Dragon Mining : Drilling returns robust intercepts from Orivesi Gold Mine

ASX ANNOUNCEMENT 19 JANUARY 2017‌‌‌ DRILLING RETURNS ROBUST INTERCEPTS FROM ORIVESI GOLD MINE

• 32 diamond core holes drilled at Dragon Mining's key Finnish projects.
• Surface drilling at Orivesi Gold Mine returns robust intercepts of 4.80 metres @ 23.89 g/t gold and 18.00 metres @ 18.05 g/t gold.

Dragon Mining Limited (ASX:DRA) ("Dragon Mining" or "the Company") is pleased to provide an update on drilling activities completed at the Orivesi Gold Mine ("Orivesi"), Jokisivu Gold Mine ("Jokisivu") and Kaapelinkulma Gold Project ("Kaapelinkulma") in southern Finland between 1 October 2016 and 31 December 2016 ("October-December period" or "period").

Thirty-two diamond core holes, totalling 4,380.90 metres have been drilled at Orivesi and Jokisivu with the objective of identifying extensions to known mineralised zones, as well as providing information to support mine planning and mine development. In addition, nineteen reverse circulation holes have been drilled at Kaapelinkulma for a total advance of 539 metres.

• Orivesi Gold Mine

  Surface and underground diamond core drilling progressed at Orivesi with twenty holes completed for a total advance of 2,728.70 metres during the period.

  The drilling of an eleven hole diamond core program from the surface commenced, targeting a panel between the 120m and 160m levels in the Sarvisuo area. By the end of the period, seven holes had been drilled for 1,082.10 metres. Results have been received for four holes, yielding robust intercepts of 4.80 metres @

  23.89 g/t gold and 18.00 metres @ 18.05 g/t gold, which include very high grade zones of 0.80 metres @

  138.00 g/t gold and 4.00 metres @ 66.35 g/t gold, respectively. The 18-metre intercept represents a true width of 4 metres and displays excellent grade continuity down the vertical mineralised lode system. The 4.80-metre intercept represents a true width of 2.2 metres. Results for three holes remain pending and four holes are still to be drilled to complete the program. All results received are provided in Table 1.

  Underground diamond core drilling was completed on a nine hole program that was designed to target the Sarvisuo West area at and around the 300m level. Results have been received for all holes returning a series of intercepts including 1.70 metres @ 4.77 g/t gold and 1.20 metres @ 11.10 g/t gold (Table 2).

  A four hole, 283.40 metre program of stope definition drilling was completed during the month from the 1205m level. Results have been received for all holes, yielding a best intercept of 6.50 metres @ 14.88 g/t gold (Table 3).

• Jokisivu Gold Mine

  Underground diamond core drilling progressed at Jokisivu, with twelve holes completed for a total of 1,652.20 metres during the period.

  Drilling of the final seven holes in a nine hole underground diamond core drilling program that was designed to further evaluate the Kujankallio Main Zone between the 105m and 145m levels were completed during the period. This panel is located in the middle of the production area and had previously been rejected due to its narrow nature and lack of intercept data. Results have been received for all holes, returning better intercepts 1.55 metres @ 16.22 g/t gold, 1.50 metres @ 19.70 g/t gold, 1.00 metre @ 21.50 g/t gold and 1.75 metres @ 14.30 g/t gold (Table 4).

  A five hole program drilled from the 350m level to improve the drill density in an area of higher grade mineralisation that is important for the development plans of the 320m and 340m levels at Kujankallio was completed. Results have been received for three holes, returning intercepts of 1.00 metre @ 6.15 g/t gold,

  1.15 metres @ 6.92 g/t gold and 1.00 metre @ 6.67 g/t gold (Table 5). Results for two holes are pending.

  Final results were received for the twenty-three hole drilling program that targeted the depth extensions of the Kujankallio Hinge Zone. Results were received from four holes during the period returning intercept highlights 0.90 metres @ 28.10 g/t gold, 3.00 metres @ 4.30 g/t gold, 2.90 metres @ 4.88 g/t gold and 4.00 metres @ 2.95 g/t gold. All results are provided in Table 6 and include the results for the initial nineteen holes that were previously released on the 19 April 2016 - Drilling Continues at the Orivesi and Jokisivu Gold Mines, 22 July 2016 - Encouraging Results from Southern Finland Drilling Programs and 20 October 2016

  - Drilling in Southern Finland Yields Promising Results. These releases can be found at www.asx.com.au (Code: DRA).

