MLA

0 500Metres

Ward

Malacca North

Malacca South

Derrick

Washing Plant

Koman

46



(Taken from Richardson, 1939)

Cross-section near Bukit Jellis Shaft

Cross-section near Bukit Koman North ShaftCross-section near Bukit Koman Main Shaft

Mine levels 100 feet / 30.5 m apart

Scale as shown in feet

LEGEND

Attitude of enclosing graphitic shales

Quartz Lodes

FIGURE 6: LODE CROSS-SECTION IN THE RAUB DEPOSIT A C A Howe International Limited

Individual lode channels are 1.2 to 2.1 m wide, though sheeted zones of up to 21 m wide occurred.

Mineralisation is largely white quartz with black shale fragments and subordinate calcite. Sulphides

form only 3 to 5 % of the ore, being pyrite, arsenopyrite, stibnite and scheelite (Richardson, 1939).

The gold values were very erratic in their distribution. Approximately 80 % of the gold was freemilling with the balance being associated with the sulphides.

The Eastern Lode Zone mineralisation occurs over a width of approximately 100 to approximately

300 m in the hangingwall (east side) of the Central Lode, where it occurs in association with narrow

felsite dykes. The mineralisation has been intersected in trenches and drillholes and dips eastwards at

moderate to low angles.

Little is known in regard to the Tailings Lode Zone, which comprises quartz veining exposed duringtailings mining, coupled with values in Banka holes drilled into the saprolitised shales below the

tailings ponds in 2004. These holes formed part of the R3 reserve drilling and metallurgical test hole

programme (see Figure 9 later).

The Oblique Faults

The lode structures are step-faulted by a series of oblique, 0308-0508 trending faults with near vertical

to steep south-eastward dips (see Figure 5). These faults obliquely upthrow the lodes to the north

(apparent right lateral throws) resulting in similar horizontal and vertical displacements. Actual

horizontal (plan) throws vary from a few metres to over 100 m. The net effect of this repeated

faulting was to extend the exposed strike length of the lodes. Richardson (1939) speculates that this

faulting was caused by the intrusion of the Bukit Kajang Granite.

It has been implied by previous workers that there is a single 6+ km long payshoot that has been

dislocated by the oblique faulting. However, Peninsular intends to test an alternative hypothesis thatthere may be further parallel shoots stacked within the Central Lode fracture system by drilling

across and below the old mine workings.

The Mineralised Tension Fractures

These narrow (approximately 2 cm), impersistent, quartz filled tension fractures are presentthroughout the lode system. They occurred in a swarm in the Raub Hole where they were mined for

their gold content. They trend east-west, dip at 508 to 608 to the north, have short strike lengths (10+

m) and show apparent centimetre-scale left lateral throws.

South-easterly Trending Oblique Fractures

The fourth fracture orientation is again oblique to the trend of the mineralisation, trending south-easterlyand dipping to the southwest at 408.

5.2.2 OTHER REGIONAL GOLD DEPOSITS

5.2.2.1 Cheroh Deposit

The Cheroh deposit was developed prior to WWII. It now lies within the grounds of a Hindu Temple

and is unlikely to be available for prospection (see Figure 2). Three underground levels were

developed off the Ross shaft at depths of 25, 53 and 93 feet. Gold mineralisation there is associated

with a crude quartz stockwork in an aplite dyke. The dyke is approximately 10 m thick, strikes

north-northwesterly and dips eastwards at 808 (Richardson, 1939).

5.2.2.2 Tersang and Chun Chok Deposits

The Tersang gold deposit occupies a 1.4 km long, northerly trending, felsite capped hill. The ChunChok gold deposit is far smaller in known extent and lies south of the Tersang prospect (see Figure

8). Other poorly exposed deposits (Tenggelan) and those inferred from soil sampling deposits (Chenua

and Tenggelan North) also occur in the area. More information concerning these deposits is given

later. Alluvial gold has been worked in the Tersang area since 1933 (Richardson, 1939). These

deposits were rediscovered by SEREM during a regional stream sediment sampling programme.

47



A small open-cast gold mine operated on MC 511 on the south-eastern flank of the Tersang hills

during the 1990’s. An unknown quantity of quartz vein associated gold mineralisation in the felsite

and its footwall shales has been mined, perhaps amounting to approximately 200,000 tonnes (visual

estimate). The grade of material mined is unknown, but according to recent SEREM sampling results,the material treated is likely to have been hand-sorted.

This mining exposed a well developed quartz vein system in graphitic shales beneath the felsitic sill, a

field sketch of which is shown in Figure 7. The quartz vein mineralisation is best developed in gash

vein or pull apart structures that dip west at angles of 408 to 608, their opening being caused by

thrusting from the east; the veins probably occupying an earlier [master] joint direction. Shallower,

westward-dipping quartz mineralisation represents shears complementary to the thrusting along the

bedding. This mineralisation represents transference of horizontal movement into the shale’s bedding

orientation.

Structural analysis of this locality is recommended as the combination of Riedel fractures in the

felsites (Cheze, 1994) and bedded thrusting in the underlying shales suggests to Howe that there maybe a wrench fault present in the area immediately adjacent to Tersang.

Howe considers the Tersang-Tenggelan-Chenua or ‘‘TTC’’ area to be of especial interest in view of

the potential size of the resources in this area, their possible depth extensions beneath the felsite at

Tersang and the probably economic (Cole, 2004), though sub-1 g/t grade of the inferred resource at

Tersang.

5.2.3 OTHER NEARBY DEPOSITS IN PAHANG STATE

5.2.3.1 Penjom Gold Mine

The proximity of the Penjom Mine to the TTC Area suggests that its geology can provide relevant

information in the context of the district gold deposit model discussed below. Avocet plc (‘‘Avocet’’)

started exploring the area in 1991 and brought the Penjom mine into production in December 1996.

The mine lies approximately 15 km east-northeast of the northeast corner of Block 8 area, at the

town of Kuala Lipis.

The Penjom Mine mineralisation is associated with thrust faulting adjacent to a significant splay on

the Raub-Bentong Suture and the deposit occurs in similar rock types to the Raub mine. Thestratigraphy has a local east-west strike and dips southward in the mine area. The westward directed

Penjom Thrust is the dominant feature controlling the distribution of ore. It strikes northeast (0358)and dips to the southeast (30-408), cutting through an asymmetric fold with the footwall strata being

folded and dipping into the thrust. Shear stress in the thrust remobilised carbon within the shales to

form a graphitic ‘‘alteration’’ zone. This, together with mylonitic rock, is considered to have made the

Penjom Thrust an impermeable hangingwall. The ‘felsite’ associated with the Raub mine

mineralisation is replaced by the Penjom Tonalite Intrusion Complex, which is composed of a series

of thin, competent sills (55 m thick) of granitic composition that are folded within the minestratigraphy.

Gold mineralisation lies beneath the thrust in discontinuous, metre-scale quartz, ankerite, dolomiteveins with minor sulphides. These occur as ribbon veins along bedding planes, in part adjacent to

steep fractures and as fracture-hosted veins and stockworks in and adjacent to tonalitic sills,

particularly where the orientation of the Penjom Thrust deviates and also where the sedimentary

strata are carbonaceous and/or tightly folded or intensely faulted. There is almost no gold

mineralisation above the Thrust, even though the steep faults cut through it. Minor (43 %) sulphides

are present and include arsenopyrite, pyrite, galena and sphalerite with minor chalcopyrite and some

tellurides.

The Penjom mine has milled 4.00 Mt of ore at an average recovered (~89 %) grade of 5.04 g/t during

the 7 year period 1998 to 2004, producing 649,000 oz of gold. Current open-pit reserves andresources (including inferred resources) are 2.81 Mt at an average grade of 4.73 g/t, using a cut-off of

0.8 g/t (Avocet, 2004 and earlier Annual Reports).

48



49



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50



Gold in Soil Values (ppb)

Figure based on Figures 23 & 36 of SEREM Report (Cheze, 1994)

Inset: Stream Sediment Gold Anomalies

TENGGELAN

NORTH

TENGGELAN

NORTH

TENGGELAN

TERSANG

CHENUA

KEKABU

CHENUA

TERSANG

CHUN CHOK

TENGGELAN

TENGGELAN NORTH

LEGEND

+ Soil Sample Locations

Scale as shown

FIGURE 8: STREAM AND SOIL GOLD ANOMALIES IN THE TTC AREA A C A Howe International Limited

5.3 CONCEPTUAL DISTRICT GOLD DEPOSIT MODEL

Though deposits within any metallogenic belt naturally vary in size depending upon local geological

factors, there is good reason to try to determine a district’s optimum economic deposit size and

exploration characteristics as the basis of exploration planning and targeting. For this reason, data on

the known gold content (i.e. production and resources/reserves) of mines and deposits in the area was

investigated, as were their geological characteristics.

5.3.1 KNOWN DEPOSIT SIZES AND GRADES

The old Raub Mine is the southernmost of a cluster of 4 gold deposits forming an anomalously gold

enriched portion of the Central Malaysian Gold Belt. The other mines are Selinsing and Penjom

open-pits, together with the Tersang-Chun Chok-Tenggelan and Chenua or ‘‘TTC’’ group of deposits

being the fourth. Known production and reserve data for Central Pahang mines and some prospects

are shown in Table 6. This data is known to be incomplete and includes a mixture of reserve and

resource types, the purpose of the compilation being to examine deposit global gold contents rather

than economic gold content.

Table 6. ESTIMATE OF REGIONAL GOLD PRODUCTION & KNOWN RESOURCES

Deposit Known Production Known Resources (Measured+Indicated+Inferred)

Location Tonnes Grade Kgs/Ounces Tonnes Grade Kgs/Ounces

Raub Overall 7,520,000 4.14 31,180/1,002,450 10,205,000 0.68 6,940/223,060

Tersang ~200,000? n.a. N00?/n,000? 18,900,000 0.87 16,440/528,650

Selinsing n.a. n.a. +2,488/80,000 n.a. n.a. ~4,976/160,000

Buffalo Reef — — — n.a. n.a. 2,799/90,000

Penjom 98-04 4,003,000 5.04 20,187/649,050 4,989,400 4.37 21,803/703,038

Note: n.a. not available/unknown. This tabulation does NOT imply that the listed production and resources were/are economic.

The global production and resources for both Raub and Penjom mines show that they are major

mesothermal lode gold deposits, containing +1 Moz of mined gold. The Tersang prospect, which is

currently poorly explored, probably contains in excess of 500,000 oz of gold in global resources,

excluding any gold in the shale hosted footwall mineralisation.

It is thus apparent that new deposits of 500,000 to 1 Moz of contained gold could reasonably be

expected to be found within areas to be explored by Peninsular, though naturally most of the

deposits that remain to be found will be smaller.

5.3.2 DEPOSIT DEFINING GEOLOGY AND STRUCTURE

The available Raub, Cheroh, Tersang, Tenggelan and Penjom documentation and site visit evidence

shows that there are numerous geological controls to and/or associations with the mineralisation,

namely:* The deposits occur east of and adjacent to the Raub-Bentong Suture (RBS).* The deposits occur near splay structures on the RBS, often associated with sharp changes in

the strike of the suture (Raub and Penjom).* The tightly folded sedimentary and tuffaceous wallrocks are usually carbonaceous in part

(Raub, Tersang, Chun Chok and Penjom).* The deposits are often marked by a potassic radiometric anomaly (Raub, Tersang and

Chenua).* The Penjom, Raub and Tersang deposits are associated with thrusting on various scales.* The Tersang stockwork is interpreted by SEREM in terms of a shear couple.* Tabular, intrusive felsic igneous rocks are closely associated with the deposits; ‘‘Felsite’’ in the

case of Raub, Cheroh, Tersang, Chun Chok and Tenggelan and as a ‘‘Tonalitic Intrusion

Complex’’ in the case of Penjom.* Cross-fracturing, at a high angle to the lodes is usually present in association with the

mineralisation, but is itself not economically mineralised (Raub, Tersang and Penjom).

51



* Identified structurally controlled sites of gold mineralisation are:* Shear and thrust associated veins within fold axes (Raub and Penjom)* Bedded thrust associated mineralisation (Penjom, Tersang footwall and Raub)* Stockworks in ‘thicker’ felsites (Tersang, Penjom, Chenua)* Steep, cross-cutting fractures (Raub, Tersang, Penjom).

* The generally quartz-carbonate vein gold mineralisation is characterised by minor quantities ofgeochemical marker arsenopyrite, stibnite and other sulphides (3 to 5 %).

5.3.3 DISTRICT MINERALISATION MODEL

The gold bearing mineralisation in Peninsular’s exploration area represents a wide variety of lode

structures developed in association with shearing and thrusting caused by a westward directed

regional compressive regime. They occur in both shear associated and pull apart structures on a

centimetre to kilometre scale, in both competent brittle (felsite) and in relatively weak, semi-ductile

rocks (shales). These lode structure loci include:* Bedded mineralisation in shales (Tersang and Penjom) associated with wrench faulting, capped by

felsitic sills together with mineralisation in local pull apart structures formed by older fractures.* Axial fold shears or thrusts along or adjacent to folds in graphitic shales (Raub and Penjom).* Multiple parallel lode structures possibly associated with sole thrust front splays (Raub)* Oriented stockworks in coherent, brittle ‘‘felsitic’’ intrusives (Cheroh, Tersang and Penjom)

The source of the gold mineralisation is likely to be the graphitic shale host rocks themselves, basedon Russian and other research (Nekrasov, 1996).

Peninsular can use these geological structural loci to focus and prioritise their exploration efforts.

6.0 EXPLORATION

6.1 EXPLORATION HISTORY

6.1.1 INTRODUCTION

Only post-1980 exploration is discussed here, though gold mining has taken place in the area for

several hundred years.

Exploration rights in the area were granted over large blocks of ground in the mid-1980’s by thePahang State Government to encourage exploration expenditure, particularly by foreign companies.

The exploration history of the Raub and Block 8 areas is covered in a series of reports which are

listed in the References. The various companies and organisations that have conducted exploration in

the Block 8 area are shown in Table 7 (Table 2 covers historical exploitation data).

Table 7. HISTORICAL GOLD EXPLORATION IN THE RAUB-TERSANG AREA

Company / Organisation Period Activity

Raub Australian Gold Mining Limited 1889-1961 Prospecting and mining over 6 km strike

Pahang Consolidated (at Raub) 1973 Drilling (5 holes, no data available)

Compagnie Generale de Geophysique 1980 Airborne geophysics flown for State

Placer (JV with Akay Holdings) 1986 – 1987 Soils geochemistry and drilling

SEREM Malaysia (BRGM) 1990 – 1994 Regional and detailed exploration of Block 8

Malaysian and British Geological

Surveys 1993 – 1994

Mineralogy and exploration methodology

studies (including biogeochemistry)

Wells Gold (JV with Akay Holdings) 1994 – 1995 Tailings Feasibility Study

Akay Holdings 1996 Soil sampling inside Plantation Block

Akay Holdings for RAGM 1999 – 2005 Trenching and drill exploration.

Note: Data taken largely from Richardson, 1939, Lee Ah Kow et al, 1986 and Cowan, 1994. Tin exploration and mining also took place,especially in the southwest and west of Block 8.

52



6.1.2 HISTORICAL EXPLORATION

The recurring theme of the post 1980’s work carried out in the Raub and Block 8 areas is the

involvement of members of the Akay group of companies (Akay Holdings, Akay Venture, RAGM

and SEREM). Akay first became directly involved in the area when title to ML 1669 was transferred

to it in 1987. Subsequently Akay privately financed exploration, the carrying out of metallurgical and

engineering studies and the preparation of bankable feasibility studies in relation to the Raub tailings,

particularly since 1995. Akay Venture, part of the Akay group of companies, acquired SEREM in1997 as part of a long-term program to consolidate mining interests on a regional scale. There has

been considerable work carried out in the Block 8 area, which is briefly summarised below. The

compilation, scanning and digitisation of the material is ongoing, with much of the data already in

digital format.

1980 Compagnie Generale de Geophysique

Compagnie Generale de Geophysique flew this area in 1980. Spectrometer results showed zones of

potassic enrichment associated with gold mineralisation at Raub, Tersang, Tenggelan and Chenua.

1986-1987 Placex (Malaysia) Sdn Bhd

Placex (Malaysia) Sdn Bhd carried out a programme of soil sampling, surface geophysics, outcrop

and trench sampling and diamond drilling on MC 483 (now ML 1669) and further to the north. Its

3.3 km long by 700 m wide surveyed grid remains the basis to RAGM’s local Raub mine grid.

A total of 1,622 base of ‘‘C’’ horizon augered soil samples were taken on soil sampling lines 50 m

apart with samples 20 m apart. The samples were analysed for gold, silver, tungsten, arsenic, copper,

lead and zinc and coincident gold (often +1,000 ppb) arsenic and tungsten anomalies are found. This

sampling was done prior to the Kim Chuan opencast mining in 1991-1995 and was utilised to guide

strip mining. Channel sampling in trenches was also carried out and the samples were assayed for the

same elements as the soils. There was again a good correlation between gold, arsenic and tungsten

values. These sampling locations were largely destroyed during the surface mining.

Ground geophysics comprising magnetics, VLF, radiometrics and IP were carried out. The VLF

results show that the Central Lode structure continues north of the known workings. Again, known

gold mineralisation was associated with K radiometric ground anomalies. No useful ground magnetic

anomalies were obtained, whilst an induced potential (IP) survey produced patchy results, with a

good response in the Malacca area.

Fifteen diamond drill holes (PRB series) were completed for a total of 2,428 m, scattered over nearly

2.35 km along strike. These holes were generally paired and were drilled to intersect the CentralLode. Results were generally disappointing, but some mineralisation was discovered in depth.

1993 The British (BGS) and Malaysian (GSM) Geological Surveys

The BGS and GSM carried out studies in Malaysia relating to gold mineralisation, mineralogy and

geochemistry using the Placex cores and gold biogeochemistry (Gunn et al, 1993). They discovered

that free gold is most commonly associated with graphite streaks and graphitic shales fragments

within the quartz-carbonate veins. The gold grains varied between 5 to 100 microns in size. Lithogeo-

chemical studies showed, as would be expected, a strong association between gold and arsenic,

uniform low mercury and base metal contents and no correlation between tungsten and gold. What is

particularly important is that all the felsites analysed had elevated gold contents of 0.2-0.5 ppm (g/t).

Their biogeochemical study showed that the oil palms extract detectable gold in their young leaftissue, but that the botanical sample gold distribution did not relate well to that of the nearby soil

samples.

1990-1994 S.E.R.E.M. Malaysia Sdn Bhd

SEREM covered most of the Gold Belt sediments with regional stream sediment sampling (Cheze,

1994). At least 1,148 such samples were taken and the samples and their pan concentrates were

analysed for gold, arsenic, copper, lead, zinc, manganese and antimony (partial).

53



A cluster of 3 major and several minor stream and soil sample anomalous areas were located within

an approximately 32 square km area in the northeast portion of Block 8 (see Figure 8). Soil sampling

was carried out off an 11 km long, north-south baseline along the Tersang River, with sampling lines

200 m apart and extending a maximum 6.2 km eastwards to cover Chenua. Soil sampling wasgenerally carried out at 50 m intervals along line spaced at various intervals. The three major

anomalies forming the cluster are Tersang, Tenggelan and Chenua, collectively termed the TTC

deposit cluster by Howe.

Numerous other significant (100-400 ppb) stream sediment anomalies remain to be investigated within

the Block 8 area as a result of SEREM concentrating its work in the TTC area. Most of these

stream anomalies lie on ground under application by SEREM.

Salient details of the major and some minor centres of mineralisation or anomalies in the TTC clusterare as follows:

Tersang

A 3 km long coincident >100 ppb gold and soil anomaly defines the prospect area, with somecoincident ground geophysics anomalies (IP and scintillometry) within and adjacent to it. The known

mineralised zone is 1,400 m long and is defined by a >300 ppb gold anomaly.

The gold mineralisation takes the form of a stockwork of quartz veins within a hydrothermally

altered acidic dyke (felsite), termed a Quartz Eye Porphyry (‘‘QEP’’) which occurs in both fine and

coarse grained forms. The quartz veins vary in thickness between 1 mm to 20 cm and exceptionally

up to 1 m in width. Their preferred orientation is approximately 0808 (060-1108), with an average dip

of 608 to the South. The sill is flat lying, but its dip steepens to approximately 20-258 to the west,

along the western margin of the deposit.

Hydrothermal alteration is shown by silicification, disseminated pyrite and arsenopyrite in the QEP,

sericitisation on quartz vein selvedges and irregular kaolinisation. The quartz veins are themselves

essentially barren of sulphides, except at Chun Chok at the southern end of Tersang where massive

arsenopyrite occurs.

Physical prospection included 3 trenches and 18 channel samples along drilling roads which exposed

the saprolitic bedrock beneath the thin soil cover. Values in the trenches average 0.5 g/t and generally

vary between 0.2 to nearly 1 g/t. The highest value was 4.72 g/t. A total of 23 boreholes were drilled

at Tersang and 3 at Chun Chok for a total of 2,202 metres. The holes were collared in HQ (63 mmcore diameter) and completed as NQ (48 mm core diameter). A total of 485 core samples were

assayed for gold. Nine of these holes were used in the Tersang inferred resource estimate by SEREM

(Cheze, 1994). Core values generally range between 0.2 and 0.8 g/t, with a maximum value of 14.2 g/t.

Metallurgical tests have been carried out on core from Tersang by Oretest Pty (Ltd) in 1995. They

showed that cyanide recoveries varied from 0 to 84%, with recoveries within the mineralised zone

averaging approximately 77% for these non-optimised tests. Fluor Daniel is reported to have also

carried out metallurgical tests, but no data is to hand.

Chun Chok

Chun Chok lies approximately 2 km south of Tersang and is surrounded by old alluvial gold

workings. Several higher grade values were disclosed by trenching of small occurrences in three

scattered locations. These contain silicified metasediments with fracture bound quartz veins withsulphides. The sample values returned varied between 0.12 and 12.30 g/t. Mineralisation also occurs in

quartz stockwork in a narrow QEP dyke in one occurrence. Three cored holes intersected the

mineralisation approximately 15 m below surface, with TER-14 intersecting 2.8 m at 2.49 g/t. The

other two holes were not assayed due to very poor recoveries.

Tenggelan and Tenggelan North

Tenggelan is located 6 km north of the Tersang anomaly within an 800 m long, northerly trending

soil gold anomaly that is approximately 200 m wide and located over a quartz vein stockwork in a

54



northerly trending sill-like QEP felsite stretching over 1 kilometre. The maximum gold-in-soil value

was 1.1 g/t and values in seven trenches gave average grades of 0.4-0.5 g/t.

Tenggelan North lies 1.5 km north of Tenggelan and is defined by a 300 m long, plus 50 ppb gold in

soil anomaly that is open to the north and to the west.

Chenua

The Chenua area lies approximately 3 to 4 km east of Tersang. Mineralisation appears more widely

dispersed at Chenua with several anomalies. These were located by soil sampling on a wide 100 m

(N-S) by 50 m (E-W) spaced grid. The south-eastern portion of the Chenua grid could not be

sampled properly due to alluvial mining ponds. Four gold-in-soil anomalies were identified, thelongest of which is 600 m long. Ground geophysics scintillometry identified a 1.2 km long potassic

anomaly in the alluvial mining area.

Ground geophysics was applied over the TTC area by SEREM. These include magnetics, scintill-ometry, resistivity and IP. Ground magnetics showed no significant anomalies at Tersang and was

dropped as a field method. Scintillometry was used both at Tersang (where it defined the coarse

grained QEP) and at Chenua where it defined a 1,200 m long anomaly. Test profiles at Tenggelan

North and Chun Chok showed coincidental gold-scintillometer anomalies. Induced polarisation and

resistivity surveys were carried out over the Tersang-Chun Chok areas and two major anomalies were

located. One of these is largely coincident with the gold and scintillometer anomalies, while the

second follows the line of the Tersang flat to the west of Tersang.

1994-1995 Wells Gold Corporation NL (JV with Akay Holdings)

Wells Gold Corporation NL (‘‘Wells’’) entered into a Joint Venture with Akay which covered MC’s

483 and 482 (an MC not in Peninsular’s property portfolio). Their work concentrated on MC 483

(now ML 1669) along the strike of the Central and Eastern Lode Zone lodes into what is now thePlantation MLA. They re-established the Placex grid and carried out preliminary tailings volume

estimates and auger sampling.

Wells conducted a 94 hole RC drilling programme comprising 5,706 m over the Central and Eastern

Lode Zones in the area covered by the Placex grid. Holes were generally drilled in fence lines of 4

holes at 150-250 m intervals for Central Lode mineralisation. Fifty three holes (2,874 m) were drilled

in ML 1669 and 41 holes (2,832 m) were drilled in the Plantation MLA.

1995-1996 McDonald Speijers and Fluor Daniels – Reserves and Bankable Feasibility Study

McDonald Speijers carried out a reserve estimation on the tailings contained in the old Raub mine’s

tailings ponds for Wells Gold in 1995. This estimate is discussed later in Section 7. Fluor Daniel Pty

Ltd, based in Perth, Australia, carried out a favourable bankable feasibility study on the Raub

tailings project in 1996 (Fluor, 1996). This report and the metallurgy of the proposed CIL plant are

discussed later in Section 8.

1996-2003 Akay Holdings Sdn Bhd

The Placex grid was extended northwards by 4 km by Akay Holdings in 1996. East-west sample lines

were spaced at 100 m intervals with soil sample collection every 50 m. This showed that anomalous

gold values continue northwards, though with a more north-northwesterly strike. These anomalies are

weaker than Placex’s due to shallower, ‘B’ soil horizon sampling.

Akay Holdings’ work since 2000 has concentrated on locating free-dig, approximately 1 g/t open pit

resources in the wide Eastern Lode horizon. Trenching in 2002 followed a programme of mappingand chip sampling. Work has been carried out in the following areas: Bukit Koman, Bukit Derrick,

Bukit Malacca South, Bukit Malacca North and elsewhere, the locations of which were shown in

Figure 5. The discussion of RAGM’s trenching results below includes some of Placex’s and Wells

Gold’s drilling results. Only part of the results listed and discussed by Cheze (2003) are given,

sufficient to give an indication of each area’s results.

55



Bukit Koman

Work in this area included 10 trenches, 5 cored Placex holes and 8 Wells RC holes. In general low

(51 g/t) values were disclosed, though numerous trench and drill sections do exceed 1 g/t, with

occasional high values.

Bukit Derrick

This area included 6 trenches, 4 Placex cored holes and 12 Wells RC holes. Results were slightly

better than in the Bukit Koman area with more higher (>1 g/t) values being present in the trenches

and drill holes, confirming that this area requires more work.

Bukit Malacca South

This area included 9 trenches, 2 cored Placex drill holes and 11 Wells RC holes. The intensity of +1g/t mineralisation increases Northwards from Bukit Derrick onto Malacca South, though the grade

remains generally low (see Section 7).

Bukit Malacca North

This area gave a good IP response during Placex’s work. It included 2 trenches and 13 Wells RC

holes. The intensity of +1 g/t mineralisation appears lower than at Malacca South, though access was

difficult in some cases due to topography.

Northern Area (Ward to Sungai Agas)

Mineralisation on the Central and Eastern Lode Zone lodes extends Northward as shown by surface

mining by local tributors, as do the lode structures (Placex VLF). Work includes 2 trenches, 2 Placex

cored holes and 21 Wells RC holes. The intensity of mineralisation and grades were again low, but

the mineralised widths appear to have increased.

6.2 RAGM’S 2004 EXPLORATION

6.2.1 DRILLING IN THE RAUB AREA

RAGM’s Work in 2004 concentrated on the Malacca South and Ward areas as shown in Figure 5,

where grid drilling has taken place on a 50 x 20 m grid. A total of 69 holes were drilled for 3,291 m

in 6 locations, as shown in Table 8. Mapping and trench sampling were carried out at the same time.

RAGM’s 2004 RC drilling programme was successful in locating significant quantities of mineralised

ground in the Eastern Lode Zone in the Malacca South and Ward Sections of the Raub mine (see

Section 7). The Malacca South mineralisation is conveniently located with regard to the proposed

CIL plant. Significant mineralisation was also located adjacent to the Central Lode in the South of

Bukit Koman/Derrick Sections.

Table 8. RAGM’S 2004 RC DRILLING PROGRAMME

LOCATION TARGET No of Holes Total m

Bt WARD Eastern Lode Zone 28 1,346

Bt MALACCA North Eastern Lode Zone 5 221

BT MALACCA South Eastern Lode Zone 25 1,206

Bt DERRICK Eastern Lode Zone 4 200

Bt KOMAN Pond Southeast Eastern Lode Zone 4 177

Bt KOMAN Pond Southwest Western Oxide 3 141

TOTAL – 69 3,291

6.2.2 TERSANG SAMPLING

SEREM carried out chip, grab and channel sampling of quartz veins and mineralised shales within

the quarry on MC 511, which lies on the southeast flanks of Tersang hill. Stockpiled material and

quartz vein mineralisation elsewhere in felsites was also sampled. Ninety five samples were taken, 75

of them from shale based footwall mineralisation (mean 0.57 g/t).

56



Though these data tend to show that the highest value (17.20 g/t) and higher average value (0.67 g/t)

lie within mineralised shales rather than within quartz veins in the shales (5.00 g/t / 0.42 g/t), the

number of samples is so small that this is only indicative. Howe lognormalised the sampling results

from the 75 samples within the shales and found that their natural log population curve approximateswell to a Normal distribution with a high value tail due to 2 high value outliers (log mean of 0.21 g/t).

6.3 PROPOSED EXPLORATION PROGRAMME

6.3.1 INTRODUCTION

Peninsular have proposed an ambitious, but justifiable, exploration programme that will commence

after listing, probably in July, 2005, to discover and evaluate extensions to known mineralisation and

to locate new mineralisation. The exploration programme runs over 3 years and falls naturally into 2

discrete areas and a wider regional programme as follows:

* Tersang Project (TTC Area). This involves geological work and drilling on the known greenfield

Tersang, Tenggelan, Chun Chok and Chenua deposits and prospects. Tenggelan North is included

in ‘‘Other Targets’’ (see below).

* Raub ML 1669 and Plantation MLA. This involves brownfield exploration, largely by drilling, for

extensions to the Central and Eastern Lode Zone lodes and new exploration for the Tailings Zone

lodes.

* Other Targets and Regional Exploration. This involves regional exploration, together with work(including possible RC drilling if required) on the Tenggelan North (gold in soil anomaly),

Kekabu (gold in stream sediments) and any newly discovered areas south of Raub.

The overall budget for the proposed programme has been estimated by Peninsular at US $6.9 million.

Projected expenditures for the various elements of the programme are shown in Table 9, together

with some additional detail on the different types of drilling and assay and analytical costs.

Table 9. PENINSULAR GOLD PLANNED EXPLORATION EXPENDITURE

Activity Raub MLs TTC Area Other Regional Totals

Personnel 705,007 731,567 565,517 2,002,090

Services * 1,821,049 2,343,164 265,478 4,429,691

Equipment 29,254 27,426 18,969 75,650

Contingency (5 %) 127,766 155,108 42,498 325,372

Total US $ 2,683,076 3,257,264 892,462 6,832,802

Services – Costs Detail

RC Drilling 578,500 920,400 78,000 1,576,900

Diamond Drilling 772,200 583,440 0 1,355,640

Assay/Analysis 470,349 839,324 187,478 1,497,151

Sub-Total US $ 1,821,049 2,343,164 265,478 4,429,691

Note: * Services refer largely to drilling and assay/analytical costs.

Outlines of the proposed work programmes are given in Peninsular’s AIM Admission Document.Study of the project timeline charts shows that much detailed planning has gone into the designs of

each of the three main programmes, that there are no obvious timing inconsistencies and that

numerous data analysis and progress decision points have been included. It should be noted that the

prospecting permits would normally have a one year life, however Peninsular has been advised by

PKNP that these permits will have a three year life, which can be extended (J. Starink, pers comm).

This period will enable Peninsular’s exploration programme to be carried out.

The drilling budgets are predicated on grid drilling for resource purposes in the TTC and Raub mine

areas. These grids, particularly the 2nd phase of RC drilling and follow-up diamond drilling, may or

may not be drilled to completion depending on field results.

57



The budgets presented to Howe appear to comprehensively cover the likely costs of the elements of

this programme. Possible minor exceptions to this are in regard to office renovation, communications

and vehicle costs. However, the cost base in Malaysia is markedly lower than that of Europe,

probably explaining these minor discrepancies.

6.3.2 GENERAL EXPLORATION METHODOLOGIES

Peninsular’s proposed field sampling procedures for stream sediment sampling, soil samples, pan

concentrates and trench channel samples are well thought out and take account of local variations,

e.g. differing seasonal flow regimes in the case of stream sediment samples. The same is apparent with

their proposed sample handling, including sample duplicates and outside laboratories. Field locationof all regional sample points will be by GPS, with the resultant easy co-ordinate download for GIS

location of data points. Rock assays will use 50 gram (gm) aliquots, rather than the more common

30 gm, which will help reduce any nugget effect problems.

