Annual report for EL 23392, for the year ended 16 February 2006

Abstract

Through compilation efforts, Falconbridge (Australia) Pty Limited identified the north-central Arunta as being favourable to host Proterozoic, intrusive related, magmatic Ni-Cu-PGE sulphide mineralisation, such as Voisey's Bay. The area has seen little historic work and has not been the focus of dedicated nickel sulphide exploration in recent years. In October 2003, Discovery Nickel Limited acquired a 100% interest in Falconbridge (Australia) Pty Ltd Arunta tenements through a Heads of Agreement document. Falconbridge had previously identified the north-central Arunta as being favourable to host Proterozoic, intrusive related, magmatic Ni-Cu-PGE sulphide mineralization. The Arunta area has seen little historic work and has not been the focus of dedicated nickel exploration in recent years. After identifying favourable targets through open file review, compilation and interpretation of regional datasets, which including landsat, aeromagnetics and gravity. Falconbridge took a strategic tenement position in the region and commissioned a 3814 line/kilometer GEOTEM airborne electromagnetic and magnetic survey focused on the highest priority target areas. The results highlighted several areas that were recommended for further follow-up exploration. In mid-2004, Discovery Nickel Ltd tested the GEOTEM targets with a detailed SMARTEM (ground EM) survey to better define individual drill targets. After interpretation, anomaly B1 was drilled. At B1 two sulphide dominated zones were intersected with significant base metal concentrations. In late 2005, DNL commissioned a second ground EM survey by Quantec Geoscience to attempt to delineate the extent of the sulphide related conductor intersected in ARD-01. Three fixed loop surveys reviled an east north east strike, different from the anticipated northern trend defined in the first ground EM surveys. More work is required to better define the conductors location and extent. Additional EM is planed for 2006 subject to crew availability.