Caballo Blanco, Goldgroup's 100%-owned advanced stage flagship gold project, is located 65km northwest of Veracruz, Mexico's largest port city. The project consists of two large areas of epithermal gold mineralization: Northern Zone, where the main La Paila Zone is located, and the Highway Zone. The project currently consists of 15 mineral concessions covering over 54,000 hectares. Caballo Blanco has easy port access, as well as paved roads and access to power on-site and clean water. Goldgroup has also developed a large on-site metallurgical and assay facility.

In February 2012, the Company announced an updated NI 43-101 mineral resource estimate on the La Paila Zone at Caballo Blanco and in April 2012, the Company completed a Preliminary Economic Assessment ("PEA"). Based on a base case of US$1,500 per ounce gold and US$30 per ounce silver, the Caballo Blanco project is expected to generate a 66.4% pre-tax internal rate of return ("IRR"), and a US$283.8 million pre-tax net present value ("NPV") at a 5% discount rate, and produce nearly 687,000 ounces of gold and 1.3 million ounces of silver, based on current mineral resources. At a higher gold price of US$1,700 per ounce, the project's IRR increases significantly to 83.7% with a pre-tax NPV of US$387.6 million at a discount rate of 5%. According to the results of the preliminary economic assessment performed on the Caballo Blanco Project, as set out in the technical report titled "Preliminary Economic Assessment Caballo Blanco Gold Heap Leach, Veracruz, Mexico" dated May 7, 2012, at full production of 20,000 tonnes per day, Goldgroup expects annual production of 95,000 ounces of gold for years two to seven, for total production of 687,000 ounces of gold and 1.3 million ounces of silver for the expected life-of-mine (LOM) of 7.5 years. The preliminary economic assessment is preliminary in nature, includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The Company has not made a production decision and no assurances can be given as to when production may commence.

Caballo Blanco highlights include:
 

• Preliminary Economic Assessment (PEA) completed in Q2 2012
• Expect average annualized gold production of 100,000 oz Au
• Completed updated NI 43-101 mineral resource estimate on La Paila Zone in Q1 2012
• Indicated Resource: 575,000 oz Au (28.9 million tonnes grading 0.62 g/t Au)
• Inferred Resource: 419,000 oz Au (24.0 million tonnes grading 0.54 g/t Au)
• Fully oxidized gold zones contained within a cluster of high-sulphidation epithermal alteration zones
• Extensive exploration upside potential with similar anomalies to La Paila located within 3km wide magnetic high ring structure
• 2011: Completed drill program of 30,000 metres
• 2012: Ongoing drill program of 30,000 metres
• Further metallurgical results expected in Q2-Q3 2012
• Environmental Impact Statement (EIS) submitted - pending government approval
• Excellent project infrastructure
• 65km Northwest of Veracruz, Mexico's largest port city
• Paved roads, on-site power, water
• Onsite metallurgical & assay facilities

Preliminary Economic Assessment Highlights:

• Un-leveraged pre-tax IRR of 66.4% and a NPV of US$283.8 million at a base case gold price of US$1,500 per ounce, a silver price of US$30 per ounce, and a discount rate of 5%, representing a payback period of 1.5 years
• The initial strip ratio is 0.5 and 1.3 in years one and two respectively, and an overall strip ratio of 1.66 for the Life-of-Mine ("LOM")
• Overall anticipated metallurgical gold recovery of 80.7% based on current metallurgical testing
• At full production of 20,000 tonnes per day, expects annual production of 95,000 ounces of gold for years two to seven, for a total production of 687,000 ounces of gold and 1.3 million ounces of silver for the expected LOM of 7.5 years
• Total cash operating cost of US$784 per ounce of gold
• Anticipate pre-production period of approximately one year
• Initial capital costs estimated at US$84.8 million, plus additional US$53.5 million of sustaining capital costs over the LOM
• Total LOM pre-income tax cash flow is US$386.3 million, net of pre-production development and sustaining capital of US$138.3 million

In 2012, the Company is continuing with an additional 30,000 metre diamond drill program. The drill program in 2012 is designed to expand the mineralization of the Northern and Highway Zones and extend the projected mine life of the Caballo Blanco project. In the updated mineral resource estimate released in February 2012, approximately 36,000 metres in 145 holes of additional diamond drilling was completed at the La Paila Zone from October 2010 to December 2011 expanding the indicated resource significantly by 314%. Based on a 0.20 g/t Au cut-off grade, the Company's indicated mineral resources at the La Paila Zone at Caballo Blanco grew from 139,000 to 575,000 ounces of gold (28.9 million tonnes grading 0.62 g/t Au). The inferred mineral resources summed to 419,000 ounces of gold (24.0 million tonnes grading 0.54 g/t Au). Furthermore, this updated mineral resource estimate added silver resources to the mineral resource estimate at Caballo Blanco, including 2,150,000 ounces of silver indicated resources (28.9 million tonnes grading 2.32 g/t Ag) and 1,930,000 ounces of silver (24.0 million tonnes grading 2.5 g/t).

The Caballo Blanco gold project consists of a series of vuggy silica breccias, high sulphidation, fully oxidized epithermal gold zones. The gold is very fine and occurs within a vuggy and brecciated silica alteration of an original Andesite host rock in the upper levels of the surrounding epithermal system. Two large areas of epithermal gold mineralization have been discovered within the current Caballo Blanco property, referred to as the Northern Zone and Highway Zone. The principal known gold zone at Caballo Blanco is the La Paila Zone located within the Northern Zone. The La Paila Zone is located on the northern portion of a large magnetic high ring structure that measures approximately three kilometres in diameter. At least four other large induced polarization (IP) resistivity high anomalies occurring here, with similar silica alteration to La Paila, have been identified along the inner flanks of this magnetic feature. The La Paila Zone currently remains open to the south, southwest and northeast.