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Cape Range Gold Acquisition

Cape Range Limited (CAG) is pleased to announce that it is satisfied with its due diligence to date and wishes to proceed with the acquisition of an equity interest in a Zimbabwean gold producing company, Ox Mining (Pvt) Ltd (OXM). As recently announced, under the terms of the Heads of Agreement, CAG has the option to acquire up to a 90% equity interest in OXM. OXM has several gold projects in the vicinity of the City of Kadoma, south of Harare, in Zimbabwe. The Inez Gold Mine is OXM’s most advanced project and is located approximately 30km east of Kadoma. The Inez Mine is currently producing gold from the surface sands and supergene/saprolite zone, down to a depth of about 12 metres. The Inez Mine was recently commissioned and had its first full production month in July 2010 (20 day operation), produced in excess of 400 ounces of gold. The current plant has a twin milling process capability, with a CIP section capable of treating up to 350t per day of sands/lumps and up to 250t per day of underground ore. To date, 400,000t have been mined from underground operations at an average grade of approximately 12g/t, with a recovery of 94% from the Inez Mine. OXM is currently mining the top sands and the saprolite zone, and intends to continue to mine this for the next 12 months. The potential high-grade underground zones have not been factored into the current mining model. If required, the existing plant and equipment can easily be expanded to treat more ore from underground ore zones. CAG’s intentions are to target the deeper high-grade gold zones which, based on old shafts and adits, indicate very high-grade potential for the mineralisation to continue at depth. OXM’s ground holdings cover approximately 8km of strike within the known green-stone goldfield. Summary of the Agreement In summary, CAG may acquire the first 10% equity in OXM by payment of US $1.5m in cash over six months. Upon completion of due diligence, CAG has an option to acquire a further 41% equity in OXM by payment of US $2m in cash and US $6m equivalent in CAG shares. The Company has up to six months to complete due diligence, if required. CAG will also commit to spending up to US $2m in underground development costs at the Inez Mine. Upon completion of the above mentioned stages, CAG can elect to acquire a further 39% in OXM (i.e. equity holding of 90% in OXM) by payment of US $15 per ounce in the JORC resource category. This payment is a combination of cash and CAG shares. Country History Due to Zimbabwe’s past hyperinflations and high taxes on gold producers, many gold mines were placed in care and maintenance mode and all exploration ceased as funds were difficult to obtain during Zimbabwe’s economic crisis. Currently, several gold mines are in operation without having JORC category resources, as exploration data is minimal and mine operators simply focus on cash flow from their current operations. Hence, a high potential exists for a systematic exploration approach on many of the gold projects in the country. Infrastructure The project is well situated with all infrastructure and logistics readily available in the nearby towns of Kadoma or Chegutu. The mining operation is easily accessible via all year round roads, with electricity and abundant water supplies. The mine itself has its own back-up power generators which ensure a constant supply of electricity. The operations are also very close to Zimplat’s power grid. Compliance with Indigenisation and Empowerment Act CAG will endeavour to best comply and develop the social and economically desirable objectives, and to adhere to the Indigenisation and Empowerment Act of Zimbabwe. With this in mind, CAG intends: To employ local skilled workers, or where required, will educate and impart new skills to local Zimbabweans. All beneficiation and mining activities will be carried out within Zimbabwe. As a publicly listed company on the Australian Securities Exchange, the Company sees an advantage to the Zimbabweans if it is dual-listed on the Zimbabwean Stock Exchange. The Company is currently reviewing and looking into the requirements to enable this process. The Company is also looking at establishing employee incentive schemes to incentivise and motivate its personnel. As the mining operations expand, the Company will further invest in social programmes and infrastructure in the areas of its operations. Improvement in Zimbabwe’s economy Zimbabwe has suffered severely since early 2000 when hyperinflation, political instability and the total collapse of its economy took place. As a result, many of the country’s mines have not produced any ore since the start of hyperinflation and those mines have been placed on care and maintenance. The economy has now begun improving and hyperinflation is under control since the country became “dollarised” as only the US currency is now in use. Zimbabwe’s mining industry has improved remarkably in 2010. Already this year, gold production is set to double over the comparative 2009 period. Many exploration projects have also recommenced in the country. Zimplats for example, is reviewing spending up to US$445m to ramp their platinum production in the country to nearly 300,000 ounces per year. Corporate compliance Shareholders should be aware that, as the Company is still listed on the Australian Stock Exchange (ASX) under the IT sector, by exercising this option agreement with OXM, the Company will be required to comply with a number of requirements as set out within the Corporations Act and the ASX Listing Rules. One of the key requirements in exercising the option agreement is that the Company will need to change sectors to “Mining and Resources” and re-comply with Chapter 1 and Chapter 2 of the ASX Listing Rules. This process requires shareholder approval and the issue by the Company of a full form Prospectus that will also allow raising of funds through the issue of shares at a minimum issue price of $0.20 each post compliance with Chapters 1 and 2 of the ASX listing rules. Pursuant to a soon to be released Notice of General Meeting, the Company will be releasing to the ASX a detailed Information Memorandum which includes the proposed structure and timing for re-compliance with Chapters 1 and 2 of the ASX Listing Rules. Capital Raising As recently announced, the Company has signed a mandate with DJ Carmichael Pty Ltd and Carmichael Corporate Pty Ltd, whereby they have been appointed as the Company’s Corporate Adviser and Sponsoring Stockbroker to raise up to $5,000,000. Kadoma The Company would also like to advise that due to its focus on the acquisition of the Inez Mine, exploration at the Kadoma Gold Project has slowed down and with mutual agreement, the timing to finalise the option agreement has been extended. The initial percussion drill programme that the company has carried out has given some encouragement to further test the high-grade potential gold zones with a diamond drill programme. The Eiffel Blue Mine returned a width of 3 metres with values between 3.45 g/t to 1.37g/t gold, from 48 metre depth. The free gold nature of the area indicates that it would be best to follow up the mineralised zones with a diamond drill rig. Managing Director, Joe Cornelius, said “Through our due diligence work to date, we have discovered that a massive potential exist for further discovery of high-grade gold mineralised zones.” He further stated that, “Drilling has been carried out by previous exploration parties over OXM’s ground holdings and some of the intercepts have been very encouraging. For example, a hole drilled by Rio Tinto, located approximately 300 metres east of the main Inez Mine, returned a high value of 21.46 g/t gold over 2.79 metres, from a down hole depth of 48.45 metres.”