Drummond Gold Limited 2012/HalfYear_Report... · Drummond Gold Limited ... undertaken to define...

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Drummond Gold Limited

ACN 124 562 849

Financial Report for the half-year ended 31 December 2011

Drummond Gold Limited and controlled entities

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Contents Page

Corporate directory 3

Highlights for the half-year 4

Directors’ report 5

Auditor’s independence declaration 10

Independent auditor’s review report 11

Directors’ declaration 13

Condensed consolidated statement of comprehensive income 14

Condensed consolidated statement of financial position 15

Condensed consolidated statement of changes in equity 16

Condensed consolidated statement of cash flows 17

Notes to the condensed consolidated financial statements 18

Resources 24

This financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report

is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by

Drummond Gold Limited during the interim reporting period in accordance with the continuous disclosure requirements of the

Corporations Act 2001.


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Corporate directory

Directors Mr. E. Eshuys (Chairman) Mr. B. K. Mutton (Non-executive Director) Mr. R. C. Hutton (Non-executive Director) Mr. M. J. Ilett (Alternate Director for Mr. R. C. Hutton)

Company secretary Mr. M. J. Ilett

Registered office and principal place of business

Suite 8, 60 Macgregor Terrace BARDON QLD 4065 P.O. Box 844 Paddington Qld 4064 Telephone: + 61 7 3367 2144 Facsimile: + 61 7 3367 2165

Share registry Link Market Services Limited Level 15, ANZ Building 324 Queen Street BRISBANE QLD 4000 Postal Address: GPO Box 2537 BRISBANE QLD 4001 Telephone: 1300 554 474 Telephone: + 61 2 8280 7454 (overseas) Facsimile: + 61 2 8280 0303

Auditors Deloitte Touche Tohmatsu Level 25, Riverside Centre 123 Eagle Street BRISBANE QLD 4000

Lawyers McCullough Robertson Lawyers Level 11, Central Plaza Two 66 Eagle Street BRISBANE QLD 4000

Stock exchange listings Drummond Gold Limited fully paid ordinary shares are quoted on the Australian Securities Exchange (ASX). ASX Code: DGO

Website address www.drummondgold.com.au

http://www.drummondgold.com.au/


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Highlights for the half-year

Drummond Gold Limited (the Company or Drummond) was highly active during the half-year with drilling activity at Mount Cannindah (near Gladstone, Queensland), Bendigo (Victoria) and Mt Coolon (near Mackay, Queensland).

Exploration activity directly focused on the Company's objective of significantly increasing the resource base at Mount Cannindah and Mt Coolon and the discovery of new gold deposits at Bendigo.

Mount Cannindah is a large gold bearing porphyry copper-gold-molybdenum system with a number of highly prospective exploration targets. Drummond is targeting the potential for large tonnage copper–gold and copper–molybdenum zones of the system. Diamond drilling was completed to test for extensions to the Mount Cannindah Resource in areas that had not been previously drill tested. A review by geological consultants Hellman & Schofield, incorporating Drummond’s recent drilling, has resulted in a better understanding of the geological constraints and has produced an upgraded Mineral Resource Estimate for Mount Cannindah including Measured, Indicated and Inferred of 5.6Mt at 0.9% copper, 0.3g/t gold and 14.9g/t silver. Drummond had announced the initial Farm In minimum threshold expenditure has been met with and has elected to continue the Joint Venture to earn 51% equity. Drummond has demonstrated extensions to mineralisation at Mount Cannindah Prospect and has recognised new drill targets for significant gold-copper-molybdenum mineralisation.

Drummond Gold's Mt Coolon tenements are located in the Drummond Basin, northern Queensland. The Drummond Basin is a highly endowed mineral province with historic production of over 7.5Moz gold. During the half-year, drilling was conducted at the Mt Coolon Koala epithermal system and at the Sullivans polymetallic target.

Epithermal systems such as Mt Coolon Koala are renowned for hosting repeat zones of high grade mineralisation along strike and associated with linking structures to the main zone. The Mt Coolon Koala drilling was completed to test depth extensions and repeats to previously intersected high grade mineralisation in areas that had not previously been tested by drilling. The results of this drilling in conjunction with interpretation of geophysical data and geological mapping are being assessed to determine further targets in the Koala area.

Sullivans is a polymetallic target defined by a soil anomaly over an area of 650 x 250 metres and with values up to 2 g/t gold and surface rock chip samples assaying up to 76 g/t gold and 83 g/t silver. Alteration and geochemistry indicate similarities to the Mt Leyshon and Kidston Intrusion Related Gold System (IRGS) mineralisation, both located in northern Queensland. Previous shallow reverse circulation drilling in late 2007 by the Company intersected broad zones of gold, silver and zinc mineralisation including 68 metres at 0.3g/t gold, 1.4g/t silver and 0.3% zinc from a depth of 40 metres to the end of the hole. Drilling was completed to test the extent of previously intersected mineralisation. The drilling demonstrated depth extent and better defined the orientation of mineralisation. The Sullivans Prospect is located in a broad area of significant geochemical anomalism. Further assessment of geophysical data and ground mapping is required to determine the full extent of the system and to plan further drilling.

At Bendigo, Drummond is exploring for sediment hosted gold mineralisation under shallow cover. Exploration activity is being conducted on two exploration licences held by Unity Mining Limited (formerly Bendigo Mining) surrounding the Bendigo Goldfield which has historically produced over 22M oz of gold. Drummond completed a regional RC drilling programme designed to test trap sites interpreted from geophysical data in areas of known mineralisation associated with stratigraphy recognised as having the highest potential for hosting black shale sediment hosted gold. Pathfinder results indicate gold potential, however not proximity, to significant gold mineralisation. Further assessment of geophysical and geological data is being undertaken to define further drill targets associated with black shale lithologies in areas under cover. Drummond has met the initial Farm In terms and has elected to continue the Joint Venture to earn 51% equity.


