Mr. Nick Brodie reports

GALANE GOLD LTD. COMPLETES ACQUISITION OF GALAXY GOLD MINING LIMITED

Galane Gold Ltd. has closed its previously announced acquisition of a majority of the issued and outstanding ordinary shares of Galaxy Gold Mining Ltd., a gold mining company with operations in the Mpumalanga province of South Africa. Galane Gold will make an offer to all other shareholders of Galaxy to acquire the remaining Galaxy shares on economically equivalent terms.

Chief executive officer Nick Brodie stated: "We are pleased to have completed the acquisition of Galaxy and added what we believe is a significant asset to our portfolio. Our experienced management team looks forward to taking an underperforming asset and returning it to full and profitable production within the next 12 months. The team can draw from the experience gained in revitalizing Mupane and an in-depth knowledge of mining and processing in the greenstone belt, including in Barberton itself.

"From our due diligence, we have confidence that the potential of the Galaxy asset will assist Galane in being able to operate in any realistic gold price environment. To support that confidence, we are currently in the process of completing a National Instrument 43-101 technical report and commencing a prefeasibility study to support the expansion of Galaxy's operations up to 50,000 ounces per annum.

"Galaxy has been operating with a working capital deficiency which has led to disputes with critical suppliers and contractors. As a result, Galaxy has also not met all of its statutory requirements. This has required an extended review of the business to satisfy ourselves that Galaxy can be resurrected to its historic production levels.

"This represents the first step in our strategic plan to build a mid-tier gold company through the acquisition of near-term production assets, with existing mine and processing facilities which will present us with the ability to increase both resource and production in easy manageable steps."

Galaxy description

Galaxy's mining assets are located on the Barberton greenstone belt (BGB), approximately 10 kilometres to the west of the town of Barberton in the Mpumalanga province of South Africa, and include several historical mining operations on the BGB as well as tailings storage facilities comprising previously mined and processed material. The mining of gold in South Africa began in Barberton, where the first traces of alluvial gold were discovered in 1874. Historic production at Galaxy commenced in the 1880s. To date, the mining assets have produced over one million ounces of gold. The information regarding the quantity of gold produced historically is based on available public sources, has not been independently verified by the company and should not be relied upon as a predictor of future results.

Galaxy's existing processing plant is in need of refurbishment and consists of a crushing, milling, flotation, thickening, Biox (bacteria oxidation), carbon in leach, elution and tailings disposal designed to treat 16,000 tonnes of ore per month. This facility can be expanded through refurbishment and the introduction of larger mills and flotation equipment.

Historical estimate

The historical estimate set out in the table below was disclosed in a report provided by Galaxy to the company with an effective date of Aug. 30, 2011, entitled "An Independent Competent Persons' Report on the Galaxy Gold Mineral Assets, Mpumalanga Province, South Africa."

Mineral resource category        Tonnes   Gold grade   Content
                                     (t)        (g/t)      (oz)
   
Measured                      2,113,200         3.39   230,520
Indicated                     4,422,900         2.85   405,352
Total measured and indicated  6,536,100         3.02   635,872
Inferred                      8,070,000         3.40   882,562

The historical estimate was prepared in accordance with the South African Code for reporting of exploration results, mineral resources and mineral reserves as at June 27, 2011, and does not comply with the CIM (Canadian Institute of Mining) definition standards on mineral resources and mineral reserves as required by National Instrument 43-101 -- Standards of Disclosure for Mineral Projects. A qualified person has not done sufficient work to classify the historical estimate as a current mineral resource in accordance with NI 43-101, and the issuer is not treating the historical estimate as a current mineral resource. It is expected that a new NI 43-101 technical report will be issued in the upcoming few weeks.

Transaction details

Galane Gold entered into share purchase agreements with certain majority shareholders of Galaxy, pursuant to which a wholly owned subsidiary of the company agreed to acquire approximately 74 per cent of the issued and outstanding Galaxy shares in exchange for 18,334,492 common shares in the capital of the company with an aggregate value of approximately $2.3-million, based on a deemed price of 12.5 cents per common share, and common share purchase warrants exercisable to acquire an aggregate of up to 4,076,599 common shares for a period of two years at 17.5 cents per common share. Galane acquired 66 per cent of the outstanding Galaxy shares today with the remaining 8 per cent of the Galaxy shares held by the majority shareholders of Galaxy expected to close within the next two weeks.

Upon full completion of the acquisition of Galaxy shares from the above-noted majority vendors, such vendors of Galaxy shares will hold an aggregate of approximately 26 per cent of the issued and outstanding common shares on an undiluted basis, based on the outstanding number of common shares as of today's date, or 30 per cent assuming the exercise of the warrants and no other convertible securities of the company. If all of the remaining minority shareholders of Galaxy tender their Galaxy shares pursuant to the mandatory offer in exchange for common shares and warrants, the shareholders of Galaxy, including the majority vendors, will hold approximately 31.8 per cent of the common shares on an undiluted basis, based on the outstanding number of common shares as of today's date, or 36.3 per cent assuming the exercise of the warrants and no other convertible securities of the company.

In connection with the transaction, Galaxy has also issued or has agreed to issue approximately $2.4-million (U.S.) aggregate principal amount of unsecured convertible debentures to settle outstanding debt obligations owed by Galaxy and its subsidiary Galaxy Gold Reefs (Pty) Ltd. The debentures have a four-year maturity date and bear 4-per-cent interest per annum, accrued and paid at maturity. The principal is convertible at maturity into common shares, based on a predetermined exchange rate of $1 (U.S.) to $1.30, at a price of $1. The interest payable on maturity is convertible into common shares, based on a predetermined exchange rate of $1 (U.S.) to $1.30, at a price equivalent to the greater of $1 and the discounted market price (as defined by the TSX Venture Exchange), subject to acceptance of the TSX Venture Exchange.

One of the above-noted majority vendors of Galaxy shares is Wayne Hatton-Jones, the chief operating officer of Galane Gold. The acquisition of the Galaxy shares from Mr. Hatton-Jones constitutes a related party transaction under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions. Galane Gold issued 1,229,515 common shares and 273,378 warrants to Mr. Hatton-Jones as consideration for his Galaxy shares. Based on the outstanding number of common shares as of today's date, and assuming the exercise of all of the warrants issued to Mr. Hatton-Jones and no other convertible securities of the company, Mr. Hatton-Jones holds approximately 2.2 per cent of the issued and outstanding common shares. The company is relying on exemptions from the formal valuation and minority approval requirements of MI 61-101, based on a determination that the fair market value of the consideration paid to Mr. Hatton-Jones did not exceed 25 per cent of the market capitalization of the company at the time such transaction was agreed to. The purchase of Mr. Hatton-Jones's Galaxy shares was unanimously approved by the board of directors of the company.

We seek Safe Harbor.