Percussion drilling will be by reverse circulation using a 4’’ central face sampling hammer with dual

wall drill pipe. Though the data is not yet unequivocal, Peninsular might consider the use of a cone

splitter rather than the more typical Jones riffle splitter (Catto and Church, 2004). These can be

sourced from Australia.

Diamond drill holes will be collared in HQ and completed in NQ and the collars will be surveyed.

No mention is made of down the hole surveys and Howe assumes that this has been included in the

average hole costs of US $66 per metre. Howe has specifically queried this low drilling cost and has

been assured by Peninsular that it is correct and reflects the general low level of Malaysian

exploration costs. Core handling will use industry standard methods (packing, marking, logging,

sawing, photo-recording, half core crushing, splitting into assay and reference samples, despatch by

courier etc.).

Though the CIL plant laboratory is basically a wet ‘solution’ laboratory, it will have the capability of

handling approximately 80 ‘dry’ gold samples per shift if required, which will assist any urgent

exploration assays.

Actual field work is projected to commence shortly after listing (approximately 1st July 2005) and

project software (MS Project) has been used to schedule the programme and will be used to keep it

on track.

6.3.3 TTC PROJECT AREA

In all cases, drilling in the TTC area is to be preceded by field work including mapping, trenching

and sampling. The exploration drilling programme drilling proposed in the TTC area will in general

move from the Tersang deposit, to Chun Chok, then to Tenggelan and end a year later at Chenua.

Sequential RC and diamond drilling is proposed at each site, with subsequent RC infill drilling atTersang. Two RC rigs and two diamond drills will be employed on these programmes, with a data

processing, evaluation and planning process between the programmes. The proposed TTC drilling is

shown in Table 10.

Table 10. PENINSULAR GOLD PROPOSED DRILLING IN THE TTC AREA

Location RC Phase I Diamond Drill In-fill RC

Tersang 13,000 3,600 6,000

Chun Chok 2,400 1,200 —

Tenggelan 8,000 2,000 —

Chenua 6,000 2,000 —

Totals 29,400 8,800 6,000

Figures in metres.

58



Peninsular’s stated purpose at Tersang is to delineate and evaluate the gold-bearing stockwork within

the coarse grained QEP felsite sill and generate a mineable resource of some 500,000 oz of gold. It

will however also search for higher grade ‘‘feeder zone’’ and major fracture bound mineralisation.

The problem of access at Chenua, due to extensive flooded alluvial workings, is likely to slow the

exploration programme there.

6.3.4 RAUB ML 1669 AND PLANTATION MLA AREA

6.3.4.1 Drilling Programmes

Two overlapping drilling programmes are proposed by RAGM for the two Raub mining licenses (ML

1669 and Plantation MLA). This drilling will follow after a period in which surveying, site and GISdatabase preparation take place.

The first drill programme is a shallow RC grid search for oxidised ore largely in the Eastern Lode

Zone, but also within the Central Lode fracture system. The spatial sequence of drilling will start

from the Koman Area in the South, moving successively northward through the Derrick, Malacca

South, Malacca North, Ward and then move to probe the Central Lode Zone. This programme will

use two RC rigs to drill 22.5 km of 50 m vertical holes and to cover nearly a year in elapsed time,again starting shortly after Peninsular’s listing (i.e. post-1st July 2005).

The second drilling programme is for deeper diamond drill holes to cover potential higher grade

underground ore in the Central Lode Zone at depths of between 50 to 250 metres. This programme

will use two diamond drill rigs to drill 11.7 km of inclined holes and cover nearly a year in elapsed

time, starting in the third quarter of 2005 and finishing in the first quarter of 2006. The holes will becollared in HQ and finished in NQ. It is assumed by Howe that borehole surveying costs are included

in the drilling cost.

6.3.4.2 Raub Tailings Lode Zone

The CIL Plant construction phase calls for the excavation of portion of tailings pond R1 to create a

holding void for tailings transfer purposes. This void will be utilised to dig trenches across the strike

of the Tailings Lode Zone. Drilling of 1,500 m of RC holes will be done in fences across the strike

extensions of this zone of mineralisation. The trenching is currently scheduled to take place towardsthe end of January 2006, but its timing will be dictated by the CIL plant’s timing.

6.3.5 REGIONAL EXPLORATION OF OTHER TARGETS

Regional assessment will primarily be by stream sediment and pan sampling, followed by soil

sampling, trenching and possibly drilling (depending upon results). Some 3,000 surface samples are

planned and will be assayed for gold and analysed for multi-elements.

Preliminary work programmes for Tenggelan North and Kekabu (east of Tenggelan North) both

envisage some 500 m of RC drilling (3,000 m in all), with diamond drilling postulated at Kekabu for

budgetary purposes.

6.3.6 RAUB TAILINGS DRILLING

No specific exploration programme is planned by Peninsular to upgrade the RAGM tailings reserves

per se. However, RAGM do intend to drill auger holes and take face samples for reserve

reconciliation, for grade/sizing tests in advance of mining and to determine pond fill/wall grades and

characteristics. Howe recommends that this drilling and sampling should be systematised.

It is very likely that ground penetrating radar (GPR) will be of material assistance in determining

internal tailing pond structure, i.e. hidden pond walls or gravity processed tailings will have different

radar signatures from the original, in-situ sheet-like tailings. The use of this remote sensing method

should be trialled. Costs for this work will fall under the CIL plant’s operational budget (Jon Starink,

pers comm).

59



6.3.7 EXPLORATION CONCLUSIONS

Peninsular is embarking on an ambitious programme to locate and evaluate large, low grade targets

suitable for low cost, mass opencast mining and simple CIL leach metallurgy. Amongst the many

tasks that will require constant monitoring if the programme is to be successful are the following data

handling functions:

* Sample handling, numbering and tracking (chain of custody)

* Sample blank, standard and repeat synchronisation

* Sample database maintenance

* GIS data input and validation

* Sample population distribution checks

* Provision of economic cut-off grades to the exploration team

With regard to RC drilling, Peninsular should ensure that the boreholes are geologically logged with

accurate sample length recording, a nominal 1 m sample length being inadequate. Sample recoveries

must be very strictly policed to the point that, if necessary, costs additional to the budget may needto be incurred to boost RC chip and dust recoveries. It is unrealistic to expect 100 % recoveries (+85

% being good), however the use of 560 % recovery grades in reserve estimates is no longer adequate.

Howe believes that, given the known targets at Raub and in the TTC area, Peninsular is likely to be

successful in fulfilling its stated intention of discovering ‘low’ grade (about 1 g/t) weathered surface

ore. This material should, on account of the regional saprolitic weathering profile, be suitable for

free-dig mass mining and cheap, largely non-crushing and grinding metallurgical treatment.

The discovery of further discrete higher grade (4 to 5 g/t), non-oxidised vein system mineralisation, as

at Raub and Penjom, should not be discounted.

7.0 MINERAL RESOURCES AND RESERVES

7.1 TAILINGS RESOURCE AND RESERVE ESTIMATES

7.1.1 MCDONALD SPEIJERS 1995 TAILINGS RESERVE ESTIMATE

7.1.1.1 Introduction

The base data for RAGM’s tailings reserves is contained in reports by Cowan (1994) and byMcDonald Speijers (1995). The tailings dams were drilled on a 25 x 50 m grid, as shown in Figure 9.

One metre long samples were obtained using hand augers (91 holes for 270 m) and air core drilling

(with some water injection, in 558 holes for 8,233 m). McDonald Speijers (‘‘MS’’) found there were 3

main types of tailings, namely:

* Type T2 – Kim Chuan / Kim Yew Lee tailings – Variable fine sandy > coarse and gravelly

* Type T1 – Old RAGM tailings (commonly +1 g/t, fine, dark grey and graphitic)

* Type TCY – Clayey tailings typically > 80% clays, often with a high organic content, some of

which they considered may not be true tailings (or could even be alluvial gold deposits; Howe)

MS subdivided the tailings into sand and slime fractions and noted that the tailings are very

heterogeneous due to their long and complex depositional history (discussed in Section 3.3). They

also noted that it was sometimes difficult to distinguish the base of the tailings.

60



61



0 200 400Metres

LEGEND

Tailing Pond Limits

Tailings Area

2004 Drilling locations

RAGM MLA Area

RAGM ML 1669 Area

1995 MS Drilling locations

2004 Drilling locations withValues in Pond Floor

Tailings Pond I.DR5

Drawing digitised & plotted from MS data

To

Pla

nta

tio

nO

ilM

ill

MLA

ML 1669

FIGURE 9: RAGM TAILINGS POND AND DRILL SAMPLING LOCATIONS A C A Howe International Limited

7.1.1.2 McDonald Speijers Tailings Bulk Densities

MS estimated the bulk tailings dry density varied between 1.20 to 1.35 and applied it in conjunction

with downward adjustments to take the tailings’ moisture content into account; the dry bulk density

being related more to water content than material type. These estimates were based on 71 in-situ

samples from the surface of the tailings ponds, with comparisons to the moisture contents of air

flushed cores which varied from 510 to nearly 60 %, with an average of 45.5 %. They considered

that below the water table the material would have an estimated dry bulk density of 1.1.

Averaged bulk densities of 1.35, 1.25 and 1.2 were used respectively for the northern ponds (R1, R6,

R7, M1, M2, NA and Bukit Malacca), the central ponds (R2 and R5) and the wetter northern ponds

(R3 and R4) (see Figure 9 for pond locations). MS used assumed density factors of 1.4, 1.6 and 2.0

respectively for fill, saprolitic clays and weathered bedrock and they considered that bulk density

errors could occur. Recent work by Cowan (2004) suggests that MS’s bulk densities were marginally

low.

7.1.1.3 McDonald Speijers Sampling Grades and Adjustments

There were no paired holes for drilling method/grade recovered comparative purposes. However, the

frequency distributions of sample grades returned from the augering and air flush core holes were

closely comparable and MS concluded the results could be combined for resource estimation

purposes.

The samples (4,834) were assayed by Analabs in Perth or Kalgoorlie (Analabs Method code GG 313,

i.e. a 50 g charge with AAS finish), with check assaying (approximately 5 % or 485 paired samples)

being done at Australian Assay Laboratories in Balcatta (AAL). Blind field duplicates were

introduced in the ratio of 1:20, i.e. approximately 1 per hole or 5 %. The removal of outlier valuesproduced little discernable difference to the resultant mean. However, blind standards (232 assays)

were also included and the Analabs Standards results were consistently lower than expected by

approximately 10 %. The AAL Standards results were consistent for samples below 1.3 g/t, but again

under-reported those above 1.3 g/t. Further check assays (181 samples), using Analabs pulps, were

submitted to AAL and a complicated series of paired assays determined a series of grade bin

correction factors, averaging 4.9%, based on lognormalised grades. In view of the uniformity of

sample size and spacing, MS applied a 5 % upgrade to all sample value, rather than applying

individual grade bin corrections.

Howe agrees in general with this simplified constant factorisation, but considers that it probably

slightly undervalues the 0.5-0.9 g/t bin (which contains the most values and the MS mean reserve

grade) and probably slightly overvalues the 0.9-1.4 g/t bin.

MS carried out basic statistics, including frequency distributions. They found the sample frequency

distributions to be highly skewed, tending towards being lognormal in form. The log mean grade of

4,834 samples was 0.86 g/t. There appeared to be more than one sample population present,

apparently with a natural break at between 1 to 2 g/t. This break was not seen by Howe in the

lognormalised values’ cumulative frequency curve.

MS decided to use non-lognormalised grades and an iterative process was adopted, whereby the

highest grade values were removed from the sampling population to reduce the arithmetic mean to

the lognormalised mean. This gave a top cut value of 3 g/t Au in tailings and 5 g/t in superficial fill

and rubble. This approach is novel, but would certainly remove any high outlier or upper value bi-

modal members of the sampling population. No bottom cut values were applied.

7.1.1.4 McDonald Speijers Resource and Reserve Modelling

Reserve modelling was carried out using Datamine software and a three dimensional (3 D) computer

block model. Vertical and then directional (45o increments) variograms were computed using log-

transformed values and a spherical log variogram was chosen to model the grade variations within

the deposit. The chosen spherical variogram showed large horizontal and vertical ranges, many times

larger than the sample and interhole spacing (e.g. 7 m vertical, 250 m E-W and 450 m N-S).

62



Grade interpolation to generate resources was carried out within individual ponds, according to each

type (zone) of material, using an anisotropic inverse distance cubed algorithm, i.e. each block’s value

would effectively reflect the nearest hole’s values. The block dimensions used were 1 m vertical, 10 m

east-west and 25 m north-south; i.e. elongated along the general valley axis in all ponds (except BukitMalacca). The resources generated were considered measured resources by MS. They were divided

into sand and slime types as follows; 2.482 Mt of sand at an average grade of 0.97 g/t and 4.789 Mt

of slimes at 0.82 g/t, to give a total of 7.272 Mt at an average grade of 0.86 g/t.

The measured resources were converted to proven reserves by MS by assuming a recovery of 99.5 %

and a 20 cm overshoot at the base of the tailings, based on the positive economics shown in the

Fluor feasibility study (Fluor, 1996). The mining method used in this reserve generation was non-

selective hydraulic mining. These reserves have been shown still to be economic (Time Mining, 2005)

based on RAGM using hydraulic mining. The reserves so generated are shown in Table 11.

Table 11. MCDONALD SPEIJERS / FLUOR DANIEL PROVED TAILINGS RESERVES

Pond Total t G/t Content kg Content oz

BM 285,297 0.89 254.15 8,171

M1 2,923 0.74 2.18 70

M2 31,686 1.77 55.99 1,800

R1 974,960 0.80 776.22 24,956

R2 1,741,406 0.80 1,398.41 44,960

R3 431,726 0.73 314.61 10,115

R4 1,165,577 0.78 905.95 29,127

R5 1,145,809 0.90 1,028.44 33,065

R6 1,007,450 0.98 990.93 31,859

R7 558,375 1.09 608.88 19,576

Total/Av 7,345,209 0.86 6,335.76 203,700

Source: Figure 9.1, McDonald Speijers, 1995

Inferred resource estimates were also generated (Table 12). Effectively these are in some poorly drilled

areas in ponds R1 and R4 (see Figure 9), tailings ‘‘outside’’ of the uppermost tailings walls and a

water saturated area within R3 (see Cowan, 2004 below). Tailings walls are normally built up

sequentially, meaning that there are considerable volumes of tailings in depth, which have been built

over by successive rises in the tailings impoundment walls.

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Table 12. MCDONALD SPEIJERS INFERRED TAILINGS RESOURCES

Pond Tonnes g/t Content kgs Content oz

BM 11,000 0.55 6.05 194

M1 0 n.a. n.a. n.a.

M2 6,000 1.95 11.7 376

R1 61,000 0.58 35.38 1,137

R2 158,000 0.91 143.78 4,622

R3* 501,000 0.67 335.67 10,792

R4 26,000 0.68 17.68 568

R5 61,000 0.84 51.24 1,647

R6 15,000 1.07 16.05 516

R7 0 n.a. n.a. n.a.

Total/Av. 839,000 0.73 617.55 19,852

Notes: Table 8.2 in McDonald Speijers, 1995. * R3 redrilled by RAGM.

MS also modelled grades for fill on top of, internal to and beneath tailings dams, and for the

material used in the tailings pond walls, but not to the same standard as the tailings work. Such

material was designated as inferred resources as its dimensions were not fully delineated by the

drilling, which would have had to have been much more extensive and closer spaced to do so. This

material still needs to be brought into at least indicated resource status (e.g. by hand augering of

surface material) so that at least probable reserves can be generated from it. MS’s estimates of this

material are shown in Table 13.

Table 13. MCDONALD SPEIJERS INFERRED FILL RESOURCES

Fill

Cut-off Tonnes

Grade

g/t

Content

Kgs / Oz

Fill Tonnes Above

Tails : t / %

Fill Kgs / Oz

Above Tails

All 983,000 0.62 609.46 / 19,594 621,000 / 63 % 383.95 / 12,344

+0.5 g/t 574,000 0.94 539.56 / 17,347 262,000 / 45 % 242.80 / 7,806

+1.0 g/t 170,000 1.57 266.90 / 8,581 59,000 / 34 % 90.76 / 2,917

Notes: Extracted from Table 8.3 in McDonald Speijers, 1995.

7.1.2 TONNAGE WORKED AND TAILINGS RESERVE ESTIMATE

7.1.2.1 RAGM Tailings Processing

RAGM has been working these tailings for the gravity recovery of gold since 1999 and, by the endof 2004, had treated 4,474,000 tonnes of material (see Section 8). A tonnage reconciliation between

the MS 1995 reserve data and tonnes worked for the period up to the end of 2003 is shown in Table

14 below. However, reconciliation between tonnes treated by gravity methods from any particular

tailings pond and the original reserve tonnages is problematic. This is because plant feed tonnage

measurement by tip-truck volume is never accurate and also because the R1 pond has been used as a

convenient holding area for off-balance material and material that was retreated more than once for a

variety of reasons (e.g. spillage and following circuit changes).

The 582,000 t of material treated in 2004 was derived from tailings ponds R1, R2, R5 and R7, but

no pond specific tonnages are known. This 2004 production nominally reduces the balance of

unworked tailings reserve to 3,485,000 tonnes, not taking the off-balance treated or R1 retreated

material into account. The RAGM tailings resources as at the end of 2003 are shown below in Table

14.

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Table 14. RAGM TAILINGS RESOURCE BALANCE AS AT END 2003

Pond Original Reserves (t) Worked as at end 2003 Unworked Balance

BM 285,297 163,000 122,297

M1 2,923 0 2,923

M2 31,686 0 31,686

R1# 974,960 1,401,000 -426,040

R2 1,741,406 262,000 1,479,406

R3 * 431,726 0 431,726

R4 * 1,165,577 0 1,165,577

R5 1,145,809 868,000 277,809

R6 1,007,450 346,000 661,450

R7 558,375 238,000 320,375

Totals 7,345,209 3,278,000 4,067,209

Note: For # see R1 text below. * R3 and R4 are untreated.

7.1.2.2 Treatment of Not-In-Reserve Tailings

Not in reserve (NIR) material treated totalled some 512,000 t as at the end of 2003. This included

oversize material, fill, drainage ditch clearance material and Eastern Lode Zone material from Bukit

Koman. This NIR material is probably the cause of the R1 tailings balance at the end of 2003

showing as negative (i.e. overmined) by 426,000 tonnes. The R1 untreated reserve balance should

however still be positive as the pond has not been mined to completion (M. Cowan, pers comm).RAGM considers that 420,000 t of pond R1 remain to be CIL treated in their cashflow forecast.

It is quite possible that the treatment of this NIR material could have diluted the residual grade of

the reworked tailings as its head grades are unknown. However, a similar tonnage of ‘‘high’’ grade

(~0.94 g/t) inferred fill resources is also NIR (McDonald Speijers, 1995) and will compensate for any

dilutive effect when finally brought into reserve. Also, the gravity gold recoveries from approximately

24,000 t of relatively high grade (2 to 4.5 g/t) oxide material from the Bukit Koman and MalaccaSouth areas were poor and will have in part redressed the balance.

For RAGM, generating an accurate reserve estimate would require a full repeat of the MS drilling

and sampling exercise (except for tailings ponds R3 and R4). On balance, Howe does not consider

this to be necessary, providing RAGM carries out pre-mining drilling and sampling grade control of

its to-be-mined material in those portions of the tailings ponds which have already been partially

treated for coarse gold extraction. RAGM also has sufficient time (based on the early treatment ofthe intact R3 and R4 tailings ponds) to carry out check drilling to firm up the MS inferred resource

estimates and the current reserve estimates.

7.1.3 RAGM 2004 TAILINGS RESERVE ESTIMATE

Cowan (2004) drilled 83 Banka holes, mostly to firm up the R3 tailings pond estimates (49 holes)

from their MS inferred status to their current measured resource status, as shown in Figure 9. He

also carried out infill drilling in the Bukit Malacca tailings pond (10 holes in a partially mined area),

reconnaissance drilling of the tailings retaining walls on ponds R2, R3 and R4 (9 holes) and

metallurgical test holes on R4 (14 holes in an undisturbed area) and R1 (7 holes in a partially mined

area). Four of the retaining wall holes were part of the R3 assessment holes and an additional hole

was a test RC hole.

Following new access in depth to previously sub-surface tailings during the current gravity gold

excavations, Cowan considered that the bulk density used in the Fluor Daniels study probably under-

estimates the tailings bulk density by a factor of 5 to 10 % and he used a bulk density of 1.4 in

RAGM’s R3 tailings tonnage calculations.

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Cowan has generated a new reserve using the previous MS proven reserve estimate and the known

gravity gold production (adjusted by Howe to end-2004) to generate a new proven tailings reserve, as

shown in Table 15.

Table 15. DECLARED RAGM TAILINGS RESERVES (* ADJUSTED)

Source Volume bcm Density Tonnes Grade g/t Gold kgs Gold Oz

Fluor: Proven – Sand 1,934,669 1.278 2,472,687 0.97 2,399 77,114

Fluor: Proven – Slime 3,837,290 1.270 4,872,522 0.81 3,947 126,891

Fluor: Total 5,771,959 1.273 7,345,209 0.86 6,345 204,004

Cowan: R3 into Reserve 486,857 1.400 681,600 0.79 542 16,854

Fluor + Cowan Reserves 6,258,816 1.282 8,026,809 0.86 6,887 220,859

1999-2004 Production * n.a. n.a. [4,474,000] [0.26] 1,198 38,548

Adj. Reserves – 31/12/04 6,258,000 n.a. 8,026,000 0.71 5,689 182,311

Note: * Updated from Table in Section 7 of Cowan, 2004 and later 04/2005 RAGM final reconciliation.

Howe lognormalised Cowan’s 2004 R3 Banka drilling grades and found, like MS in 1995, that the

values were near-lognormally distributed. The average lognormalised grade is lower (0.72 g/t) than the

length weighted grade (0.79 g/t) used by Cowan, who did not top cut the values used (to MS’s 3 g/t)

in his R3 tailings reserve estimate. It is therefore possible that the R3 reserves brought into reserve

are marginally overvalued by the traditional method used by Cowan.

Cowan’s scattered drilling of the approximately 3.5 km of visible tailings pond walls (Cowan, 2004)

gave an average length weighted grade of 0.46 g/t for a bimodal sample population (median ‘‘0.43’’ g/t), whereas Howe’s lognormalised point grades averaged 0.30 g/t, i.e. lognormalisation is not

appropriate here as would be expected for a non-natural support. Though Howe considers that the

pond walls can provide a source of CIL plant feed, detailed drilling will be necessary to bring this

material to account, or as Cowan suggests, the material can be used to build new low cost tailings

pond walls if unsuitable for treatment.

7.2 RAUB OXIDISED OPEN-CAST RESOURCE ESTIMATES

RAGM carried out RC drilling in 2004 to delineate easily treated ore in the Eastern Lode Zone in

the Malacca South and Ward areas.

7.2.1 EASTERN LODE ZONE BULK DENSITIES

RAGM’s Eastern Lode Zone oxidised reserves were estimated using an assumed bulk density of 2 for

this saprolitic material. Eight in-situ measurements were carried out recently at different locations in

the Koman and Malacca areas and agree closely (Mean 1.95) with this assumed figure (Cheze, 2005).

More in-depth and less well-weathered samples (i.e. core) are required to provide a wider range ofvalues that can be applied to different weathering levels and mineralisation types.

7.2.2 MALACCA SOUTH FREE DIG OXIDE RESOURCES

Following their drilling programme in this area, RAGM proposes that a saprolitic, indicated resource

of 1.062 Mt at an average grade of 1.06 g/t is present, based on length-weighted drill hole sample

grades only. This resource is regarded as being of an interim nature by RAGM as it excludes some

higher grade values and trenching results. They estimate that this area could contain approximately1,123 kg or approximately 32,073 oz of gold if brought wholly into reserve.

Howe considers this mineralisation to currently be of the ‘‘inferred’’ resource class primarily due to

the very high and erratic chip and dust losses and over-recoveries, with mineralised zone recovery

averaging only 62 %.

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The sample losses have almost no correlation with the near-lognormally distributed quartz content

and the log-normally distributed gold content (log mean grade of 0.63 g/t). RAGM’s length weighted

resource modelling failed to take this lognormal gold value distribution into account and consequently

their resource gold content is very likely to be overstated. Other factors in placing this material intothe inferred resource class are that there are no twinned holes, no structural linkage of mineralisation

has been demonstrated and that surface trench values were not included.

However, the fact that Howe has downgraded the Malacca South resource from indicated to inferred

resource status should not detract from the fact that RAGM has plainly demonstrated that

potentially economic mineralisation can occur in the Eastern Lode Zone in the Malacca South areaand that this area certainly warrants additional exploration.

7.2.3 WARD FREE DIG OXIDE RESOURCES

Following drilling in this area north of Malacca, RAGM proposes that a saprolitic, indicated

resource of 1.170 Mt at an average grade of 0.74 g/t is present, based on length-weighted drill hole

grades. This resource is again regarded as being of an interim nature by RAGM as it also excludes

some higher grade values and trenching results. They estimate that this area could containapproximately 863 kg or 27,758 oz of gold if brought wholly into reserve.

Howe again considers this mineralisation to be insufficiently well tested to be brought into the

indicated resource category for the identical reasons given for the Malacca South drilling. In this case,

the RC recovery in the mineralised zone was 61 % and the grades at Ward are lower than at

Malacca South. The Ward value population is not as well distributed lognormally as the MalaccaSouth sample population (log mean grade of 0.52 g/t) due to a long, low value tail. Howe considers

that this population is likely to have a three parameter lognormal distribution, but has not tested for

it.

Again, this Ward area resource downgrading from indicated resource to mineralised ground status (on

account of its lower grade) by Howe should not detract from the fact that RAGM has demonstratedthat a large volume of mineralised ground has been shown to occur at Ward in the Eastern Lode

Zone, which also warrants additional exploration.

7.2.4 COMMENT ON DRILLING RECOVERIES AND SAMPLE STATISTICS

The principal reason for Howe not re-estimating the Malacca South and Ward resources was the very

poor and very erratic RC recoveries within the blocked ‘‘ore’’ zone. Though there are a number of

possible reasons for the poor recoveries, one fundamental reason is the extremely fine grained, clay-

like nature of the saprolitic weathered shale bedrock. Some data on size fractions in weathered shalein Malaysia (actual location unknown) showed that the natural -2 mm content of those saprolitic

shales was 25 %, rising to 35 % on air drying (Fookes, 1997). Thus, the loosely bonded nature of this

soft weathered rock will break down and generate excess dust in a dry, high-pressure air, percussive

environment.

Single stage cyclones of the type commonly used in mineral exploration are unlikely to adequatelycapture this extremely fine material, especially if the cyclone’s vortex finder is worn or its depth

incorrectly set. There are a number of remedies that RAGM could consider, which should be

explored to improve RC recoveries.

7.2.5 TERSANG RESOURCE ESTIMATES

A ‘‘reserve’’ of ~25.9 Mt grading 0.57 g/t was identified in 1994 by SEREM (then a BRGM

subsidiary) within the coarse grained QEP, with a cut-off grade of 0.3 g/t and a low stripping ratio ofapproximately 0.5 waste to 1 ore. The average thickness quoted was 37 m, with a strike length of

1,700 m and an average width of 250 m. It was based on the results of 9 boreholes (over a strike

length of 1,400 m), 3 trenches (250 m) and 18 continuous channel samples along tracks. These

SEREM reserves would today be regarded as an inferred resource estimate in terms of the JORC

Code.

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This original SEREM ‘reserve’ estimate was revised as an inferred resource in a scoping study by

Cole (2004), who re-estimated a resource of 18.9 Mt at 0.87 g/t for a content of 528,000 oz, using a

0.6 g/t cut-off and a stripping ratio of 1.8 waste to 1 ore. His outline financial valuation, using an

estimated 84% recovery, modelled an annual production of 82,000 oz from 3.5 Mt of ore, at anestimated cash cost of US $259 per ounce.

Cole concluded that the drill sampling density was clearly insufficient to evaluate the deposit and

recommended that sixty-five 70 m deep holes (i.e. about 4,500 m) would be required to bring this

material into indicated reserve. Howe can only concur with this and Peninsular intends to carry outchannel sampling and both RC and diamond drilling on a grid pattern over Tersang to intersect not

only the stockwork mineralised felsite, but also the vein system in the underlying graphitic shales.

7.3 RESOURCE CONCLUSIONS

Peninsular’s stated intention is to target deposits containing low grade, mass mining, weathered

mineralisation and its exploration results to date support this by showing large volumes of inferredresources at Tersang and Malacca South and a large volume of mineralised ground at Ward.

Peninsular has not as yet conducted sufficient work to generated saprolitic resource estimates that are

acceptable under either the IMMM or JORC definitions of indicated resources, though potential for

economic recovery has been shown at both Tersang and Malacca South. In particular, the use of

length-weighted means in low grade material with lognormal sample populations is deprecated.However, there appears little doubt that reserves of the type being sought by Peninsular should be

found by Peninsular, both at Raub and in the TTC area.

The tailings reserve estimate was originally done to a high standard by McDonald Speijers (1994).

Though later tailings processing for coarse gold recovery by gravity methods has complicated theoriginal tailings dispositions, gold balance calculations correct for this.

8.0 TAILINGS DUMP PROCESSING

8.1 INTRODUCTION

A considerable amount of testwork has been performed on the Raub tailings by several engineering

companies. The testwork has been focused on gravity and carbon-in-leach (‘‘CIL’’) processes. FluorDaniel performed a series of tests in 1996 (Fluor, 1996), Signet in 1999 and Time Mining/

Performance Laboratories in 2004/5. The tailings have been shown to be amenable to cyanide

leaching. Gravity recoveries have been generally low.

It is proposed to install a new classification circuit to produce a plus 212 mm coarse fraction whichwill be treated by a gravity concentration and a minus 212 mm fraction which will be treated in a

new CIL plant. Some processed coarse material will be stockpiled depending on grade and will be

treated by the existing mill and by CIL later in the project’s life.

8.2 METALLURGICAL TESTWORK

8.2.1 General Comments on Testwork

Several testwork programmes have been performed on samples from various tailings deposits. These

test programmes were designed to assess the metallurgical response of the material using gravity

separation, and cyanide leaching using CIL of whole ore, gravity tailings, and milled ore.

Of these tests, only Phase 1 of the Performance Laboratories tests, reported in January 2005, actuallyreplicate the proposed flowsheet in treating the -212 mm fractions using CIL. The tests carried out

previous to these did not replicate the proposed flowsheet as they omitted classification at 212 mm

although Phase Four of Fluor’s testwork was based on classification at 212 mm and grinding of the

oversize, followed by CIL of the combined streams (Fluor, 1996). However, they do provide

additional information regarding potential gold recovery.

The results showed that the tailings are amenable to leaching by cyanide and the Carbon-in-leach

(CIL) process should be used. The proposed process of classifying and screening at 212 mm and

treating the -212 mm fraction using CIL should produce recoveries better than 85% with average

residue values of approximately 0.15 g/t for tailings from R1, R3 and R4. The cyanide addition and

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consumption should be approximately 0.4 kg/t. Treating the +212 mm fraction using a Knelson

concentrator should recover approximately 10% of the gold in that fraction.

Milling the coarse material would improve the recoveries from this material. The average recoveries of

milled tailings should be approximately the same as the unmilled -212 mm fraction. The CIL

conditions should be 2.5 hours pre-conditioning and 16 hours leaching. The tanks should include air

sparging.

The pre-2005 test results indicate that the gold recoveries could be up to 90% whether leaching onlyor gravity concentrate and leaching of the tailings is used. The majority of the residue values for the

tests prior to 2005 range between 0.12 g/t to 0.40 g/t, including tests which used milled ore. These

tests indicate that residue grades of 0.20 g/t or better could be achieved by leaching the fine fraction.

This would give a range of recoveries between 60 % to 80 %.

GBM cannot comment fully on the representativity of the samples used in the metallurgical tests dueto the varied depositional history and later retreatment of portion of the tailings ponds for coarse

gold. Other things being equal, the R3 samples should be fully representative, the R4 samples are

undisturbed and should (at the very least) be moderately representative, whilst the R1 samples may

be marginally coarse grained if they represent undisturbed material.

8.2.2 GBM Comments on RAGM’s January 2005 Report (Prepared by Time Mining Pty Ltd)

8.2.2.1 Phase 1 Tests

Samples from previous tests were compiled to make up composites for R1, R3 and R4 tailings. Tests

were performed by Performance Laboratories to optimise the retention time, confirm the CIL

testwork, and cyanide optimisation. SGS Lakefield performed oxygen uptake and dissolution rate

tests. The composites were screened at 212 mm and the -212 mm fractions were used in the leach tests.