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Directors’ report

The Directors of Drummond Gold Limited (the Company) submit herewith the consolidated financial report of Drummond Gold Limited and its controlled entities (the Group) for the half-year ended 31 December 2011. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

Directors

The names and details of the directors of the Company in office during the half-year and until the date of this report are:

Mr. E. Eshuys (Executive Chairman) Mr. B. K. Mutton (Non-executive Director) Mr. R. C. Hutton (Non-executive Director) Mr. M. J. Ilett (Alternate Director for Mr. R. C. Hutton) Principal activities

The principal activity of the Group is exploration for gold and other minerals.

Operating results

The Group recorded a net profit after income tax of $28,817 for the half-year ended 31 December 2011 (31 December 2010: Net Loss $738,996).

Review of operations

The objective of the Group is to significantly increase its resources and reserves through the discovery and acquisition of gold and base metal deposits. The Group will continue to explore its own tenements and has elected to continue with the farm in arrangements at Mt Cannindah and Bendigo.

During the half-year the Group actively pursued exploration work directly focused on the Group's objective of increasing the resource base through drilling at Mount Cannindah and Mt Coolon. Drilling was also undertaken at Bendigo to test for new sediment hosted gold mineralisation and at the Sullivans Target, Mt Coolon, to determine the extent of previously intersected polymetallic mineralisation.

Mount Cannindah

Mount Cannindah, located 100 kilometres southwest from Gladstone, central Queensland, is a large gold bearing porphyry copper (Cu)-gold (Au) –silver (Ag) system with a number of highly prospective exploration targets. Drummond has undertaken a comprehensive geological review with the assistance of a porphyry copper expert consultant to determine the relationship between the large numbers of important mineralisation occurrences at Mount Cannindah. Data review and core re-logging was aimed at creating a better understanding of the ore controls in the Mount Cannindah district to assist in prioritising and planning further drilling.

Drummond is targeting the potential for large tonnage copper–gold and copper–molybdenum zones of the system.

The Mount Cannindah district is an intrusion centred polymetallic Cu-Au-Ag-Mo hydrothermal system approximately 5km in diameter. The Mt Cannindah breccia-hosted Cu-Au-Ag resource estimate of 5.6Mt at 0.9% Cu, 0.3g/t Au and 14.9g/t Ag for 56,000t contained copper and 61,000oz gold is just one mineralised body within the Mount Cannindah District.

The Mount Cannindah system consists of mineralisation styles similar to the world-class southwest USA porphyry Cu-Mo-Au deposits such as Battle Mountain, Nevada and Bingham Canyon Utah. The styles at Mount Cannindah include:

Cu-Au-Mo breccia (Mt Cannindah-Mt Theodore-Little Wonder)

Cu-Mo stockwork (Monument, United Allies)


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Cu-Au-Mo skarn (Appletree, Dunno, Lifesaver)

Lead (Pb) - zinc (Zn) - Ag veins and breccia (Cannindah West),

Au - arsenic (As) epithermal veins (Cannindah East, Barrimoon)

Past exploration identified high grade, near surface gold, copper and molybdenum mineralisation intersected in shallow drilling at several prospects including:

At United Allies, intersections including 40.23m at 0.6% Cu and 245g/t Mo from surface, 13.72m at 1.4% Cu from 1.5m and 8m at 2% Cu from 19.8m have been returned over an area of 350m by 250m. Only four holes have been drilled to depths greater than 40m in this area (Figure 2).

At Monument – Lifesaver, drilling along a one kilometre trend has returned intersections including 53.3m at 0.5% Cu and 95g/t Mo from surface and 45m at 0.4% Cu and 241g/t Mo from 1m. Most holes in this area are less than 60m depth.

At Cannindah East drilling returned values including 36m at 8.7g/t Au (including 2m at 112.6g/t Au) from 2m, 24m at 2.3g/t Au from 4m and 34m at 7.4g/t Au from surface.

The Cannindah & Monument intrusive bodies are part of the same magma suite. The overall complex is zoned with a composition range of gabbro-diorite monzodiorite-monzonite. Monzonite porphyry dikes and spines are linked to the mineralisation. This magma suite is similar to Cadia and Goonumbla (North Parkes) NSW and to the world class Bingham Canyon and Battle Mountain in the USA. Mount Cannindah overall is polymetallic in nature with widespread occurrence of gold in the system.

The majority of previous exploration has focused on the mine lease area, however relogging of drill holes and previous outcrop mapping suggests that the entire system may extend outside the mine leases into the exploration licences to the west and south with potential for additional vein, skarn and replacement deposits in these areas.

Drummond completed diamond drilling to determine the extent of mineralisation at the Mount Cannindah Prospect. Five diamond holes were completed for 2,859.8m with one hole abandoned at 122m. Drill hole details are listed in Table 1 and significant results summarised in Table 2. The drilling tested significant extensions to mineralisation in areas where no drilling had previously been undertaken. Results demonstrate continuity at depth and to the south.

The geological review has defined several targets for drill testing. The higher priority targets, the southern copper-molybdenum skarns, extensions to the Cannindah East gold mineralisation, and repeats of Mount Cannindah-style copper-gold mineralisation in the breccia to the south of Mount Cannindah will be tested by drilling in the coming year.

