Letter to Shareholders

RNS Number:6087Q
Ballarat Goldfields N.L.
02 February 2007

Ballarat Goldfields NL

2 February 2007

Dear Shareholder,

The Proposed Merger of Ballarat Goldfields with Lihir Gold

Following your receipt of documents relating to our merger with Lihir, including
the Explanatory Statement and personalised proxy form, I am writing to encourage
you to support your company by voting in favour of the merger.

The outcome of this shareholder meeting will be critical for Ballarat Goldfields
and your vote is important. Your Directors maintain their confidence in, and
support for the merger, and believe the merged company will deliver significant
value to BGF shareholders.

For the reasons expressed in the Explanatory Statement, your Directors
unanimously recommend that, in the absence of a superior proposal, you vote in
favour of the merger as the Ballarat Goldfields Directors propose to do so in
respect of their own shareholdings and any proxies cast at their discretion.

Lihir is a major gold producer operating one of the world's largest gold mines
on the island of Lihir, PNG. Producing over 650,000 ounces of gold in 2006,
Lihir has a market capitalisation of over A$3.5 billion and is listed in
Australia on ASX, in the USA on NASDAQ and in PNG on POMSox. Under a new and
focussed management team, Lihir is undergoing a significant transformation,
focussed on growing gold output from its enormous resource base. I encourage you
to read about their progress in their latest Quarterly Report available on their
website www.lihir.com.pg.

Also enclosed with this letter is a copy of Ballarat Goldfields' Quarterly
Activities Report for the three months to 31 December 2006 that provides an
update of development progress during the quarter and subsequent to the
publication of the company's Explanatory Statement.

At the Ballarat East project, definition drilling continues to confirm the
geological model with supporting assay results confirming the presence of late
stage high grade gold mineralisation identified in resource drilling to date.
Underground development is continuing as planned with development rates
improving on both the excellent rates achieved last quarter and as scheduled in
the new development plan.

As outlined in the Quarterly Report, Ballarat Goldfields' cash balance stood at
A$40.7 million at 31 December 2006. The approval of the merger with Lihir will
ensure that the balance of funds required to complete the Ballarat East mine
development and future financing for Ballarat's additional projects is secure.

For the merger to proceed, votes in favour of the merger must be received from:

* a majority in number (more than 50%) of Ballarat Goldfields'
shareholders present and voting at the scheme meeting (in person, by proxy, by
attorney or, in the case of corporate shareholders, by a corporate
representative); and

* at least 75% of the total number of votes cast on the resolution at the
scheme meeting by members entitled to vote on the resolution.

Lihir is not entitled to vote its 11% interest in Ballarat Goldfields at the
scheme meeting.

At the date of this letter your Directors are not aware of any alternative
proposal and as such we urge you to either attend the shareholder meeting on 12
February 2007 and vote in favour of the merger or complete the proxy form sent
to you with the Explanatory Statement and return it in the envelope supplied so
that it is received at least 48 hours before the shareholder meeting.

If you require further information please call Ballarat Goldfields share
registry on [phone] or Ballarat Goldfields on [phone].

Yours sincerely,


Alister Maitland

Chairman




ASX and Media release: 30 January 2007

                   Quarterly Activities and Cash flow Report

                    For the 3 months ended 31 December 2006

SUMMARY

Corporate and Finance

   * Proposed merger with Lihir Gold Ltd (LHG) via a scheme of arrangement
    (Scheme) was announced on 17 October 2006 and Explanatory Statement released
    to the ASX on 18 December 2006.
   * The Directors unanimously recommend that, in absence of a superior
    proposal, shareholders vote in favour of the merger.
   * If approved, Ballarat Shareholders will own 5 shares in the new merged
    Lihir entity, for every 54 BGF shares they owned.
   * As part of the merger, BGF placed 149 million shares with LHG at $0.28
    raising $41.7 million. These funds enabled BGF to commit to the new
    development plan.
   * Cash balance at 31 December 2006 was A$40.7 million.

.Mine Development

   * Performance to the revised development plan, implemented in the
    September quarter, was slightly ahead of schedule with key depth and lateral
    targets achieved during the quarter.
   * Underground development of 989 metres continued the improved development
    rates achieved in the previous quarter.
   * Over 7,000 tonnes of low grade development material from a sill drive at
    the base of the 218 Woah Hawp ore block was processed.
   * Commitment made for construction of the In-Line Leach Reactor (stage 2
    of the process plant).
   * Water treatment options, previously focused on dewatering objectives,
    are being reviewed to access the opportunity for supplementary supply to the
    city of Ballarat.

Mine Geology and Exploration

   * Drilling continues to confirm the geological model.
   * Assay grades continue to support the existence of strong gold
    mineralisation.


