Svartliden AB

SWEDEN

Svartliden Gold Mine

In Sweden the Svartliden Mine development has reached 100% design completion, 90% equipment procured, partially assembled and shipped, and site civil and infrastructure works well advanced. Critical path items are starting to crystallise the completion schedule. Gold production from Svartliden is now anticipated for late rather than early October. Dragon estimates that the project has a cost overrun of US$1M on the overall project finance facility of US$12.25M. Dragon remains adequately funded to bring the Svartliden Mine into production.

The plant is being supplied and built under a lump sum turn key contract. The plant contractor has advised that they are claiming a total of US$2.2M for variations, increases in provisional costs and delays. Under the contract terms variations and delays have to be approved by the client, and none of these claims have been approved. The plant contractor and Dragon are working to expedite the completion of the project and any contractual issues will be dealt with after completion of the project.

Svartliden Area

Dragon holds 183km2 of tenements in the Svartliden area where geophysical data has indicated a conjunction of prospective geology and structural controls. Exploration is seeking to find extensions and repetitions of the Svartliden deposit that can be used to expand planned production from the Svartliden plant. During the quarter, reprocessing and compilation of geophysical data has provided more precise target information for the region. A soil geochemistry program covering the tenement holdings has commenced and will be completed during the September Quarter.

Mvh Prod