No significant additional leaching occurred after 16 hours for any of the composites, and 16 hours

leach time is taken to be the optimum. The recoveries after 16 hours are reported to be 92.9%,88.5%, and 85.0% for composites R1, R3 and R4 respectively and the residue values were 0.14 g/t,

0.11 g/t, and 0.12 g/t for these three composites.

The results of the confirmation CIL tests are reported as 92.7%, 87.5%, and 85.7% recoveries and

residue grades of 0.12 g/t, 0.12 g/t and 0.12 g/t for R1, R3, and R4 composites respectively. In

addition a composite of grey material gave a recovery of 81.8% with a residue of 0.20 g/t.

CIL tests were performed to optimise the cyanide addition. The reported results gave recoveries of

88.8%, 89.6%, and 86.3%, with residue values of 0.19 g/t, 0.10 g/t and 0.11 g/t for R1, R3 and R4

respectively. The cyanide addition of 0.4 kg/t was half the quantity used in the confirmatory test.

Dissolution rate tests indicated that additional oxygen to R1 gave enhanced dissolution rates but noadvantage to recoveries over extended retention times. For R3 and R4 there was no significant

difference. The CIL recoveries after 24 hours retention time and cyanide addition of 0.8 kg/t were

reported to be 91.2%, 82.8% and 86.0% and the residues as 0.13 g/t, 0.13 g/t and 0.12 g/t for R1, R3

and R4 respectively, that is, comparable to those achieved in the Performance CIL tests. Oxygen

uptake tests indicated that air sparging would be beneficial due to the relatively high consumption

rates.

No gravity recovery tests were performed on the +212 mm fractions.

8.2.2.2 Phase 2 Tests

New samples were used to make up composites for R1, R3 and R4 tailings. This testwork included

gravity tests on -250 mm +106 mm fraction, gravity tests on +250 mm fraction, CIL tests on gravitytailings and -106 mm material. These tests do not simulate the flowsheet as only the +212 mm fraction

will be treated by gravity and -212 mm fraction by CIL.

Gravity tests on the -250 mm +106 mm fraction indicated that the gravity recoverable gold ranges

should be somewhere between 8.9 % and 11.6 %, 10.2 % and 15.0 %, and 14.4 % and 16.8 % for

tailings from ponds R1, R3 and R4 respectively.

Gravity tests on the +250 mm fraction indicated that the gravity recoverable gold ranges should be

somewhere between 12.6 % and 15.4 %, 9.5 % and 12.4 % and 8.5 % and 9.9 % for tailings from

ponds R1, R3 and R4 respectively.

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CIL tests on combined gravity tailings and -106 mm fraction produced recoveries of 88.6 %, 89.0 %,

and 85.9 %, with residue grades of 0.10 g/t, 0.09 g/t, and 0.17 g/t for ponds R1, R3 and R4

respectively.

8.2.2.3 Metallurgical Test Conclusions

The table below summaries the results of the tests with similar conditions to those which are

proposed.

Table 16. CIL LEACH TEST RESULTS

Test Composite

Retention

Time

Optimisation Confirm

Cyanide CN

Optimisation

Retention

Time

Optimisation Confirm

Cyanide CN

Optimisation

Recovery % Residue grade g/t

R1 92.9 92.7 88.8 0.14 0.12 0.19

R3 88.5 87.5 89.6 0.11 0.12 0.10

R4 85.0 85.7 86.3 0.12 0.12 0.10

Grey 81.8 0.2

These results are better than those achieved in previous tests. The results indicate that residue values

for the tailings from R1, R3 and R4 should be less than 0.15 g/t. The results indicate that the

optimum cyanide addition is 0.4 kg/t and that air sparging would be beneficial in the CIL. The tests

indicated that the potential gold recoverable by treating the +212 mm fraction by a Knelson

concentrator would be between 10% and 15%.

8.2.3 GBM Comments on the Previous Test Results

Previous tests do not replicate the proposed flowsheet, however, they do provide additional

information regarding the potential gold recoveries by CIL and gravity concentration. The tailings are

amenable to treatment by CIL. The tests indicated that the gold recoveries using gravity

concentration are low.

8.2.3.1 Tests on R1 Composite Sample

The gravity recoverable gold was 12% of the head grade. Tests on a composite from R1 gave a CIL

gold recovery of 90% for whole ore and 86% for gravity tailings. The residue grades were 0.14 g/t

and 0.12 g/t for the whole ore and gravity tailings respectively. Cyanide consumptions were 0.29 kg/t

for the whole ore and 0.22 kg/t for the gravity tailings.

8.2.3.2 Tests on R3 Composite Sample

Testwork on R3 composite whole ore gave the gravity recoverable gold to be approximately 14% of

the head grade. Cyanide leach tests indicated that approximately 90% of the gold in the tailings couldbe recovered. The final tailings grade was 0.16 g/t.

Cyanide leach tests on the gravity tailings indicated that approximately 82% of the gold in the tailings

could be recovered. The final tailings grade was 0.18 g/t. Cyanide consumptions were 0.25 kg/t for

whole ore and 0.22 kg/t for gravity tailings.

8.2.3.3 Tests on R4 Composite Samples

Three composites were made up based on their colour, yellow, orange and grey, and an ‘‘Overall’’composite. Gravity tests gave recoveries of 9.2% for Yellow, 5.7% for Orange, 19.3% for Grey, and

13.5% for the Overall composite. CIL tests gave the recoveries shown in Table 17.

Further CIL tests on milled gravity tailings of Grey and Overall composites were carried out. The

results were recoveries of 63.2% for the grey and 79.4% for the overall composites.

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Table 17. R4 BANKA SAMPLE CIL LEACH TESTS

Composite Whole ore Gravity tailings 1 Gravity tailings 2

Au rec. % Tailings g/t Au rec. % Tailings g/t Au rec. % Tailings g/t

Yellow 79.6 0.172 80.1 0.144 69.4 0.220

Orange 83.8 0.142 83.6 0.120 67.0 0.240

Grey 27.9 0.420 76.7 0.160 46.0 0.380

Overall 55.4 0.352 74.8 0.216 57.7 0.36

Additional CIL tests were performed on Orange and Yellow gravity tailings, these achieved recoveries

of 93.6% and 83.9% respectively with residue grades of 0.08 g/t and 0.16 g/t respectively. No reason

for the improved recoveries was given in the report.

8.2.3.4 Tests on R4 ‘‘New Grey’’ Composite

Cyanide leach tests on a ‘‘new grey’’ composite from R4 gave a gold recovery of 40% for whole ore

and 64% for milled ore. Cyanide consumptions were 0.33 kg/t for the whole ore and 0.22 kg/t for the

gravity tailings. Preg-robbing tests indicated that preg-robbing was not the cause of low gold

recoveries.

8.2.3.5 Tests on Eastern Lode Zone Composite Samples

Tests on a two oxide RC drill composites, Oxide 01 and Oxide 02 from Malacca South, gave gravity

gold recoveries of 6.6% and 5.0% respectively. The gold recoveries on milled composites were 78% for

Oxide 01 and 82.6% for Oxide 02. The recoveries for gravity tailings were 86% and 96%, with tailingsgrades of 0.36 g/t and 0.07 g/t respectively. Cyanide consumptions were approximately 0.17 kg/t.

8.2.3.6 Fractional Analyses

The fractional analyses of samples were carried out. These showed that there would be no significant

upgrading of the feed grade to CIL by rejecting the +212 mm fraction.

8.2.3.7 Gravity Recovery

The tests showed that the gravity recoverable gold is low, the Updated Feasibility Study uses a

combined G Conc 1 and G Conc 2 recovery. However, the G Conc 1 recovery is a conservative

estimate of that achievable in a plant and in practice this would be recovered, together with a

proportion of the G Conc 2. These tests indicate that approximately 10% to 15% of the gold couldbe recovered by gravity treatment of the +212 mm.

The CIL leach tests results for unclassified ore are summarised in the table below. As these samples

were not classified at 212 mm they are not representative of the proposed process. These results shown

in Table 30 indicate that ‘‘Grey’’ ore will have a poor gold recovery and for the other ores the

recoveries would be 80-96%.

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Table 18. CIL RECOVERY TESTS

Sample CIL of Whole Ore CIL of Gravity Tailings

Composite Au Rec. % Tailings g/t Au Rec. % Tailings g/t

R3 90.2 0.16 81.5 0.18

R1 89.6 0.14 85.5 0.12

R4 Yellow 79.6 0.172 80.1 / 69.42 0.144 / 0.222

R4 Orange 83.8 0.142 83.6 / 67.02 0.120 / 0.2402

R4 Grey 27.9 0.420 76.7 / 46.02 0.160 / 0.3802

R4 Overall 55.4 0.352 74.8 / 57.72 0.216 / 0.3602

R4 New Grey 40.6 0.40 40.2 / 41.02 0.400 / 0.3922

R4 Orange — — 93.7 0.084

R4 Yellow — — 83.9 0.16

Oxide 01 78.01 0.37 86.2 0.36

Oxide 02 82.61 0.28 96 0.07

Notes: 1 Milled to 80% (d80) passing 75 microns, 2 Duplicate leach tests.

8.3 RAGM GRAVITY PLANT OPERATIONAL RESULTS

A milling and gravity gold plant was brought into production by RAGM in March 1999. Annual

gold production by gravity concentration from inception to the 31st December 2004 is tabled below.

The gravity plant continues to operate at low levels for licence and permit protection reasons and will

continue until construction of the CIL plant commences.

Table 19. RAGM ANNUAL GRAVITY FINE GOLD PRODUCTION TO END 2004

Year Treated t Recov. gm g/t Recov. Recov. kg Recov. Oz

1999 613,278 120,713 0.19 120.71 3,881

2000 839,107 138,348 0.16 138.34 4,448

2001 790,296 227,366 0.28 227.37 7,310

2002 1,057,538 316,602 0.29 316.60 10,179

2003 591,623 243,675 0.41 243.68 7,545

2004 582,384 161,209 0.27 161.21 5,183

Total / Average 4,474,226 1,207,913 0.26 1,207.92 38,546

Note: Period March, 1999 to 31st December, 2004. Tailings recovered from ponds R1, R1 reworked, R2, R5, R6, R7, Bukit Malacca andother sources. Only tailings ponds R3 and R4 have not been worked.

8.4 PENINSULAR’S PROPOSED TAILINGS TREATMENT

8.4.1 PROCESS OVERVIEW

The proposed process will be mining by hydraulic mining, classification, gravity processing of the

coarse fraction, thickening of the fine fraction, CIL, elution and smelting, detoxification (if required)and residue disposal.

Approximately 1.5 Mt/y will be mined. This will be classified using cyclones and a screen to produce

+212 mm and -212 mm fractions. The +212 mm fraction will be treated (‘scalped’) by Knelson

concentrators to recover gravity recoverable gold and the residue from this unit will be transferred to

a separate tailings dam. Higher grade coarse material will be stockpiled for later milling and leaching.

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The -212 mm fraction will be thickened before being treated in a conventional CIL circuit. The

thickener underflow will be pre-leached with lime before transferring to the six CIL tanks. The

retention time in the pre-leach will be 2.5 hours and 15 hours in the CIL tanks. Provision is made for

detoxifying the cyanide in the residue from the CIL using an oxidation by sulphur dioxide process,before the tailings are pumped to the tailings ponds for disposal.

The loaded carbon will be transferred from the first CIL tank to the loaded carbon screen and into a

hopper. Once 3 tonnes of loaded carbon has been collected, the batched loaded carbon is dropped

into the elution column. The elution and electrowinning is a typical Zadra process. The gold will beplated out onto cathodes, stripped and then calcined. The calcine and gravity gold concentrate will be

smelted together to produce dore. The eluted carbon will be regenerated before being acid washed

and returned to the CIL circuit.

It is proposed that the existing ball mills be used from year 5 onwards for +212 mm sandsretreatment at a rate of approximately 400,000 t/year. The milled product will be treated in the CIL

circuit.

8.4.2 COMMENTS ON PROPOSED OPERATIONS AND DESIGN

8.4.2.1 Process Description Comments

From the testwork results there is little, if any, benefit in treating the coarse tailings by cyanidation

and hence the process flowsheet is appropriate.

8.4.3.2 Equipment Selection

The unit processes and the equipment are standard for the gold industry and are appropriately sized.

Although the mining will be approximately 130,000 t/m, the CIL circuit is rated at 90,000 t/maccording to the design criteria, which takes into account the removal of the +212 mm fraction.

The existing milling circuit should be capable of treating the throughput of 400,000 tons per year.

8.4.3.3 Plant Management

The senior management of the plant will be expatriates experienced in operating tailings reclamation

and CIL treatment projects.

8.4.3.4 CIL Plant Construction

The construction of the plant should be straightforward as the plant is relatively uncomplicated and

no complicated engineering is required. The construction period of 7 months should be sufficient. The

CIL plant site has been partially drilled for sterilisation purposes (McDonald Speijers, 1995).

8.4.3.5 Plant Capital Costs

The capital costs have been estimated based on:* Design flowsheets* Layouts and equipment lists* Firm price quotations for major equipment* In-house data for other equipment* Tenders from local companies for civil, structural, piping, electrical and some locally supplied

equipment* Costs provided by RAGM and Time Mining

The capital cost estimate has been compiled in accordance with standard industry practice and the

level of engineering and number of quotations is sufficient for the reported accuracy of -5% to +10%.

The design work for estimating material quantity take-offs for obtaining quotations is sufficient and

multiple capital item quotations have been sought for the majority of the equipment and for materials

of construction. Quotations from both local and overseas have been obtained where appropriate, for

73



example, steelwork, piping, pumps, etc. Only overseas suppliers have been approached regarding

specialised equipment which has to be imported. The capital cost estimate is summarised in Table 20.

The quotations were obtained during the period March to November 2004.

8.4.3.6 Consistency of Cost with the Technical Description of the Project

The capital cost appears consistent with the size and complexity of the plant. There are no capital

costs for the milling in the financial model or Updated Feasibility Study, which GBM assumes is

because the existing milling plant will be used. GBM has insufficient information to comment on the

condition of this milling plant or the capital required for any refurbishment.

8.4.3.7 Accuracy of Costs and Contingencies

The accuracy of the capital cost estimate is given as -5%, +10%, which is compatible with the amount

of engineering design and number of quotations received for this type of plant.

8.4.3.8 Working Capital Requirements

The working capital includes fill reagents. The amount of $1.1M should be sufficient taking into

account the type of plant and the location. The financial model has the total of this value recovered

at the end of the project, however, the first fill will not be recovered. GBM estimate that this would

be approximately $200,000.

Table 20. RAGM CAPITAL COST ESTIMATE

Capital Expenditure Item Indirect Capital Capital Costs

US $’000 US $’000

Process/Mechanical Equipment 2,530

Civils and earthworks 850

Structural/Platework/Vessels 900

Piping 550

Valves 180

Electrical and instrumentation 960

Erection/Equipment Installation/Tools 30

Shipping 120

Indirect Costs 680

Final Design, Project Management 400

Vehicles/Transport/Accommodation 120

Environmental/Licensing fees 60

Insurance 100

Assay Laboratory 275

Sub-total 955

Working Capital 1,100

1st Fill Reagents 1,100

Spares Included

Total Project Cost 8,175

74



8.4.3.9 On-going Capital Costs

There are no on-going capital costs. However, there may be some costs associated with any

refurbishment of the milling circuit in year 5. There is no specific cost included for closure.

8.4.3.10 Operating Costs

The operating costs have been estimated in accordance with standard methods, that is, based on

consumptions and unit prices. The operating cost estimates are tabulated below.

Table 21. RAGM OPERATING COST ESTIMATES

Item Cost – US $/t

Variable Costs 1.33

Fixed Costs 1.89

Hydraulic Mining 0.40

Marginal Grinding 1.92

Detoxification 0.62

These costs are reasonable considering the operation and location. The unit costs have been obtained

either from existing local prices or from quotations. The consumptions are a fair reflection of what islikely to occur in practice. Detoxification has not been included in the operating costs as it may not

be required. If it is, then this will be an additional $0.61/t, plus any licence fee for using the Inco

process.

8.4.3.11 Manpower Costs

The number of operators for the CIL and associate plant is appropriate for this size plant taking into

account requirements for vacations, training and sickness. GBM has been informed by Time Mining

that both the mill and maintenance superintendents’ positions will be filled by expatriates.

GBM cannot comment on the rates of payment of the manpower, except that GBM has been

informed that the local rates used are current for this location and that Time Mining has supplied the

expatriate rates.

8.4.3.12 Environment

GBM has been informed by Peninsular that cyanide destruction is not required by either the local

authority, or the lender. Provision has been made in the capital cost for a detoxification plant,

although its operating cost has not been included as it may not be required.

The gold recovery circuit includes units for containing any mercury which might be present.

There is no provision in the capital expenditure for final rehabilitation on closure. Both a closure

plan and an allowance should be included.

8.5 PROPOSED PROCESSING OF OPEN-CAST MATERIAL

It is proposed to displace tailings material from the CIL plant feed once open-castable ore has been

located at Raub, primarily in the Eastern Lode Zone (where brownfield exploration is being carried

out). A bulk metallurgical extraction test on this material was carried out in the present plant in May

2003 on material taken from the outcrop of the Central Lode from Malacca South. This test wascarried out using standard gravity operating conditions and 3,761 tonnes of material grading 4.59 g/t

were treated over 3 days (23-25 May). Only 982 grams (28 oz) of gold was recovered to Knelson

concentrate and the calculated grade ‘‘lost’’ to tails was 4.35 g/t; which will be mostly recovered in

the new CIL plant. The limited testwork which has been performed on Eastern Lode Zone material

(see Section 8.2.3.5) indicates that leaching would produce recoveries of between 80 and 90%.

75



As would be expected, the bulk test showed a very high slime content in the pulped, saprolitic plant

feed. RAGM’s technical management is well aware of the effect of this ‘slime’ sized material with

regard to its proposed CIL treatment of the saprolitic oxide material (J. Starink, pers comm).

The plant available to treat oxide ore currently comprises a 36’’ by 24’’ single toggle jaw crusher, a

double deck vibrating screen (1.8 m by 4.5 m, approx. 125 dry tph capacity), a cone crusher, two mill

feed bins, two 9’ by 12’ ball mills (approx. 125 dry tph capacity), various cyclones, pumps andconveyors, a 6’ by 10’ regrind mill (approx. 40 dry tph capacity), ten Knelson concentrators (2 by

24’’ and 8 by 30’’ diameter), a 4’ diameter concentrate regrind mill, a full sized slimes shaking table

and a smelt house, together with the proposed new CIL plant.

8.6 TAILINGS TREATMENT COMMENTS AND CONCLUSIONS

The tailings have undergone extensive metallurgical tests and studies. The testwork shows that the

tailings from ponds R1, R3 and R4 is amenable to cyanide leaching. The recoveries using CIL to

treat minus 212 mm material should be between 85% and 93% and the residue values should beapproximately 0.15 g/t, assuming the material tested is representative of all the material to be treated.

The tests indicated that the gravity recoverable gold from the plus 212 mm fraction would only be

approximately 10% to 15%.

Fluor Daniel had an extensive amount of testwork carried out in 1996 on various samples and

composites, although none of it directly relates to the current proposed flowsheet. Some testwork was

performed on samples from ponds other than R1, R3 and R4, and composites for the total resource

at the time. These tests indicated that the CIL residue values for tailings from ponds other than R1,

R3 and R4 should be less than 0.2 g/t. Copper oxide has been reported in some of the samples

tested. Any copper oxide would have the effect of increasing the cyanide consumption. To mitigate

this strict reagent control is required in the CIL circuit. GBM believes that this should be possible forthe proposed plant.

The proposed process is in accordance with the testwork. The process is classification at 212 mm toproduce a coarse fraction which will be treated by gravity concentration to produce a concentrate

which can be smelted, and a fine fraction which will be treated by CIL and subsequent gold recovery

to produce dore. Sands will be milled in years 5 and 6 and treated in the CIL circuit. The plant has

been designed to treat 130,000 tpm tailings with the CIL circuit treating 90,000 tpm of fine material.

A cyanide detoxification circuit is included, however if detoxification is not required, this can be

converted to a CIL tank to increase either the plant’s throughput or residence time. GBM concludes:

* the appropriate processing method has been selected and is based on adequate and appropriate

testwork.

* the proposed production rates and gold recoveries are reasonable and should be achievable

* the capital and operating costs are reasonable and have been estimated in accordance with

industry standards for an accuracy of -5% +10%.

* the production figures, capital and operating costs used in the financial model appropriately

reflect the proposed process.

9.0 VALUATION OF CIL PLANT OPERATIONS

Howe had previously carried out a Net Present Value (NPV) valuation of the proposed CIL plant

operations (Howe, 2004). This has been revised following further tailings pond drilling, a revised

tailings reserve estimate, additional metallurgical testwork and the provision of revised capital and

operating cost estimates.

9.1 KEY ASSUMPTIONS, RISKS AND LIMITATIONS

The cashflow model used follows that used by RAGM, though several differences exist, e.g. Howe,

like Peninsular, has depreciated the capital on a per tonne basis. However, the capital for

depreciation has been increased by expensing US $1 million of owners costs as capital, rather than as

working costs.

76



The residual value of the plant is given by Peninsular as $3.0 million on the basis that this would

represent the sale of an operating plant. GBM considers this to be a little high, even including the

‘‘used’’ value of the ball mills and considers that a value of $2.4 million is more reasonable. The

working capital of US $1.1 million includes first fill. In the financial model this is recovered at theend of the project, however, there are certain items that will remain, for example carbon, and hence

these should not be included. GBM considers that the recovered working capital should be $0.9

million and US $0.2 million of RAGM’s working capital has been included in capital expenditure.

Closure and rehabilitation costs are included under the tailings management costs as an allowance of

US 3c per tonne. GBM considers that this may be low and a long term, closure maintenance cost

equating to US 2c/t has been added to 7th year of modelled operations. RAGM has modelled the

tailings grade to be 0.15 g/t for the life of the project, based on recent testwork on ponds R1, R3

and R4. GBM is however uncertain that the material tested from these three ponds is fully

representative of the entire tailings stock and the CIL plant tails were raised to a maximum of 0.18 g/t in the cashflow for the other ponds.

Advice on the tax situation, acceptability of the method of capital depreciation, starting balances and

the loans drawn-down and their applicable interest rates has been given to Howe by Peninsular and

Moore Stephens. The model is taxed at 28 % on mining profits, sixty months from the start of

construction. Loans are assumed to be drawn down as required for capex and no bank interest

accrues to RAGM. Interest and repayments of the US $4.05 million loan are included in the model.

The cashflow is however not fully optimised from an accounting perspective as Howe cannot

anticipate Peninsular’s strategic financial decisions.

Howe considers it unlikely that the CIL plant as modelled will cease operations during the 7th year

on account of the large quantity of inferred pond resources, pond walls and other fill materialavailable for treatment. Further, the modelled tailings reserve exhaustion also excludes the likelihood

of treating oxidised ore that would displace lower grade tailings. This non-tailings based increase in

the life of operations and any increased head grade are currently unquantifiable as only inferred

resources are currently present in ML 1669.

Risk factors beyond the control of Peninsular are the Ringgit exchange rate and changes in the State

Royalty percentage and State gold price. The Ringgit currently trades at a fixed rate of RM 3.8 to

the US Dollar and the State Royalty is set at 5 % of gold revenue, at a fixed State gold price of RM

893 (US $235) per ounce.

9.2 DISCOUNTED CASHFLOW VALUATION

Individual cashflow input factors (price, costs and grades) were modelled over a 20 to 25% range. Themost sensitive individual input was found to be the head grade, followed closely by the gold price,

then operating costs and then tailings grade (i.e. a proxy for recovery). Capital costs were found to

be the least sensitive to change, Figure 10; Table 22.

The base case is considered to be the 10% discounted cashflow value (NPV) of US $17.2 million

modelled at a gold price of US $420 with the head grade, tails grade, capital expenditure and

operating costs as modelled by RAGM with modifications as discussed above.

If the current gold price of US $435 is used (and other base case factors held constant), the CIL

plant’s cashflow over its current reserve life is modelled to be US $29.0 million, for a NPV of US

$19.0 million at a 10% discount rate.

77



Table 22. SINGLE PARAMETER SENSITIVITY TABLE (IN US $ MILLIONS)

Parameter (in descending order of sensitivity) Negative > > > > > > > > > Positive – –

Head Grade % 90% 95% 100%* 110% Change US $ M/%

0 % Discount 20.5 23.7 27.0 33.5 13.0 0.65

10 % Discount 12.9 15.0 17.2 21.7 8.9 0.45

Gold Price US $ 390 420* 450 480 Change US $ / %

0 % Discount 23.0 27.0 31.0 35.0 12.1 0.60

10 % Discount 14.5 17.2 20.0 22.7 8.2 0.41

Opex Factor % 1.10 1.00* 0.95 0.90 Change US $ / %

0 % Discount 24.7 27.0 28.1 29.2 4.5 0.23

10 % Discount 15.7 17.2 18.0 18.8 3.1 0.16

Tails Grade g/t 1.10 1.05 1.00* 0.95 Change US $ / %

0 % Discount 25.7 26.3 27.0 27.7 2.0 0.10

10 % Discount 16.3 16.8 17.2 17.7 1.4 0.07

Capex Factor% 1.10 1.00* 0.95 0.90 Change US $ / %

0 % Discount 26.2 27.0 27.4 27.8 1.7 0.08

10 % Discount 16.6 17.2 17.5 17.9 1.2 0.06

Notes: Range of factor changes is 20% to 25 %., * indicates Base Case, with values to the left indicating a negative effect and values to theright indicating a more positive effect.

9.3 VALUATION DISCUSSION AND CONCLUSIONS

Howe has modelled a variety of simple scenario cashflows. These differ from the single parameter

sensitivities in that all parameters, as well as the discount rate were varied. The results are shown in

Table 23 below. These scenarios are simplistic in that all parameters were varied in a similar fashion,i.e. up or down simultaneously. This is unlikely to happen in practice.

Table 23. SCENARIO SENSITIVITY TABLE (IN US $ MILLIONS)

Case

Head

Grade

Gold Price

US $ / oz

Opex

Costs

%

Tailings

Grade %

Capex

Costs %

Cashflow

US $ M

Dis. Cash-

flow $ M

8% – Stellar 1.10 480 0.90 0.95 0.90 42.6 30.3

9% – Good 1.05 450 0.95 1.00 0.95 36.0 24.4

10% – Current 1.00 435 1.00 1.00 1.00 29.0 19.0

10% – Base 1.00 420 1.00 1.00 1.00 27.0 17.2

11% – Bad 0.95 390 1.05 1.05 1.05 19.0 11.2

12% – Worst 0.90 400 1.10 1.10 1.10 12.6 6.6

Using the worst likely possible case, the discounted cashflow, at a 12 % discount rate, is estimated tobe worth US $6.6 million, i.e. not only is the cost of the CIL plant recovered; the cost of the

exploration programme is also likely to be nearly recovered under this scenario.

The economic case for working the old Raub mine tailings has been shown to be justified on the

basis of the available information.

78



79



10

12

14

16

18

20

22

24 8

0%

85%

90%

95%

100%

105%

110%

115%

120%

Pe

rce

nta

ge

Ch

an

ge

inV

ari

ab

le

NPV(10%)EBITDACashFlows(US$Million)

Head

Gra

de

Gold

Price

Opex

Tails

Gra

de

Capex

FIG

UR

E1

0:

RA

GM

CA

SH

FL

OW

SE

NS

ITIV

ITY

CU

RV

ES

AC

AH

ow

eIn

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ati

on

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Lim

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d

10.0 COMMENTS AND CONCLUSIONS

Peninsular’s proposed operations fall into three distinct categories, namely:* Brownfield exploration for low grade extensions to known deposits, and* Greenfields exploration for new gold deposits.* Tailings retreatment by CIL, based on the tailings reserves of an old, major gold mine,

Howe believes that, given the known brownfield targets at Raub and the greenfield and brownfield

exploration targets in the TTC area, Peninsular is likely to be successful in fulfilling its stated

intention of discovering low grade (approximately 1 g/t) weathered surface bodies of mineralisationsuitable for treatment. These bodies should, on account of the regional saprolitic weathering profile,

be suitable for free-dig mass mining and cheap, non-crushing and minimum grinding metallurgical

treatment. The discovery of non-oxidised, lower tonnage, higher grade (4 to 5 g/t) vein system

mineralisation as at Raub (and Penjom) should not be discounted.

The ground holding situation is that only some exploration (prospecting) title has been granted to

SEREM (6 of 12 applications) subject to the payment of fees (see Table 3), whilst approval of the

remainder of the exploration title is expected shortly. Peninsular currently holds two areas of mining

title (see Table 4), namely ML 1669 (RAGM, at Raub) and MC 511 (SEREM, at Tersang). A

further two mining lease applications at Tersang and Tenggelan have been approved subject to

payment of the lease premium quit rent, registration fees and deposit by SEREM and the renewal ofthe offers to grant such mining leases as more particularly described in the ‘‘Additional Information’’

section of Peninsular’s Admission Document. A third mining lease application at Raub (RMDC, the

Plantation MLA) covering known mineralised lode extensions is awaiting approval (see Table 4).

Concerning the proposed CIL plant at Raub, GBM concludes, subject to the various comments given

above, that:* The appropriate processing method has been selected and is based on adequate and

appropriate testwork.* The proposed production rates and gold recoveries are reasonable and should be achievable* The capital and operating costs are reasonable and have been estimated in accordance with

industry standards for an accuracy of -5% +10%.* The production figures, capital and operating costs used in the financial model appropriately

reflect the proposed process.* The operation of the CIL plant should provide a post-royalty and post-tax discounted cashflow

with a NPV of US $17.2 M.

80



REFERENCES

Alexander JB, 1968 The Geology and Mineral Resources of the Neighbourhood of Bentong, Pahang

and Adjoining Portions of Selangor and Negri Sembilan, Incorporating an Account of the

Prospecting and Mining Activities of the Bentong District. Geological Survey of West Malaysia. 250

pgs.

Anon, Avocet Plc, 2004 Various Web documents, particularly Annual reports, downloaded from end-

September to December, 2004 (www.avocet.co.uk).

Catto B and Church P, 2004 Obtaining a Representative RC Sample – The Cone Splitter versus theTiered Riffle Splitter. Proceedings 5th International Mining geology Conference, Bendigo, 2003. Aus

IMM Publication Series 8/2003. Pgs 367 – 375.

Cheze Y, 1994 Exploration Results of the Raub Block 8 and the Tersang-Tenggelan Gold Prospect

(State of Pahang, Republic of Malaysia). SEREM Malaysia Sdn. Bhd. Unpublished company report,including extracts from BRGM Geophysical Report N1462. 116 pgs.

Cheze Y, 2003 The Raub Mine, State of Pahang, Malaysia: Summary of Exploration and Results

with Emphasis on the 1986 – 2002 period. February 2003. Unpublished RAGM company report.

Cheze Y, 2004 ‘‘Raub Gold Project – Oxidised Ore’’. Reserve and Resource Drilling, April-June, 2004

Unpublished RAGM company report.

Cheze Y, 2005 ‘‘Raub Gold Project – Exploration & Development Programme, January, 2005.

Unpublished RAGM company report.

Cole NH, 2004 NH Cole and Associates Pty Ltd. Tersang Project Economics, e-mail memorandum

discussing economic scoping study. 2 pgs.

Cowan, BM, 1994 Cowan & Associates, Raub Gold Tailings Project Progress Report. November,

1994. Unpublished report for Wells Gold Corporation NL.

Cowan, BM, 1997 Cowan & Associates, Report on Exploration and Mining at Raub, Pahang,

Malaysia, May 1997. Unpublished report for Wells Gold Corporation NL. (The most complete

summary report on the Raub gold mine and the McDonald Speijers (1995) tailings drilling and

sampling programme).

Cowan, BM, 2004 Cowan & Associates, Raub Tailings Project, Reserve and Resource Drilling, April

– June 2004. Unpublished Report produced for Raub Australian Gold Mining Sdn Bhd. 42 Pgs.

Fluor, 1996 RAUB TAILINGS PROJECT. Feasibility Study to Bankable Standard. Unpublishedreport by Fluor Daniel Pty Ltd produced for Raub Australian Gold Mining Sdn Bhd, dated August,

1996. Volume 1, 360 pgs and Volume 2, 352 pgs.

Fookes PG, Editor, 1997 Tropical Residual Soils. A Geological Society Engineering Group Working

Party Revised Report. Geological Society Professional Handbook, Geol. Soc., London. 184 pgs.

Foster RP, Editor, 1993 Gold Metallogeny and Exploration. Chapman & Hall. London. 432 pgs.

Gobbett DJ & Hutchison CS, 1973 Geology of the Malay Peninsula (West Malaysia and Singapore).

The Geological Society of Malaysia. Wiley Interscience. 438 pgs.

Gunn AG et al, 1993b Geochemical and mineralogical studies at the Kim Chuan gold mine, Raub,

Pahang, Malaysia. Geological Survey of Malaysia – British Geological Survey. Gold Sub-ProgrammeReport 93/3. Ipoh. 46 pgs.

