5718-PROSPECTUS V1F(Bup).indd

Transcription

u
c t
e
s p
P r o
ABN 47 116 648 956
An Offer to raise up to $7,500,000 by the issue of up to 37,500,000
New Shares in the Company at an issue price of $0.20 per Share.
Each Bullion Minerals Limited Shareholder has a Priority Right to
apply for not less than 10,000 New Shares pursuant to the Offer.
This is an important document. Please consult your professional
adviser(s) if you have any questions. The mineral properties
described in this prospectus are at the exploration and evaluation
stage and accordingly investment in the Shares offered
by this Prospectus should be regarded as speculative in nature.
s
C O R P O R A T E
D I R E C T O R Y
DIRECTORS
Andrew R Bantock – Executive Chairman
John R McIntyre – Executive Director
Timothy R B Goyder – Non-executive Director
Bryan W Alexander – Non-executive Director
COMPANY SECRETARY
Richard K Hacker
PRINCIPAL PLACE OF BUSINESS
AND REGISTERED OFFICE
Level 2, 1292 Hay Street
West Perth WA 6005
Tel: 61 8 9322 3960
Fax: 61 8 9322 5800
Email: [email protected]
Web: www.chalicegold.com
CORPORATE ADVISER
Venture Group Equities Pty Limited
Level 2
52 Phillip Street
Sydney NSW 2000
SOLICITOR TO THE OFFER AND
INDEPENDENT SOLICITOR
REPORTING ON TENEMENTS
Pullinger Readhead Lucas
Level 2
Fortescue House
50 Kings Park Road
West Perth WA 6005
INDEPENDENT
GEOLOGIST
Northwind Resources Pty Limited
6 Muir Place
Booragoon WA 6154
AUDITOR AND INDEPENDENT
ACCOUNTANT
HLB Mann Judd
Chartered Accountants
15 Rheola Street
West Perth WA 6005
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 2, Reserve Bank Building
45 St Georges Terrace
Perth WA 6000
Tel: 1300 557 010
PROPOSED ASX CODE
CHN
I N V E S T M E N T
S U M M A R Y
• An independently funded and focused gold exploration and development company.
• An extensive portfolio of over 2,200 square kilometres of highly prospective gold tenements
located strategically throughout Western Australia, including:
• 150 square kilometres at Higginsville adjacent to Avoca Resource Limited’s Trident gold
discovery (24 targets, 6 of which warrant immediate diamond/RC drilling);
• 163,000 ounce resource (as shown in Table 4 in Section 3 of this Prospectus) at the
Chalice Gold Mine (2 immediate diamond drilling targets, including extensions to the
existing resource);
• the large Yandeearra Gold Project in the West Pilbara adjacent to Range River Gold
Limited’s Indee Gold Project and DeGrey Mining Limited’s Wingina Well and Mount
Berghaus gold discoveries; and
• funded exploration of almost an entire greenstone belt at the Gnaweeda Gold Project,
through a $1,500,000 joint venture with Teck Cominco. Minimum spend by Teck Cominco
of $140,000.
• Multiple drill ready targets across established and emerging gold camps.
• 31,000 metre drilling program scheduled for the first year post capital raising (13,000 metres of
RC/diamond drilling and 18,000 metres of RAB/aircore drilling).
• Historically strong $A/$US gold price environment.
• Board and Management team with the requisite geology, mining, corporate and business
development skills needed to operate and develop an emerging resource company.
N
NT
QLD
YANDEEARRA
WA
GNAWEEDA
WILGA
SA
Kalgoorlie
Perth
CHALICE
HIGGINSVILLE
NSW
Albany
1000km
Figure 1 : Chalice Gold Mines Limited project locations
VIC
TAS
This section is not intended to provide full information for investors intending to apply for Shares offered pursuant to
this Prospectus. This Prospectus should be read and considered in its entirety.
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C O N T E N T S
PAGE
INVESTMENT SUMMARY
1
CONTENTS
2
CHAIRMAN’S LETTER
3
IMPORTANT NOTICE
4
1
INVESTMENT HIGHLIGHTS
5
2
DETAILS OF THE OFFER
8
3
THE COMPANY AND ITS GOLD PROJECTS
11
4
PROFILES OF DIRECTORS & SENIOR MANAGEMENT
28
5
INDEPENDENT GEOLOGICAL REPORT
29
6
INDEPENDENT SOLICITOR’S REPORT
81
7
INDEPENDENT ACCOUNTANT’S REPORT
99
8
CORPORATE GOVERNANCE
111
9
RISK FACTORS
113
10
ADDITIONAL INFORMATION
116
11
DIRECTORS’ STATEMENTS
125
GLOSSARY
2
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C H A I R M A N ’ S
L E T T E R
Dear Investor
On behalf of the Directors, I am pleased to present this prospectus and the opportunity to
invest in Chalice Gold Mines Limited (“Chalice Gold Mines”).
Chalice Gold Mines has been established to create a dynamic gold exploration and
development business. Completion of the Initial Public Offering will achieve a final condition for
the acquisition by Chalice Gold Mines of an exciting portfolio of gold exploration properties in
both new and emerging Western Australian gold camps.
The funds raised from this prospectus will be applied to an intensive, drilling focused exploration
program, commencing with a number of previously delineated targets that are considered to
warrant RC/diamond drilling programs.
In particular:
Eastern Goldfields
•
A major focus will be at Higginsville, south of Kalgoorlie where Chalice Gold Mines’
interests will comprise approximately 150 square kilometres of tenements, adjacent to
Avoca Resources Limited’s tenements (host to the high grade Trident discovery, reported
at 485,000 ounces of indicated and inferred resources at 5.0 g/t gold).
Chalice Gold Mines has identified 24 target areas at Higginsville, 6 of which are
considered to warrant RC/diamond drilling. We plan to test these targets within the first
year of ASX listing.
•
Further opportunity lies at the Chalice Gold Mine and its strike extensions, which already
host a 163,000 ounce JORC compliant gold resource (details of which are set out in
Table 4 in Section 3 of this Prospectus).
Within approximately 170 square kilometres of Chalice tenements, located approximately
20 kilometres to the west of Higginsville, the Company has highlighted 2 targets which
warrant RC/diamond drilling (at Chalice Deeps and Minsys 4) out of 25 targets that
warrant follow-up work.
With the Chalice Gold Mine having previously produced over 556,000 ounces of gold from
1995-1999, these targets will also be a key focus within the first year of listing.
West Pilbara, Murchison
•
Chalice Gold Mines offers further discovery potential from its extensive ground position
at Yandeearra in the West Pilbara, as well as at Gnaweeda in the Murchison (where Teck
Cominco have recently agreed a $1,500,000 70% earn-in joint venture) and at Wilga, south
of Laverton.
We are looking forward to the commencement of exploration and expect to be one of
the most active gold exploration companies in the Eastern Goldfields region. Indeed, in the
first year of ASX listing Chalice Gold Mines plans to undertake in excess of 31,000 metres of
exploration drilling.
I look forward to welcoming you as a Shareholder of Chalice Gold Mines Limited and
participating together in an active exploration program in some of Australia’s most exciting
gold provinces.
Yours sincerely
ANDREW BANTOCK
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I M P O R T A N T
N O T I C E
This Prospectus is dated 3 February 2006 and was lodged with the ASIC on that date. No Shares will be issued on
the basis of this Prospectus later than 13 months after the date of this Prospectus.
Neither the ASIC nor ASX take any responsibility for the content of this Prospectus or the merits of the investment
to which this Prospectus relates.
The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons
into whose possession this document comes should seek advice on and observe any such restrictions. Any failure
to comply with these restrictions may constitute a violation of those laws. This Prospectus does not constitute an
offer of Shares in any jurisdiction where, or to any person to whom, it would be unlawful to issue this Prospectus.
It is important that you read this Prospectus carefully, in its entirety and seek professional advice where necessary
before deciding to invest in the Company. In particular, in considering the prospects for the Company, you should
consider the risk factors that could affect the performance of the Company. The Offer does not take into account
your investment objectives, financial situation and particular needs. Accordingly, you should carefully consider
the risk factors in light of your personal circumstances and seek professional advice from your accountant,
stockbroker, lawyer or other professional adviser before deciding whether to invest. The Shares, the subject of this
Prospectus, should be considered speculative.
No person is authorised to provide any information or make any representation in connection with the Offer
contained in this Prospectus which is not contained in this Prospectus.
WEB SITE – ELECTRONIC PROSPECTUS
A copy of this Prospectus may be downloaded from the Company’s website at www.chalicegold.com. Any
person accessing the electronic version of this Prospectus for the purpose of making an investment in the Company
must be an Australian resident and must only access the Prospectus from within Australia. Persons who access the
electronic version of this Prospectus should ensure that they download and read the entire Prospectus.
The Corporations Act prohibits any persons passing on to another person an Application Form unless it is attached
to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus. Any
persons may obtain a hard copy of this Prospectus free of charge by contacting the Company by telephone on
(08) 9322 3960 during normal business hours.
EXPOSURE PERIOD
This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this
Prospectus to be examined by market participants prior to the raising of funds. Potential investors should be aware
that this examination may result in the identification of deficiencies in the Prospectus and, in those circumstances,
any application that has been received may need to be dealt with in accordance with Section 724 of the
Corporations Act.
Applications for Shares under this Prospectus will not be accepted by the Company until after the expiry of the
Exposure Period. No preference will be conferred on persons who lodge applications before the expiry of the
Exposure Period.
GLOSSARY
Certain terms and abbreviations used in this Prospectus have defined meanings which are explained in the
Glossary at the end of the Prospectus.
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1.1
I N V E S T M E N T
H I G H L I G H T S
IMPORTANT NOTICE
This Section is not intended to provide full information for investors intending to apply for Shares offered pursuant
to this Prospectus. This Prospectus should be read and considered in its entirety.
1.2
INDICATIVE TIMETABLE
Lodgement of Prospectus
3 February 2006
Opening Date
15 February 2006
Closing Date (5.00pm WST)
14 March 2006
Allotment of Shares under this Prospectus (anticipated)
21 March 2006
Trading of Shares to commence on ASX (anticipated)
24 March 2006
The above dates are indicative only and may vary. The Company reserves the right to change the key dates of
the Offer without prior notice which may have a consequential impact on other dates.
1.3
COMPANY OVERVIEW
Chalice Gold Mines Limited was incorporated by Bullion Minerals Limited on 13 October 2005 for the purpose of
developing an independently focused and funded gold exploration and development company.
Chalice Gold Mines entered into a Tenement Purchase Agreement with Bullion on 18 January 2006, (the details
of which are set out in Section 6 of this Prospectus) to aquire the projects the subject of this offer. The proposed
acquisition will provide Chalice Gold Mines with an extensive portfolio of gold projects with drill ready exploration
targets strategically located throughout Western Australia.
Further information on the gold projects is detailed in Sections 3 and 5 of this Prospectus.
1.4
BUSINESS OBJECTIVES
The Company’s business objectives are to create shareholder wealth through the exploration for, and discovery
and development of, mineral deposits.
In the short to medium term the Company intends to undertake the following activities:
(a)
commence exploration including RC/diamond drilling of the priority targets within the gold portfolio,
within the first year of completion of the Offer;
(b)
identify additional RC or diamond drilling targets within the ground package in the first year, and
undertake further exploration and drilling in relation to these targets in the second year following
completion of the Offer;
(c)
apply the Board of Directors’ skills and experience in discovery, evaluation and development of
mineral resources, as well as the financing of minerals mining and processing operations, in a cost
effective manner to advance the Company’s projects; and
(d)
utilise the same skills to generate new gold opportunities and projects in geologically prospective
areas for exploration or development.
1.5
PURPOSE OF THE OFFER AND USE OF FUNDS
The purpose of the Offer is to provide Chalice Gold Mines with funding to pursue its objectives as outlined in
Section 1.4 of this Prospectus.
Chalice Gold Mines is seeking to raise up to $7,500,000 to progress the exploration and development of the
portfolio of gold projects that it will acquire from Bullion. The Board has elected to accept a minimum capital
raising of $6,000,000.
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I N V E S T M E N T
H I G H L I G H T S
Budgeted expenditure for the Company for the first two years is set out below:
Minimum Subscription
Budgeted Expenditure
Full Subscription
$
Drilling and exploration projects (refer Table 2 below)
$
3,870,400
5,306,800
35,000
35,000
Capital raising fees*
486,000
569,000
Tenement acquisition expenses
225,000
225,000
Corporate administration
1,383,600
1,364,200
Total
6,000,000
7,500,000
ASX Listing fees
Table 1 : Chalice Gold Mines Ltd overall budgeted expenditures for the first two years after completion of the Initial Public Offer
*This assumes brokerage fees of 5% are paid with respect to 80% (ie $6,000,000) of the funds raised. This amount will
be reduced or increased depending on the extent to which Bullion shareholders take up their priority subscription
entitlements pursuant to the offer (no brokerage fees are payable in respect of funds raised from such priority
subscriptions).
The intended expenditure on exploration and development of each project is as follows:
Project
Higginsville
937,700
653,000
1,125,300
1,033,300
Chalice
738,150
596,250
1,109,650
767,250
Yandeearra
424,000
298,200
497,450
464,550
125,600
97,500
134,300
175,000
2,225,450
1,644,950
2,866,700
2,440,100
Wilga
Total
Year 2
$
Full Subscription
Year 1
$
Year 1
$
Year 2
$
Table 2 : Chalice Gold Mines Ltd budgeted drilling and exploration expenditures, by gold project, for the first
two years after completion of the Initial Public Offer
The Gnaweeda Project is subject to the joint venture agreement with Teck Cominco, further details of which are
set out in Section 3.2.5 of this Prospectus.
Further details on the intended drilling and exploration programs are set out below in Sections 3 and 5 of this Prospectus.
The budgets of the Company will be subject to modification on an ongoing basis having regard to a number of
factors, including:
• the ongoing results obtained from the exploration and drilling programs;
• periodic re-assessment of underlying geological factors, including the exploration results of
other regional explorers;
• the market price for gold; and
• joint venture agreements with respect to exploration and drilling activities of particular tenements.
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I N V E S T M E N T
1.6
H I G H L I G H T S
CAPITAL STRUCTURE
The capital structure at completion of the Offer, is set out below in Table 3 below:
Number Of
Shares
Shares
(Minimum
Subscription)
Shares on issue on acquisition of
tenements (1)
% of Shares
Number Of
Shares
% of Shares
(Minimum
Subscription)
(Full Subscription)
35,000,000
53.84
35,000,000
48.28
Shares to be issued pursuant to the
Prospectus (2)
30,000,000
46.16
37,500,000
51.72
Total Shares on issue at the close of the
Offer and Acquisition
65,000,000
100.00
72,500,000
100.00
(Full Subscription)
Options
Options issued upon completion of the
Offer to existing Directors and employees
under the Employee Share Option Plan (3)
6,075,000
6,075,000
Options expected to be issued following
completion of the Offer to future
Director(s) and employees (3)
3,925,000
3,925,000
Table 3 : Chalice Gold Mines Limited proposed capital structure upon completion of fully subscribed Initial Public Offer, on the
basis of full subscription
Footnotes:
(1)
Details on the Shares to be issued on acquisition of tenements are set out in Section 7 of this Prospectus.
(2)
Assumes subscriptions are received for $7,500,000. This may be reduced proportionately if subscriptions between
$6,000,000 and $7,500,000 are received.
