Annual report for EL 10004 Coronet Hill year ending 18 August 2008

Abstract

Segue Resources Ltd (Segue) as the registered holder of EL 10004, wishes to report on the exploration activities in the year ending l8 August 2008. Remedial road work completed in June 2008 to enable 4WD access to the project area. A series of metallurgical samples was collected and submitted to AMMTEC Ltd. The first in a series of metallurgical tests is currently in progress. At the time of writing, these tests are incomplete and the following is an interim report of findings. The rationale behind this round of test work was to make a preliminarylfirst pass assessment of the nature and treatment implications of arsenic in the known mineralization. Previous sampling and historical analyses have shown 20-30% arsenic in the massive sulphide mineralization associated with the Coronet Hill Fault. This level of arsenic concentration is likely to cause significant penalty in any potential concentrate that may be produced. Four metallurgical samples (MET1 - MET4) and three small grab samples (CHI-CH3) were collected with a total weight of approximately 90kg and sent to AMMTEC in Perth for analysis. These metallurgical samples were collected from historical shaft workings positioned along the Coronet Fault to get an initial indication of grade variability. Mulloch dumps of massive sulphide are abundant around a number of these workings and it was this material that was selectively chosen for test work. These mineralized samples were dominantly arsenopyrite with subordinate chalcopyritelcovellite and minor pyrite, tennantite, galena, sphalerite and wolframite Samples were received by AMMTEC, Perth and initial head assays were completed. Head assays confirm high arsenic, silver and copper values combined with other significant polymetallic credits. Roger Townend and Associates completed optical ISEM microscopy on each of the four metallurgical samples to assist in grind establishment ahead of metallurgical tests. The rejection of arsenic remains problematical. There is however a diminished response at elevated pH levels. Further work at higher pH (around 10.5-1 1.5) may help. Copper concentrates have the potential to be very high grade (see con1 for MET3) Copper recovery is modest and definitely has room for improvement. Cleaning will be required to assist in arsenic rejection. It is likely that there will always be a penalty level of arsenic in a resultant copper concentrate given the high-grade arsenic feed. In 2008-2009, completion of metallurgical test work will provide some answers on the impact of arsenic in the known mineralization and the implications for extraction (of particularly copper and silver), ongoing drilling resource definition and downstream processing. The completion of this test work will allow for decisions on the future of the project.