Final Report for GR124 EL 9725 and EL 10136 Hammer Hill Project 18 December 2001 to 28 November 2013

Abstract

This report is a summary of all work completed on EL 9725 and EL 10136 (Hammer Hill Project). The project is predominantly located within the Irindina Province of the Arunta Region and is considered prospective for a number of commodities including REE, nickel, copper and cobalt, but only the REE prospects were investigated by Arafura. On 22 November 2005, Mithril Resources entered a Heads-of-Agreement with Arafura Resources to farm-in to the Hammer Hill Project. The first phase of the farm-in agreement was successfully completed on 26 June 2006, with Mithril Resources appointed as tenement operator on 31 July 2006. In November 2007, BHP Billiton elected to participate in a joint venture with Mithril Resources whereby BHP Billiton could earn up to 51 percent of the project (leaving Mithril with 19 percent) by spending 5 million dollars on the project. The BHP Billiton - Mithril agreement was designed to explore for Cu-Ni-sulphide mineralisation. Exploration activities during the farm-in agreement period resulted in the acquisition of 1,325 line kilometres of airborne VTEM with follow up ground EM surveys over three targets, reconnaissance rock chip and stream sediment sampling, systematic geochemical sampling using magnetic-lag fractions, and 819.3m in three diamond core holes and 1,630m in 52 air-core holes. Anomalous mineralisation was discovered during this farm-in exploration activity with the best results being 4.52m of 0.37 percent Cu from 341.75 - 346.27m in HHDD001. Mithril also identified additional off-hole conductors but these have not been drill tested. The farm-in agreement ceased in 2010 and Arafura regained control of all tenement operations. Arafura decided not to follow up any of Mithril's untested EM anomalies or the weakly anomalous non-REE mineralisation identified by them. Instead Arafura focused exploration activities around further REE exploration. Arafura acquired a detailed 100 metres-spaced, low-level NS airborne geophysical survey in 2011 over the Holsteins REE prospect in the western part of EL 9725. Reconnaissance fieldwork was conducted in 2012 to review and re-assess the potential of the Holsteins REE prospect and to follow up the other highest priority REE targets. Unfortunately the main part of the Holsteins REE prospect is excluded from exploration activity under Sacred Site Clearance Certificate number C2012-061. Despite this set-back reconnaissance exploration was conducted over the remainder of the Holsteins prospect. Prospecting activities confirmed the previously reported distribution of REE mineralisation but failed to locate any additional analogous REE mineralisation in this area. The REE mineralised Lodes are low-grade and light REE-enriched, relatively thin, widely-spaced veins that are subvertical with preference for down-dip structural extensions. Hence, there is little evidence to suggest a potential for substantial REE-mineralised tonnage per vertical metre. These factors along with the mineralogy and the remoteness of the site all suggest that Holsteins is uneconomic at present. Three other concealed geophysical targets within the project were investigated using biogeochemistry. Reconnaissance biogeochemical samples failed to highlight any evidence for concealed REE mineralisation. The meaningfulness of the elevated Zn, Cu and Mo biogeochemical results was not investigated.