(3)
No employee options have been issued at the date of this Prospectus. The number of options included above is an
estimate only. It is estimated to be the upper limit of options required to be issued to current and future Directors and
employees pursuant to the Company’s Employee Share Option Plan upon completion of the Offer to attract and retain
high quality personnel. Details of the Employee Share Option Plan are set out in Section 10.3.5 of this Prospectus.
1.7
PRO-RATA DISTRIBUTION IN-SPECIE
In mid-March 2006, Bullion shareholders will be requested to approve the in-specie distribution of all 35,000,000
Shares in the Company to be held by Bullion on completion of the acquisition of tenements.
The in-specie distribution is expected to occur in 2 tranches of 17,500,000 Shares in the Company approximately
3 months and 6 months respectively after Chalice Gold Mines Shares commence trading on the ASX.
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D E T A I L S
O F
T H E
O F F E R
This Prospectus invites investors to apply for a total of 37,500,000 Shares at a price of $0.20 for each Share to raise
up to $7,500,000, before costs of the Offer.
All Shares offered under this Prospectus will rank equally with existing Shares. Details of the rights attaching to the
Shares are set out in Section 10.2 of this Prospectus.
All application monies are payable in full on application.
The Offer is comprised of the Public Offer and the Bullion Priority Offer.
2.1
BULLION PRIORITY OFFER
The Company is offering Bullion’s Shareholders registered as at 5pm WST on 14 Feburary 2006 the opportunity to
become Shareholders in the Company.
The Company has set aside as a Priority Offer a pool of up to 7,500,000 Shares for Bullion Shareholders.
Bullion Shareholders may apply for as many Shares as they wish under the Bullion Priority Offer and are guaranteed
a minimum of 10,000 Shares (at an application price of $2,000).
The Directors of the Company who hold shares in Bullion have indicated their intention to participate in the
Priority Offer.
Bullion Shareholders may also participate in the Public Offer.
A copy of this Prospectus will be forwarded to all Bullion Shareholders registered as at 5pm WST on 14 February
2006. This Prospectus will contain a green Priority Application Form. Bullion Shareholders who wish to subscribe
for Shares pursuant to the Priority Offer must make an application using the green Priority Application Form and
forward it to the Company so that it is received by no later than 14 March 2006.
Sections 2.3 to 2.5 of this Prospectus set out further details on applying for Shares.
2.2
PUBLIC OFFER SHARES OFFERED FOR SUBSCRIPTION
The Public Offer is open to the public including Bullion Shareholders. A minimum of 30,000,000 Shares plus any
Shares not subscribed for under the Bullion Priority Offer will be available under the Public Offer.
Applications must be made on the white Public Offer Application Form enclosed with this Prospectus.
Sections 2.3 to 2.5 of this Prospectus set out further details on applying for Shares.
2.3
APPLICATION FOR SHARES
Applications under both the Public and Bullion Priority Offers must be for a minimum of 10,000 Shares (being
minimum application monies of $2,000) and thereafter in multiples of 2,500 Shares ($500).
Applicants under both the Public and Bullion Priority Offers should read this Prospectus in its entirety in order to
make an informed decision on the prospects of the Company and the rights attaching to the Shares offered by
this Prospectus before deciding to apply for Shares.
If you do not understand this Prospectus you should consult your stockbroker, accountant or other professional
adviser in order to satisfy yourself as to the contents of this Prospectus. The Shares offered by this Prospectus are
speculative in nature.
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D E T A I L S
2.4
O F
T H E
O F F E R
LODGEMENT OF APPLICATION FORMS
Application Forms must be accompanied by a cheque in Australian dollars, for the full amount of your application
monies. Cheques must be made payable to “Chalice Gold Mines Limited – Share Issue Account” and should be
crossed “Not Negotiable”.
Application Forms must not be circulated to prospective investors unless accompanied by a copy of this
Prospectus.
Completed Application Forms and accompanying cheques must be received by no later than 5.00 pm (WST) on
14 March 2006 in the case of both the Bullion Priority Offer and the Public Offer by the Share Registry:
By Delivery to:
By Post to:
Chalice Gold Mines Limited
c/- Computershare Investor Services
Level 2, Reserve Bank Building
45 St Georges Terrace
PERTH WA 6000
c/- Computershare Investor Services
GPO Box D182
Perth WA 6840
The Company reserves the right to extend the Offers or close the Offers early without notice. Applicants are
therefore urged to lodge their Application Forms as soon as possible.
An original, completed and lodged Application Form, together with a cheque for the application monies,
constitutes a binding and irrevocable offer to subscribe for the number of Shares specified in the Application
Form. An Application Form does not need to be signed to be a valid application. An Application will be deemed
to have been accepted by the Company upon allotment of the Shares.
If the Application Forms are not completed correctly, or if the accompanying payment of the application monies is for
the wrong amount, it may still be treated as valid. The Directors’ decision as to whether to treat the Application as valid
and how to construe, amend or complete the Application Forms is final. However, an Applicant will not be treated as
having applied for more Shares than is indicated by the amount of the cheque for the application monies.
No brokerage or stamp duty is payable by Applicants in respect of Applications for Shares under this Prospectus.
2.5
ALLOCATION AND ALLOTMENT OF SHARES
Subject to the Bullion Priority Offer, the Company reserves the right to reject any Application or to allocate to any
Applicant fewer Shares than the number applied for. The Company also reserves the right to reject or aggregate
multiple applications in determining final allocations.
In the event an Application is not accepted or accepted in part only, the relevant portion of the application
monies will be returned to Applicants, without interest.
The Company reserves the right not to proceed with the Offer or any part of it at any time before the allocation
of the Shares to Applicants. If the Offer or any part of it is cancelled, all application monies, or the relevant
application monies will be refunded.
The Company also reserves the right to close the Offer or any part of it early, or extend the Offer or any part of it,
or accept late Application Forms either generally or in particular cases.
The allotment of Shares to Applicants will occur as soon as practicable after Application Forms and application
monies have been received for the minimum subscription of Shares being offered, following which statements of
shareholding will be dispatched. It is the responsibility of Applicants to determine their allocation prior to trading
in the Shares. Applicants who sell Shares before they receive their statement of shareholding will do so at their
own risk.
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2.6
D E T A I L S
O F
T H E
O F F E R
APPLICATION MONEY HELD IN TRUST
All application monies will be deposited into a separate bank account of the Company and held in trust for
Applicants until the Shares are issued or application monies returned. Any interest that accrues will be retained by
the Company and will not be paid to Applicants.
2.7
MINIMUM SUBSCRIPTION
The minimum subscription to be raised under this Prospectus is $6,000,000.
No Shares will be issued pursuant to this Prospectus until the minimum subscription has been achieved. Should the
minimum subscription not be reached within 4 months after the date of this Prospectus, all applications monies will
be dealt within in accordance with the Corporations Act.
The Company believes the minimum subscription is sufficient working capital to achieve its objectives as set out
in this Prospectus.
2.8
DIVIDEND POLICY
The Company anticipates that significant expenditure will be incurred in the evaluation and development of the
Company’s projects. These activities are expected to dominate the two year period following completion of the
Initial Public Offer. Accordingly, the Company does not expect to declare any dividends during that period.
Subject to the Company achieving sustained profitability, the Directors will consider paying dividends, subject to
available cash flow and capital requirements.
2.9
ASX LISTING
The Company will apply to ASX within 7 days after the date of this Prospectus for admission to the Official List and
for Official Quotation of the Shares, other than those existing Shares that the ASX treats as restricted securities as
defined in ASX Listing Rules.
If the Shares are not admitted to official quotation within 3 months after the date of this Prospectus, none of the
Shares offered by this Prospectus will be allotted or issued. In that circumstance, all Applications will be dealt with
in accordance with the Corporations Act.
The fact that ASX may admit the Company to the Official List is not to be taken in any way as an indication of
the merits of the Company or the Shares. ASX, its officers and employees take no responsibility for the contents of
this Prospectus.
2.10 INVESTMENT RISKS
The business of the Company involves mineral exploration and investment in mining tenements and accordingly,
investments in the Shares offered by this Prospectus should be considered speculative. The key risks associated
with an investment in the Company are outlined in Section 9 of this Prospectus.
2.11 BROKER FEES
The Company reserves the right to pay a fee of up to 5% in respect of applications lodged by any member
organisation of ASX, licensed securities dealer or the holder of an Australian Financial Securities Licence and
accepted by the Company provided the relevant stamp of the organisation is on the Application Form.
No brokerage or commission is payable by Applicants in respect of Shares issued pursuant to this Prospectus.
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3.1
T H E
C O M PA N Y
A N D
I T S
G O L D
P R O J E C T S
OVERVIEW OF THE COMPANY AND ITS GOLD PROJECTS
The Company has secured the rights to acquire Bullion’s gold assets through a conditional Tenement Purchase
Agreement, detailed in Section 6 of this Prospectus.
Chalice Gold Mines’ exploration tenements will initially be held 100% by Chalice Gold Mines, subject to the joint
venture agreement with Teck Cominco in relation to the Gnaweeda Project (described further in Section 3.2.5
of this Prospectus). Additionally, the rights to nickel exploration on certain of the Company’s Higginsville and
Chalice tenements will remain with Bullion, and are subject to the Cowan Nickel Joint Venture between Bullion
and Equinox Minerals Limited, as described further in Section 6 of this Prospectus.
Chalice Gold Mines will be managed by a team with extensive experience in exploration, mining
and corporate management.
The gold projects are strategically located throughout Western Australia, comprising 5 separate major areas
(shown in Figure 2).
Figure 2 : Chalice Gold Mines Ltd project locations
Chalice Open Pit looking north.
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T H E
C O M PA N Y
A N D
I T S
G O L D
P R O J E C T S
Eastern Goldfields
Chalice Gold Mines’ Eastern Goldfields interests include the gold rights to over 320 square kilometres of tenements
in the historic Higginsville and Chalice gold camps.
The Higginsville-Chalice area has reported over 1,200,000 ounces of historical gold production, approximately 50%
each from the Chalice Gold Mine and the Higginsville area (including the Poseidon South, Fairplay and Two Boys
bedrock mines and a number of palaeochannel deposits). The district is located between the highly endowed St
Ives (15,000,000 ounces) and Norseman (7,000,000 ounces) gold camps.
More recently, Avoca Resources Limited (Avoca) has announced the discovery of the high grade gold resource
at Trident (reported by Avoca as 2,990,000 tonnes at 5.0 g/t gold for 485,000 ounces of JORC compliant resources,
comprising 449,000 ounces of indicated resources and 36,000 of inferred resourses), a blind deposit located
just north of the historic Poseidon South, Two Boys and Fairplay gold mines, which collectively produced over
420,000 ounces.
Further details are provided in Sections 3.2.1 and 3.2.2 of this Prospectus.
West Pilbara
The Yandeearra project comprises a tenement package of over 1,400 square kilometres in the West Pilbara of
Western Australia, contiguous with both Range River Gold Limited’s (Range River) Indee Gold Project and De Grey
Mining Limited’s (De Grey) Turner River Gold Belt. The province is a newly emerging gold district.
Further details are provided in Section 3.2.3 of this Prospectus.
Laverton
Chalice Gold Mines’ interests comprise a recently granted tenement covering 7 sub-blocks located 15 kilometres
south east of AngloGold Ashanti’s Cleo gold mine and approximately 55 kilometres south of Laverton in the highly
endowed Laverton Tectonic Zone, which hosts the Granny Smith, Sunrise Dam and Red October gold deposits.
Murchison
Chalice Gold Mines will hold interests in over 470 square kilometres of tenements, representing almost an entire
greenstone belt, at Gnaweeda in the Murchison Region of Western Australia, approximately 30 kilometres
northeast of Meekatharra.
Teck Cominco has recently agreed to commence a joint venture to spend $1,500,000 to earn a 70% equity interest
at Gnaweeda.
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GOLD PROJECTS
A detailed description and analysis of the Company’s gold projects can be found in the Independent Geologist
Report, included as Section 5 of this Prospectus.
Details of the agreements relevant to the various projects are included in the Independent Solicitor’s Report,
included as Section 6 of this Prospectus.
3.2.1
HIGGINSVILLE
Principal Targets
Chalice Gold Mines has identified 24 targets at Higginsville, 6 of which are considered to warrant immediate RC or
diamond drilling, applying a similar geological interpretation of exploration potential to that applied at Avoca’s
recent high grade discovery at Trident. In particular, 10 kilometres of strike of the Poseidon Thrust, inferred to be the
controlling structure of gold mineralisation at Trident, lie within Chalice Gold Mines’ Higginsville project and are
either untested or contain significant drill results which warrant follow-up drilling.
Location and Tenure
Chalice Gold Mines’ Higginsville gold project will comprise 34 tenements (a tenement schedule is presented
in Section 6 of this Prospectus) covering 150 square kilometres of granite-greenstone belt centred on the old
Higginsville gold mining centre (Figure 3).
Figure 3 : Higginsville and Chalice Projects – location and regional geology
An active exploration program is planned for Higginsville.
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The Higginsville mining centre is located around 80 kilometres by road south of Kambalda, or 50 kilometres by road
north of Norseman in the Higginsville mining district, near the southern end of the Norseman-Wiluna Greenstone Belt.
The project area is traversed by the Coolgardie-Norseman Highway, and associated rail line and water pipeline.
The Higginsville region is notably located between the world class St Ives and Norseman gold mining centres.
Historical open pit and minor underground operations in the Higginsville mining centre have previously produced
around 690,000 ounces of gold. Higginsville lies contiguous to and to the south of Avoca’s recent high grade
discovery at Trident.
Project Geology
The geology of the Higginsville area comprises a sequence of north, north-west trending, east dipping maficultramafic units overlain by a metasedimentary package (Figure 4). The mafic-ultramafic package comprises
amphibolite facies high magnesian basalt, komatiites and minor interflow clastic sedimentary rocks intruded
by differentiated gabbros. The package shows repetition, probably across a series of east dipping thrust faults.
The overlying metasedimentary package comprises felsic volcaniclastic rocks and psammo-pelitic sequences,
equivalent to the Black Flag Beds of the Kalgoorlie Domain to the north.
Figure 4 : Higginsville Project – tenements, interpreted geology and exploration targets
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The mafic-ultramafic package is interpreted to be a D2 thrust stack, separated from the overlying metasediments
by the moderately east dipping Poseidon Thrust, and from underlying metasediments by the Higginsville Thrust.
These structures are jogs in, or splays off, the regionally significant Zuleika Shear, host to several world class gold
deposits to the north.
A complex regolith is developed over the Archaean sequence, including Tertiary palaeochannels, a Tertiary
laterite profile, and playa lake sediments associated with Lake Cowan.
Two broad styles of gold mineralisation are developed. Gold deposits in bedrock comprise either quartz vein systems
associated with splays off the D2 thrusts, developed preferentially in the granophyric phases of differentiated
dolerites (eg, Trident and Poseidon South with production of 312,000 ounces and JORC compliant resources of over
485,000 ounces of gold, comprising 449,000 ounces of indicated and 36,000 ounces of inferred resources), or lodes
developed in the fault splays in high magnesian basalts (eg, the Two Boys gold mine, production approximately
82,000 ounces). Approximately 300,000 ounces of gold has been produced from Tertiary palaeochannels,
principally from the Challenger-Swordsman system.