Henney PJ et al, 1995a Characterisation of Gold from the Raub Area, Pahang Malaysia. British

Geological Survey ODA Technical Report WC/95/20. 70 pgs.

Henney PJ et al, 1995b Characterisation of Gold from the Penjom Area, Near Kuala Lipis, Pahang

Malaysia. British Geological Survey ODA Technical Report WC/95/21. 67 pgs.

81



Howe, 2004 Valuation of the Raub Mining Lease in Pahang State, Malaysia. Unpublished report

prepared for Raub Australian Gold Mining Sdn Bhd by ACA Howe International Limited. August,

2004. 15 pgs.

Lee Ah Kow et al, 1986 Gold Mineralisation and Prospects in North Pahang. Regional Mineral

Exploration Project Report. Geological Survey of Malaysia. 99 pgs.

Nekrasov IYa, 1996 Geochemistry, Mineralogy and Genesis of Gold Deposits. Balkema, Rotterdam.Translation of Russian work published in 1991 by Nauka, Moscow.

Process Design, 2004 Raub 130,000 tpm Gold Plant Project (90 000tpm CIL) 3 November 2004.

Engineering Design Pack for Tender Purpose Raub 90000tpm Gold Plant Project 17 March

2004Tender Evaluation Raub 90,000tpm VS 130,000 tpm Gold Plant Project 3 November 2004. Raub

Australian Gold Mining SDN BHD Malaysia Revised to 130,000 tpm Gold Plant Project. Layouts ga

structural concrete

Performance Laboratories July 2004 Metallurgical Testwork on the New Grey Composite Sample and

Repeat Tests from Pond R4 for Raub Australian Gold Mine

Performance Laboratories May 2004 Metallurgical Testwork on Tailings Samples from R4 Pond for

Raub Australian Gold Mine

Performance Laboratories July 2004 Metallurgical Testwork on Tailings Samples from R1 and R3 for

Raub Australian Gold Mine

Performance Laboratories July 2004 Metallurgical Testwork on Two Composite Samples from the

Oxide Zone for Raub Australian Gold Mine

Performance Laboratories July 2004 Metallurgical Testwork on the New Grey Composite Sample andRepeat Tests from Pond R4 for Raub Australian Gold Mine

Performance Laboratories January 2005 Additional Metallurgical Testwork on Tailings Samples fromR1, R3 and R4 Ponds for Raub Australian Gold Mine.

Richardson AJ, 1939 The Geology and Mineral Resources of the Neighbourhood of Raub, Pahang,

Federated Malay States, with an Account of the Geology of the Raub Australian Gold Mine.

Geological Survey Department, Federated Malay States, Memoir No.3 (New Series), Singapore. 164

pgs. Accompanied by 1:63,360 Geological Map Sheet by ES Willibourn and JA Richardson.

(Scrivenor, 1928 Reference not seen by Howe, quoted by Cowan, 1997).

Sone M, 2001 Middle Permian cephalopods from central Peninsular Malaysia: implications for faunal

migration through the Southern Tethys, Journ. Asia Earth Sci, Vol. 19 (2001), pgs 805-814.

Time Mining January 2005 Raub Tailings Project Updated Feasibility Study Sections 5.0 to 10.0

Time Mining January 2005 Raub Tailings Project Updated Feasibility Study Appendix 1 Testwork by

Fluor Daniel (1996)

(Yeap EB, 1993 Tin and Gold Mineralisation in Peninsular Malaysia and Their Relationship to the

Tectonic Development. Journ. SE Asian Earth Sci. Vol. 8, Nos 1-4, pgs 329-348. Quoted by Cowan,

not seen by Howe)

Yeow YC, 1996 Environmental Impact Assessment (EIA) Inclusive of Risk Analysis for Proposal toMine and Recover Gold from the Old Mine Tailings at Bukit Koman, Raub, Negri Pahang, Darul

Makmur. Ref. PH/984/95(1). 87 pgs.

82



PART 3

RISK FACTORS

The risk factors which should be taken into account in assessing the Group’s activities and an investment

in the Company include, but are not necessarily limited to, those set out below. The risk factors below

are not intended to be presented in any assumed order of priority.

Prospective investors should carefully consider the following factors, among others, affecting the proposed

activities of the Group prior to making an investment in the Company, as well as other matters set forth

elsewhere in this document. The exploration and development of natural resources is a highly speculative

activity that involves a high degree of financial risk. An investment in the Company may not be suitable

for all recipients of this document.

General Economic Risks

Share market conditions, particularly those affecting mining and exploration companies, may affect

the ultimate value of the Company’s share price regardless of operating performance.

The price of gold is influenced by physical and investment demand and supply and has historically

displayed wide ranges and is affected by numerous factors over which the Company does not have

any control. These include production levels, international economic trends, speculative activity,

consumption patterns and global or regional political events.

Fluctuations in the gold price may influence individual projects in which the Group has an interest.

The Group could be affected by unforeseen events outside its control including, among other things,

natural disasters, terrorist attacks and political unrest and/or government legislation or policy,

particularly in connection with environmental issues which may interrupt or prevent exploration, mine

development or production operations.

General economic conditions may affect interest rates and inflation rates. Movements in these rates

will have an impact on the Group’s cost of raising and maintaining debt financing.

Trading and Liquidity in the Company’s Shares

An investment in the securities of the Company is highly speculative and subject to a high degree of

risk and only those who can bear the risk of the entire loss of their investment should invest.

Prior to Admission there was no public market for the Ordinary Shares and nor have they ever been

traded, quoted or dealt on any securities market. Consequently, each prospective investor should view

their purchase of Ordinary Shares as a long-term investment and should not consider such purchase

unless they are certain that they will not have to liquidate the investment for an indefinite period oftime.

Even though the Company will make an application for the Ordinary Shares to be traded on AIM,this should not be taken as implying that there will be a ‘‘liquid’’ market in the Ordinary Shares. An

investment in the Ordinary Shares may thus be difficult to realise. The Ordinary Shares will not be

quoted on the Official List. Investments in shares traded on AIM carry a higher degree of risk than

investments in shares quoted on the Official List. AIM has been in existence since June 1995 but its

future success and liquidity in the Ordinary Shares cannot be guaranteed. The value of the Ordinary

Shares may go down as well as up. Investors may therefore realise less than their original investment,

or sustain a total loss of their investment.

Market perception of mining and exploration companies may change which could impact on the

value of the Ordinary Shares.

Raising of Future Funds and Growth of the Group

The Group will require additional financial resources to continue funding its future expansion. TheGroup may in the future raise additional funds through public or private financing. No assurance can

be given that any such additional financing will be available or that, if available, it will be available

on terms favourable to the Company or its Ordinary or Preference Shareholders.

Subject to pre-emption rights of current shareholders set out in the Articles, if additional funds are

raised through the issue of equity securities, the percentage ownership of then current Shareholders of

the Company may be reduced and such securities may have rights, preferences or privileges senior to

those of the holders of the Ordinary Shares.

83


If adequate funds are not available to satisfy either short or long-term capital requirements, the

Group may be required to limit its operations significantly.

There can be no assurance that the Group will be able to manage effectively the expansion of its

operations or that the Group’s current personnel, systems, procedures and controls will be adequate

to support the Group’s operations. Any failure of management to manage effectively the Group’s

growth and development could have a material adverse effect on the Group’s business, financial

condition and results of operations.

Related Party Contracts

The Company is controlled by its primary shareholders, Dato’ Andrew Tai Yeow Kam (through

Akay Holdings and Akay Venture) and Dato’ Mohamed Moiz Bin JM Ali Moiz, who as at 17 June

2005 (the latest practicable date prior to the publication of this document) beneficially own or have

an interest in over 99% of the Company’s shares. The Company has entered into a number of

transactions with these related parties, which are described in the ‘‘Group Restructuring and RelatedParty Contracts’’ section of Part 5. Although the Board believes that the transactions were on terms

reflecting then prevailing market conditions, the Company cannot be certain that the terms of these

transactions were as favourable as the terms that could have been obtained in similar transactions

with unrelated third parties. See ‘‘Related Party Contracts’’ at Section 8 of Part 5.

Labour

Certain of the Company’s operations are carried out under potentially hazardous conditions. Whilst

the Company intends to continue to operate in accordance with relevant health and safety regulations

and requirements, the Company remains susceptible to the possibility that liabilities may arise as a

result of accidents or other workforce-related misfortunes, some of which may be beyond the

Company’s control.

Reliance on Key Personnel

The Group’s future results will depend in part on management’s ability to manage growth, which will

require, among other things, continued development of the Group’s financial and management

controls, and its ability to expand, manage and train its employee base. There is no certainty

therefore that all or, indeed, any of the elements of the Group’s current strategy will develop as

anticipated and that the Group will be profitable.

The Group is highly dependent on the Directors. Whilst the Board has sought to and will continue to

ensure that Directors and any key employees are appropriately incentivised, their services cannot be

guaranteed. The Group has a small management team and the loss of one or more executive

Directors may have an adverse effect on its operational performance and growth plans. The

continued involvement of key employees, consultants and Directors is not assured, and the loss of

their services to the Group may have a material adverse effect on the performance of the Group.

Foreign Exchange

The Group operates internationally and is therefore exposed to the effects of changes in currency

exchange rates.

Competition

The Group competes with other companies, including major mineral exploration and mining

companies. Some of these companies have greater financial and other resources than the Group and,

as a result, may be in a better position to compete for future business opportunities. There can be

no assurance that the Group can compete effectively with these companies.

Exploration and Production Risks

Exploration and production are endeavours which may be hampered by mining, heritage, community

and environmental legislation, industrial disputes, cost overruns, land claims and compensation, and

other unforeseen events.

The success of the Group also depends on the delineation of economically recoverable reserves, access

to required development capital, movements in the price of metals, securing and maintaining title to

its exploration tenements and obtaining all consents and approvals necessary for the conduct of its

exploration and mining activities.

84


The Group’s success may be dependent upon it being able to attract adequately resourced and

competent joint venture partners to assist the Group in its exploration strategy and the development

of any economically viable reserves.

Exploration may be unsuccessful, resulting in a reduction of the value of those tenements, diminution

in the cash reserves of the Group and possible relinquishment of the exploration tenements. Whether

or not income will result from projects undergoing exploration, development and production

programmes depends on successful establishment of mining operations. Factors including costs, actual

mineralisation, consistency and reliability of ore grades, and mineral prices affect successful project

development, as does the design and construction of efficient processing facilities, competent operation

and management and prudent financial administration, including the availability and reliability of

appropriately skilled and experienced employees and consultants.

Development and mining of mineral deposits involve obtaining licences or clearances from the

relevant authorities, which may require conditions to be satisfied and/or the exercise of discretion by

such authorities. It may or may not be possible for such conditions to be satisfied, or it may be that

the satisfaction of the conditions is not commercially practicable.

Exploration, mining, processing and transporting activities may be prevented, delayed or adversely

affected by many factors outside the control of the Group. These include adverse operating conditions

(such as unexpected geological conditions, seismic events, fire, weather, accidents), compliance withgovernmental requirements, labour and safety issues, shortages or delays in installing, commissioning

and repairing plant and equipment or import or customs delays. Problems may also arise due to

interruptions to essential services (such as power, water, fuel, equipment or transport capacity) or

technical support, which result in a failure to achieve expected target dates for exploration or

production and/or result in a requirement for greater expenditure.

Payment Obligations

Under the exploration permits and licenses and certain other contractual agreements to which the

Group is or may in the future become a party, the Group is or may become subject to payment andother obligations. In particular, the permit holders are required to expend the funds necessary to

meet the minimum work commitments attaching to permits and licenses. Failure to meet these work

commitments will render the permit liable to be cancelled. Further, if any contractual obligations are

not complied with when due, in addition to any other remedies which may be available to other

parties, this could result in dilution or forfeiture of interests held by the Group.

Litigation

Legal proceedings may arise from time to time in the course of the Company’s business. The

Directors cannot preclude that litigation may be brought against the Company.

Environmental Risk

Exploration and production activities have become subject to increasing environmental responsibility

and liability. The Group will seek to operate in accordance with the highest standards of

environmental practice, however, the potential for liability is an ever present risk.

Environmental legislation may change in a manner that may require stricter standards and a

heightened degree of responsibility for companies and their directors and employees. There may also

be unforeseen environmental liabilities resulting from exploration and mining activities and theseproblems and liabilities may be costly to remedy.

The Group is unable to predict the effect of additional environmental laws and regulations, which

may be adopted in the future, including whether any such laws or regulations would materially

increase the Group’s cost of doing business or affect its operations in any area.

The Group, as a participant in exploration and mining activities, may become subject to liability from

hazards that cannot be insured against or against which it may elect not to be insured because of

high premium costs or other reasons. The Group may incur liabilities to third parties (in excess ofany insurance cover) arising from pollution or other damage or injury.

Country Risk

The Company’s primary assets are located in Malaysia, which introduces both sovereign and

Malaysian domestic economic risk issues to investors owning the Ordinary Shares. Investors in the

Company should be aware of the specific country risk issues associated with Malaysia.

85


Since its formation, Malaysia has been governed by a coalition, the National Front Coalition,

comprising three major component parties: the United Malays National Organisation, the Malaysian

Chinese Association and the Malaysian Indian Congress and a number of smaller political parties

which have changed from time to time.

As with other companies having operations in Malaysia, the Group’s operations are closely linked to

the economic fundamentals and political stability of Malaysia. Any adverse developments or

uncertainties in the political and economic environment in Malaysia may materially adversely affect

the business, financial condition and results of operations of the Group. Such developments could

include social or civil unrest, outbreak of hostility with an external party, unfavourable changes in the

Malaysian Government’s policies or changes in regulation and legislation.

In addition, other political uncertainties include but are not limited to the risk of expropriation and

nationalisation. If any of these events (or similar events) were to occur, there may be an adverseeffect on the Group’s business, financial condition and results of operations, as well as on any

investment in the Company’s shares.

Short term risks

Among the key short-term risks are external demand shocks, exchange-rate volatility, a switch in

currency regime and inflation. The US dollar is likely to continue facing downward pressure as long

as it continues to experience fiscal and current account deficits. A weak US dollar would exert

pressure on the Malaysian ringgit, which is pegged to the former. Speculation over the breaking point

of the fixed-exchange-rate regime in Malaysia is likely to intensify this year and the ensuinguncertainties may be disruptive to trade and investment.

Long term risks

The Malaysian economy’s medium to long term challenges include accelerating the shift to private-

sector-led growth, managing excess liquidity and savings, as well as sustaining industrial upgrades and

productivity growth. Malaysia’s medium- to long term prospects are also contingent upon a

progressive shift to higher-value production across all sectors of the economy, especially

manufacturing and services. Maintaining the growth momentum of the Malaysian economy would

require productivity-increasing investments to upgrade skills with respect to labour input, highertechnology in relation to capital inputs, and research and development as well as managerial expertise

with regard to knowledge inputs. Failure to address or meet the challenges of these medium to long

term challenges could result in an adverse impact on the growth and performance of the Malaysian

economy which could in turn cause the business, financial condition and results of operations of the

Group being materially adversely affected. (Source: Rating Agency Malaysia)

Exchange control risks

As part of the package of policy responses to the 1997 economic crisis in south east Asia, the

Malaysian government introduced on 1 September 1998, selective capital control meaures whichentailed, among others, the prohibition of trading of the ringgit outside Malaysia and the pegging of

the ringgit at an arbitrary fixed rate against the U.S. dollar. These capital control measures have been

largely disapplied, although there is no assurance that they, or other similar measures, will not be re-

introduced in response to changed economic conditions.

Enforcement of Judgments

As the Company is incorporated under the laws of Jersey, the rights of Shareholders will be governedby Jersey law and the Company’s Memorandum and Articles of Association. The rights of Ordinary

and Preference Shareholders under Jersey law may differ from the rights of shareholders of companies

incorporated in other jurisdictions. Several of the Directors and some of the named experts referred

to in this document are not residents of the UK or Jersey and all of the Group’s assets are located

outside of the UK and/or Jersey.

As a result, it may be difficult for investors to effect service of process on those persons in the UK

or to enforce in the UK or Jersey judgments obtained in UK or Jersey courts against the Group or

those persons who may be liable under UK law.

City Code on Takeovers and Mergers

The Code applies to offers for all listed and unlisted public companies considered by the Takeover

Panel to be resident in the UK, the Channel Islands or the Isle of Man. The Panel will normally

consider a company to be resident only if it is incorporated in the United Kingdom, the Channel

86


Islands or the Isle of Man and has its place of central management in one of those jurisdictions.

Although the Company is incorporated in Jersey and its place of central management is in Jersey, the

Takeover Panel considers that the Code does not apply to the Company. It is emphasised that

although the Ordinary Shares will trade on AIM, the Company will not be subject to takeoverregulations in the UK.

Legislative Changes

Changes in government regulations and policies in Jersey or Malaysia or elsewhere may adversely

affect the financial or other performance of the Group.

Retention of Key Business Relationships

The Group relies significantly on strategic relationships with other entities and also on good

relationships with regulatory and governmental departments. The Group also relies upon third parties

to provide essential contracting services. There can be no assurance that its existing relationships will

continue to be maintained or that new ones will be successfully formed and the Group could be

adversely affected by changes to such relationships or difficulties in forming new ones. Any

circumstance, which causes the early termination or non-renewal of one or more of these key business

alliances or contracts, could adversely impact the Group, its business, operating results and prospects.

Various aspects of the Group’s future performance and profitability are dependent on the outcome of

future negotiations with third parties. The Group’s interests may in future be held in a joint ventureand, in some cases, a joint venture partner may be the manager of the joint venture. In these

situations the joint venture decision may not accord with the Group’s stated plan.

Restrictions in Mining Rights

The Group does not have proprietary interest in all its mining tenements and is dependent on its

substantial shareholder Akay Holdings for the right to mine certain of its mining tenements. At

present, the Group has two mining tenements, namely the sub-lease of the MC511 Land and the

permit to mine in relation to the 1669 Mining Lease. The MC511 Land is the subject of a miningcertificate held by Abdul Aziz Bin Othman who has in turn granted a sub-lease to Serem to mine the

land for a period expiring on 28 February 2007 (the details of which are set out in paragraph 12 of

part 5 of this document). Approval for the extension of the mining certificate and the sub-lease until

28 February 2017 has recently been granted. Serem’s right to mine the MC511 Land is a proprietary

interest under the provisions of the National Land Code of Malaysia (‘‘NLC’’).

The mining certificate held by Abdul Aziz Bin Othman is subject to a number of conditions,

including the requirement that not more than one-third of the share capital of the holder of the

mining certificate may be owned by non-Malaysians or non-Malaysian corporations. Under section 18

of the Mining Enactment, the implied and express covenants and conditions imposed on any mining

lease or certificate are, by operation of law, also binding on the sub-lessee of such mining lease orcertificate.

Following Admission, if non-Malaysian citizens or corporations own more than one-third of theCompany, this condition will be breached and may render the mining certificate liable to forfeiture by

the government of the State of Pahang. The Company is seeking a waiver of this condition. There is

no assurance that the waiver will be granted. In such a case, Serem will enter into a permit to mine

with Abdul Aziz Bin Othman. The rights of Serem under a permit to mine are contractual in nature

and will be subject to the terms of the permit to mine.

The 1669 Mining Lease is held by Akay Holdings. Akay Holdings has granted RAGM two permits

to mine the land forming the subject of the 1669 Mining Lease (the details of which are set out in

paragraph 12 of part 5 of this document). Akay Holdings’ interest in the 1669 Mining Lease is

proprietary and registered under the provisions of the NLC. However, RAGM’s right to mine is a

contractual and not proprietary right. It is subject to the terms of the permits to mine and may beterminated in certain circumstances (as more particularly described in paragraph 12 of part 5 of this

document).

As the permits to mine are contractual in nature and RAGM does not have a proprietary interest in

the 1669 Mining Lease, RAGM’s rights to mine are limited and may be at risk in certain

circumstances including those set out below. Firstly, where Akay Holdings deals in the proprietary

interest in the 1669 Mining Lease, which may include a disposal of such interest or the creation of an

encumbrance of that interest in favour of a third party. While this would result in the occurrence of

87


a breach by Akay Holdings of the terms of the permits to mine, such breach may, in ordinary

circumstances and unless RAGM can prove that its loss cannot be compensated by way of monetary

damages, only entitle RAGM to a right to claim damages. Any third party that acquires the

proprietary interest in the 1669 Mining Lease may cause the determination of the permits to mineand prevent RAGM from exercising its rights under such permits.

Secondly, if Akay Holdings becomes subject to receivership, insolvency, winding-up or other similar

proceedings, third parties such as a liquidator, receiver, receiver and manager or secured creditor may

lay claim to its proprietary interest in the 1669 Mining Lease. Akay Holdings may also experience a

change in control.

Thirdly, the term of the permits to mine are limited. The permit which is currently in existence over

the 1669 Mining Lease will expire on 30 July 2005 and Akay Holdings has granted to RAGM a

further permit to mine for a period expiring on 30 July 2006. RAGM may notify Akay Holdings of

its intention to renew the permit within three months prior to 30 July 2006. Akay Holdings is

obligated to grant a renewal of the permit upon the same terms for a further term of one year but

provided only that RAGM is not in breach of any of the terms of the permit. RAGM’s right to seekan annual renewal of the permit would subsist until the expiry of the 1669 Mining Lease on 31

December 2017. Upon the expiry of the term of the 1669 Mining Lease, RAGM may only require

Akay Holdings to apply to the relevant authorities to extend the term of the 1669 Mining Lease for a

period of ten years if it is able to demonstrate to Akay Holdings that there are economically viable

gold deposits in the land forming the subject of the 1669 Mining Lease. There is no assurance that

RAGM will be able to fully realise the full benefit of its mining rights in the 1669 Mining Lease by

31 December 2017 or, if it is able to demonstrate the existence of economically viable gold deposits,

by 31 December 2027.

The Company has entered into the Mining Rights Agreement in order to secure rights over a third

mining tenement. Pursuant to the Mining Rights Agreement, Akay Holdings is to procure fromRMDC a sub lease of a mining lease of the RMDC Land. Akay Holdings is in turn required to

grant to RAGM or an entity nominated by the Company (‘‘Group Permit Holder’’), a permit to mine

in respect of such land. RMDC is in the process of applying for the necessary approvals from the

Pahang State Government to obtain the relevant mining lease. If the approvals are obtained and the

mining lease issued, the Group Permit Holder will be reliant on the contractual rights which are

similar in nature to the permits to mine over the 1669 Mining Lease granted to RAGM. The risks

and limitations set out above in respect of RAGM’s right to mine the 1669 Mining Lease would

equally apply to the rights of the Group Permit Holder in respect of the RMDC Land.

Uninsured Risks

The Company, as a participant in exploration and potential extraction activities, may become subject

to hazards that cannot be insured against or against which it may elect not to be so insured because

of high premium costs.

Property Rights

All of the tenements or licences in which the Group has, or may earn an interest in, will be subject

to applications for renewal or grant (as the case may be). The renewal or grant of the term of each

tenement or licence is usually at the discretion of the relevant government authority. If a tenement or

licence is not renewed or granted, the Group may suffer significant damage through loss of the

opportunity to develop and discover any mineral resources on that tenement.

Tenements and licences currently under application may not be granted by the relevant authorities.

While the Directors have no reason to believe that the existence and extent of any of the Group’s

properties are in doubt, title to mining properties may be subject to potential litigation by third

parties claiming an interest in them.

Under the mineral title system in Malaysia, the issuance of an exploration licence does not imply that

other parties do not have any prior claims over that area. Whilst the Group has made and will makeinvestigations to determine if prior rights exist, there can be no assurance that such rights do not

exist.

The failure to comply with all applicable laws and regulations, including failures to pay taxes, meet

minimum expenditure requirements, or carry out and report assessment work, may invalidate titles to

tenements or licenses. The Group might not be able to retain its licence interests when they come up

for renewal.

88


Forward Looking Statements

Certain statements within this document, including in the parts of this document under the headings

‘‘Group Strategy and Future Prospects’’ and ‘‘The Market’’ constitute forward looking statements.Such forward looking statements involve risks and other factors which may cause the actual results,

achievements or performance to vary from those expressed or implied by such forward looking

statements. Such risks and other factors include, but are not limited to, general economic and

business conditions, changes in government regulation, currency fluctuations the group’s ability to

recover its reserves develop new reserves, competition, changes in development plans and other risks

described in this Part 3 – Risk Factors. There can be no assurance that the results and events

contemplated by forward looking statement contained in this document will, in fact, occur. These

forward looking statements are correct only as at the date of this document. The Company will notundertake any obligation to release publicly any revisions to these forward looking statements to

reflect events, circumstance or unanticipated events occurring after the date of this document except

as required by law or by any regulatory authority.

General

The risk factors noted above do not necessarily comprise all those potentially faced by the Company.

An investment in the Company should only be made by investors able to sustain a total loss of theirinvestment. Investors are strongly recommended to consult an investment advisor authorised under

the Financial Services and Markets Act 2000 who specialises in investments of this nature before

making any decision to invest.

89


PART 4

ACCOUNTING INFORMATION ON THE GROUP

Independent Accountants’ Report

PART A

FINANCIAL INFORMATION ON THE COMPANY

The following is the text of an accountants’ report on the Company by Moore Stephens, for the periodended 31 May 2005.

The Directors,

Peninsular Gold Limited,

First Island House,

Peter Street,

St Helier,

Jersey JE2 4SP,Channel Islands

St. Paul’s House,

Warwick Lane,

London EC4M 7BP

17 June 2005

The Directors

Nabarro Wells & Co. Limited,

Saddlers House,

Gutter Lane,

London EC2V 6HS.

Dear Sirs,

PENINSULAR GOLD LIMITED

We report in connection with the admission document issued by Peninsular Gold Limited (‘‘theCompany’’) dated 17 June 2005 (‘‘the Admission Document’’). In accordance with our instructions,

we report on the financial information set out below relating to the Company. This financial

information has been prepared for inclusion in the Admission Document.

Basis of Preparation

The Company was incorporated in Jersey on 8 April 2005 as a public company under the Companies

(Jersey) Law 1991 as amended. On incorporation, the Company had an authorised share capital of

£50,000,000 divided into 500,000,000 Ordinary Shares of £0.10 each, of which 1,000 Ordinary Shares

of £0.10 each were issued at par for cash.

On 27 May 2005, the Company converted from a par value company to a no par value company; the

authorised share capital was re-designated as an unlimited number of shares of no par value

designated as Ordinary Shares, and an unlimited number of shares of no par value designated as

Preference Shares and the 1,000 Ordinary Shares of £0.10 each in issue at that date were re-

designated as Ordinary Shares of no par value.

On 27 May 2005 the Board resolved the 2,560,000 redeemable convertible cumulative non-votingPreference Shares of no par value would upon Admission be issued at an issue price of £0.50 per

share.

On 17 June 2005, the Company entered into an agreement to acquire the whole of the issued share

capital of Raub Australian Gold Mining Sdn Bhd and S.E.R.E.M. Malaysia Sdn Bhd, both

companies incorporated in Malaysia, in consideration for the issue of 33,950,596 Ordinary Shares of

no par value in the Company at an issue price of £0.50 per share.

On 17 June 2005, the Company entered into the Mining Rights Agreement which provides for the

issue by the Company of 1,356,780 Ordinary Shares to Akay Holdings at £0.50 per share in

90


consideration for the procurement by Akay Holdings of certain mining rights, the details of which are

set out in the ‘‘Additional Information’’ section of the Admission Document.

Save for the above transactions, the Company has not traded, has not made up any accounts for

presentation to its members and has not declared or paid any dividends. For the purpose of the

Admission Document, an audited balance sheet of the Company has been prepared as at 31 May

2005, the latest practicable date.

The Company will incur expenses relating to the Admission as described in the Admission Document.

The expenses are not accrued in the balance sheet as at 31 May 2005 set out below and, accordingly,no profit and loss account for the period from incorporation (8 April 2005) to 31 May 2005 is

required to be presented.

As a company incorporated under the laws of Jersey, the Company is not subject to the UK

Companies Act, and the financial information does not constitute statutory accounts within the

meaning of Section 240 of the Companies Act 1985 (as amended).

Responsibility

The financial information is the responsibility of the directors of the Company, who approved its

issue.

The directors of the Company are responsible for the contents of the Admission Document in which

this report is included.

It is our responsibility to form an opinion on the financial information set out below and to report

our opinion to you.

Basis of Opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting

Standards issued by the Auditing Practices Board. Our work included an assessment of evidence

relevant to amounts and disclosures in the financial information. It also included an assessment of

significant estimates and judgements made by those responsible for the preparation of the financial

information and whether the accounting policies are appropriate to the Company’s circumstances,

consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance that

the financial information is free from material misstatement, whether caused by fraud or otherirregularity or error.

Opinion

In our opinion, the financial information gives, for the purposes of the Admission Document, a true

and fair view of the state of affairs of the Company as at 31 May 2005.

Consent

We consent to the inclusion in the Admission Document of this report and accept responsibility for

this report by the purposes of paragraph 45(8)(b) of Schedule 1 to The Public Offers of Securities

Regulations 1995.

91


FINANCIAL INFORMATION

BALANCE SHEET AS AT 31 MAY 2005

Note £

Current assets:

Debtors – called up share capital not paid 100

Capital and Reserves:

Share capital 2 100

NOTES TO THE FINANCIAL INFORMATION

1. Accounting Policies

Accounting Convention

The financial information has been prepared under the historical cost convention, on the going

concern basis, and in accordance with applicable accounting standards in the United Kingdom.

2. Called Up Share Capital

No. £

Authorised

Ordinary shares of no par value Unlimited

Preference shares of no par value Unlimited

Issued, allotted and called up

Ordinary shares of no par value 1,000 100

On 27 May 2005 the Board resolved that 2,560,000 redeemable convertible cumulative non-votingPreference Shares of no par value would, upon Admission, be issued at an issue price of £0.50 per

share.

3. Post balance sheet events

On 17 June 2005, the Company entered into agreements, conditional upon Admission, to acquire the

whole of the issued share capital of Raub Australian Gold Mining Sdn Bhd and S.E.R.E.M.

Malaysia Sdn Bhd, both companies incorporated in Malaysia, in consideration for the issue of

33,950,596 Ordinary Shares of no par value in the Company at £0.50 per share.

On 17 June 2005, the Company entered into the Mining Rights Agreement which provides for the

issue by the Company of 1,356,780 Ordinary Shares to Akay Holdings at £0.50 per share inconsideration for the procurement by Akay Holdings of certain mining rights, the details of which are

set out in the ‘‘Additional Information’’ section of the Admission Document.

Yours faithfully,

Moore Stephens

Chartered Accountants

Registered Auditors

92


PART B

FINANCIAL INFORMATION ON RAUB AUSTRALIAN GOLD MINING SDN. BHD.

The following is the text of an accountants’ report on Raub Australian Gold Mining Sdn. Bhd. by

Moore Stephens, for the three years ended 30 June 2004 and the six months ended 31 December

2004.

The Directors


First Island House,

Peter Street,St Helier,

Jersey,

Channel Islands JE2 4SP

St. Paul’s House,

Warwick Lane,

London EC4M 7BP.

17 June 2005

The Directors

Nabarro Wells & Co. Limited,

Saddlers House,

Gutter Lane,

London EC2V 6HS.

Dear Sirs,

RAUB AUSTRALIAN GOLD MINING SDN. BHD.

We report in connection with the admission document issued by Peninsular Gold Limited dated17 June 2005 (‘‘the Admission Document’’). In accordance with our instructions, we report on the

financial information set out below relating to Raub Australian Gold Mining Sdn. Bhd. (‘‘RAGM’’).

This financial information has been prepared for inclusion in the Admission Document.


RAGM was incorporated as a private limited company on 20 January 1996 under the laws of

Malaysia.

The financial statements of RAGM for the years ended 30 June 2002 and 2003 have been audited by

Yeo & Co, Chartered Accountants, Kuala Lumpur, who have issued unqualified audit reports on

them. The financial statements of RAGM for the year ended 30 June 2004 and the six months ended

31 December 2004 have been audited by KPMG, Kuala Lumpur, who have issued unqualified reportson them. We point out that the audit report by KPMG on the financial statements for the year

ended 30 June 2004 included an emphasis of matter as follows –

‘‘Without qualifying our opinion, we draw attention to Note 1(a) to the financial statements. The

Company has net current liabilities of RM6,281,897 as at 30 June 2004. The Directors have prepared

the financial statements on the going concern basis as the holding company has indicated its willingness

to provide continuous financial support to the Company and the Company has since the year end

obtained banking facilities of some RM15 million to be secured by a debenture, a charge on a parcel of

the holding company’s mining land and the personal guarantee of a Director.’’

We further point out that the audit report by KPMG on the financial statements for the six months

ended 31 December 2004 included an emphasis of matter as follows:

‘‘Without qualifying our opinion, we draw attention to Note 2(a) to the financial statements. The

Company has net current liabilities of RM3,221,711 as at 31 December 2004. The Directors have

prepared the financial statements on the going concern basis as the holding company has indicated its

willingness to provide continuous financial support to the Company.

