Annual report for year ended 7 December 2008 EL 23571 Reynolds Range

Abstract

The Reynolds Range area is prospective for numerous styles of mineralisation with U, Au, As, Sb, Ag, Fe, Sn, Ta, W, Mo, Cu, Pb, Zn, Ni, REE, P, Th and talc occurrences known in the region. Of these, Arafura Resources is principally interested in exploring for economic REE mineralisation. Several companies conducted exploration activities in EL 23671, adjacent to EL 23571, and failed to realise the potential of the world-class Nolans Bore REE deposit, which now has a defined total resource of 30.3 Mt at 2.8% REO, 12.9 % P2O5 and 0.44 lb/t U3O8 [see Goulevitch (2008) for details]. This is encouraging because the Nolans Bore style of REE mineralisation may occur elsewhere in the region. Other styles of REE mineralisation may also exist. EL 23571 is part of a number of tenements in the Aileron-Reynolds Range area including EL 23571 (Reynolds Range), EL 23671 (Aileron), EL 24548 (Yalyirimbi Range) and EL 24741 (Woodforde). Arafura Resources completed a HyMap hyperspectral survey covering a large part of the Reynolds Range- Aileron project area. This survey covered all existing areas in EL 23571, and parts of SEL 23671 and EL 24741. A number of Hymap and radiometric anomalies have been identified as regions of exploration interest have been generated and will be followed up during reconnaissance activities in 2009. Preliminary processing of the HyMap data indicates a number of targets with spectral signatures worthy of follow-up inspection. These include; - areas that have been modelled as argillic alteration in the central-northern parts of EL 23571. - large regions of epidote have been modelled. While this is not surprising given the presence of calcsilicate rocks, it is possible that at least some of these signatures may be related to REE-bearing epidote (allanite). - Some of the epidote-rich signatures also appear to have an associated apatite signature but this is more speculative and requires further processing following on-ground investigations. - localised patches of topaz have been modelled in the dataset. A number of airborne Th anomalies have also been identified in the NTGS regional geophysical dataset. Arafura commissioned a detailed low-level airborne magnetic/radiometric survey in June-July 2008 over the central portion of the adjacent SEL 23671, and parts of EL 24741 immediately to the north (Hallenstein and Goulevitch, 2009). This survey covers an area of approximately 550 km2, with the Nolans Bore deposit located in the central southern part of the survey. The aim of the survey was twofold: 1. To provide a baseline radiometric response of the district for future environmental monitoring; and 2. To generate additional apatite-hosted REE exploration targets. The newly acquired airborne geophysical dataset was reprocessed by SGC, incorporating existing open file NTGS data, to produce a library of standard geophysical images for the greater Aileron-Reynolds Range region a 50 m pixel size. A number of airborne Th radiometric targets are highlighted in the reprocessed imagery in EL 23571. The overall intensity of the Th radiometric signature is clearly reduced and less dominant in EL 23571 compared to adjacent tenements suggesting EL 23571 contains lower priority Th targets at the surface. The highest Th anomaly in EL 23571 forms a segmented linear feature about 2.6 km long near 286850E 7512270N with another slightly less prominent Th feature at 303350E 7497550N. Both of these Th anomalies coincide with outcropping units, mapped as faulted/sheared Napperby Gneiss, and alluvium. The only other major Th anomaly in EL 23571 forms a 15 kilometre-long elongate segmented zone of lowmoderate Th anomalism between 299200E 7511300N and 285200E 7518600N. The northern parts of this feature are locally more Th enriched whereas the southeast parts tend to be more potassic in the ternary radiometric images (not shown). This feature coincides with mapped Napperby Gneiss and undifferentiated granitic gneiss with Reynolds Range Group metasediments. Gravity surveys During the reporting period, two ground gravity programs were completed over the Aileron-Reynolds Range region: 1. A semi-regional 4 x 4 km-spaced survey, commissioned by the NT Geological Survey and Geoscience Australia, with Arafura participating in a cost-sharing arrangement to infill the government coverage to 2 x 2 km over SEL 23671, EL 23571 and EL 24741; and 2. Three detailed prospect-scale traverses centred on the Nolans deposit (see Hallenstein and Goulevitch 2009 for details). The purpose of the former gravity program is to provide increased spatial resolution of fundamental geological structures over Arafura's strategic land holdings in the Aileron-Reynolds Range region. The location and character of these structures may assist in prioritising target zones generated through other recently acquired data sets (hyperspectral, radiometric, magnetic). Arafura Resources commissioned HyVista Corporation to acquire and process HyMap airborne hyperspectral scanner imagery over the Aileron-Reynolds Range region during the reporting period. The survey encompasses outcropping Proterozoic rocks at a scale suitable to regional exploration (nominal pixel size is about 4.6 x 4.6 metres) and covers parts of SEL 23671 and EL 24741 and all of EL 23571. The purpose of this HyMap survey and imagery was to: - characterise the HyMap hyperspectral signature of the Nolans Bore deposit and its country rocks; - generate exploration targets using HyMap mineral maps based on characteristic minerals from Nolans Bore; - generate exploration targets using a standard suite of HyMap mineral maps; and - assist regional geological interpretations and reconnaissance mapping/sampling. The HyMap survey was acquired 8 April 2008. An acquisition attempt was made in March 2008 however inclement weather conditions prevented the completion of the initial survey. Details of all HyMap survey data and processing report are included digitally in this report. HyVista presented the processed HyMap data and imagery to Arafura (Hussey) at a 3 day workshop held in Darwin in August 2008. HyVista demonstrated interpretations with the following diagnostic maps: 1. Standard HyMap imagery, such as Visible, False colour, Decorrelation and MNF images 2. Kaolin and kaolinite group minerals 3. Fe oxides and hydroxides 4. Carbonates 5. Epidote +/- apatite 6. Topaz 7. Argillic alteration mineral assemblages 8. Chlorite 9. Amphibole 10. Mica Within EL 23571, the processed HyMaP data reveals significant areas of epidote are present. This is not surprising given the mapped calcsilicate lithologies. Epidote is considered interesting as the REE-enriched epidote (allanite) may or may not be present. Some of the epidote rich areas also have apparent apatite signatures, but these are probably more speculative. Additional processing and ground-truthing is planned to further evaluate this aspect. The HyMap dataset also revealed numerous areas of contiguous pixels with signatures that match argillic alteration mineral assemblages amongst areas of known kaolin and deeply weathered/intensely altered rocks. HyVista also demonstrated signatures characteristic of argillic alteration minerals such as alunite and dickite are locally present. The potential use of monazite and REE mineral maps were investigated within the HyMap dataset during the workshop to varying degrees of success. It was decided that an additional workshop with HyVista should occur in 2009 to further evaluate and develop specific mineral maps such as: 1) apatite 2) apatite-epidote (allanite)