Quarterly Report

For the period ending 31 December 2015

HIGHLIGHTS

• Strategic mining review during the quarter resulted in the lead time to gold production from re-commencement of Charters Towers operations being shortened to 10 months. This assessment was made possible by the geological work over last the 2 years, planning sessions in the previous quarter, the rethinking of lead-time constraints and the commercial benefit imperatives for an incoming financing partner.

• The business plan review was able draw on over the 5 years of analysis of how to automate an underground gold reef mine and Citigold is now in a unique position of have a clear view of how this will be implemented in parallel with the re- commencement of gold mining.

• The commercial negotiations between Citigold and Fortune Gems and Jewelry DMCC were finalised resulting in an alteration to the redemption date of the redeemable notes to 21 March 2016 and an extension to our long term relationship.

• Major funding negotiations continue with the recent strengthening of the US$ gold price assisting, and the Company is working towards finalizing the major funding of the Charters Towers Project.

• Capital raising of $300,000 during the quarter was used for working capital, confirming the continued support of investors and shareholders.

OPERATIONS

The underground operations and processing plant continue to be on active care and maintenance. The team at the mine and processing plant sites continues to prepare the site in readiness to move back in to gold production once the required funding is secured. This includes underground inspections, preparation and planning for the dewatering, minor site works and general maintenance to the infrastructure.

The preparations for the wet season were completed and whilst Charters Towers has only received moderate rainfalls to date the site is ready for a tropical wet season.

No production mining operations were undertaken during the quarter.

Citigold's geologists have continued to develop the new data capture and interrogation system in anticipation of the initiation of drilling in the near future. The team has been

focused on several key projects including a major undertaking to re-define its mineral targeting criteria. These advances were driven by the need to consolidate and strategically fine-tune the company's data acquisition and data query methodologies. Emphasis has been placed on re-defining the lithological and mineralogical associations observed in drill core and on surface exposures. This comprehensive review is ongoing but has so far resulted in the generation of a more efficient and more effective system of capturing geological data.

These new data interrogation techniques have already proven successful in allowing Citigold to prioritise targets on its exploration permits surrounding Charters Towers.

This process has been aided by the 3D Mine software in use for the last 3 years. Its powerful and efficient 3D graphical capabilities and ease of use, due to a smarter approach to the problem, are in our experience way ahead of cumbersome old world industry packages.

This same open minded efficiency driven approach is also producing results through work by Adrok with innovative geophysics techniques that have been tailored and proven very suitable to our particular gold mineralized system at Charters Towers.

Overall our innovation program in exploration and mining is driven by finding what is useful and works at Charters Towers rather than what is applicable across the industry.

HEALTH, SAFETY & ENVIRONMENT

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

During the quarter and previous quarters the sites were actively maintained.

The Company's mine sites have been established so as to have the minimal land surface area thereby minimizing surface impact.

With the planned underground expansion there will be a shift from an internal own operator workforce model to an outsourced multi contractor operated model. This will more fully generate benefit to and from the already substantial local industry infrastructure. The market has changed in that skilled operators are now available compared to previous 'boom' years.

Citigold's systems will be used to ensure the ongoing good health, safety and environmental performance is maintained.

STRATEGIC REVIEW

During the December quarter there was a significant amount of time spent on fine tuning the business plans. This will ensure Citigold is in a ready state position to move back into production at the earliest possible time once the major capital funding is secured.

Citigold has a plan to develop the project in stages over a five year period, subject to adequate capital funding, building gold production to over 300,000 ounces per annum. In addition to the 148 square kilometre central goldfield, Citigold has surrounding exploration areas with identified targets and potential for major discoveries.

This is founded on the knowledge of the defined gold deposit that has a high average grade of 14 g/t gold and is large at 11 million ounces*. Nevertheless it has the usual reef geometry and continuity challenges that can be managed based on recent experience with 'trial' scale mining and the mining system cost savings that will result.

The surface infrastructure to support underground mining is already in place including the gold process plant.

Citigold has a motivated and experienced core management team focused on expanding into an ultra low cost gold producer. An ultra-low cost per gold ounce is realistic.

The Charters Towers gold deposit is large and forecasts show that it has the potential to generate substantial positive cash flows for over 20 years.

First 1 to 3 years of mining

The first three years of mining will initially see the extension of the Central Tunnel (decline underground roadway) to the King Shaft and the mining of adjacent gold reefs. The King Shaft will be re-opened and secured. The King Shaft will act as a second fresh air intake ventilation shaft and as a second exit (egress) from the mine in accordance with statutory requirements.

The Central Tunnel roadway will be extended from a current point vertical depth of 201 metres from surface to initially junction again with the Brilliant Block Shaft at a vertical depth of 238 metres for fresh air intake and then continues to the King Shaft junctioning at a vertical depth of 364 metre. Should the King Shaft reopening have unavoidable complexities then a new smaller shaft will be drilled nearby (raise-bored).

This Central Tunnel extension will open up the gold ore reefs C03W, C38 and C39 respectively (see Figures 1-3) and then move on to C05E. Access to the C03W, C38 and C39 will come off the Central Tunnel extension, and gold reef access tunnels (drives) will be driven at 20 metre vertical levels to provide closely-spaced grade control samples. High volume gold ore extraction (stoping) will commence once these levels are developed and the King Shaft emergency second exit (egress) established.

Figure 1. Plan view of the Central Mine area of the Charters Towers Gold Project. The existing Central Tunnel (decline) (in green) runs westward from the Central Portal for 1.6 kilometres where it intersects the vertical Brilliant Block Shaft and draws in fresh air. The planned extension to The Central Tunnel (in yellow) runs northeast for a kilometre to intersect the existing King Shaft at a vertical depth of 364 metres. The King Shaft will initially act as a second downcast fresh air intake ventilation shaft and as an a second exit (egress) from the mine. Access to the C03W, C38 and C39 will come off this Central Tunnel extension, and access tunnels (drives) will be excavated at 20 metre vertical levels to provide closely-spaced grade control samples. Gold ore extraction (stoping) will commence once these levels are excavated and the King Shaft access established.

The first year mining is projected to commence in C03W reef and should take the Project well into year 2 and 3, with total projected production of 133,153 ounces of gold.

At the same time, the Project will start opening up C38 and C39 reefs with an additional projected gold production of 91,945 ounces. As part of the ongoing underground development during Year 3 the plan is to extend the Decline and open up C05E, which will open up projected additional ore of 108,126 ounces of gold. C05E is planned to be mining in Years 3 to 4.