Sandfire releases Quarterly Activities report

Tag : zinc strip
Sandfire releases Quarterly Activities report Monday , 21 Jul 2008

HIGHLIGHTS
CORPORATE
• Strategic Alliance secured with Posco Australia, asubsidiary of Korean-based POSCO, the world's fourth largest steelproducer.
• A$7.23M share placement at 40 cents completed to PoscoAustralia, representing a strong endorsement of Sandfire's projectsand strategy. POSCO acquires a 19.9% stake in Sandfire atcompletion of the share placement.
• Positions Sandfire to accelerate exploration of itshigh-quality portfolio and target additional strategic resourceopportunities in the current market.
BORROLOOLA PROJECT (Northern Territory)
Manganese
• Drilling scheduled to commence in late August targeting upto 11 cretaceous-style manganese targets.
• Targets range in area from 2 to 15 square kilometres andinclude areas proximal to known manganese deposits and historicalintersections.
Base Metals
• Diamond drilling of the Yalco and Warramana Prospectsscheduled to commence in August following completion of theregional review phase.
• Substantial lead-zinc-silver targets outlined at bothprospects from detailed gravity surveys.
Diamonds
• Independent review confirms the diamond potential of the13,400km2 project area, which is central to three knowndiamondiferous kimberlite fields.
DOOLGUNNA PROJECT (Western Australia)
Iron Ore
• Mapping of the hematite mineralisation in the Robinson Rangewas completed, with access for drilling subject to Heritage siteclearances.
• Six zones of mineralization defined with the potential tohost low-phosphorus Direct Shipping Ore (DSO).
• Drilling of a new target being a large, circular magneticanomaly to commence mid-July 2008.
Gold
• High-gold values recorded for four holes received to datefrom recent drilling at the DeGrussa Prospect, with a best resultof 24 m @ 6.8 g/t gold.
OVERVIEW
During the Quarter, Sandfire Resources finalised agreements withPosco Australia Pty Ltd, a subsidiary of the leading Korean-basedglobal steel group POSCO, for Posco Australia to acquire astrategic 19.9% stake in Sandfire through a Share Placementcomprising 16.5 million shares at 40 cents each and 2.5 millionpartly paid ordinary shares (Contributing Shares) at 25 cents each(with 15 cents unpaid) to raise A$7.23 million.
The completion of the share placement was announced on 3 July 2008after all conditions precedent were satisfied on 19 June 2008 forthe placement of both the ordinary shares and the contributingshares.
The Share Subscription Agreement, together with a CommercialAgreement encompassing an off-take agreement with POSCO for up to30% of future mineral production from Sandfire Projects excludinggold and diamond production. It establishes the foundations for along-term alliance between Sandfire and POSCO. POSCO is aKorean-based global company and the world's fourth largest steelproducer.
The establishment of a long-term Strategic Alliance with POSCOrepresents a significant endorsement of the quality of Sandfire'sdiversified portfolio of manganese, lead-zinc-silver, iron ore andgold projects in Australia. Securing the financial backing andstrategic technical and corporate support of such a substantialindustry group represents a substantial achievement, particularlyin the current volatile and difficult market conditions for juniorexploration companies.
This will enable Sandfire to accelerate exploration activitiesacross its portfolio, as well as position the Company to takeadvantage of additional resource opportunities, both in Australiaand overseas.
1. BORROLOOLA PROJECT, Northern Territory (Sandfire - 100%)
The Borroloola Project comprises a 13,000km2 tenement area in theNorthern Territory which encompasses a significant proportion ofthe Batten Fault Zone. This important geological structure hoststhe world-class McArthur River Mine, the second largest SEDEXhosted base metal deposit in the world. Sandfire's tenements alsocover a coastal strip which is considered highly prospective forcretaceous-style manganese deposits, similar to the world-classGroote Eylandt manganese deposits (BHP Billiton).