Table 1. Mount Cannindah Drilling Programme

Hole Id Planned Hole MGA East

MGA North

RL MGA Depth East Local

North Local

Azi Grid

Azi Mag

Dip

CARCD0001 MTCplan0007 324985 7270349 398 399.6 2950 2775 098 088 -55

CARCD0002 MTCplan0001 324915 7270638 410 600.3 2839 3051 098 088 -65

CARCD0003 MTCplan0005 324940 7270734 410 654 2850 3150 098 088 -55

CARCD0004 MTCplan0004 325001 7270250 420 501.7 2980 2680 098 088 -55

CADD0005 MTCplan0006 324605 7270586 425 121.9 2540 2955 094 084 -55

CADD0006 MTCplan0006 324605 7270586 425 704.2 2540 2955 094 084 -55


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Table 2. Mount Cannindah Drilling results.

HOLE_ID FROM TO WIDTH (m)

GRADE (Cu %)

GRADE (Au g/t)

GRADE(Ag g/t)

CARCD0001 298 302 4 1.4 0.3 20.1

CARCD0002 385 408 23 0.4 0.2 6.4

443 460 17 0.4 0.2 9.9

CARCD0004 284.35 308 23.65 0.4 0.1 7.5

Includes 284.35 293 8.65 0.8 0.2 12.1

314 319 5 -- 1.3 5.0

A review by geological consultants Hellman & Schofield, incorporating Drummond’s recent drilling, has resulted in a better understanding of the geological constraints and has produced an upgraded Mineral Resource Estimate for Mount Cannindah including Measured, Indicated and Inferred of 5.6Mt at 0.9% copper, 0.3g/t gold and 14.9g/t silver.

The Company has elected under the Agreement to earn a 51% interest in the Mt Cannindah Joint Venture, having met the initial Threshold Expenditure Requirements. Drummond has the right to earn up to 75% interest in the project by spending an additional $5.25 million within a further 4 years. Drummond has the right to withdraw at any time.

Bendigo

Drilling at Bendigo has returned anomalous gold mineralisation and elevated pathfinder metals from initial broad-spaced testing of targets. One hole at Apollo returned a gold intersection of 31m at 0.2g/t Au. This drill hole result is from holes spaced 200m apart along an east-west traverse. The hole is 500m from the Whitelaw Fault, an important regional structure for controlling gold mineralisation in the Bendigo Region.

Research by the Centre of Excellence in Ore Deposits (CODES) on sediment hosted gold deposits worldwide has defined pathfinder metals that indicate potential for sediment hosted gold mineralisation within black shale. Anomalous pathfinder metals were present in drill holes at Apollo, Break O’Day and Woodvale.

The four target areas Woodvale, Break O’Day, Apollo, and Neilborough, were determined by structural interpretation of aeromagnetic data and favourable stratigraphy. A total of 53 RC drill holes for 3,136m were drilled.

The targets were recognised as having the highest potential for hosting black shale sediment hosted gold. The broad-spaced drilling was designed as a first pass test of the favourable stratigraphy, associated known gold mineralisation and reinterpretation of aeromagnetic and gravity data of possible trap sites.

Pathfinder results indicate gold potential, however not proximity, to significant gold mineralisation. Further assessment of geophysical and geological data is being undertaken to define further drill targets associated with black shale lithologies in areas under cover.

Drummond has spent over $750,000 during the past year and met the initial earn in requirement. Drummond now has the right to earn 51% interest in the Bendigo Region by spending a further $4.75 million within three years. Drummond can earn an additional 19% interest, taking its interest to 70%, by spending a further $3 million in the following two years. Drummond has the right to withdraw at any time.

Drummond Basin – Mt Coolon

Drummond Gold's Mt Coolon tenements are located in the Drummond Basin, northern Queensland. The Drummond Basin is a highly endowed mineral province with historic production of over 7.5Moz gold. During the half-year drilling was conducted at the Mt Coolon Koala epithermal system and at the Sullivans polymetallic target.

The Koala Mine was worked by underground methods during the 1930’s producing 180,000oz


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gold at an estimated grade of 18.4g/t Au over one kilometre extent to a depth of 120 metres. Open pit mining during the 1990’s produced a further 45,000oz Au at 5.3g/t Au.

Epithermal systems such as Koala are renowned for hosting repeat zones of high grade mineralisation along strike and also associated with linking structures to the main zone. The Pajingo ore body, where mineralisation has been defined over a 4 kilometre strike extent at the northern end of the Drummond Basin, has repeat shoots of less than 500m length that host ore bodies of 550,000oz Au at 14.4g/t Au (Vera) and 734,000oz Au at 11.2g/t Au (Vera South). Total production at Pajingo to May 2009 is 2.3Moz Au at 12.2g/t Au (from Conquest Mining website).

Drilling was undertaken at Koala to test for extensions and repetitions to known mineralisation. Three diamond holes for 830.3 metres tested down plunge from the historic underground workings and up to 500m north from the open pit. The diamond drilling intersected alteration and veining at the expected intersection with the main lode structure. The Koala mineralisation occurs within andesitic agglomerate that is not present at depth. An assessment of the Koala stratigraphy and structure is currently being undertaken.

Sullivans is a polymetallic gold-silver-lead-zinc prospect located within the Koala Structural Corridor, 9 kilometres south of Mt Coolon township. Three holes were completed during the quarter to test down dip to previously intersected zones of gold and base metal mineralisation including 68m at 0.3g/t gold, 1.4g/t silver and 0.25% zinc from 40m to the end of the hole and 4m at 0.3g/t gold, 17g/t silver and 3.4% zinc from a depth of 51m.

