Very good update, but as usual looks as the market will ignore...

Very good update, but as usual looks as the market will ignore it:


OPERATIONAL AND DFS UPDATE
POTENTIAL 22% LIFT IN ANNUAL AVERAGE GOLD PRODUCTION
& 10% REDUCTION IN AVERAGE SITE CASH OPERATING COSTS
(INCL ROYALTIES


The Board of Sihayo Gold Limited (ASX: SIH) is pleased to provide an Operational and Definitive
Feasibility Study (?DFS?) update for its 75% owned Sihayo Pungkut Gold Project (?SPGP?) in North
Sumatra, Indonesia.

Operational Update

Drilling activities at the SPGP are set to resume in late September, following the end of the
Ramahdan period and the associated public holidays, with a focus on the final phase of infill drilling
for the SPGP. An infill programme of approximately 3,000 meters is required to likely convert the
limited amount of Inferred Resource contained within the overall JORC compliant resource into the
higher Indicated category. The programme will be undertaken with two diamond drill rigs and given
the relatively shallow depth of the planned holes it is anticipated that the drilling will be completed
within three months.

Once the infill programme is complete, ongoing exploration drilling shall target potential nearsurface
mineralisation along strike from the existing JORC Resources, which could potentially be
included in the early years of the current proposed mine schedule as described within the DFS.

Figure 1 below shows the Sihayo and Sambung Resources and highlights the potential resource
extensions to the northwest and southeast of the Sihayo deposit.

Government and Community meetings

As previously reported, on Sunday 29th May, a group of demonstrators, believed to be supported by
the representatives of illegal artisanal miners from the region, arrived and caused significant damage
to Sihayo?s exploration camp.
Over the past three months, our company relations team has conducted over forty meetings with
the key SPGP stakeholders including; local community members, village heads, religious groups,
NGO?s, local and provincial Government representatives, local and provincial Police and Army
commanders, the newly elected Bupati of Mandailing Natal, North Sumatra and the Governor of
North Sumatra. The meetings have been focused on ensuring that the future activities of the
Company are conducted in a safe and secure environment without the risk of any further unlawful
acts against the Company.

As with any mining project, our relationship with the local community is critical to our long term
operational success. As part of our ongoing community programme we are taking 15 local
representatives on a site visit to a newly commissioned gold mine in North Sulawesi, Indonesia in
mid‐September, to show them first‐hand the operational, environmental and community aspects of
a mine of similar size to our planned SPGP.

Definitive Feasibility Study (?DFS?)


The final phase of the DFS work related to the overall metallurgical gold recoveries is progressing
well. Over 4,500 additional cyanide leach tests are being completed (1,500 completed to date)
across the multiple mineralisation types that make up the Sihayo and Sambung Resources and the
initial results suggest that some improvement in overall process gold recoveries maybe achievable.
It is anticipated that the metallurgical work will be completed by the end of October.

Ongoing assessment of the ?optimal plant capacity? has indicated that an increase from the current
1.25 mtpa capacity to a rate of 1.5 mtpa is economically positive. The Capex and Opex components
of an expansion to 1.5 mtpa have been completed to DFS standard and the key summary results are
detailed in the table below. An additional scenario of improved recoveries over the initial mine life
has also been included in the table, however, it needs to be emphasised that this is merely for
indicative purposes at this stage and any improvement in overall recoveries will be confirmed at the
conclusion of the current metallurgical testwork programme.

The Sambung Resource has been included in the mining schedule of the expanded 1.5 mtpa
throughput case, however, it must be noted that the

Sambung Resource is currently in the Inferred
category and therefore will require a successful infill drilling programme to bring the resource up to
the required Indicated category for its ultimate inclusion in the DFS mining schedule.

Key DFS parameters for the 1.25 mtpa and 1.5 mtpa cases
 1.5 mtpa case delivers 22% increase in average annual gold production and 10%
decrease in site cash operating costs (including royalties) compared with 1.25 mtpa
case

Sihayo Pungkut Gold Project 1.25 Mtpa 1.5 Mtpa 1.5 Mtpa *
Capital Cost (pre contingency allowance) USD mill 80.4 87.1 87.1
Pre‐production mining USD mill Nil 11.2 11.2
Initial Mine Life years 7 7 7
LOM Total ore processed** Mt 8.6 10.2 10.2
LOM Average anual gold production Oz 72,000 88,000 93,000
LOM Site Cash Costs (including royalties) US$/oz 752 678 639
LOM average gold recoveries % 71.5 71.5 75*
LOM average strip ratio Waste:Ore 5.4:1 4:1 4:1


Sambung JORC Resource

Runge Limited completed an updated JORC Resource report for the Sambung Resource in July 2011.
Whilst there has not been any additional drilling since the previous JORC Report completed in
January 2007, Runge have used the greater knowledge base obtained during the preperation of the
latest JORC Report for the Sihayo Resource to assist in the completion of the new Sambung Report.

In summary, the new JORC report saw an increase in the estimated contained gold from 100,000oz
to 123,200oz, a decline in the average grade from 2.6 g/t Au to 2.2 g/t Au and a revised cut‐off grade
of 1.2 g/t compared to 1.5 g/t previously. The table below details the new Sambung JORC resource

Sambung Inferred Mineral Resource Estimate
Type Tonnes Au Au Au
t g/t ounces cut‐off
Oxide 313,000 2.3 22,900
Transitional 1,404,000 2.2 100,100
Fresh 4,000 2 200
Total 1,721,000 2.2 123,200 1.2 g/t

Regional Exploration

For the entire period of the disruption at our main project, regional exploration work at Tambang
Tinggi, Hutabargot Julu and Huta Pungkut, including drilling at Tambang Tinggi, has continued
without issue. Refer to Figure 2 below for the location of all prospects.

Hutabargot Julu epithermal gold prospect

The work program has significantly expanded the known mineralisation potential of the prospect to
the north, east and west. The underlying geology, soil and rock chip geochemistry results are
contained in Figures 3 ? 5 below.

New mineralised vein systems have been discovered to the east (fault vein) and to the north
(Kaporas prospect). Soil and IP programs will be extended to the northwest to cover the expanding
anomalous zones.

The Kaporas East soil gold anomaly is approximately 1 x 1 km sq and open under cover to the east.
The anomaly is consistent with a broad area of magnetite destruction (alteration) and represents a
high priority target for bulk tonnage gold potential.
The Kaporas West soil gold anomaly is also approximately 1 x 1 km sq and is open to the north and
the west and is consistent with a mapped granodiorite intrusive.

Gold mineralisation at Hutabargot Julu is hosted in epithermal veins and structures within a northsouth
trending belt of dacitic volcanics. The mineralised vein systems are covered to the south by
post‐mineral acidic (dacite‐rhyolite) flows and pyroclastics and to the east by quaternary alluvium.

Hutabargot Julu is a high priority for further exploration and potential discovery of both high
grade ? low tonnage gold deposits and bulk tonnage ? low grade gold deposits and is located only
8km along trend from the Sihayo and Sambung Resources.

Drilling is expected to commence in late September.
Tambang Tinggi gold and copper / gold
Drilling of the multiple near surface gold targets in the Tambang Tinggi Region is nearing the
completion of the first phase. The second phase of the drilling programme will be a series of deeper
holes testing the copper / gold potential indicated by the results of holes TTDD011 and TTDD008.
Conclusion

With the final phase of infill drilling about to commence at our main project and concurrently a recommencement
of drilling at the highly prospective Hutabargot Julu epithermal gold prospect, the
next six months should prove to be a very exciting period for our Company.

Yours faithfully,
SIHAYO GOLD LIMITED