Citigold : 02 February 2017 Quarterly Report December 2016

Quarterly Report

For the period ending 31 December 2016

HIGHLIGHTS

• Continued planning for the development of the Charters Towers project centred on the Central Mine being an ultra-low cost producer of gold.

• Major project funding discussions have now entered into a more advanced stage and continued with potential interested strategic partners to expand the Group's production ready Charters Towers Gold Project into a strong gold producer.

• Capital raising of $100,000 during the quarter was used for working capital, confirming the continued support of investors and shareholders.

• The Queensland Department of Environment and Heritage (DEHP) has approved the new 5 year Plan of Operations advising it is effective to 31 October 2021.

• Productivity and cost efficiency programs continued in the corporate office and in the administration areas.

• Company looking at engaging a new project manager to take the Central Mine from care & maintenance to gold production phase.

OPERATIONS

The underground mining operations at the Company's Charters Towers 'Central' and 'Imperial' mining areas, together with the processing plant, remained on active care and maintenance during the Quarter. No gold production operations were undertaken during the quarter.

The preparations for the wet season were completed and whilst Charters Towers has only received moderate rainfalls to date the site is ready for a tropical wet season.

Resumption of mining at Charters Towers is contingent on capital financing, but active strategic planning and scheduling continued during the Quarter in readiness. The main Central Mine underground is the first area planned to be reopened and is scheduled to expand into a 220,000 ounce annual producer of gold once funding is finalised. An outline of the mining plan for the Central Mine has been given in previous Quarters.

Project Assessment Process

Citigold has a deep and informed knowledge of the assets, which was taken into account in assessing the project's future growth.

Currently, once the project funding is in place, the lead-time is 10 months to initial gold production. Production is then planned to grow, in general terms, by 50,000 ounces extra each year over the next four years to the total target 220,000 ounces of gold.

Building upon the existing developed infrastructure and $200 million investment to date, a detailed and comprehensive Technical Report dated 18 May 2012 was prepared, listing the Mineral Reserves and Ore Resources of the Charters Towers Gold Project (Project). This report, in compliance with JORC reporting

requirements, was prepared in the format of the Canadian NI 43-101 report because it conforms to a very detailed and structured format to the report. This report was able to draw upon the technical and operational information from the project's trial mining operation by Citigold. This information was a strong foundation to build into the go-forward development plan to see the project completed, once funding is finalised; growing to a 220,000 ounce per year producer with low operating costs. Some of the mining and economic factors considered and assessed were:

1. property description and location;

2. geological factors in detail;

3. types of mineral tenures;

4. mineral processing and metallurgy including the processing plant which is built, established and has previously operated successfully;

5. mineral resource and reserve estimates;

6. mining methods including processing, development capital costs, production schedule, operating costs and gold price. The Technical Report contains photographs of the different drives and stopes after extraction, together with diagrams of the planned mining methods proposed for Central area;

7. recovery methods;

8. project infrastructure on surface is essentially already built;

9. market studies and contracts;

10. environmental studies, permits and social or community impact with a successful long-term harmonious relationship with the local community;

11. capital and operating costs derived from actual mining techniques, and;

12. economic analysis.

With this solid data foundation to build on, the remaining project funding will be mainly used for underground development of the Central mine. The plan is to have up to 15 working areas underground ('stopes') that ore can be extracted from at the one time, ensuring sufficient tonnage to meet predictions.

GEOLOGY AND EXPLORATION

No new exploration drilling was undertaken during the Quarter, with work continuing to be focused on consolidating geological data including surface and drill hole samples in preparation for the upcoming period of mine planning.

The Company has long held a very large tenure holding in the surrounding region. Some of the outer areas exploration efforts have not produced results and some consider these areas are a distraction. With the focus to be on gold production mining operations at the already defined gold deposit the Company will be optimising the overall holding. Some dual tenure has been relinquished, MDL 116 and 251, and further efficiencies will be considered. The relinquishments have no material effect on the project.

Preliminary discussions recommenced with Adrock in utilising it's unique "Atomic Dielectric Resonance" technology in forward exploration planning initially targeting Central. This technology has previously been used by Adrock in partnership with the Charters Towers Gold Project and has demonstrated promising results.