The financial statements of RAGM have been prepared in accordance with the Malaysian Companies

Act 1965. Accordingly, the financial information does not constitute statutory accounts within the

meaning of Section 240 of the UK Companies Act 1985 (as amended).

93


We have reviewed the audited financial statements of RAGM for the three years ended 30 June 2002,

2003 and 2004, and the six months ended 31 December 2004.

The financial information is based on the audited financial statements of RAGM for the years ended

30 June 2002, 2003 and 2004, and the six months ended 31 December 2004, without material

adjustment, save for the restatement of the results for the year ended 30 June 2003 to reflect a prior

years adjustment effected in the financial statements for the year ended 30 June 2004. Theadjustment related to the reversal of a depreciation charge capitalised as mining development costs,

and a restatement of stock of consumables and spare parts.

No financial statements for RAGM have been prepared or presented to the members of RAGM for

any period since 31 December 2004 and no dividends have been paid or declared in respect of the

period since that date.

Responsibility

The directors of Peninsular Gold Limited are responsible for the contents of the Admission

Document in which this report is included.

It is our responsibility to compile the financial information set out below from the financial

statements, to form an opinion on the financial information, and to report our opinion to you.

Basis of Opinion



relevant to accounts and disclosures in the financial information. The evidence included that recorded

by the auditors who audited the financial statements underlying the financial information and that

obtained by us during the course of our review. It also included an assessment of significant

estimates and judgements made by those responsible for the preparation of the financial statementsunderlying the financial information and whether the accounting policies are appropriate to the

Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that

the financial information is free from material misstatement, whether caused by fraud or other

irregularity or error.

Opinion

In our opinion, the financial information gives, for the purposes of the Admission Document, a true

and fair view of the state of affairs of RAGM as at 30 June 2002, 2003 and 2004 and 31 December2004 and of the results and cash flows of RAGM for the periods then ended.

Consent


this report for the purposes of paragraph 45(2)(b)(iii) of Schedule 1 to The Public Offers of Securities

Regulations 1995.

94


Profit and Loss Accounts

Year ended 30 June

Six months

ended 31

December

2002 2003 2004 2004

Note RM’000 RM’000 RM’000 RM’000

Revenue 10,253 11,524 9,101 4,209

Cost of sales (7,743) (8,620) (7,435) (3,240)

Gross profit 2,510 2,904 1,666 969

Other operating income 75 8 64 48

Administrative expenses (5,047) (1,424) (1,200) (870)Other operating expenses (134) (119) (122) (73)

Operating (loss)/profit 10 (2,596) 1,369 408 74

Interest expense (232) (379) (154) (42)

(Loss)/profit/ before taxation (2,828) 990 254 32

Tax expense 12 — — — —

Net (loss)/profit for the year/period (2,828) 990 254 32

95


Balance Sheets

As at 30 June As at 31

December

2002 2003 2004 2004

Note RM’000 RM’000 RM’000 RM’000

Property, plant and equipment 2 9,229 7,040 4,636 3,965

Mining development expenditure 3 — 1,510 3,395 4,766

Current assets

Inventories 4 — 216 1,371 1,591Trade and other receivables 5 3,013 2,138 1,058 2,022

Cash and cash equivalents 126 71 81 1,830

3,139 2,425 2,510 5,443

Current liabilities

Trade and other payables 6 (10,804) (10,622) (8,138) (2,368)

Borrowings (secured) 7 (2,727) (2,246) (654) (6,297)

(13,531) (12,868) (8,792) (8,665)

Net current liabilities (10,392) (10,443) (6,282) (3,222)

Long term liabilities 7 (1,920) (200) (88) (3,816)

(3,083) (2,093) 1,661 1,693

Financed by:

Capital and reserves

Share capital 8 6,500 6,500 10,000 10,000Accumulated losses (9,583) (8,593) (8,339) (8,307)

Shareholder’s (deficit)/funds

(3,083) (2,093) 1,661 1,693

96


Statements of Changes in Equity

Share Capital

Accumulated

Losses Total

RM’000 RM’000 RM’000

At 1 July 2001 5,000 (6,755) (1,755)

Issue of shares 1,500 — 1,500

Loss for the year — (2,828) (2,828)

At 30 June 2002 6,500 (9,583) (3,083)

Net profit for the year — 990 990

At 30 June 2003 6,500 (8,593) (2,093)

Issue of shares 3,500 — 3,500Net profit for the year — 254 254

At 30 June 2004 10,000 (8,339) 1,661

Net profit for the period — 32 32

At 31 December 2004 10,000 (8,307) 1,693

97


Statements of Cash Flows

Year ended 30 June

Six months

ended

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Cash flow from operating activities

(Loss)/profit before taxation (2,828) 990 254 32Adjustments for:

Depreciation 3,250 2,276 2,389 696

Gain on disposal of property, plant & equipment (38) — (49) (48)

Interest expense 232 379 154 42

Loss on disposal of property, plant & equipment — 16 — 6

Operating profit before working capital changes 616 3,661 2,748 728

Changes in working capital:

Inventories — (216) (1,154) (220)Trade and other receivables (2,354) 875 1,080 (964)

Trade and other payables 5,240 (182) 1,016 (5,770)

Net cash generated from operating activities 3,502 4,138 3,690 (6,226)

Cash flow from investing activities

Mining development expenditure — (1,511) (1,885) (1,370)

Proceeds from sale of property, plant & equipment 86 74 102 48

Purchase of property, plant & equipment (5,176) (111) (38) (32)

Net cash used in investing activities (5,090) (1,548) (1,821) (1,354)

Cash flow from financing activities

Interest paid (232) (380) (155) (42)

Repayment of/proceeds from, term loan 2,776 (1,458) (1,317) 10,000

Repayment of lease creditor (777) (777) (259) —

Repayment of hire purchase creditors (94) (150) (136) (25)

Net cash generated from used in, financing activities 1,673 (2,765) (1,867) 9,933

Net increase/(decrease) in cash and cash equivalents 85 (175) 2 2,353

Cash and cash equivalents at beginning of year/period (435) (350) (525) (523)

Cash and cash equivalents at end of year/period (350) (525) (523) 1,830

Cash and cash equivalents

Cash and cash equivalents included in the cash flow statement comprise the following balance sheetamounts:

30 June

2002 2003 2004

31 December

2004

RM’000 RM’000 RM’000 RM’000

Cash and bank balances 126 71 81 1,830

Bank overdraft (476) (596) (604) —

Cash and cash equivalents at end of year/period (350) (525) (523) 1,830

98


Notes to the Financial Information

1. Summary of Significant Accounting Policies

The following accounting policies are adopted by the Company and are consistent with those adopted

in previous years except for the adoption of MASB 29, Employee Benefits during the year ended 30

June 2004.

Apart from the inclusion of the new policies and extended disclosures where required by this new

standard, there is no effect on these financial statements.

a) Basis of accounting

The financial statements of the Company are prepared on the historical cost basis except asdisclosed in these notes to the financial information and in compliance with the provisions of

the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

The Company has net current liabilities of RM3,221,711 as at 31 December 2004. The

Directors have prepared the financial statements on the going concern basis as the holdingcompany has indicated its willingness to provide continuous financial support to the Company.

The financial statements do not include any adjustments relating to the recoverability and

classification of recorded asset amounts and classification of liabilities that may be necessary ifthe Company is unable to continue as a going concern.

b) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated

impairment losses, if any.

Depreciation

The straight line method is used to write off the cost of the following assets over the term of

their estimate useful lives at the following principal annual rates:

Plant and equipment 20%

Building 20%

Motor vehicles 20%

Laboratory equipment 20%

Furniture and fittings 10%Office equipment 10%

c) Mining development expenditure

Mining development expenditure is capitalised when it is probable that the projects will besuccessful and the cost can be measured reliably. Development expenditure that has been

capitalised is amortised on the straight line method over the life of the interest to which such

costs relate on the production output basis and recognised in the income statement upon the

commencement of commercial production.

d) Inventories

Inventories of consumable supplies and spare parts are valued at the lower of cost and net

realisable value. Cost comprises the purchase price plus costs incurred in bringing each product

to its present location and condition accounted for on a first-in-first-out basis.

Gold is valued at the lower of the cost and net realisable value using market price at the period

end or where applicable a forward contract price. Work-in-progress comprise gold concentrates

and gold contained in stockpiled ore as determined by production records. The cost of work-in-

progress includes the cost of direct materials, labour and variable and fixed overheads relatingto mining activities.

e) Trade and other receivables

Trade and other receivables are stated at cost less allowance for doubtful debts.

f) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks and highly liquid

investments which have an insignificant risk of change in value. For the purpose of the cash

flow statement, cash and cash equivalents are presented net of bank overdrafts.

99


g) Impairment

The carrying amounts of assets, other than inventories, deferred tax assets and financial assets,

are reviewed at each balance sheet date to determine whether there is any indication ofimpairment. If any such indication exists, the asset’s recoverable amount is estimated. An

impairment loss is recognised whenever the carrying amount of an asset or the cash-generating

unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised in

the income statement.

The recoverable amount is the greater of the asset’s net selling price and its value in use. In

assessing value in use, estimated future cash flows are discounted to their present value using a

pre-tax discount rate that reflects current market assessments of the time value of money and

the risks specific to the asset. For an asset that does not generate largely independent cash

inflows, the recoverable amount is determined for the cash-generating unit to which the asset

belongs.

An impairment loss is reversed if there has been a change in the estimates used to determine the

recoverable amount and it is reversed only to the extent that the asset’s carrying amount does

not exceed the carrying amount that would have been determined, net of depreciation oramortisation, if no impairment loss has been recognised. The reversal is recognised in the

income statement.

h) Liabilities

Borrowings and trade and other payables are stated at cost.

i) Finance leases

Leases in which the Company assume substantially all the risks and rewards of ownership are

classified as finance leases. Assets acquired by way of finance leases are stated at an amount

equal to the lower of their fair values and the present value of the minimum lease payments at

the inception of the leases, less accumulated depreciation and impairment losses.

In calculating the present value of the minimum lease payments, the discount rate is the interest

rate implicit in the lease, if this is practicable to determine; if not, the Company’s incremental

borrowing rate is used.

j) Employee benefits

Short term employee benefits

Wages, salaries and bonuses are recognised as expenses in the year in which the associated

services are rendered by employees of the Company. Short term accumulating compensated

absences such as paid annual leave are recognised when services are rendered by employees that

increase their entitlement to future compensated absences, and short term non-accumulating

compensated absences such as sick leave are recognised when absences occur.

Defined contribution plan

Obligations for contributions to defined contribution plan are recognised as an expense in the

income statement as incurred.

k) Income Tax

Tax on the profit or loss for the year comprises current and deferred tax. Income tax is

recognised in the income statement except to the extent that it relates to items recognised

directly in equity, in which case it is recognised in equity.

Current tax expense is the expected tax payable on the taxable income for the period, using tax

rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax

payable in respect of previous years.

Deferred tax is provided, using the liability method, on temporary differences arising between

the tax bases of assets and liabilities and their carrying amounts in the financial statements.Temporary differences are not recognised for the initial recognition of assets or liabilities that at

the time of the transaction affects neither accounting nor taxable profit. The amount of

deferred tax provided is based on the expected manner of realisation or settlement of the

carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the

balance sheet date.

100


A deferred tax asset is recognised only to the extent that it is probable that future taxable

profits will be available against which the asset can be utilised.

l) Foreign currency transactions

Transactions in foreign currencies are translated to Ringgit Malaysia at rates of exchange ruling

at the date of the transactions. Monetary assets and liabilities denominated in foreign

currencies at the balance sheet date are translated to Ringgit Malaysia at the foreign exchange

rates ruling at that date. Foreign exchange differences arising on translation are recognised in

the income statement.

The closing rate used in the translation of foreign currency monetary assets and liabilities is as

follows:

USD1 = RM3.80 (2002, 2003 and 2004)

m) Revenue

Revenue from sale of goods is measured at the fair value of the consideration receivable and isrecognised in the income statement when the significant risks and rewards of ownership have

been transferred to the buyer.

n) Expenses

Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight-line

basis over the term of the lease. Lease incentives received are recognised in the incomestatement as an integral part of the total lease payment made.

Financing costs

All interest and other costs incurred in connection with borrowings, are expensed as incurred.

The interest component of finance lease payments is recognised in the income statement so as to

give a constant periodic rate of interest on the outstanding liability at the end of each

accounting period.

101


2. Property plant and equipment

Plant and

Equipment Building

Motor

Vehicles

Laboratory

Equipment

Furniture

and Fittings

Office

Equipment Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost

At 1 July 2001 10,201 316 328 3 43 180 11,071

Additions 4,972 92 316 — 19 28 5,427

Disposals — — (114) — — — (114)

At 30 June 2002 15,173 408 530 3 62 208 16,384

Additions 11 32 80 — 34 20 177

Disposals — — (112) — — — (112)

At 30 June 2003 15,184 440 498 3 96 228 16,449

Additions — — — — — 38 38

Disposals — — (166) — — — (166)

At 30 June 2004 15,184 440 332 3 96 266 16,321

Additions — — — — — 32 32

Disposals (33) — — — — (12) (45)

At 31 December 2004 15,151 440 332 3 96 286 16,308

Depreciation

At 1 July 2001 3,600 190 132 1 8 41 3,972

Charge for the year 3,034 82 106 1 6 21 3,250

Disposals — — (67) — — — (67)

At 30 June 2002 6,634 272 171 2 14 62 7,155

Charge for the year 2,056 87 100 — 10 23 2,276

Disposals — — (22) — — — (22)

At 30 June 2003 8,690 359 249 2 24 85 9,409

Charge for the year 2,260 25 67 — 10 27 2,389

Disposals — — (113) — — — (113)

At 30 June 2004 10,950 384 203 2 34 112 11,685

Charge for the period 636 12 29 — 5 14 695

Disposals (33) — — — — (5) (38)

At 31 December 2004 11,553 396 232 2 39 121 12,343

Net book value

At 30 June 2002 8,539 136 359 1 48 146 9,229

At 30 June 2003 6,494 81 249 1 72 143 7,040

At 30 June 2004 4,234 56 129 1 62 154 4,636

At 31 December 2004 3,598 44 100 1 57 165 3,965

Included in plant and equipment are idle assets amounting to RM2,452,585 (June 2004 –

RM2,452,585; 2003 – RM2,452,585) which are not subject to depreciation as these assets, which were

purchased for the commencement of the commercial mining operations, have not been used since

their respective dates of acquisition.

102


Mining operations are carried out on land owned by the holding company.

Asset under lease

Included in property, plant and equipment is plant and machinery acquired under lease arrangement

with a net book value of RM Nil (2004 – RM466,400; 2003 – RM932,800).

Assets under hire purchase

Included in property, plant and equipment are motor vehicles acquired under hire purchase

agreements with a net book value of RM100,127 (June 2004 – RM130,039; 2003 – RM250,043).

3. Mining development expenditure

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Mining development expenditure, at cost — 1,510 3,395 4,766

The Directors are of the view that there will be sufficient future income from the extraction of gold

to offset the mining development expenditure capitalised in the financial statements.

4. Inventories

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Spare parts and consumables — 216 195 149

Work in progress — — 1,176 1,442

— 216 1,371 1,591

5. Trade and other receivables

As at 30 June As at 31

December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Trade receivables 1,436 561 369 647

Other receivables, deposits and prepayments 1,577 1,577 689 1,375

3,013 2,138 1,058 2,022

Included in other receivables, deposits and prepayments are interest free advances of RM513,500

(June 2004 – RM510,000; 2003 – RM1,024,542) to a third party.

103


6. Trade and other payables

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Trade payables 2,901 2,316 1,947 1,909

Other payables and accrued expenses 372 484 642 459

Amount owing to Director 177 238 1,169 —Related company — 46 46 —

Holding company 7,354 7,538 4,334 —

10,804 10,622 8,138 2,368

The amounts owing to Director, related company and holding company are unsecured, interest free

and have no fixed terms of repayment.

7. Borrowings (secured)

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Current

Bank overdraft 476 596 604 —

Term loan 1,399 1,317 — 1,250

Hire purchase creditors 75 73 50 47

Finance lease liability 777 260 — —

Revolving credit — — — 5,000

2,727 2,246 654 6,297Non-current

Term loan 1,376 — — 3,750

Hire purchase/lease creditors 544 200 88 66

1,920 200 88 3,816

4,647 2,446 742 10,113

Hire purchase Creditors

Hire purchase creditors (gross – interest and principal), as at 31 December 2004, are payable as

follows:

Interest

RM’000

Principal

RM’000

Gross

RM’000

Less than one year 11 47 58

Between one and five years 13 67 80

24 114 138

The Company’s overdraft and term loan are subject to interest at rates of 2% (June 2004 – 2.5%;

2003 – 2%) above the bank’s base lending rate. Hire purchase and finance lease arrangements are

subject to fixed interest rates ranging from 3.8% to 6.9% (June 2004 – 3.8% to 6.9%; 2003 – 3.8% to

6.9%).

The term loan is repayable in 36 equal instalments commencing from month 13 of drawdown. Forthe first 12 months from drawdown, only interest payment is made.

The Company’s bank overdraft, term loan and revolving credit are secured by way of debentures over

all fixed and floating assets, third party charge over a related company’s property and a personal

guarantee by a Director.

104


8. Share capital

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Ordinary shares of RM1.00 each

Authorised 10,000,000 10,000,000 10,000,000 10,000,000

Issued and fully paid:

Opening balance 6,500,000 6,500,000 6,500,000 10,000,000

Issued during the year — — 3,500,000 —

Closing balance 6,500,000 6,500,000 10,000,000 10,000,000

9. Deferred tax

As at 30 JuneAs at

31 December

2003 2004 2004

RM’000 RM’000 RM’000

Taxable temporary differences (562) (537) (692)

Unabsorbed capital allowances 4,760 3,902 4,575Unutilised tax losses 2,139 2,139 2,139

6,337 5,504 6,022

The unutilised tax losses and unabsorbed capital allowances do not expire under current tax

legislation. Deferred tax assets have not been recognised in respect of these items because it is not

probable that future taxable profit will be available against which the Company can utilise the

benefits.

10. Operating Profit

Year ended 30 June

Six months

ended

31 December

2002

RM’000

2003

RM’000

2004

RM’000

2004

RM’000

Operating profit is arrived at after charging:Auditors’ remuneration 10 10 35 25

Depreciation 3,250 2,276 2,389 696

Directors’ emoluments

— Fees 132 132 132 66

— Remuneration — — 21 —

Loss on disposal of property, plant and

equipment — 16 — 7

Rental of premises 144 98 102 40Rental of plant and equipment / vehicles 50 1,329 1,481 1,020

And crediting:

Gain on disposal of property, plant and

equipment 37 — 49 48

105


11. Employee Information

Year ended 30 June

Six months

ended

31 December

2002

RM’000

2003

RM’000

2004

RM’000

2004

RM’000

Staff costs 1,705 1,821 1,509 665

The number of employees of the Company at the end of the period was 62 (June 2004 – 69; 2003 –

88; 2002 – 88).

Staff costs include contribution to the Employees’ Provident Fund of RM51,326 (June 2004 –

RM108,969; 2003 – RM124,800; 2002 – RM104,525).

12. Tax Expense

Year ended 30 June

Six months

ended

31 December

Reconciliation of effective tax

rate/tax expense

2002

RM’000 %

2003

RM’000 %

2004

RM’000 %

2004

RM’000 %

(Loss)/profit before taxation (2,828) 989 100 253 100 32 100

Income tax using Malaysian tax rates 277 28 71 28 9 28

Non-deductible expenses 197 20 170 67 55 173

Effect of deferred tax assets recognised (474) (48) (233) (92) (64) (200)

Others — — (8) (3) — (1)

Tax expense — — — — — — — —

13. Holding Company

The holding company as at 31 December 2004 is Akay Holdings Sdn. Bhd., a company incorporatedin Malaysia.

14. Related Company Transactions

Year ended 30 June

Six months

ended

31 December

2002

RM’000

2003

RM’000

2004

RM’000

2004

RM’000

Holding company Mining permit 10 10 10 —

15. Financial Statements

Financial risk management objectives and policies

Exposure to credit, interest rate, currency and liquidity risks arises in the normal course of the

Company’s business. The Board reviews and agrees policies for managing each of these risks and

they are summarised below.

Credit risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing

basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

At 31 December 2004, the Company’s trade receivables are due from a single debtor.

106


Interest rate risk

The Company financed its operations via overdraft and term loan which bear interest at rates of

2.0% (June 2004 – 2.5%; 2003 – 2%) above the bank’s base lending rate. The Company also usedrevolving credit that is subject to interest at a rate of 1.5% (June 2004: nil) above the bank’s base

lending rate.

Foreign currency risk

The Company incurs foreign currency risk on sales and purchases that are denominated in a currency

other than Ringgit Malaysia. The currency giving rise to this risk is primarily US dollars. The

Company does not enter into forward exchange contracts to hedge its foreign currency exposure in

view of the current government’s ‘‘peg’’ on US dollars. However, the Board keeps this policy underreview.

Liquidity risk

The Company maintains a level of cash and cash equivalents and bank facilities deemed adequate by

management to finance the Company’s operations and to mitigate the effects of fluctuations in cash

flows.

Fair values

In respect of cash and cash equivalents, trade and other receivables, trade and other payables, and

short term borrowings, the carrying amounts approximate fair value due to the relatively short termnature of these financial instruments.

The aggregate fair values of the other financial liabilities as at 31 December 2004 are:

Carrying

amount

RM’000

Fair value

RM’000

Term loan 5,000 5,000

16. Events after the Balance Sheet Date

On 17 June 2005 the whole of the issued share capital of RAGM was acquired, conditional upon

Admission, by Peninsular Gold Limited, a company incorporated under the laws of Jersey and whichcompany will become the ultimate holding company.

Yours faithfully

Moore Stephens

Chartered AccountantsRegistered Auditors

107


PART C

FINANCIAL INFORMATION ON S.E.R.E.M. MALAYSIA SDN. BHD.

The following is the text of an accountants’ report on S.E.R.E.M. Malaysia Sdn. Bhd. by Moore

Stephens, for the three years ended 30 June 2004 and the six months ended 31 December 2004.

The Directors,


First Island House,

Peter Street, St Helier,Jersey,

Channel Islands JE2 4SP

St. Paul’s House,

Warwick Lane,

London EC4M 7BP.

17 June 2005

The Directors

Nabarro Wells & Co. Limited,Saddlers House,

Gutter Lane,

London EC2V 6HS.

Dear Sirs,

S.E.R.E.M. MALAYSIA SDN. BHD.

We report in connection with the admission document issued by Peninsular Gold Limited dated 17

June 2005 (‘‘the Admission Document’’). In accordance with our instructions, we report on the

financial information set out below relating to S.E.R.E.M. Malaysia Sdn. Bhd. (‘‘Serem’’). This

financial information has been prepared for inclusion in the Admission Document.


Serem was incorporated as a private limited company on 7 March 1968 under the laws of Malaysia.

The financial statements of Serem for the years ended 30 June 2002 and 2003 have been audited by

Wong & Co, Chartered Accountants, Kuala Lumpur, who have issued unqualified audit reports on

them. The financial statements of Serem for the year ended 30 June 2004 and the six months ended

31 December 2004 have been audited by KPMG, Kuala Lumpur, who have issued unqualified reports

on them. We point out that the audit reports by KPMG on the financial statements for the year

ended 30 June 2004 and the six months ended 31 December 2004, included an emphasis of matter as

follows – ‘‘Without qualifying our opinion, we draw attention to Note 2(a) to the financial statements.

The financial statements of the Company have been prepared on the going concern basis in view of the

undertaking from the holding company to provide continuous financial support. Accordingly, the financial

statements do not include any adjustments relating to the recoverability and classifications of recorded

asset amounts or to amounts and classifications of liabilities that may be necessary if the Company is

unable to continue as a going concern.’’

The financial statements of Serem have been prepared in accordance with the Malaysian Companies

Act 1965. Accordingly, the financial information does not constitute statutory accounts within themeaning of Section 240 of the UK Companies Act 1985 (as amended).

We have reviewed the audited financial statements of Serem for the three years ended 30 June 2002,

2003 and 2004, and the six months ended 31 December 2004.

The financial information is based on the audited financial statements of Serem for the years ended

30 June 2002, 2003 and 2004, and the six months ended 31 December 2004, without material

adjustment.

No financial statements for Serem have been prepared or presented to the members of Serem for any

period since 31 December 2004 and no dividends have been paid or declared in respect of the period

since that date.

108


Responsibility

The directors of Peninsular Gold Limited are responsible for the contents of the Admission

Document in which this report is included.

It is our responsibility to compile the financial information set out below from the financial

statements, to form an opinion on the financial information, and to report our opinion to you.

Basis of Opinion



relevant to accounts and disclosures in the financial information. The evidence included that recorded

by the auditors who audited the financial statements underlying the financial information and that

obtained by us during the course of our review. It also included an assessment of significant

estimates and judgements made by those responsible for the preparation of the financial statementsunderlying the financial information and whether the accounting policies are appropriate to the

Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance that

the financial information is free from material misstatement, whether caused by fraud or other

irregularity or error.

Opinion

In our opinion, the financial information gives, for the purposes of the Admission Document, a trueand fair view of the state of affairs of Serem as at 30 June 2002, 2003 and 2004 and 31 December

2004 and of the results and cash flows of Serem for the periods then ended.

Consent


this report for the purposes of paragraph 45(2)(b)(iii) of Schedule 1 to The Public Offers of Securities

Regulations 1995.

109


Profit and Loss Accounts

Year ended 30 June

Six months

ended

31 December

Note

2002

RM’000

2003

RM’000

2004

RM’000

2004

RM’000

Administrative expenses (2) (2) (6) (3)

Other income — — 1 —

Loss before taxation 5 (2) (2) (5) (3)Tax expense 6 — — — —

Net loss for the year/period (2) (2) (5) (3)

Balance Sheets

As at 30 JuneAs at

31 December

Note 2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Current assets

Other receivables 2 — — 50 175

Cash and cash equivalents 12 2 1 —

12 2 51 175

Current liabilitiesOther payables 3 (3,481) (3,473) (3,527) (3,654)

Net current liabilities (3,469) (3,471) (3,476) (3,479)

Financed by:

Capital and reserves

Share capital 4 1,115 1,115 1,115 1,115

Share premium 170 170 170 170

Reserves (4,754) (4,756) (4,761) (4,764)

Deficit in shareholder’s funds (3,469) (3,471) (3,476) (3,479)

110


Statement of Changes in Equity

Share capital

Share

premium

Accumulated

losses Total

RM’000 RM’000 RM’000 RM’000

At 1 July 2001 1,115 170 (4,752) (3,467)

Net loss for the year — — (2) (2)

At 30 June 2002 1,115 170 (4,754) (3,469)


At 30 June 2003 1,115 170 (4,756) (3,471)


At 30 June 2004 1,115 170 (4,761) (3,476)

Net loss for the period — — (3) (3)

At 31 December 2004 1,115 170 (4,764) (3,479)

Statement of Cash Flows

Year ended 30 JuneSix months ended

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Cash flow from operating activities

Loss before taxation (2) (2) (5) (3)

(Increase)/Decrease in working capital:

Other receivables 1 — (50) (125)

Other payables 3 (8) 54 127

Net cash used in operating activities 2 (10) (1) (1)

Net increase/(decrease) in cash and cash

equivalents 2 (10) 0 (1)

Cash and cash equivalents at beginning of

year/period 10 12 2 1

Cash and cash equivalents at end of year/

period 12 2 1 —

Cash and cash equivalents comprise:

Cash and bank balances 12 2 1 —

Notes to the Financial Information

1. Summary of Significant Accounting Policies

Basis of accounting

The financial statements of the Company are prepared on the historical cost basis except as disclosed

in the notes to the financial statements and in compliance with the provisions of the Companies Act,

1965 and applicable approved accounting standards in Malaysia. The Directors have prepared thefinancial statements on the going concern basis as the holding company, Akay Venture Sdn. Bhd., a

company incorporated in Malaysia, has indicated its willingness to provide continuous financial

support to enable the Company to continue as a going concern in the foreseeable future.

Other receivables

Other receivables are stated at cost less allowance for doubtful debts.

111


Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank balances.

Impairment

The carrying amount of assets, other than financial assets, are reviewed at each balance sheet date todetermine whether there is any indication of impairment. If any such indication exists, the asset’s

recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of

an asset or the cash-generating unit to which it belongs exceeds its recoverable amount. Impairment

losses are recognised in the income statement.

The recoverable amount is the greater of the asset’s net selling price and its value in use. In

assessing value in use, estimated future cash flows are discounted to their present value using a pre-

tax discount rate that reflects current market assessments of the time value of money and the risks

specific to the asset. For an asset that does not generate largely independent cash inflows, the

recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is reversed if there has been a change in the estimates used to determine the

recoverable amount and it is reversed only to the extent that the asset’s carrying amount does not

exceed the carrying amount that would have been determined, net of depreciation or amortisation, ifno impairment loss had been recognised. The reversal is recognised in the income statement.

Liabilities

Other payables are stated at cost.

Income tax

Tax on the profit and loss for the year comprises current and deferred tax. Income tax is recognised

in the income statement except to the extent that it relates to items recognised directly in equity, in

which case it is recognised in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates

enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in

respect of previous years.

Deferred tax is provided, using the liability method, on temporary differences arising between the tax

bases of assets and liabilities and their carrying amounts in the financial statements. Temporary

differences are not recognised for the initial recognition of assets or liabilities that at the time of the

transaction affects neither accounting nor taxable profit. The amount of deferred tax provided isbased on the expected manner of realisation or settlement of the carrying amount of assets and

liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits willbe available against which the asset can be utilised.

2. Other Receivables

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Other receivables — — — 75

Deposit — — 50 100

— — 50 175

The deposit relates to the sub-lease (with an option to purchase) of a Mining Certificate which grants

the rights to occupy and mine a piece of mining land in Tersang, Raub district, Pahang.

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3. Other Payables

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Other payables and accrued expenses 37 29 82 78

Amount due to related company — — 1 —

Amount due to holding company 3,444 3,444 3,444 3,576

3,481 3,473 3,527 3,654

The amount due to holding company and related company are unsecured, interest free and have no

fixed terms of repayment.

4. Share Capital

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Ordinary shares of RM1.00 each:

Authorised 5,000 5,000 5,000 5,000

Issued and fully paid 1,115 1,115 1,115 1,115

5. Loss before taxation

Year ended 30 June

Six months

ended

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Loss before taxation is arrived at after

charging:

Audit fee 1 1 5 3

6. Tax expense

Reconciliation of effective tax rate/tax expense

Year ended 30 JuneSix months ended

31 December

2002 2003 2004 2004

% RM’000 % RM’000 % RM’000 % RM’000

Loss before taxation 100 (2) 100 (2) 100 (5) 100 (3)

Income tax using Malaysian

tax rate (28) (1) (28) (1) (28) (1) (28) (1)

Non-deductible expenses 28 1 28 1 28 1 28 1

Tax expense — — — — — — — —

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7. Deferred tax

No deferred tax has been recognised for the following items:

As at 30 JuneAs at

31 December

2002 2003 2004 2004

RM’000 RM’000 RM’000 RM’000

Unutilised tax losses 814 814 814 814

Unabsorbed mining allowances 2,518 2,518 2,518 2,518

3,332 3,332 3,332 3,332

The unutilised tax losses and unabsorbed mining allowance do not expire under current tax

legislation. Deferred tax assets have not been recognised in respect of these items because it is not

probable that future taxable profit will be available against which the Company can utilise the

benefits.

8. Holding company

The holding company is Akay Venture Sdn. Bhd., a company incorporated in Malaysia.

9. Financial instruments

Financial risk management objectives and policies

The Company does not have any significant exposure to credit, interest rate and currency risks arising

from the normal course of the Company’s business.

Liquidity risk

The Company maintains a level of cash and cash equivalents deemed adequate by management tofinance the Company’s operation and to mitigate the effects of fluctuation in cash flows.

Fair values

In the opinion of the Directors, there is no significant difference between the fair values and the

carrying values of financial assets and financial liabilities.

10. Capital commitments

As at

30 June

As at

31 December

2004 2004

RM’000 RM’000

Authorised and contracted for Acquisition /sublease of mining rights 450 400

11. Events after the balance sheet date

On 17 June 2005, the whole of the issued share capital of Serem was acquired, conditional upon

Admission, by Peninsular Gold Limited, a company incorporated under the laws of Jersey and which

company will become the ultimate holding company.

Yours faithfully,

Moore Stephens


Registered Auditors

114


Illustrative pro forma statement of consolidated net assets

The pro forma statement of net assets of the Group set out below is provided for illustrative

purposes only. It has been compiled on the basis described below, from the audited balance sheets ofRAGM and Serem as at 31 December 2004 as set out in Parts 4B and C, and the audited balance

sheet of the Company as at 31 May 2005 as set out at Part 4A, and includes the estimated costs of

Admission. Due to its nature, the pro forma statement of net assets cannot give a complete picture of

the intended financial position of the Group.

