SAVANNAH GOLDFIELDS LIMITED — Interim / Quarterly Report 2003

ACN 003 049 714

Mail Address PO Box 7066 Riverside Centre Brisbane Qld 4001

Level 30 Riverside Centre 123 Eagle St Brisbane Qld 4000

Phone: (07) 3832 6488 Fax: (07) 3832 6261 Email: [email protected]

QUARTERLY REPORT OF OPERATIONS

FOR THE PERIOD ENDED

30 SEPTEMBER 2003

ACN 003 049 714

Highlights of the Quarter's Activities

• Substantial progress was made during the quarter on the Company's Northern Territory gold projects, Ouest 29 and Tom's Gully. The Company's efforts were focused on the commencement of mining and the dump leaching of ore from the Ouest 29 gold project in the Northern Territory and progressing the feasibility study on the Tom's Gully gold project.
• Open cut mining at Ouest 29 commenced during the quarter with the first gold $\bullet$ produced at the end of the quarter. Gold production is utilizing the Company's existing leaching pads and facilities at Ouest 29.
• The Quest 29 gold mine was brought into production within 3 months of the funding $\bullet$ being raised to commence development and has been achieved within budget.
• A 7 hole diamond drilling program at the Tom's Gully Gold Mine was carried out $\bullet$ during the quarter. This program's purpose was to gain further understanding of the grade of the resource, increase confidence levels in the resource estimate and to collect samples for metallurgical testwork and geotechnical purposes.
• All of the drill holes intercepted the mineralized reef with a series of high grade gold $\bullet$ intercepts (true thickness) including 1.4 m at 13.9 g/t, 1.4 m at 10.5 g/t and 0.9 m at 24.5 g/t. The average intercept from the program was 1.56 m at 7.5 g/t.
• Additional drilling utilizing reverse circulation drilling techniques is being planned to $\bullet$ commence in December following completion of metallurgical testwork.
• It is expected that the feasibility study into the development of an underground $\bullet$ operation at the Tom's Gully Gold Mine can be completed by mid 2004 allowing a decision to mine to be made at this time.
• During the quarter a capital raising of \$1.2 million by way of a non-renouceable pro- $\bullet$ rata entitlement issue of convertible notes to existing shareholders.
• The Company also continued to evaluate further acquisition and investment opportunities in the resources sector focusing on projects that could be developed as mines within a 2 to 3 year timeframe.

ACN 003 049 714

$\mathbf{1}$ . Northern Territory Gold Projects - Tom's Gully and Quest 29

Substantial progress was made during the quarter on the Company's Northern Territory gold projects, Quest 29 and Tom's Gully. The Company's efforts were focused on the commencement of mining and the dump leaching of ore from the Quest 29 gold project and progressing the feasibility study on the Tom's Gully gold project.

At the Tom's Gully and Quest 29 gold projects in the Northern Territory the Company currently has a resource base of approximately 320,000 ounces of gold in various resource categories contained within 26 square kilometers of granted mining leases and mining claims.

Resource Statement (prior to recent mining):

* Tonnes rounded to nearest 5,000t and 0.1 g/t Au. Ounces of gold based on calculation pre-rounding and then rounded to nearest 100 ounces.

At the Tom's Gully project the Company has an established 250,000 tonne per annum CIP gold treatment plant with associated infrastructure and services. The Company also has established dump leach processing infrastructure at the Quest 29 project.

Ouest 29

During the quarter the Company's efforts were focused on the commencement of mining and the dump leaching of ore from Quest 29.

Following receipt of government approvals the leach pads were re-profiled, material screened for drainage and liner protection materials and made ready for stacking of ore. In addition the carbon absorption plant was modified and re-commissioned.

Mining of ore commenced on 21 July. By the end of the quarter approximately 200,000 tonnes of ore had been mined and stacked at a grade of approximately 1.0 $g/t$ . Mining was completed in mid October with a total of approximately 275,000 tonnes mined. Contained gold mined has been 8% greater than expected from the feasibility studies.