MERGER WITH LIHIR GOLD LIMITED

BGF and Lihir Gold Limited (Lihir) announced on 17 October 2006 a proposal to
merge the two companies via a scheme of arrangement (Scheme). Under the terms of
the Scheme, BGF will become a wholly owned subsidiary of Lihir with BGF
shareholders receiving 5 New Lihir Shares for every 54 BGF shares held, valuing
BGF at 28.8 cents per share (based on the LHG share price as at the date of the
announcement of the merger).

An Explanatory Statement was released to ASX and mailed to BGF shareholders on
10 January 2007 to provide them with relevant information necessary to determine
whether to vote in favour of the merger at the Scheme Meeting that will take
place on 12 February 2007 in Ballarat.

The Directors of Ballarat Goldfields unanimously recommend that, in the absence
of a superior proposal, BGF shareholders vote in favour of the proposed merger
as they believe it will deliver significant value to BGF shareholders. Ballarat
Goldfields Directors (all of whom hold BGF shares) intend to vote their shares,
and any proxies cast at their discretion, in favour of the merger.

The Explanatory Statement is also available on the BGF website at
www.ballarat-goldfields.com.au.

BALLARAT EAST PROJECT Development

Revised Development Strategy

As announced in early September 2006, BGF completed a comprehensive review of
its development strategy for the Ballarat East project. The outcome was a new
and substantially superior development plan, with emphasis on early access to
the deeper, higher grade Resources, deferring production until calendar year
2008.

Underground Development

Depth and lateral development objectives established under the revised
development plan, implemented in September, were achieved putting the
underground development slightly ahead of schedule.
                 Ballarat Goldfields - Decline Advance Summary
            Woah Hawp Decline         Sulieman Decline        Prince Decline
          (depth below surface)    (depth below surface)  (depth below surface)
          Planned        Actual      Planned     Actual     Planned     Actual
Dec             339          345         324        330         336        337
-06


Development rates were sustained at the high rates achieved in the previous
quarter with a total of 989m developed for the December quarter. Ground
conditions have improved with depth and, with work practices now reflecting
accumulated local knowledge, the current development rates are expected to be
maintained, and improved upon, as increased heading availability further
improves equipment utilisation and productivity.
             Dec Qtr 05   Mar Qtr 06   Jun Qtr 06   Sept Qtr 06  Dec Qtr 06
U/G
Development
(m)                 546          584          691          976          989
Ore Tonnes        6,737        6,519        3,993        4,100        7,345


The development focus remains on the Sulieman, Woah Hawp and the recently
commenced Prince declines. The Sulieman decline initially provides a platform
for underground diamond drilling and in the future will become the main return
airway for the mine. The Woah Hawp decline is being driven to provide access to
Resources in the central and northern areas of the mine and the Prince decline
will provide access to deeper high grade Resources in the southern part of the
mine.

As the Resources are accessed it is planned that they will be fully delineated
by drilling, developed and then brought into production.

Development continued within the 218 Woah Hawp ore block during the quarter with
a sill drive pushed to the geological boundary of the structure, and extensive
mapping undertaken to better define the ore zones before production drilling
commenced in late December.

An underground ventilation circuit was commissioned in the first week of January
to support the development of the Prince decline system.

BGF is re-evaluating the nature and timing of major elements of the ventilation
circuit for Ballarat East including ventilation options at South Prince and
Golden Point as a consequence of the improved underground development rates.

A second underground dewatering pump installation was commissioned in the first
week of January that will allow access to the 176 Sulieman trial stoping area
over the coming months.

Processing Plant

The High Pressure Grinding Roll trials have been completed and results are being
analysed in order to determine the best option to meet future expanded
production rates.

Approximately 7,000 tonnes of low grade development material was processed
during the December quarter as part of the trials, and to enable further fine
tuning of the process plant. Approximately 500 tonnes of sulphide concentrate
was produced, which has been added to the previous stockpiled material in
readiness for the stage 2 leach circuit. Approximately 4kg of gold was recovered
to dore with the balance of the gold reporting to the sulphide concentrate.

Gekko Systems were engaged to commence construction of stage 2 of the processing
plant, the concentrate leaching circuit (In-Line Leach Reactor) that will
commence treating gold bearing sulphide concentrates later in 2007.

MINE GEOLOGY AND EXPLORATION

Exploration drilling

During the December quarter drilling was focused on shallow resources close to
the planned Woah Hawp decline, followed by deeper drilling (to 700m below the
surface) targeted towards the Blue Whale fault. The drilling results continue to
identify gold mineralisation in the locations defined by the geological model,
with visible gold and higher grade assay results observed in quartz veins close
to the Blue Whale fault.