HEALTH, SAFETY AND ENVIRONMENT

There were no Lost Time Injuries, significant environmental, health or safety issues during the Quarter.

Citigold's solar power planning continues and consideration is being given to various suitable sites for the future rollout and implementation of the program. The company is concurrently researching and aiming to set robust targets in achieving and becoming a carbon neutral workplace in it's head office and administration areas. This

can be achieved by utilising a combination of various technologies and re-engineering work processes.

Citigold's Dr Sibasis Acharya (Technical Director), is providing guidance on groundwater matters and on the geochemistry and reactivity of the rock stockpiles and tailings storage facility (TSF) in conjunction with external consultants as required. He has contributed significantly to formally documenting the chemistry formulas and detailed workings that clearly prove that the Company's waste rock stockpiles are benign and incapable of producing deleterious environmental outcomes. This chemistry confirms the analysis and sampling over a long period of time.

In addition the chemistry of the tailings produced from the processing of Charters Towers ore in the TSF does not and cannot produce material environmentally deleterious outcomes. This also is in keeping with analysis over a long period of time. The TSF was built 20 years ago and is a good foundation for the future operations.

A replacement Plan of Operations, as required under Queensland environmental legislation, has been accepted by the Department of Environment and Heritage covering a 5 year period. This replaces the prior 2 year plan. The replacement plan is in effect until 31 October 2021.

This new plan takes into account our planned gold production expansion.

CORPORATE Major development funding

Activities during the Quarter continued to remain heavily focused on advancing discussions with strategic funding partners. Current discussions with strategic funding partners have now entered a more advanced stage and potential funding partners continue to show interest in the production ready Charters Towers Gold Project.

This major development funding seeks to raise circa $100 million with a strong partner in stages that will see aggressive development of the gold project to the targeted full production.

FINANCIAL HIGHLIGHTS

During the Quarter, the Company raised $100,000 through a fully paid ordinary share placement with investors and the funding was used for "working capital".

With the production ready Charters Towers Gold Project remaining in active care and maintenance, the focus continues to be on cost cut backs and efficiency improvement programs.

Current working capital raising plans for the coming Quarter continue to include share placement(s), sale of gold in the ground as previously announced, and moving towards finalising discussions with one of the major funding partners to promptly move back into gold production.

Further staff reduction has continued in the head office and administration.

Update on Redeemable Notes - As previously reported the Company has been and continues in ongoing discussions with Fortune Gems and Jewelry DMMC ('Fortune') in relation to the redeemable Notes ('Notes') that have passed their redemption date. Citigold is currently in discussion with Fortune on the Notes' redemption date and will make a further announcement when the current commercial negotiations are complete. As previously announced Citigold has a long term relationship with Fortune. SUMMARY OF MINING TENEMENTS & AREAS OF INTEREST

In accordance with requirements, Citigold reports that the Consolidated Entity has a 100% control of the following mining tenements at Charters Towers as at 31 December 2016. During the Quarter there were no acquisitions, and there were two disposals MDL 116 and 251, that have no material effect on the project:

Exploration Permits Minerals	EPM 15964	EPM 15966	EPM 16979	EPM 18465	EPM 18813	EPM 18820
Minerals Development Licences	MDL 118	MDL 119	MDL 252
Mining Leases	ML 1343	ML 1408	ML 1433	ML 1548	ML 10042	ML 10222
	ML 1344	ML 1409	ML 1472	ML 1549	ML 10048	ML 10281
	ML 1347	ML 1424	ML 1488	ML 1585	ML 10050	ML 10282
	ML 1348	ML 1428	ML 1490	ML 1586	ML 10091	ML 10283
	ML 1385	ML 1429	ML 1491	ML 1587	ML 10093	ML 10284
	ML 1387	ML 1430	ML 1499	ML 1735	ML 10193	ML 10285
	ML 1398	ML 1431	ML 1521	ML 10005	ML 10196	ML 10335
	ML 1407	ML 1432	ML 1545	ML 10032	ML 10208

For further information contact: