Zimbabwe

• February 2007 saw the purchase of Falgold (84.7%) and Olympus (100%) gold mining companies
• Initial attributable reserve estimate of 0.58 million ounces within 2.17 million ounces of gold in resources
• Sustain production levels around 20,000 ounces in the short-term
• Good infrastructure, a skilled workforce and easy logistical access to South Africa

Central African Gold acquired an 84.7% interest in Falcon Gold Zimbabwe Limited (Falgold) and the entire issued share capital of Olympus Gold Mines Limited (Olympus), two Zimbabwean-based gold mining companies on 1 March 2007.

Falgold and Olympus (both companies will be merged as Falgold) control the rights to extensive claim areas located throughout Zimbabwe, with exploration properties and five mining operations centered on the Kadoma, Shurugwe and Bulawayo regions. In the financial year to 31 September 2006, the companies generated turnover of ZIM$1.83 billion (approximately £3.75 million) and an attributable net profit of ZIM$199.7 million (approximately £409,045) having produced 21,031 ounces of gold. (Due to hyperinflation in Zimbabwe, the conversion rates from Zimbabwe Dollars to Pounds Sterling are likely to vary materially).

While Falgold and Olympus have been valued on properties and operations that have mineral assets with defined mineral resources and ore reserves, the two companies have significant additional ground holdings, covering approximately 12,300 hectares, not included in the valuation but considered to be geologically prospective. A Competent Person’s Report commissioned by CAG, indicates that with the requisite work, these additional properties could add material value to both Falgold and Olympus.

Falgold, listed on the Zimbabwe Stock Exchange (ZSE), and Olympus, which is an unlisted private company, share the same management and majority shareholders. It is CAG’s intention to incorporate the Olympus assets into Falgold, which will remain listed. CAG believes the listing gives the people of Zimbabwe access to an exciting company and sector of their economy. CAG continues to actively engage with the Reserve Bank of Zimbabwe, Ministry of Mines and Zimbabwe Stock Exchange to ensure that Falgold is able to function effectively and efficiently.

History

Falgold is a Zimbabwean company, first listed on the ZSE in 1991 with a history of operations dating back to 1910. The current company was incorporated in 1989 to facilitate operations in Zimbabwe. The company has 111 million issued shares, from an authorised share capital of 115 million. Olympus is a private Zimbabwean company with two operations, namely the Old Nic mine and a heap leach operation at Camperdown.

Falgold and Olympus share management and have common controlling shareholders. Over the past 14 years, Falgold has seen a number of changes. Operating mines have ranged between two and five and there has also been treatment of residue dumps. Over the last decade, other than current activities, plant operations have included Antelope mine (1993 – 1995, tailings retreatment), Globe and Phoenix mine (1996 – 1998, surface and underground operations), Bell-Riverlea mine (1996 – 1998, underground) and Venice mine (1993 – 2002, underground at the Venice complex and Grandeur mine, tailings treatment at Venice).

Current Operations

Current plant operations are at Dalny mine complex (Dalny mine underground ore and Rix tailings treatment), the Golden Quarry/Camperdown (“GQ/C”) mine complex (Golden Quarry mine underground ore, Camperdown mine quarry) and the Old Nic mine (underground).

