🕐21.09.10 - 08:54 Uhr

Vatukoula Gold Mines plc Operational Update for the Fourth Quarter ended 31st Au
gust 2010 and the year end 31 August 2010



20 September 2010 AIM: VGM
Vatukoula Gold Mines plc
("Vatukoula" or "the Company")
Operational Update for the Fourth Quarter ended 31st August 2010 and the year end 31 August 2010
Vatukoula Gold Mines Plc, the AIM listed (AIM:VGM) gold producer, is pleased to announce its unaudited preliminary operational results from its 100% owned Vatukoula Gold Mine in Fiji for the fourth quarter ended 31st August 2010 ("Q4") and the 12 months ended 31 August 2010 ("2010").
Financial Highlights (unaudited)
12 months ended 31 August 2010 12 months ended 31 August 2009 Fourth Quarter Third Quarter Gold recovered 59,658 ozs 33,757 ozs 21,107 ozs 13,306 ozs Gold sales 54,642 ozs 33,246 ozs 19,251 ozs 11,299 oz Average gold price received per ounce US$1,150 US$881 US$1,199 US$1,161 Cash costs per ounce of gold recovered (unaudited) ** US$664/oz US$881/oz US$647/oz US$751/oz Mine net operating earnings (unaudited) �12.9 million (�3.3 million) � 5.6 million � 1.5 million ** excludes amortization and depreciation, unrealised foreign exchange rate movements, provisions, and gold stock movements Operational Highlights � Increased underground production due to newly acquired underground equipment working satisfactorily, greater availability of stopes and higher grades � Underground development increased to 2,650 metres in Q4 (Q3: 2,371 meters) and remains a focus of mine management � New exploration programme initiated to explore the extensive Vatukoula properties.

New drilling program to explore both surface and underground targets planned to commence in January 2011 * �7.4 million raised during Q4 to finance exploration and development programmes and complete the detailed feasibility of the bagasse power project
David Paxton, CEO of Vatukoula Gold Mines, commented: "During Q4 the Vatukoula Gold Mine recovered a total of 21,107 ounces of gold bringing the total of the recovered gold for the 12 months ended 31 August to 59,658 ounces.

These levels of production have exceeded our revised annual production forecast of 50,000 ounces announced in May 2010.

We anticipate that in the current year we will further increase our production by about 25% moving towards our annual production rate of 100,000 ounces of gold per year. Our primary and continued focus at Vatukoula of sustainable production and cost management has delivered over the year both consistent gains in our production and the reduction of our cost per ounce. Given these achievements and the positive gold environment we have embarked on an exploration programme targeting the enormous mineral potential in and around Vatukoula.

Our geologists and consultants have identified numerous, extremely prospective exploration targets.

We anticipate that the new drilling programme to explore multiple targets will commence in January 2011." Production Summary
June 2010- Aug 2010 Q4 Mar 2010 - May 2010 Q3 12 Months to Aug 2010 12 Months to Aug 2009 Underground Mining / Sulphide Processing
Ore mined (t) 81,943 71,534 261,188 212,536 Development (metres) 2,650 2,371 8,721 5,755 Sulphide Ore delivered (t) 72,444 65,944 240,024 188,421 Sulphide head grade (g/t) 8.81 5.87 7.44 6.28 Oxide Plant
Ore delivered (t) 54,279 56,856 198,507 32,095 Oxide head grade (g/t) 2.24 1.87 2.01 1.78 Total (Sulphide + Oxide)
Ore processed (t)) 126,688 123,372 438,691 220,439 Average ore head grade (g/t) 5.99 4.07 5.00 6.27 Total Recovery (%) 86.29% 82.20% 84.42% 75.71% Gold recovered *(oz) * 21,107 13,306 59,658 33,757 Gold shipped (oz) 19,251 11,299 54,642 33,246 Cash Costs
Cash cost / recovered ounce** (US$) (unaudited) 647 751 664 881 Cash cost / tonne*** (US$) (unaudited) 108 81 88 135 Average realised gold price (US$ / oz) 1,199 1,161 1,150 881 Mine net operating earnings (loss) (� ,000) (unaudited) 5,551 1,496 12,926 (3,332)
* includes gold which has been partially processed, but not produced as gold dore or shipped ** excludes amortization and depreciation, unrealised foreign exchange rate movements, provisions, and gold stock movements *** only includes mining and milling plus royalties
Underground Mining and Development
Ore mined for 2010 increased to 261,188 tonne from 212,536 tonne in the previous year.

The ramp up in underground production has shown a steady increase in underground ore mined over the past four quarters.

This has increased from 45,105 tonne in the first quarter, to 62,606 tonne in the second, 71,534 tonne in the third and 81,943 tonne in the final quarter.


The overall increase in the delivered grade from underground sources for Q4 and the full 12 months can be attributed to a number of factors, including;
� increased mining from the Philip section with a higher than average grade; � increased availability of stopes with higher grades; � higher grades from R1, Cayzer and Smith mining sections at various intervals over the quarter;
The newly acquired underground equipment is working satisfactorily and overall utilization has increased steadily.
Underground development has increased steadily from 1,664 meters, 2,036 meters, 2,371 meters in the first second and third quarters, respectively, to 2,650 meters in Q4.

The underground development programme remains a focus of mine management, with a target of 18 to 20 stopes available for production.

Management expect this level of availability should provide operational flexibility and allow the mine to optimise the mine plan and deliver consistent grades to the mill.
Milling operations
The Vatukoula Treatment Plant ("VTP") continued to operate satisfactorily during the period and progress continues with the equipment refurbishment programme.