During the Quarter, Sandfire continued to work towards generatingpriority drilling targets for the 2008 field season for bothmanganese and base metals. The Company has now completed anextensive review of historical data from previous exploration inthe McArthur Basin and surrounding areas.
A large proportion of the available airborne electromagnetic (AEM)data has been reprocessed through the latest version of EMFlowsoftware, including data covering the world-class HYC deposit nowbeing mined by Xstrata at the McArthur River Mine. Further work hasalso been conducted on behalf of Sandfire by the CSIRO Division ofExploration and Mining on the airborne electromagnetic data.
The Company's geological team has initiated discussions withacademic researchers from the ARC Centre of Excellence in OreDeposits (CODES) at the University of Tasmania. This group hasconducted extensive geological research in the area over the past15 years and a cooperative research project between Sandfire andCODES is currently being set up with a PhD student.
1.1 Manganese Exploration
The potential for manganese mineralisation at the BorroloolaProject is primarily within the sediments of the CretaceousCarpentaria Basin that overlie the basement McArthur Basin rocks.This geological setting is similar to the world-class GrooteEylandt manganese deposit, located 180km north of the project,which produces some 1.6Mtpa of high-grade manganese ore,representing over 10% of global supply.
Sandfire's tenements include four known manganese depositsdiscovered by BHP in the early 1990s, namely L4, Yiyinti and SouthRosie Creek, as well as an historical manganese intersectionrecorded by Mt Isa Mines at the Eastern Creek Prospect.
Reconnaissance exploration for cretaceous-style manganesemineralization relies primarily on airborne electromagnetic (AEM)surveys that can identify the flat-lying shallow and aeriallyextensive conductive rock sequences that characterise this type ofmanganese mineralisation.
During the Quarter, Sandfire refined its modelling of the AEM dataover the upper catchment of Rosie Creek. This work has outlined 11discrete shallow conductive targets ranging up to 15 squarekilometres in area (see Figs 3 and 4).
Reconnaissance drill testing of these targets is planned tocommence in the middle of the September 2008 Quarter. In addition,an area south west of the Rosie Creek manganese deposit will betested, together with some reconnaissance drilling around theboundaries of the known Cretaceous manganese mineralisation atRosie Creek.
The drilling proposed for the Eastern Creek Prospect will target anextensive conductor in Proterozoic rocks along strike from areported intersection of manganese mineralisation by Mt Isa Mines(12m @ 25% Mn).
1.2 Base Metal Exploration
In addition to manganese exploration, the other main explorationtarget at the Borroloola Project is zinc, lead and silvermineralisation in sediment-hosted base metal deposits withinPalaeoproterozoic McArthur Group rocks. This mineralisation istypified by the world-class McArthur River Mine deposit, located 26kilometres south of the Project boundary, which is one of theworld's largest zinc-lead-silver deposits with an ore resource ofapproximately 120 million tonnes.
At McArthur River, the base metal mineralisation is closely relatedto the Emu Fault Zone that was active during the formation ofsediments and the accompanying base-metal mineralisation.Sandfire's tenement block at Borroloola covers approximately 100kilometres of the Emu Fault Zone and is considered to be highlyprospective for large base metal accumulations.
During the Quarter, Sandfire completed an assessment of thehistoric exploration database, geology and geographic setting ofthe project area and has now prioritised the principal prospectiveareas. The areas defined are considered the most prospective forrepetitions of the McArthur River-style zinc-lead mineralisation.
Other Proterozoic McArthur Basin sequences throughout the Projectarea are also considered prospective for base metal deposits; areview of historic data for these areas, together with ongoingreconnaissance, is continuing (see Fig 5).
Sandfire recently completed two large and, in places, detailedgravity surveys of the two most prospective areas along the EmuFault Zone, the Yalco and Warramana Prospects. Detailed in-fillgravity surveys at the Warramana Prospect have located fivediscrete gravity highs in areas of little outcrop, but which arethought to be underlain by the most prospective stratigraphicunits.
The interpretation of the gravity data from Yalco Prospect is morecomplicated than suggested by the available mapping. The Companywill undertake detailed geological mapping during the Septemberquarter to prioritise several gravity anomalies.