Exploration History and Potential
In October 2003 Bullion acquired Resolute Limited’s (Resolute) residual interests in its Higginsville assets. Bullion
subsequently applied for extensive areas of open ground in the Higginsville region. These have been granted and
now form the bulk of Bullion’s Higginsville gold project.
Previous exploration by Resolute identified a number of anomalies and mineralised targets on the tenements
to be aquired by Chalice Gold Mines, including numerous significant drilling intercepts warranting further
review (Figure 4).
Exploration by Avoca has outlined further mineralisation at the Trident deposit, which is sited to the north of the
Poseidon South open pit. The most recent quoted indicated resource for Trident is 2,990,000 tonnes at 5.0 g/t gold
for 485,000 ounces, with recent drilling intersections announced as including 27 metres at 88g/t from 355 metres,
including 10 metres at 229g/t gold from 369 metres in drill hole HIGD047.
An extensive review of gold exploration targets within Chalice Gold Mines’ Higginsville project area has outlined
24 exploration targets, ranging from mineralised systems with significant drill hole intercepts through to geological
targets containing both prospective structure (eg, sections of, and splays off, the Poseidon Thrust) and prospective
stratigraphy (differentiated gabbroic or doleritic rocks).
Chalice Gold Mines consider the Higginsville project’s mineralisation model is similar to that at Trident and that it is
significant that previous shallow drilling in the project area has not tested the deeper stratigraphic and structural
contacts that have been the focus of Trident exploration to date.
Four of the priority prospects at Chalice Gold Mines’ Higginsville project (Figure 4) include:
• MITCHELL BASEMENT NORTH: located just west of the Mitchell palaeochannel open pit mine and approximately
200 metres north of the Mitchell Basement South prospect. Aircore drilling has intersected significant gold
mineralisation in weathered basalt beneath approximately 15 metres of transported cover on the western flank
of the Mitchell palaeochannel. The best intersections occur on drill section 6483050 mN (Figure 5), including 3
metres at 10.68 g/t Au from 58 metres in MAC1812 and 3 metres at 1.55 g/t Au from 67 metres in MAC1813. The
orientation of the mineralised structure is not apparent and follow-up RC drilling is proposed.
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Figure 5 : Mitchell Basement North Prospect – cross-section 6483050mN showing gold targets
• MITCHELL BASEMENT SOUTH: The prospect is located directly to the west of the Mitchell palaeochannel
open pit, and to the east of the interpreted position of the Poseidon Thrust. Here, aircore and RC drilling has
intersected numerous zones of gold mineralisation in weathered basaltic bedrock beneath transported cover
on the western flanks of the palaeochannel (Figure 6).
Significant intersections include 4 metres at 93 g/t Au 31 metres, including 1 metre at 367 g/t Au from 32 metres
in MAC1835, 4 metres at 7.25 g/t Au in MAC1844 from 32 metres, 6 metres at 7.98 g/t Au in MRC0032 from 40
metres and 1 metre at 121 g/t Au in MAC1807 from 70 metres (end of hole).
The mineralisation may be associated with a flat lying splay off an interpreted structure on the basalt-ultramafic
contact located immediately to the east. The structure can be traced north and south of the section and
remains untested by drilling. Follow-up RC drilling is proposed.
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Figure 6 : Mitchell Basement South Prospect – cross-section 6482560mN showing gold targets
• POSEIDON FOOTWALL: a package of mafic volcanic and/or intrusive rocks located in the footwall of the
Poseidon Thrust (Figure 7). This package and structural position is host to mineralisation at the Poseidon
South, Two Boys and Fairplay mines, and the Trident prospect, to the north (shown schematically in Figure 8).
The target is developed under shallow transported cover, and is considered by Chalice Gold mines to not have
been adequately drill tested to date.
Figure 7 : Poseidon Footwall Prospect – composite section on 6482560mN, with inferred targets
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Figure 8 : Poseidon Footwall Prospect with Higginsville-style deposits shown schematically, projected along strike of the
Poseidon Thrust
• NAWOCK: where previous exploration has located significant drill results over 2,000 metres of strike, but with
drilling oriented at a low angle to the inferred strike direction, and not adequately testing the mineralised
structure.
A further 8 targets are considered to warrant first pass or follow up aircore drilling (Figure 4). These targets start
around 5 kilometres south of Trident at Poseidon Footwall, located along the interpreted continuation of the
Poseidon Thrust. Other targets include gold anomalous intercepts in historical drilling that warrant follow-up
drilling, soil anomalies not drill tested, and conceptual targets developed over priority structures but buried
under transported cover and not adequately tested by existing surface geochemical techniques.
3.2.2
CHALICE
Principal Targets
Chalice Gold Mines has identified 2 key initial targets for diamond drilling in the Chalice mining lease (Figure 9)
with a further 5 that warrant early follow up aircore or RC drilling in the regional tenements.
Location and Tenure
The Chalice project comprises 49 tenements (a tenement schedule is presented in Section 6 of this Prospectus)
covering 172.5 square kilometres of granite-greenstone belt along the western margin of the NorsemanWiluna belt within the Widgiemooltha-Higginsville district of the Archaean Eastern Goldfields Province of Western
Australia (Figure 3).
The Chalice project is centered on the Chalice Gold Mine, which produced over 550,000 ounces of gold (at an
average grade of over 5g/t) from open pit and minor underground operations between 1995 and 1999.
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Figure 9 : Chalice Project tenements, interpreted
geology and exploration targets
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Chalice Deeps drill core showing intensely altered amphibolite
Project Geology
The Chalice tenements are located over a sequence of mafic and ultramafic volcanic rocks which lie between
the Boorabbin Batholith to the west, and the Widgiemooltha and Pioneer Domes to the east, near the southern
end of the Norseman-Wiluna Greenstone Belt. At Chalice, the greenstone sequence has been intruded by a series
of granitic sills and dykes thought to be related to the Pioneer Dome and the Boorabbin Batholith. The stratigraphy
strikes broadly north-northwest to north, and comprises up to four ultramafic sequences separated by amphibolite
developed after tholeiitic basalt. A series of large layer parallel shear zones are developed within and on the
margins of the mafic-ultramafic packages, including the structure that controls gold mineralisation at Chalice.
Within the Chalice open pit, Main Lode mineralisation is hosted in a steeply west dipping shear zone in amphibolite
sandwiched between the hanging wall and footwall ultramafics. Discontinuous remnants of a highly altered
komatiite are developed between the Main Lode and the footwall ultramafic, and are named the Middle
Ultramafic (“MUM”). These are mineralised locally. Within this sequence, several types of granitoid intrusive have
been recognised, including the Western Granite (part of the Boorabbin Batholith and developed above the
hangingwall ultramafic), Dyke 2 (a steeply west dipping feature with lesser sub-parallel structures), and the Basal
Pegmatite. Dyke 2 is spatially related to the high grade core of the deposit, whilst the Basal Pegmatite is generally
flat lying, and separates the Deeps 1 and Deeps 3 mineralisation from the Main Lode mineralisation mined in the
open pit (Figure 10).
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Figure 10 : Chalice Gold Mine long section - showing the existing open pit, down plunge extensions and exploration targets
The most significant historical mining was undertaken by Resolute and its corporate predecessors, including
Samantha Gold NL (collectively called Resolute). Resolute commenced mining at Chalice in May 1995 and
ceased mining activities in early 1999.
Resolute mined 3.09 million tonnes of ore at 5.59g/t Au (for 556,000 ounces of contained gold) from open pit
and minor underground workings developed above the Basal Pegmatite (Figure 10). Exploration beneath the
open pit delineated further mineralisation, and at the cessation of mining Resolute had defined further 162,700
ounces of gold resources (itemised in Table 4 below) around or below the open pit, including the Deeps 1 and
Deeps 3 bodies.
Category
Tonnes
Grade g/t Gold
Ounces
Measured
300,000
3.3
31,800
Indicated
70,000
3.3
7,400
Inferred
1,200,000
3.2
123,500
Total
1,570,000
3.22
162,700
Table 4 : Existing resources, Chalice Gold Mine
Footnotes:
This classification under the JORC code relies on the material assumption that further mineralisation of significant grade and
width be discovered down plunge of the existing resources. Should no further mineralisation be discovered, the company may
need to reassess the classification of these resources under the requirement of the Australasian Code for Reporting of exploration
results, Mineral Resources and Ore Reserves (“JORC code”) 2004 that Resources must have reasonable prospects for eventual
economic extraction.
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Bullion acquired the Chalice mining lease and applications along strike in October, 2003.
During 2005 Bullion tested both the Main lode and Middle Ultramafic lode (or MUM lode), a second lode horizon
developed around 20-30 metres below the Main lode horizon, in positions above and below the existing Chalice
Deeps 3 mineralisation. Significant gold results (plotted in Figure 10) were reported from both lodes, indicating the
Chalice gold mineralised system is open at depth down plunge from the historically defined resources, and that
further MUM lode is developed below the limits of the current open pit.
Additional exploration targets along the Chalice line of strike include Minsys 4, located just south of the Chalice
open pit, and the Cavalier and Cavalier South prospects (Figure 9), where historical exploration has produced
highly anomalous gold results in drilling.
The delineation of new resources to extend the current inventory delineated at Deeps 1 and 3 will be the main
focus of exploration and drilling activities at Chalice. Several targets are outlined below:
• EXTENSIONS OF DEEPS 4: recent diamond drilling of the Deeps 4 shoot has demonstrated that the Chalice
mineralised system continues at depth beneath a sub-horizontal granite dyke which previously defined the
base of the Deeps 3 mineralisation.
Although bulk grades were low, narrow high grade intercepts were reported, and there is considered to be
potential to locate a Chalice style target along and down plunge of these intersections. Results were highly
encouraging as they revealed that the prospective stratigraphic mine sequences containing the lode horizons
have not been closed off and extend to depth and along strike.
The low to moderate grade intercepts encountered may be on the margins of more substantial high grade
core. An extended drill program is proposed to test the Main lode horizon seeking to identify the position of a
possible high grade shoot.
• MINSYS 4 is located south of the open pit where the regionally north-northwest trending sequence swings into
a northerly trend, the amphibolite package appears thickened compared to material along strike, and broad
zones of alteration and gold anomalism are developed in drilling. The pattern is consistent with the empirical
controls on the Chalice open pit, and the system may represent the up-plunge expression of a new Chalice
system developed at moderate depths (around 300 metres, as plotted on Figure 10).
A further 23 regional or mine site targets have been defined, 14 of which warrant initial or follow up RAB or
Aircore drilling.
3.2.3
YANDEEARRA
Principal Targets
Chalice Gold Mines has identified 17 initial gold targets at Yandeearra, including 2 which are considered to
warrant immediate RC drilling.
Location and Tenure
Chalice Gold Mine’s interests in the West Pilbara gold district (Figure 11) will include a tenement package of over
1,400 square kilometres at Yandeearra, contiguous with both Range River’s Indee Gold Project (with published
JORC compliant resources of 529,000 ounces of gold, comprising 123,000 ounces of measured, 277,000 ounces
of indicated and 129,000 ounces of inferred resources in several deposits) and De Grey’s Turner River Gold Belt
(including a published resource of 203,000 ounces of gold at Wingina Well comprising 61,200 ounces of measured,
101,700 ounces of indicated and 40,400 ounces of inferred resources). A tenement schedule is presented in
Section 6 of this Prospectus.
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Figure 11 : West Pilbara Gold District – Yandeearra project location
The project is approximately 100 kilometres south of Port Hedland, and access can be gained from established
roads and bush tracks off the North West Coastal Highway.
The 100% interest in the tenement package was earnt by Bullion pursuant to an agreement with Farno-McMahon
Pty Limited, Farno Pty Limited and Dorsch Resources Pty Limited (Farno Group).
With access to much of the area only recently approved by the traditional owners, Yandeearra remains as a
large, strategically located but largely unexplored area.
Helicopter– assisted exploration at Yandeearra Project
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Soil sampling at Holly Prospect Yandeearra Project
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Project Geology
The Yandeearra project straddles the boundary between the Central Pilbara Tectonic Zone and the East Pilbara
Granite-Greenstone terrane within the early Archaean Pilbara Block.
The south-eastern part of the project area incorporates the north-easterly-trending Pilbara Well greenstone belt.
This consists of basalts, ultramafics and silicified sediments which have undergone deformation and metamorphism.
The greenstone lithologies are overlain by cherts of the Cleaverville formation.
The northern part of the project area is dominated by turbiditic sediments of the Mallina Formation, with numerous
interbedded differentiated mafic/ultramafic intrusives of the Millindinna Intrusion and the Satirist Gabbro.
The granitic terrane of the East Pilbara Granite-Greenstone terrane occurs to the southeast of the tenements. To
the south of the tenements, outcropping flat-lying basaltic volcanics and sediments of the Fortescue Group of the
Hamersley Basin partly obscure the underlying lithologies.
Most of the historical mines at Yandeearra, which predominantly lie within the granted exploration tenements,
have had only minor investigations for gold and base metal by modern exploration techniques. The limited
amount of modern exploration completed within the region is due to a previous moratorium on mining and
exploration within the Yandeearra Aboriginal Reserve.
Following the lifting of the exploration moratorium and the granting of a number of exploration licences, the
Farno Group undertook initial geological mapping, stream sediment sampling, grid soil sampling and first pass RAB
drilling targeting gold and base metals in the Pilbara Well Greenstone Belt.
Pursuant to the joint venture with Farno, exploration and drilling by Bullion has included aircore, RAB, RC and
vacuum drilling programs at several prospects within the project area, mostly in the Mallina Basin. This work has
outlined 17 significant gold in soil anomalies, of which 8 anomalies remain untested by drilling. Of the 9 targets
drill tested, each has reported significant gold results in broad spaced drilling, with 2 considered by Chalice Gold
Mines to warrant immediate RC drilling.
Outside of the immediate tenement area, recent exploration activities in the Pilbara region have highlighted the
prospectivity of the Mallina Basin and its relatively under-explored status.
3.2.4 Wilga
Principal Targets
Chalice Gold Mines has identified 2 gold exploration targets at Wilga. Although grass roots in nature, Chalice Gold
Mines Considers the tenement is located within a fertile, well endowed gold belt adjacent to a major, mineralised
structure, and further exploration is warranted.
Location and Tenure
The Wilga tenement is located 50 kilometres south of Laverton and 15 kilometres south, south, east of AnglogoldAshanti’s Cleo gold mine (Figure 12).
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Figure 12 : Wilga Project – location and regional geology
Project Geology
The geology of the area consists of outcropping Archaean basalts, peridotite and thin banded iron formation
within the central section of the licence area. This area has been the focus of much of the past exploration effort
as the western and eastern part of the licence is dominated by Quaternary colluvium and transported alluvium
on the northern margin of Lake Carey.
Mineralisation in the area is hosted by banded iron/chert formations, quartz veining and shear zones within the
basaltic sequences. Visible gold has been noted from the area associated with the banded iron formations (BIFs)
and reconnaissance rock chip sampling of the outcrop has produced assays of 7.8g/t and 5.1g/t gold.
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Delta Gold NL (Delta Gold) commenced the first major exploration program in the region for gold with a broad
spaced soil sampling program which outlined anomalous gold geochemistry at Wilga.
Follow up exploration by Delta included an exploration program of gridding, soil sampling, rock chip sampling
and RAB and RC drilling.