Results of the recently completed drilling better defined a mineralised structure associated with quartz veining and visible sphalerite (zinc sulphide) that strikes north-east to south-west with an apparent dip of 50 to 60 degrees to the west. The structure has not been tested north or south of the Sullivans prospect.

The significant broad zones of near surface gold, silver and base metal mineralisation over an area of 1200m by 700m at Sullivans are associated with illite-sericite and silica-carbonate-pyrite alteration and the presence of pyrite-carbonate-silica fracture stockworks indicate that the mineralisation is indicative of Intrusion Related Gold Systems (IRGS).

Other examples of gold bearing IRGS systems in north Queensland include Mt Wright (reserve of 6.2 million tonnes @ 2.7g/t Au for 535,000 oz Au), Mt Leyshon (2.7 million ounces gold produced) and Kidston (3.4 million ounces gold produced). These deposits are typically developed as breccia pipes and/or with sheeted veins within a pre existing breccia pipe. These systems show a large diversity in style and mineralisation form and are characteristically zoned on a 100m to 500m basis on both vertical and lateral scales. All of these deposits have well defined surface geochemical expressions and are frequently polymetallic in nature with significant amounts of base metals in some cases. The drilling results are being assessed in conjunction with geological, geochemistry and aeromagnetic data. Sullivans may represent a portion of a larger mineralisation system associated with anomalous gold and base metal geochemistry results at Manaman, located 2 kilometres to the northwest.

A detailed assessment of all previous drilling in conjunction with geology and detailed geophysics has been undertaken for the Mt Coolon area. Aeromagnetic lows, interpreted to indicate alteration associated with mineralisation, in favourable structural positions in areas under alluvial cover that have not been previously investigated will be the target of RAB drilling programmes. Specific targets are to the north and south of Eugenia and to the south of Sullivans.

Table 1. Sullivans Drilling Results

HOLE ID TOTAL

DEPTH

EAST

(MGA)

NORTH

(MGA)

FROM

(m)

WIDTH

(m)

Au

(g/t)

Ag

(g/t)

Zn

(%) SURC001 252 538725 7627225 107 13 0.1 6.4 0.9

includes 115 3 0.2 24 3.0

SURC002 264 538625 7627125 125 6 0.1 8 1.7


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During the half-year, an assessment was made of the Group’s eligible Research and Development expenditure for the previous financial year which is expected to result in an income tax benefit of $624,648.

At the date of this report the Company has 235,688,642 fully paid ordinary shares and 10 million options on issue.

Matters subsequent to the end of the half-year

On 7 March 2012, the Company announced its arrangement with Apex Minerals NL (Apex) whereby the Company will receive 1,000,000,000 share options and an arrangement fee of $350,000 from Apex which are conditional upon passing of resolutions at the Apex NL Shareholders’ Meeting, in relation to the raising of $20 million from the Apex Rights Issue, and the appointment of Mr. Eduard Eshuys to the Apex Board. Drummond has agreed to sub-underwrite $250,000 in the Apex Rights Issue representing 125 million shares at an issue price of $0.002 per share from the proceeds of the arrangement fee.

As a part of this transaction it is proposed that Company’s directors will also be appointed to the Apex Board and exploration services provided to Apex through a consultancy arrangement. Further details of the transaction are outlined in note 12 to the Half-Year Financial Report.

No other matter or circumstance has arisen since 31 December 2011 that has significantly affected, or may significantly affect the Group’s operations, results of those operations or state of affairs in future financial years.

Auditor’s independence declaration

The auditor’s independence declaration is included on page 10 of the Half-Year Financial Report. Signed in accordance with a resolution of directors made pursuant to s.306 (3) of the Corporations Act 2001.

On behalf of the Directors.

Eduard Eshuys

Executive Chairman

Brisbane, 14 March 2012

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

Deloitte Touche Tohmatsu

ABN 74 490 121 060

Riverside Centre

Level 25

123 Eagle Street

Brisbane QLD 4000

GPO Box 1463

Brisbane QLD 4001 Australia

DX: 115

Tel: +61 (0) 7 3308 7000

Fax: +61 (0) 7 3308 7001

www.deloitte.com.au

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14 March 2012

Dear Board Members


In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the

following declaration of independence to the directors of Drummond Gold Limited.

As lead audit partner for the review of the financial statements of Drummond Gold Limited

for the half-year ended 31 December 2011, I declare that to the best of my knowledge and

belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation

to the review; and

(ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Stephen Tarling

Partner

Chartered Accountants

The Board of Directors


Suite 8

60 Macgregor Terrace

BARDON QLD 4065

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

Deloitte Touche Tohmatsu

ABN 74 490 121 060

Riverside Centre

Level 25

123 Eagle Street

Brisbane QLD 4000

GPO Box 1463

Brisbane QLD 4001 Australia

DX: 115

Tel: +61 (0) 7 3308 7000

Fax: +61 (0) 7 3308 7001

www.deloitte.com.au

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Independent Auditor’s Review Report

to the members of Drummond Gold Limited

We have reviewed the accompanying half-year financial report of Drummond Gold Limited,

which comprises the condensed consolidated statement of financial position as at 31

December 2011, and the condensed consolidated statement of comprehensive income, the

condensed consolidated statement of cash flows and the condensed consolidated statement of

changes in equity for the half-year ended on that date, selected explanatory notes and, the

directors’ declaration of the consolidated entity comprising the company and the entities it

controlled at the end of the half-year or from time to time during the half-year as set out on

pages 13 to 23.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial

report that gives a true and fair view in accordance with Australian Accounting Standards and

the Corporations Act 2001 and for such internal control as the directors determine is

necessary to enable the preparation of the half-year financial report that is free from material

misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our

review. We conducted our review in accordance with Auditing Standard on Review

Engagements ASRE 2410 Review of a Financial Report Performed by the Independent

Auditor of the Entity, in order to state whether, on the basis of the procedures described, we

have become aware of any matter that makes us believe that the half-year financial report is

not in accordance with the Corporations Act 2001 including: giving a true and fair view of the

consolidated entity’s financial position as at 31 December 2011 and its performance for the

half-year ended on that date; and complying with Accounting Standard AASB 134 Interim

Financial Reporting and the Corporations Regulations 2001. As the auditor of Drummond

Gold Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to

the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review

procedures. A review is substantially less in scope than an audit conducted in accordance

with Australian Auditing Standards and consequently does not enable us to obtain assurance

that we would become aware of all significant matters that might be identified in an audit.