Significant assay results from the December 2006 quarter are summarised in the
following Table:
Hole number  Down hole depth (m)  Width (m)*    Grade g/t   Location
BEU145            289 to 293              4.0         5.2   Tiger Fault
----------     ---------------        ---------    -------- -------------
BEU145B           334 to 339              5.0         4.2   Mako Fault
----------     ---------------        ---------    -------- -------------
                  354 to 356              2.0        10.7   MakoFW fault
  ----------   ---------------        ---------    -------- -------------
BEU158B           371 to 375              4.0         3.7   Whale Shark Fault
----------     ---------------        ---------    -------- -------------


(NB*All of the intersections reported have been adjusted for their estimated
true widths.)

ENVIRONMENT AND COMMUNITY

In maintaining continual improvement of amenity and environmental aspects, BGF
ensures progressive and continual land rehabilitation is achieved. A major
replanting program was successfully completed during the quarter, despite lower
than average rainfall.

Maintaining a high level of community support and regulatory compliance is a key
focus and was successfully achieved during the quarter with no significant
environmental breaches or incidents. A high level of pro-active community
dialogue was maintained with blast vibration being the main point for
discussion.

A contract has been awarded to construct a water treatment facility at the
historic Llanberris shaft site. The treatment plant will enable BGF to
recommence dewatering the northern part of the Ballarat East field in 2007. BGF
is pursuing water re-use opportunities within the Ballarat community.

CORPORATE AND FINANCE

Finance

The cash balance at 31 December 2006 was $40.7 million.

As part of the proposed merger, BGF placed 149 million ordinary shares with
Lihir at $0.28 raising $41.7 million on 17 October 2006.


BACKGROUND INFORMATION

Ballarat East Project Summary

Situated in one of the most famous historical gold mining regions of Australia,
Ballarat produced over 12 million ounces before it's premature closure, around
the time of the first world war.

In 2004, for the first time following discovery in the 1850's, the leases over
the entire Ballarat field were consolidated under the sole ownership of BGF.

This has resulted in the company constructing a comprehensive geological model
of the entire field, demonstrating what many had suspected, that Ballarat had
massive unexplored prospectivity.

Following a prefeasibility study, based on BGF's geological model, underground
development at Ballarat East recommenced in December 2004. The plan, proposed an
initial underground mine at Ballarat East, with twin access declines servicing
the haulage and ventilation.

This plan has now been modified, as increased knowledge has led to increased
resources and a better understanding of the likely distribution of high grade
gold within the system. Drilling has continued to increase confidence in the
geological model. Development of the mine and associated process plant is
continuing, with stage 1 of the process plant now commissioned.

BGF's geological model robust

BGF's geological model remains robust as the drilling continues to intersect
gold mineralisation in the target zones identified by the geological model.
After probability adjustment for risk and uncertainty the company derived an
Exploration Potential of 8.3 million ounces, with 90% confidence limits ranging
from 3.3 million ounces to 15.7 million ounces in addition to a Total resource
of 1.4 million ounces, including 0.24 million ounces of indicated resource, for
Ballarat East. (Further information is available on the BGF website
www.ballarat-goldfields.com.au)

Note: The information in this report that relates to Exploration Results,
Mineral Resources and Exploration Potential is based on information compiled by
Mr Steven Olsen. Mr Olsen is an employee of Ballarat Goldfields NL, is a member
of the Australian Institute of Mining and Metallurgy and is a Competent Person
under the definition of the 2004 JORC Code. The Exploration Potential described
above is conceptual in nature, and there is insufficient information to
establish whether further exploration will result in the determination of a
Mineral Resource. Mr Olsen consents to the publication of this information in
the form and context in which it appears. . The terms Exploration Results,
Mineral Resources and Exploration Potential are used in accordance with their
definitions in the 2004 JORC Code, which is available at www.jorc.org.

                              CORPORATE DIRECTORY
Registered and Principal Office           Directors        Chairman
10 Woolshed Gully Drive                   Alister Maitland Managing Director
Mt Clear Victoria 3350                    Richard Laufmann Non-executive
                                                           Director
Australia                                 Mike Etheridge   Director of
                                                           Operations
                                          Wojciech Ozga
Web Site                                  Company Secretary
www.ballarat-goldfields.com.au            Amber Rivamonte
Shareholder Services                      Stock Exchange Listing
Computershare Investor Services Pty       Australian Stock Exchange Code BGF
Limited
GPO Box 2975EE                            Alternative Investment Market (AIM)
                                          BGF
Melbourne                                 AIM Nominated Advisor
Victoria 3000                             RFC Corporate Finance Ltd
Australia                                 Level 14, 19-31 Pitt St
Investor Enquires Tel: [phone]       Sydney, NSW, Australia 2000
Tel: [phone]                         AIM Nominated Broker
Fax: [phone]                         Numis Securities
www.computershare.com                     Cheapside House, 138 Cheapside
                                          London EC2V 6LH, United Kingdom

For further information: please visit the company website
(www.ballarat-goldfields.com.au)
Or contact Joel Forwood, Manager Corporate and Markets, on [phone].






                      This information is provided by RNS
            The company news service from the London Stock Exchange

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