GOLDSTAR RESOURCES NL (ASX: GDR)

Open Briefing®. Goldstar Resources. Fast Tracking Tubal Cain

Record of interview:

corporatefile.com.au

Goldstar Resources NL last week announced a revised and expanded exploration and development strategy encompassing both the Eureka and nearby Tubal Cain deposits at its Walhalla Gold Project in Victoria. Can you briefly explain the main aspects of the revised and expanded strategy?

Managing Director Andrew King

What’s happened in the last few months is that we’ve seen a number of significant positives coming together for us at both Eureka and Tubal Cain. The delivery of the report by the independent geologist, SRK Consulting, with its statement regarding the ability to drill out dyke bulge style deposits, coupled with the recent success we’ve had with the drilling in the upper levels of Tubal Cain and the positive feedback we’ve received about our preferred long-term plant location, has provided us with the impetus to look at an expanded development approach.

In simple terms, we are now looking at the ability to deliver our first production hub fed by initially two mines delivering +100,000 ounces of gold production per annum, potentially three years ahead of our original strategy – rather than developing a small-scale start-up operation at Eureka followed by Tubal Cain several years later. The focal point of this expanded strategy is a proposed new location for the processing facility at a site we’ve called Southern Crown, near Tubal Cain. We see this as forming a key southern production hub within our broader lease area, treating ore initially from Eureka and Tubal Cain, but also potentially processing ore from other dyke bulge deposits in the area.

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You’ve stated that the findings of the Eureka Feasibility Study support an expanded Tubal Cain strategy. Can you explain why Tubal Cain has assumed greater importance? What is its relative potential compared with Eureka?

Managing Director Andrew King

We’ve always viewed Tubal Cain as a potential company-maker for Goldstar. Previously, our focus was to delineate an area that could deliver a bulk sample out of Tubal Cain because this was seen as the only way of achieving a set of figures that would justify debt and equity funding of the project. The SRK Report, with its statement regarding the ability to drill out these dyke bulge style deposits to enable estimation of Indicated Resources, was a key driver in a re-think about the quickest way of bringing Tubal Cain into production, and hence enable a major uplift in our production profile.

I think a good way of comparing Eureka with Tubal Cain is to look at the historical production from each deposit. Eureka produced 3,000 ounces at 16 grams (1/2 ounce) per tonne and, by comparison, Tubal Cain produced around 30,000 ounces at 31 grams (1 ounce) to the tonne. We see these relative historical production levels reflected in the work we’ve done to date at each deposit, where Tubal Cain has already delivered a much higher tonnage per vertical metre than Eureka, and we are starting to see an increase in the number of visible gold hits in Tubal Cain.

We’ve always been very cautious about expecting visible gold hits to be reflected in high-grade assays, however the recent intercept of 4.7 metres at 9.1 grams per tonne did not just comprise one large hit with a few outliers. It included 1.05 metres at 29.6 grams per tonne and 0.3 metres at 14.6 grams per tonne, which clearly demonstrates the potential for broader zones of higher grade mineralization as opposed to spotty, narrow higher grade zones.

corporatefile.com.au

Goldstar announced an initial JORC Mineral Resource at Eureka Deposit of 153,000 tonnes at 10g/t containing 48,000 ounces of gold. Can you explain the significance of the ability to achieve JORC Resources by drilling alone? What are the implications across your ground holdings?

Managing Director Andrew King

As I’ve mentioned, the approach until now has been that we needed to undertake a bulk sample to deliver the level of confidence in these dyke bulges. As you can see from Eureka, these bulk samples cover only a relatively small proportion of the overall resource and are both time and capital intensive. The ability to drill these deposits out therefore represents a major step forward. We see it as enabling a significant cost and time reduction in the delineation of resources for dyke bulge style mineralization. Considering the time involved in conducting the Eureka bulk sampling exercise last year, you can appreciate the importance of this breakthrough.

Having said that, the bulk sampling has been a crucial part of our “Proof of Concept” approach. It has demonstrated that increasing sampling density delivers a potential uplift in grade and a corresponding increase in confidence level of the mineralization. Furthermore it has provided the necessary correlation between bulk sampling results and diamond drilling which has underpinned SRK’s report on the ability to deliver JORC resources.