Accordingly, we do not express an audit opinion.

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Auditor’s Independence Declaration

In conducting our review, we have complied with the independence requirements of the

Corporations Act 2001. We confirm that the independence declaration required by the

Corporations Act 2001, which has been given to the directors of Drummond Gold Limited,

would be in the same terms if given to the directors as at the time of this auditor’s review

report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that

makes us believe that the half-year financial report of Drummond Gold Limited is not in

accordance with the Corporations Act 2001, including:

(a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and

(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the

Corporations Regulations 2001.

DELOITTE TOUCHE TOHMATSU

Stephen Tarling

Partner

Chartered Accountants



Directors’ declaration

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Directors’ declaration

The Directors declare that:

a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able

to pay its debts as and when they become due and payable; and

b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

Signed in accordance with a resolution of the Board of Directors made pursuant to section 305(5) of the Corporations Act 2001.

On behalf of the Directors.

Eduard Eshuys

Executive Chairman



Condensed consolidated statement of comprehensive income

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Condensed consolidated statement of comprehensive income for the half-year ended 31 December 2011

Consolidated

Half-year ended

Note

31 Dec 2011

$

31 Dec 2010

$

Continuing operations

Revenue

Interest income 51,447 80,727

Administration and other expenses (272,073) (101,124)

Consulting and contractor expenses (102,975) (174,015)

Depreciation of non-current assets (45,856) (38,207)

Directors’ fees (70,000) (70,141)

Employee benefits expenses (57,569) (370,293)

Exploration and evaluation expenditure written off 4 (69,466) (42,425)

Financial costs (26) -

Property rental and occupancy expenses (29,313) (23,518)

Loss before income tax benefit/(expense) (595,831) (738,996)

Income tax benefit 624,648 -

Profit/ (loss) attributable to the members of the parent entity 28,817 (738,996)

Other comprehensive income

Items of other comprehensive income - -

Income tax on other items of other comprehensive income - -

Total comprehensive income/ (loss) for the period 28,817 (738,996)

Total comprehensive income/ (loss) attributable to the members of

the parent entity 28,817 (738,996)

Earnings per share

Basic (cents per share) 8 0.01 (0.36)

Diluted (cents per share) 8 0.01 (0.36)

Notes to the condensed consolidated financial statements are included on pages 18 to 23.

Drummond Gold and controlled entities

Condensed consolidated statement of financial position

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Condensed consolidated statement of financial position as at 31 December 2011

Consolidated

Half-year ended

Note

31 Dec 2011

$

30 June 2011

$

Current assets

Cash and cash equivalents 840,567 3,361,058

Income tax refund receivable 624,648 423,478

Trade and other receivables 98,005 200,664

Total current assets 1,563,220 3,985,200

Non-current assets

Trade and other receivables 380,908 379,915

Property, plant and equipment 478,670 522,145

Exploration and evaluation assets 4 8,583,593 6,501,579

Total non-current assets 9,443,171 7,403,639

Total assets 11,006,391 11,388,839

Current liabilities

Trade and other payables 282,281 717,991

Provisions 42,173 55,324

Total current liabilities 324,454 773,315

Non-current liabilities

Provisions 495,861 492,335

Total non-current liabilities 495,861 492,335

Total liabilities 820,315 1,265,650

Net assets 10,186,076 10,123,189

Equity

Issued capital 5 19,581,001 19,581,001

Reserves 6 300,652 266,582

Accumulated losses 7 (9,695,577) (9,724,394)

Total equity 10,186,076 10,123,189



Condensed consolidated statement of changes in equity

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Condensed consolidated statement of changes in equity for the half-year ended 31 December 2011

Fully paid ordinary shares

Contributions from

shareholders

Accumulated

losses

Option

premium

reserve Total

Consolidated $ $ $ $ $

Balance at 1July 2010 12,784,251

684,700

(6,676,891) 61,000 6,853,060

Profit/ (Loss) for the half-year - - (738,996) - (738,996)

Total comprehensive income - - (738,996) - (738,996)

Issue of shares 7,078,592 (684,700) - - 6,393,892

Share issue costs (293,343) - - - (293,343)

Option reserve - - - 221,738 221,738

Balance at 31 December 2010 19,569,500 - (7,415,887) 282,738 12,436,351

Balance at 1July 2011 19,581,001

-

(9,724,394) 266,582 10,123,189

Profit/ (Loss) for the half-year - - 28,817 - 28,817

Total comprehensive income - - - - 28,817

Option reserve - - - 34,070 34,070

Balance at 31 December 2011 19,581,001 - (9,695,577) 300,652 10,186,076



Condensed consolidated statement of cash flows

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Condensed consolidated statement of cash flows for the half-year ended 31 December 2011

