Dragon Mining Limited Quarterly Activities Report

For the Quarter ended 30 September 2015

Quarter Overview‌‌

• Improved safety performance continued with a Lost Time Injury ('LTI') free quarter reducing the Group's 12 month rolling LTI frequency rate per million work hours to 3.08, an 85% reduction compared to Q2 2014. Management remains focused on continuing to improve safety and to this end have ordered new seismic monitoring equipment at Orivesi and are seeking to obtain approval from Mine Inspectors to replace underground safety ladders with emergency evacuation cages.‌‌‌

  
  

• Gold production of 14,270 ounces included 4,124 ounces produced from external concentrate sources at the Svartliden Production Centre in Sweden.

  
  

• Concentrate processing at the Svartliden Production Centre included 100% of the concentrate from Jokisivu. Metallurgical issues prevented the processing of Orivesi concentrate at Svartliden, instead this was delivered to the Boliden refinery. The processing of external concentrates continued to ramp up during the quarter, generating a further benefit to the Group revenue stream.‌‌‌‌

  
  

• A Group C1 Cash Cost of US$942/oz was achieved during the quarter. This achievement was in line with the C1 Cash Cost from the previous quarter and was again driven by the improved recovery from the Vammala Plant and the reduction in refining costs associated with the processing of Jokisivu concentrate at the Svartliden Production Centre.‌‌‌

  Company receiving the remaining A$750,000 of the A$1.0 million cash consideration payable (plus penalty interest of A$128,773) pursuant to the Share Sale Agreement. Ausinox plc also reimbursed the Company an additional A$33,742 which represented costs incurred, over and above the purchase price, by the Company as a result of the delays in completion.

  
  

  Quarter at a Glance

  
  

  Gold Production	14,270 ounces
  C1 Cash Cost US/oz(1)	US$942
  Safety Performance	0 LTI
  Available Cash(2) (Quarter end)	A$18.6m

• For the Vammala Production Centre, the Group uses the C1 Cash Cost definition as set out by Mackenzie Wood. For the Svartliden Production Centre, the Group calculates C1 Cash Costs by including total production costs (which includes concentrate purchases) divided by total ounces sold from all sources.

• Available Cash = Cash at bank plus Receivables less Accounts Payable.

  
  

• Statutory Tailings Storage Facility ('TSF') inspections were conducted by the environmental authorities in Finland and Sweden. The inspections confirmed both TSF's are approved for continued use.

  
  

• Sale and Purchase Agreement to acquire the Fäboliden Gold Project completed, with the Company and the Bankruptcy Estate agreeing to amend the condition relating to the extension of the existing Environmental Permit in consideration for a lower total purchase price of 38 million SEK. 6 million SEK had already been paid, the remaining 32 million SEK was paid on 30 July 2015.‌‌

  
  

  20,000‌

  Ounces

  15,000

  10,000

  5,000

  0

  Dragon Mining Quarterly Gold Production

  and C1 Cash Cost

  USD/Oz

  3,000

  2,000

  1,000

  2Q13

  3Q13

  4Q13

  1Q14

  2Q14

  3Q14

  4Q14

  1Q15

  2Q15

  3Q15

  0

  
  

  Ounces Produced (Oz, LHS) C1 Cash Cost (USD/Oz, RHS)

• Results from the Fäboliden infill program were received during the quarter. The results from the drilling program have shown that the high grade zone displays good continuity both down dip and along strike; the grades received from drilling are commensurate with the results from historic drilling.

  
  

• Available cash was depleted by A$3.5 million during the quarter. Available cash (bank accounts plus trade receivables less accounts payable) totalled AU$18.6m at the end of the quarter (details of cash movement are given on page 10).

  
  

• The Sale of the Weld Range Metals investment to Ausinox plc was completed during the quarter, with the

Ore Mined vs Ore Milled

300,000

200,000

100,000

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

0

Ore Mined (t) Ore Milled (t)

Page | 1

Operations Review

The Group's gold production for the quarter was 14,270 ounces at a C1 Cash Cost of US$942/oz.