There are a number of other dyke bulges on our lease and I think it’s fair to say that our exploration team is having a very close look at what opportunities are out there in front of us. I should be careful to point out that not all the historical deposits or all the zones of potential mineralization are dyke bulges, however let’s just say we’ll be looking at ways to use the information we’ve gleaned to date to further value add the exploration upside to Goldstar.

corporatefile.com.au

What were the major findings of the Eureka Feasibility Study? Is Eureka economically viable? How will you apply the knowledge gained from the Feasibility Study to other deposits or targets within the Walhalla Gold Project?

Managing Director Andrew King

Firstly, dealing with the Eureka Feasibility Study, the resource realistically accounts for less than 12% spatially of the overall Geological Model. In fact, the Indicated portion only encompasses the Reefs E3/E3A and E5, with very little drilling density in the remaining reefs around the Western Adit. As a result, we consider the results to date to be relatively conservative and encouraging.

What has been demonstrated in the bulk sampling program is that increasing sampling density, which can be by bulk sampling or drilling, tends to lead to an increase in grade. In simple terms the more holes you drill, the higher probability you have of achieving higher grade intercepts – which is what you’d expect in a coarse but finely disseminated gold environment such as Walhalla. The good thing about deposits like Eureka and Tubal Cain is that it appears there is a lesser tendency for the higher grade results to be extremely high, thus reducing the need to apply a harsh top-cut. Of course, we do get excited when we get a high-grade outlier.

Eureka has always been seen as a “Proof of Concept” with the paybacks on the plant and other capital not necessarily being exclusively funded by Eureka. After all, the plant is expected to have a 10 year plus life which is far in excess of what Eureka was ever expected to deliver. The capital cost as detailed for the mine was also based on going to at least 550 metres depth, while the current resource only extends to 350 metres. Based on the work we have done to date, we believe that there is a significant probability that further drilling, as defined in the SRK report, will lead to continued conversion of the Geological Model into Indicated and

Inferred status – which can then potentially be further converted into mineable tonnes.

It goes without saying that the information we have gained from Eureka will be used as the basis for a Feasibility Study on a combined Eureka/Tubal Cain production scenario. The processing plant already has front-end capacity of 400,000tpa. This was a conscious decision, based on our belief that we would find additional tonnages to feed the plant, for instance at Tubal Cain, and we did not wish to be capacity constrained up front. The balance of the processing facility has been designed on a modular basis with additional modules being added or potentially subtracted depending on tonnage available at each of our production hubs – bearing in mind, of course, that we are not talking about a multi-million tonne per annum operation at this stage.

corporatefile.com.au

Can you outline the revised exploration and development timetables at both Tubal Cain and Eureka?

Managing Director Andrew King

As we’ve outlined in the announcement last week, we have an aggressive exploration program now underway at Tubal Cain. Our total geological team and four drill rigs will be focused on delivering an Inferred Resource during the June quarter of 2008. With four drill rigs then committed to a 25 metre by 25 metre infill program on the top 300 metres, we are targeting an Indicated Resource in that zone by the end of calendar 2008.

In parallel with this, we will be running a Tubal Cain/Eureka Feasibility Study and Permitting program with the aim of being in a position to commence operational development in early 2009.

corporatefile.com.au

Can you summarise how the revised and expanded exploration and development strategy at the Walhalla Gold Project will lead to greater value creation for Goldstar  shareholders? What possible project size and scope do you envisage at Walhalla in the future?

Managing Director Andrew King

Just to recap on what we’ve covered. The ability to deliver Tubal Cain up to three years earlier feeding a production hub positioned in its long-term location from the start, we would consider as a major step forward. As we’ve indicated, we would like to think that Tubal Cain is a multiple of the size of Eureka with significantly thicker reefs. The ability to potentially couple Eureka and Tubal Cain together opens up the opportunity to deliver plus 100,000 ounce per annum production for Goldstar and set us on the path towards being a mid-tier producer.

We are very focused on delivering this in the shortest possible time, however there will always be some factors outside of our control that will impact final timelines. As I’ve said on several occasions previously, our focus has been to deliver sustainable gold production from the Walhalla Field. We would rather take a measured approach to achieve the maximum possible return to shareholders at an acceptable risk profile. Particularly in the current high operating cost environment in the resource sector, our Board is of the view that we need to spend shareholders’ funds wisely and ensure that we have thoroughly prepared the groundwork before committing to production. Our view is that the best way to add value to the Company in the short term is to drill out Tubal Cain to deliver JORC compliant resources as the basis for a much larger integrated development of the two deposits. That should lift us into the ranks of the mid-tier producers.

corporatefile.com.au

Thank you, Andrew.

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