  • Kaapelinkulma Gold Project

Reverse Circulation ("RC") drilling at Kaapelinkulma started in mid-December and by the end of the period nineteen holes of the eighty-three hole program had been drilled. The program has primarily been designed to improve the drill density over the southern gold deposit in readiness for mining. Results are pending from all completed holes.

For and on behalf of

Dragon Mining Limited

Competent Persons Statement

The information in this report that relates to Exploration Results previously unreleased is based on and fairly represents information and supporting documentation compiled by Mr. Neale Edwards BSc (Hons), a Fellow of the Australian Institute of Geoscientists who is a full time employee of the company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code of Reporting for Exploration Results, Mineral Resources and Ore Reserves. Mr. Neale Edwards has provided written consent for the inclusion in the announcement of the matters based on his information in the form and context in which it appears.

The information in this report that relates to Exploration Results previously released to the ASX on the 19 April 2016 - Drilling Continues at the Orivesi and Jokisivu Gold Mines, 22 July 2016 - Encouraging Results From Southern Finland Drilling Programs and 20 October 2016 - Drilling in Southern Finland Yields Promising Results. These releases can be found at www.asx.com.au (Code:DRA). They fairly represent information and supporting documentation that was compiled by Mr. Neale Edwards BSc (Hons), a Fellow of the Australian Institute of Geoscientists, who is a full time employee of the company and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Persons as defined in the 2012 Edition of the Australasian Code of Reporting for Exploration Results, Mineral Resources and Ore Reserves. Written consent was previously provided by Mr. Neale Edwards for the releases dated the 19 April 2016, 22 July 2016 and 20 October 2016. Mr. Neale Edwards BSc (Hons), a Fellow of the Australian Institute of Geoscientists, confirms that the form and context in which the Exploration Results are presented in this report have not been materially modified from the releases dated 19 April 2016, 22 July 2016 and 20 October 2016. Mr. Neale Edwards has provided written consent approving the inclusion of the Exploration Results in the report in the form and context in which they appear.

Background

The Vammala Production Centre is located in southern Finland, 165 kilometres northwest of the Finnish capital Helsinki.

The Centre comprises the Vammala Plant, a 300,000 tonnes per annum conventional crushing, milling and flotation facility, which sources feed from the Orivesi and Jokisivu gold mines. In addition, the Centre also includes the advanced Kaapelinkulma Gold Project and the Vammala Nickel-Copper Project.

The Vammala Production Centre was successfully recommissioned in June 2007 and has to 30 September 2016 produced 274,972 ounces of gold in concentrate.

The Orivesi Gold Mine is located 80 kilometres to the northeast of the Vammala Plant. The mine was initially in operation

between 1992 and 2003 and produced 422,000 ounces of gold from a series of near vertical pipe-like lodes at Kutema. Two of the five principal lodes at Kutema continued below the historical extent of the decline at the 720m level and this area is now the subject of a program of staged development and production stoping down to the 1205m level. Mining from the Sarvisuo lodes, 300 metres east of Kutema commenced in April 2008 and has been conducted from the 240m to the 620m level.

The Kutema and Sarvisuo lode systems occur within the Proterozoic Tampere Schist Belt, representing a metamorphosed palaeo-epithermal system. Gold mineralization is associated with strongly deformed andalusite rich, silicified zones found in vertical pipe-like lode systems that exhibit depth extensions ranging from tens to hundreds of metres. These lode systems are located in a broad zone of hydrothermally altered rocks that cover an area of 40 hectares. Both Kutema and Sarvisuo remain partially open and potential remains for the identification of additional gold bearing pipes or pipe clusters within the surrounding hydrothermal alteration system.

The Jokisivu Gold Mine is located 40 kilometres southwest of the Vammala Plant and hosts two gold deposits 200 metres apart, Kujankallio and Arpola. The deposits represent structurally controlled orogenic gold systems located within the Palaeoproterozoic Vammala Migmatite Belt. Gold mineralization at both Kujankallio and Arpola is hosted within relatively undeformed and unaltered diorite, in 1 to 5 metre wide shear zones that are characterised by laminated, pinching and swelling quartz veins.

The Kujankallio deposit has been shown by drilling to extend to at least 525 metres in depth, though resource drilling currently extends only down to 350 metres vertically below surface. The Arpola deposit has only been drilled down to 200 metres. Both deposits remain open with depth and partially along strike.