Consolidated

Half-year ended

31 Dec 2011

$

31 Dec 2010

$

Cash flows from operating activities

Research and development tax refunds 423,478 -

Payments to suppliers and employees (522,833) (437,722)

Interest and other costs of finance paid (26) -

Net cash used in operating activities (99,381) (437,722)

Cash flows from investing activities

Interest received 51,277 73,525

Payments for property, plant and equipment (2,381) (79,605)

Payments for exploration and evaluation costs (2,470,006) (1,464,324)

Proceeds from security deposits - 4,999

Net cash used in investing activities (2,421,110) (1,465,405)

Cash flows from financing activities

Proceeds from issues of equity securities - 6,013,650

Payment for share issue costs - (147,177)

Net cash provided by financing activities - 5,866,473

Net increase/(decrease) in cash and cash equivalents (2,520,491) 3,963,346

Cash and cash equivalents at the beginning of the period 3,361,058 1,296,277

Cash and cash equivalents at the end of the period 840,567 5,259,623



18

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2011

Note Contents Page No.

1 Significant accounting policies 19

2 Segment information 20

3 Results for the period 20

4 Exploration and evaluation assets 20

5 Issued capital 20

6 Reserves 21

7 Accumulated losses 21

8 Earnings per share 21

9 Information in relation to mining tenements 22

10 Dividends 22

11 Farm in agreements 22

12 Subsequent events 22



19

1. Significant accounting policies

(a) Statement of compliance

The Half-Year Financial Report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 “Interim Financial Reporting”. Compliance with AASB 134 ensures compliance with International Reporting Standard IAS 34 “Interim Financial Reporting”. The Half-Year Financial Report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the most recent financial report.

(b) Basis of preparation

The condensed consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of adoption in the preparation of the Half-Year Financial Report are consistent with those adopted and disclosed in the Company’s 2011 Annual Financial Report for the financial year ended 30 June 2011, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

(c) New or revised Standards and Interpretations that are first effective in the current reporting period

The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

The adoption of these amendments have not resulted in any changes to the Group’s accounting policies and has no effect on the amounts reported for the current or prior periods. The new revised Standards and Interpretations has not had a material

impact and not resulted in changes to the Group’s presentation of, or disclosure in, its half-year financial statements.

The new, revised or amended Accounting Standards and Interpretations effective for the current reporting period that are relevant to the Group include:-

AASB 1054 ‘Australian Additional Disclosures’, AASB 2011-1 ‘Amendments to Australian Accounting Standards arising from

the Trans-Tasman Convergence Project’ and AASB 2011-2 ‘Amendments to Australian Accounting Standards arising from the

Trans-Tasman Convergence Project – Reduced Disclosure Requirements

AASB 1054 sets out the Australian-specific disclosures for entities that have adopted Australian Accounting Standards. This Standard contains disclosure requirements that are additional to IFRSs in areas such as compliance with Australian Accounting Standards, the nature of financial statements (general purpose or special purpose), audit fees, imputation (franking) credits and the reconciliation of net operating cash flow to profit (loss). AASB 2011-1 makes amendments to a range of Australian Accounting Standards and Interpretations for the purpose of closer alignment to IFRSs and harmonisation between Australian and New Zealand Standards.

(d) Going concern

The Half-Year Financial Report has been prepared on the basis that the Company and the consolidated entity (Group) are going concerns, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The Group recorded a profit after tax of $28,817 for the half-year ended 31 December 2011 (31 December 2010: loss of $738,996).

During the half year period ended 31 December 2011, and the period to the date of this report, the Directors have taken steps to ensure the Group continues as a going concern. These steps include the following:

the Company intends to undertake capital raising activity in the near term to raise funds for continued activities at Mt Coolon, Mt Cannindah, Bendigo and for working capital activities; and

throughout the period ended 31 December 2011, the Group has prepared, and continues to review a series of scenario budgets and cash flow forecasts (including a ‘hibernation’ budget/ cash flow) prepared and updated by management for board review and approval. These tools have been used by management in tightly controlling expenditure and cash outgoings of the Company.

Notwithstanding the above initiatives, the ability of the Group to continue as a going concern is dependent upon additional equity capital being raised or the entering into of a hibernation budget which forecasts a scenario of reduced exploration expenditure which meets the minimum legal/ contractual exploration commitments of the Group. In order for the Group to undertake reduced exploration activities as per its hibernation budget and continue contractually committed minimum

operations they will have to receive funds as budgeted by the Group, mainly in relation to tax refunds relating to eligible research and development activities (R&D tax refunds) for the 2011 financial year, which is expected to be received by April 2012, and for the 2012 financial year, which is expected to be received in October 2012. The Group, on a conservative basis estimates to receive approximately $1.56 million in total R&D tax refunds for financial years 2011 and 2012.

The Directors are of the opinion that the basis upon which the Half-Year Financial Report is prepared is appropriate in the circumstances as the Directors believe that they will receive the budgeted receipt of funds in relation to R&D tax refunds and continue planned operations under the hibernation scenario without raising additional equity capital.



20

2. Segment information

The Group has a number of exploration licenses and farm in agreements across Australia which are managed on a portfolio

basis. The decision to allocate resources to individual projects in the portfolio is predominantly based on available cash

reserves, technical data, and the farm in requirements.

Accordingly, the Group effectively operates as one segment, being exploration in Australia. This is the basis on which internal

reports are provided to the Directors for assessing performance and determining the allocation of resources within the Group.

