Lagoon Creek Project EL 23573 Lagoon Creek annual report for period ending 22 December 2008

Abstract

Exploration License (EL) 23573 was granted to Arafura Resources NL on 23rd December 2003 for 6 years, comprising 67 blocks covering an area of 194 square kilometres of Wollogorang Station in the Gulf region of the NT. In May 2005 Arafura entered into an agreement with Laramide Resources via the wholly owned Australian subsidiary Lagoon Creek Resources Ltd whereby Lagoon Creek Resources can earn up to 60% interest by spending A$5.5M over 5 years. Nupower Resources Ltd acquired the property from Arafura on 14th March 2007 as a result of the demerger of certain uranium interests into the new company and is now the registered title holder. The Westmoreland region lies on the Palaeoproterozoic Murphy Tectonic Ridge that separates the Palaeoproterozoic Mt Isa Inlier from the Mesoproterozoic McArthur Basin and the flanking Neoproterozoic South Nicholson Basin. Early Proterozoic sediments, volcanics and intrusives of the Murphy Metamorphics are the oldest rocks exposed in the area and are overlain by two Proterozoic cover sequences. The oldest cover lying unconformably on the Inlier is the Cliffdale Volcanics comprising over 4000m of volcanics of probable sub-aerial origin, over half of which is ignimbrite and the rest of which is rhyolite. They are comagmatic with the Nicholson Granite and together comprise the Nicholson Suite. The Tawallah Group unconformably overlies the Nicholson Suite and is the oldest part of the southern McArthur Basin. The base contains conglomerates and sandstones of the Westmoreland Conglomerate that thin towards the southeast and are overlain by andesites, basalts agglomerates, tuffs and sandstones of the Seigal Volcanics. Together the Westmoreland Conglomerate and Seigal Volcanics make up two thirds of the total thickness of the Tawallah Group. Although not represented here the volcanics are in turn overlain by the McDermott Formation, the Sly Creek Sandstone, the Aquarium Formation and the Settlement Creek Volcanics. Uranium mineralisation in the Westmoreland region is found in structural zones of the Murphy Metamorphics, in shear zones of the Cliffdale Volcanics close to the Westmoreland Conglomerate unconformity, at the reverse-faulted contact between Cliffdale Volcanics and Westmoreland Conglomerate, within the basal part of the Westmoreland Conglomerate, in Westmoreland Conglomerate close to the overlying Seigal Volcanics, in association with mafic dykes and sills and in shear zones within the Seigal Volcanics. Prospects within EL 23573 include NE Westmoreland (Lagoon Creek, Mageera Zone, Contact Lode, Jackson Point, Jim Beam, Southern Comfort, Jacques), Duccios, El Hussen, Wide Reef, St. Barb, Terrace Mountain, Horse Pocket, White Label, Calvert North and Calvert South, Debbil Debbil Zone and Conglo. The Joint Venture is exploring primarily for uranium and secondly for gold and has focussed to date on the extension of the Redtree Dyke Zone from Queensland southwestwards into the NE Westmorland area where uranium is localised around mafic dykes that intrude the shear zone and the adjacent Conglomerate and in structures of the El Hussen Fault Zone. An airborne radiometric and magnetics survey covering 100% of the area at 60m flight height on 100m spaced lines for a total of 21,500 line kilometres was completed in 2005 that identified several strong radiometric anomalies. In 2006 a geological interpretation using the airborne geophysical data and satellite imagery was undertaken and regional geological mapping was completed. Radiometric anomalies at Debbil Debbil, El Hussen and NE Westmoreland were ground located and followed up with ground radiometrics at 25m spaced stations on lines 100m apart. The same year 23 RC holes were drilled at NE Westmoreland for a total of 2814m. The exploration model for all the historical drilling was near flat-lying mineralisation either side of a major NE trending fault at the lower contact of a siltstone at the top of the Westmoreland Conglomerate immediately beneath Seigal Volcanics. However Laramide recognised that uranium mineralisation at Redtree occurred both at flat lying contacts and in association with steeply dipping mafic dykes. Sparse dyke material