Second combined annual report EL 24246 and EL 24606 year end 28 December 2008

Abstract

During the current reporting period, Toro Energy Limited (Toro) under an option agreement with the tenement holder Deep Yellow Limited (DYL) undertook a programme of 333 sonic-core and 784 aircore resource drill holes covering 13 km2 of the Napperby uranium deposit. Assay results from this programme and the 2007 programme are reported here. During 2008, Toro commissioned SRK Consulting to undertake resource calculations based on the 2007 drilling data and previous auger drilling by DYL, upgrading the Global Inferred Resource at Napperby to 4.6 million tonnes at 305 ppm (0.031%) U3O8 for 1,420 tonnes (3,130,000 lbs) of contained uranium oxide (using a 200 ppm U3O8 cut off). This compares to the Inferred Resource estimation by Deep Yellow of a smaller (0.6 km2) part of the deposit of 1,920,00 tonnes at a grade of 349 ppm U3O8 for 670 tonnes or 1,477,000 lbs of contained U3O8. Another round of resource calculations had been commissioned prior to this report data, based on the 2008 drilling results, with a report expected early in 2009. Toro commissioned URS Corporation to undertake a Scoping Study on the Napperby deposit using contemporary mining, processing and economic parameters, the results of which are due in early 2009. Disequilibrium studies carried out during the year show that downhole gamma in the area drilled in 2007 consistently underestimates uranium grades, as determined by XRF pressed pellet. Two independent methods suggest a correction factor of 1.4 that can be applied to downhole eU3O8 to bring it in line with chemical assays. This has only been used for internal purposes thus far, as further work is required to assess the widespread applicability of this or any other correction factor. Preliminary petrological studies indicate that the principal uranium mineral is carnotite with the possibility of Ca-carnotite as well. This mineral occurs principally as coatings on detrital mineral grains. Routine hydrogeochemical water samples were collected from the drill holes for analysis. These data will form a valuable baseline should there be future development at the site. Results from 2007 show that groundwater is quite saline (average 1.5% total dissolved solids) and contains elevated Sr (ave. 15,000 ppb), SO4 (ave. 3,800 ppb), I, B and Br, typical of saline lake compositions. Importantly, both U (ave. 153 ppb) and V (ave. 435 ppb) are both mobile in this fluid. The results of a trial geobotanical sampling programme in 2007 are reported. These do not show a simple direct correlation to currently established mineralisation, but further detailed work is required to identify more appropriate species to sample. During 2008, Toro also drilled 30 regional aircore holes to test stratigraphic plays to the west of the Napperby deposit near Lake Lewis, identifying favourable reduced facies accompanied by a weak gamma response at ~85 m depth. Minor U and Au are associated with this spike. This Annual Report also incorporates data relating to trial airborne electromagnetics (TEMPEST) and detailed (100m-spaced) radiometrics and magnetics flown over both EL 24246 and EL 24606 during 2007. The TEMPEST survey has highlighted an irregular granitic basement architecture onto which the mineralised sediments at Napperby have been deposited. The detailed magnetics and radiometric survey depicts the distribution of secondary radionucleiides in modern drainage and the subtle magnetic features in the granitic basement, which will assist in the identification of new exploration targets and in future drill pattern planning.