Combined annual report EL 23074 and EL 23271 Arunta Project for the year ended 21 October 2005

Abstract

Through compilation efforts, Falconbridge (Australia) Pty Limited identified the north-central Arunta as being favourable to host Proterozoic, intrusive related, magmatic Ni-Cu-PGE sulphide mineralisation, such as Voisey's Bay. The area has seen little historic work and has not been the focus of dedicated nickel sulphide exploration in recent years. On the 18th of August 2003, Falconbridge (Australia) entered into a Joint Venture (JV) agreement with Tennant Creek Gold (NT) Pty Ltd, the owners of tenements EL 23074 and EL 23271. This JV gained Falconbridge a 60% share in these tenements by spending $800,000 within four years. On 15th of October 2003, Discovery Nickel Limited assumed Falconbridge's 60% interest in EL 23074 and EL 23271, through a Heads of Agreement. 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. Included in the Heads of Agreement were the results of a Falconbridge commissioned AEM survey flown over the Arunta tenements in early 2003. After analysis of the Falconbridge AEM results, Discovery Nickel Limited commissioned a ground EM (SMARTEM) survey in 2004 focused on the highest priority target areas. The results did not highlight any strong anomalies/basement conductors that warranted drill testing within EL 23074 or EL 23271. However, DNL did investigate, model and drill a significant aeromagnetic anomaly, Target J-1 (EL 23074). J-1 proved to be massive magnetic gabbro, and non economic. Successful drilling on adjacent tenement EL 23392 during the same campaign intersected a mineralised conductor is less that 1 km from the tenement boundary and EM suggests it strikes towards EL 23074 and EL 23271. Unfortunately restricted access to EM crews and drill contractors meant little work was completed on EL 23271 or EL 23074 during 2005. A small EM survey was indicated in late 2005 to try and trace the mineralised conductor on EL 23392, the survey was cut short, but did confirm the conductor headed towards EL 23271.