EVOLUTION MINING LIMITED - Interim / Quarterly Report 2010

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QUARTERLY ACTIVITIES STATEMENT 30 September 2009

HIGHLIGHTS .................................................................................................................................................. 3 OVERVIEW ..................................................................................................................................................... 4 CORPORATE ACIVITIES .................................................................................................................................. 6 PROPOSED MERGER WITH LION SELECTION PROGRESSING AS PLANNED ............................................... 6 EDNA MAY OPERATIONS PROGRESS REPORT ............................................................................................... 8 EXPLORATION REPORT ................................................................................................................................ 12 REGIONAL AUGER GEOCHEMICAL SAMPING .......................................................................................... 12 RESOURCE DRILLING ............................................................................................................................... 13 GOLDEN POINT ........................................................................................................................................ 14 MINERAL RESOURCES AND ORE RESERVES ................................................................................................ 16 ATTRIBUTION STATEMENTS ........................................................................................................................ 18 COMPANY PROFILE ..................................................................................................................................... 19

HIGHLIGHTS

CORPORATE

Merger with Lion Selection Limited progressing

EDNA MAY GOLD PROJECT

Safety ‐ Edna May Gold Project remains Lost Time Injury free
Mining fleet mobilised to site
Mine engineering and geological team employment complete
Over 1400m[3] concrete poured or approximately 70% complete
Leach/absorption tank construction well advanced
Refurbishment of plant mechanical components 80% complete
Accommodation village being extended to 144 rooms to cover peak demand during construction

EXPLORATION

Regional auger geochemical sampling provided encouraging results along the Westonia Greenstone belt with targets for follow up RAB drill testing in the current financial year
RAB Drilling extends Edna May Gneiss to the west of Greenfinch deposit at Edna May Gold Project
Resource definition drilling program near completion at the Edna May Gold Project to expand and upgrade the Mineral Resource and Ore Reserve
Revised Ore Reserve estimate planned for December 2009
Edna May and Greenfinch gold mineralisation remain open at depth
Strong anomalism and visible gold confirm prospectivity of Golden Point mineralisation

OVERVIEW

The quarter under review has seen Catalpa’s Board and Management focused on advancing both the construction of its Edna May Gold Project and its planned merger with its largest shareholder (46.9%), Lion Selection Limited.

As announced to the market on 12 October 2009, the Supreme Court of Victoria made an order convening a meeting of Lion Selection Limited shareholders to consider the merger. Catalpa will convene a shareholder meeting on 17 November 2009 at which its shareholders will also be asked to approve the merger and the consolidation of Catalpa shares based on an 11 for 1 ratio. The Notice of Meeting and accompanying Explanatory Memorandum have been dispatched to Catalpa shareholders.

Catalpa and Lion Selection have amended the End Date of the Merger Implementation Agreement from 30 November 2009 to 18 December 2009.

Catalpa secured Works Approval by the Department of Environment and Conservation (DEC) on 6 July 2009, and, having provisionally appointed its major site works contractor, Perth‐based GR Engineering Services in March was able to immediately commence work on‐site on receipt of the Works Approval.

During the past three months the Company’s Edna May Gold Project has undergone a rapid transformation from a plant lay‐down yard to an advanced construction site. This transformation has taken place with zero lost time injuries to employees or contractors.

Considerable construction progress has been made in the quarter under review. On 7 October the mining fleet commenced mobilisation to Edna May to start earthworks preparing areas for the mining equipment maintenance facility, construction of roads, stockpiles and dumps in preparation for 24 hour mining operations in early November 2009.

Other highlights include:

Mine engineering and geological team employment complete
Over 1400m[3] concrete poured or approximately 70% complete
Leach/absorption tank construction well advanced
Refurbishment of plant mechanical components 80% complete
Accommodation village being extended from 88 rooms to 144 rooms to cover peak demand during construction

Catalpa remains confident in the upside potential of its Edna May Gold Project, and positive sentiment continues to be underpinned by consistently encouraging results from Catalpa’s ongoing exploration programme.