3. Results for the period

The Group recorded a profit after tax of $28,817 for the half-year ended 31 December 2011 (31 December 2010: loss of

$738,996). Included in the net profit for the half-year is an income tax benefit of $624,648 (31 December 2010: $Nil),

representing a tax refund from eligible Research and Development activities in the 30 June 2011 financial year, an employee

benefits expense of $34,070 relating to share based payments relating to options previously issued to Mr. Eduard Eshuys and

a write-off amounting to $69,466 against the carrying value of the capitalised exploration and evaluation assets.

4. Exploration and evaluation assets

31 Dec 2011

$

30 June 2011

$

Balance at the beginning of the period 12,220,492 8,911,129 Exploration expenditure incurred during the financial period 2,151,480 3,309,363 Accumulated write off/ impairment (i) (5,788,379) (5,718,913)

Net book value at end of period 8,583,593 6,501,579

(i) A write off totalling $69,466 (Dec 2010:$42,425) was made against the carrying value of some of the tenements because

these tenements were no longer held by the Group. The above amounts represent capitalised costs of exploration areas of

interest carried forward as an asset. The ultimate recoupment of the exploration and evaluation expenditure in respect to th e

areas of interest carried forward is dependent upon the discovery of commercially viable reserves and the successful

development and exploitation of the respective areas or alternatively the sale of the underlying areas of interest for at least

their carrying value.

5. Issued capital

31 Dec 2011

$

30 June 2011

$

Balance at the beginning of the financial year 19,581,001 12,784,251

Issue of shares for payment of fees for Maldon Project - 180,242

Issue of shares to key management personnel in accordance with employment contract - 75,000 Issue of shares to key management personnel for corporate and advisory services

provided - 125,000

Issue of shares under share placements - 6,698,350

Share issue costs - (281,842)

Balance at the end of the financial period 19,581,001 19,581,001

Other share options

It is noted that 5,000,000 unlisted options exercisable at $0.06 per share on or before the earlier of 31 December 2011 or the

expiration of three (3) months, or any longer period as may be determined by the Directors, after Mr. Eduard Eshuys ceases

(as applicable) to be a Director of the Company and 5,000,000 unlisted options exercisable at $0.09 per share on or before

the earlier of 31 December 2011 or the expiration of three (3) months, or any longer period as may be determined by the

Directors, after Mr. Eduard Eshuys ceases (as applicable) to be a Director of the Company lapsed on 31 December 2011.



21

6. Reserves 31 Dec 2011

$

30 June 2011

$

Option premium reserve (i) 300,652 266,582

300,652 266,582

(i) A total of $34,070 has been recorded as an employee benefit expense in the Condensed Consolidated Statement of

Comprehensive Income for the half-year ended 31 December 2011 calculated on a pro-rata basis for the total number of

days from 1 July 2011 until 31 December 2011 as a proportion of the total number of days from 9 July 2010 until the

entitlement date of 31 December 2011 for the 10,000,000 options issued to Mr. Eduard Eshuys at various exercise prices

exercisable on or before the earlier of 30 June 2012 or the expiration of three (3) months, or any longer period as may be

determined by the Directors, after Mr. Eduard Eshuys ceases (as applicable) to be a Director of the Company.

7. Accumulated losses

31 Dec 2011

$

30 June 2011

$

Balance at the beginning of financial period 9,724,394 6,676,891 Net (profit)/loss for the period (28,817) 3,047,503

Balance at the end of the financial period 9,695,577 9,724,394

8. Earnings per share

Half-year

31 Dec 2011

cents per

Share

Half-year

31 Dec 2010

cents per

share

Basic profit/ (loss) cents per share

From continuing operations 0.01 (0.36)

Total basic profit/ (loss) per share 0.01 (0.36)

Half-year

31 Dec 2011

cents per

Share

Half-year

31 Dec 2010

cents per

share

Diluted profit/ (loss) cents per share

From continuing operations 0.01 (0.36)

Total diluted profit/ (loss) per share 0.01 (0.36)

The net profit/ (loss) and weighted average number of ordinary shares used in the calculation of the basic profit/ (loss) per

share and diluted profit/ (loss) per share are as follows:-

Half-year

31 Dec 2011

$

Half-year

31 Dec 2010

$

Net Profit/ (Loss) 28,817 (738,996)

Net Profit/ (Loss) used in the calculation of the basic profit/ (loss) per share and diluted profit/ (loss) per share from operations 28,817 (738,996)

Half-year

31 Dec 2011

Number

Half-year

31 Dec 2010

Number

Weighted average number of fully paid ordinary shares used for the purposes of calculating the loss per share and diluted loss per share. 235,688,342 203,139,486



22

9. Information in relation to mining tenements

Exploration outlays

The possibility of Native Title claim applications at some future time, under the provisions of the Native Title Act (1993) and negotiations with land owners, may affect access to and tenure of exploration tenements. Any substantial claim may have an effect on the value of the tenement affected by the claim or negotiations. No provision has been made in the accounts for the possibility of a Native Title claim application. In order to maintain current rights to tenure of exploration tenements, the Group will be required to outlay amounts in respect of tenement rent to the relevant governing authorities and to meet certain annual exploration expenditure requirements. It is likely that variations to the terms of the current and future tenement holdings, the granting of new tenements and changes at renewal or expiry, will change the expenditure commitments for the Group from time to time.

The expected outlays which can be extinguished at any time which arise in relation to tenements inclusive are as follows:-

31 Dec 2011

$

30 June 2011

$

Not longer than 1 year 911,200 871,181 Longer than 1 year and not longer than 5 years 770,000 921,181 Longer than 5 years - -

Total (i) 1,681,200 1,792,362

(i) The above expenditure commitments exclude expenditure requirements under the Farm in agreements with Planet

Metals Limited and Unity Mining Limited outlined in note 11.

