QUARTERLY REPORT Quarter ended 31 December 2006

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MAJOR DEVELOPMENTS Encouraging results from initial first pass drilling at the Elaine Dorothy and MacGregor targets at Mary Kathleen. Best result of 1 metre at 0.047% U3O8 and 0.988% Rare Earth Oxides at Elaine Dorothy. Wide zones (100 metres) of elevated uranium (0.004% eU3O8) at the MacGregor target. Expanded exploration programs and budget for Mary Kathleen are being finalised with work to commence immediately once approved. Work programs lodged for initial programs at Mount Wellington in Victoria. Geophysical programs expected to commence in March 2007 quarter with RC drilling of targets commencing soon after. Goldsearch and Independence Group have entered into an agreement in principle with BHP Billiton whereby BHP Billiton will earn a 65% interest in the Musgrave Joint Venture in South Australia. BHP Billiton will fund up to $25million in exploration to earn its interest.

QUEENSLAND

MARY KATHLEEN PROJECT (Goldsearch earning 75%)
(uranium, copper, gold)

The Mary Kathleen Project is a joint venture between Goldsearch Limited and Central West Gold NL. Goldsearch is currently earning a 75% interest in the project.

Encouraging assay results have been received for first-pass, reverse circulation drilling of two target areas completed at the Mary Kathleen Project in late December 2006. A total of five close-spaced holes were drilled at the Elaine Dorothy target located 6 kilometres south and along strike from the former Mary Kathleen Uranium Mine. Two holes were drilled at the MacGregor target located 20 kilometres south-west from the Mary Kathleen Uranium Mine.

Mary Kathleen Project drill hole location data

Based on preliminary on-site scintillometer readings of drill samples, those which returned an eU (estimated uranium content) of greater than 0.005% (50ppm) were sent to ALS laboratories in Brisbane for analysis. Samples were assayed for a multi element suite of 27 elements by the ICP-AES method, uranium was also determined by the XRF method. This was a broad, first-pass assaying exercise to determine elemental relationships and mineralisation styles and it is anticipated that, based on the results, further assaying of the samples is required for elements not included in the standard multi-element suite including gold (Au), thorium (Th) and a number of specific rare earth elements (REE).


Elaine Dorothy

At Elaine Dorothy the close-spaced drilling was designed to test surface indications of Mary Kathleen-style uranium mineralisation at a depth of between 50 and 100 metres below surface. The drilling intercepted two individual zones of uranium and rare earth element (cerium (Ce) and lanthanum (La)) mineralisation. The mineralisation is hosted by the Corella Formation an altered meta-carbonate sequence with minor metamorphosed mafic volcanic rocks.

The mineralisation style and host sequence is consistent with the nearby Mary Kathleen Uranium Mine and, as at Mary Kathleen, the higher grade mineralisation appears to be associated with the presence of the mafic volcanic rocks within the sequence. Of the five holes drilled at Elaine Dorothy only one hole, MKRC04, appears to have intercepted the mafic volcanic rocks down hole. This hole was the eastern-most hole drilled at the prospect and further surface mapping and sampling is expected to commence in the next few weeks to better understand the distribution of the mafic volcanics in the target area. Additional drilling will be undertaken to further evaluate the target once surface exploration is completed and relevant approvals can be put in place. Additional assaying is also required to better determine total rare earth element concentrations.

Elaine Dorothy Target drilling results

Based on the positive results from the first-pass drilling at Elaine Dorothy, surface sampling will also commence at the Elaine 2 and Elaine 3 uranium prospects with the aim of defining drilling targets. These prospects are located 500 metres and 1 kilometre along strike from the Elaine Dorothy prospect. At these prospects limited work by previous explorers has also recognised minor occurrences of uranium mineralisation at surface.

Elaine Dorothy Target - Simplified geology

MacGregor

At the MacGregor target two wide-spaced holes were drilled to test a broad 1800 metre long by 300 metre wide, coherent scintillometer anomaly associated with a thick carbonaceous shale unit of the White Blow Formation. This carbonaceous shale is exposed along the eastern limb of a small synclinal fold structure. The location of the two first-pass holes was limited to the central and northern part of the anomaly due to rugged topography at the southern, fold closure end of the structure.

Both drill holes intercepted carbonaceous shale to final depth at 100 metres, based on scintillometer sampling, both holes intercepted elevated eU values over essentially the entire depth of drilling. Subsequent limited assaying of highest eU readings returned peak assays over one metre from MacGregor of 52ppm uranium (U), 24ppm molybdenum (Mo) and 462ppm vanadium (V).

MacGregor Target drilling results

The very wide zones of low grade uranium mineralisation intercepted by the first pass drilling at MacGregor is encouraging and suggests the area may represent a potential stratabound hydrothermal alteration system. An apparent zoning towards higher uranium values at the southern end of the target has also been recognised along with minor occurrences of copper mineralisation identified during surface sampling at the southern end of the target which is yet to be drill tested.

This type of system could potentially be correlated to the U,REE system at the Mary Kathleen Mine or the recent Cu, Au, Mo, U, REE system discovered by Kings Minerals at Kalman 16 kilometres south of MacGregor. Such systems also have a potential genetic relationship to the Fe-oxide Cu, Au, U systems in the Mount Isa province, including Ernest Henry and Osborne among others.