RAGM Serem PGL Acquisition Pref Shares Admission Pro Forma

Note 1 Note 1 Note 2 Note 3 Note 4 Note 5

£’000 £’000 £’000 £’000 £’000 £’000 £’000

Property, plant and equipment 543 543

Mining development expenditure 652 652

Intangible mining reserves 17,220 17,220

1,195 17,220 18,415

Current assets

Inventories 218 218

Trade and other receivables 277 24 301

Cash and cash equivalents 250 1,280 (510) 1,020

745 24 0 0 1,280 (510) 1,539

Current liabilities

Trade and other payables (324) (501) (825)

Borrowings (862) (862)

(1,186) (501) 0 0 0 0 (1,687)

Net current liabilities (441) (477) 0 0 1,280 (510) (148)

Long term liabilities

Borrowings (522) (522)

Net assets 232 (477) 0 17,220 1,280 (510) 17,745

Basis of preparation

The above pro forma statement of net assets is based on the following:

Note 1 The balance sheets of RAGM and Serem are as set out in the Accountants’ Reports in Parts 4B and C,

translated from Malaysian Ringgit into £ sterling at RM1:£0.1369, being the rate ruling at 31 December

2004.

Note 2 The balance sheet of PGL is as set out in the Accountants’ Report in Part 4A.

Note 3 The acquisition reflects the issue of 33,950,596 ordinary shares of no par value in the Company in

consideration for the acquisition of the whole of the issued share capital of RAGM and of Serem, for an

aggregate value of £16,975,298 and the fair value accounting of underlying reserves held by those

companies, which will be subject to future review for impairment and amortisation.

Note 4 The issue by the Company of 2,560,000 redeemable convertible cumulative non-voting Preference

Shares at £0.50 per share for £1,280,000.

Note 5 Estimated costs of Admission of £550,000 of which approximately £40,000 had been prepaid as at

31 December 2004.

Note 6 No adjustment in respect of any trading results since 31 December 2004.

115


The Directors,


First Island House,

Peter Street,

St Helier,

Jersey JE2 4SP,

Channel Islands

St. Paul’s House,

Warwick Lane,

London EC4M 7BP

17 June 2005

The Directors,

Nabarro Wells & Co. Limited

Saddlers House

Gutter Lane

London EC2V 6HS

Dear Sirs,

PENINSULAR GOLD LIMITED (‘‘THE COMPANY’’)

We report on the unaudited pro forma statement of net assets set out in Part 4 of the Company’s

Admission document dated 17 June 2005. The pro forma statement of net assets has been prepared,for illustrative purposes only, to provide information about how the acquisition, conditional upon

Admission, by the Company of the whole of the issued share capitals of Raub Australian Gold

Mining Sdn Bhd and S.E.R.E.M. Malaysia Sdn Bhd, the issue by the Company of redeemable

convertible cumulative non-voting Preference Shares, and Admission might have affected the financial

position as at 31 May 2005.

Responsibility

It is the responsibility of the directors of the Company to prepare the pro forma statement of netassets.

It is our responsibility to form an opinion, on the pro forma statement of net assets and to report

our opinion to you. We do not accept responsibility for any reports previously given by us on any

financial information used in the compilation of the pro forma statement of net assets beyond that

owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our work in accordance with the Statements of Investment Circular ReportingStandards and Bulletin 1998/8 ‘‘Reporting on pro forma financial information pursuant to the Listing

Rules’’ issued by the Auditing Practices Board. Our work, which involved no independent

examination of the underlying financial information, consisted primarily of comparing the unadjusted

financial information with the source documents, considering evidence supporting the adjustments and

discussing the pro forma statement with the Directors of the Company.

Opinion

In our opinion:-

i) The pro forma statement of net assets has been properly compiled on the bases stated.

ii) Such bases are consistent with the accounting policies of the Company; and

iii) The adjustments are appropriate for the purposes of the pro forma statement of net assets as

disclosed.

Yours faithfully,

Moore Stephens


Registered Auditors

116


PART 5

ADDITIONAL INFORMATION

1. The Company

(a) The Company was incorporated in Jersey on 8 April 2005 as a public company under the

Companies Law, with registered number 89895 under the name Peninsular Gold Limited. On8 April 2005, the Company issued a total of 1,000 Ordinary Shares to the founding shareholders

of the Company, namely First Island Nominees Limited as nominee for Akay Holdings, First

Island Services Limited, as nominee for Akay Venture and Pennine Trustees Limited as nominee

for Dato’ Mohamed Moiz Bin JM Ali Moiz. Of the 1,000 Ordinary Shares issued on 8 April

2005, 750 Ordinary Shares were issued to First Island Nominees Limited, 200 Ordinary Shares

were issued to First Island Services Limited and 50 Ordinary Shares were issued to Pennine

Trustees Limited. On 17 June 2005, First Island Nominees Limited, First Island Services Limited

and Pennine Trustees Limited disposed of all Ordinary Shares held by each of them to AkayHoldings, Akay Venture and Dato’ Mohamed Moiz Bin JM Ali Moiz in a manner resulting in

the following shareholding structure:

Shareholder

Number of

Ordinary

Shares

Akay Holdings 500

Akay Venture 365

Dato’ Mohamed Moiz Bin JM Ali Moiz 135

Subsequent increases in the share capital of the Company prior to and contemplated increases after

the date of this document are described in paragraph 3 below.

(b) The registered office of the Company in Jersey is at First Island House, Peter Street, St. Helier,

Jersey, JE2 4SP Channel Islands.

(c) The register of members of the Company is kept at First Island House, Peter Street, St. Helier,

Jersey, JE2 4SP Channel Islands.

(d) In accordance with the provisions of the Companies Law, the Company’s Memorandum of

Association does not contain an objects clause.

2. Group Structure

Following completion of the Share Swap Agreement on 17 June 2005, the Company holds 100% of

the equity share capital of the following companies:

Name Registered Office

Country of

Incorporation

Principal Activity

and place of business

Raub Australian Gold

Mining Sdn Bhd

Suite 30D, 30th Floor, Empire

Tower, City Square Centre,

182 Jalan Tun Razak, 50400

Kuala Lumpur, Malaysia

Malaysia Gold mining and

exploration, Raub, State of

Pahang, Malaysia

S.E.R.E.M. Malaysia

Sdn. Bhd.

Suite 30D, 30th Floor, Empire

Tower, City Square Centre,

182 Jalan Tun Razak, 50400Kuala Lumpur, Malaysia

Malaysia Gold mining and

exploration, Raub, State of

Pahang, Malaysia

3. Share Capital

(a) Other than as disclosed above in relation to the issue of 1,000 Ordinary Shares to the founding

shareholders, the only other increases in the issued share capital of the Company since the

Company’s incorporation are set out below in paragraph 3(a)(i). Paragraph 3(e) describes further

contemplated issues of Ordinary Shares and Preference Shares after Admission. Upon the

completion of:

117


(i) the Share Swap Agreement on 17 June 2005, the Company issued a total of 33,950,596

Ordinary Shares to Akay Holdings, Akay Venture and Dato’ Mohamed Moiz Bin JM Ali

Moiz. Of the 33,950,596 Ordinary Shares, 16,319,340 were issued to Akay Holdings,

12,873,848 were issued to Akay Venture and 4,757,408 were issued to Dato’ MohamedMoiz Bin JM Ali Moiz;

(ii) the Share Subscription Agreements which will occur following, among other things, the

Admission, the Company will issue a total of 2,560,000 Preference Shares to the OffshoreInvestors in a placing at a subscription price of 50 pence per Preference Share, raising net

proceeds to the Company of £1,280,000. Of the 2,560,000 Preference Shares issued,

1,500,000 Preference Shares will be issued to Granite Peak Limited, 500,000 Preference

Shares will be issued to Bondstar Investment Limited and 560,000 Preference Shares will

be issued to Innopilot Group Limited; and

(iii) the Mining Rights Agreement, the Company will issue 1,356,780 Ordinary Shares to Akay

Holdings as consideration for Akay Holdings procuring a permit for the Company to

undertake prospecting and mining activities on the RMDC Land. RMDC is currently

applying, from the State Government of Pahang, for the grant of a mining lease or mining

certificate in respect of a portion of the land which will involve its surrender and re-

alienation in the form of the grant of the mining lease or mining certificate. The Directors

are of the opinion that RMDC is likely to obtain the grant within six months ofAdmission upon which RMDC will grant a sub-lease of the mining lease or mining

certificate to Akay Holdings which will in turn grant the Company or any person or entity

nominated by the Company with a permit to undertake prospecting and mining activities

upon the terms described in paragraph 8(f). The issue of the 1,356,780 Ordinary Shares

will occur upon the grant to the Company or any person or entity nominated by the

Company of the permit.

(b) On 27 May 2005, special resolutions were passed by way of written resolution of the

shareholders of the Company in terms of which:

(i) the status of the Company was changed from a par value company to a no par value

company;

(ii) the authorised share capital of the Company was re-designated as an unlimited number ofshares of no par value designated as ordinary shares and an unlimited number of shares of

no par value designated as preference shares;

(iii) the 1,000 issued and fully paid ordinary shares with a par value of £0.10 each in the ShareCapital was re-designated as ordinary shares of no par value; and

(iv) the Memorandum of Association of the Company was altered to give effect to the matters

resolved in paragraphs 3(b)(i), (ii) and (iii) above.

(c) It is proposed that on or around 22 June 2005, special resolutions be passed by way of written

resolutions of the shareholders of the Company in terms of which:

(i) new Articles of Association be adopted, a summary of certain terms of which are set out

in paragraph 4 below; and

(ii) the allotment and issue of Preference Shares upon the terms of the Subscription

Agreements be approved.

(d) The authorised share capital of the Company before and after Admission is an unlimitednumber of shares of no par value designated as ordinary shares and an unlimited number of

shares of no par value designated as preference shares. The present issued share capital of the

Company is 33,951,596 Ordinary Shares. There will be no change to the issued share capital of

the Company immediately following Admission. Following completion of the Share Subscription

Agreements, which will occur after, among other things, the Admission, the issued share capital

of the Company will comprise 33,951,596 Ordinary Shares and 2,560,000 Preference Shares.

Assuming no further issues of Ordinary Shares of Preference Shares after the completion of the

Share Subscription Agreements, the issued share capital of the Company will change furtherfollowing the completion of the Mining Rights Agreement such that it will comprise 35,308,376

Ordinary Shares and 2,560,000 Preference Shares. The Preference Shares are redeemable,

convertible, cumulative and rank equally amongst themselves in all respects. They carry no right

to vote save in certain limited circumstances including where the Company proposes to reduce

its capital, wind itself up or dispose of the whole of its property and business. Dividends accrue

118


on the Preference Shares at the rate of six per cent per annum. Payment of dividends is subject

to the Companies Law, the availability of distributable profits and the discretion of the Board.

The Preference Shares may be converted into Ordinary Shares at the option of the holder at a

rate of conversion determined by application of a formula that could result in every 4Preference Shares being converted into 5 Ordinary Shares. The Preference Shares are redeemable

at the option of the Company either in cash or through the issue of Ordinary Shares to the

Preference Share holder based on a rate determined by application of a formula that could

result in the issue of 5 Ordinary Shares in redemption of every 4 Preference Shares.

(e) The Directors are aware, as at 17 June 2005 (the latest practicable date prior to publication of

this document), of the following direct and indirect interests in 3% or more of the Company’s

issued Ordinary Share capital:

Upon Admission

Shareholder

Ordinary

Shares %

Akay Venture{ 12,874,213 37.9

Akay Holdings{ 16,319,840 48.1

Dato’ Mohamed Moiz Bin JM Ali Moiz 4,757,543^ 14.0

^ Dato’ Mohamed Moiz Bin JM Ali Moiz will acquire 4,757,543 Ordinary Shares directly upon completion of the Share SwapAgreement and will be deemed to have a disclosable interest in an additional 3,860,976 Ordinary Shares by virtue that his wife,Tengku Nong Fatimah Sultan Ahmad Shah holds 29.99% of the issued share capital of Akay Venture.

{ Dato’ Andrew Tai Yeow Kam has upon Admission, an interest in 25,315,469 Ordinary Shares and after the completion of theMining Rights Agreement he will have an interest in 26,670,892 Ordinary Shares by virtue of his ownership of 99.9% of AkayHoldings and 70% of Akay Venture.

Following Completion of

the Share Subscription

Agreements*

Shareholder

Ordinary

Shares %

Akay Venture{ 12,874,213 34.7

Akay Holdings{ 16,319,840 43.9


Bondstar Investments Limited 625,000 1.7**Granite Peak Limited 1,875,000 5.0**

Innopilot Group Limited 700,000 1.9**

^ Dato’ Mohamed Moiz Bin JM Ali Moiz will acquire 4,757,408 Ordinary Shares directly upon completion of the Share SwapAgreement and will be deemed to have a disclosable interest in an additional 3,860,976 Ordinary Shares by virtue that his wife,Tengku Nong Fatimah Sultan Ahmad Shah holds 29.99% of the issued share capital of Akay Venture

* Assuming that the completion of the Share Subscription Agreement occurs after the completion of the Share Swap Agreement butbefore the completion of the Mining Rights Agreement and the holders of the Ordinary Shares after the completion of the ShareSwap Agreement do not dispose of any of such shares (or acquire any additional Ordinary Shares) in the period between thecompletion of the Share Swap Agreement and the completion of the Share Subscription Agreements

** Based on the right of a holder of Preference Shares to convert 4 Preference Shares for 5 Ordinary Shares

{ Dato’ Andrew Tai Yeow Kam has upon Admission, an interest in 25,315,469 Ordinary Shares and after the completion of theMining Rights Agreement he will have an interest in 26,670,892 Ordinary Shares by virtue of his ownership of 99.9% of AkayHoldings and 70% of Akay Venture.

119


Following Completion of

the Mining Rights

Agreement***

Shareholder

Ordinary

Shares %

Akay Venture 12,874,213 33.4

Akay Holdings 17,676,620 45.9


Bondstar Investments Limited 625,000 1.6

Granite Peak Limited 1,875,000 4.9

Innopilot Group Limited 700,000 1.8

*** Assuming that no Ordinary or Preference Shares are disposed or acquired by the holders listed above in the period between thecompletion of the Share Swap Agreement and the Share Subscription Agreements and the completion of the Mining RightsAgreement

^ Dato’ Mohamed Moiz Bin JM Ali Moiz will acquire 4,757,543 Ordinary Shares directly upon completion of the Share SwapAgreement and will be deemed to have a disclosable interest in an additional 3,860,976 Ordinary Shares by virtue that his wife,Tengku Nong Fatimah Sultan Ahmad Shah holds 29.99% of the issued share capital of Akay Venture.

{ Dato’ Andrew Tai Yeow Kam has upon Admission, an interest in 25,315,469 Ordinary Shares and after the completion of theMining Rights Agreement he will have 26,670,892 Ordinary Shares by virtue of his ownership of 99.9% of Akay Holdings and 70%of Akay Venture.

(f) Save as disclosed above, the Company is not aware of and has not received any notificationfrom any person confirming that such person is interested, directly or indirectly, in 3% or more

of the issued share capital of the Company nor is it aware of any person who directly or

indirectly, jointly or separately, exercises or could exercise control over the Company.

4. Articles of Association

The following contains a summary of certain provisions of the proposed new Articles of Association

of the Company to be adopted by special resolution passed as a written resolution on or around 22

June 2005 which is subject to the express terms thereof which are binding on all shareholders.

Prospective investors are accordingly referred to the Articles of Association for further details. The

Articles contain provisions, inter alia, to the following effect:

Voting Rights

Subject to any special rights restrictions or prohibitions as regards voting for the time being attached

to any shares, on a show of hands every member present in person or by proxy or (in the case of a

corporation) by duly authorised representative shall have one vote and on a poll every member shall

have one vote for each share of which he is the holder.

In the case of joint holders unless such joint holders shall have chosen one of their number to

represent them and so notified the Company in writing the vote of the most senior who tenders a

vote whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint

holders and for this purpose seniority shall be determined by the order in which the names stand inthe register.

On a poll votes may be given either personally or by proxy.

Dividends

Subject to the Companies Law and the Articles, the Company in general meeting may by resolution

declare dividends in accordance with the respective rights of the members but no dividend shall

exceed the amount recommended by the Directors.

Subject to the Companies Law, the Directors may from time to time pay to the members such

interim dividends as appear to the Directors to be justified.

If the share capital is divided into different classes the Directors may pay interim dividends on shareswhich confer deferred or non preferred rights with regard to dividends as well as on shares which

confer preferential rights with regard to dividends, but no interim dividend shall be paid on shares

carrying deferred or non preferred rights if, at the time of payment, any preferential dividend is in

arrear.

Directors may also pay at intervals settled by them any dividend payable at a fixed rate if they are of

the opinion that the profits available for distribution justify the payment.

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Provided the Directors act in good faith, they shall not incur any personal liability to the holders of

shares conferring preferred rights for any loss they may suffer by reason of the payment of an

interim dividend on any shares having deferred or non preferred rights.

Before the declaration of a dividend the Directors may set aside any part of the net profits of the

Company to create a reserve fund which shall at their discretion be applicable either by employing itin the business of the Company or by investing it in such a manner as the Directors may from time

to time think fit. The Directors may also without placing the same to reserve carry forward any

profits which they may think prudent not to divide.

The Directors may deduct from any dividend payable to any member all such sums of money (if any)

as may be payable by him to the Company on account of calls or otherwise.

No dividend shall bear interest against the Company.

All unclaimed dividends may be invested or otherwise made use of by the Directors for the benefit of

the Company until claimed. Any dividend unclaimed after a period of ten years from the date of

declaration of such dividend, if the Directors so resolve, shall be forfeited and shall revert to the

Company.

Capitalisation of Reserves

The Company may by special resolution, upon the recommendation of the Directors, resolve that it is

desirable to capitalise an amount to the shareholders, by means of a transfer to the stated capital

account maintained in accordance with the Companies Law for any class of issued shares of the

Company of the amount resolved to be capitalised from a profit and loss account or from any capital

or revenue reserve, and accordingly that the Directors be authorised and directed to appropriate the

amount resolved to be capitalised to the shareholders in the proportion in which such amount would

have been divisible amongst them had the same been applicable and had been applied in payingdividends, and to apply such amount on their behalf in or towards paying up the amounts, if any,

for the time being unpaid on any shares held by such shareholders respectively, or in paying up in

full any unissued shares or debentures of the Company, such shares or debentures to be allotted and

distributed, credited as fully paid up, to and amongst such shareholders in the proportions aforesaid,

or partly in one way and partly in the other provided that any unrealised profits may not be applied

in the paying up of any debentures of the Company.

Share Capital

Without prejudice to any special rights for the time being conferred on the holders of any shares or

class of shares or the rights of holders of Preference Shares (which special rights should not be varied

or abrogated except with such consent or sanction as contained in the Articles and subject to the

Companies Law) any share or class of shares in the share capital of the Company may be issued with

such preferred, deferred or other special rights or such restrictions whether in regard to dividends,

return of capital, voting or otherwise, as (a) the Company may from time to time by specialresolution determine; or (b) the Directors may from time to time determine, provided that the

maximum number of shares or options over shares or any combination thereof that the Directors

may so issue in each calendar year commencing on 30 June in each year shall not exceed 10 per cent.

of the aggregate number of shares on the first Business Day of each such period and in respect of

any shares so issued by the Directors the pre-emption rights described in the following paragraph

shall not apply.

Unless otherwise directed by the Company in general meeting or as otherwise provided for in the

Articles of Association, all new Ordinary Shares shall be offered to the shareholders (other than the

holders of the Preference Shares) in proportion to the existing shares held by them. Such offers shall

be made by notice specifying the number of shares to which the shareholder is entitled andprescribing the period within which the offer will remain open, and upon the expiry of such period

the offer, if not accepted, shall be deemed to have been declined. All such shares, if offered to the

shareholders and not taken up by them, shall be disposed of by the Directors in such manner as the

Directors think most beneficial to the Company.

The Company may by special resolution alter its share capital as stated in its memorandum in any of

the ways permitted or provided for under the Companies Law and the Articles.

The Company may from time to time subject to the provisions of the Companies Law issue or

convert existing non redeemable shares (whether issued or not) into shares which are to be redeemed,

121


or are liable to be redeemed at the option of the Company or the holder thereof on such terms and

in such manner as may be determined by special resolution or in accordance with the Articles.

The Company may from time to time subject to the provisions of the Companies Law purchase itsown shares (including any redeemable shares) in any manner authorised by the Companies Law

provided that in the event that the Company shall purchase any shares which are admitted to listing

or trading on any investment exchange such purchases shall be made in accordance with any relevant

restrictions imposed by any such listing authority or exchange.

Modification of Rights

Subject to the Companies Law whenever the share capital of the Company is divided into different

classes of shares the special rights attached to any class unless otherwise provided by the terms of

issue of the shares of that class may be varied or abrogated at any time with the consent in writing

of the holders of the majority (and in the case of the Preference Shares all) of the issued shares of

that class, or with the sanction of a resolution passed at a separate meeting of the holders of the

shares of that class. To every such separate meeting all the provisions of the Articles and of the

Companies Law relating to general meetings of the Company or to the proceedings thereat shallapply mutatis mutandis except that the necessary quorum shall be two persons holding or representing

at least one third of the issued shares of that class but so that if at any adjourned meeting of such

holders a quorum as above defined is not present those persons who are present in person shall be a

quorum.

The special rights conferred upon the holders of any shares or class of shares issued with preferred or

other special rights shall not (unless otherwise expressly provided by the Articles or by the conditions

of issue of such shares) be deemed to be varied by the creation or issue of further shares ranking pari

passu therewith or by the redemption, conversion or cancellation of any shares in accordance with the

Articles.

Shares

Subject to the Companies (Uncertificated Securities) (Jersey) Order 1999 (the ‘‘Jersey Order’’), and the

Articles, the unissued shares shall be at the disposal of the Directors who may, subject to theprovisions of the Companies Law and the Articles allot, grant options over, or otherwise dispose of

them to such persons at such times and on such terms as they think proper provided that the

maximum number of shares or options over shares or any combination thereof that the Directors

may so allot, grant or otherwise dispose of as the case may be in each calendar year commencing on

30 June in each year shall not exceed 10 per cent. of the aggregate number of shares in issue on the

first Business Day of each such period and in respect of any shares so issued the pre-emption

provisions described in the paragraph above (entitled Share Capital) shall not apply.

Interests in Shares

The Directors shall have power by notice in writing to require any Director or shareholder to disclose

to the Company the identity of any person other than the shareholder (an ‘‘interested party’’) who

has or has within the 12 months preceding the notice any interest in the shares held by the Director

or shareholder and the nature of such interest. The Company shall maintain a register of interestedparties.

Transfer of Shares

Unless and until the Directors determine that one or more classes of share may be held in

uncertificated form, the shares shall be issued in certificated form.

The Directors may, in accordance with the Companies Law, the Jersey Order and the AIM Rules,

resolve that a class of shares is to become, or is to cease to be, a share held in uncertificated form.

Subject to the Articles and the Companies Law, a shareholder may transfer all or any of his

uncertificated shares without a written instrument and in accordance with the Jersey Order.

The Articles apply to uncertificated shares of a class which is an uncertificated share only to the

extent that the Articles are consistent with the holding of such shares in uncertificated form, with thetransfer of title to such shares by means of the relevant uncertificated system and with the Jersey

Order.

The Directors may lay down regulations not included in the Articles which (in addition to or in

substitution for any provisions in the Articles):

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(i) apply to the issue, holding or transfer of shares held in uncertificated form;

(ii) set out (where appropriate) the procedures for conversion and/or redemption of shares held in

uncertificated form; and/or

(iii) the Directors consider necessary or appropriate to ensure that the Articles are consistent with

the Jersey Order and/or rules and practices of the approved operator (‘‘approved operator’’, as

defined in the Jersey Order).

Such regulations will apply instead of any relevant provisions in the Articles which relate to

certificates and the transfer, conversion and redemption of shares or which are not consistent with theJersey Order, in all cases to the extent (if any) stated in such regulations.

For any purpose under the Articles, the Company may treat a shareholder’s holding of shares held in

certificated and uncertificated form of the same class as if they were separate holdings, unless the

Directors otherwise decides.

Where the Company is entitled under the Companies Law, the Jersey Order, the approved operator’s

rules and practices, the Articles or otherwise to dispose of, forfeit, enforce a lien over or sell or

otherwise procure the sale of any shares of a class which is an uncertificated share which are held in

uncertificated form, the Directors may take such steps (subject to the Jersey Order and to such rules

and practices) as may be required or appropriate, by instruction by means of the relevant

uncertificated system or otherwise, to effect such disposal, forfeiture, enforcement or sale including by

(without limitation):

(i) requesting or requiring the deletion of any computer based entries in the relevant uncertificatedsystem relating to the holding of such shares in uncertificated form;

(ii) altering such computer based entries so as to divest the holder of such shares of the power totransfer such shares other than to a person selected or approved by the Company for the

purpose of such transfer;

(iii) requiring any holder of such shares to take such steps as may be necessary to sell or transfer

such shares as directed by the Company;

(iv) otherwise rectify or change the register of members in respect of any such shares in such

manner as the Directors consider appropriate (including, without limitation, by entering the

name of a transferee into the register of members as the next holder of such shares); and/or

(v) appointing any person to take any steps in the name of any holder of such shares as may be

required to change such shares from uncertificated form to certificated form and/or to effect the

transfer of such shares (and such steps shall be effective as if they had been taken by such

holder).

Any instrument of transfer of certificated shares shall be in the normal common form or in any other

form which the Directors may approve and shall be signed by or on behalf of the transferor and, inthe case of any partly paid certificated share, the transferee and the transferor shall be deemed to

remain the holder of the certificated share until the name of the transferee is entered in the register of

members in respect thereof.

The Directors may refuse to register any transfer of partly paid certificated shares or any certificated

shares on which the Company has a lien and may decline to register any transfer of certificated

shares unless the instrument of transfer is deposited at the office or such other place as the Directors

may reasonably require, accompanied by the certificate of the shares to which it relates and such

other evidence as the Directors may reasonably require to show the right of the transferor to make

the transfer. If the Directors decline to register a transfer of any certificated share, they shall, within

2 months after the date on which the transfer was lodged with the Company, send to the proposedtransferor and transferee notice of the refusal.

The registration of transfers of certificated shares or of transfers of any class of certificated shares

may not be suspended.

The Company shall retain any instrument of transfer of any share which is registered, but any

instrument of transfer of any certificated share which the Directors refuse to register shall (except in

the case of fraud) be returned to the person lodging it.

The Directors shall register a transfer of title to any uncertificated share or the renunciation or

transfer of any renounceable right of allotment of a share which is an uncertificated share held in

accordance with the Jersey Order, except that the Directors may refuse (subject to any relevant

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requirements of the London Stock Exchange) to register any such transfer or renunciation in favour

of more than four persons jointly or in any other circumstance permitted by the Jersey Order.

Lien

The Company shall have a first and paramount lien on every share (not being a fully paid share) forall monies (whether presently payable or not) called or payable at a fixed time in respect of that

share and the Company shall also have a first and paramount lien on all shares (other than fully paid

shares) registered in the name of a single person for all monies presently payable by him or his estate

to the Company but the Directors may at any time resolve that any share exempt from the

provisions of the relevant Article. The Company’s lien (if any) on the shares shall extend to all

dividends payable thereon.

General Meetings

The Company shall hold a general meeting as its Annual General Meeting once in every calendaryear at such time and at such place as may be determined by the Directors, but so long as the

Company holds its first annual general meeting within eighteen months of its incorporation it need

not hold it in the year of its incorporation or the following year.

The Directors may whenever they think fit convene an Extraordinary General Meeting and

Extraordinary General Meetings shall also be convened on a requisition made in accordance with the

Companies Law in writing and signed by members holding in the aggregate not less than one tenth

of the total voting rights of the members of the Company who have the right to vote at the meeting

requisitioned.

Appointment of Directors

The number of Directors shall be not fewer than two.

A Director need not be a member in the Company.

No person shall be appointed to be a Director if it would cause or permit a majority of the Directors

to be resident in the United Kingdom.

The Directors shall have power at any time and from time to time to appoint, subject to the

provisions of the Companies Law and the Articles, any person to be a Director either to fill a casual

vacancy or as an additional Director.

The Company may by Ordinary Resolution appoint any person to office as a Director provided it

would not cause a majority of Directors to be resident in the United Kingdom.

Powers of Directors

The business of the Company shall be managed by the Directors who may exercise all such powers of

the Company as are not required by the Companies Law or the Articles to be exercised by the

Company in general meeting. The Director’s powers shall be subject to any regulations of the

Articles, to the provisions of the Companies Law and to such regulations, being not inconsistent withsuch regulations or provisions, as may be prescribed by the Company in general meeting, but no such

regulations shall invalidate any prior act of the Directors which would have been valid if such

regulations had not been made. A meeting of the Directors at which a quorum is present may

exercise all powers and discretions exercisable by the Directors.

Proceedings of Directors

The Directors may meet together for the despatch of business, adjourn and otherwise regulate their

meetings as they think fit and may determine the quorum necessary for the transaction of business

which in default of such determination shall be two.

No meeting of the Directors shall be held in the United Kingdom or Malaysia and any decision

reached or resolution passed by the Directors at any meeting which is held in the United Kingdom or

Malaysia shall be invalid and of no effect. If a Director is by any means in communication with oneor more other Directors so that each Director participating in the communication can hear what is

said by any other of them, each Director, so participating in the communication shall be deemed to

be present at such meeting for all the purposes of the Articles, provided that no resolution passed at

any such meeting shall be valid if a majority of Directors participating in the communication are in

the United Kingdom or Malaysia at that time.

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The Directors may elect from their number and remove a chairman and determine the period for

which he is to hold office. The Chairman shall preside at all meetings of the Directors but if no such

chairman is elected or if at any meeting the chairman is not present within five minutes after the time

appointed for holding the same the Directors present may choose one of their number to bechairman of such meeting.

Directors’ Interests

Subject to the requirements of the Companies Law and the AIM Rules, a Director may be or

become a director or other officer of or otherwise interested in any company promoted by the

Company or in which the Company may be interested as a member or otherwise and no suchDirector shall be accountable to the Company for any remuneration or other benefits received by him

as a director or officer of or from his interests in such other company unless the Company otherwise

directs.

A Director who has directly or indirectly an interest in a transaction entered into or proposed to be

entered into by the Company or by a subsidiary of the Company which to a material extent conflicts

or may conflict with the interests of the Company or which would be a related party transaction (to

which Rule 12 of the AIM Rules applies) and of which he has actual knowledge shall disclose to the

Company at the first meeting of the Directors at which the transaction is considered after theDirector concerned becomes aware of the circumstances giving rise to his duty to make it, or failing

which, as soon as practical after that meeting, by notice in writing delivered to the Company

Secretary, the nature and extent of his interest and in the case of a related party transaction the

information required by Rule 12 of the AIM Rules. Subject thereto, any such Director shall not be

liable to account to the Company for any profit or gain realised by him on such transaction.

Subject to the AIM Rules, a notice in writing given to the Company by a Director that he is to be

regarded as interested in a transaction with a specified person is sufficient disclosure of his interest inany such transaction entered into after the notice is given. Subject to the Articles and the AIM Rules,

a Director may vote in respect of any such transaction and if he does so vote his vote shall be

counted and he shall be capable of being counted towards the quorum at any meeting of the

Directors at which any such transaction shall come before the Directors for consideration.

Subject to the provisions of the Companies Law, a Director may act by himself or his firm in a

professional capacity for the Company and he or his firm shall be entitled to remuneration for

professional services as if he were not a Director.

Where proposals are under consideration concerning the appointment (including fixing or varying the

terms of appointment) of two or more Directors to offices or employments with the Company or any

body corporate in which the Company is interested, such proposals may be divided and considered in

relation to each Director separately, and in such case each of the Directors concerned (if not

debarred from voting under the Articles shall be entitled to vote (and be counted in the quorum) in

respect of each resolution that does not concern his own appointment.

If any question arises at any meeting as to the materiality of a Director’s interest (other than thechairman’s interest) or as to the entitlement of any Director (other than the chairman) to vote or be

counted in the quorum, and such question is not resolved by his voluntarily agreeing to abstain from

voting or from being counted in the quorum, such question shall be referred to the chairman of the

meeting and his ruling in relation to any such Director shall be final and conclusive except in a case

where the nature or extent of the interests of the Director concerned has not been fairly disclosed.

If any question arises at any meeting as to the materiality of the chairman’s interest or as to the

entitlement of the chairman to vote or be counted in a quorum, and such question is not resolved by

his voluntarily agreeing to abstain from voting or from being counted in the quorum, such questionshall be decided by resolution of the Directors or committee members present at the meeting

(excluding the chairman) whose majority vote shall be final and conclusive except in a case where the

nature or extent of the interests of the chairman has not been fairly disclosed.