• Dalny mine is situated 36km north of Kadoma in the Chakari district, approximately 175km south-west of the capital, Harare. On current reserves it has an estimated life-of-mine of approximately six years as an underground operation plus an additional one year of tailings recovery. Work has been initiated investigating the potential for the development of a number of open-pit, low-grade, bulk-mining operations within the greater Dalny shear zone.
• The Golden Quarry mine is situated approximately 30km south-east of the town of Gweru (approximately 180km north-east of Bulawayo) and consists of an operational underground mine with a dedicated milling circuit and beneficiation plant.
• The Venice mine, which has a wide range of exploration targets, is located approximately 28km south of Kadoma and is currently on care and maintenance. The mine has a modern metallurgical facility that has capacity to process 18,000 tonnes of ore per month. This area is a high priority target for CAG in terms of exploration potential.
• Olympus holds the rights to the Camperdown mine located on claims to the north-east of Shurugwi approximately 30km south-east of Gweru. Production is sourced from a dual open pit (low grade to heap leach) and underground (milling – CIL) operation with a life-of-mine of approximately seven years. The expansion of production at Camperdown mine is a top priority for CAG, and diamond drilling scheduled early 2008 will underpin the right-sizing of a future capital project.
• Olympus also operates the Old Nic mine near Bulawayo, one of the oldest gold mines in Matabeleland. The mine currently has an estimated two year life, although we believe this could be extended with additional exploration.

Mineralisation

The existing ore bodies within the Falgold stable of mineral rights can be described as a classic mixture of mesothermal, structurally controlled zones of gold mineralisation, typical of most Archean greenstone belts around the world. Previous mining has commonly exploited 4-10 g/t vein-style ore bodies that are located within a broader mineralised envelope that characterises the controlling shear corridor, ranging in widths of 1-50m.

Host rocks vary between mafic volcanics, metasediments/volcaniclastics, banded iron formation, granodiorite, granite and often quartz and quartz-feldspar porphyry intrusives. Probably the most significant aspect in the localisation of the ore zones are the rheological differences between lithologies, which upon deformation preferentially control the geometry of shearing, as well as localising mineralising fluids into favourable structural sites and host-rock receptors.

Gold mineralisation is commonly associated with influxes of carbonate and silica, with alteration assemblages including sericite, chlorite, graphite, carbonate, quartz and sulphides. Gold may occur in its native state, or commonly in association with sulphides such as pyrite, arsenopyrite, pyrrhotite and chalcopyrite.

Mine Development Plan 2007-2008

During 2007 CAG has initiated revising and updating the mineral resource estimates and ore reserve classification in terms of JORC guidelines, as well as applying modern and efficient mining techniques to improve the productivity and profitability of the operations. Where appropriate, surface exploration and underground mine plans are in the process of being digitised and collated into coherent geological models. All the underground orebodies will be remodeled, and mineral resource and ore reserve estimates reviewed and, where necessary, estimation procedures standardised across the group.

Zimbabwe Exploration Programme 2007-2008

CAG is in the process of assembling a small, yet well-qualified and proficient Zimbabwe exploration team, which is supported by the head office generative (remote sensing and structural geology) and geological modeling and resource estimation teams. The exploration programme during 2007 is focused largely on data compilation and digitisation, so as to enable a better understanding of the scope and nature of targets, as well as prioritisation of follow-up work. A fundamental step forward on all the properties will be satellite image enhanced mapping studies, including structural analyses and modeling of ore bodies where applicable information is available. The emphasis on target prioritisation will be on delineation and evaluation of opencast opportunities.

These exploration programmes will have a significant effect on the Falgold growth strategy through:

• The anticipated increase of all the operations’ life-of-mine through underground drilling;
• certain opencast opportunities providing flexibility in assessing plant expansion options; and
• structural studies providing predictive models that in turn will improve the “hit rate” of exploration drilling, as well as the basis for sustainable production.

With these objectives in mind, field exploration has been initiated on the opencast targets of the Dalny shear zone, inclusive of multi element soil geochemistry, trenching, and heap leach bench test-work on mineralised zones. Surface RC and DD programmes are planned based on the outcome of the above work, which will ultimately advance certain targets to mining stage. Also, an underground drilling programme has been initiated at the Dalny main project, where a broad (10-30m) mineral envelope grading 2-4 g/t is being evaluated from surface to 9L to test a conceptual open pit target (+1 million oz).

A diamond drilling programmme has been planned , and scheduled for Jan 2008, to further delineate the + 1 million oz Au opencast expansion at Camperdown.