was also noted in the structure at NE Westmoreland and so the drilling was designed to test both flat lying and steeply dipping mineralisation. In 2007 further drilling included 9 new diamond core drill holes and 3 diamond tails to holes from the 2006 program for a total of 2126.5m at NE Westmoreland, 5 diamond holes for 708m at El Hussen and a regional stream sediment sampling program of 160 sites at each of which 3 samples were collected. Significant results from the drilling include; 4m at 0.21% U3O8 from 124m in NEWM204, 2m at 0.10% U3O8 from 75m in NEWM222, 1.5m at 0.19% U3O8 from 64.75m in NEMW205, 4.5m at 0.10% U3O8 from 120.75m in NEWM212 and 2.0m at 0.04% U3O8 from 60.25m in NEWM231 from NE Westmoreland and 5.5m at 0.02%U3O8 from 10.95m in EHS7 and 3.5m at 0.02% U3O8 from 17.35m in EHS7 from El Hussen. The stream sediment sampling identified anomalies in the headwaters of Lagoon Creek and Breakneck Creek. These have not been followed up. Drilling at NE Westmoreland and El Hussen has encountered minor uranium mineralisation associated with flat lying sedimentary contacts and in steeply dipping structures associated with mafic dykes, consistent with the historical results. No new discoveries have been made thus downgrading the potential for an economic uranium deposit of these styles of mineralisation. Further exploration including drilling was suspended while a preliminary review of the exploration model was undertaken in 2008. This identified the potential for uranium mineralisation in specific fluvial sand and grit palaeochannels of the Westmoreland Conglomerate that may be independent of regional structures or mafic dykes. Further re-logging of drill core and integration of the exploration data is required to substantiate this new model. Follow up of the radiometric and geochemical anomalies on the basis that they may represent radiogenic and geochemical leakage from mineralized palaeochannels at depth may lead to defining drill targets to be tested with a limited number of well sited drill holes. Exploration at Lagoon Creek to date has focussed on the potential for economic uranium mineralisation associated with near flat lying fine grained sedimentary units in the upper part of the Westmoreland Conglomerate and in near vertical structural zones crosscutting the Conglomerate associated with intruded mafic dykes. While the historical drilling targeted flat lying mineralisation with vertical holes that mostly failed to test the crosscutting structural zones and located minor mineralisation the recent drilling of inclined holes to test both targets has failed to identify any significant zones of potentially economic mineralisation. Radiometric anomalies identified by the airborne survey have not been followed up in detail and geochemical anomalies from the stream sediment survey remain to be followed up. A preliminary review of exploration models suggests potential for sandstone hosted uranium mineralisation in fluvial sand and grit palaeochannels of the Westmoreland Conglomerate that may be independent of crosscutting structural zones and any mafic dykes. The dykes are thought to be an unlikely source of the uranium but may have acted locally to laterally remobilise and upgrade disseminated uranium in the sediments proximal to the dykes and vertically along the dyke margins. This new model enhances the prospectivity of the Westmoreland Conglomerate in the absence of structural control but requires substantiation with more detailed core relogging. Integration of the airborne survey data with the historical and recent stream sediment data is required for the purpose of identifying geochemical and radiogenic (radon, radium, uranium) leakage, particularly along faults and fractures, from mineralised palaeochannels at depth within the body of the Westmoreland conglomerate. Reprocessing of the airborne magnetic data could assist with identifying structures as leakage conduits and mafic dykes. Clipping and enhancing of the radiometric data may assist in recognising more subtle leakage anomalies in the dataset. Prospective areas should then be followed up with reconnaissance mapping, rock chip sampling, ground radiometrics and soil sampling to identify potential source areas beneath capping units for drill testing.