Historical exploration defined an extensive gold anomalous zone, over 1,500 metres long and up to 500 metres
wide, centred on the banded iron formation. Broad spaced RAB drilling has reported significant gold results.
Chalice Gold Mines considers that the results from the historical exploration described above warrant follow-up
exploration activity, and that there may be an extensive area of greenstone developed under shallow surficial
cover that has not been tested to date.
Gold exploration targets include the strike and depth extensions of the mineralised corridor defined by
previous drilling.
3.2.5
GNAWEEDA
Project managed and funded by Teck Cominco
Chalice Gold Mines will hold interests in over 470 square kilometres of tenements covering almost an entire
greenstone belt at its Gnaweeda project in the Murchison region, 30 kilometres east of Meekatharra, Western
Australia (Figure 13).
Figure 13 : Gnaweeda Project – location and regional geology
Gnaweeda Project –
previous drilling site
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On 28 July 2005, an exploration joint venture was signed with Teck Cominco in respect of Gnaweeda. Under
the agreement Teck Cominco can earn a 70% interest in the project by spending $1,500,000 over three years
(minimum expenditure of $140,000).
The Teck Cominco agreement is summarised in Section 6 of this Prospectus.
The agreement with Teck Cominco associates Chalice Gold Mines with a major international mining house on
terms providing significant exploration upside exposure.
Historical exploration has defined an extensive gold and arsenic anomalous zone, over 15 kilometres long and
up to 750 metres wide, within a package of mafic and felsic rocks (the Fairway Magnetic Package, or FMP).
Gnaweeda is considered prospective for gold mineralisation, either developed within the FMP, or in structure
along the 50 kilometres of strike interpreted within Chalice Gold Mine’s tenements.
Field
Reconnaissance
Gnaweeda
3.3
EXPLORATION AND DRILLING PROGRAM AND EXPENDITURE
Exploration and Drilling Program – Higginsville
The proposed forward exploration and drilling program for the Higginsville project includes:
1. Phase 1 RC drill testing of 6 high priority targets including the Poseidon Footwall, Mitchell Basement North,
Mitchell Basement South and Nawock prospects, following up existing significant drill results;
2. Phase 1 Aircore drill testing of 8 moderate priority targets;
3. Field checking, surface geochemical sampling of low priority target areas; and
4. Phase 2 RC diamond drilling to follow-up mineralisation defined by Phase One programs.
Exploration and Drilling Program - Chalice
The proposed forward exploration and drilling program for the Chalice project includes:
1. Phase 1 diamond drilling of the advanced targets at Deeps 4 and Minsys 4;
2. Phase 1 aircore and RC drilling of 13 priority regional targets;
3. Field checking regolith and geological mapping and surface geochemical sampling over regional target of 9
first pass targets; and
4. Phase 2 diamond drilling following up significant results from Chalice Deeps, Minsys4 and the regional
exploration targets.
Exploration and Drilling Program - Yandeearra
The proposed forward work program for the Yandeearra project comprises:
1. Exploration for Indee-style gold deposits in the Mallina Formation turbiditic sediments, including RC drilling at
two targets, and RAB or aircore drilling at a further 11 targets; and
2. Exploration for Shear-hosted gold deposits in the Pilbara Well Greenstone Belt.
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Exploration and Drilling Program - Wilga
The proposed forward exploration program for the Wilga project, comprises:
1. Acquisition and interpretation of available multi-client and company aeromagnetic data;
2. Field inspection, geological and regolith interpretation;
3. Extension of the surface geochemical coverage in areas amenable to surface sampling techniques, particularly
to the south of the previously defined gold anomalies;
4. Auger or vacuum geochemistry programs in areas of interpreted thin transported cover; and
5. RAB or aircore drilling to test strike continuity of previously defined gold mineralisation and first pass drill testing
of geochemical anomalies generated from the surface geochemical programs.
Exploration and Drilling Expenditure Budget
Project
Full Subscription
Year 1 $
Year 2 $
Year 1 $
Year 2 $
Higginsville1
937,700
653,000
1,125,300
1,033,300
Chalice
738,150
596,250
1,109,650
767,250
Yandeearra3
424,000
298,200
497,450
464,550
Gnaweeda4
-
-
-
-
125,600
97,500
134,300
175,000
2,225,450
1,644,950
2,866,700
2,440,100
Wilga
2
5
Total
Footnotes:
1
A breakdown of the Company’s exploration expenditure by activity is presented in Section 5, Table 1 of this Prospectus.
2
3
4
Exploration at this project is expected to be funded by Teck Cominco persuant to the subject Joint Venture Agreement
(refer further Section 6 (Schedule B, Section 4) of this Prospectus).
5
Table 5 : Chalice Gold Mines Ltd budgeted drilling and exploration expenditures, by gold project, for the first two years after
completion of the Initial Public Offer
The budgets of the Company will be subject to modification on an ongoing basis having regard to a number of
factors, including:
• the ongoing results obtained from the exploration and drilling programs;
• periodic re-assessment of underlying geological factors reflecting the exploration results of other
regional explorers;
• the market price for gold; and
• joint venture agreements with respect to exploration and drilling activities of particular tenements.
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PROFILES OF DIRECTORS & SENIOR MANAGEMENT
ANDREW R BANTOCK, BCOM, ACA
EXECUTIVE CHAIRMAN
Mr Bantock is currently the Managing Director of Bullion Minerals Limited. Mr Bantock has extensive professional,
corporate and commercial experience in the resources, resource contracting and infrastructure sectors having
previously been with GRD Limited, where he served 6 years as the Executive Finance Director.
Prior to his 10 years with GRD, Mr Bantock worked in Australia and internationally with a leading global accounting
and financial services organisation. Mr Bantock has been Managing Director of Bullion since September 2004.
MR JOHN R MCINTYRE, BSC (HONS), MAIG
EXECUTIVE DIRECTOR
Mr McIntyre has over 19 years experience in mineral exploration throughout Australia, covering gold, nickel,
platinum group metals, copper-gold, unconformity related gold-PGE-uranium, IOCG style copper-gold-uranium
and zinc-lead mineralisation. Mr McIntyre graduated from the University of Western Australia in 1985 with First Class
Honours in Geology, and has spent the last ten years in either senior management roles with junior companies, or
consulting to both junior explorers and major miners. He is a member of the Australian Institute of Geoscientists, the
Geological Society of Australia, and the Society of Economic Geologists.
MR TIMOTHY R B GOYDER
NON-EXECUTIVE DIRECTOR
Mr Goyder is currently the Chairman and a substantial Shareholder of Bullion Minerals Limited. Mr Goyder has
extensive experience in the resource industry and is currently Managing Director and the proprietor of Grimwood
Davies Pty Limited, a contract drilling company, based in Kalgoorlie, Western Australia.
Mr Goyder has been involved in the formation and management of a number of publicly listed companies.
MR BRYAN W ALEXANDER, BSC, MAUSIMM
NON-EXECUTIVE DIRECTOR
Mr Alexander is a qualified geologist with over 15 years experience in the exploration and mining industry. Mr
Alexander is currently providing geological contracting and consulting services through Archaean Exploration
Services Pty Limited (Archaean Exploration). Most recently Archaean Exploration has been responsible for directing the
exploration, underground mine geology and acquisition activities for a private exploration and mining syndicate.
Prior to this Mr Alexander has been responsible for the management of exploration bases and the implementation
of substantial exploration and resource definition programs for several gold exploration and mining companies.
MR RICHARD K HACKER, BCOM, ACA, ACIS
COMPANY SECRETARY
Mr Hacker has extensive professional and corporate experience in the resources sector both in Australia
and the United Kingdom. For the last 5 years he has worked in senior finance roles with global energy
companies including Centrica Plc and more recently, Woodside Petroleum Limited. Prior to this, Mr Hacker
worked for seven years with leading accounting practices. Mr Hacker is both a Chartered Accountant and
Chartered Secretary.
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G E O L O G I S T ’ S
Northwind Resources Pty Ltd
R E P O R T
6 Muir Place
ABN 67 067 522 098
Booragoon Western Australia 6l54
Email: [email protected]
MINING INDUSTRY CONSULTANTS
Tel:
+61 (8) 9364 6634
Mob: 0412 987 734
Fax::
+ 61(8) 9316 1138
1 Feburary 2006
The Directors
Level 2
1292 Hay Street
West Perth Western Australia 6005
Dear Sirs
INDEPENDENT CONSULTING GEOLOGIST’S REPORT for INCLUSION IN PROSPECTUS
Northwind Resources Pty Ltd (“NRPL”) has been engaged by you to prepare an Independent Consulting Geologist’s
Report (“Report”) describing five mineral exploration projects which Chalice Gold Mines Limited (“CGML”) is to
acquire from Bullion Minerals Limited (“Bullion”). The projects are all located in Western Australia. The report is to be
included in a prospectus inviting subscriptions for 37.5 million new shares in CGML at an issue price of 20 cents per
share to raise a total of $7.5 million before the costs of the issue (“Prospectus”). The minimum amount to be raised
by CGML is $6 million. CGML proposes to lodge the Prospectus with the Australian Securities and Investments
Commission on or about 3 Feburary 2006. It is intended that a significant part of the funds raised will be used for
the purposes of exploration and evaluation of the mineral properties.
The Report has been prepared by Mr RE Cary, the Principal of NRPL. Mr Cary is a Fellow of the Australasian Institute
of Mining and Metallurgy wherein he is accredited with Chartered Professional status in Management, a Fellow of
the Australian Institute of Geoscientists, a Member of the Mineral Industry Consultants Association and a Member
of the Australian Institute of Company Directors. Mr Cary trained as a geologist and has over 35 years of diversified
mining industry experience including exploration, resource evaluation, feasibility studies, project development,
mining operations, corporate and asset acquisitions, project financing and company directorships. He has
prepared numerous public and private evaluations of companies, mining operations and exploration projects.
The Report has been prepared in accordance with the Code for the Technical Assessment and Valuation of Mineral
and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports (“The Valmin Code”).
Mr Cary has the appropriate qualifications and experience, and the independence, to qualify him as an “Expert”
according to the definition of same in The Valmin Code. As part of this review, Mr Cary visited the Yandeearra
project area on 3 November 2005, and the Higginsville, Chalice, Wilga and Gnaweeda projects between 11 and
13 November 2005. The locations of the project tenements are shown on maps included in the Report.
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In preparing the Report, NRPL has relied upon information provided to it by the Directors of CGML, together with
other published and unpublished reports and data. CGML has warranted in writing that all material information in
its possession has been made available and that, to the best of its knowledge and understanding, such information
is complete, accurate and true. NRPL has not independently verified any of the information provided by CGML,
nor did it conduct an audit of CGML or any of its associated entities. CGML has stated that all information
provided by it may be presented in the Report and that none of the information is regarded as confidential.
Where information has been derived from sources which are not in the public domain, consents have been
obtained from the respective authors to quote their work in our Report. The Report has been prepared to include
information available up to and including 31 January 2006. The principal sources of information are included in a
bibliography at the end of the Report.
The legal status of tenements, including Native Title considerations, is the subject of a separate Independent
Solicitor’s Report which appears in Section 6 of the Prospectus. These matters have not been considered in any
detail in our Report, however, it has assumed that CGML will have lawful access to the tenements for the purposes
of conducting exploration and evaluation activities. NRPL has not been asked to comment on any vendor or
promoter considerations to be paid by CGML. The potential consequences of exploration and mining on the
environment within the project areas have not been assessed.
The mineral properties discussed in the Report are exploration projects, and as such, are inherently speculative in
nature. Nonetheless, NRPL considers that they are to be acquired by CGML on the basis of sound technical merit,
and are sufficiently prospective, subject to varying degrees of exploration risk, to warrant their further exploration
and assessment. CGML has prepared staged work programs specific to the potential of each of the projects, other
than for Gnaweeda which is subject to a joint venture wherein the incoming party is sole funding exploration.
CGML intends to raise a minimum of $6 million, and up to $7.5 million. The exploration and evaluation programs
summarised in the Report anticipate total expenditure of $3.9 to $5.3 million depending upon the amount raised,
so that at least half the amount raised is to be committed to the exploration, evaluation and administration of
the mineral properties. The proposed exploration budgets also exceed the anticipated minimum annual statutory
expenditure commitments for each of the project areas. CGML plans to spend between $2.2 million and $2.9
million in the first year of assessment.
The statements and opinions included in the Report are given in good faith and in the belief that they are not
false, misleading or incomplete. Copies of the relevant sections of the Report in draft form were provided to CGML
together with a written request for comment as to errors of fact or misinterpretation, material omissions, or substantive
disagreement as to the assumptions contained therein. Whilst evidence may be available to support our conclusions,
and whilst we believe our conclusions to be appropriate at the date of the Report, these could alter materially over
time in the light of new information which might affect our views with regard to the prospectivity of the tenements
and their resource potential, metal prices, exchange rates and other relevant factors.
Neither NRPL nor its principals has any relationship with CGML or Bullion which could reasonably be construed
as affecting their independence in the preparation of the Report. Neither NRPL nor its principals has any interest
or entitlement, direct or indirect, in tenements held by CGML or Bullion, or in the securities and assets of CGML
or Bullion, their principal shareholders, or any other company believed to be associated with CGML or Bullion. In
July 2005, NRPL assisted Bullion in its assessment of tenements in Queensland that it was considering purchasing.
This work was conducted on a consulting basis, with payment on the basis of hourly professional fees and the
time taken in the appraisal of the opportunity. This prior relationship with Bullion has in no way affected NRPL’s
independence in the preparation of this Report. In the current circumstance, NRPL is entitled to receive a fee
based upon hourly rates for the time taken in the preparation of the Report, plus reimbursement of out-of-pocket
expenses necessarily incurred in the completion of its brief from you. This fee is payable regardless of the findings
of the Report, or the success of the proposed capital raising.
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The terms of NRPL’s appointment include the provision of an indemnity whereby CGML will indemnify and
compensate NRPL in respect of preparing the Report against any and all losses, claims, damages and liabilities
to which NRPL might become subject under any applicable law or otherwise arising from the preparation of
the Report, and which arises wholly or in part from CGML or any of its officers providing NRPL with any false or
misleading information, or the failure of CGML or its officers in providing material information.
NRPL has consented to the inclusion of the Report in its entirety in the Prospectus in the form and context in which
it appears, and has not withdrawn that consent prior to the lodgement of the Prospectus with the Australian
Investments and Securities Commission. NRPL has only been involved in the preparation of the attached Report,
and has authorised and/or caused issue of only that portion of the Prospectus, other than references to and
comments relating to the Report elsewhere in the Prospectus. Neither the whole nor any part of the Report, nor
any reference thereto may be included in or with, or attached to, any documents, circular, resolution, letter or
statement without the prior written consent of NRPL as to the form and context in which it is to appear.
