CTO 20.0% 0.4¢ citigold corporation limited

announcement

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    ANNOUNCEMENT


    Update Charters Towers gold
    16 December 2009: Brisbane, Australia Citigold Corporation Limited (Citigold)
    (ASX:CTO, NASDAQ Dubai:CTO, FSE:CHP) is pleased provide an update on the
    Charters Towers mining operation.

    Revised Production Targets Citigold has considered the expected gold production for the
    December quarter in relation to the earlier announced target.
    Gold production for the current quarter is now expected to be
    5,000 ounces. While this is below the earlier target forecast it
    would represent nearly a 100% increase from the September
    quarter and the largest quarterly gold production since mining
    operations began. The 5,000 ounce quarterly production would represent an
    annualised rate of 20,000 ounces per annum if the rate is
    maintained. This lift in gold production at Charters Towers follows the mine site's management
    restructure implemented 2 months ago. With the new growth focused management team in place, the Board met in
    Charters Towers recently to get a first hand opinion on what is achievable going
    forward. In consultation with both Mr Towsey (COO) and Mr McDonald (GM
    Operations), the gold production target for calendar 2010 year has been revised to
    50,000 ounces. These more modest targets are based on accumulated experience
    and the more detailed understanding of the gold distribution. With the benefit of
    hindsight the previous aggressive production build up rate was premature. The
    overall long term project target remains unchanged however it will be a more
    gradual build up in production. Strength of the Charters Towers gold asset. Although the production expansion has taken longer then anticipated, the capital
    and infrastructure works plus mining completed to date have helped strengthen the
    value of the asset. Ore Body is as expected The overall mining payability of the reef structure explored as part of the
    mining process has proven to be consistent with the 70% discount factor Page 2 Citigold Corporation Limited Level 15, IBM Centre, 348 Edward Street, Brisbane QLD 4000 Australia Tel:+61 (0)7 3834 0000 Fax:+61 (0)7 3834 0011 www.citigold.comalready applied to the overall tonnages used in the Inferred Mineral
    Resource published in 2005 and available on the Company web site. Mechanised mining system optimisation continues Citigold has developed a mine planning and development system that is
    suitable for a large scale mining operation. While the mechanised system is
    taking longer then expected the Company's conservative approach aims to
    ensure a low operating cost mining method for long term gold production. Ore Reserve reconciliation - 101.5% recovery Of an initial parcel of 19,307.5 oz outlined within the Probable Ore Reserve
    that was mined from the Warrior reef, the refinery paid the Company for
    19,210 ounces. At 98% recovery in the Mill, we expected 18,921.35 oz to be
    sold, indicating Citigold produced 288 oz more (101.5%) than the Probable
    Ore Reserve estimate. This shows that the Company's estimation
    methodology including mining factors applied to the resource is sound and
    confirms the methods used in the current Inferred Mineral Resource of
    23 million tonnes at 14 g/t Au containing 10 million ounces. Power to sites exceeds 10 MW Electric power throughout 2008 was a limiting factor that put Citigold behind
    by a year on the planned production growth. With state grid electric power
    connected to the overall Charters Towers gold project of 10 megawatts, the
    Company is starting to see production growing after the development catch
    up made in 2009. Geophysics and diamond drilling Test work to date using down hole induced polarisation (DHIP) has shown
    very encouraging results in mapping the sulphide zones associated with the
    gold mineralisation around and between drill holes. A number of significant
    target areas have been defined after initial calibration of the system on
    known mineralised areas. The goal is to use these geophysical imaging
    techniques to map the ore body in detail for mine planning to efficiently
    locate the development drives to access the stoping panels. The Charters Towers gold field is performing in keeping with our studies and
    general expectations. Although growth in gold production is slower than expected,
    in 2008 and 2009, we believe that the knowledge gained to date from nearly
    3 years of continuous gold production has been very valuable and will better assist
    future gold output estimations. Citigold's approach to capital expenditure has been
    prudent through gradual expenditure of relatively small capital amounts. Current gold prices coupled with growing gold production are producing good cash
    flows. The Reserve and Resource assumptions are being confirmed, the
    mechanised mining method is working well, new mine site management has
    produced results and with a strong gold price, the Company is looking to a strong
    result in 2010.


 
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