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31/08 - Hartleys Research Report

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Dargues Reef on course for gold production

Cortona Resources Limited (ÔÇ£CortonaÔÇØ, ÔÇ£CRCÔÇØ, ÔÇ£CompanyÔÇØ) is progressing
the underground development of its 100%-owned Dargues Reef Gold
Project, located 60km east of Canberra in New South Wales. The Company
is currently undertaking a Definitive Feasibility Study (ÔÇ£DFSÔÇØ), which is on
track for completion in November 2010.

Scoped as commercially robust; DFS near completion

The scoping study for Dargues Reef was based on an assessment of the
Main Lode which contains a current resource of 286Koz at a grade of 6.2g/t
gold. The study indicated that production of 40-50Koz gold per annum over
4 years would be viable from capital costs in the order of A$30m. CortonaÔǃs
estimated cash operating costs of mining (sub-level open stoping) accessed via a decline. The Company has
now progressed to a DFS and regulatory approvals for mine development,
while continuing active exploration to further improve the project economics.

Resource upgrade and maiden reserve expected soon

As part of the DFS, Cortona has completed resource infill and extensional
drilling, with a new resource estimate expected before the end of the year.
The Company is targeting near term resource growth of ~200Koz gold to
yield a resource in the order of 500Koz gold. The vast majority is expected
to be in the measured and indicated categories, enabling a maiden reserve
to be calculated. The Dargues Reef Main Lode remains open at depth
allowing for potential mine life extensions. In addition, there are parallel
mineralised lodes (Plums and Hanging Wall), which are only 200m to the
east of the Main Lode. However, these have not been included in the
current mining plan but highlight potential development options.

Substantial exploration upside near mine and regionally
The historical goldfield has received minimal modern exploration. However,
recent exploration success by Cortona at Dreadnought and Tory Boy,
located within 2km of Dargues Reef, has highlighted good potential for
additional discoveries, which may lead to resource growth and mine life

Initiate Coverage with a Speculative Buy

We see Cortona as a good quality explorer transitioning through to gold
producer via the development of Dargues Reef. The Dargues Reef ore body
is relatively wide, at an average width of 6-7m allowing for efficient
mechanised mining methods with low mining dilutions. In addition, high
grades and excellent metallurgical characteristics enabling high recoveries
(>95%), bode well for low operating costs, ensuring good margins.
The Company will have steady news flow over the coming months, including
a resource upgrade, on-going drill results from exploration and the release
of a DFS which is expected to be favourable. We have a preliminary
valuation of A$70m (ignoring funding) which is above the current market
capitalisation of A$28m. We note that that using the current shares on issue
this equates to 41cps. We initiate coverage of Cortona Resources Limited
with a Speculative Buy recommendation.

See attached for full details

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