Yours faithfully
NORTHWIND RESOURCES PTY LTD
R CARY BSc., FAusIMM (CP), FAIG, MMICA, MAICD
Director & Principal
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TABLE OF CONTENTS
1
EXECUTIVE SUMMARY
2
INTRODUCTION
3
HIGGINSVILLE
3.1
Previous Exploration and Production
3.2
Geology and Mineralisation
3.2.1
Regional Geology
3.2.2
Project Geology
3.3
Exploration Database
3.4
Exploration Targets
3.5
Proposed Exploration Program and Budget
4
CHALICE
4.1
Previous Exploration and Production
4.2
4.2.1
Chalice Mineralisation
4.2.2
Interpreted Mineralisation Controls
4.3
Work Completed by Bullion
4.3.1
Down-plunge Extensions of Chalice Lode System
4.3.2
Regional Exploration
4.4
Exploration Targets
4.4.1
Chalice-style Deposits at Depth
4.2.2
Regional Targets
4.5
5
YANDEEARRA
5.1
Geology
5.2
Mineralisation and Competitor Activity
5.3
Historical Exploration
5.4
Exploration by Bullion
5.4.1
Results of Exploration for Indee-style Targets
5.4.2
Pilbara Well Greenstone Belt Exploration Results
5.4.3
PGE Exploration
5.5
Exploration Targets
5.6
6
WILGA
6.1
6.2
Previous Exploration
6.3
Exploration Targets, Work Proposals and Budget
7
GNAWEEDA
7.1
7.2
Previous Exploration
7.3
Work Completed by Bullion
7.4
Exploration Opportunities and Prospectivity
8
PRINCIPAL SOURCES OF INFORMATION
GLOSSARY OF TECHNICAL TERMS
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R E P O R T
EXECUTIVE SUMMARY
Chalice Gold Mines Limited (“CGML”) is to acquire the interests held by Bullion Minerals Limited (“Bullion”) in five
gold projects located within Western Australia. The projects are Higginsville, located between Kalgoorlie and
Norseman in the Eastern Goldfields, Chalice, to the west of Higginsville, Yandeearra, south of Port Hedland in the
Pilbara region, Wilga, to the south of Laverton in the North Eastern Goldfields and Gnaweeda, which is located
to the east of Meekatharra in the Murchison (Figure 1). Nickel rights within the majority of the Higginsville and
Chalice tenements are excluded.
Figure 1 : Location diagram
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Substantial exploration has been conducted over most of the projects, which in all cases has demonstrated the
presence of significant gold mineralisation. At Chalice, the now-depleted 720,000 ounce Chalice gold deposit is
included within the tenements to be acquired by CGML, whilst at Higginsville, there is an endowment of over 1.2
million ounces in previously mined deposits and recently discovered resources within adjoining tenements. Recent
discoveries immediately to the north of the Yandeearra tenements have combined resources of around 730,000
ounces in a previously under-explored region with a history of only small scale mining and very limited production.
Wilga is located to the south of an area which is host to a number of very large gold deposits hosting in aggregate
over 13 million ounces of gold. Exploration to date has been fairly limited. At Gnaweeda, extensive gold and
arsenic anomalism has been outlined beneath an extensive mantle of transported cover. In all cases, the historical
exploration record has been critically reviewed, with the result that numerous targets have been identified, which
will be the focus of CGML’s exploration programs.
Higginsville is located over a sequence of late Archaean mafic and ultramafic volcanic rocks near the southern
end of the highly mineralised Norseman-Wiluna greenstone belt. Here, bedrock gold deposits are associated with
splays from regional fault structures, and are developed preferentially in the granophyric phases of differentiated
dolerites or gabbros, or in high magnesium basalts. Significant gold accumulations also occur at shallow depths
in buried palaeochannels. CGML’s principal target is the Poseidon Footwall prospect where mineralisation akin
to that in the recently discovered 485,000 ounce Trident resource is to be explored for in a possible southward
extension of the gabbroic sequence hosting Trident. Historical drilling in the area was related principally to the
evaluation of the Mitchell palaeochannel system, was generally widespaced and shallow, and often did not test
the underlying bedrock. Other targets include follow-up of bedrock gold mineralisation encountered in previous
drilling at Mitchell Basement South and Mitchell Basement North, investigation of regional structures or favourable
geology identified beneath transported cover and follow-up of gold anomalies in soils and previous drilling.
Although the Chalice resource is largely depleted, drilling beneath the old open pit has demonstrated that the
altered amphibolite which hosted the orebody continues to depth and is mineralised. Diamond drilling is planned
to test for repetitions of the Chalice deposit down plunge from existing drilling that may have intersected the
margins of a more substantial system. A review of the geological and structural controls on the Chalice orebody has
also generated several conceptual targets located at moderate depths. There is also scope to add to previously
identified, but presently sub-economic mineralisation beneath the open pit, which could provide a worthwhile
addition to production in the event that a new underground mine were to be established. A review of the regional
database has identified numerous targets, including drillholes with significant gold mineralised intercepts requiring
follow-up, magnetic and/or structural targets beneath the Quaternary cover, areas with anomalous levels of gold
in soil samples and areas underlain by greenstone lithologies that are completely unexplored.
The Yandeearra project straddles the boundary between the Central Pilbara Tectonic Zone and the East Pilbara
Granite-Greenstone Terrane. Within the Central Pilbara Tectonic Zone, Mallina Formation turbiditic sediments host
substantial gold mineralised resources in a number of deposits associated with the regionally significant Mallina
Shear Zone at Indee and Wingina Well. The project tenements lie mostly within an Aboriginal reserve, where a
moratorium on exploration that was in place until 1998 effectively precluded evaluation by modern techniques
until Bullion’s involvement from mid-2002. Exploration for Indee-style deposits since then has identified extensive
areas with significant gold and arsenic anomalism, with follow-up RAB and aircore drilling reporting widespread
gold mineralisation, but no economic deposits. Numerous soil anomalies remain untested by drilling, and many
mineralised drillhole intercepts require follow-up RC drilling. Exploration over the Pilbara Well greenstone belt has
identified several large areas with anomalous gold in soils, two of which have been confirmed as mineralised by
drilling. Within the Mallina Basin, differentiated mafic-ultramafic complexes are targets for PGE and/or nickel-copper
mineralisation, and strongly magnetic features in areally extensive, but only recently recognised high magnesium
basalts may represent differentiates with potential to host magmatic-associated nickel sulphide deposits.
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The Wilga project lies in a highly prospective area, but has been only cursorily explored, and that largely over
areas of outcropping basalt, peridotite/dunite and thin BIF. The majority of the tenement is covered by Quaternary
colluvium and transported alluvium and has received little attention. Gold mineralisation has been identified in
association with BIF from surface sampling, and in RAB drilling of soil geochemical anomalies. The project is grass
roots in nature, but is located within a fertile, well endowed gold belt, and lies adjacent to a major mineralised
structure in the Laverton Tectonic Zone. Work planned includes interpretation of multi-client aeromagnetic data,
extension of the existing surface geochemical coverage, shallow geochemical drilling in areas of transported
cover and follow-up drilling of known gold mineralisation and geochemical anomalism, as well as newly
generated targets.
Gnaweeda covers almost the entire 56 kilometre length of a small greenstone belt to the east of Meekatharra.
Widespaced shallow drilling through transported cover has outlined extensive gold and arsenic anomalism over
at least 15 kilometres of strike. Within this, closer spaced drilling across a 750 metre wide, 5 kilometre strike interval
has intersected extensive, but generally low grade gold mineralisation in association with mafic rocks, with higher
grade mineralisation associated with quartz veining in altered felsic intrusives. The drilling has achieved only
limited penetration into the Archaean basement. Aeromagnetic data indicates that the host structure to the
system may extend over the full length of the greenstone belt. Drilling beneath outcropping copper-zinc-silver
anomalous gossans in felsic volcanics in the late 1970s intersected massive sulphides, however, no testing for base
metals was undertaken in conjunction with the later gold exploration. Further targets may well be developed for
volcanic-hosted massive sulphide deposits beyond those already tested. Historical drilling suggests that a series
of large magnetic anomalies may be sourced by either a dismembered layered mafic-ultramafic intrusion or
a dismembered lava lake. Both scenarios present opportunities for the discovery of accumulations of nickelcopper-PGE bearing sulphides.
CGML has prepared exploration programs and budgets for the Higginsville, Chalice, Yandeearra and Wilga
projects for a period of two years. The Gnaweeda project is the subject of a joint venture with a third party which
is sole funding exploration to earn its interest. The exploration proposals have been reviewed in the course of
preparing this report, and found to be consistent with the mineralisation models and the exploration potential
perceived by CGML. Programs and budgets have been prepared in anticipation of successfully raising the $7.5
million maximum subscription, with reduced programs proposed in the event that only the minimum of $6 million is
achieved. In all cases, the nominated expenditures are adequate to meet the costs of the proposed exploration,
and will satisfy the statutory expenditure obligations for the tenements. The expenditure proposed by CGML is
summarised in the table below.
Chalice Gold Mines Limited – Summary of Proposed Exploration Expenditure
Maximum Subscription $7.5M
Exploration staff & field support
Drilling
Geochemistry & assaying
Geological studies
Geophysics
GIS
Tenements & associated costs
Total
Year 1
Year 2
$637,600
$627,600
$1,696,000
Total
Minimum Subscription $6.0M
Year 1
Year 2
Total
$1,265,200
$558,000
$540,800
$1,098,800
$1,420,000
$3,116,000
$1,188,000
$788,500
$1,976,500
$309,400
$168,600
$478,000
$258,200
$94,100
$352,300
$24,500
$12,500
$37,000
$24,500
$12,500
$37,000
$3,000
-
$3,000
$3,000
-
$3,000
$24,000
$24,000
$48,000
$21,600
$21,600
$43,200
$172,200
$187,400
$359,600
$172,200
$187,400
$359,600
$2,866,700
$2,440,100
$5,306,800
$2,225,500
$1,644,900
$3,870,400
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Numerous technical terms and abbreviations are used throughout this report. Reference should be made to the
Glossary of Technical Terms at the rear for explanations and definitions.
2
INTRODUCTION
Chalice Gold Mines Limited was incorporated on 13 October 2005 as a 100% owned subsidiary of Bullion Minerals
Limited. CGML is purchasing the interests that Bullion holds in five gold projects in Western Australia in return for
shares in CGML. Bullion is to retain the interest it holds in a nickel exploration joint venture over parts of two of the
project areas. The projects to be acquired by CGML are the subject of this Independent Consulting Geologist’s
Report (“Report”) to the directors of CGML.
Bullion has assembled comprehensive databases from the results of historical exploration conducted over the
projects from open file data held by the Department of Industry and Resources in its Western Australian Minerals
Exploration (“WAMEX”) database, internal company reports generated by previous holders of the tenements,
and the results of its own exploration. Using this data, CGML has developed detailed programs and budgets for
the further exploration and evaluation of the tenements, which have been comprehensively documented in a
Business Plan. The Business Plan forms the basis for this Report, together with reviews of the respective databases,
and visits to each of the project areas by Northwind Resources Pty Ltd over the period 3 to 13 November 2005 in
the company of Mr Bryan Alexander, the author of the Business Plan and a Non-Executive Director of CGML.
The areas held under tenements, types and numbers of tenements and relevant agreements covering the
tenements are discussed briefly in the appropriate sections of this Report by way of background. The legal status
of the tenements, including Native Title issues and status, and any relevant agreements, is discussed in detail in the
Independent Solicitor’s Report in Section 6 of this Prospectus.
3
HIGGINSVILLE
The Higginsville gold project comprises 34 tenements with an aggregate area of about 150 square kilometres
centred on the old Higginsville mining centre. Higginsville is located about 80 kilometres by road south of the
nickel mining centre of Kambalda, and about 50 kilometres north of the gold mining centre of Norseman in the
Higginsville Mining District of the Coolgardie Mineral Field (Figure 2). The major regional centre of Kalgoorlie is
located 50 kilometres to the north of Kambalda. Historical open pit and underground mining operations in the
district have yielded around 720,000 ounces gold from bedrock Archaean deposits and Tertiary palaeochannel
deposits. More recently, drilling by Avoca Resources Limited (“Avoca”) at its Trident project has identified Indicated
and Inferred Mineral Resources containing 485,000 ounces gold.
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Figure 2 : Higginsville-Chalice regional geology & tenements
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Bullion applied for extensive areas of open ground in the district in October 2003, most of which has since been
granted. The tenements (Figure 3) include 5 exploration licences (“E”), 28 prospecting licences (“P”) and 1
prospecting licence application. The prospecting licence application has entered the Native Title negotiation
process. The annual statutory expenditure commitment for the granted tenements is $263,000. Twenty one of the
tenements are subject to the Cowan Nickel Joint Venture (“CNJV”) wherein Equinox Resources Limited (“Equinox”)
may earn up to a 60% interest in the nickel rights within the tenements concerned, with Bullion retaining rights
to gold and all other minerals. Equinox must meet the $187,520 in statutory expenditure commitments for the
CNJV tenements, although Bullion (and after its acquisition of the project, CGML) must report any non-nickel
exploration to Equinox to assist Equinox in meeting its obligations. Bullion’s interest in the CNJV is not being
transferred to CGML.
Figure 3: Higginsville Project – geology and prospects
The Higginsville project was inspected on 11 November 2005. Access throughout the area is good, the project
being traversed by the Goldfields-Esperance Highway and numerous exploration tracks.
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R E P O R T
PREVIOUS EXPLORATION AND PRODUCTION
The project covers parts of the historic Higginsville and Eundynie gold mining centres. Pre-1980s exploration was
largely for Kambalda-style volcanic-associated nickel deposits, with only minor exploration for gold, and this
mostly close to historical workings. In 1983, Samantha Gold NL (“Samantha”) commenced exploration around
the old workings, and by 1987, had acquired a significant land holding in the area. Extensive use was made of
soil geochemistry to assess the prospectivity of the area, which resulted in the discovery of the gabbro-hosted
Poseidon South gold deposit in 1988, the Challenger-Swordsman palaeochannel deposits in 1991, and later,
the Mitchell and Graveyard–Aphrodite palaeochannel deposits. Exploration and mining continued following
Samantha’s takeover by Resolute Ltd (“Resolute”) early in 1994, and by the cessation of mining early in 1999, the
area had produced around 587,000 ounces of gold from open pits, including more than 300,000 ounces from the
palaeochannels. A further 25,000 ounces was produced from underground mining. Mining of the Two Boys deposit
by an unrelated joint venture produced a further 82,000 ounces of gold in 1997/98.
In July 1999, Resolute joint ventured the bulk of the area to Western Mining Corporation (“WMC”) which continued
both gold and nickel exploration until the project was sold to Gold Fields Ltd (“Gold Fields”) as part of the sale by
WMC of its St Ives gold assets. Exploration by both WMC and Gold Fields was focussed on discovering high grade
gold deposits that could be treated through the St Ives mill, and resulted in the discovery of extensions to the lodes
historically mined in the Poseidon South pit at the Trident deposit.
In October 2003, Resolute sold its Higginsville assets to Bullion, which included its Higginsville database and the
nickel rights to a number of tenements held by Gold Fields. In April 2004, Gold Fields sold its Higginsville assets to
Avoca, which, following a re-interpretation of the Gold Fields drilling results and further drilling, has established
resources containing 485,000 ounces gold at Trident. A series of more recent very high grade intersections is not
included in the estimate. The Trident resource is located approximately 5 kilometres north, along strike of Bullion’s
Poseidon Footwall prospect.