Open cut mining at Kujankallio commenced in 2009 and underground production in 2011. A small open pit was mined at Arpola in 2011 and underground production commenced from this deposit in 2014.

The Kaapelinkulma Gold Project is an advanced gold project located 65 kilometres east of the Vammala Plant. Kaapelinkulma is an orogenic gold deposit located in the Palaeoproterozoic Vammala Migmatite Belt. It comprises a set of sub-parallel lodes in a tight array hosted within a sheared quartz-diorite unit inside a tonalitic intrusive. Two separate gold deposits have been identified at Kaapelinkulma, the southernmost deposit is the larger of the two. Both deposits remain open in several directions.

Table 1 - Results from the surface diamond core drilling program that is targeting a panel between the 120m and 160m levels in the Sarvisuo area at the Orivesi Gold Mine. All intercepts reported at a 1 g/t gold cut-off. (Appendix 1 - JORC Table 1)

Hole	North	East	Elevation	Azimuth (°)	Dip (°)	Length (m)	From (m)	Down Hole Interval (m)	Gold (g/t)
KU-1563	6838510.91	2508889.13	145.89	351.77	-65.58	129.50	15.50	1.50	4.03
46.00	3.00	1.10
119.00	4.80	23.89
Including 0.80 metres @ 138.00 g/t gold from 123.00 metres
128.00	1.00	2.69
KU-1565	6838517.80	2508938.50	144.98	317.59	-75.93	173.15	103.50	1.00	1.80
141.00	2.00	3.42
147.00	1.00	3.21
158.00	1.00	1.82
KU-1566	6838517.37	2508938.87	144.87	321.60	-79.40	178.35	109.85	1.50	6.05
120.00	18.00	18.05
Including 4.00 metres @ 66.35 g/t gold from 120.00 metres
143.75	1.05	1.25
KU-1567	6838516.96	2508938.92	144.80	337.02	-77.24	146.30	No significant results

Table 2 - Results from the underground diamond core drilling program that was designed to target the Sarvisuo West area at and around the 300m level. All intercepts reported at a 1 g/t gold cut-off. (Appendix 1 - JORC Table 1)

Hole	North	East	Elevation	Azimuth (°)	Dip (°)	Length (m)	From (m)	Down Hole Interval (m)	Gold (g/t)
KU-1549	6838484.83	2508794.9	-125.88	318.07	10.10	161.50	20.00	1.00	1.29
KU-1550	6838484.83	2508794.9	-126.39	318.84	-1.74	150.00	79.50	0.65	8.02
112.00	0.50	4.48
121.00	0.90	2.25
KU-1551	6838484.77	2508794.9	-126.423	301.98	-1.27	130.20	No significant intercepts
KU-1552	6838484.81	2508794.9	-126.44	320.93	-8.00	150.30	21.40	0.95	1.03
113.00	1.00	3.18
KU-1553	6838484.81	2508794.9	-126.81	300.09	-15.16	123.10	No significant intercepts
KU-1554	6838484.80	2508794.9	-126.85	306.42	-21.41	166.90	25.00	1.00	3.66
88.00	1.70	4.77
KU-1555	6838484.80	2508794.9	-126.88	307.99	-29.71	194.50	26.00	1.10	6.34
96.00	1.50	3.56
163.00	3.50	2.73
KU-1556	6838484.81	2508794.9	-126.89	300.98	-34.14	142.20	30.60	1.20	11.10
123.00	2.00	1.89
KU-1557	6838484.81	2508794.9	-126.89	309.82	-35.23	141.50	27.20	1.05	1.32
94.00	1.10	1.56
100.00	1.00	1.69

Table 3 - Results from the underground diamond core drilling stope definition program that is targeting Kutema Pipe 5 from the 1205m level at the Orivesi Gold Mine. All intercepts reported at a 1 g/t gold cut-off. (Appendix 1 - JORC Table 1)

Hole	North	East	Elevation	Azimuth (°)	Dip (°)	Length (m)	From (m)	Down Hole Interval (m)	Gold (g/t)
KU-1568	6838538.56	2508619.20	-1040.60	351.59	-8.29	65.00	13.50	1.50	1.64
KU-1569	6838536.69	2508620.30	-1040.42	359.99	-8.11	71.60	18.00	1.00	1.11
27.50	1.50	2.97
50.50	6.50	14.88