Sandfire has contracted a diamond drilling rig to commence drillingin Borroloola in August 2008. Initial targets will be the gravityanomalies at Warramana and deepening of the hole BD016 at the Yalcoprospect, which was drilled as part of the 2007 program. The laterhole targeted a deep AEM anomaly and was suspended above the targetdepth for operational reasons.
The diamond core drilling program testing base metal targets isexpected to continue until the onset of the northern wet season inlate October.
1.3 Review of the Diamond Potential of the Borroloola Project
The Borroloola Project tenement holding of 13,400 square kilometreslies between the known kimberlite fields of Merlin (a pastproducer), Abner Range and Roper River. Historic records of diamondexploration within the Project report numerous macro-diamonds,micro-diamonds and other kimberlitic indicator minerals.
A review of the potential of the Borroloola Project for diamondswas completed during the June 2008 Quarter by well-known diamondexploration geologist, David Jones. This review highlighted fivepriority targets and two areas of high interest for Sandfire.
The review concluded that:
• previous exploration in the area has largely beenreconnaissance in nature and must be considered inadequate for anarea of such high potential;
• previous work has identified a number of areas wherenoteworthy, but unexplained, concentrations of macro-andmicro-diamonds as well as kimberlitic indicator minerals have beenrecovered;
• five priority targets and two areas of significant interesthave been identified within the overall project area; and
• a combination of regional exploration to assess the truepotential of the tenements and detailed follow-up on existingpriority targets is recommended for the area.
In light of its focus on the priority manganese and base metalprospects at Borroloola, Sandfire is currently reviewing theoptions available for evaluating the diamond potential of the area.
2.0 DOOLGUNNA PROJECT, Western Australia (Sandfire - 100%)
The Doolgunna Project covers an area of 465km2 north of Meekatharrain Western Australia and includes two significant explorationopportunities for iron ore and gold. The potential for high-grade(+65% Fe), low-phosphorus hematite mineralization has beenconfirmed within a +26km strike length of the Robinson Ranges. Inaddition, Sandfire has delineated multiple virgin gold discoverieswithin this well-endowed gold district and is continuingexploration targeting a much larger accumulation of goldmineralization.
2.1 Iron Ore
Field reconnaissance and detailed geological mapping of theRobinson Range iron formations and previously identifiedlow-phosphorus hematite mineralisation was completed during theQuarter. It is anticipated that Heritage clearances for the areasof interest should be possible during the next six months. Thiswill enable a detailed evaluation of this mineralization to beundertaken (see Native Title section 2.3 below).
Six zones of mineralization have been defined with the potential tohost low-phosphorus Direct Shipping Ore (DSO) grading +60% Fe. Thismineralization is strategically located in close proximity toMidwest Corporation's tenements.
In addition, there is a large, very strong circular magneticanomaly within the Marymia Dome granites where the Proterozoicsequence is over thrust from the south. This anomaly has previousbeen drilled in one locality to a maximum depth of approximately110 metres. The hole intersected partially mineralized banded ironformation (BIF) to a depth of 80 metres below surface.
Sandfire has carried out a detailed ground magnetic survey over theanomaly and subsequent modelling has indicated that:
• the drill hole was centred on the peak of the anomaly; and
• there is a substantial volume of non-magnetic materialwithin the modelled source rocks.
Aboriginal heritage clearance of the area was undertaken during theJune Quarter, and drill testing of the anomaly is scheduled forearly July.
2.2 Gold Exploration
During the Quarter, Sandfire completed a further program of RABdrilling for gold on the Doolgunna Project (see Fig 2). Thedrilling was targeted to test the eight known areas of goldgeochemical anomalism, either comprising gold-in-soil anomalism orfollow-up of previous reconnaissance gold-bearing drill intercepts.
The program comprised 239 holes for a total of 11,289 metres. Mostof the assay results from this program have not yet been received.However, at the DeGrussa Prospect a previously reported goldintersection of 10m @ 5.95glt gold was confirmed and extended withintersections on a traverse 40m to the southwest.