3.2
GEOLOGY AND MINERALISATION
3.2.1 Regional Geology
The Higginsville project is located to the east of the Chalice project (Section 4 of this report), over a sequence
of mafic and ultramafic volcanic rocks which lies to the east of the Pioneer and Widgiemooltha Domes near
the southern end of the late-Archaean Norseman-Wiluna Greenstone Belt (Figure 2). The Norseman–Wiluna
Greenstone Belt is the dominant feature of the Eastern Goldfields Province of the Archaean Yilgarn Craton or Block,
and hosts, among many others, the Norseman, St Ives and Kalgoorlie gold deposits, the Kambalda sulphide nickel
deposits and major nickel sulphide and gold deposits at Leinster, Mt Keith and Wiluna to the north. Higginsville is
strategically located between world class gold deposits at St Ives to the north (15 million ounces) and Norseman
to the south (7 million ounces).
The Yilgarn Block is characterised by a series of narrow, steeply dipping, generally north - northwest elongate
volcano-sedimentary sequences or greenstone belts which are for the most part separated by large masses of
granitic rocks. Within the Eastern Goldfields Province, the greenstone stratigraphy comprises complex sequences
of mafic and ultramafic lavas and intrusives, with intercalated felsic volcaniclastics, extrusives and intrusives, and
volcano-sedimentary rocks, which have been intruded by oval-shaped granitoid batholiths. The greenstone belts
show evidence of major dislocation by north-south trending crustal sutures which have had a profound effect on
both their geometry and distribution. Many of these faults are traceable for hundreds of kilometres and effectively
sub-divide the greenstone belts into a series of tectono-stratigraphic Domains or Terranes. These faults are believed
to have been the conduits for the mineralising fluids which formed the majority of the Archaean gold deposits.
East-west trending, Proterozoic aged dolerite dykes occur as late intrusives throughout the region.
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3.2.2 Project Geology
The Higginsville district is traversed by the north trending Zuleika Shear, a regionally extensive feature which here
defines the boundary between the Coolgardie and Kambalda Domains within the Eastern Goldfields Province. The
Zuleika Shear is host to several large gold deposits to the north. At Higginsville, a pile of north-northwesterly trending,
easterly dipping mafic-ultramafic units is overlain by metasediments. The mafic-ultramafic sequence comprises
amphibolite facies high magnesian (“high-Mg”) basalt, komatiites and minor interflow clastic sedimentary rocks
which have been intruded by differentiated gabbros. The mafic-ultramafic package shows repetition, probably
across a series of east dipping thrust faults, and is interpreted to be a D2 thrust stack separated from the overlying
metasediments by the moderately east dipping Poseidon Thrust, and from the underlying metasediments by
the Higginsville Thrust. These structures are jogs in, or splays off, the Zuleika Shear. The overlying metasediments
comprise felsic volcaniclastic rocks and psammo-pelitic sequences, equivalent to the Black Flag Beds of the
Kalgoorlie Domain to the north.
A complex regolith is developed over the Archaean sequence, including Tertiary palaeochannels, a Tertiary
laterite profile and playa lake sediments associated with Lake Cowan.
Two broad styles of gold mineralisation are present. Gold deposits in bedrock comprise either quartz vein systems
associated with splays off the D2 thrusts, which have developed preferentially in the granophyric phases of
differentiated dolerites or gabbros (e.g. Poseidon South and Trident), or lodes developed in the fault splays in
high-Mg basalts (e.g. Two Boys). Around 300,000 ounces has also been produced from Tertiary palaeochannels,
including the Challenger-Swordsman, Mitchell and Graveyard-Aphrodite systems.
3.3
EXPLORATION DATABASE
Bullion acquired Resolute’s Higginsville database in October 2003. The data includes digital drill hole and surface
geochemical data, digital aeromagnetics, including both located and gridded data and images, and some
hardcopy data for individual projects. Other digital information has been sourced from the Geological Survey of
Western Australia’s Eastern Goldfields Dataset. A solid geology interpretation at 1:25,000 scale covering most of
the Cowan 1:100,000 map sheet has been compiled based on the detailed aeromagnetics, published geology
and drill hole lithology information.
The geochemical database contains 60,653 records, of which 6,299 occur within the Higginsville tenements. The
bulk of the geochemical data was generated from surface samples, which were probably -80 mesh soil samples
analysed for gold only. Significant areas of the tenements have not been sampled, or are covered in regolith
where traditional soil sampling may not have been effective.
The database also contains 15,666 drillhole collar records, of which 2,089 occur within the tenements. Although
there is a significant number of drillholes, the bulk of the drilling was related to the Mitchell palaeochannel system,
and did not always test the bedrock below. Similarly, in areas of Lake Cowan, significant lake cover is developed,
and bedrock drill coverage is limited.
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EXPLORATION TARGETS
The historical exploration data, including surface and drillhole geochemistry, aeromagnetic data and the solid
geology interpretation has been reviewed by CGML. Drillhole cross sections have been generated and interpreted
where there is sufficient lithological information, and maximum downhole gold values have been extracted and
plotted. The review generated a total of 24 targets at differing stages of advance ranging from grass-roots, to
targets defined by significant, that is, potentially economic intersections in drillholes. The main targets identified by
the study may be generally categorised as follows:
• Outcropping geological targets: Areas of outcrop or sub-crop on significant regional structures and/or
prospective geological units where there has been no previous exploration for gold. These targets will be
assessed by surface geochemical techniques.
• Buried geological targets: Areas with significant regional structures and/or prospective geological
units under cover where conventional soil sampling has not identified any zones of interest. In instances
where it is thought that the regolith may be masking bedrock anomalism, testing will be by well targeted
RC drilling traverses.
• Soil anomalies: Areas of outcrop or sub-crop with low level gold-in-soil anomalism. These zones will be
tested by angled RAB or aircore drilling.
• Supergene anomalies: Areas of supergene gold anomalism, or supergene gold mineralised intercepts
reported from drilling which have had limited effective follow-up. These targets will be tested by angled
RAB or aircore drilling.
• Bedrock gold systems: Areas of bedrock gold anomalism reported from drilling which have not been
effectively followed-up. These zones will be tested by RC drilling.
The more important targets identified by the review are:
• Poseidon Footwall: Potential has been identified for Trident-style mineralisation hosted in gabbroic rocks
in the footwall of the Poseidon Thrust below Tertiary cover. The target area includes 2 kilometres of
greenstone strike bounded by the Poseidon Thrust and associated stacked D2 splay structures, which
is an extension of the Trident–Poseidon South–Two Boys–Fairway stratigraphic package. Minor low-level
gold-in-soil anomalism has been identified, with RAB or aircore drilling over the target area only shallow,
and broadly spaced (mostly 400 metre by 100 metre).
Figure 4 is a schematic showing the interpreted position of the Poseidon Thrust on section 6482400 mN where RAB
and aircore drilling intersected zones of strong quartz veining in the interpreted position of the Poseidon Thrust. An
aircore hole sited 80 metres to the west and in the footwall of the interpreted Poseidon Thrust position reported
2 metres at 0.82 g/t Au at hole bottom which may represent supergene mineralisation derived from adjacent
mineralised structures. Several 200 to 250 metre deep RC stratigraphic traverses are proposed to test for splay
structures in the footwall of the Poseidon Thrust, and differentiated dolerite-gabbro intrusives which could be
the stratigraphic equivalent of the Trident-Poseidon South host. A number of conceptual targets are depicted in
Figure 5.
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Figure 4 : Higginsville Project – Poseidon Footwall Target
Figure 5 : Poseidon Footwall target, section 6482560mN, showing schematically Higginsville style deposits projected from along strike
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• Mitchell Basement South: The prospect covers an area approximately 500 metres square located directly to
the west of the Mitchell palaeochannel open pit, and to the east of the interpreted position of the Poseidon
Thrust. Here, aircore and RC drilling has intersected numerous zones of gold mineralisation in weathered
basaltic bedrock beneath transported cover on the western flanks of the palaeochannel (Figure 6). Significant
intersections include 4 metres at 93 g/t Au from 31 metres, including 1 metre at 367 g/t Au from 32 metres in
MAC1835, 4 metres at 7.25 g/t Au in MAC1844 from 32 metres, 6 metres at 7.98 g/t Au in MRC0032 from 40 metres
and 1 metre at 121 g/t Au in MAC1807 from 70 metres (end of hole). The mineralisation may be associated
with a flat lying splay off an interpreted structure on the basalt-ultramafic contact located immediately to
the east. The structure can be traced north and south of section and remains untested by drilling. It is also
possible that the drill section is oriented at a low angle to the strike of the mineralised structure. Follow-up RC
drilling is proposed.
Figure 6 : Higginsville Project – Mitchell Basement South target cross-section 6482560mN
• Mitchell Basement North: This target is located approximately 200 metres north of the Mitchell Basement
South prospect. Aircore drilling has intersected significant gold mineralisation in weathered basalt beneath
approximately 15 metres of transported cover on the western flank of the Mitchell palaeochannel. The best
intersections occur on drill section 6483050 mN (Figure 7), including 3 metres at 10.68 g/t Au from 58 metres in
MAC1812 and 3 metres at 1.55 g/t Au from 67 metres in MAC1813. The orientation of the mineralised structure
is not apparent, and follow-up RC drilling is proposed.
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Figure 7 : Higginsville Project – Mitchell Basement North target cross-section 6483050mN
• Mitchell North End: An east northeast trending feature coincident with the northern limits of economic gold
mineralisation in the Mitchell palaeochannel is evident in imaged aeromagnetic data. The feature may
represent a mineralised structure which provided the source for the gold in the palaeochannel, or it may
represent an intrusive dyke which formed a local palaeohigh which varied the local bedrock topography and
water table resulting in the precipitation and accumulation of the palaeochannel gold mineralisation directly
to the south. A program of aircore and/or RC drilling is proposed.
• MRC001: The target is a zone of bedrock gold mineralisation encountered in aircore holes drilled through the
Mitchell palaeodrainage. Anomalous gold, including 6 metres at 0.82 g/t Au from 36 metres in MAC0107, 3
metres at 2.32 g/t Au from 36 metres in MAC0981 and 2 metres at 1.60 g/t Au from 38 metres in MAC0362,
occurs over several hundred metres of strike in association with weathered, locally quartz veined basalt. No
deep drill testing has been undertaken, and RC drilling is proposed.
• Nawock: RAB and RC drilling has intersected high grade gold mineralisation in association with quartz veined
ultramafics and sediments, including 5 metres at 11.35 g/t Au from 30 metres in LCA0182, 3 metres at 1.65 g/t Au
from 29 metres in LCC002 and 4 metres at 33 g/t Au from 103 metres in LCC006. The intercepts occur mostly on a
single east–west drill section, which may suggest that the drilling is at a low angle to the strike of the mineralised
structures. The prospect is coincident with a prominent palaeohigh that may reflect a zone of silicification
associated with the gold mineralisation. RC drill testing is planned to define the trend of the mineralisation, with
follow up diamond drilling proposed to identify the lithological-structural controls on mineralisation.
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R E P O R T
PROPOSED EXPLORATION PROGRAM AND BUDGET
The work program proposed for Higginsville is:
• drill testing of high priority targets, including deep stratigraphic RC drilling of the Poseidon Footwall target and
RC drilling at the Mitchell Basement North, Mitchell Basement South and Nawock prospects.
• extensional and infill aircore drilling of moderate priority targets.
• field checking and surface geochemical sampling of low priority target areas. RC and diamond drilling to
follow-up mineralisation defined by phase one programs.
Expenditure of $1,125,300 is proposed for Year 1, and $1,033,300 in Year 2 if the full $7.5 million is raised. Expenditure
in Year 1 will be reduced to $937,700, and in Year 2 to $653,000 if only the $6 million minimum subscription is
raised. The reductions will be effected by scaling back the work programs for testing lower priority targets
and follow-up work in Year 2, whilst testing of high priority targets in Year 1 will remain largely unchanged. The
proposed exploration expenditure is summarised in Table 1 and the principal exploration targets are illustrated in
Figures 3 to 7.
Table 1: Higginsville Project Program and Budget
Exploration staff & field
support
Drilling
GIS
Tenements &
associated costs
Total
Year 1
Year 2
Total
$234,800
$234,800
$469,600
Year 1
Year 2
Total
$213,200
$206,000
$419,200
$724,000
$119,500
$8,000
$39,000
$684,000
$67,500
$8,000
$39,000
$1,408,000
$187,000
$16,000
$78,000
$574,000
$103,500
$8,000
$39,000
$364,000
$36,000
$8,000
$39,000
$938,000
$139,500
$16,000
$78,000
$1,125,300
$1,033,300
$2,158,600
$937,700
$653,000
$1,590,700
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CHALICE
The Chalice project is centred on the now depleted Chalice gold mine which produced over 3 million tonnes of
ore between 1995 and 1999 from a large open pit, plus minor production from underground. The Chalice mine is
located about 90 kilometres south of Kambalda, and about 60 kilometres north of Norseman, in the Higginsville
Mining District of the Coolgardie Mineral Field (Figure 2). Access is via the sealed Goldfields-Esperance Highway,
thence by the old Chalice mine access road and local tracks. The old Higginsville mining centre, close to CGML’s
Higginsville project, lies about 22 kilometres to the north east.
Bullion acquired the Chalice mining lease from Resolute in October 2003, and later applied for further tenements
in its own name. The tenements now held cover an area of 172.5 square kilometres, and comprise 3 exploration
licences, 44 prospecting licences and a single mining lease (“M”) which covers the old Chalice mine. Included
in this area is a prospecting licence over which the CNJV holds an option. The granted tenements have an
aggregate annual statutory expenditure commitment $481,860, however, 33 of the tenements are subject to
the CNJV (see opening comments Section 3) under which Equinox must meet $370,220 in statutory expenditure
commitments for those tenements.
Exploration by Resolute and Bullion has identified a series of geochemical anomalies and mineralised intercepts
in drillholes which require follow-up. CGML has reviewed the extensive database and has developed numerous
exploration targets.
The Chalice project was visited on 11 November 2005.
4.1
PREVIOUS EXPLORATION AND PRODUCTION
Prior to the discovery of the Chalice deposit by Samantha in September 1993, there had been no history of mining
in the area, despite the region being well endowed with gold at Norseman, Higginsville and St Ives, and nickel
at Widgiemooltha and Kambalda. The first reported exploration in the area was in the period 1968 to 1971 when
Newmont Mining Corporation conducted a search for nickel sulphide mineralisation in ultramafic rocks around
the Pioneer Dome. The work included magnetic surveying, geological mapping, soil geochemistry and surface
prospecting for gossans. In the Chalice area, activities were restricted to outcrops within the mostly residual soil
covered ultramafic stratigraphy. Despite drilling intersecting sheared sulphidic and quartz veined lithologies, no
gold assays were completed.
In the early 1970s, Falconbridge Nickel Inc. explored for nickel, without success, and in the early 1980s, Lachlan
Resources NL held tenements in the area. In 1987, Billiton Australia Ltd (“Billiton”) conducted a small BLEG stream
sediment sampling program over ground which includes the Chalice deposit. The highest gold value reported was
2.5 ppb from a stream located about 1 kilometre south east of Chalice. Follow-up BLEG sampling produced a peak
sample value of 7 ppb gold, however, no further work was completed to identify the source of the anomaly.