Accounts and Auditors

The accounting records shall be kept at the registered office of the Company or at such other placeor places as the Directors think fit and shall always be open to the inspection of the Directors, the

Secretary and any liquidator of the Company provided that if such records are kept outside the

Island returns with respect to the business dealt with in such records shall be sent to and kept in the

Island where they must at all times be open to the inspection of the Directors the Company Secretary

and any liquidator of the Company and must be such as to disclose with reasonable accuracy the

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financial position of the business in question at such intervals as shall be required by the Companies

Law and the AIM Rules from time to time and enable the Directors to ensure that any accounts

prepared by the Company comply with the requirements of the Companies Law and with the

requirements of the AIM Rules. Subject to the provisions of the Companies Law such accountingrecords shall be preserved for a period of at least ten years from the date on which they are made.

Auditors shall be appointed for the Company under the provisions of the Companies Law to examine

and report in accordance with the Companies Law and the AIM Rules on the accounts of the

Company. Subject to the provisions of the Companies Law, and the AIM Rules all acts done by anypersons acting as auditors shall, as regards all persons dealing in good faith with the Company, be

valid, notwithstanding that there was some defect in their appointment or that they were at the time

of their appointment not qualified for appointment or subsequently became disqualified. The

provisions of the Companies Law and the AIM Rules shall govern, inter alia, the powers and duties

of the auditors the auditors’ report on the accounts of the Company and the re-appointment removal

and replacement of the auditors.

The Company’s accounts shall be approved by the Directors and signed on their behalf by at least

one Director.

Within six months of the end of each financial period a copy of every balance sheet and profit andloss account prepared in accordance with the requirements of the AIM Rules, and a copy of every

Directors’ and auditors’ report on the same, shall be laid before a general meeting of the Company

(including every document required by Companies Law to be comprised therein or attached or

annexed thereto).

Without delay and in any event not later than six months after the end of the financial period towhich they relate a copy of the balance sheet and profit and loss account shall be sent to every

shareholder.

Within six months after the end of each financial period, the Directors shall deliver to the registrar

one copy and to the London Stock Exchange three copies of the accounts for that period signed byone of the Directors on behalf of them all and a copy of the auditors’ report thereon.

The Directors shall determine and may vary the accounting reference date for the Company by

resolution of the Directors. The first accounting reference period shall end no more than eighteen

months after incorporation. The Company shall comply with Rule 15 (notification of any change of

accountants reference date) of the AIM Rules. Thereafter the Directors shall cause to be preparedannual accounts for the Company for periods of not more than twelve months. Such accounts shall

comply with the requirements of the Companies Law and the AIM Rules.

Winding up

Subject to any particular rights or limitations for the time being attached to any shares, as may be

specified in the Articles or upon which such shares may be issued, if the Company is wound up, the

assets available for distribution among the members shall be applied first in repaying to the membersthe amount paid up on their shares respectively, and if such assets shall be more than sufficient to

repay to the members the whole amounts paid up on their shares, the balance shall be distributed

among the members in proportion to the amount which at the commencement of the winding up had

actually paid up on their said shares.

If the Company is wound up the Company may, with the sanction of a special resolution and any

other sanction required by the Companies Law, divide the whole or any part of the assets of the

Company among the members in specie and the liquidator or, where there is no liquidator, the

Directors may, for that purpose, value any assets and determine how the division shall be carried out

as between the members or different classes of members or vest the same in trustees upon such trusts

for the benefit of the members as the liquidator or the Directors (as the case may be) with the like

sanction shall think fit.

Indemnity

In so far as the Companies Law allows, every present or former officer of the Company shall be

indemnified out of the assets of the Company against any loss or liability incurred by him by reason

of being or having been such an officer.

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5. Principal Offices

Both RAGM’s and Serem’s principal offices are at Suite 30D, 30th Floor, Empire Tower, City Square

Centre, 182 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia.

6. Directors’ and Other Interests

(a) The interests of the Directors, and of persons connected with them, in the Ordinary Shares as at17 June 2005 (the latest practicable date prior to the publication of this document), all of which

are beneficial, are as follows:

Upon Admission

Following Completion of the

Mining Rights Agreement*

Director

Ordinary

Shares % Ordinary Shares %

Dato’ Andrew Tai Yeow Kam** 25,315,469 74.6 26,670,892 75.5

Dr. Yves Fernand Marcel Cheze 0 0 0 0Dato’ Mohamed Moiz Bin JM Ali Moiz^ 4,757,543 14.0 4,757,543 13.5

Jon Starink 0 0 0 0

* Assuming that the Directors or the Shareholders by virtue of whom the Directors are deemed to hold Ordinary Shares, do notdispose of or acquire any Ordinary Shares in the period between the completion of the Share Swap Agreement and the completionof the Mining Rights Agreement

^ Dato’ Mohamed Moiz Bin JM Ali Moiz will acquire 4,757,408 Ordinary Shares directly upon completion of the Share SwapAgreement and will have an interest in an additional 3,860,976 Ordinary Shares by virtue that his wife, Tengku Nong FatimahSultan Ahmad Shah holds 29.99% of the issued share capital of Akay Venture

** By virtue of ownership of 99.9% of Akay Holdings and 70% of Akay Venture

(b) Save as set out below, or as disclosed elsewhere in this document, no directorships of any

company, other than the Company, have been held or occupied over the previous five years by

any of the Directors, nor over that period has any of the Directors been a partner in a

partnership:

Director Current directorships Former directorships

Dato’ Andrew Tai Yeow Kam Akay Holdings Sdn Bhd.Akay Serem Sdn Bhd.Akay Venture Sdn Bhd.Golden Excalibur Sdn BhdPenaga Tiara Sdn BhdRaub Australian Gold Management SdnBhdRaub Resources Sdn BhdTroskam Holding Sdn BhdBerjaya Realty Sdn BhdGranny’s Kitchen Sdn BhdRaub Gold Sdn BhdRaub Mining and Development CompanySdn BhdWahbunga Realty Sdn BhdYum Sdn BhdGrandfoods Sdn BhdKam Woon Wah Realty Sdn BhdLead Enterprises Sdn BhdSG. Pelek Realty Sdn BhdUnited Raub Oil Palm Sdn BhdRaub Oil Mill Sdn BhdCoastal Realty Sdn BhdRAGM

Deraujaya Sdn BhdSatay Emas Sdn BhdFlourish Scraper Sdn BhdIndera Baiduri Properties Sdn Bhd

Dr. Yves Fernand MarcelCheze

Aycel Global Holdings Sdn BhdAycel Geological Services Sdn BhdBonanza Aycel Mining Sdn BhdSerem Malaysia Sdn BhdGem Venture Sdn Bhd

SeremPT Siriwo Mining

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Director Current directorships Former directorships

Dato’ Mohamed Moiz Bin JMAli Moiz

Tradium Corporation Sdn BhdEsplanade Villa Sdn BhdEffective Capital Sdn BhdAmbang Sehati Sdn BhdIcon Dimension Sdn BhdAmbangan Assets Sdn BhdTudor Capital Sdn BhdLayang Cekap Sdn BhdIYO Alam Sekitar Sdn BhdMastegy Enterprise Sdn BhdRaub Australian Gold Mining Sdn BhdStraits Fund BhdBandar Raya Development BhdMieco Chipboard BhdKombinasi Awal (M) Sdn BhdMieco Manufacturing Sdn BhdMieco Matsushita Denko Sdn Bhd

Tradium Langgak Golf Sdn BhdInnocase Corporation Sdn BhdEffective Console Sdn BhdPrudenvest Sdn BhdMelium Sdn BhdMelium Aseana Sdn BhdDanga Bay Sdn BhdCredence Resource Sdn BhdWengcon Holdings Sdn BhdWengcon Equipment Sdn BhdWengcon Marketing Sdn BhdWengcon Machinery Sdn BhdKnusford BerhadKL Land Development Sdn Bhd

Jon Starink Chemical & Extractive Metallurgical –Engineering Pty. Ltd.Mining Management Services Pty. Ltd.Lazarus Foundation Pty. Ltd.Moondarra Pty. Ltd.Zutphen Pty. Ltd.BioMolecular Technologies Ltd.Westdata Pty. Ltd.Australian BioScience and TechnologyInvestments Pty. Ltd.

(c) None of the Directors has any unspent convictions in relation to indictable offences nor save as

disclosed below has any of the Directors been a director of a company (wherever incorporated)

or a partner in a partnership at any time which has gone into administration, company or

partnership voluntary arrangements, or any composition or arrangement with creditors generally

or any class of creditors, receiverships, compulsory liquidations or creditors’ voluntaryliquidations, where he was a partner or director at the time or in the preceding 12 months, nor

has any of them ever been personally bankrupt, in an individual voluntary arrangement with

creditors or been publicly criticised by any statutory or regulatory authority or professional

body.

(d) Dato’ Mohamed Moiz Bin JM Ali Moiz is a director of Tradium Fashions Sdn. Bhd., Tradium

Langgak Golf Sdn. Bhd. and Tradium Land Holdings Sdn. each of which has been placed

under voluntary liquidation by its respective directors.

(e) None of the Directors has been disqualified by a court from acting as a director of a companyor from acting in the management or conduct of the affairs of any company.

7. Directors’ Service Agreements

The Directors, whose names appear under the section headed ‘‘Board of Directors’’ in Part 1 of this

document, have been appointed to the offices set out next to their respective names. The terms oftheir respective service agreements and letters of engagement are set out below:

(a) The Company entered into a service agreement for a period of one year with Dato’ Andrew Tai

Yeow Kam commencing on the date of Admission. Pursuant to the agreement, Dato’ Andrew

Tai Yeow Kam will devote no less than 70% of his time, attention and skill, to the duties of

chairman and chief executive of the Company. He is entitled to a base salary of £90,000 per

annum. Dato’ Andrew Tai Yeow Kam’s salary will be reviewed annually by the Company’s

remuneration committee. Dato’ Andrew Tai Yeow Kam may terminate the service agreement by

giving three months’ notice in writing. The Company may terminate the service agreement eitherby giving three months’ notice in writing or a payment of three months’ salary in lieu of notice.

(b) The Company entered into a service agreement for a period of three months with Jon Starink

commencing on the date of Admission. Pursuant to the agreement, Jon Starink will devote his

time, attention and skills to the duties of executive director. He is entitled to a base salary of

£10,000 per month. Either Jon Starink or the Company may terminate the service agreement by

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giving 24 hours’ notice in writing. In the event of a termination of the service agreement by the

Company by 24 hour written notice, Jon Starink shall be entitled to the payment of an amount

equivalent to one month’s salary.

(c) Save as stated in this paragraph 7, there are no service agreements existing or proposed between

any Director and the Company or any member of the Group other than service agreements

expiring or determinable by the employing company without payment of compensation, within

one year.

(d) Dato’ Mohamed Moiz Bin JM Ali Moiz is engaged by the Company as a Non ExecutiveDirector on the terms of a letter of appointment. The appointment is for an initial fixed term

commencing on 16 June 2005 and continuing for a term of one year unless otherwise terminated

earlier by and at the discretion of either party upon three months’ notice. The term may be

renewed by the Board. Dato’ Mohamed Moiz Bin JM Ali Moiz will receive an annual fee of

£20,000. Dato’ Mohamed Moiz Bin JM Ali Moiz has undertaken that, as a director of any

other company or as agent for any other company, he will not (except with the Board’s written

permission) use or exploit for commercial advantage any opportunities or situation which may

arise directly or indirectly as a result of this appointment.

(e) Dr. Yves Fernand Marcel Cheze is engaged by the Company as a Non Executive Director on

the terms of a letter of appointment. The appointment is for an initial fixed term commencing

on 16 June 2005 and continuing for a term of one year unless otherwise terminated earlier by

and at the discretion of either party upon three months’ notice. The term may be renewed by

the Board. Dr. Yves Fernand Marcel Cheze will receive an annual fee of £18,000. Dr. Yves

Fernand Marcel Cheze has undertaken that, as a director of any other company or as agent forany other company, he will not (except with the Board’s written permission) use or exploit for

commercial advantage any opportunities or situation which may arise directly or indirectly as a

result of this appointment.

(f) Prior to the execution of the service contracts described above, the only arrangement involving

the payment of remuneration between any member of the Group and the Directors was that

between RAGM and Dato’ Andrew Tai Yeow Kam pursuant to which Dato’ Andrew Tai YeowKam had been paid director’s fees by RAGM. Pursuant to this arrangement, the aggregate of

the director’s fees granted to Dato’ Andrew Tai Yeow Kam during the period from 1 August

1999 until June 2005 by RAGM is RM213,000. The aggregate of the remuneration payable and

benefits in kind to be granted by the Group to the Directors for the financial year ending 30

June 2006 under the arrangements in force at the date of this document is estimated to be

approximately £158,000. In addition to the service contracts specified above, RAGM pays

directors’ fees of RM96,000 per annum to one of its directors, Dato’ Azinudin Bin Abdul

Rahim.

8. Related Party Contracts

As a result of Dato’ Andrew Tai Yeow Kam’s 99.9% interest in Akay Holdings and 70% interest in

Akay Venture and the substantial shareholding of Akay Holdings and Akay Venture in the Company

and Dato’ Mohamed Moiz Bin JM Ali Moiz’s substantial shareholding in the Company, the

following contracts are or will be related party contracts.

(a) On 17 June 2005, the Company entered into and completed the Share Swap Agreement with

Akay Venture, Akay Holdings and Dato’ Mohamed Moiz Bin JM Ali Moiz pursuant to which

the Company issued 12,873,848 Ordinary Shares to Akay Venture, 16,319,340 Ordinary Shares

to Akay Holdings and 4,757,408 Ordinary Shares to Dato’ Mohamed Moiz Bin JM Ali Moiz in

consideration for the transfer of all shares held by Akay Holdings and Dato’ Mohamed Moiz

Bin JM Ali Moiz in RAGM and all shares held by Akay Venture and Dato’ Mohamed Moiz

Bin JM Ali Moiz in Serem. The Share Swap Agreement also provides that by 31 December

2005, the Company will procure the release of the Andrew Kam Guarantees. The Company alsoagrees that if the Andrew Kam Guarantees are not released by 31 December 2005, the

Company will use, after 31 December 2005, the proceeds of any fundraising undertaken by it

after Admission to procure the release of the Andrew Kam Guarantees in priority to any other

use. Dato’ Mohamed Moiz Bin JM Ali Moiz agrees to exercise his rights as a shareholder and

director of the Company to give effect to the foregoing.

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(b) On 17 June 2005, the Company entered into the Mining Rights Agreement with Akay Holdings

pursuant to which the Company will issue 1,356,780 Ordinary Shares at £0.50 per share to Akay

Holdings as consideration for Akay Holdings procuring a permit for the Company to undertake

prospecting and mining activities on the RMDC Land. RMDC are currently applying, from theState Government of Pahang, for the grant of a mining lease or mining certificate in respect of

the land which will involve the surrender of the agricultural land and its re-alienation in the

form of the grant of the mining lease or mining certificate. The Directors are of the opinion

that RMDC is likely to obtain the grant within six months of Admission upon which RMDC

will grant a sub-lease of the mining lease or mining certificate to Akay Holdings which will then

grant RAGM or an entity nominated by the Company with the permit to undertake mining

activities upon the terms described in paragraph 12(f) below.

(c) On 17 June 2005, RAGM was granted by Akay Holdings an unregistered permit to undertake

mining activities on the 1669 Mining Lease for a period of one year expiring on 30 July 2006.

Under the terms of the permit, Akay Holdings may cancel the permit, where, among other

things, it is notified by a relevant authority that the 1669 Mining Lease is at risk of forfeiture

by reason of any action or omission of RAGM. The material terms and conditions of the

permit are described in paragraph 12(a)(ii). Provided that RAGM does not breach the terms of

the permit, Akay Holdings will grant an annual extension of the permit until expiry of the 1669

Mining Lease on 31 December 2017. RAGM also has the right to require Akay Holdings toprocure a renewal, extension or replacement of the 1669 Mining Lease for a further period of

10 years if RAGM is able to demonstrate the existence of economically viable gold deposits. In

such circumstances, Akay Holdings is obligated to grant RAGM a further permit on the same

terms provided such renewal extension or replacement of 1669 Mining Lease is granted to Akay

Holdings on terms and conditions that are acceptable to Akay Holdings and RAGM. Akay

Holdings also undertakes that it shall not dispose, encumber of otherwise deal with its interest

in the 1669 Mining Lease during the term of the permit.

(d) The term of the permit to mine in respect of the RMDC Land to be granted by Akay Holdings

to RAGM or to any company, a person or entity nominated by the Company (‘‘Permit

Holder’’) is one year from the date of its execution. Provided that the Permit Holder is not in

breach of the terms of the permit, Akay Holdings will grant an annual extension of the permit

until expiry of the sub-lease of the mining lease or mining certificate held by Akay Holdings in

respect of the RMDC Land. The Permit Holder shall be liable to pay to Akay Holdings, or to

its duly appointed agent, tribute at an amount of 2% of the gross value of gold extracted from

primary gold deposits and 6% of the gross value of all other minerals. The Permit Holder shallnot be entitled to transfer or assign the permit without the written authority of Akay Holdings

and the permit is liable to cancellation at any time at the discretion of Akay Holdings if the

Permit Holder has not worked the land which is the subject of the permit in accordance with

the permit or if Akay Holdings is notified by a relevant authority that the mining certificate or

mining lease over the RMDC Land is at risk of forfeiture as a result of any action or omission

of the Permit Holder.

(e) The service contracts between the Company and each of Dato’ Andrew Tai Yeow Kam and

Dato’ Mohamed Moiz Bin JM Ali Moiz, the details of which are set out in paragraph 7 above;

(f) The permits to mine entered into between Akay Holdings and RAGM in respect of the 1669

Mining Lease, the details of which are set out in paragraph 12(a) below;

(g) The permit to mine upon the completion of the Mining Rights Agreement to be entered into

between Akay Holdings and RAGM or any entity nominated by the Company in respect of the

mining certificate or mining lease over the RMDC Land, the details of which are set out in

paragraph 12(f) below.

9. Material Contracts

The following contracts, not being contracts entered into in the ordinary course of business, have

been entered into by the Group and are or may be material.

(a) A prospecting and mining agreement dated 9 July 1990 between Serem, Pahang SEDC and the

Perak Motor Company. Pursuant to this agreement, Pahang SEDC has granted exclusive rights

to Serem and the Perak Motor Company to undertake large scale prospecting of minerals

including gold over the Block 8 Area for a period commensurate with the term of prospecting

licences and permits granted to Pahang SEDC by the Pahang State Government. The

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prospecting licences and permits granted to Pahang SEDC expired in 1999 but approval for

their extension has been obtained from the Pahang State Government. Upon discovery of

economically viable mineral deposits by Serem or the Perak Motor Company, Pahang SEDC is

to apply from the Pahang State Government for a mining lease in respect of the relevant areawhere discovery of deposits is made and pending receipt of such mining lease, Pahang SEDC is

to obtain a mining certificate to enable the commencement of mining activities. In consideration

of the grant of the exclusive right to conduct prospecting and mining activities, Serem agrees to

pay a tribute of 2% of the gross value of gold extracted from primary gold deposits and 6% of

the gross value of gold extracted from alluvial and eluvial deposits and 6% of the gross value of

other minerals extracted from the relevant area. In the event that Serem obtains profits in

respect of the Block 8 Area that exceed its projected net profits for any particular year, it will

be liable to pay an additional tribute to the Pahang SEDC to be determined in accordance witha prescribed formula. The additional tribute varies between 25% to 50% of Serem’s windfall

profits in respect of the Block 8 Area that exceeds its projections for any particular year.

(b) An agreement dated 26 December 1989 between Serem and the Perak Motor Company. This

agreement provides that Serem is entitled to exploit and mine hard rock and alluvium in an

identified area within the Block 8 Area and hard rock only in the remaining parts of the Block

8 Area. Serem grants an option, exercisable within one year from the commencement ofproductive hard rock mining operations, to the Perak Motor Company for it to acquire up to

5% of the issued share capital of any company incorporated to undertake mining operations in

the Block 8 Area. Subject to the agreement of the parties, the price of such shares is to be

determined by reference to the price earnings ratio indicated in a feasibility study in respect of

the Block 8 Area, subject to a maximum price earnings ratio of 20 times. As at 17 June 2005

(the latest practicable date prior to the publication of this document), no company has been

incorporated to undertake mining operations in the Block 8 Area.

(c) A mining agreement dated 30th April 2004 between SEREM, Chong Ah Ngan @ Choong

Loong Sang and Abdul Aziz Bin Othman pursuant to which SEREM was granted a sublease in

respect of the MC511 Land for a period expiring on 28 February 2007 in consideration of a

payment of RM100,000. Under the mining agreement, Abdul Aziz has applied for and obtained

an extension of the term of the mining certificate for a period expiring on 28th February 2017.

Subject to approval of transfer from the Pahang State Government and the payment of a

premium amounting to RM104,725 and consideration of RM400,000 the entire interest of

Choong Ah Ngan @ Choong Loong Sang and Abdul Aziz Bin Othman in the MC511 Landwill be transferred to SEREM. The Directors are of the opinion that it is likely that the parties

will be able to complete the transfer within 3 months of Admission.

(d) A credit facilities offer letter dated 27 September 2004 issued by Southern Bank and accepted by

RAGM. Under the credit facilities offer letter, Southern Bank makes available the following

credit facilities to RAGM: (i) a standby letter of credit (for the purpose of providing a security

deposit to the contractor appointed to construct the CIL Plant) for a term of 15 months; (ii) a

bank guarantee (for the same purpose as the standby letter of credit) for a term of 12 months;and (iii) a term loan (for the purpose of part financing the construction and commissioning of

the CIL Plant) for a term of 48 months. The aggregate amount of the credit facilities is

RM15,000,000 and they are secured against a first legal charge over the 1669 Mining Lease, a

debenture over the fixed and floating assets and undertakings of RAGM and a personal

guarantee given by Dato’ Andrew Tai Yeow Kam.

(e) A credit facilities offer letter dated 2 March 2005 issued by Southern Bank and accepted by

RAGM. Under the credit facilities offer letter, Southern Bank makes available, for a periodexpiring on 24 September 2005, a revolving credit facility amounting to RM5,000,000 for

working capital purposes. The revolving credit facility is secured against a personal guarantee

given by Dato’ Andrew Tai Yeow Kam and a memorandum of pledge of a fixed deposit of

RM4,000,000.

(f) A letter of undertaking dated 17 June 2005 whereby Akay Holdings irrevocably undertakes that,

in the event that Southern Bank does not renew the RM5,000,000 facility described at section

9(e) above as it falls due or otherwise withdraws the facility or calls in the funds drawn underthe facility for any reason whatsoever within 12 months of Admission, Akay Holdings will lend

RM1,000,000 to RAGM. Alternatively, if Southern Bank takes the collateral cash of

RM4,000,000 provided by Dato Andrew Tai Yeow Kam in satisfaction of repayment of the

drawn facility, Akay Holdings will repay Southern Bank the balance of RMl,000,000. In the

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event that RAGM is able to obtain an appropriate facility within 12 months to replace the loan

or security provided or an extension of the facility then this undertaking would immediately

become null and void and of no legal effect.

(g) A letter of undertaking dated 17 June 2005 under which Dato Andrew Tai Yeow Kam has

personally provided RM4,000,000 collateral to Southern Bank and pledged fixed deposits insupport of the RM5,000,000 facility described in section 9(e) above. Dato Andrew Tai Yeow

Kam undertakes that in the event that Southern Bank does not renew the facility as it falls due

or otherwise withdraws the facility or calls in the funds drawn under the facility for any reason

whatsoever within 12 months of Admission, he will lend the collateral cash released. If Southern

Bank takes the collateral cash in satisfaction of repayment of the drawn facility, Dato Andrew

Kam Tai Yeow will stand in the place of Southern Bank, leaving the RM4,000,000 retained by

RAGM as a loan due to him. In the event that RAGM is able to obtain an appropriate facility

within 12 months to replace the loan or security provided or an extention of the facility thenthis undertaking would immediately become null and void and of no legal effect.

(h) A credit facilities offer letter dated 14 March 2005 issued by Southern Bank and accepted by

Serem. Under the credit facilities offer letter, Southern Bank makes available, for a period

expiring on 23 September 2005, a revolving credit facility amounting to RM3,700,000 for

working capital purposes. The revolving credit facility is secured against a personal guarantee

given by Dato’ Andrew Tai Yeow Kam and a memorandum of pledge of a fixed deposit of

RM3,700,000.

(i) The Directors have each entered into separate orderly market agreements with the Company

and the Broker dated 17 June 2005 in respect of their respective shareholdings in the Company,

in terms of which they have each agreed not to dispose of any interest in the Ordinary Sharesor other securities of the Company held by them other than through the Broker for a period of

twelve months from Admission other than where the Broker is unable to effect the disposal in

accordance with the instructions of the Director within 10 days of receipt of the instructions in

which case the Director may effect the disposal by other means.

(j) The Shareholders in the Company holding 3% or more of the issued capital of the Company

prior to Admission (as set out in paragraph 3(e) of Part 5 of this document) (‘‘Relevant

Shareholder’’) have each entered into separate orderly market agreements with the Company and

the Broker dated 17 June 2005 in respect of their respective shareholdings in the Company, in

terms of which they have each agreed not to dispose of any interest in the Ordinary Shares or

other securities of the Company held by them other than through the Broker for a period oftwelve months from Admission other than where the Broker is unable to effect the disposal in

accordance with the instructions of the Relevant Shareholder within 10 days of receipt of the

instructions in which case the Relevant Shareholder may effect the disposal by other means.

(k) On 8 November 2004 (prior to the incorporation of the Company), RAGM entered into a letter

agreement with Nabarro Wells in respect of its appointment as Nominated Adviser. The letter

agreement has since been novated and the Company has assumed the rights and liabilities of

RAGM by way of a novation agreement dated 17 June 2005 between RAGM, the Company

and Nabarro Wells. Pursuant to the letter agreement, the Company has agreed to pay Nabarro

Wells, for the services outlined in the engagement letter provided in connection with theAdmission, a fee of £85,000 on Admission, legal fees, costs and disbursements where agreed in

advance with the Company. The engagement may be terminated by either the Company or

Nabarro Wells giving six months’ written notice.

(l) On 17 June 2005, the Company entered into a letter agreement and a broker agreement with the

Broker in respect of its appointment as broker. Pursuant to the broker agreement, the Company

has agreed to pay the Broker an annual retainer fee of £15,000 commencing on Admission. The

broker agreement may be terminated by either the Company or the Broker by the giving of one

month’s notice in writing provided that if the appointment is terminated earlier than the first

anniversary of Admission, the Company shall pay the Broker the balance of the annual retainerfee. Pursuant to the letter agreement, the Broker provides services for the purposes of acting as

the Company’s broker in connection with the Admission. Subject to Admission occurring on or

before 30 June 2005, the Company has agreed to pay the Broker a broking fee of £10,000 to be

satisfied by the issue of 20,000 Ordinary Shares. The letter agreement terminates upon the earlier

of 14 July 2005 or Admission.

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(m) On 17 June 2005, the Company entered into the Share Subscription Agreements with the

Offshore Investors, pursuant to which the Company agreed to issue 2,560,000 Preference Shares

in a private placing at a subscription price of £0.50 per Preference Share, raising net proceeds to

the Company of £1,280,000. The completion of the Share Subscription Agreements areconditional upon, among others, the Admission. Save for the condition relating to the accuracy

of warranties given by the Subscribers which can only be satisfied at the completion of the

Share Subscription Agreements and the Admission, all the conditions for the completion of the

Share Subscription Agreements have been satisfied.

(n) On 17 June 2005, the Company entered into the Escrow Agreements with the Offshore Investors

and RBC in connection with the execution of the Share Subscription Agreements. Pursuant to

the Escrow Agreements, the Offshore Investors have transferred the subscription price of the

Preference Shares into an interest bearing escrow account established by RBC, who, acting as

escrow agent, will hold such monies until, upon receipt of instructions from the Company, ittransfers the monies to the account of the Company or, if it does not receive such instructions

by 14 July 2005, it returns the subscription monies plus interest earned thereon to the Offshore

Investors.

10. Contracts for the Sale of Gold

Under the Exchange Control Act, a person may not, in Malaysia, buy or borrow gold from, or sell

or lend gold to, any person other than a person approved by BNM as an authorised dealer, unless

the prior approval of BNM is obtained. Pursuant to the ECM Notices, a set of notices issued byBNM pursuant to the Exchange Control Act, BNM has granted general approval for any person to

undertake dealings in gold in Malaysia. The ECM Notices are subject to revocation or change by

BNM at its discretion. Any such revocation or change may result in the Group becoming subject to

the requirement to sell gold it produces to an authorised dealer within the Exchange Control Act.

11. Overview of the Mining Regulatory Framework in Pahang

The prospecting and mining of gold in the state of Pahang is principally governed by the Mining

Enactment. In order to obtain a prospecting permit or licence, application is made to the Department

of Land and Mines for consideration by the Pahang state executive council, an administrative bodychaired by the chief minister of Pahang.

The term of a prospecting permit is usually between 6 and 12 months and can encompass an area of

up to 2,000 acres. Prospecting licences confer a holder with the right to prospect over a larger area

and for a longer duration. A prospector who intends to undertake mining operations may only do so

upon the grant of a mining certificate or a mining lease which are also applied for from the

Department of Land and Mines and approved by the Pahang state executive council. In order to

obtain a mining certificate or mining lease, the prospector must show that the land in respect of

which an application is made has exploitable and economically viable deposits.

12. Details of the Group’s Mining Certificates, Leases and Prospecting Permits & Licenses

(a) RAGM holds the permits to mine set out below. A summary of the material terms and

conditions of the permits is also set out below. Both permits to mine are in respect of the 1669

Mining Lease. Permit to Mine II (a summary of the material terms and conditions of which are

set out in paragraph 12(a)(ii)) has been granted in anticipation of the imminent expiry of the

Permit to Mine I (a summary of the materials terms and conditions of which are set out below

in paragraph 12(a)(i)).

(i) Permit to Mine I

Description Material Terms and Conditions

Permit to Mine granted

to RAGM by Akay

Holdings on 19 May

2004

The term of the permit is from 31 July 2004 until 30 July 2005

RAGM shall not be liable to pay to Akay Holdings any tribute upon all or any

ore removed from the land

RAGM shall be liable upon suit before the Senior Inspector of Mines or anycourt to pay to Akay Holdings the sum of RM10,000 as a penalty for each and

every breach of the conditions of the permit

RAGM shall not be entitled to transfer or assign the permit without the written

authority of the Akay Holdings

RAGM is to sell all gold from the land to licensed gold buyers or BNM

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Description Material Terms and Conditions

according to the requirements of the Exchange Control Act

The permit is liable to cancellation at any time:

at the discretion of the Akay Holdings and/or the Senior Inspector of Mines

and/or any court upon proof:that RAGM has committed any breach of the terms and/or conditions of the

permit;

that RAGM has not worked the land which is the subject of the permit in

accordance with the permit.

(ii) Permit to Mine II

Permit to Mine Material Terms and Conditions

Permit to Mine granted

to RAGM by

Akay Holdings on

17 June 2005

The term of the permit is from 31 July 2005 until 30 July 2006. Provided that

RAGM is not in breach of the terms of the permit, Akay Holdings will grant

an annual extension of the permit until expiry of the 1669 Mining Lease on

31 December 2017.

RAGM also has a right to require Akay Holdings to apply for an extension,

renewal or replacement of the 1669 Mining Lease for a further period of 10years and to obtain a permit to mine in respect of this period

RAGM shall not be liable to pay to the Akay Holdings any tribute upon all or

any ore removed from the land

RAGM shall pay all quit rent – rates – taxes – assessments – any royalty

required to be paid – other changes and outgoings

RAGM shall be liable upon suit before the Senior Inspector of Mines or any

court to pay to Akay Holdings the sum of RM10,000 as a penalty for each and

every breach of the conditions of the permitRAGM shall not be entitled to transfer or assign the permit without the written

authority of Akay Holdings

RAGM is to sell all gold from the land to licensed gold buyers or BNM

according to the requirements of the Exchange Control Act or as directed by

Malaysian Industrial Development Authority

The permit is liable to cancellation if any of the following events occur

(‘‘Default’’) and the Relevant Permit Holder is not able to remedy the Default

within a period of 21 days of the service of a notice by Akay Holdings:

(a) the Relevant Permit Holder breaches any of the terms and conditions

of the permit;

(b) the Relevant Permit Holder has not worked the land which is the

subject of the permit in accordance with the permit;

(c) Akay Holdings is notified by a relevant authority that its sub-lease is

at risk of forfeiture under the Mining Enactment as a result of any action

or omission of the Relevant Permit Holder;

(d) a petition is presented or a proceeding is commenced or an order is

made or an effective resolution is passed for the winding-up, insolvency,administration, judicial management or dissolution of the Relevant Permit

Holder or its holding company or for the appointment of a liquidator,

receiver, administrator, judicial manager, trustee or similar officer of the

Relevant Permit Holder or its holding company or of all or any part of

their respective business or assets;

(e) the Relevant Permit Holder or its holding company stops or suspends

payments to its creditors generally or is unable or admits its inability to

pay its debts as they fall due or seeks to enter into any composition or

other arrangement with its creditors or is declared or becomes insolvent.

