Daly River Project EL22495, EL22496, EL22498 and EL23595 annual report for the period 6 September 2006 to 5 September 2007

Abstract

Daly River is, located approximately 145 kilometres south of Darwin in the Northern Territory. Deposits of copper, lead and zinc have been mined sporadically from veins and lodes in the Daly River region since the late 19th century. Approximately 7,000 tonnes of oxide ore grading 20% to 30% copper has been produced. Modern mineral exploration, since the 1960s, using geophysical and geochemical techniques, resulted in the discovery of several small volcanogenic massive sulphide (VMS) deposits, which to date have been prohibited from exploitation by their small size and uneconomic grade./Exploration for gold in the area has been minimal. Troy Resources NL currently holds the area, including all the old mines, prospects and new discoveries, under four granted exploration licences and two exploration licence applications. Troy has carried out little exploration work in the area having been restricted both currently and in an earlier period of tenure by other stakeholder ownership disputes. The project area has potential for discovering additional base-metal deposits and gold and a number of inadequately tested and untested targets generated by previous explorers are available for immediate follow-up. Also, it is anticipated that other targets can be generated through surveys resulting from the appraisal of the large volume of data in existence. Applications for E10081 and EL 22066 are located on Aboriginal Freehold Land ('ABF') and require processing in accordance with the NT Mining Act and the Aboriginal Land Rights (Northern Territory) Act ('ALRA' ? Commonwealth of Australia). The ALRA requires that negotiations be entered into (once Ministerial consent has been given to commence negotiations) with the holders of the ABF. Consent to the grant of licence must be obtained from the ABF holders as part of the application/granting process. If the ABF holders refuse consent, the application goes into moratorium for 5 years. However, the ABF holders can elect to lift the veto after 2 years and recommence negotiations with the applicant. Negotiations were delayed pending determination by the Northern Land Council ('NLC') of right of ownership and determination of demarcation boundaries between two Aboriginal groups, the Malak Malak and Kamu, within the Aboriginal Corporation awarded the freehold. A court case relating to the dispute between the two traditional owner groups found in favour of the Kamu people The Malak Malak refused to recognise the decision but no appeal was lodged against the decision and the time allowed for this process has lapsed. Malak Malak?s refusal to recognise the decision left Troy with no legitimate negotiating partner. Eventually meetings were scheduled for November 2006 although the dispute between the two groups had not been settled. The meetings were subsequently rescheduled to early 2007 and as the negotiating period for the ELAs was due to expire 31 December 2006 an extension of time was granted. During March 2007 separate meetings were held with the Malak Malak and Kamu people on successive days at the Nauiyu Community Hall, Daly River. Representatives of the NLC arranged the meetings, established the appropriate protocol and were present at the meetings. In conclusion both groups refused consent. The Kamu were indecisive and requested a month to consider Troy?s proposal. However, as NLC protocol required a decision on the day of the meeting their only alternative was to refuse consent. The applications have therefore gone into moratorium for five years. ALRA clearly requires that any re-opening of negotiations has to be at the instigation of the Aboriginal land owners. EL 22066 is a key tenement containing most of the old mine workings and mineral occurrences as well as the Anomaly A volcanogenic massive sulphide (VMS) base metal deposit. The delay in grant of this tenement has prohibited a more concerted on ground exploration effort and a more extensive airborne geophysical survey throughout the project area. Although progress was made in at least being able to meet and commence negotiations with the ABF people, failure to advance negotiations and the refusal to consent grant of EL 22066 in particular has meant that the intended airborne geophysical survey has been minimized and further groundwork attendant on that survey has been and delayed. An airborne magnetic survey has been commissioned to cover a large part of EL 22495 and ground surveys will commence once this data has been received and modelled. The survey was commissioned in June 2007 but has yet to be completed due initially to logistical requirements and more recently due to the loss of the aircraft on another survey in the Northern Territory. Expenditure during the year has been directed towards planning and commissioning this survey as well as attendant costs related to negotiations with Aboriginal parties.