These were:
• Confirmation Holes (twinned)1
- Hole 2272: 2m to 10m (downhole), for 8m at 8.8g/t gold
- Hole 2268: 2m to 14m (downhole), for 12m at 2.83g/t gold
• Southwestern traverse (holes also twinned)
- Hole 2283: 5m to 14m (downhole) for 9m at 2.8g/t gold. and 17m to20m (downhole) for 3m at 8.53 g/t gold
- Hole 2282: 16m to 40m (downhole) for 24m at 6.8g/t gold.
1 The twinning of the holes on both lines was to determine the dipof the gold-bearing shear. The gold analyses were by acid digest ofa pulverised 30 gm sample, read by ICP.MS. The averages arearithmetic averages with no cutting of elevated values. Further,RAB drilling is an open hole system with possibilities for sampleloss and contamination. The results are to be considered indicativeonly
1 VENTNOR AVE WEST PERTH 6005 WESTERN AUSTRALIA PO BOX 1495 WESTPERTH 6872 WESTERN AUSTRALIA T +61 8 9226 5833 F +61 8 9226 5844 Eadmin@sandfire.com.au www.sandfire.com.au
The analytical results from two further traverses of close spaceddrilling testing of the DeGrussa gold-in-soil geochemical anomalyat 160m and 360m to the southwest are awaited.
To date, no quartz veining has been observed in the mineralisedintersections, suggesting the prospects for a mineralised shearlode system.
Follow-up RAB reconnaissance drilling of the DeGrussa prospect wasrecommenced in early July extending the drilling grid up to 700msouthwest of the discovery hole on 100m traverse lines of inclined,overlapping holes.
2.3 Native Title
There are three separate, non-conflicting Native Title areas overthe Doolgunna Project area. Two of the areas are applications, andfor these areas, heritage clearances are routinely carried out byarrangement with the Yamatji Land and Sea Council and thetraditional owners.
The NWN peoples have been granted Native Title that extends overthe western sector of the Doolgunna Project. To date no heritagesurveys have been carried out in this area.
During the Quarter, Sandfire was advised that the Jidi JidiAboriginal Corporation (acting for the NWN peoples) were proposingto execute the Heritage Agreement attached to the Indigenous LandUse Agreement. Sandfire believes this will facilitate a moreharmonious relationship and advance our exploration programs.
3. YANNARIE PROJECT: Western Australia (Sandfire 100%)
No field work was conducted in the past quarter. Planning isunderway for an Induced Polarisation (IP) survey to start in theSeptember quarter, over the lead and zinc anomalies. Consequent tothat survey, a Reverse Circulation (RC) drilling program is plannedto test any targets identified by the survey.
4. URANDY PROJECT: Western Australia (Sandfire 100%)
A program of soil geochemistry for the base metal (lead and zinc)and gold anomalous areas is planned for early in the SeptemberQuarter.
5. SANDFIRE PROJECT: Western Australia (Sandfire 100%)
No work was carried out during the Quarter.
JOHN EVANS
TECHNICAL DIRECTOR
21 July 2008
The information in this report that relates to Exploration Resultsis based on information complied by John Evans who is a Fellow ofthe Australasian Institute of Mining and Metallurgy. John Evans hassufficient experience which is relevant to the style ofmineralisation and type of deposit under consideration and to theactivity which he is undertaking to qualify as a Competent Personas defined in the 2004 Edition of the Australasian Code forReporting of Exploration Results, Mineral Resources and OreReserves. John Evans consents to the inclusion in the report of thematters based on his information in the form and context in whichit appears.
1 VENTNOR AVE WEST PERTH 6005 WESTERN AUSTRALIA PO BOX 1495 WESTPERTH 6872 WESTERN AUSTRALIA T +61 8 9226 5833 F +61 8 9226 5844 Eadmin@sandfire.com.au www.sandfire.com.au