In Q2 2009, regional infill auger geochemical sampling in previously defined anomalous areas and first‐ pass sampling in the previously untested eastern areas of Catalpa’s 880km2 tenement holdings yielded two substantial gold anomalies in the north‐western area; with spot highs of up to 26.4ppb and one in the east with a spot high of 258pp. These results provide a good basis for follow up RAB drilling in this current financial year, planning of which is underway.

Resource drilling at the Edna May deposit during the past quarter has returned consistent broad mineralised intersections and results which continue to underpin the robustness of the Mineral Resource for open pit mining at the Edna May Gold Project.

A revised Ore Reserve, including the recent resource definition drill results and updated gold price assumptions, is planned to be finalised and reported before the end of the year.

In addition to the continued resource definition of the Edna May deposit, two holes extended into the footwall lithologies to scope depth extensions of the Golden Point Gneiss, have identified a broadening of the host lithology at depth just 30 metres from the Edna May footwall. Given this extremely encouraging result; the Golden Point Gneiss has been elevated as a priority near mine exploration target.

While there was a steep increase in the US dollar gold price, which has traded at above US$1,000 per ounce since September, much of the gain in US dollar gold price was offset by the strength of the Australian Dollar. In Australian dollar terms, gold traded between A$1,125 and A$1,225 per ounce for much of the period under review.

Catalpa’s hedge facility of 352,317 ounces of gold at A$1,557.50 per ounce provides surety against both the gold price and fluctuations in currency.

CORPORATE ACIVITIES

PROPOSED MERGER WITH LION SELECTION PROGRESSING AS PLANNED

The proposed merger between Catalpa Resources Limited and its largest shareholder, Lion Selection Limited (ASX:LST) is progressing as planned. On 9 October 2009, the Supreme Court of Victoria made an order convening a meeting of Lion Selection Limited shareholders to consider the merger.

On 12 October 2009 Lion Selection released its Scheme Booklet which includes an Independent Expert Report by Grant Samuel recommending that the merger is in the best interest of Lion Selection shareholders.

Catalpa has also convened a shareholder meeting on 17 November 2009 at which shareholders will be asked to approve the merger and the consolidation of Catalpa shares based on an 11 for 1 ratio. The Notice of Meeting and accompanying Explanatory Memorandum were dispatched to Catalpa shareholders on 16 October 2009.

The merger will amalgamate Lion Selection’s two gold assets, namely 30% of the Cracow Gold Project (Newcrest) and a 46.9% holding in Catalpa Resources Limited, with Catalpa which owns the 100,000 ounces pa Edna May Gold Operation.

The broader market has responded extremely positively to news of the merger. Since announcing the Merger Implementation Agreement, shares in Lion Selection and Catalpa Resources have risen by more than 80%.

The implied market support for the merger is very encouraging and reflects the opinion of both Catalpa’s and Lion Selection’s Directors, who have indicated their unanimous intention of voting their respective shares in favour of the merger, in the absence of a superior competing proposal.

Catalpa and Lion Selection have amended the End Date of the Merger Implementation Agreement from 30 November 2009 to 18 December 2009.

The timetable for the restructure is:

Time and date by which you must lodge the Catalpa General Meeting Proxy Form for the Catalpa General Meeting if you wish to vote by proxy at the meeting	Before 5.00pm on 13 November 2009
Time and date for determining eligibility to vote at the Catalpa General Meeting	7.00pm on 15 November 2009
Lion Selection General Meeting	10.00am (AEST) on 17November 2009
Lion Selection Scheme Meeting	10.15am (AEST) on 17 November 2009
Catalpa General Meeting to be held at the Hyatt Regency Perth, Traders Lounge, 99 Adelaide Terrace, Perth WA	10.00am on 17 November 2009
Catalpa Share Consolidation takes effect	7.00pm on 26 November 2009
Catalpa Shares commence trading on ASX on a deferred settlement basis	27 November 2009
Court hearing for approval of the Scheme	27 November 2009
Scheme Effective Date – the date the Scheme becomes legally effective. Lion Selection ceases trading at close of trading on ASX	30 November 2009
Catalpa Share Consolidation record date	3 December 2009
Scheme Record Date ‐ Date for determination of entitlements of Lion Selection Shareholders to Scheme Consideration	7 December 2009
Demerger Effective Date ‐ Transfer of LSG shares to Lion Selection shareholders	9 December 2009 (immediately prior to implementation of Scheme)
Scheme Implementation Date ‐ Catalpa issues Scheme Consideration	10 December 2009
Despatch date in respect of Catalpa Share Consolidation and Scheme Consideration – last day of deferred settlement trading	10 December 2009