Irrigation with cyanide solution of the first 20,000 tonnes of ore mined commenced on 4 August and by quarter end approximately 150,000 tonnes of ore was under irrigation and the final sections are expected to be under irrigation within the next few days. Recovery of gold to carbon commenced on 16 August. With the remediation of the Tom's Gully elution and

ACN 003 049 714

gold electrowinning circuits in August and early September the first gold pour occurred on 18 September 2003.

Capital expenditure has been within budget and with strip ratios lower than expected, mining unit costs (\$ per tonne of ore) are expected to be below budget at the end of mining. Ore stacking has been part undertaken by excavator and has produced a dump with excellent solution flow characteristics and no evidence of ponding as yet.

Initial leaching performance indicates that the original production estimate of 4.500 ounces is expected to be achieved or even exceeded due to the increased contained gold content being stacked. However due to delays in commencing mining and indications of slower leach kinetics the leaching time frame will be extended into 2004.

The pouring of the first gold dore bullion bar occurred shortly before the end of the quarter with the first refined gold sales occurring in October. The Company's gold production is currently unhedged. The Quest 29 gold mine was brought into production within 3 months of the funding being raised to commence development and has been achieved within budget.

There were no lost time injuries or reportable incidents at Quest 29 during the quarter.

The commencement of mining at Quest 29 is a significant step by the Company in its continued development as an emerging gold producer through the development of its Northern Territory mining assets.

Tom's Gully Underground Mine

Cashflows from Quest 29 are being applied to the diamond drilling, metallurgical testwork and feasibility studies into the development of the Tom's Gully Underground Mine. Scoping studies have previously indicated that based on a head grade of $6.\overline{4}$ g/t gold there is the potential to establish an underground mining operation producing 35,000 to 40,000 ounces of gold per annum, generating annual revenues of approximately \$20 million and with an EBITDA of between \$6 and \$7million per annum at a A\$540 per ounce gold price. Treatment of the existing tailings resource could also enhance the economics of the project. Previous open cut mining operations by MIM had produced 356,651 tonnes at 9.23 g/t Au.

A diamond drilling program was commenced in July and completed during the quarter. The drilling program is part of the first stage of a feasibility study into the development of an underground mining operation at the Tom's Gully gold mine where the Company has previously reported an Inferred Mineral Resource of 900,000 tonnes at 7.0 g/t gold (201,200)

ACN 003 049 714

ounces) from a mineralised reef structure which has a variable thickness from less than 1m up to 3.5m. The reef is exposed at the base of the open cut and dips initially shallowly, then subhorizontally, to the south. Significant mineralisation has previously been intersected by drilling over 1 km to the south of the pit and is open at depth.

The drilling program has consisted of seven inclined diamond drill holes, the purpose of which was to gain further understanding of the impact of the steeply dipping gold bearing veins/structures on the grade of the resource and to collect samples for metallurgical test work. The program has also provided important geotechnical information. All drill holes in the program intersected the mineralised reef structure. Assay results from the significant intercepts from the program are summarised below (including results announced 7 October 2003).

The drilling program has provided excellent geological and structural information and significantly increased the Company's understanding of the mineralisation controls. Core from the current program is being used for metallurgical testwork that is currently underway. The Company is currently undertaking the planning for further drilling utilising reverse circulation drilling techniques. This next drilling program should commence in December following completion of the current metallurgical testwork program.

At the end of this stage it is anticipated that the grade of the resource, the metallurgical characteristics and processing route will be sufficiently well determined to allow the final scope of the feasibility study to be defined. If the results from this stage confirm the economics of the project to be similar to the scoping study undertaken by the Company already, then it is expected that the final stage of the feasibility study can be completed by the Company around the second quarter of next year allowing a decision to commence mining at Tom's Gully to be made at this time. The scoping study undertaken by the Company showed the potential for the establishment of an underground mining operation producing 35,000 to 40,000 ounces of gold per annum with processing being done at the Company's existing Tom's Gully 250,000 tonnes per annum CIP gold treatment plant.

