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24 August 2009                                                                                                                                  AIM: VGM

Vatukoula Gold Mines plc

('Vatukoula' or 'the Company')

Interim Operational Update

Vatukoula, the AIM-quoted Fijian gold producer is pleased to provide an interim operational update from its wholly-owned Vatukoula Gold Mine in Fiji, noting in particular the successful commissioning of its oxide processing circuit.

Update highlights include:

• Successful commissioning of a new oxide processing circuit in late June 2009
  
• Over 30,000 tonnes of oxide ore processed since commissioning at a grade of 1.82 grams of gold per tonne, with gold recoveries reported in excess of  85%
  
• Approximately 200,000 tonnes of previously mined and stockpiled oxide material has been delineated to date and is available for treatment
  
• Surface exploration programme begun to define the additional open pit oxide ore resources 
  
• Underground exploration programme begun to further define any extensions of the current  reserves and resources
  
• The first underground mining equipment purchased with funds received from the last fund raising arrived on site 12 July 2009, a delay of some 6 weeks. Two of the three pieces of delivered equipment are currently working in the Phillip Shaft production area. Further equipment deliveries are expected imminently.
  
• Due to the delayed delivery of underground equipment, mine development and production has been behind plan for the quarter ending 30 August 2009, however over the last week production has returned to planned levels and management expects the next quarter to 30 November 2009 to show an improvement from underground production coupled with an increase in gold production from the newly commissioned oxide circuit.

 

Oxide Processing Circuit

The new oxide processing circuit, which has a design capacity of 850 tonnes per day, is currently operational and commercial production is underway. The circuit is now operating continuously, albeit not yet at its designed rate while metallurgical staff balance the system. The oxide circuit allows a second feed option to the Smith Mill which will allow the Vatukoula Treatment Plant to treat surface oxide ore separately from the underground sulphide ore. Pre-crushed material is being delivered from various sources and the gold will be recovered using carbon-in-pulp recovery process. 

Since late June 30,985 tonnes of oxide ore has been processed at a grade of 1.82 grams of gold per tonne, with recoveries reported in excess of 85%. 

Currently the oxide processing plant is treating material from stockpiled oxide material mined by the previous owners. To date the Company has delineated approximately 200,000 tonnes of this material.

 

Underground Equipment

Two underground haulage trucks and one underground loader have recently arrived on site. Logistical problems with the delivery delayed their arrival on-site by over 6 weeks. One haulage truck and one loader have been commissioned and are operating underground. The remaining haulage truck is still being commissioned by our engineers and the suppliers.

On the 26 March 2009 the company announced that it would require a total of eleven pieces of underground equipment. Since then management has reviewed this requirement and has assessed that an additional two underground loaders will be required as part of the plan to bring the mine to a pro rata rate of production of 110,000 ounces per annum. Therefore the total underground mobile equipment requirement consists of 5 EJC 415 Haulage Tucks, 4 Toro 006 Loaders and 4 Toro 151 Loaders, To date we have sourced and ordered 4 reconditioned EJC haulage trucks, 2 reconditioned Toro 006 Loaders and 2 reconditioned Toro 151 Loaders. Of which 2 EJC trucks and 1 Toro loader have been delivered. The remaining loaders are expected to arrive at the mine shortly and the underground trucks are expected within the next three months. We are currently sourcing the remaining underground equipment.

 

Underground Production 

Due to the expected imminent arrival of the new equipment, underground mining had refocused on development of suitable operating faces for the planned ramp-up in underground production. As a result of the delays in the delivery and commissioning of the new equipment, underground mine production has been adversely affected. The delay has resulted in low flexibility of underground operations, which in turn has affected productivity levels.  Management now expects that gold production for the final quarter of the year to end of August 2009 to be between 6,000 and 6,500 ounces.  The Company plans to release its operational update for the final quarter in September 2009.  

Management believes that once the underground equipment is operating, the mine will be capable of achieving our targeted pro rata production rate of 110,000 ounces / year in 2010. 

 

Exploration

As part of the planned development of the oxide circuit, management has initiated an exploration programme on the open pit oxide material. This currently consists of 10 surface diamonds drill holes. These exploration holes represent the first in over ten years. In addition to these surface holes, the Company has begun underground exploration to assist with detailed mine planning and further define the reserves and resources. The Company will announce the results from both programmes once they become available.

 

David Paxton, CEO of Vatukoula Gold Mines commented - 'We are pleased with the quick start up and progress made to date on the new oxide circuit. However over the last three months aspects of underground mine operations have been constrained by equipment availability issue, in particular the late delivery and commissioning of new underground haulage equipment. However we have made progress in resolving these issues and operations have returned to planned rates of production.'

 

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) degree 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		Religare Hichens, Harrison plc.
David Paxton	+ 44 20 7016 7861	Daniel Briggs	+ 44 20 7382 7776
Kiran Morzaria		Colin Rowbury	+ 44 20 7382 7771
W.H. Ireland Limited		Bishopsgate Communications
David Porter	+ 44 20 7220 1666	Nick Rome	+44 20 7562 3350
James Joyce

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 110,000 ounces per year. The mine has a Proven and Probable Reserve of 830,000 ounces of gold and a Measured, Indicated and Inferred resource of 5.15 million of ounces gold. These current reserves and resources provide for a mine life at the current rate of production of approximately over 40 years. The Company has no forward gold sales.

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