Strangways Project, EL 10364 Mud Tank, EL 22443 Strangways, EL 22446 Alcoota, EL 22623 Phlogopite and EL 23592 Johnnies Reward, Third combined annual report for the period 20 December 2003 to 19 December 2004

Abstract

A staged exploration program of ground geophysical surveying, costeaning, vacuum, aircore, RAB and limited diamond drilling has delineated a potential vermiculite resource area, currently 400 m long x 50 m wide and persisting to a vertical depth of at least 42 metres, at the Bleechmore prospect, located 150 km northeast of Alice Springs. Australia?s only vermiculite mining and processing operation, AVI?s Mud Tank Mine, is located 19 km southsoutheast of the Bleechmore prospect (EL 22446/EL 10364). Considerable vermiculite testwork has been undertaken by Amdel and the Palabora Mining Company. The work was carried out on disaggregated core samples of 70% 90% mineralised vermiculite schist from one Bleechmore diamond drillhole (BD01 - EL 22446), to determine vermiculite flake size distribution by crushing, wet drum scrubbing and wet screening, followed by heavy liquid separation of crude vermiculite flakes for expansion testing. Results of the above testwork indicate a commercially acceptable crude vermiculite product, comprising 25% of ore processed. This is the same 4:1 ratio of the plus 0.5 mm to plus 4 mm flake size range as Mud Tank, with an average crude bulk density or yield of 130 kg/m3 and an expansion factor of x 9. Within EL 10364, excellent exploration potential exists for additional vermiculite resources within Flinders Diamonds Limited?s Bleechmore Mining Lease Application area (MLA 23903), where a near surface 500 m long zone of drill indicated 70% 90% vermiculite carbonatite, located to the west of the current resource area, remains to be followed up. A magnetically defined ring structure, 15 km x 8 km, envelops the Bleechmore prospect, underlying to the west a very heavily mulga vegetated Tertiary plain which appears to mirror a regional potassium depletion zone similar to that enveloping the Mud Tank Carbonatite Complex. This ring structure may be the subsurface manifestation of a larger basemetal bearing carbonatitic alkaline intrusive, similar to Palabora in South Africa, thus representing excellent regional exploration potential for more vermiculite, rare earths, phosphate and possibly base metals. There are two regional alkaline drainage anomalies which require following up. One, within EL 22446, appears to be shedding off an area of interpreted carbonatitic dykes near Tilmouth Bore. A regional drainage sampling program was completed in the Wigley area near the southern boundary of the project area, to follow up KIM positive Geodiscovery heavy mineral concentrates observed by IDL. A single grain of hercynite from WDD04 was microprobed. Its high chromium content may possibly indicate a kimberlite source. Johnnies Reward IOCG deposit, located within EL 23592, has been farmed out to Tanami Gold NL.