Kagara Limited (ASX: KZL)

Listing of Gold Assets

In order to facilitate the rapid development of Kagara?s substantial gold assets, the Company intends to incorporate a new subsidiary company, Mungana Goldmines Pty Ltd, which will acquire the rights to gold within Kagara?s north Queensland tenements and subject to compliance with ASX requirements, apply for listing on the ASX.

Amongst other assets, Mungana Goldmines will acquire the right to an inferred resource of 1.6 million ounces of gold, 90,000 tonnes of copper and 14 million ounces of silver contained within the Red Dome and Mungana porphyry gold deposits, located near Chillagoe in far north Queensland and summarised below.

By way of background, Red Dome was a very profitable gold mine for Nuigini Mining between 1985 and 1996. It produced one million ounces of gold and 35,000 tonnes of copper from an open pit 350 metres in depth over a period when the gold price averaged between A$450 and A$550 per ounce. Today?s gold price is in excess of A$1,500 per ounce.

The gold ore body at Mungana which has been defined over several years by Kagara is currently being developed as an adjunct to the Mungana base metal operations and to date, more than A$90 million has been expended on decline access and cross cut development to a depth of approximately 500 metres vertical which Mungana Goldmines will have access to. Gold ore, which is currently being mined during cross cut development to access the zinc-copper-lead orebody, is being stockpiled on surface for future treatment by Mungana Goldmines. Ore stocks at the end of January stood at 33,000 tonnes grading 1.77 grams per tonne gold and these stocks will continue to build up as mining of the base metal deposit proceeds.

Although detailed studies have not yet been carried out, it is tentatively planned to extract the 45 million tonne Mungana gold deposit using sub level caving techniques, on a scale similar to Newcrest Mining?s Ridgeway deposit in New South Wales.

Also being acquired by Mungana Goldmines is the newly discovered Victoria gold copper porphyry system, located 3.5 kilometres to the east of Mungana which has been intersected in several holes beneath the Victoria zinc-copper deposit. This has the potential to be a third major gold ore body within the Red Dome Mine Corridor.

Kagara?s emphasis has not been on exploring for gold in the Chillagoe area and with a dedicated focus on gold by Mungana Goldmines, more of these major gold-copper porphyry related systems ore likely to be discovered along the world class Red Dome Mine Corridor.

Advisors will be retained to manage the listing process and more detail on the IPO structure will be provided to shareholders as information becomes available.

In accordance with ASX Listing Rule 11.4.1(a), Kagara shareholders will be invited to participate in the public flotation of Mungana Goldmines.

Kim Robinson

EXECUTIVE CHAIRMAN

This report, so far as it pertains to ore and mineralisation, is based on information compiled by and as reported upon by Mr Joe Treacy, an employee of Kagara Ltd, and who is a member of the Australian Institute of Geoscientists or the Australasian Institute of Mining and Metallurgy and has over five years experience which is 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?. Mr Treacy consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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