Year 4 annual report for EL 22349 Molyhil, 17 May 2006

Abstract

Tungsten and Molybdenum mineralisation was originally discovered at Molyhil in 1973. Fama Mines Pty Ltd selectively mined approximately 20,000 tonnes of ore during 1976 - 7. Petrocarb Exploration NL acquired the operation in 1978 and production continued until late 1981 when Tungsten prices collapsed. Petrocarb published an indicated open cut reserve of 1.8 million tonnes at 0.6% WO3 and 0.3% MoS2. The reserve ore grade was primarily based on statistical analysis of mining head grades. Mining experience indicated that the drill estimated grades were low, with production head grades significantly higher. In June and July 2004, Tennant Creek Gold completed 5 diamond drill holes for 675.59 metres and 23 Reverse Circulation (RC) holes for 3,146.7 metres. A JORC compliant drill indicated resource was subsequently calculated at 2,065,009 tonnes grading 0.304% WO3 and 0.182% MoS2. The resource zone remains open at depth and along strike to the south. In December 2004, 3 trenches were excavated over an 80-metre strike length of the southern orebody and 15 tonnes of ore extracted for metallurgical testwork. An average grade of 0.70% WO3 and 0.58% MoS2 was calculated for the 15 tonne sample and is an almost identical grade to Petrocarb historical mined grade. The bulk sample results were considerably higher than assayed intersections from nearby RC drillholes, and provide further evidence that the drill indicated grade substantially underestimates the true grade of the deposit. In July 2005 Sunsphere commenced a trial underground mining program to confirm the head grade of the deposit relative to the previous drilling and historical grades. Three shafts and crosscuts were excavated in the Southern Lode and totalled 96 and 102m respectively. The extracted ore was crushed, sampled and assayed. Further samples were used for metallurgical Testwork. The bulk sampling was used to upgrade the JORC resource to a Measured Resource of 370,000t at 0.52% WO3 and 0.32% MoS2, an Indicated Resource of 1,750,000t at 0.52% WO3 and 0.26% MoS2, and an Inferred Resource of 250,000t at 0.7% WO3 and 0.2% MoS2. This resource has been estimated to a depth of 150m (RL250m). The Measured Resource is to a depth of 45m (RL 355m). Magnetic modelling of the Southern and Yacht Club orebodies indicated the mineralised zone possibly extends to 400-500 metres vertical depth and potentially contains 4-5 million tonnes of high-grade ore, more than double the existing drill indicated tonnage. Further drilling is planned for August 2006.