The advancement of the Company's Northern Territory mining assets through this drilling program at Tom's Gully and the Company's mining and gold production activities at the

ACN 003 049 714

nearby Quest 29 gold mine continue the Company's development as an emerging gold producer.

Northern Territory - Other Exploration Areas

The Company has approximately 270 square kilometers of granted Exploration Licenses within cartage distance of Tom's Gully or Ouest 29 infrastructure and an additional 8 exploration licenses (597 square kilometers) under application.

These tenements cover a significant segment of the Pine Creek Geosyncline that has not been subject to modern detailed exploration. Early prospectors have sampled narrow gold bearing quartz veins and float in the past within the licence areas but detailed exploration in the vicinity of these finds has been hampered due to the presence of extensive soil cover. The recent advent of digitally acquired remote sensing data has highlighted the prospectivity of the new licence areas with several structural/chemical exploration targets recognisable from the data. The combination of localised grid based ground magnetics and economically effective modern geochemical sampling methods will be used in defining drill targets within these new tenements.

Before detailed exploration work can commence, site clearances will be carried out in conjunction with the registered Native Title claimants.

$2.$ Other Projects

During the quarter, the Company also continued to evaluate further acquisition and investment opportunities in the resources sector focusing on projects that could be developed as mines within a 2 to 3 year timeframe.

$3.$ Capital Raising

The Company undertook a capital raising during the quarter of \$1.2 million by way of a nonrenounceable pro-rata entitlement issue of convertible notes to existing shareholders. Through subscriptions from shareholders and placement of the shortfall by the Company, this issue was fully subscribed. The funds from this raising, together with the recently completed \$1.5 million placement of convertible notes to institutional and professional investors, are being applied to the commencement of operations at Quest 29, completion of the Tom's Gully feasibility study and for general working capital purposes. The convertible notes were quoted on the ASX during the quarter (ASX code: RSNG) and have a term of 4 years with a minimum 10% yield linked to the Australian dollar gold price and have the right to convert into ordinary shares at a conversion price of 5 cents per share.

ACN 003 049 714

$\overline{4}$ . Corporate

ASX Announcements made during the Ouarter included:

• 22 July 2003 Commencement of Mining at Quest 29 Gold Mine
• $\bullet$ 22 July 2003 Capital Raising Update
• 29 July 2003 Drilling Program Commences at Tom's Gully Gold Mine
• 31 July 2003 Quarterly Activities Report
• $\bullet$ 31 July 2003 Quarterly Cashflow Report
• $\bullet$ 20 August 2003 Capital Raising Fully Subscribed
• 27 August 2003 Capital raising Update / Top 20 Convertible Note Holders
• 19 September 2003 Gold Production Commences at Ouest 29 Gold Mine
• $\bullet$ 30 September 2003 Financial Accounts
• 7 October 2003 High Grade Gold Intercepts at Tom's Gully
• 27 October 2003 Notice of Annual General Meeting
• $\bullet$ 27 October 2003 Annual Report
• 29 October 2003 Amendment to Partly Paid Shares Call Program
• 30 October 2003 Further High Grade Gold Intercepts at Tom's Gully

5. Summary

The Company maintains its focus on ensuring that its endeavors are aimed towards maximizing returns to shareholders by adding value to shareholder's funds through long-term growth in the assets and earnings of the Company. The immediate focus is the continued development of the Company as an emerging gold producer through the development of its considerable Northern Territory mining assets including the Tom's Gully and Quest 29 gold projects. The Company will also continue to consider and evaluate further acquisition and investment opportunities in the resources sector.

For and on behalf of the Board

JPK Marshall Company Secretary Brisbane, 31 October 2003

For further information contact: Richard Seville or Stephen Bizzell Phone: (07) 3832 6488 Fax: $(07)$ 3832 6261 E-Mail: [email protected]

The information on ore reserves and mineral resources contained in this report is based on information compiled by Mr Chris Creagh who is a member of the Australian Institute of Mining and Metallurgy. Mr Creagh has relevant experience in relation to the mineralisation being reported on to qualify as a Competent Person as defined by the Australasian Code for Reporting of Mineral Resources and Reserves.