Lucy Creek Project EL 24716 Lucy Creek Annual report for period ending 30th November 2007

Abstract

Arafura Resources completed an RC drilling program at Lucy Creek, in EL 24716 and the adjacent EL 10215 in November 2006 to test for uranium mineralisation associated with the airborne uranium radiometric anomalies identified by the 2004 NTGS regional survey and subsequently reflown for greater detail by Arafura Resources in December 2005 (Hussey 2006). Although they completed little geological mapping they collected some rock chip samples with locally encouraging uranium assays from the southern part of the radiometric anomaly in EL 10215. The airborne uranium channel anomalies coincide with a series of black and white hills and mesas that lie in a broad valley between high standing ridges in the western parts of the Jervois Range where they are related to highly ferruginous caps and a dissected well developed regolith weathering profile at or near the Mt Baldwin Formation (Red Heart Dolostone) Arthur Creek Formation boundaries of the Georgina Basin. Of the total of 60 holes and 1713 metres drilled throughout the anomaly, 45 holes for 1472 metres were completed on this tenement. All samples were dispatched to ALS Chemex, Alice Springs in late November 2006 and held in temporary storage awaiting assay instructions. Samples were stored temporarily at the lab during the demerger of Arafura's uranium interests to NuPower Resources Ltd to avoid further delaying the demerger process and lengthy re-valuation of the prospective NuPower assets. Results are now available and reported here. NuPower has carried out preliminary metallurgical testwork of two composite samples representative of possible end member ore types to determine the suitability of this material to heap leach recovery of uranium. NuPower also engaged a consultant to carry out denoising and element ratio imagery of the Arafura airborne radiometric data in order to better understand the nature of the anomalies. The extent of the drilling program was sufficient to adequately test the surficial extent of the uranium radiometric anomaly however the assay results were disappointing and have shown that there is little potential for a large low grade near-surface uranium deposit beneath the anomaly. The uranium was shown to be in secular equilibrium with its daughter decay products and therefore the low spectrometer counts recorded from the RC samples is consistent with the low tenor of the mineralisation. (Previously it was thought that the spectrometer counts were comparatively high and that this might be the results of disequilibrium). Preliminary testwork has shown that as a result of the very fine grained nature of the ore minerals, the likely presence of significant quantities of uranium in refractory minerals and the abundance of phosphates and clays, even highly aggressive acidic leach conditions failed to provide satisfactory recoveries and therefore even poorer recoveries could be expected from a less aggressive heap leach environment. There has been no modern systematic geological mapping of the property and therefore the local geology is poorly understood. Most of the holes were shallow and while they were controlled to terminate at the basal disconformity the extent of regolith development may have obscured this and holes may have been terminated prematurely. Reprocessing and interpretation of the Arafura Airborne radiometric survey had identified a series of small and isolated areas within the main anomaly of higher uranium and thorium concentrations that were not adequately tested by drilling. NuPower plans to complete a series of detailed geological mapping and rock chip sampling traverses to provide a better understanding of the local geology and the nature of the zones with higher uranium and thorium concentrations, in conjunction with reconnaissance exploration of the adjacent Johanssen Range tenement EL 24724 and exploration of the Arganara Project tenements ELs 24726 and .25664, all underlain by similar Georgina Basin geology. NuPower also plans to assess the tenement for its phosphate potential. Therefore potential remains in this tenement for small tonnages of higher grade near-surface material identified by reprocessing of the results of the radiometric survey but missed by the drilling, particularly in the southern part of the anomaly in the vicinity of the reconnaissance rock chip samples that assayed up to 480ppm U. The potential for secondary uranium accumulation derived from these highly weathered rocks has not been assessed. There is also potential for economic concentrations of phosphate.