Korab commenced development of the Bobrikovo gold mine in June 2008 through Korab's 74% owned subsidiary Donetsky Kryazh Ltd (DKL). Korab's equity in DKL is held by Korab’s Australian subsidiary, Lugansk Gold Ltd. The remaining 26% interest in DKL is held by Ukrainian investors. DKL is registered under Ukrainian laws and is subject to local corporate tax at a rate of 25%. All funding requirements for DKL’s Bobrikovo gold mine are provided by Korab through Lugansk Gold Ltd. Loans provided by Korab to Lugansk will be repaid by Lugansk following its IPO. Loans provided by Lugansk to DKL will be repaid by DKL from project’s pre-tax cash flows. Ukraine has no restrictions on repatriation of capital or profits and is a major investment destination for European Union’s institutional investors.

Lugansk Gold Ltd will seek listing on ASX this year. Korab shareholders will receive between 1 and 1.27 free shares in Lugansk Gold Ltd. IPO indicative price range for Lugansk has been set at 26-34 cents per share. Korab shareholders will also have a priority to subscribe for additional shares in Lugansk IPO.

Bobrikovo mine is located in Eastern Ukraine in the Lugansk Region within Nagolny Ridge. Nagolny Ridge is part of a large intra-continental Phanerozoic structure that extends from southern Europe east to Central Asia. This structure hosts several world-class gold mining operations including Muruntau, Vysokovoltnoe, and Bakirchic. The tenor and style of mineralisation at Bobrikovo is similar to 170 million ounce gold deposit at Muruntau in Uzbekistan and to 57 million ounce Sukhoi Log deposit in Russia. Other deposit anonalogues to Bobrikovo are gold deposits in Nova Scotia, Canada.

Bobrikovo structure strikes 11km by 2.5 km. The deposit occurs on the intersection of deep fault zones. Mineralisation is controlled by NW-NNW trending anticline hinge, and occurs as concordant quartz-carbonate tension veins and stockworks. Host rocks of the Nagolny Kryazh comprise two structural stages: the lower, Precambrian, and the upper, Phanerozoic. The lower structure comprises deformed sequence of gneisses and crystalline schists. Precambrian basement is overlapped by 3km- thick sedimentary rock sequence. Ore zone is 2.5-3 km long and 0.9 – 1km wide. Sulphide ores occur from the depth of 35m down to at least 3200m.

The oxidised zone of the Bobrikovo deposit begins at the surface and extends down to 30-40 m. Sulphide gold mineralisation starts at 30-40 m depth and continues to a depth of 3,200m. Veins are easily recognizable and suitable for selective extraction.

Deposit has a JORC Code compliant resource base of 1,012,000 ounces of gold in measured, indicated and inferred categories. In addition to the classified mineral resource Bobrikovo has a substantial exploration potential. Government geologists estimate that the primary ore zone between 150m level and 3,200m contains between 2.3Moz and 3.0Moz Au, highlighting the prospectivity and development potential of the deposit at depth. Geophysical data show presence of buried felsic intrusion at a depth of 4km.

Korab has re-commenced mining and stockpiling of the oxide ore in the first half of 2010. The processing of ore to concentrate is scheduled to commence in 2011.

Modeling completed by independent consulting firms Intertech (USA) and Micromine (Australia) confirmed the excellent economics of Bobrikovo mine.

Metallurgy Tests Results

Independent test work by accredited laboratories has shown good recovery of gold from both primary and oxide ores using variety of methods including gravity, cyanidation and heap leach. The summary of test results is included below:

(Top of page..)

Gold Mineralisation

Bobrikovo structure strikes 11km by 2.5 km. The deposit occurs on the intersection of deep fault zones. Mineralisation is controlled by NW-NNW trending anticline hinge, and occurs as concordant quartz-carbonate tension veins and stockworks. Host rocks of the Nagolny Kryazh comprise two structural stages:

1. the lower, Precambrian, and

2. the upper, Phanerozoic.

The lower structural comprises deformed sequence of gneisses and crystalline schists. Precambrian basement is overlapped by 3km- thick sedimentary rock sequence.