EDNA MAY OPERATIONS PROGRESS REPORT

The Edna May Gold Project remains within budget and on schedule to achieve first gold production by June 2010. The team has achieved considerable progress towards this objective during the past quarter:

Mining Fleet Mobilised

Five 90 tonne trucks, one 120 tonne excavator and associated ancillary mining equipment were mobilised to Edna May in early October in preparation for the commencement of pre‐stripping.

The fleet commenced earthworks on 15 October preparing areas for the mining equipment maintenance facility, construction of roads, stockpiles and dumps in preparation for 24 hour mining operations in early November 2009.

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Part of Catalpa’s Edna May Operations mining fleet on site. Mining commenced on 15 October 2009

Recruitment

Employment of the mine’s management and technical team has been finalised as is the first phase of employment of the mine equipment operating teams. The full complement of mining engineers, geologists, surveyors, supervisory staff, mining equipment operators and other mining support staff commenced employment in early October.

Construction Progress

GR Engineering Services (GRES), the major contractor appointed to construct and refurbish the Edna May Gold Project process plant, continues to advance construction on schedule. The majority of the plant site earthworks including crusher dump pocket, crushed ore stockpile, grinding, leach and absorption, gold recovery area, raw and process water dams are now complete.

The process plant concrete civil works are also well advanced with the completion of the leach/absorption tank ring beams, workshop pad, MCC footings and pipe rack footings. The concrete rafts for both the SAG and ball mills are both complete as is the ball mill and SAG mill plinths as seen in the centre of the photograph below. The mills are scheduled to be placed on the plinths by month end. The MCC building (foreground of photograph below) steel fixing is complete and ready for cladding. In addition the plant workshop and store construction are also complete.

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MCC building in foreground with Ball and SAG Mill plinths complete (centre) ready to receive the mills in October.

The tank fabrication contractor was mobilised to site at the beginning of August to construct 2 x 2000 m3 leach tanks and 6 x 1,200 m3 absorption tanks. Leach and absorption tank fabrication is also well advanced at the plant site. The concrete ring beams for the foundation of the tanks were poured mid August and are in situ below the absorption tanks, as can be seen in the photograph below .

Four of the six absorption tanks are now at full height and the remaining two are at half height. Construction of the two larger leach tanks has now commenced and is on schedule for construction to full height in October 2009.

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Absorption tanks at full height and two larger leach tanks being constructed in foreground.

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View of plant site looking south west with the plant workshop and store centre left and raw and process dams in the left foreground.

The refurbishment of motors, pumps, steel and other mechanical equipment on site is well advanced and the steel and other refurbishment continues on schedule. The Perth‐based mechanical and electrical refurbishment of equipment is approximately 80% complete.

The process plant construction remains on schedule and within budget.

EXPLORATION REPORT

REGIONAL AUGER GEOCHEMICAL SAMPING

Catalpa’s Board remains confident in the exploration upside potential of its tenement holdings, which is underpinned by ongoing exploration successes. On 3 July 2009 Catalpa reported further encouraging exploration results from a recent first pass auger and follow up infill geochemical sampling.

In combination with the 2008 auger sampling programme, the recent results have produced three promising, wide gold‐in‐soil anomalies which strengthen last year’s promising results and define coherent anomalies up to 2km wide, and also produced several new anomalous values in areas not previously sampled.