Gold production from Challenger for the 2008/09 financial year is forecast to be slightly in excess of 100,000 ounces at an average site cash operating cost of approximately $420 per ounce with capital and development expenditure, excluding a ventilation shaft yet to be finalised of around $180 per ounce. The strategic focus for exploration at Challenger has shifted from reserve replacement to a more ambitious strategy designed to evaluate the longer term potential of the project. This strategy has resulted in a significant increase in the reserves to more than 725,000 ounces. To view the full Resource & Reserve Statement click here. The strategy is ongoing with programs in place to further increase the reserve base of the project.

Underground production to date has been largely based on the M1 Shoot and the depth extensions to this, now well understood, structure represent a well defined exploration target, which is being evaluated by deep drilling from the surface. The adjacent M2 and M3 Shoots are less well understood, mainly because of the lack of exploration data, but are known to host high grade mineralisation.

These shoots are particularly attractive targets because of their proximity to the existing underground development and so can be effectively evaluated from underground access.

The combined M1 Shoot, M1 Shadow Zone and M2 Shoot reserves now have an average gold content of between 1,400 - 1,500 ounces per vertical metre. This is double the contained gold on which the initial underground development was based.

An expansion feasibility study has been completed with decision made to proceed with expansion of the Challenger Plant to a throughput capacity of around 530,000 tonnes per annum.  Construction will take about 12 months and expected to increase production to around 120,000 ounces per annum from January 2010.

As a result of the increase in the reserve position and greater confidence with respect to the depth continuity of the Challenger orebody, an option exists that a production expansion could involve the installation of a shaft for haulage of ore from depth.

A ventilation shaft will be commissioned by about mid-2009 to maximise productivity and scheduling flexibility when mining the principal shoots at depth.  This will allow the development of the M2 shoot to be accelerated for stoping if required as a second mining panel concurrently with the M1 shoot.

Drilling of the preparatory holes for raiseboring a ventilation shaft to over 700 metres vertically started in August 2008.

A critical long lead item for the treatment plant expansion is a second ball mill to increase the grinding capacity. A mill, identical in diameter and girth gear to the existing ball mill, has been purchased by Dominion and is in storage pending refurbishment.