Annual report EL 23619 Litchfield Project for the year ended 21 October 2006

Abstract

This report summarises work carried out on Exploration License 23619, Litchfield Project, Northern Territory for the year ended 21st October 2005. 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 mineralization, 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 EL23619 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. The review and interpretation work confirmed the high prospectively of the tenement area for magmatic Cu-Ni mineralization related to the Wangi Basics, and that there are undercover extensions to the mafic/ultramafic rocks along strike from the known occurrences. In follow-up an airborne EM survey GEOTEM was completed during September 2004. The survey covered the known intrusions of Wangi basics and structural corridor that contains them. Interpretation of the GEOTEM data has reviled a number of conductors coincident with the Wangi basics. Follow up ground EM was completed and interpretation and modelling defined two targets warranting drill testing. In November 2006 Titeline Drilling collared two diamond holes, in both cases conductive sulphidic sediments were intersected but with on evidence of economic metals specifically Nickel. The results are however encouraging, as such stratigraphiy is an excellent sulphur source and commonly intersected in WA near or adjacent to know mafic hosted Ni resources. Magnetics over the area show mafic (Wangi basics) are present, and more work is required to asses how they interact with the sulphidic sediments and what their geochemical signature is revieling. Exploration work completed to date includes: review and compilation of open file reports, published literature and data; interpretation of the aeromagnetic, gravity and landsat data; designing the boundaries of a Geotem Survey; Commission of GEOTEMTM survey (late last period); Interpretation of GEOTEMTM data; Collection of Detailed Ground EM (Smartem); Interpretation of Ground EM data; and Targeting and drilling of two EM anomalies.