For 2010 the VTP processed a total of 438,691 tonne of combined sulphide and oxide ores at an average grade of 5.00 g/t, which was a significant increase in total tonne treated from 220,439 tonne in 2009.

This increase in milled ore over the year can be attributed to a full year of oxide ore milling.

In Q4 the VTP treated a total of 126,688 tonne ore which represented an increase of 2.7% over the previous quarter.

.
For Q4, 72,444 tonne of sulphide ore at a grade of 8.81 g/t was delivered to the VTP, compared to 65,944 tonne at a grade of 5.87 g/t in Q3, an increase of 9.8% for the tonnage, and a 50% increase in the grade in the quarter.
For Q4, 54,279 tonne of oxide ore at a grade of 2.24 g/t was delivered to the VTP, down from 56,856 tonne at 1.87 g/t in the third quarter.
During 2010, 59,658 ounces of gold were recovered of which 54,642 ounces were shipped and sold.

For Q4 21,107 ounces of gold were recovered and 19,251 ounces shipped and sold.
Financial results and Operating Costs
For 2010, the Company recorded mine net operating earnings of �12.9 million (unaudited), a substantial increase from the loss of �3.3 million recorded in the previous year.


Mine net operating earnings for Q4 were recorded at �5.5 million (unaudited) up from �1.50 million (unaudited) in Q3.

The variation in earnings between the third and fourth quarters is primarily due to the increased gold production and an increased realised gold price.
Cash operating costs per ounce of gold recovered were US$664 per ounce for 2010, down from US$881 in the same period last year.

For Q4 the operating cash cost decreased to US$647 per ounce of gold recovered, a 14% decrease over the previous quarter cash cost of US$751 per ounce.

This was a result of higher tonnes and grades mined and processed.
In Q4 cash operating costs increased to US$108 per tonne mined.

This increase in cost per tonne can be attributed primarily to higher percentage of underground ore delivered at a higher operating cost and a 7% increase in fuel prices compared to the previous quarter.

For 2010 cash operating costs per tonne were reduced to US$87 per tonne down from US$135 per tonne in the previous year.
The average gold price realised for 2010 was US$1,150 per ounce, up very significantly from US$881 per ounce realised in the previous year.

For Q4 the average realised gold price was US$1,199, a slight increase from US$1,161 in the previous quarter.
Capital Expenditure Programme
During Q4 repair of the Philip shaft barrel continued, using a specialist contracting group.

Repairs involved the replacement of the previous shaft steelwork, and more effective ground support.

The repairs have taken longer than predicted.

The Company now anticipates to have access to all levels at the Philip shaft in November 2010.
Power
The feasibility study for the development of the power station at Vatukoula has been delayed.

We have maintained discussions with the Fiji Sugar Corporation in order to persuade the group to work with the Company in developing this alternate power source.

However as of the month end the Fiji Sugar Corporation has not committed to this project.


Although the current power supply situation is very frustrating for the management of Vatukoula, the Company remains committed to exploring the potential to assist with the construction of an alternative power supply for Vatukoula.
Exploration
As announced on the 21 June 2010, the Company proposed an exploration programme to: * identify high-grade areas within the current mining infrastructure; * identify new areas in close proximity to the mine to enable mine expansion; and * undertake exploration over the special prospecting licenses.

Preliminary results from the initial studies have identified several exploration targets.

These include underground near vertical structures associated with the Gold Cross shear potential lateral extensions of the Matanagata flatmake, surface or near surface oxide material and the F51 target in the northern portion of our prospecting license. The Company is now prioritising targets, defining the detailed drilling programme and sourcing the drilling contractors.

Vatukoula anticipates that the new drilling program to explore both surface and underground targets will commence in January 2011.

Financing Completed in July 2010
During Q4 the Company placed 400,000,000 ordinary shares at a price of 1.85p per share to raise gross proceeds of �7.4 million.
The funds are primarily being used to embark on our exploration programme and to complete the detailed feasibility of the bagasse power project, with the remainder for general working capital.
Qualified Person Kiran Morzaria B.Eng.

(ACSM), MBA, has reviewed and approved the information contained in this announcement.

Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Kiran is the Finance Director of VGM. Enquiries
Vatukoula Gold Mines plc David Paxton + 44 20 7440 0643 Kiran Morzaria
W.H.

Ireland Limited James Joyce + 44 20 7220 1666
Pelham Bell Pottinger Charles Vivian +44 (0)20 7861 3883 Klara Kaczmarek +44 (0)7859 048 228
Notes to Editors
The Company acquired the Vatukoula Gold Mine in April 2008 and has since then re-established gold mining operations.

The mine has operated for over 75 years and over that time has produced approximately 6.9 million ounces of gold.

Current planning is to restore mine operations at a rate of 100,000 ounces per year.

The mine has a Proven and Probable Reserve of 680,000 ounces of gold and a Measured, Indicated and Inferred resource of 4.30 million of ounces gold.

The Company has no forward gold sales.
Klara Kaczmarek Account Director Direct line: +44(0)20 7861 3883 Mobile: +44 (0)7859 048 228 Pelham Bell Pottinger 5th Floor, Holborn Gate, 330 High Holborn, London, WC1V 7QD Tel: +44 (0)20 7861 3232 Fax: +44 (0)20 7861 3233 www.pelhambellpottinger.co.uk PLEASE NOTE OUR NEW OFFICE ADDRESS & TELEPHONE NUMBERS AS OF MONDAY 24 MAY 2010 ....................................... A CarbonNeutral� company
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