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Kalkaroo Project (Copper-Gold-Molybdenum)

Summary

Kalkaroo is a large mineral deposit containing over 60 million tonnes of copper-gold-molybdenum mineralisation that is known to extend for more than 2.5 kilometres along strike and to depths of greater than 200 metres. Its limits have not yet been determined by drilling and there is high potential for discovery of additional ore material. Havilah is confident that Kalkaroo will develop into a major new copper mine in South Australia.

History of Exploration

Kalkaroo was explored by a number of major mining groups in the past including Placer, Newcrest Mining and MIM Exploration, who completed more than 45,000 metres of drilling in the region. Following a detailed evaluation of all historic exploration data, Havilah developed a 3D geological model of an interpreted copper resource envelope which it commenced drill testing in July 2004. This model was not tested by previous explorers.

Over the following six months Havilah completed twenty-one 100m spaced drill traverses over a strike length of 2000 metres and achieved wide ore grade copper and gold intersections on every section line, such as the following :

• 78 metres of 0.90% copper and 0.61 g/t gold in KKRC006
• 36 metres of 3.13% copper and 0.98 g/t gold in KKRC039
• 42 metres of 1.37% copper and 1.66 g/t gold in KKRC022

Subsequent drilling campaigns expanded the mineralisation to the west, in an area known as West Kalkaroo, where some of the best drilling results were obtained, including 102 metres of 0.83% copper and 1.6 g/t gold in KKRC136.

During the exploration phase Havilah’s drilling was restricted to RC percussion drillholes that were somewhat limited in depth owing to frequent high water inflows. Where Havilah’s drillholes duplicated earlier explorer’s drillholes there was invariably good correlation of assays, providing a high degree of confidence in the drill results.

Geology

The entire region is overlain by a blanket of younger sediments, generally from 30 to 80 metres thick, and averaging about 50 metres at Kalkaroo. Consequently, all information concerning the Kalkaroo deposit is derived entirely from drilling.

Kalkaroo mineralisation occurs as two distinct styles. That comprising the large arc or Main Zone, formed as stratabound replacement of a chemically reactive “mine sequence” that dips 45 degrees to the north as a large sheet. This style of mineralisation characteristically contains moderate copper and gold grades and often quite appreciable molybdenum. Drilling indicates that the mineralised horizon is persistent both along strike and down-dip.

The second style of mineralisation forming the “handle” at West Kalkaroo is hosted by quartz breccias and stockworks developed within highly fractured and altered mine sequence rocks. Copper, and especially gold grades, tend to be significantly higher in this area, while molybdenum is generally absent. The orebody reaches its shallowest depth at West Kalkaroo.

Superimposed on the primary copper sulphide mineralisation are the effects of deep weathering that has produced a distinct vertical ore zonation and associated enrichment of gold and copper mineralisation in the upper part of the orebody (green area on sections). As a consequence, the top of the orebody typically has a gold rich cap, overlying a native copper and gold zone. This lies above secondary chalcocite ore which merges into the primary copper sulphide ore below (red area on sections). The enriched, oxidised copper and gold ore, apart from being nearest the surface is also considerably softer than the underlying sulphide ore, which is positive for the mining economics.

On a regional scale, the Kalkaroo deposit lies on the north-plunging nose of a major structural dome, termed the “south dome”. A second, larger dome known as “north dome” lies to the north. There is enormous regional exploration potential along the prospective horizon in the Kalkaroo north and south domes, as shown by exploration drillhole KKRC071 some 3 km south of the Kalkaroo deposit, which contains 63m of 0.41% Cu and 69 metres of 0.67 g/t Au in expected host rocks. These domes are also cut in a number of places by major fault zones which are also likely hosts to West Kalkaroo style quartz breccia mineralization.

2007 – 2008 Feasibility Study

In July 2007, Glencore International joined with Havilahto fund a $14 million feasibility study on the Kalkaroo project. Upon completion of the feasibility study, Glencore may elect to arrange project financing for the subsequent mining joint venture in exchange for taking a 14% participating interest and metals offtake.

Overall the feasibility drilling supported the results of the earlier rounds of exploration drilling and confirmed that generally wide economic gold and copper grades continue to at least 200 metres depth over the entire 3 km length of the deposit.

Based on some 353 drillholes totalling 64,457 metres of drilling, Havilah’s geologists developed a detailed geological model of the Kalkaroo deposit from which a measured resource of 62 million tonnes of 0.55% copper and 0.44 g/t gold was calculated. This resource is tightly constrained by a $20 ore value boundary or cut-off, created using a copper price of A$5,000 per tonne and a gold price of A$1,000 per ounce. This, combined with the excellent continuity of mineralisation between drill sections, provides a high level of confidence in the integrity of the Kalkaroo orebody, suppporting its measured resource status in strict accordance with the JORC code for reporting mineral resources. The attached table summarises important geological parameters relevant to the resource estimate.

Molybdenum, while ubiquitous in the Kalkaroo orebody, was excluded from the above resource estimate although a discrete inferred resource of 4.5 mt of 615 ppm molybdenum was defined within a section of the main copper-gold orebody.

The potential to define further ore outside of the present measured resource is high and would be expected to add further resources in the indicated and inferred categories in future.

The completed geological resource model forms the basis for the design of an optimised open pit mine shell in order to develop an economic model for mining the Kalkaroo deposit using current estimates of capital and operating costs.

Metallurgical testing of large diameter core samples carried out at Optimet laboratory in Adelaide has shown that good recoveries of copper and gold can be obtained by standard gravity and flotation treatment methods from both the oxide and sulphide ore types. In particular :

1. For the native copper (or copper metal) mineralisation in the oxide zone, high recoveries of copper (up to 90%) and gold (up to 80%) were achieved by screening of the +2mm size crushed material (recovering more than 40% of the native copper) followed by flotation of the ground -2mm size material to produce a high grade copper product. Gold floats readily with the native copper.
2. Conventional flotation of mixed chalcopyrite and chalcocite ore can produce a >30% copper concentrate with recoveries of both gold and copper exceeding 85%.
3. For the primary sulphide ore copper recoveries of 92-95% for a copper concentrate in the range of 25-29% copper are achievable.
4. A high proportion of the molybdenum in the primary ore can be recovered and it is expected that by optimising flotation conditions it should be possible to achieve good separation of copper and molybdenum
5. A pyrite concentrate, produced after recovery of copper from the primary sulphide ore assayed 0.275% cobalt, which could yield valuable by-products of sulphuric acid and cobalt.

Table of Assessment and Reporting Criteria

The following tables provides a summary of important criteria related to the assessment and reporting of the Kalkaroo copper-gold resource.

Sampling Techniques, Assay Data, Drilling Details

Estimating and Reporting of Mineral Resources