10. Dividends

There were no dividends paid or proposed during the current or previous financial period.

11. Farm in agreements

The Company had met the minimum threshold expenditure of $750,000 under the terms and conditions of the Farm In

Agreement for exploration of the Mt Cannindah Prospect with Planet Metals Limited and Mt Cannindah Mining Pty Ltd. The Company has elected to continue earning-in and is required to spend a further $1 million by July 2012 (approximately

$750,000 had been spent by 31 December 2011). A minimum expenditure of $1.5 million is required by July 2013 to earn a 51% interest in the Mt Cannindah Prospect.

The Company has met its expenditure requirement of $500,000 under the terms and conditions of the Farm In Agreement for

the Bendigo Tenements with Unity Mining Limited. The Company is required to spend a further $5 million by January 2014 to earn a 51% interest in the Bendigo Tenements.

12. Subsequent events

On 7 March 2012 Apex Minerals NL (Apex) announced that it is undertaking a conditionally underwritten renounceable rights issue to raise up to $22.2 million (Apex Rights Issue) as part of a turnaround strategy which includes the proposed

appointment of Drummond Gold Limited’s directors and management team to Apex to help re-establish Apex as a sustainable Australian gold producer.

Drummond Gold Limited will receive from Apex an arrangement fee of $350,000 within seven days following the passing of the resolutions in the Apex Shareholders’ Meeting, the raising of the funds received under the Apex Rights Issue and the

appointment of Drummond Gold Limited’s directors to the Apex Board. Drummond has agreed to sub-underwrite $250,000 in the Apex Rights Issue representing 125 million shares at an issue price of $0.002 per share from the proceeds of the

arrangement fee. The Company will also receive 1,000,000,000 Options in Apex which are conditional upon Mr. Eduard Eshuys being

appointed to the Apex Board, resolutions being passed at the Apex Shareholders’ Meeting, and Apex raising a minimum of $20 million under the Apex Rights Issue.



23

12. Subsequent events (continued)

The expiry dates, exercise prices, and vesting conditions of the Options to be issued by Apex are set out in the table below:-

Numbers Expiry Date Exercise

Price Vesting Conditions

225,000,000 5.00pm (WST) on the date that

is 3 years from the date of issue

0.3 cents None



0.45

cents

None



0.6 cents None



0.8 cents These options will vest if and only if the Company

produces at least 100,000 ounces of gold at a cash cost

(as reported in the Company’s Annual Financial Report)

of less that A$1,100 per ounce in financial year 2013-14.

The Apex shareholders will also be asked to consider a resolution that the issued capital of Apex be consolidated on the basis

that every one hundred (100) shares be consolidated into one (1) share. If the resolution is passed the Options will be

reduced by a multiple of 100 and the exercise prices of the Options will be increased by a multiple of 100.

Further details of this transaction can be found in the Apex Prospectus and Apex Notice of General Meeting announced on 7

March 2012 by Apex Minerals NL.


Unaudited additional information

24

Resources

Mt Coolon Resources 30 June 2010

Mine Location

Resource Category Total

cut-off

Measured Indicated Inferred

000’ t Au g/t Au oz

000’ t

Au g/t Au oz 000’ t

Au g/t Au oz 000’ t Au g/t Au oz Au g/t

Koala Hectorina Pit 15 2.6 1,300 15 2.6 1,300 None

Underground Extension 205 5.9 39,600 62 5.3 10,600 267 5.7 49,300 3.0

Tailings 305 1.6 15,800 11 1.6 500 6 1.5 300 322 1.6 16,700 None

Total 305 1.6 15,800 231 5.5 40,400 604 3.5 67,200

Eugenia in whittle pit - direct mill 428 1.5 20,800 428 1.5 20,800 0.5

outside pit 3,988 1.2 157,500 3,988 1.2 157,500 0.5

Total 4,416 1.3 178,200 4,416 1.3 178,200 0.5

Glen Eva Underground below pit 132 7.8 33,200

21,000 5.9 4,000 154 7.5 37,200 3.0

Total 305 1.6 15,800 363 6.3 73,600 4,506 1.3 193,100 5,174 1.7 283,000

(minor rounding errors)

The data in this report that relates to Exploration Results, the accuracy and quality of data forming the basis of all resource estimates, and the interpretation of mineralisation at Eugenia, Koala and Glen Eva, Sullivans, Mount Cannindah and Bendigo are based on information

compiled by Mr. Erik Norum who is a Member of The Australasian Institute of Geoscientists and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves

(the “JORC Code”). Mr. Norum is a full-time employee of Drummond Gold Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear.

The data in this report that relates to Mineral Resources for the Eugenia, Glen Eva and Koala Deposit is based on information evaluated by

Mr. Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore

Reserves (the “JORC Code”). Mr. Tear is a full-time employee of Hellman & Schofield Pty Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear.

Mount Cannindah Resources October 2011

Category 000’t Copper

% Gold g/t

Silver g/t Cu

tonnes Au ozs

Ag ozs

Measured 1,888 0.96 0.39 16.2 18,100 23,700 983,600

Indicated 2,530 0.86 0.34 14.5 21,800 27,700 1,182,800

Inferred 1,135 0.97 0.27 13.6 11,000 9,900 494,900

Total 5,553 0.92 0.34 14.9 50,900 61,300 2,661,300

(0.5% copper cut off; density of 2.7t/m3; minor rounding errors)

The data in this report that relates to Mineral Resources for the Mount Cannindah Deposit is based on information evaluated by Mr. Simon

Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person

as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reser ves (the “JORC Code”). Mr. Tear is a full-time employee of Hellman & Schofield Pty Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear.

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