Annual report for EL 22959 'Litchfield Project', for the year ended 16 February 2006

Abstract

This report summarises work carried out on Exploration License 22959, Litchfield Project, Northern Territory for the year ended 16th February 2006. 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 EL22959 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 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 was completed during the period and drill testing is planned for the next period.