14 May 2012

ERITREAN EXPLORATION UPDATE

DRILLING TO START FOLLOWING GRAVITY SURVEY COMPLETION

Highlights

5,000 metre reconnaissance RC drill programme to test coincident VTEM and gravity anomalies expected to start mid-May and be completed within 6 weeks.
Gravity survey completed including extension of survey areas.
Strong, coincident VTEM and residual gravity anomalies identified at V15.
Coincident VTEM, residual gravity and geochemical anomalies identified at V9, 10 & 11.
Residual gravity data at Anomalies V13 and 14 (where outcropping copper mineralisation was identified) remains pending.
Road access completed to the first drill sites at anomalies V9, 10 & 11.

Gippsland Limited ('Gippsland' or 'the Company') [ASX: GIP, FRA: GIX] is pleased to announce the imminent commencement of a 5,000 metre reconnaissance reverse circulation ('RC') drilling to test high-priority targets following the completion of a gravity survey within the Adobha Project. The gravity survey was conducted over twelve electromagnetic anomalies including six high and medium to high ranked electromagnetic anomalies (Figure 1) previously identified from an airborne survey flown by Geotech Airborne Limited using a Versatile Time Domain Electro Magnetic system (VTEM) during 2011.

In view of the considerable areal footprint of the previously identified VTEM anomalies and the difficulty in distinguishing VTEM anomalies related to graphitic rock types, a programme of gravity survey work, surface geochemical sampling and geological mapping was conducted to more clearly define priority drill targets and select drill hole locations.

Lower ranked VTEM anomalies previously identified will be gravity surveyed in due course.

Gravity survey

The gravity survey on a 100m x 50m grid was completed by Geo-surveys International Inc. and designed to cover the highly-ranked VTEM anomalies as a prelude to RC drilling. Preliminary results from the gravity survey were encouraging and in the light of these preliminary results, the survey grids over the V10, 11 & 15 anomalies were extended. Limited infill gravity data was collected on a 50m x 50m grid in the vicinity of anomaly V10 in order to produce better definition of the anomaly and to assist in the selection of drill hole location.

All of the scheduled field work, including the surveys over the grid extensions, has now been completed. The residual gravity data for the northern anomalies V13 & 14 remains outstanding and results in relation to these anomalies will be reported in due course.

Geological mapping and geochemical sampling

Geological mapping to assist with the interpretation of the anomalies for the purpose of prioritising proposed drill collar locations of each of the anomalies has been completed.

Surface geochemical sampling is continuing.

Anomaly V15

Anomaly V15 contains the strongest of the VTEM anomalies with a coincident and clearly defined residual gravity anomaly (Figure 2).

Surface rock-chip samples on a 100m x 50m grid have been collected over the VTEM anomaly with results pending, a consequence of the considerable turn-around time from sample collection, through transport to Australian analytical laboratories, assay and reporting. A small number of drainage samples collected during the reconnaissance inspection of the VTEM anomalies in late 2011 indicate low-level but anomalous copper and zinc contents.

The coincident VTEM and residual gravity anomalies are considered sufficiently prominent as to represent walk-up drill targets even without the results of the geochemical sampling programme.

This target is scheduled to be drill-tested following the testing of the drill targets identified on anomalies V9, 10 & 11, as road access construction to V15 is still underway and is expected to take some time due to the difficult terrain in the area of V15.

Anomalies 9, 10 & 11

The preliminary gravity survey data identified a number of gravity anomalies that were not adequately covered by the proposed survey area. In the light of these preliminary results, the survey grids over the V10 & 11 anomalies were extended.

The residual gravity data for the extended grids show gravity anomalies coincident with the VTEM anomalies and adjacent to geochemical soil anomalies for lead, gold and zinc near to VTEM anomalies V10 and V11 (Figure 3).

Anomalies 13 & 14

Anomalies V13 and 14 are located in the northern part of the Adobha project area (Figure 1) where early exploration by the company discovered outcropping copper mineralisation. Details of this surface mineralisation have previously been reported and included 20m of 0.14% copper.

Anomaly V13 is dominated by a broad, good VTEM conductor that is coincident with a gravity low. Some 500m to the west of the main VTEM conductor there is a smaller conductor which is coincident with a strong gravity high. This anomaly is of considerable interest as fragments of rocks in the overlying colluvium were found to contain copper-bearing mineral malachite. Priority drill targets for V13 will be selected when the final residual gravity data is to hand.

Although anomaly V14 is a lower ranked VTEM anomaly, it is of interest as it is in close proximity to the area where copper-mineralisation was located by drainage sampling of Thematic Mapper anomalies during the early phase of exploration undertaken by Gippsland (Figure 4). The VTEM anomaly V14 covers an area largely covered by alluvium and is located 1,500m north of the area where the outcropping mineralisation was discovered. A small number (12) of rock-chip samples have been collected in this area with a maximum value of 213ppm copper.

The area containing the outcropping copper mineralisation overlies a low order gravity anomaly adjacent to a dominant gravity high located to the east. When the residual gravity data for this area is received it may be possible to propose drill targets based on the relationship between the outcropping copper mineralisation and the gravity anomalies.

Drilling

Construction of site access roads to the area in which anomalies V9, 10 & 11 are located has been completed. Access road construction is continuing to the north towards anomalies 13 and 14 after which the access to V15 will be completed.

A RC drill rig is to be mobilised from Asmara during mid-May with drilling expected to commence shortly thereafter. The drilling will comprise a series of inclined holes to depths of 60 to 80m to test each of the anomalies. A Niton portable XRF analyser has been purchased to enable onsite base metal determinations to be made during the course of the drilling in order to optimise the programme.

Signed

Jon Starink Director

For further detail, contact [email protected]

Suite 4, 207 Stirling Highway Claremont WA 6010 Australia Phone +61 8 9340 6000

Note:

In accordance with Listing Rule 5.6 of the Australian Stock Exchange Limited, the geological information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data compiled by Dr John Chisholm, a Fellow of The Australasian Institute of Mining and Metallurgy. Dr Chisholm has sufficient 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'. Dr Chisholm consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.