Ore zone is 2.5-3 km long and 0.9 – 1km wide. Initial sulphide ores occur from the depth of 30-40m down to 3200m. Drilling evidenced presence of 8-12 m thick ore bodies with gold grade above 10g/t within the interval from 200 to 500m.

Oxide reserves (C2 by Russian classification, corresponding to Probable Reserves of JORC code) are 220kt @ 7.2 g/t Au containing 52,600 oz Au, 1.8Mt @ 1.0 g/t containing 51.7oz Au. Silver (Ag) reserves 225.7Kt @ 45.2 g/t Ag containing 328koz Ag.

(Top of page..)

APPENDIX

Muruntau gold deposit in Uzbekistan is the world's largest gold deposit with production of 2Moz Au per annum. The ore reserves and resources at Muruntau (including historical production) is about 170Moz of gold. It is also world's largest open pit gold mine, The open pit measures about 3.5km by 2.5 km and extends to a depth of 350m. Ore is mined from an open pit with dimensions of about 2,500m x 3,500m, and 300m deep. Final pit depth is planned to be 650m with the mineralisation known to extend to a depth of at least 1,500m. Long term plans are to mine from underground. Gold is free milling with variable grain size and minor gold associated with sulphides, primarily arsenopyrite. Muruntau processing plant treats ore with an average head grade of 2.4 g/t Au at the rate of 2.2kt per day. The processing circuit includes a gravity circuit.

There are many similarities between Bobrikovo and Muruntau deposits, but mineralisation at Bobrikovo is closest to Sukhoi Log gold deposit in Russia. Mineralisation at Bobrikovo occurs at the intersection of deep fault zones controlled by NW-NNW trending anticlinal hinge and occurs as discordant and concordant quartz-carbonate veins and stockworks.

(Top of page..)

Sukhoi Log gold deposit mineralisation is pyrite ore body. Highest ore grades occur in pyritic black shale beds. Sukhoi Log's mineral reserves at a cutoff grade of 1 g/t Au are 384Mt with average grades of 2.6 g/t Au for 33Moz. Additional resources include 165Mt at 2.1 g/t which could be converted to reserves and developed into an open pit operation. 205Mt at 0.8 g/t Au sits as a low grade hallow around the higher grade mineralisation. The deposit contains 50Moz of gold.

(Top of page..)

GEOLOGY OF BOBRIKOVO FIELD
Crustal environment: Nagolny Kriazh - centre of the Donetsk Fold Zone, on the E margin of the Ukrainian Shield.

Structural regime: Intersection of the Osyovy & Elanchik-Rovenkov deep-seated fault zones, where the Osyovy Fault splays S and N. 7-25 m wide quartz-ankerite veins and stockworks sit at crest of NW-trending anticline (280-290°, 11 km long, 2.5 km wide).

Host rocks: C2-P3 metamorphosed flysch greywacke-shale sedimentary rocks.

Ores: Carbonate-quartz veins and altered rocks with sulphide-gold mineralisation; fault controlled

Regional metallogeny: mercury, gold, base metals, silver, coal, sandstone-hosted uranium mineralisation

Age of host rocks: Early-Carboniferous
Age of mineralisation: 200 +/- 70 Ma (by galena)

(Top of page..)

Bobrikovo deposit block model, surface to 200m depth

oxide and upper sulphide, central zone, 7m cells

(click on picture to enlarge)

Bobrikovo deposit oxide ore

Korab's geologist standing on a high grade gold-bearing vein

(click on picture to enlarge)

Bobrikovo deposit oxide ore

Multiple 1-3m wide, high grade gold-bearing veins up to 211g/t

(click on picture to enlarge)

(click on pictures to enlarge)

Bobrikovo open pit oxide zone plan view

(click on picture to enlarge)

Bobrikovo open pit oxide zone cross section

(click on picture to enlarge)

Bobrikovo deposit oxide zone mining method

(click on picture to enlarge)

Bobrikovo mine Stage 2 process flowchart

(click on picture to enlarge)