Sihayo Gold: Update on local illegal mining activity

(11 April 2012) -- Sihayo Gold Limited is providing an update on local illegal mining activities within the boundaries of the Contract of Work (?COW?) area held by its 75% owned subsidiary, PT Sorikmas Mining, located in North Sumatra.

Over the past 18 months local illegal mining activities have taken place at two main locations within the COW area, namely, nearby the Sambung JORC Compliant Resource and nearby the Hutabargot Julu epithermal gold prospect. For the vast majority of the time these activities have not directly impacted our drilling and exploration activities, however, the activities are of concern to the Company from both a human health and environmental perspective.

In addition, the financial supporters of the local illegal mining activities are believed to have been a primary factor in the events leading up to the Sihayo Exploration Camp incident of May 2011.

The Company has been following due process in regards to the local mining activities and we have provided detailed reports including photos and video footage to the relevant Government authorities.

Until very recently the local Government and Police have not taken any direct action to limit or prevent the activities of the local miners despite the activities being in direct contravention of prevailing Indonesian Laws and regulations.

However, as of last week, the Bupati (Head of the Regency of Mandailing Natal, North Sumatra) issued a public statement that clearly outlined the required permitting necessary before any local mining can take place and further stated that new permits could not be issued within areas already covered by existing permits, including the COW area of PT Sorikmas Mining.

The Company is very pleased that the Bupati and local Government have taken the stance of publicly reaffirming the necessary permitting and reporting obligations for conducting mining activities.

Consequently, we heave been discussing in detail with the local Government about a proposed joint operation

Government authorities, Police and Army to remove the illegal miners from within the COW area. This operation is expected to take place within the next two months.

The fact that the local Government is preparing to take action to limit and prevent local illegal mining within our COW area is a major positive for the long-term, however, the Company cannot rule out possible short-term negative effects.

In anticipation of the joint operation, our own security presence has been significantly increased in the past two months with the appointment of one of Indonesia?s largest private security contractors.

In addition, the Company has implemented a communication program outlining the issues surrounding illegal mining, including mercury contamination, and highlighting the Company?s sponsored agricultural development programs for the long-term benefit of the local communities.

At the operational level, we are currently drilling at the highly prospective Hutabargot Julu epithermal vein prospect located 8km southeast of our Sambung JORC Compliant Resource and we expect to continue drilling throughout the period of the proposed joint operation.

At the Sambung Resource, we are awaiting final assays from the recently completed Infill Drilling program and the upcoming Runge JORC Report before we continue further resource definition drilling along strike to the southeast.(ends)