(f) the Relevant Permit Holder has assigned or transferred the permit

without the written authority of Akay Holdings;

(g) the Relevant Permit Holder has not complied with Section 16(iii)(b) of

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Permit to Mine Material Terms and Conditions

the Mining Enactment in relation to employment of mining labourers or

labour saving apparatus

(b) SEREM has rights, pursuant to the prospecting and mining agreement described in paragraph

9(a) above, to undertake prospecting activities over land the subject of the prospecting licence

and prospecting permits issued to Pahang SEDC described below. A summary of the material

terms and conditions of the prospecting licence and the prospecting permits is also set outbelow:

(i) Prospecting Licence

Material Terms and Conditions of Prospecting Licence

* The term of the prospecting licence was originally for a period of five years from 1994.

Approval for the extension of the prospecting licence was granted on 19 May 2005. The

prospecting licence will be re-issued upon the payment of relevant fees and will be subject

to the terms contained in the licence.

* The licence is in respect of an area of 928 acres.

* All levels of salaried workers who work on land forming the subject of the prospecting

licence must be subjects of HRH the Sultan of Pahang or citizens of Malaysia.

(ii) Prospecting Permits

There are 5 prospecting permits, namely prospecting permit SKC(H) No 4/94 in respect of an

area of 411 acres, prospecting permit SKC(H) No 1/94 covering an area of 896 acres,

prospecting permit SKC(H) No 2/94 comprising an area of 8,991 acres, prospecting permit (file

number PTL 9/002/2005) over an area of 6,433 acres and prospecting permit SKC(H) No 3/94in relation to an area of 458 acres. The term of each prospecting permit has expired. Approval

for the extension of the prospecting permits was granted on 19 May 2005. Each prospecting

permit will be re-issued upon the payment of relevant fees and will be subject to its terms. The

material terms and conditions of each prospecting permit are identical and set out below.

Material Terms and Conditions of Prospecting Permits

* Prospecting works must be conducted according to a prospecting scheme approved by a

Minerals Inspector.

* No tree felling is permitted without the approval of the State Forestry Director.

* Any disruption to logging or reforestation work must be avoided in the event logging or

reforestation has already begun in the area where the prospecting permit is granted.

* Prospecting works must begin within 60 days of the date of issue of the permit.

* The deposit provided by the permit holder to the State Forestry Director may be

confiscated upon breach of conditions relating to tree felling and disruption of logging or

reforestation work.

(c) Serem holds a sub-lease expiring on 28 February 2007 in respect of the MC511 Land forming

the subject matter of a mining certificate granted by the Raub Land Administrator to Abdul

Aziz Bin Othman. Subject to the payment of premium, quit rent, registration fees and a deposit

amounting to RM104,725, the term of the mining certificate has been extended by the Raub

land administrator until 28 February 2017. The material terms of the sub-lease are set out

below. In addition to the sub-lease, Serem has also entered into an agreement (described in

paragraph 9(c) above) for the acquisition of the interests of Chong Ah Ngan @ Choong LongSang and Abdul Aziz Bin Othman in the MC511 Land.

Material Terms and Conditions of MC511 Sub-Lease

* Mining works may only commence after obtaining forest clearance from the Director of

Forestry.

* The mining scheme must be in accordance with the rules specified by the Senior StateMinerals Inspector.

* The MC511 Land may not be transferred, leased or encumbered without the written

approval of the State Government of Pahang.

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* No more than one third of the share capital of any company holding the mining certificate

may be owned by foreigners or foreign corporations.

* All levels of salaried workers must be subjects of HRH the Sultan of Pahang or a citizen

of Malaysia and 50% of them must be Bumiputras.

By virtue of the Mining Enactment, the conditions of the mining certificate apply to Serem’s

MC511 Sub-Lease. Upon the completion of the Share Swap Agreement, the entire issued share

capital of Serem will be held by the Company, a foreign corporation. Technically, such an event

constitutes non-compliance with the equity ownership condition specified above which couldpotentially result in a termination of the MC511 Sub-Lease. Serem is seeking a waiver of the

condition in light of the proposed Admission.

(d) The Land and District Office of Raub has offered to grant a mining lease for a term of ten

years to the Pahang SEDC (with whom Serem has entered into the agreement the material

terms of which are described in paragraph 9(a) above pursuant to which Serem has been

granted rights by the Pahang SEDC to undertake large scale prospecting and mining activities in

the Block 8 Area) in respect of a piece of land having a total acreage of 606.3 acres in Mukim

Batu Talam, District of Raub, Pahang. Acceptance of the offer and the issue of the mining lease

entails the payment of premium, quit rent, registration fees and a deposit amounting to

RM682,531. Although the offer has expired, based on conventional practice, the Directors are ofthe opinion that it may be possible to seek a fresh offer in respect of the land on generally

similar terms. Serem has not made a decision whether to request Pahang SEDC to seek such

fresh offer. There is no assurance that a fresh offer would be made if sought by the Company.

(e) The Land and District Office of Lipis has offered to grant a mining lease for a term of five

years to the Pahang SEDC (with whom Serem has entered into the agreement the material

terms of which are described in paragraph 9(a) above pursuant to which Serem has been

granted rights by the Pahang SEDC to undertake large scale prospecting and mining activities in

the Block 8 Area) in respect of a piece of land having a total acreage of 550 acres in Mukim

Telang, District of Lipis, Pahang. Acceptance of the offer and the issue of the mining lease

entails the payment of premium, quit rent, registration fees and a deposit amounting toRM481,350. Although the offer has expired, based on conventional practice, the Directors are of

the opinion that it may be possible to seek a fresh offer in respect of the land on generally

similar terms. Serem has not made a decision whether to request Pahang SEDC to seek such an

offer. There is no assurance that a fresh offer would be made if sought by the Company.

(f) Pursuant to the Mining Rights Agreement entered into between the Company and Akay

Holdings, Akay Holdings will, upon the grant to it of a sub-lease over the RMDC Land, grant

a permit to mine in respect of such land to RAGM or an entity nominated by the Company

(‘‘Relevant Permit Holder’’). The material terms and conditions of the permit to mine are set out

below:

* The permit is for a period of one year. Provided that the Relevant Permit Holder is not in

breach of any of the terms of the permit, Akay Holdings will grant an annual extension of

the permit until expiry of the term of Akay Holdings sub-lease. The Relevant Permit

Holder also has a right to require Akay Holdings to apply for an extension, renewal orreplacement of its sub-lease for a further period of 10 years, and to obtain a permit to

mine in respect of this period.

* The Relevant Permit Holder shall be liable to pay to Akay Holdings tribute at an amount

of 2% of the gross value of gold extracted from primary gold deposits from the land and

6% of the gross value of all other minerals.

* The Relevant Permit Holder shall be liable upon suit before the Senior Inspector of Mines

or any court to pay to Akay Holdings the sum of RM10,000 as a penalty for each and

every breach of the conditions of the permit.

* The Relevant Permit Holder shall not be entitled to transfer or assign the permit without

the written authority of Akay Holdings.

* The Relevant Permit Holder is to sell all gold and/or minerals at the prevailing fair market

price according to the requirements of the Exchange Control Act or as directed by the

Malaysian Industrial Development Authority.

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* The permit is liable to cancellation if any of the following events occur (‘‘Default’’) and the

Relevant Permit Holder is not able to remedy the Default within a period of 21 days of

the service of a notice of Akay Holdings:

(a) the Relevant Permit Holder breaches any of the terms and conditions of the permit;

(b) the Relevant Permit Holder has not worked the land which is the subject of the

permit in accordance with the permit;

(c) Akay Holdings is notified by a relevant authority that its sub-lease is at risk of

forfeiture under the Mining Enactment as a result of any action or omission of the

Relevant Permit Holder;

(d) a petition is presented or a proceeding is commenced or an order is made or aneffective resolution is passed for the winding-up, insolvency, administration, judicial

management or dissolution of the Relevant Permit Holder or its holding company or

for the appointment of a liquidator, receiver, administrator, judicial manager, trustee

or similar officer of the Relevant Permit Holder or its holding company or of all or

any part of their respective business or assets;

(e) the Relevant Permit Holder or its holding company stops or suspends payments to its

creditors generally or is unable or admits its inability to pay its debts as they fall due

or seeks to enter into any composition or other arrangement with its creditors or is

declared or becomes insolvent.

(f) the Relevant Permit Holder has assigned or transferred the permit without the written

authority of Akay Holdings;

(g) the Relevant Permit Holder has not complied with Section 16(iii)(b) of the Mining

Enactment in relation to Employment of minimum labourers or labour saving

apparatus.

13. Litigation

No member of the Group is engaged in, or has pending or threatened either by it or against it, any

legal or arbitration proceedings which are having or may have a significant effect on the financial

position of the Group:

14. Working Capital

The Directors are of the opinion that, having made due and careful enquiry and having regard to the

net proceeds receivable by the Company from the subscription of the Preference Shares pursuant to

the Share Subscription Agreements, the working capital available to the Group following Admissionwill be sufficient for its present requirements, that is for at least 12 months from the date of

Admission.

15. Taxation

General

(a) The statements set out below are intended only as a general guide to the tax position based oncurrent Jersey and UK tax legislation and Comptroller of Income Tax and Inland Revenue

practice and the statements in relation to UK taxation apply only to certain categories of UK

persons. The summary does not purport to be a complete analysis or listing of all the potential

tax consequences of holding shares in the Company. Prospective purchasers of Ordinary Shares

are advised to consult their own tax advisers concerning the consequences under any tax laws of

the acquisition, ownership and disposition of Ordinary Shares in the Company. Shareholders

who may be subject to tax in any jurisdiction other than the United Kingdom should consult

their professional advisers without delay.

(b) The statements do not cover all aspects of Jersey or UK taxation that may be relevant to, or

the actual tax effect that any of the matters described herein will have on, the acquisition,

ownership or disposition of Ordinary Shares in the Company by particular investors. Thestatements in relation to UK taxation apply only to Shareholders who are the beneficial owners

of the Ordinary Shares but are not applicable to all categories of Shareholders, and in particular

are not addressed to (i) shareholders who do not hold their Ordinary Shares as capital assets;

(ii) Shareholders who own (directly or indirectly) 10% or more of the Company; (iii) special

classes of Shareholders such as dealers in securities or currencies, broker dealers, or investment

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companies; (iv) Shareholders who hold Ordinary Shares as part of straddles, hedging or

conversion transactions; or (v) Shareholders who hold Ordinary Shares in connection with a

trade, profession or vocation carried on in the UK (whether through a branch or agency or

otherwise).

(c) Except where indicated, the statements below in respect of the taxation of dividends and

distributions and the taxation of chargeable gains only cover the principal UK tax consequences

of holding Ordinary Shares for holders who are resident in the UK for tax purposes although it

should be noted that special rules, which are not covered, apply to such holders of shares who

are not domiciled in the UK.

UK Taxation of dividends and distributions

(d) A UK holder, or a holder of Ordinary Shares who is carrying on a trade, profession or

vocation in the UK through a branch, agency or permanent establishment in connection with

which the Ordinary Shares are held will, depending upon the holder’s particular circumstances,

be subject to UK income tax or corporation tax as the case may be on the amount of any

dividends paid by the Company. An individual Shareholder who is resident in the UK for tax

purposes and who receives a dividend from the Company will be taxable at the dividend

ordinary rate (10% in 2004-05) and/or (depending on the amount of the holder’s overall taxableincome) at the dividend upper rate (32.5% in 2004-05). Therefore a higher rate taxpayer’s tax

charge will be 25% of the actual dividend received.

(e) A Shareholder resident outside the UK may also be subject to foreign taxation on dividend

income under local law. Shareholders who are not resident in the UK for tax purposes should

consult their own tax advisers concerning tax liabilities on dividends received from the

Company.

UK Taxation of chargeable gains

(f) A disposal, or deemed disposal, of Ordinary Shares in the Company by a Shareholder who is

either resident or ordinarily resident for tax purposes in the UK will, depending on the

Shareholder’s circumstances and subject to any available exemption or relief, give rise to a

chargeable gain or allowable loss for the purposes of the taxation of chargeable gains in the

UK.

(g) Broadly, Shareholders who are not resident or ordinarily resident for tax purposes in the UKwill not be liable for UK tax on capital gains realised on the disposal of their Ordinary Shares

unless such Shares are used, held or acquired for the purposes of a trade, profession or vocation

carried on in the UK through a branch, agency or permanent establishment or for the purposes

of such branch, agency or permanent establishment. Such Shareholders may be subject to

foreign taxation on any gain under local law.

(h) A Shareholder who is an individual and who has, on or after 17 March 1998, ceased to be

resident or ordinarily resident for tax purposes in the UK for a period of less than five complete

tax years and who disposes of the Ordinary Shares during that period may also be liable to UKtaxation of chargeable gains (subject to any available exemption or relief) as if, broadly, the

disposal was made in such Shareholder’s year of return to the UK.

UK Inheritance tax

(i) The Ordinary Shares will not be assets situated in the UK for UK inheritance tax purposes. A

gift of such assets by, or the death of, an individual holder who is domiciled, or is deemed tobe domiciled under certain rules relating to long residence or previous domicile, may (subject to

certain exemptions and reliefs) give rise to a liability to UK inheritance tax. For inheritance tax

purposes a transfer of assets at less than market value may be treated as a gift and particular

rules may apply where the donor reserves or retains some benefit.

EU Code of Conduct on Business Taxation

(j) On 3 June 2003, the European Union (‘‘EU’’) Council of Economic and Finance Ministersreached political agreement on the adoption of a Code of Conduct on Business Taxation

(the ‘‘Code’’). Jersey is not a member of the European Union, however, the Policy & Resources

Committee of the States of Jersey has announced that, in keeping with Jersey’s policy of

constructive international engagement, it intends to propose legislation to replace the Jersey

exempt company regime by the end of 2008 with a general zero rate of corporate tax.

138


(k) It is intended that the new corporate tax will preserve tax neutrality (and so retain the existing

benefits of the exempt company regime through a revised fiscal structure). Unlike the exempt

company regime, it is anticipated that the new regime will not require an annual application/

election or the payment of any sum by the relevant company.

Jersey

(l) The Company will have ‘‘exempt company’’ status within the meaning of Article 123A of the

Income Tax (Jersey) Law 1961, as amended, for the calendar year ended 2005. The Company

will be required to pay an annual exempt company charge which is currently £600 in respect of

each subsequent calendar year during which it wishes to continue to have ‘‘exempt company’’

status. The retention of ‘‘exempt company’’ status, for so long as such status is available as a

matter of Jersey Law, is conditional on the Jersey Comptroller of Income Tax being satisfied

that no Jersey resident has a beneficial interest in the Company, except as permitted byconcessions granted by the Jersey Comptroller of Income Tax, and disclosure of beneficial

ownership being made to the Jersey Financial Services Commission. As an ‘‘exempt company’’,

the Company will not be liable to Jersey income tax other than on Jersey source income (except

by concession bank deposit interest on Jersey bank accounts).

(m) Holders of Ordinary Shares (other than residents of Jersey) are not subject to any tax in Jersey

in respect of the holding, sale or other disposition of such Ordinary Shares. So long as the

Company maintains its ‘‘exempt company’’ status, dividends on the Ordinary Shares may be

paid by the Company without withholding or deduction for or on account of Jersey income tax.

Stamp duty

(n) No stamp duties are payable in Jersey on the acquisition, ownership, exchange, sale or otherdisposal of Ordinary Shares.

(o) Probate or Letters of Administration may be required to be obtained in Jersey on the death of

a registered holder of Ordinary Shares who is an individual with an estate in Jersey (which

includes for these purposes, Ordinary Shares). Stamp duty is payable in Jersey on the

registration of such Probate or Letters of Administration on the value of the deceased’s estate in

Jersey.

16. Consents

(a) The Competent Person’s Report from A.C.A. Howe International Ltd. set out in Part 2 of this

document and the name A.C.A. Howe International Ltd. included in the form and context in

which they appear with the written consent, which has not been withdrawn, of A.C.A. Howe

International Ltd. which accepts responsibility for it.

(b) Nabarro Wells has given and not withdrawn its written consent to the inclusion in this

document of references to its name, in such form and context in which it appears.

(c) Moore Stephens has given and has not withdrawn its written consent to inclusion in this

document of its name, reports and references to it in the form and content in which they appearand accepts responsibility for its reports in accordance with paragraphs 45(2)(a)(iv) and 45(8)(b)

of Part VII of Schedule 1 of the POS Regulations.

(d) Hichens, Harrison & Co plc has given and has not withdrawn its consent to the inclusion in

this document of reference to its name, in such form and context in which it appears.

17. General

(a) The accounting reference date of the Company is 30 June.

(b) The Company was incorporated on 8 April 2005.

(c) Save as disclosed in this document, there has been no significant change in the trading orfinancial position of the Group since 31 December 2004, the latest date to which audited

accounts have been prepared for the Group.

(d) No intellectual property rights are registered by the Group and the Group does not have any

material intellectual property rights, nor is the Group dependent on patents or other intellectual

property rights.

139


(e) Other than as disclosed in this document, there have been no significant recent trends

concerning the development of the company’s business nor any significant acquisitions or

disposals of assets since 31 December 2004, the latest date to which audited accounts have been

prepared for the Group.

(f) Save as disclosed in this document, the Directors are not aware of any exceptional factors that

have influenced the Group’s activities.

(g) Save as set out below and as otherwise disclosed in this document, no person, (other than the

Company’s professional advisers and trade suppliers) has received, directly or indirectly, fromthe Company or any member of the Group within the 12 months preceding the date of this

document, or entered into contractual arrangements (not otherwise disclosed in this document)

to receive, directly or indirectly, from the Company or any member of the Group on or after

Admission, fees totalling £10,000 or more, securities in the Company to such value, or any other

benefit with a value of £10,000 or more at the date of Admission.

(h) The expenses of, and incidental to, the Admission, including commissions, registration and

listing fees, printing, advertising and distribution costs, legal and accounting fees and expenses,

are estimated to amount to approximately £550,000 and are payable by the Company.

(i) Copies of this document are available free of charge for one month from the date of Admission

from Nabarro Wells & Co. Limited, Saddler’s House, Gutter Lane, London EC2V 6HS and

from the registered office of the Company.

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PART 6

GLOSSARY

Aircore An air assisted coring method used in soft ground

Alteration Chemical or mineralogical alteration of a rock/mineral by

geological forces

Amphibolite Type of metamorphic rock defined by specific temperature and

pressure conditions

Anomalous Value of a given element that is deemed to be above the

background or normal value

Anticline A ‘\’ shaped fold or structure in stratified rocks with the oldest

rocks in the centre

Arenaceous Said of a sediment or sedimentary rock consisting wholly or in part

of sand-sized fragments, or having a sandy texture or the

appearance of sand; pertaining to sand or arenite. Also said of

the texture of such a sediment or rock

Argillaceous Pertaining to, largely composed of, or containing clay-size particles

or clay minerals, such as an argillaceous ore in which the gangue is

mainly clay; esp. said of a sediment (such as marl) or a sedimentary

rock (such as shale) containing an appreciable amount of clay

Arsenopyrite Arsenic-iron sulphide mineral

As the chemical symbol for arsenic

Assay The analysis of minerals, rocks and mine products to determine and

quantify their ingredients

Au Chemical symbol for gold

AusIMM Australasian Institute of Mining and Metallurgy

Ball Mill A heavy rotating mechanical cylinder designed to grind rock into

fine particles using steel balls as its grinding medium

Base Metal Any of the more common metals such as copper, lead, nickel,tin and zinc

Breccia A rock comprised of broken fragments in a fine matrix

BRGM Bureau de Reserches Geologiques et Miniers

BSc Bachelor of Science

BChemE Bachelor of Chemical Engineering

Carbonate Relating to rocks rich in Calcium and / or Magnesium. Also a

sediment formed by the organic or inorganic precipitation fromaqueous, solution of carbonates of calcium, magnesium or iron, e.g.

limestone and dolomite

CChem Chartered Chemist

CEng Chartered Engineer

Channel sample A means of taking a sample from a rock face by collecting the

cuttings from a small channel

Conglomerate A sedimentary rock composed of non-angular pebbles of singular

or varied composition with a finer grained sandy or calcareous

matrix

CPEng Chartered Professional Engineer

CSci Chartered Scientist

Deposit An anomalous occurrence of a specific mineral or minerals within

the Earths crust

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Devonian A geologic period that extends from about 408 to 360 million years

ago

Diamond Drilling Drilling method, which obtains a cylindrical core of rock by drilling

with an annular bit set with diamonds

Dip Inclination of a geological feature/rock from the horizontal

(perpendicular to strike)

Dislocation The relative displacement to either side of a fracture

Disseminated Fine grained material scattered quite evenly throughout the rock

Dykes Often thin and tabular intrusive rocks that are discordant to host

rocks

EM Electromagnetic geophysical survey technique

Epigenetic Pertaining to mineralisation which formed later than its enclosingrocks

Epidote A basic silicate of aluminium, calcium, and iron; a common rock-

forming mineral with albite and chlorite in low-grade metamorphic

rocks and an accessory in some igneous rocks

Facies Unit defined by its geological features

Fault A fracture in a rock along which there has been displacement of the

two sides.

FAusIMM Fellow of the Australasian Institute of Mining and Metallurgy

Feasibility study A detailed study of the economics of a project based on technical

calculations and specific mine designs undertaken to a sufficiently

high degree of confidence to justify a decision on construction

Felsic Term pertaining to siliceous, feldspar-rich rocks. (usually light

coloured)

FIChemE Fellow of the Institution of Chemical Engineers

FIEAust Fellow of the Institution of Engineers, Australia

FIMMM Fellow of the Institute of Materials, Minerals and Mining

Fissile Capable of being easily split along closely spaced planes; exhibiting

fissility. Said of bedding that consists of laminae less than 2 mm

thick

Footwall The underlying side of a fault, orebody or mine working

g Gram

g/t Unit of grade for precious metals: grams per tonne

(= parts per million)

Gamma ray spectrometry A geophysical survey method used to distinguish different rocktypes and alteration types by their radioactivity.

Geochemical prospecting techniques which measure the content of specified

metals in soils and rocks; sampling defines anomalies for further

testing

Geochemical Anomaly An abnormal concentration of elements in soil or rock indicative of

underlying or nearby metal deposits

Geochemical soil sampling Prospecting technique using samples of soil and laboratory analysis

Geophysical prospecting techniques which measure the physical properties

(magnetism, conductivity, density, etc) of rocks and defineanomalies for further testing

Geophysical Survey Prospecting technique using physical differences between rock

formations to operate anomalies

GIS Geographical Information System often used to compile

exploration data

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Grab Sample Sample collected at irregular intervals from surface outcrops, mine

dumps etc., not necessarily representative of the material sampled

Grade The quantity of ore or metal in a specified quantity of rock

Granite Medium to coarse-grained quartz-rich igneous rock usually light

coloured

Granitoids Group of rock types related to granite

Grass-roots Early stages of exploration including activities such as mapping and

geochemical sampling

Hangingwall The overlying side of a fault, orebody or mine working

Hornfels A fine-grained rock composed of a mosaic of equidimensionalgrains without preferred orientation and typically formed by heat

during contact metamorphism by an igneous body

Hydrothermal The name given to any processes associated with igneous activity

which involve heated or superheated water

Igneous Applied to rocks solidified from a molten state

IMMM The Institution of Materials, Minerals and Mining

Indicated Mineral Resource That part of a Mineral Resource for which tonnage, densities,shape, physical characteristics, grade and mineral content can be

estimated with a reasonable level of confidence. It is based on

exploration, sampling and testing information gathered through

appropriate techniques from locations such as outcrops, trenches,

pits, workings and drill holes. The locations are too widely or

inappropriately spaced to confirm geological and/or grade

continuity but are spaced closely enough for continuity to be

assumed

Inferred Mineral Resource That part of a Mineral Resource for which tonnage, grade and

mineral content can be estimated with a low level of confidence. It is

inferred from geological evidence and assumed but not verified

geological and/or grade continuity. It is based on information

gathered through appropriate techniques from locations such as

outcrops, trenches, pits, workings and drill holes which may be

limited or of uncertain quality and reliability

Intrusive Derived from molten material that originated and solidifiedbeneath the Earth’s surface

Intrusion Body of igneous rock that invades older rocks

In-Situ In place

IP Induced Polarisation geophysical survey technique

Isoclinal folding Tight folding of a rock band/strata whereby the limbs between fold

hinges are parallel

JORC code Australasian code for reporting of Mineral Resources and Ore

Reserves

km Kilometre

Laterite Residual deposits of iron oxide formed as a result of weathering

under specific climatic conditions

Limb Geological term for one side/part of a fold

Limestone A sedimentary rock comprised almost entirely of calcium carbonate

Lithology Description of the characteristics of rocks

Logging Recording geological, geotechnical and other information from

drill core

Mafic Descriptive of igneous rocks composed predominantly of

magnesium and iron rock forming silicates

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MAIMM Member of the Australasian Institute of Mining and Metallurgy

MAppSc Master of Applied Science

Measured Mineral Resource That portion of a mineral resource for which tonnage, densities,

shape, physical characteristics, grade and mineral content can be

estimated with a high level of confidence. It is based on detailed and

reliable exploration, sampling and testing information gathered

through workings and drill holes. The locations are spaced closelyenough to confirm geological and/or grade continuity

Mesothermal A hydrothermal ore deposit formed at intermediate temperatures(2008-3008)

Meta A prefix attached to the name of any rock which has undergone

metamorphism

Metallurgical Describing the science concerned with the production, purification

and properties of metals and their applications

Metallurgical Testwork Studies pertaining to the metal content of a rock and the extraction

of such metals

Metamorphism Process by which rocks are changed by heat and pressure

Metasediment Sedimentary rocks that have undergone varying levels of

metamorphism but are still recognisable as original sediments

Metavolcanic A volcanic rock that has undergone some metamorphism

MIMMM Member of the Institution of Materials, Minerals and Mining

Mineral Resource A concentration or occurrence of material of intrinsic economicinterest in or on the Earth’s crust in such a form and quantity that

there are reasonable prospects for eventual economic extraction.

The location, quantity, grade, geological characteristics and

continuity of a Mineral Resource are known, estimated or

interpreted from specific geological evidence and knowledge.

Mineral Resources are sub-divided, in order of increasing

geological confidence, into Inferred, Indicated and Measured

categories

Mineralisation The concentration of metals and their chemical compounds within

a body of rock

Mineralised Containing ore minerals

MRACI Member of the Royal Australian Chemical Institute

MSc Master of Science

Mt Million metric tonnes

MTMS Member of The Metallurgical Society

Mudstone A sediment comprised of very fine grains

NPV Net present value

Oceanic Basin A geological environment between continental plates which often

grows to form the sea floor of large oceans

Ore Reserve The economically mineable part of a Measured or Indicated

Mineral Resource. It includes diluting materials and allowances for

losses which may occur when the material is mined. Appropriate

assessments, which may include feasibility studies, have been

carried out, and include consideration of and modification by

realistically assumed, mining, metallurgical, economic, marketing,legal, environmental, social and governmental factors. These

assessments demonstrate at the time of reporting that extraction

could reasonably be justified. Ore Reserves are sub-divided in order

of increasing confidence into Probable Ore Reserves and Proved

Ore Reserves

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Orebody The volume of rock containing the mineral resource

Orogenic Pertains to coastal forces resulting in mountain building

oz troy ounce (= 31.1034 grammes)

Oxide Ore Soft, weathered ore. Formed by the processes of saprolite

weathering near surface

Pegmatite A very coarse grained igneous intrusion

Permian A geological time period from 286 to 248 million years ago

Phanerozoic Cambrian and later time wherein fossil evidence is abundant

Phyllite A laminated metamorphic rock derived from clay rich sediments.

Pitting A means of exposing and sampling near-surface geology by digging

a vertical hole

PL Prospecting Licence

Pluton A large body of igneous rock which solidified beneath the Earth’ssurface

Porphyritic Texture in igneous rocks containing relatively large crystals set in a

finer grained ground mass

Porphyry (porphyries) Rock names usually applied to hypabyssal rocks containing large

crystals (phenocrysts)

ppb Parts per billion (1,000 million)

ppm Parts per million – equivalent to grams per tonne

Probable Ore Reserve The economically mineable part of an Indicated, and in somecircumstances Measured Mineral Resource. It includes diluting

materials and allowances for losses which may occur when the

material is mined. Appropriate assessments, which may include

feasibility studies, have been carried out, and include consideration

of and modification by realistically assumed, mining, metallurgical,

economic, marketing, legal, environmental, social and

governmental factors. These assessments demonstrate at the time

of reporting that extraction could reasonably be justified

Prospect An area of ground considered worthy of investigation with respect

to mineral potential

Proved Ore Reserve The economically mineable part of a Measured Mineral Resource.

It includes diluting materials and allowances for losses which may

occur when the material is mined. Appropriate assessments, whichmay include feasibility studies, have been carried out, and include

consideration of and modification by realistically assumed, mining,

metallurgical, economic, marketing, legal, environmental, social

and governmental factors. These assessments demonstrate at the

time of reporting that extraction could reasonably be justified

Pyrite Iron sulphide mineral

Quartz A common rock forming mineral (SiO2)

Quartzite A rock type formed predominantly of recrystallised quartz

RAB Rotary Air Blast drilling technique

RC Reverse Circulation drilling technique

Regolith Unconsolidated rock material resting on bedrock, found near the

Earth’s surface

Reserve See ‘‘Ore Reserve’’

Rhyolite A group of extrusive igneous rocks, typically porphyritic and

commonly exhibiting flow texture, with phenocrysts of quartz and

alkali feldspar in a glassy to cryptocrystalline groundmass; also,

any rock in that group; the extrusive equivalent of granite

145


Sandstone A sedimentary rock comprised of sand-sized grains in a fine grained

matrix

Saprolite In-situ chemically altered rock. A term often applied to the lower

portion of the weathered profile in tropical areas

Schist Metamorphic rock type with a characteristic layered fabric

Sediment An accumulation of solid matter usually transported by anddeposited from water

Sedimentary Rock type formed from fragments of other rocks, laid down by/in

water

Semi-pelite Partially metamorphosed clay rich rocks

Sericite A fine grained white micaceous mineral often the product of

alteration processes

Serpentinised Pertaining to mafic rocks which have been hydrothermally altered

Shale A type of laminated sedimentary rock

Shear zone Fault zone, often associated with fluid movement and

mineralisation

Siltstone Type of fine grained sedimentary rock

Specific Gravity The ratio of the weight of a substance to the weight of an equal

volume of water, expressed as a number

Stratabound Any type or types of orebody concordant or discordant insediments, which are restricted to a particular part of the

stratigraphical column

Stratiform Having the form of a bedded layer but without internal bedding

features

Silicification Introduction of silica into a non siliceous rock via groundwater or

fluids of igneous origin

Stockwork Mineral deposit formed of a network of small, irregular cross-

cutting veins so closely spaced that it may be mined as a unit

Strike Direction taken by a structural surface such as a fault or bedding

plane as it intersects a horizontal plane

Stringer Narrow quartz vein/veinlet

Sulphide Metalliferous minerals formed with sulphur and often iron

Supergene (enrichment) Re-precipitation of sulphides and oxides by descending acidic

groundwater which has leached such from the surface zone of an

ore deposit

Syncline A U-shaped fold or structure in stratified rocks, with youngestrocks in the centre

Syngenetic Pertaining to mineralisation which formed at the same time as the

enclosing rock

t Metric tonne

Tectonic Relating to a major structural event

Thrust Low angle reverse fault

Tonalite A quartz diorite which is particularly rich in aluminium and sodium

tpa tonnes per annum

Tremolite Amphibole group with magnesium replaced by iron, and silicon by

aluminum toward actinolite; in low-grade metamorphic rocks suchas dolomitic limestones and talk schists

Trenching A means of exposing and sampling near-surface geology by digging

a trench

146


Triassic A geologic period that extends from about 248 to 202 million years

ago

Tuff A general term for all consolidated fine grained pyroclastic rocks

Ultramafic Igneous rock type defined by its high dark mineral content

Unconformable/unconformity Lack of parallelism between rock strata in sequential contact,

caused by a time break in sedimentation

Vein/veinlet Small conduit within larger rock mass, consequently comprised of

quartz or carbonate

VLF Geophysical exploration technique using Very Low Frequency

waveforms

VMS Volcanogenic Massive Sulphides

Volcanic Petaining to igneous rocks which have been erupted from volcanoes

Weathering Degradation of rocks at the Earth’s surface by climatic forces

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imprima de bussy — C92113

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Peninsular Gold Ltd Security Cover As At June'23 2005