Guanaco Project

Guanaco is located some 220 kilometres south east of Antofagasta in Northern Chile at an elevation of 2600 metres.

Location and Geology
Exploration and Drilling
Production
History

The Guanaco gold deposit is located 220 kilometers south east of Antofagasta (II Region), Northern Chile. The UTM coordinates are 7,224,000N and 446,000E. The mine is located 45 km east of the Pan American Highway and 70 km south of El Peñón (Yamana´s successful operation). The trip from Antofagasta takes about three hours. The climate is typical Atacama Desert, with little or no rainfall, and a resulting absence of practically any form of vegetation. The altitude ranges between 2,400 and 2,900 meters, averaging 2,600 meters above sea level.

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The Chile-Alemania Formation, represented by dacitic and andesitic tuffs and andesitic lavas of Paleocene age, has been intruded in the area by synchronous dacitic and rhyolitic domes. The deposit is located within a 5 kilometer long (E-W) and more than 1 kilometer wide hydrothermally altered zone hosted by the abovementioned formation.

Gold mineralization at Guanaco is controlled by pervasively silicified, ENE trending sub-vertical zones and related hydrothermal breccias. Silicification grades outward into advanced argillic alteration, and further into zones with propylitic alteration.

Dozens of mineralized veins have been exploited in the district, the most important veins being the Defensa, Perseverancia, Abundancia, and San Lorenzo.

In the Cachinalito vein system, most of the gold mineralization is concentrated between the 2,500 and 2,650 m levels. High grade ore shoots (up to 180 grams per tonne gold), 0.5 to 3.0 meters wide, have been mined out, but the lower grade halos, below 2 grams per tonne, can reach up to 20 meters in width.

The oxidation zone extends down some 70 to 80 meters and is relatively free of copper. Gold grades in this zone are generally high, sometimes exceeding 50 grams per tonne.

Native gold, forming dendrites, coarse and fine grains, is the most important ore mineral, although it is rarely seen. Disseminated pyrite is actually the most common mineral in the non-weathered ores, while enargite, luzonite and minor chalcopyrite are present in the deeper horizons. Chalcocite and covellite, together with copper carbonates, silicates and a number of rare copper arsenates (chenevixite, ceruleite, etc.), have been found in secondary enrichment zones. Important gangue minerals are quartz, tabular barite, as well as pink alunite and kaolinite (in substitution of feldspars in zones affected by advanced argillic alteration), hematite, chlorite, epidote, etc.

The alteration pattern and the mineralogical makeup of the Guanaco ores have lead to its classification as a high sulfidation epithermal deposit.

2. Exploration and Drilling

This diagram shows the principal vein systems at Guanaco. These systems all strike east north east/west south west and dip steeply to the north.

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The latest increase to resources at Guanaco was reported in September 2011 following a drilling campaign incorporating the Natalia structure.

The table below shows resources at Guanaco. Combined measured, indicated and inferred resources total 884,653 oz Au with a further 95k gold equivalent ounces of silver.

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3. Production

Production through to September 2011 from the retreatment of heap leach material and open pit mining is set out in the table below.

	Mar 2011 Quarter	Jun 2011 Quarter	Sep 2011 Quarter	Total
Gold (Au)	2,457oz	3,234oz	3,241oz	8,932oz
Silver (Ag)	2,995oz	8,314oz	10,902oz	22,211oz

4. History

Intense gold mining activities between 1886 and 1939 with some interruptions.
Copper was exploited between 1928 and 1930
It is estimated that Guanaco produced in excess of a million ounces of gold until the mid 80's and 500k oz Au between 1993 and 1997.
In 1991, Amax Gold optioned the property from Minera Guanaco and within 1 year developed a reserve of 11,5mm tonnes containing 1,77 grams per tonne gold.
In 1992, Amax Gold leased additional properties from ENAMI. Mining began in 1993, and in 1997 was shut down due to mainly the low gold prices
In 1999, Kinross Gold acquired Amax Gold, and the property was taken over by its local subsidiary Kinam Guanaco.
After the acquisition, Kinam performed several exploration programs and technical reviews.
In September 2002, Gold Rose International, a subsidiary of Austral Gold, executed an option purchase agreement to acquire the property.
In March 2003, Guanaco Capital Holding acquired a 51% direct interest.
In May 2007 Guanaco Capital Holding transferred its 51% interest to Austral Gold Limited
In May 2008 Austral Gold Limited acquired the remaining 49% to now hold 100% interest in the Guanaco Project.

Competent Persons Statement

Dr Robert Trzebski is a Director of Austral Gold Limited. He has a Degree in Geology, a PhD in Geophysics, a Masters in International Project Management and has over 17 years professional experience in mineral exploration, project management and research and development. Dr Robert Trzebski is a member of the Australian Institute of Mining and Metallurgy (AUSIMM) and qualifies as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ Dr Robert Trzebski consents to the inclusion of the resource figures identified in the context it has been provided here.