Goldsearch is currently working towards establishing vehicle access to the southern end of the MacGregor target in order to allow further evaluation and drilling.


Regional targets

Based on the encouraging results from Elaine Dorothy and MacGregor first-pass exploration will commence at a number of other regional targets over the coming months.

VICTORIA

MOUNT WELLINGTON PROJECT (100% Goldsearch)
(gold,silver,copper)

Mount Wellington - Regional geology and main prospects

Work programs have been lodged with the Native Title parties for initial geophysical and drilling programs at Rhyolite Hill (EL4843). Previous exploration conducted at Rhyolite Hill has identified significant gold and silver mineralisation associated with an extensive precious and base metals alteration system. Better drilling results at Rhyolite Hill by previous explorers are 12.6 metres at 1.01 grams/tonne gold from six metres in hole RCK002 and 32 metres at 27.25 grams/tonne silver and 0.32 grams/tonne gold from 69.5 metres in hole RCK003. Following work program approvals, a program of IP geophysics followed by RC drilling of targets is scheduled to commence in March 2007.

Goldsearch is currently awaiting the outcome of negotiations for an Indigenous Land Use Agreement (ILUA) between the Mineral Council of Australia (Victoria) and Native Title parties which is relevant to its application for EL4835. EL4835 covers the Hill 800 prospect where drilling by previous explorers has returned numerous encouraging drilling results. Goldsearch currently anticipates completion of native title negotiations by the middle of 2007.

Oblique drill section Mount Wellington, Hill 800 Prospect.

The Mount Wellington project covers an area of Cambrian age volcanic rocks in central-eastern Victoria where work by previous explorers has identified a number of areas of encouraging precious and base metal mineralisation. These rocks, and the styles of mineralisation identified, have numerous similarities to the Mount Read metallogenic province of Western Tasmania. Based on these similarities the Mount Wellington belt has been considered by many to represent geological equivalents to the Mount Read area.


SANDY CREEK PROJECT (100% Goldsearch)
(gold)

A proposed drilling program to test the high grade O'Dells gold target on EL4812, previously scheduled for the December 2006 quarter, has been delayed due to both lack of availability of suitable drill rigs and the ongoing extreme bush fire conditions in Victoria. The program is planned to test the potential for additional high grade mineralisation to be located based on the interpreted structural controls of the known mineralisation and is expected to completed by the end of the current quarter. Historical production from a number of small mines in the Sandy Creek area in the late 1800's and early 1900's is estimated to be 72,000 tonnes at an average grade of 50 grams per tonne gold.


ST ARNAUD (100% Goldsearch - Auselect Limited (Sedimentary Holdings) earning 75%)
(gold)

Goldsearch is awaiting advice on the proposed future programs from its current joint venture partner following the takeover of Sedimentary Holdings Limited by Auselect Limited in late 2006.

NORTHERN TERRITORY

BLOODS RANGE (Goldsearch earning 70%))
(gold, copper)

Auger geochemical results have been received for the program completed over high grade gold targets in EL5701. The results failed to define a target based on which a drilling program could be justified. Goldsearch is currently reviewing future programs on the basis of these results.

SOUTH AUSTRALIA

MUSGRAVE BLOCK SOUTH AUSTRALIA - (100% Goldsearch - Independence Group earning 51%)
(nickel, copper, gold)

Goldsearch announced to the ASX in the December 2006 quarter details of an agreement in principle whereby the existing joint venture with Independence Group will be rationalised and, following this, the parties will enter into an arrangement with BHP Billiton. The agreement will potentially see BHP Billiton earn a 65% interest in the Project via expenditure of $25m or delivery of a Feasibility Study (whichever comes first) within 10 years. Upon BHP Billiton earning its interest, equity in the project will comprise BHP Billiton 65%, GSE 17.15%, IGO 17.85%.

As part of the arrangement it is agreed that Independence Group will issue Goldsearch with 200,000 fully paid ordinary shares.

Anthropological work has been ongoing over four priority tenement areas and, following a meeting with relevant Traditional Owners in December 2006, a second meeting has been proposed for early 2007. This work is a key part of the final stages of having these priority tenements and access for exploration granted.

The joint venture has also received approval from the Minister for Mineral Resources Development to commence negotiations with the Anangu Pitjantjatjara Yankunyjatjara in relation to gaining access for exploration to an additional four tenement areas.

PHILIPPINES

PANAON ISLAND GOLD PROJECT (Goldsearch earning 50%)
(Gold)

No new exploration developments.



STATEMENT
Technical information contained in this report was prepared by Mr Greg Duncan and Mr Heath Hellewell, Consulting Geologists, who are Members of the Australasian Institute of Mining and Metallurgy and/or Geological Society of Australia, and accurately reflects the information compiled by them. Mr Duncan has in excess of 20 years relevant experience in mineral exploration and mine development, Mr Hellewell has 15 years of relevant experience, and they qualify as Competent Persons as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves".

Mr Duncan and Mr Hellewell consent to the inclusion in this report of the matters based on their information in the form and context in which it appears.