Annual Report EL 22959 Litchfield Project for the year ended 16 February 2005

Abstract

Through compilation efforts, Falconbridge (Australia) Pty Limited identified the Litchfield/Batchlor area of the Northern Territory as being favourable to host Proterozoic, intrusive related, magmatic Ni-Cu-PGE sulphide mineralisation, such as Thompson or Voiseys Bay in Canada. The area has seen little historic work and has not been the focus of dedicated nickel sulphide exploration in recent years. In December 2003, Discovery Nickel Limited acquired 100% interest in EL 22959 and other Falconbridge tenements following the successful listing of Discovery Nickel on the Australian Stock Exchange. The tenement area lies in the western parts of the Pine Creek Inlier (Litchfield Province) and is considered to have excellent potential for magmatic Cu-Ni mineralisation related to the Proterozoic Wangi Basics. The Litchfield Province is the continuation of the prospective Halls Creek Province of the Kimberley's, a known significant magmatic Cu-Ni province (e.g. Sally Malay Deposit). Most significant nickel-copper massive sulphide deposits are extremely good conductors. Discovery Nickel's exploration approach relies heavily on airborne electromagnetic (AEM) surveying, followed up by ground EM to define targets. Falconbridge commissioned an AEM survey over the Arunta tenements in early 2003 and after analysis of the Falconbridge AEM results, Discovery Nickel Limited commissioned a ground EM (SMARTEM) survey focused on the highest priority target areas. The results did not highlight any strong anomalies/basement conductors that warranted drill testing on EL 22959. The review and interpretation work confirmed the high prospectively of the tenement area for magmatic Cu-Ni mineralisation related to the Wangi Basics, and that there are undercover extensions to the mafic/ultramafic rocks along strike from the known occurrences. In followup an airborne EM survey GEOTEMTM was completed during September 2004. The survey covered the known intrusions of Wangi basics and structural corridor that contains them. Interpretation of the GEOTEMTM data has reviled a number of conductors coincident with the Wangi basics. Follow up ground EM and drill testing is planned for the next period. This second annual report summarises all exploration work conducted by Discovery Nickel Ltd.