To compensate for lower production from Orivesi, ore production from Jokisivu was increased. Production at Orivesi will be limited to existing sill pillars until the new stopes are available in December. Drilling and blasting has commenced with some cracking in the rock making progress difficult.

The ramp up in concentrate throughput at Svartliden continued during the quarter with

4,124 additional ounces sourced from external concentrate (Q2: 2,370 ounces). This was the first quarter that Svartliden processed concentrate only. Metallurgical issues associated with the processing plant caused precautionary production stoppages in September to ensure discharge limits were maintained. External technical assistance was sought and the resulting metallurgical recommendations are in the process of being implemented, yielding early positive results.

Vammala Production Centre, Southern Finland

1For the Vammala Production Centre, the Group uses the C1 Cash Cost definition as set out by Mackenzie Wood. For the September 2015

quarter, the calculation denominator has been changed to gold sold (rather than gold produced). The change was implemented at Vammala to ensure consistency across the Group.

2The total gold production includes a positive quarterly true up to reconcile the provisional ounces sold to Boliden against the final gold

outturn from Boliden.

Safety

September represented the ninth consecutive month of zero LTI's. The rolling 12 month accident frequency rate per 1 million working hours reduced from 20.3 at the end of Q4 2014 to 3.9 in Q3 2015.

During the quarter:

• A two week maintenance shutdown at the Vammala Mill was completed without any accidents or incidents;

• New blasting procedures were implemented for the Orivesi Mine;

• A design for emergency evacuation cages has been presented to the Mine Inspectors for approval;

• Prior to the maintenance shutdown, a safety focus has continued on those issues related to heightened risks surrounding the performance of non-routine tasks; and

• A total of 11 reportable incidents were reported during the quarter; 3 at Orivesi, 6 at Vammala and 2 at Jokisivu.

  
  

  Production

  
  

  Gold production at the Vammala Production Centre for the quarter was 10,146 ounces, which was 368 ounces below forecast. Mill feed at Vammala comprised 26,783 tonnes from

  Orivesi at 6.0 g/t gold and 48,521 tonnes from the Jokisivu at 4.2 g/t gold.

  
  

  Orivesi is presently attempting to mine out the remaining sill pillars while the decline is progressing to the new stope are. Overall ore

  
  

  production volumes have been maintained but with lower grade ore from Jokisivu.

  
  

  Orivesi Gold Mine

  
  

  Production from Orivesi was 16,646 tonnes of ore (57% below forecast). Mining capacity was affected by the difficult condition of the stopes that were in production.

  
  

  The Kutema decline advanced 91 metres by the end of the quarter to the 1,120m level.

  
  

  Development works advanced a total of 456 metres during the quarter, this being 56 metres above forecast.

  
  

  Jokisivu Gold Mine

  
  

  Ore mined totalled 38,894 tonnes (16% above forecast) and development advanced 480 metres (60 metres above forecast) during the quarter. Production from Jokisivu has been ramped up to help compensate for the reduced ore production from the higher grade Orivesi mine.

  
  

  The deepening of the main decline has advanced as planned to the 340m level.

  
  

  Vammala Plant

  Ore milled totalled 75,304 tonnes and mill recovery averaged 85.9%.

  
  

  The following occurred during the quarter:

  
  

  • Follow up work has shown the new cyclones have resulted in a flotation recovery increase of 1% - 3% for Orivesi ore, better size classification and less ultra-fines;

  • The maintenance shutdown began as planned on 27 September 2015. Primary tasks involved replacing the conveyor from the cone crusher to the silo, replacing the rotators and stators for the rougher flotations cells, replacement of the transformer for the crusher and repair work for the Larox filter;

  • TSF embankment raising work was completed as planned by the beginning of August 2015;

  • A statutory TSF safety inspection was completed by the relevant authorities. The TSF is being operated and maintained as intended. The inspection confirmed the dams can be raised with minor modifications; and

  • Dust from the TSF resulted in the Company receiving one complaint from neighbours during the quarter. Two sprinkler systems were installed during the quarter. The area has been watered continuously with lime milk and dust binding chemicals (Refer to Environment - Vammala Plant Section).

