Citigold : 31 October 2016 Quarterly Report September



Quarterly Report

For the period ending 30 September 2016

HIGHLIGHTS

• Continued planning for the development of the Charters Towers project centred on the Central Mine being an ultra-low cost producer of gold.

• Major project funding discussions continued with potential interested strategic partners to expand the Group's production ready Charters Towers Gold Project into a strong gold producer.

• New Plan of Operations lodged with Department of Environment and Heritage (DEHP) and DEHP advising it is effective to 31 October 2021.

• During the period the Company received $534,000 confirming the continued support of investors and shareholders.

• As previously announced, Citigold has changed it's registered and corporate office in order to reduce corporate administration costs.

OPERATIONS

The underground mining operations at the Company's Charters Towers 'Central' and 'Imperial' mining areas, together with the processing plant, remained on active care and maintenance during the Quarter. No gold production operations were undertaken during the quarter.

Resumption of mining at Charters Towers is contingent on capital financing, but active planning and scheduling continued during the Quarter in readiness. The main Central Mine underground is the first area planned to be reopened and is scheduled to expand into a 220,000 ounce annual producer of gold once funding is finalised. An outline of the mining plan for the Central Mine has been given in previous Quarters.

Project Assessment Process

Citigold has a deep and informed knowledge of the assets, which was taken into account in assessing the project's future growth.

Building upon the existing developed infrastructure and $200 million investment to date. A detailed and comprehensive Technical Report dated 18 May 2012 was prepared, listing the Mineral Reserves and Ore Resources of the Charters Towers Gold Project (Project). This report, in compliance with JORC reporting requirements, was prepared in the format of the Canadian NI 43-101 report because it conforms to a very detailed and structured format to the report. This report

was able to draw upon the technical and operational information from the project's trial mining operation by Citigold. This information was a strong foundation to build into the go-forward development plan to see the project, once funding is finalised; growing to a 220,000 ounce per year producer with low operating costs. Some of the mining and economic factors considered and assessed were :

1. property description and location;

2. geological factors in detail;

3. types of mineral tenures and identifying numbers already granted and production ready;

4. mineral processing and metallurgy including the processing plant which is built, established and has previously operated successfully;

5. mineral resource and reserve estimates;

6. mining methods including processing, development capital costs, production schedule, operating costs and gold price. The Technical Report contains photographs of the different drives and stopes after extraction, together with diagrams of the planned mining methods proposed for Central area;

7. recovery methods;

8. project infrastructure on surface is essentially already built;

9. market studies and contracts;

10. environmental studies, permits and social or community impact with a successful long-term harmonious relationship with the local community;

11. capital and operating costs derived from actual mining techniques, and;

12. economic analysis.

With this solid data foundation to build on, the remaining project funding will be

mainly used for underground development of the Central mine. The Central access tunnel is already at a depth of over 201 metres vertical and from this point will be extended deeper. As the tunnel progresses deeper, branch tunnels (cross-cuts, ramps and drives) will access the several adjacent reefs referred to above. Once the reefs have been accessed, several kilometres of small tunnels

(level drives) will be excavated along the reefs in preparation to extract the ore. The plan is to have up to 15 working areas that ore can be extracted from at the one time, ensuring sufficient tonnage to meet predictions.

Currently, once the project funding is in place, the lead-time is 10 months to initial gold production.

Production is then planned to grow, in general terms, by 50,000 ounces extra each year over the next four years to the total target 220,000 ounces of gold.

GEOLOGY AND EXPLORATION

No new exploration drilling was undertaken during the Quarter, with work focused on consolidating geological data including surface and drill hole samples in preparation for the upcoming period of mine planning.

HEALTH, SAFETY AND ENVIRONMENT

There were no Lost Time Injuries, significant environmental, health or safety issues during the Quarter.

Citigold is planning to work towards solar power as the primary energy source for underground operations, while reducing the power requirements.

It is planned to replace diesel engines in the

underground environment with electric equipment, reducing the ventilation requirements to remove fumes and heat from diesel engines. This initiative could be implemented in year two of the central development program when a doubling of the power needs is expected.

Environmental monitoring of the operations continued.

Citigold's recently-appointed Dr Sibasis Acharya (Technical Director), who is providing guidance on groundwater matters and on the geochemistry and reactivity of the rock stockpiles and TSF in conjunction with external consultants as required. He has contributed significiently to formally documenting the chemistry formulas and detailed workings that clearly proves that the Company's rockstockpiles are benign and incapable of producing deleterious environmental. This chemistry confirm the annalis and sampling ower a long period of time.

In addition the chemistry of the tailings produced from the processing of Charters Towers ore does not and cannot produce material, if any, environmentally deleterious outcomes. This also is in keeping with analysis over a long period of time. The tailings facility was built 20 years ago and is a good foundation for the future operations.

A replacement Plan of Operations, as required under the environmental legislation, was prepared and lodged with Department of Environment and Heritage (DEHP) covering a five year period. This replaces the current 2 year plan. The replacement plan has been accepted and DEHP advised it is in effect until 31 October 2021.

This new plan takes into account our planned gold production expansion.

CORPORATE

Office Address Changes

As previously announced, to reduce corporate overheads, the registered office has moved to our Charters Towers project mine site, the corporate office and postal address in Brisbane has changed from 1 August 2016.

New address details below.

We have continued to reduce recurring corporate overheads during the 2016 financial year with results to be reflected in the coming 2017 financial year.

Major development funding

Activities during the Quarter continued to remain heavily focused on advancing discussions with strategic funding partners. Current discussions have extended and strategic funding partners showing continued interest in the production ready Charters Towers Gold Project given the recent rise in the gold price.

This major development funding seeks to raise circa $100 million.

Current working capital raising plans for the coming Quarter continue to include share placement(s), limited sale of gold in the ground as previously announced, and moving towards finalising discussions with one of the major funding partners.

FINANCIAL HIGHLIGHTS

During the Quarter, the Company received funds of $534,000 including $90,000 through fully paid ordinary share placement with investors. Funding was used for working capital. A further funding prepayment was received in addition to the gold sale of $324,000.

The Financial Report for 2016 was released during the Quarter. Citigold incurred a net loss of $8.3 million during the 2016 financial year - being an improvement from the 2015 net loss of $103 million (that included the non-cash impairment of $96 million to Capitalised Exploration, Evaluation and Development Expenditure).