LEFA CORRIDOR FEASABILITY STUDY

The future lies in expansion, with all the major building blocks now in place

The Future of the Lero Gold Project

The Lero Gold Project has produced significant quantities of gold from the Lero-Karta and Fayalala pits since production commenced in 1995. A total of 700,000 ounces has been produced up to the end of 2004 through the processing of laterite and saprolite oxide ore. Based on drilling up to December 2004 Guinor has achieved 40.5 million tonnes grading at 1.7 g/t and containing 2.3 million ounces proven and probable reserves. The measured and indicated resource of 68.1 million tonnes grading at 1.6 g/t and containing 3.4 million ounces, represents a 26 per cent increase over last year and includes the above reserves. The total discovery cost to date is US$5.20 per resource ounce.

Exploitation of the Dinguiraye Concession is governed by a Convention de Base which provides SMD with the exclusive right to explore for, mine and sell gold, diamonds and associated minerals within a 1,500 km2 concession and with the fiscal, legal and financial terms fixed. The concession was granted by way of a decree dated March 1994 for a duration of 25 years which may be extended by means of applications for successive periods of a further 5 years. The group holds adjacent exploration leases for an additional 700 km2, representing a total land package of 2,200 km2.

Early in 2001 Guinor’s predecessor, Kenor, completed a detailed review of the Lero Gold Project to determine the ultimate exploration and development potential of the concessions. With assistance from independent consultants, the findings of these studies concluded that the project had the potential to significantly expand and support the development of a large tonnage CIL processing operation, with production from both oxide and primary ore types. The company commenced a US$9 million exploration program, in September 2002, designed to define sufficient resources to support a large tonnage CIL operation.

A scoping study was undertaken in July 2003 to evaluate the viability of establishing a CIL processing operation. This study was based on modelled resources to May 2003, in addition to the projected resources based on further drilling from June to December 2003. The study indicated that the project could generate a healthy return based on the assumptions made.

A BFS including a reserve drilling program was commissioned in September 2003, with a US$12.5 million budget. The BFS announced in the first quarter of 2005, concluded that open cut mining with the expansion of two major existing pits and five smaller pits would generate a positive return for Guinor shareholders.

Prior to completion of the BFS Guinor signed a Heads of Agreement to secure the Kelian crushing, milling and CIL processing plant from the Rio Tinto subsidiary P.T. Kelian Equatorial Mining (KEM). The plant will be acquired at a cost of US$15.5 million in order to further enhance the economics of the future operation. The contract with KEM includes the process plant, the diesel power station, workshops, insurance spares, general spares, mobile materials handling plant, grinding media and activated carbon. In addition, intellectual property rights such as design drawings and maintenance records have also been secured. The quality of the maintenance and the records kept underscore the exceptional condition of this used plant.

The BFS was produced by a Perth, Australia based team of independent consultants led by Lycopodium Engineering Pty Ltd., and including RSG Global, Knight Piesold, METS, Senet Engineering (South Africa), supplemented by input from management of Guinor. The BFS estimates average annualized production of around 320,000 ounces of gold over 7 years, with plant commissioning by the end of 2006 at an average life of mine cash cost of US$231 per ounce before royalties. Assuming a gold price of US$400/oz and utilizing only the reserves of 2.3 million ounces, the internal rate of return is calculated at 22.3 per cent.

The new project is scheduled to begin treating ore by the end of 2006 with a mining schedule taking into account realistic mining rates and limits on the saprolite to primary ore ratio. The schedule provides 7.0 million tonnes of plant feed in year 1 and 6.0 million tonnes in subsequent years, exploiting blended ore through a 7 year project life.

The capital cost of the new project, including the Kelian plant and new mining equipment, amounts to US$144 million. The BFS addresses the question of environmental impact associated with open pit mining operations, ore haulage, treatment plant operations, tailings dams and infrastructure.

The average cash costs excluding royalties based on owner mining, averages US$231 per ounce throughout the mine life. It is estimated that the project will employ around 600 people of which 50 will be expatriates.