SAVANNAH GOLDFIELDS LIMITED — Capital/Financing Update 2005

Sep 7, 2005

ACN 003 049 714

Mail Address GPO Box 5268 Brisbane Old 4001 Level 5, Santos House 60 Edward Street Brisbane Old 4000

Phone: (07) 3303 0630 Fax: (07) 3303 0601 Email: admin@rcm.com.au

ASX ANNOUNCEMENT

8 SEPTEMBER 2005

ARRAWATTA COAL PROJECT DRILLING UPDATE AND PROGRAMME FORWARD

The Company is pleased to advise on results from the reconnaissance drilling programme at its exploration licenses at Arrawatta and Bukkulla (EL 6433 and 6434), in northern New South Wales together with plans for the project looking forward.

RECONNAISSANCE PROGRAMME RESULTS

On 25 August the Company announced that it had made a new coal discovery at Arrawatta (EL 6433) in northern New South Wales. Five out of seven reverse circulation holes had intersected thick sequences of Permian sediments containing significant thicknesses of coal beneath thin Tertiary basalts in the north of the Arrawatta exploration license.

The coal occurs as multiple seams with individual seam thicknesses of up to 6.4m and with a maximum cumulative thickness in one hole of 28.5m of coal in a sequence of 128m of Permian sediments. Coal seams have been intersected from a depth of 12m. The discovery is interpreted as the being in the eastern margin of a westerly dipping Permian basin.

Subsequent geophysical logging of the holes at Arrawatta has confirmed the thickness of the seams as previously geologically logged. Preliminary coal quality results from the reverse circulation drilling chips will be available over the next few weeks.

Reconnaissance drilling has also been undertaken at two other areas on the exploration licenses. The locations of these areas together with the Arrawatta discovery are shown on the accompanying plan.

Two holes totaling 234m have been drilled in the south east corner of EL 6433 (Area A) located approximately 12kms south-east of the Arrawatta discovery and intersected sediments within a sequence of basalt flows interpreted to be of Tertiary age. Beneath these sequences sediments containing multiple narrow intercepts of coal up to 1m were also intersected from a depth of 79m to a depth of 145m when basement rocks were intersected. The sedimentary sequence is interpreted to be of Permian age. This is encouraging and the area is considered worthy of follow up drilling.

Two holes totaling 126m have also been drilled at Bukkulla on EL 6434, (Area B) located approximately 15 kms north or the Arrawatta discovery. The holes intersected sediments interpreted to be of Tertiary age. Basement rocks were intersected at approximately 63m. Permian rocks have been noted to the south between Bukkulla and Arrawatta and this area is considered very prospective and will be drilled when the Exploration License over this area has been granted.

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ACN 003 049 714

11 holes in total $(1,247m)$ have been drilled with 3 of the 4 areas originally planned for drilling by the reconnaissance programme now tested. One of these areas contained the Arrawatta discovery. Access to the fourth area to the south-west part of the Arrawatta exploration license (Area C) has not been possible as ground conditions are currently unsuitable for heavy drilling equipment. Drilling of this area will be delayed until conditions suit

A review of the results to date and previous data has highlighted the potential for the Company's exploration licenses to contain a coal bearing Permian basin of significant size trending to the west from the Arrawatta discovery towards Area D which had been previously highlighted as a high priority exploration target area based on then available data. Progress so far fully justifies the commitment to a major exploration programme over this area as discussed below.

PROGRAMME FORWARD

The recent capital raising by the Company will enable it to aggressively pursue further programmes on the Arrawatta coal project in parallel with the advancement of the Company's other considerable mining and exploration projects.

The next stage will be to complete the reconnaissance programme with a 150m cored hole for coal quality testwork. Drilling is expected to commence around the end of the month when a suitable diamond drilling rig becomes available.

The results to date have highlighted the potential for the area to contain a coal bearing Permian basin of significant size and delineating the extent and characteristics of the basin will be the main focus for the next phase of work at Arrawatta. This will involve a major drilling programme which is planned to commence around the end of October.

The programme will take around two months and is planned to involve drilling an area of approximately 40 square kilometres on a 1 km by 1 km grid covering an area to the south and west of the Arrawatta discovery within the granted EL6433. This area is considered particularly prospective based on the reconnaissance drilling, water bore logs and surface geology. The programme's objective will be to drill through to basement and map the coal bearing Permian basin in three dimensions.

The programme is scoped to contain approximately 40 holes $(8,000\text{m})$ with potentially 5 cored holes (1,000m) for coal quality and structural information.

An additional drilling programme of a similar scale and nature is contemplated for the 127 sq km exploration license application covering the area between the Bukkulla and Arrawatta exploration licenses once it is granted which is expected to occur around the end of the year.

ACN 003 049 714

PROJECT BACKGROUND

The Company is nearing completion of the first stage reconnaissance reverse circulation drilling and coring programme at the Company's coal exploration licenses 6433 and 6434 at Arrawatta and Bukkulla in northern NSW.

The licenses are located 30 to 60 kms south of the Ashford Coking Coal project (Renison 50%) and cover 65 sq kms. An additional application covering 127 sq kms has been applied for surrounding these licenses, following initial geological appraisal.

Much of the area is covered with tertiary basalts of variable thickness which overlay carboniferous basement and sedimentary sequences of intermediate age. It is these sedimentary sequences which were considered prospective for coal, and have subsequently been shown to contain significant coal thicknesses at the Arrawatta discovery.

The discovery is located approximately 50kms south of the Ashford Coking Coal Project (Renison 50%). Geological logging and interpretation indicates that the Arrawatta Permian sequences are geologically similar to those at Ashford, with up to approximately 150m of coal bearing sediments intersected beneath the basalt cover. The coal is bituminous and bright.

Due to the multi-seam nature of the coal measures and lack of Permian outcrop, structural interpretation is currently limited. However, based on basement intercepts, the coal intersected so far is interpreted as being on the eastern margin of a westerly dipping Permian sedimentary basin.

Testing of other areas has shown both coal bearing sequences of later Tertiary and potentially Permian age.

Company Growth

The further advancement of the Company's considerable mining assets through this exciting new coal exploration project together with the current development of the company's 45,000 ounce per annum Tom's Gully gold mine, the ongoing successful exploration programs at the Agate Creek gold project and the Ashford Coking Coal project, continues the Company's rapid development as an emerging mining group.

For and on behalf of the Board

JPK Marshall Company Secretary

For further information contact: Richard Seville or Stephen Bizzell Phone: (07) 3303 0630 Fax: (07) 3303 0601

David Waterhouse Waterhouse Investor Relations 0407 880 937

The information on mineralisation, ore reserves and mineral resources contained in this report is based on information compiled by Mr Chris Creagh who is a member of the Australian Institute of Mining and Metallurgy. Mr Creagh has relevant experience in relation to the mineralisation being reported on to qualify as a Competent Person as defined by the Australasian Code for Reporting of Mineral Resources and Reserves.

ACN 003 049 714