Environment

Vammala Plant

The new Environmental Permit for the Vammala Plant was granted in June 2014 and - as detailed in the Company's quarterly announcement on 31 July 2014 - was later appealed by the Company (and a few other parties).

In September, the Vaasa Administrative Court requested the Company's response with regard to statements and opinions it had received concerning the appeal. The Company provided its response on 5 October, after which the Vaasa Administrative Court should have enough information to determine a ruling.

During spring and early summer, strong winds combined with work to raise the TSF embankment resulted in the Company receiving dust complaints. As a result, a statement

outlining any potential health impacts was requested by the ELY centre and the health inspector for the Sastamala Municipality ('Relevant Authorities'). The statement was completed by the Finnish Institute of Occupational Health and delivered to the Relevant Authorities on 31 August 2015. The Company's preventative actions produced positive results and have been continued throughout the quarter. The Relevant Authorities have confirmed that the preventative actions taken by the Company were adequate.

The inspection of the TSF embankments, carried out every fifth year, was organised for September. The inspection confirmed the TSF embankments are being operated and maintained as planned and can be raised higher after minor repair work.

According to monthly water analyses, the discharge amount of nickel and sulphate continued to decrease by comparison to previous years. This is mainly the result of seepage waters being pumped successfully back to the TSF.

Orivesi Gold Mine

In August, as part of the review process associated with renewing the Orivesi Environmental Permit the permit setting authority, The Regional State Administrative Agency ('AVI'), asked the Company's opinion on the statements provided by the ELY Centre and Metsähallitus, the state land owner, regarding the Natura assessment that was completed in late 2014. The statements are not binding on AVI and, as expected, both questioned the granting of a new Environmental Permit. The Company responded accordingly to both statements on 16 October.

Noise mitigation work continued during the quarter. The noise silencers were inspected and found that some lamellas in the fan were damaged. New lamellas have been ordered and are to be installed as soon as possible. Noise measurements will be carried out after the installation has been completed.

Orivesi operated according to its permit conditions in August and September. In July, monthly water analyses showed that aluminium concentration (6,900µg/l) exceeded the Environmental Permit's limit (3,000µg/l). The ELY Centre requested a report of the reasons for the breach and planned future preventative actions. The report was submitted in August and was approved by the ELY Centre by late September, no remedial actions were required.

As a result of test fishing, carried out in the lakes downstream every third year, a number of fish were caught in the lake Ala-Jalkajärvi (within the immediate vicinity of the site). In 2009 and 2012, previous test fishing occasions, no fish were caught in the lake.

Jokisivu Gold Mine

The Environmental Permit application for crushing waste rock at the Jokisivu mine site was submitted to AVI in July. The permit will allow the crushing of a maximum 100,000 TPA. The waste rock is considered inert and therefore is suitable for using as an aggregate.

Discharge water limit monthly analyses confirmed the mine continues to operate according to its permit conditions. The analyses sampled in August showed anomalous concentrations of e.g. sulphate and nitrogen in the ditch downstream when compared to previous water analyses. Concentrations are related to seasonally low water flows.

Kaapelinkulma Gold Project

In April 2015, the Supreme Administrative Court handed down its decision to dismiss the appeal of the Nature Conservation Organization of Pirkanmaa, which was concerned with the possible threat to a local protected butterfly's habitat, by the Company's mining activities. The decision by the mining authority Tukes, to issue a Mining Concession for Kaapelinkulma is now final and the process for ordering the Mining Concession is proceeding. Consequently, a meeting with local land owners providing information regarding the land purchase was organised by the Company in September with follow up negotiations planned for the coming quarter.