September 2015

QUARTERLY ACTIVITY REPORT

Key Highlights

Production

Quarterly production of 13,409 Au oz and 9,652 Ag oz in line with the goal of achieving total production of 50,000 Au oz for calendar year 2015. For the 9-month period ended September 2015, total gold production reached 37,010 Au oz.

Quarterly production achieved at an average quarterly cash cost (C1) of US$539/AuEq oz and AISC of US$649/AuEq oz.

Exploration

In our Amancaya project, we completed all of the surface geological mapping as well as sample collection.

Mergers & Acquistions

Binding agreement signed to acquire the remaining 80.1% of shares not already held by Austral Gold and dual-list on the TSX-V.

A further payment of US$3 million was paid to Yamana Gold in relation to the acquisition of the US$12 million Amancaya Project. Total outstanding balance is US$5 million to be repaid within the next 12 months.

Cash Generation

Quarterly cash flow from operations was US$2.9 million and as at 30 September 2015 cash and cash equivalents reached US$7.4 million.

CHILE

Guanaco Mine

Background

The wholly-owned Guanaco mine remains the Company's flagship asset. Guanaco is located approximately 220km south-east of Antofagasta in Northern Chile at an elevation of 2,700m and 45km from the Pan American Highway. Guanaco is embedded in the Paleocene/Eocene belt, a geological structural trend which runs north/south through the centre of Chile, and hosts several large gold and copper mining operations including: Zaldivar, El Peñon and Escondida.

Currently, the majority of the ore processed from the Guanaco operation comes from the Cachinalito underground system and nearby vein systems with higher average grades.

Gold mineralisation at Guanaco is controlled by pervasively silicified, sub-vertical E/NE trending zones with related hydrothermal breccias. Silicification grades outward into advanced argillic alteration and further into zones with propylitic alteration. In the Cachinalito vein system, most of the gold mineralisation is concentrated between depths of 75m and 200m and is contained in elongated ore shoots. High grade ore shoots (up to 180 g/t Au), 0.5m to 3.0m wide, have been exploited, but the lower grade halos, below 3 g/t Au, can reach up to 20m in width. The alteration pattern and the mineralogical composition of the Guanaco ores have led to the classification as a high-sulfidation epithermal deposit.

Production

Production from underground operations using the heap leach process generated 13,409 gold ounces (Au oz) and 9,652 silver ounces (Ag oz) during the quarter ended 30 September 2015. When measured in gold equivalent ounces* (AuEq oz) total production was 13,553 AuEq oz compared to 12,339 AuEq oz in the prior quarter and 12,698 AuEq oz in the same quarter of the previous year.

Gold and Silver Production

For the September 2015 quarter the average operating cash cost1 (C1) was US$539/AuEq oz while the all-in sustaining cost2 (AISC) was US$649/AuEq oz (US$597/AuEq oz and US$771/AuEq oz respectively for the quarter ended 30 June 2015).

* AuEq ratio is calculated at 67:1 Ag:Au

1. The operating cash cost (C1) for the Guanaco Mine includes: Mine, Plant, On-Site G&A, Smelting, Refining, and 3% ENAMI Royalty.

2. The all-in sustaining cost (AISC) for the Guanaco Mine includes: C1, Sustaining Capex, Exploration, and Mine Closure Amortisation.

3. Nine-month period ended September 2015.

1,184

AuEq oz Production per Quarter (calendar year)

18,000

16,000

14,000

Production (AuEq oz)

12,000

10,000

8,000

6,000

4,000

2,000

-

1,287

1,226

1,198

547 476 597597

539

1,400

1,139

1,200

US$/AuEq oz

1,000

800

600

400

200

-

3Q2014 4Q2014 1Q2015 2Q2015 3Q2015

Cash Cost (US$/AuEq oz) AuEq oz Production Realized Gold Price (US$/AuEq oz)

Mining

During the September 2015 quarter, mining continued at the Cachinalito underground operations with a total of 83,187 tonnes mined at an average grade of 3.43 g/t Au and 5.56 g/t Ag. The crushed and leached ore totalled 100,612 tonnes for the quarter at an average grade of 2.91 g/t Au and 5.35 g/t Ag.

Total underground mine development was 926 metres for the September 2015 quarter leading to a total of 1,977 metres for the 9-month period ended September.

Safety

During this quarter, no lost-time accidents (LTA) occurred, and two nil-lost-time accidents (NLTA) were reported involving employees of Guanaco and third party contractors. Safety and environmental protection are core values of the Company. The implementation of best practice safety standards along with a sound risk management program are key priorities for Austral Gold.

Exploration Program

Production Summary

September Quarter FY16

The Geology team continued to advance on the exploration program within the current development area of the Guanaco deposit. During this period, underground works were mainly performed at the Aurora vein and the Dumbo sector at 2,570 and 2,670 levels respectively.

The exploration program during the quarter comprised the following main activities: (i) design of underground drilling campaign for next quarter (1,128 metres of Diamond drilling); (ii) execution of geophysics studies including detailed ground magnetics survey totalling 980.5km of profiles (done since the beginning of the calendar year); and

(iii) evaluation of potential geological resources located in the south of the Cachinalito structure, amongst others.

Other Activities

• The Company celebrated Miner's Day on August 10 and different sporting and other activities were organised at the Guanaco site.

  
  

• A massive 8.3-magnitude earthquake struck the centre of Chile on 16 September 2015. As a result, the Company activated its contingency plan to take home all personnel whose families were affected by this situation. In total 16 employees were transferred in a special bus to their towns of residence (Illapel, Canela, Coquimbo and Ovalle).

Guanaco Area Tenements Status

A complete list of the mining tenements in which the Company has an interest is presented in Appendix A attached to this report. The Company's interests in these mining tenements have been combined for Chile during the quarter. Approximately 3,415 hectares of the Guanaco properties were transferred from being classified as mining claims in process to constituted mining claims during the period. All mining properties are fully owned by the Company through its subsidiaries.

Amancaya Project

Development of the Amancaya Project

During the September 2015 quarter, all of the surface geological mapping works were completed in the Amancaya district with 50 samples taken for petrographic studies and 78 samples taken for ICP analysis.

The epithermal vein sector presents more than 70% post-mineral cover providing the opportunity to find new structures beneath these rocks. In addition, quartz floats allowed the identification of new structures and defined structural blocks inside the mineralised corridor.

Amancaya Tenements Status

A complete list of the mining tenements in which the Company has an interest is presented in Appendix A attached to this report. The Company's interests in these mining tenements have been combined for Chile during the quarter. Approximately 2,845 hectares of the Amancaya properties were transferred from being mining claims in process to constituted mining claims during the period. All mining properties are fully owned by the Company through its subsidiaries.