Infill soil sampling of the Billiton anomalies in 1993 by the Widgiemooltha Joint Venture, comprising Samantha,
Great Southern Mines NL and Newmex Exploration Limited, outlined a gold-in-soil anomaly with a peak value of
360 ppb gold. Follow-up RC drilling returned a number of strong intercepts, including 38 metres at 10.86 g/t Au
from 4 metres in WMC 9 and 30 metres at 24.8 g/t Au from 6 metres in WMC13. The discovery was announced in
September 1993 and by January 1994, an Inferred Resource of 3 million tonnes at a grade of 6.1 g/t Au containing
596,000 ounces gold had been outlined. In January 1995, a Proved and Probable Ore Reserve of 2.8 million tonnes
at a grade of 5.4 g/t Au was announced. Mining commenced in May 1995, and by the cessation of operations in
January 1999, 3.1 million tonnes of ore grading 5.5 g/t Au containing 556,000 ounces gold had been produced.
Included in this is 218,000 tonnes at a grade of 5.0 g/t Au which was mined by underground methods.
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Exploration by Resolute showed that mineralisation continues beneath the open pit, and down plunge in the socalled “Deeps” shoots. Measured Resources of 300,000 tonnes at a grade of 3.3 g/t Au and Indicated Resources
of 70,000 tonnes at the same grade containing a combined 39,200 ounces gold were estimated beneath the
final pit limits to a depth of around 200 metres, whilst Inferred Resources of 1.2 million tonnes at a grade of 3.2 g/t
Au containing 123,500 ounces gold were outlined in the Deeps 1 and Deeps 3 positions to a depth of about 500
metres (Figure 8). An underground mining pre-feasibility study in 1998 identified potentially mineable resources of
457,000 tonnes at a grade of 5.29 g/t Au above a cut-off grade of 3.0 g/t Au containing 77,500 ounces gold. The
study assumed mechanised mining of the ore and treating it at the since removed Chalice mill, but concluded
that either or both of higher grades or a much larger tonnage would be necessary for profitable development.
Although the current gold price is much higher than that assumed for the study (A$475/ounce), the capital
required to establish underground access and to re-establish a mill on site, or the additional costs which would
be incurred for trucking to a third party mill for toll treatment would probably still render development of the
known mineralisation uneconomic. More recent editions of the JORC Code specifically state that portions of a
deposit that do not have reasonable prospects for eventual economic extraction must not be included in Mineral
Resources, which, in the absence of the previous infrastructure, and until new, economically viable resources
are discovered in close proximity, probably makes the classification of the Resolute estimated resources as such
today, a moot point.
Figure 8 : Chalice Project – longitudinal projected location showing previous mining, mineralisation outlines and drill targets
Resolute conducted an extensive regional exploration program concurrent with the mining operations, and
reported significant gold intersections from drilling at the Cavalier and Cavalier South prospects, about 4.5
kilometres south of Chalice, at Frank’s Find, and at Vendetta, about 25 kilometres north of Chalice (Figure 9).
Resolute did not conduct any further exploration along the Chalice trend after 1998.
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Figure 9 : Chalice Project – geology and regional targets
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RC drilling at Chalice Project
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R E P O R T
The Chalice tenements are located over a sequence of mafic and ultramafic volcanic rocks which lie between
the Boorabbin Batholith and the Widgiemooltha and Pioneer Domes, near the southern end of the NorsemanWiluna Greenstone Belt. At Chalice, the greenstone sequence is metamorphosed to amphibolite facies, and has
been intruded by a series of granitic sills and dykes thought to be related to the granites of the Pioneer Dome to
the east, and the Boorabbin Batholith to the west. The stratigraphy strikes broadly north-northwest to north, and
comprises up to four ultramafic sequences separated by amphibolite after tholeiitic basalt. Beneath the maficultramafic sequence are felsic volcaniclastic sediments and the intrusive granites of the Pioneer Dome, whilst the
top of the sequence has been conformably intruded by the Boorabbin Batholith.
Within the Chalice open pit, the sequence comprises the Western Granite (“WG”) which is part of the Boorabbin
Batholith, the Hanging Wall Ultramafic (“HUM”), the Host Amphibolite (“AH”) which is the principal host to the gold
mineralisation, and the Footwall Ultramafic (“FUM”). Within the Host Amphibolite, there are discontinuous remnants
of a highly altered komatiite which are thought to represent a once continuous ultramafic unit termed the Middle
Ultramafic (“MUM”). Within this sequence, several types of granitoid intrusive have been recognised, including the
Western Granite, Dyke 2, which is a steeply west dipping feature with lesser sub-parallel structures, and the Basal
Pegmatite. Dyke 2 was, at least, spatially related to the high grade core of the deposit, whilst the Basal Pegmatite
is generally flat lying, and separates the Deeps 1 and Deeps 3 mineralisation from the Main Lode mineralisation
mined in the open pit (Figure 8). Age dating suggests that the mineralisation is broadly contemporaneous with the
Western Granite and Boorabbin Batholith, but marginally older than the apparent emplacement of Dykes 1 and
2 and the Basal Pegmatite.
The mafic-ultramafic sequence has been deformed by a series of early, broadly layer-parallel shear zones
developed on the margins of individual units, or entirely within the Host Amphibolite. The dominant fabric is S1,
which is parallel to layering, and with which the bulk of the mineralised veining and mineralisation within the
Chalice deposit was conformable. A number of late faults have been recognised, including a strike parallel, subvertical fault with a west down movement that appears to displace the extensions to the Deeps 3 resource.
4.2.1
CHALICE MINERALISATION
The bulk of the production from Chalice was hosted by calc-silicate altered amphibolite located between the
HUM and MUM. Gold mineralisation was associated with 1 to 30 centimetre thick quartz-diopside-albite-titanite
veining with minor to trace pyrrhotite, pyrite, magnetite, scheelite, chalcopyrite, calcite and apatite. The veins
were emplaced parallel to the S1 foliation and were locally folded and boudinaged. Total sulphide was generally
less than 5%, and the veins were not always gold mineralised. Pervasive quartz-feldspar-diopside-titanite (± minor
pyrrhotite, and trace garnet, hornblende, biotite, calcite and apatite) wall rock alteration associated with the
veining appears to overprint the S1 fabric. As with the veining, gold mineralisation did not always occur where
there was alteration.
Four broadly layer-parallel mineralised positions have been identified, viz:
• Main Lode, which yielded the bulk of the tonnage mined from the open pit. Main Lode occurs in the Host
Amphibolite above the MUM and is continuous with the southern, up dip extensions of the Deeps mineralisation
(Figure 8). The cross-cutting Basal Pegmatite separates the Main Lode below the pit from the Deeps
mineralisation, which has been displaced southward below the pegmatite. Down plunge, the extensions to
the Deeps 3 mineralisation have again been offset to the south by a sub-horizontal granite dyke, and an
interpreted strike parallel sub-vertical fault with west block down movement. The Main Lode horizon is inferred
to extend southward from Chalice and ultimately through the Cavalier and Cavalier South prospects 4 to 6
kilometres distant. To the north of the Deeps extensions, it appears likely that the Main Lode horizon is significantly
displaced by the Western Granite. The down dip margin of the Main Lode appears to either abruptly decrease
in grade in otherwise altered amphibolite, or locally, especially in the Deeps, truncate against the HUM.
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• MUM Lode, comprising mineralisation located in or near MUM lithological units. High grade ore was mined from
underground from MUM Lodes on the north end of the pit, and from shallow positions at the south end of the
pit. The highly variable position of the MUM within the stratigraphy and its discontinuous nature are a result of
folding and shearing, with MUM Lode mineralisation only sporadically developed along strike.
• Footwall Lode, comprising a series of continuous, but low grade intersections located at or near the contact
between the Host Amphibolite and the Footwall Ultramafic, especially in the south end of the pit. Within the pit,
and in the Deeps areas, the horizon remains largely untested by drilling.
• Other lodes, comprising a series of discrete mineralised horizons developed parallel to Main Lode in amphibolite,
particularly in the Deeps 3 position. These are generally developed below the Main Lode, above the MUM, and
often remain untested by drilling in the Deeps.
Several other mineralisation styles are developed away from the Main Lode environment, including some
palaeochannel material near the western side of the Chalice mining lease and mineralisation in amphibolite
below the FUM to the east of the pit.
4.2.2 Interpreted Mineralisation Controls
CGML has concluded that the mineralisation at Chalice is hosted in D1 shear zones in a number of stratigraphic
positions, and that the mineralisation developed synchronously with granite emplacement and peak metamorphic
conditions. The bulk of the mineralisation mined to date has been sourced from the Main Lode structure. The
following are features of the main body of mineralisation mined from the open pit:
• The deposit is located where the overall north north westerly striking stratigraphy swings to a
north-south orientation.
• The mineralisation is developed in an apparent thickening of the Host Amphibolite between the
FUM and HUM.
• The greatest accumulation of gold is associated with the steeply west dipping Dyke 2, which has been
described as a “strained granite” located within a shear zone.
• Mineralisation is associated with fold structures, either as intrafolial features in high strain zones, or as gross
features such as the MUM Lodes in the south end of the pit. The mineralisation in the Deeps occupies an
intrafolial position.
• High grade shoots plunge shallowly to the north-northwest, parallel to F2 fold axes.
• No zoning has been recognised in the calc-silicate alteration system to date.
4.3
WORK COMPLETED BY BULLION
4.3.1 Down-plunge Extensions of Chalice Lode System
Following a review and re-interpretation of the results of previous drilling below the Chalice open pit, Bullion
completed three pre-collared diamond drill holes to test the Deeps mineralisation in the March quarter of 2005. The
holes targeted mineralisation in either the Main Lode or the MUM Lode positions, with the deeper holes targeting
mineralisation on the other side of the interpreted strike parallel fault and beneath the flat lying granite dyke
which separates the Deeps 3 position from Deeps 4 (Figure 8). Four RC pre-collars totalling 820 metres, and three
diamond tails for 1,146 metres of coring were completed. Hole collar positions were established by survey, and all
holes were downhole surveyed by both magnetic and gyroscopic methods. Directional drilling techniques were
employed to ensure the targets were intersected where planned. The holes were routinely logged and sampled,
and the samples assayed for gold. Samples reporting significant gold values were re-assayed using screen fire
assay techniques.
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The first hole was planned to probe a large untested position between the Basal Pegmatite and the Deeps 3
resource. The first pre-collar BCRC001 was abandoned due to excessive deviation. BCRD002 was directed toward
the same target at a vertical depth of 200 to 250 metres, and reported intersections of 2.7 metres at 4.52 g/t Au
from the Main Lode position and 4.0 metres at 5.73 g/t Au from the MUM Lode (Figure 8). The Main Lode intersection
is similar in tenor to nearby drillholes beneath the Basal Pegmatite. Bullion noted that there is a significant area
of untested MUM Lode between the BCRD002 intersection and the underground workings which exploited this
structure immediately beneath the open pit.
A 298 metre deep pre-collar was drilled for BCRC003 with the intention of testing a similar target to BCRD002, and
although penetrating to within 30 metres of the Main Lode position, was not core drilled to the planned target.
BCRD004 intersected the Main Lode sequence at a vertical depth of about 550 metres and was extended into the
footwall to test other potential lode positions, including the Footwall Lode associated with the FUM. BCRD004A was
wedged off BCRD004 to test the Main Lode position at the same depth as BCRD004, about 40 metres to the north.
Best intercepts in BCRD004 were 17.4 metres at 1.67 g/t Au, including 2.9 metres at 5.1 g/t Au in Main Lode, and
14.5 metres at 1.33 g/t Au in MUM Lode. BCRD004A intersected 10.45 metres at 2.59 g/t Au, including 1.55 metres
at 6.74 g/t Au in Main Lode. In both holes, the gold mineralisation occurs in association with intense quartz-feldspardiopside-pyrrhotite alteration in the interpreted offset position of Main Lode beneath the granite dyke.
Although clearly not economic, the intersections confirm the continuation of the Chalice mineralised system
beneath the granite dyke, with potential remaining to locate a Chalice-like deposit either along strike or down
plunge of the intersections in BCRD004/4A.
4.3.2
REGIONAL EXPLORATION
The Resolute surface geochemistry and drilling database has been used to develop layer files for use in a GIS
package. Maximum down-hole gold values have been extracted from the drilling database and plotted. The
drilling database has also been used to generate a complete set of drilling cross sections throughout the project
area which have been interpreted with respect to geology, regolith, alteration, structure and gold mineralisation.
In addition to the Cavalier, Cavalier South, Vendetta and Frank’s Find prospects, this work has identified a number
of individual holes and clusters of holes which are clearly anomalous and warrant follow-up drilling.
The surface geochemistry database comprises almost 21,000 records for gold only. Gold-in-soil values have been
plotted and interrogated using GIS software and referenced to mapped geology and aerial photography. This
work identified several subdued gold-in-soil anomalies (>10 ppb) in areas of thin transported soil cover that warrant
follow-up. Parts of the project area, particularly to the south of the Chalice mine, are blanketed by a variable
thickness of Tertiary transported cover. Soil geochemical programs conducted over these areas are considered to
have been largely ineffectual and shallow drilling will be required to obtain meaningful samples. Any gold-in-soil
values in these areas below the 10 ppb threshold may be significant.
A detailed aeromagnetic and structural interpretation has been prepared using the Resolute detailed
aeromagnetic data, bottom-of-hole geological and geochemical data from the drilling database and any
available outcrop mapping. The interpretation has been used as the basis for the identification and development
of structural and/or geological targets.
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EXPLORATION TARGETS
4.4.1 Chalice-style Deposits at Depth
Several targets with potential for the discovery of Chalice-style mineralisation have been identified below the
Chalice open pit:
• Drilling of the Deeps 4 target beneath a flat lying granite dyke early in 2005 intersected only modest gold
grades, albeit over substantial widths, with higher grades reported over narrower internal intervals. The drilling
confirmed the continuation of the Chalice mineralised system at depth, and potential exists along strike and
down plunge to discover higher grade mineralisation in a Chalice-like geological setting. Bullion’s drilling may
have intersected the margins of a more substantial system, and an extended drilling program is proposed to
continue testing of the Main Lode position.
• A conceptual target designated MinSys 4 has been identified at depth to the south of the existing open pit
(Figure 8). Here, the regional strike of the sequence swings to a northerly trend, the amphibolite sequence
appears to have thickened and broad zones of calc-silicate alteration and gold anomalism have been
outlined by RC and diamond drilling, including 12 metres at 2.57 g/t Au from 114 metres and 4 metres at 4.24
g/t from 172 metres. These features are similar to those observed for the Chalice deposit, and may represent
the up-plunge expression of a Chalice-style deposit which may be located at moderate depth.
• A further conceptual target has been developed wherein a substantial lode may be developed in a large
scale flexure in the Footwall Lode system, analogous to a similar flexure in the MUM Lode in the southern end
of the open pit. The down-plunge extensions of this flexure should intersect the down dip extension of the
Dyke 2 granite which was associated with the best mineralisation in the Chalice orebody. CGML believes the
combination of these factors suggests potential for the development of a Chalice-like deposit at depth.
• Potential has also been identified to incrementally add to the resources defined by Resolute in Main Lode
resources at Deeps 3, and to define new resources in Deeps 2 and in MUM Lode targets at depth. The target
sizes, of themselves, are unlikely to be economic, however, successful exploration would have the potential to
add to the resources available for mining from a significant new discovery.
4.4.2 Regional Targets
Targets have been sub-divided into first pass targets, soil geochemical anomalies requiring follow-up, magnetic
and/or structural targets and existing drillhole geochemical anomalies. In all, 21 targets have been identified, four
of which CGML considers high priority, with eleven warranting first pass or further RAB or aircore drilling. The targets
are shown in Figure 9 and are discussed below.
