Bobrikovo has a JORC Code compliant resource of 1,012,000 ounces of gold. Approximately 500,000 ounces are in measured and indicated categories. Bobrikovo deposit also contains silver as a accompanying metal. The average silver content is 45.2 g/t, however in some parts of the deposit grade reaches over 400 g/t Ag. Silver resource has been estimated at between 12,250,000 and 14,500,000 ounces. It should be noted that silver credits have not been included in the previous economic assessments of Bobrikovo deposit. Inclusion of the silver credits further enhances the economics of this project. In addition to the classified mineral resource Bobrikovo has a substantial exploration potential. Government geologists estimate that the primary ore zone contains between 2.3Moz and 3.0Moz Au, highlighting the prospectivity and development potential of the deposit at depth. Geophysical data show presence of buried felsic intrusion at a depth of 4km.

Lugansk Gold commenced development of the Bobrikovo gold mine in June 2008 through its wholly owned subsidiary Donetsky Kryazh Ltd (DKL). DKL is registered under Ukrainian laws and is subject to local corporate tax. All funding requirements for DKL’s Bobrikovo gold mine are provided by Lugansk as loans which will be repaid by DKL from project’s pre-tax cash flows. Ukraine has no restrictions on repatriation of capital or profits and is a major investment destination for European Union’s institutional investors.

Bobrikovo mine is located in Eastern Ukraine in the Lugansk Region within Nagolny Ridge. Nagolny Ridge is part of a large intra-continental Phanerozoic structure that extends from southern Europe east to Central Asia. This structure hosts several world-class gold mining operations including Muruntau, Vysokovoltnoe, and Bakirchic. The tenor and style of mineralisation at Bobrikovo is similar to 170 million ounce gold deposit at Muruntau in Uzbekistan and to 57 million ounce Sukhoi Log deposit in Russia. Other deposit anonalogues to Bobrikovo are gold deposits at Goldenville field in Nova Scotia, Canada.

Bobrikovo deposit is located within a structure that strikes 11km by 2.5 km. The deposit occurs on the intersection of deep fault zones. Mineralisation is controlled by NW-NNW trending anticline hinge, and occurs as concordant and discordant quartz-carbonate tension veins and stockworks. Host rocks of the Nagolny Kryazh comprise two structural stages: the lower, Precambrian, and the upper, Phanerozoic. The lower structure comprises deformed sequence of gneisses and crystalline schists. Precambrian basement is overlapped by 3km- thick sedimentary rock sequence. Ore zone is 2.5-3 km long and 0.9 – 1km wide. Sulphide ores occur from the depth of 35m down to at least 3200m. The oxidised zone of the Bobrikovo deposit begins at the surface and extends down to 30-40 m. Sulphide gold mineralisation starts at 30-40 m depth and continues to a depth of 3,200m. Veins are easily recognizable and suitable for selective extraction.

Korab has re-commenced mining and stockpiling of the oxide ore in March 2010. The processing of ore to concentrate is scheduled to commence following the completion of the processing plant in early 2013.

Modeling completed by independent consulting firms Intertech (USA) and Micromine (Australia) confirmed the excellent economics of Bobrikovo mine.

Metallurgy Tests Results

Independent test work by accredited laboratories has shown good recovery of gold from both primary and oxide ores using variety of methods including gravity, cyanidation and heap leach. The summary of test results is included below:

APPENDIX
Muruntau gold deposit in Uzbekistan is the world's largest gold deposit with production of 2Moz Au per annum. The ore reserves and resources at Muruntau (including historical production) is about 170Moz of gold. It is also world's largest open pit gold mine, The open pit measures about 3.5km by 2.5 km and extends to a depth of 350m. Ore is mined from an open pit with dimensions of about 2,500m x 3,500m, and 300m deep. Final pit depth is planned to be 650m with the mineralisation known to extend to a depth of at least 1,500m. Long term plans are to mine from underground. Gold is free milling with variable grain size and minor gold associated with sulphides, primarily arsenopyrite. Muruntau processing plant treats ore with an average head grade of 2.4 g/t Au at the rate of 2.2kt per day. The processing circuit includes a gravity circuit.
There are many similarities between Bobrikovo and Muruntau deposits, but mineralisation at Bobrikovo is closest to Sukhoi Log gold deposit in Russia. Mineralisation at Bobrikovo occurs at the intersection of deep fault zones controlled by NW-NNW trending anticlinal hinge and occurs as discordant and concordant quartz-carbonate veins and stockworks.

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Sukhoi Log gold deposit mineralisation is pyrite ore body similar structurally and in style of mineralisation to Bobrikovo deposit. Like at Bobrikovo, highest ore grades occur in pyritic black shale beds. Sukhoi Log's mineral reserves at a cutoff grade of 1 g/t Au are 384Mt with average grades of 2.6 g/t Au for 33Moz. Additional resources include 165Mt at 2.1 g/t which could be converted to reserves and developed into an open pit operation. 205Mt at 0.8 g/t Au sits as a low grade halo around the higher grade mineralisation. The deposit contains 50Moz of gold.

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GEOLOGY OF BOBRIKOVO FIELD
Crustal environment: Nagolny Kriazh - centre of the Donetsk Fold Zone, on the E margin of the Ukrainian Shield.

Structural regime: Intersection of the Osyovy & Elanchik-Rovenkov deep-seated fault zones, where the Osyovy Fault splays S and N. 7-25 m wide quartz-ankerite veins and stockworks sit at crest of NW-trending anticline (280-290°, 11 km long, 2.5 km wide).

Host rocks:

C2-P3 metamorphosed flysch greywacke-shale sedimentary rocks.

Ores: Carbonate-quartz veins and altered rocks with sulphide-gold mineralisation; fault controlled

Regional metallogeny: mercury, gold, base metals, silver, coal, sandstone-hosted uranium mineralisation

Age of host rocks: Early-Carboniferous
Age of mineralisation: 200 +/- 70 Ma (by galena)
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