Drillhole Geochemical Anomalies
The drilling database has been used to generate hard copy cross sections through areas with anomalous drillhole
results away from the Chalice mining lease. These were used in conjunction with aerial photography, interpreted
geology and aeromagnetic data to generate drilling targets. The drillhole geochemical targets include Cavalier,
Cavalier South, D9, Vendetta and Frank’s Find, as well as weak gold mineralisation (to 0.25 g/t Au over 1 metre)
present in drilling at three other locations.
• At Cavalier, several significant gold intersections, including 2 metres at 36.7 g/t Au from 134 metres in WMC0363,
4 metres at 2.03 g/t Au from 50 metres in WMC0394, 1 metre at 7.80 g/t Au from 73 metres in WMC0395 and 4
metres at 3.89 g/t Au from 47 metres in WMA0922, have been reported from aircore, RC and diamond drilling
adjacent to, and on a granite-greenstone contact. Anomalous gold values are present over 800 metres of
strike, with some of the higher grade intercepts coincident with the granite-greenstone contact. Although
the anomaly has been tested at depth on most sections, and the higher grade zones appear to be limited
in their strike extent, drill core is to be re-logged in an attempt to determine the structural controls on, and
style of gold mineralisation.
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• Aircore, RC and diamond drilling at Cavalier South has intersected substantial widths of low grade gold
mineralisation over 1 kilometre of strike, predominantly within granite, and close to the granite-greenstone
contact. Intersections include 12 metres at 0.57 g/t Au from 58 metres to end-of-hole in WMA0834 and 4 metres
at 9.59 g/t Au from 40 metres in WMC0486. Diamond drill testing returned broad intersections of low grade
mineralisation including 13 metres at 0.25 g/t Au from 148 metres in WMD0205 and 21 metres at 0.20 g/t Au
from 128 metres in WMD0206. The mineralised zone remains open to the south, within the granite, and there
is scope for additional aircore drilling. Following re-logging of drill core to determine the structural controls on
mineralisation, a deep hole may be drilled to test for cross-cutting structures.
• Reasonably intensive RAB and RC drilling at the D9 anomaly includes a RAB drill intercept of 16 metres at 8.39
g/t Au from surface in WMR0643. A single, immediately adjacent follow-up RC hole reported 6 metres at only
0.28 g/t Au from surface, suggesting that the drilling may be oriented at a low angle to the mineralised structure.
There is scope for some follow-up drilling oriented at a high angle to the existing drill sections.
• At Vendetta, gold mineralisation (up to 4 metres at 5.8 g/t Au and 1 g/t Au over 10 metres) has been intersected
by RAB and RC drilling over a 500 metre strike extent of altered mafic-ultramafic rocks. The main mineralised
zone is open to the north west, and the intersection of the mineralised structure with an interpreted granite to
the north west will be the target of further exploration.
• The Frank’s Find prospect covers an area of mafic and ultramafic sub-crop where RAB drilling has reported
intersections up to 8 metres at 1.6 g/t Au within a bedrock geochemical anomaly extending over 1.5
kilometres of strike. The mineralisation remains open to the west on several sections in the central part of
the prospect area.
Magnetic and/or Structural Targets
These were generated by processing of aeromagnetic data in conjunction with geological and structural
interpretations. The targets comprise untested features with relatively high magnetic relief and/or areas with
apparent demagnetisation which may be associated with magnetite destructive alteration along interpreted
structures. Of the six targets identified by the analysis, two have been designated as high priority. One of the
targets occurs in an area of high magnetic susceptibility which may indicate an ultramafic unit or magnetite
altered mafic unit. The feature coincides with a flexure in an interpreted structural feature in an area of transported
cover. The target is regarded as a Chalice look-alike.
Soil Geochemical Anomalies
Six gold-in-soil geochemical anomalies have been identified which are either untested, or have not been
adequately tested. These include a +10 ppb layer-parallel anomaly traceable over 1 kilometre of strike within
an area of mafic-ultramafic outcrop and sub-crop, with a peak greater than 50 ppb gold. A second +10 ppb
anomaly extending over a similar strike interval has been identified.
FIRST PASS TARGETS
A first pass target has been identified at Vendetta North West, where a 5.5 kilometre extension of the greenstone
sequence at Vendetta lies under recent cover, with no record of any surface geochemical sampling or drilling.
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R E P O R T
CGML has developed a forward exploration program for the Chalice project as follows:
• Phase 1 diamond drilling comprising two step-out holes north of BCRD004A to test for extensions and a
possible high grade core to the Deeps 4 target, and drilling to test the concept of a Chalice analogue at the
MinSys 4 prospect.
• Phase one aircore and RC drilling of regional geochemical and magnetic and/or structural targets.
• Field checking, regolith and geological mapping and surface geochemical sampling over first pass targets if
the regolith is amenable. Auger or vacuum drilling, or partial leach sampling will be undertaken in areas where
the transported cover is interpreted to be thin.
• Given encouragement in the initial exploration, follow-up diamond drilling will be completed at Chalice Deeps,
MinSys 4 and any encouraging regional exploration targets.
CGML has budgeted for expenditure of $1,109,650 in Year 1 and $767,250 in Year 2 should $7.5 million be raised.
If only the minimum subscription is raised, the expenditure in Year 1 will be reduced to $738,150, and in Year 2
to $596,250. As with Higginsville, expenditure to test high priority targets will be largely unchanged, however,
the amount of drilling proposed for testing of lower priority targets and follow-up drilling has been reduced. The
proposed exploration expenditure is summarised in Table 2.
Table 2: Chalice Project Program and Budget
support
Drilling
Geochemistry &
assaying
GIS
Tenements &
associated costs
Total
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Year 1
Year 2
Total
$288,800
$288,800
$577,600
Year 1
Year 2
Total
$244,800
$244,800
$489,600
$696,000
$59,650
$383,000
$20,250
$1,079,000
$79,900
$383,000
$46,150
$261,500
$15,750
$644,500
$61,900
$8,000
$57,200
$8,000
$67,200
$16,000
$124,400
$7,000
$57,200
$7,000
$67,200
$14,000
$124,400
$1,109,650
$767,250
$1,876,900
$738,150
$596,250
$1,334,400
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YANDEEARRA
Yandeearra comprises over 1,400 square kilometres of tenements located about 100 kilometres south southwest of
Port Hedland in the West Pilbara Gold Field (Figure 10). The tenements are located largely within the Yandeearra
Aboriginal Reserve, where a moratorium on exploration and mining that was in place until 1998 resulted in the
area being virtually unexplored by modern methods prior to Bullion’s involvement from mid-2002. The project
covers part of the Archaean Mallina Basin, an emerging metallogenic province where recent exploration has
identified new gold resources at Range River Gold Ltd’s (“Range River”) Indee project and De Grey Mining Ltd’s
(“De Grey”) Turner River project, which includes the Wingina Well prospect.
Figure 10 : Yandeearra Project – location, geology and prospects
Access to the southern part of the project is available from Port Hedland via the sealed North West Coastal
Highway and the Great Northern Highway for 100 kilometres, then by 45 kilometres of good quality graded road
to the Mugarinya Aboriginal Community which lies about 8 kilometres south of the tenements. Access to the
northern tenements can also be gained from a number of tracks from the North West Coastal Highway, however,
best access is via the Indee project or south from the Mallina Station Homestead on local station tracks. Good
access throughout the remainder of the area is possible on four wheel drive bush tracks.
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The tenements presently include 8 granted exploration licences, 5 exploration licence applications, 7 prospecting
licence applications and 2 mining lease applications beneficially held by Bullion. Production based royalties are
payable to the original vendors of most of the tenements (“Farno Group”), who also retain the rights to any alluvial
gold. The development of any hard rock mineral discovery will take precedence over the alluvial rights. Bullion
also has an option to purchase 4 mining leases and 2 prospecting licences over the historical Friendly Creek
gold/tin alluvial mining area for $125,000 payable before 29 March 2007. The vendors again retain alluvial rights,
with Bullion to meet the cost of annual rents and rates, and half the annual statutory expenditure commitment.
Bullion’s share of the annual expenditure commitment for all the tenements is $410,780.
Some of the exploration licences are due for partial surrender, however, a part of the area to be surrendered will be
reapplied for as mining leases. Following the partial surrenders and lodgement of the mining lease applications.,
the tenement area is expected to reduce to 1,453 square kilometres. These actions, together with other changes
in tenements, will change the annual expenditure commitments. Figure 10 shows the tenement outline after the
partial surrenders.
The majority of the tenements are located within the Yandeearra Aboriginal Reserve and are subject to a Native
Title claim by the Kariyarra group. Tenement applications outside the Reserve may be subject to the Kariyarra
claim and a further claim by the Ngaluma/Indjibandi group. The Friendly Creek tenements are located on a
Town Common and are not subject to Native Title. A Reserve Access Agreement is in place for the Farno Group
tenements, and Bullion has been made a party to that agreement. The Farno Group also has an Exploration
Agreement with the Kariyarra group over other of the granted exploration licences. Further, Bullion and the Farno
Group have signed a Deferred Heritage Agreement with the Pilbara Native Title Service on behalf of the Native
Title claimants that allows access to undertake low impact exploration without the need for a heritage survey.
Heritage surveys will be required for any future high impact exploration, including drilling.
Two heritage surveys have been completed between Bullion and the Kariyarra Group, the first conducted on a
line clearance basis, and the most recent on a regional site avoidance basis. This has provided greater flexibility
by allowing drilling to proceed in a logical manner based on results. It is likely that any further heritage surveys will
be similarly conducted.
The Yandeearra project was inspected on 3 November 2005.
5.1
GEOLOGY
The project is located in the north-central part of the east-west elongate Archaean Pilbara Craton. The Pilbara
Craton can be sub-divided into two major components, viz, a granite-greenstone terrain exposed in the north,
and the unconformably overlying volcano-sedimentary sequence of the Hamersley Basin which outcrops over
the southern half of the craton and along its eastern margin. The northern granite-greenstone terrain has been
further sub-divided into the East Pilbara and West Pilbara Granite-Greenstone Terranes, which are separated by
the north easterly trending Central Pilbara Tectonic Zone. The Mallina Basin forms the major component of the
Central Pilbara Tectonic Zone and consists of a thick sequence of turbiditic and mass-flow deposits. The East
Pilbara Granite-Greenstone Terrane is dominated by large ovoid granitoid-gneiss complexes partly surrounded by
greenstone belts of tightly folded volcanic and sedimentary rocks.
The Yandeearra tenements straddle the boundary between the Central Pilbara Tectonic Zone and the East
Pilbara Granite-Greenstone Terrane (Figure 10). The south eastern part of the area incorporates the north easterly
trending Pilbara Well greenstone belt, which consists of basalts and ultramafics with silicified sediments that have
undergone up to three phases of ductile deformation and metamorphism. Late stage brittle deformation has
resulted in the formation of a series of north easterly trending faults with dextral offsets. Greenstone lithologies are
overlain by cherts of the Cleaverville Formation to the northeast.
The north eastern part of the project area is dominated by Mallina Formation turbiditic sediments with numerous
interbedded, differentiated mafic/ultramafic intrusives of the Millindinna Intrusion complex and the Satirist Gabbro
suite. Granitic rocks of the East Pilbara Granite-Greenstone Terrane occur to the south east of the tenements. To
the south, outcropping, flat lying Hamersley Basin basaltic volcanics partly obscure the underlying lithologies. The
contact between the Hamersley Basin and the underlying granite-greenstone terrain is an angular unconformity.
The Hamersley Basin rocks typically dip shallowly to the south.
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Regolith conditions are varied, with physiographic divisions closely matching major geological divisions. In the
south, lithologies of the Hamersley Basin Fortescue Group and the Pilbara Well greenstone belt form a well
dissected erosional region of undulating hills. To the north, areas underlain by the Mallina Formation form low hills
and sand plains, whilst those underlain by granitoid rocks comprise the aeolian sand plain and alluvial-colluvial
plain divisions.
5.2
MINERALISATION AND COMPETITOR ACTIVITY
Gold was discovered in the Pilbara in 1888, with the resultant rush producing discoveries at Mallina, Pilbara Creek,
Egina, Hong Kong, Towerana and Station Peak. With the exception of Mallina and Towerana, all occur within
Bullion’s granted tenements. Towerana produced about 29,000 ounces gold, whilst Station Peak produced around
11,400 ounces at an average grade of 27 g/t Au.
In more recent times, the prospectivity of the area and its relatively underexplored status have been highlighted
with significant gold discoveries at Indee and Wingina Well. The larger of these is Range River’s 529,000 ounce Indee
Project which is located immediately north of the project area. The mineralisation is associated with the regionally
significant Mallina Shear Zone, and is characterised by a gold-pyrite-arsenopyrite association developed within
zones of shearing and quartz veining within Mallina Basin turbiditic sediments. The most advanced prospects are
Camel 1 and Withnell with a combined Measured, Indicated and Inferred Resource of 7.6 million tonnes at 1.7 g/t
Au containing 400,000 ounces of gold above a 0.5 g/t Au cut-off. Another four deposits including Calvert (49,000
ounces) and Towerana (29,000 ounces), contain a combined 2.8 million tonnes at 1.4 g/t Au for a further 129,000
ounces in the Indicated and Inferred Resource categories. Feasibility studies are well advanced at Withnell and
Camel 1. De Grey has also enjoyed success at its Wingina Well Prospect where drilling has defined resources
of 3.4 million tonnes at 1.8 g/t Au containing 203,000 ounces of gold above a 0.5 g/t Au cut-off. Gold and PGE
exploration is continuing on numerous other prospects.
Tantalum is mined from the Wodgina deposit on the eastern extension of the Pilbara Well Greenstone Belt and
alluvial mining operations at Friendly Creek produced 167 tonnes of tin concentrate between 1969 and 1982.
5.3
HISTORICAL EXPLORATION
Previous exploration is limited to work around the Station Peak and Egina workings, and nickel and base
metal exploration in the Pilbara Well Greenstone Belt. Only minor drilling had been completed prior to
Bullion’s involvement.
The earliest work is dominated by the activities of The Utah Development Co Ltd (“Utah”). Utah’s search was
focussed on nickel, and it conducted extensive soil and auger geochemical sampling, and percussion and
diamond drilling in the early to mid 1970s. In 1998, Kilkenny Gold NL identified gold targets outside the Yandeearra
Aboriginal Reserve at Nunyerry and Malvern Hill. At Nunyerry, aircore drilling of narrow quartz veins in sediments
reported true widths of up to 2.5 metres at 5.26 g/t Au and 1 metre at 10.8 g/t Au. The Malvern Hill prospect
returned gold assays up to 1.0 g/t Au in soil sampling, with the full extent of the anomaly not yet defined.
Little further work was completed following the imposition of the moratorium on mining and exploration within the
Yandeearra Aboriginal Reserve. The moratorium was lifted for the Farno Group in 1998, and following the grant
of a number of exploration licences, Farno Group undertook regional geological mapping, stream sediment
sampling, grid soil sampling and first pass RAB drilling targeting gold and base metals.
Most of the historical mines have been assessed to only a limited extent for gold and base metals using modern
exploration techniques.
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EXPLORATION BY BULLION
Bullion’s initial efforts were concentrated on follow-up of known mineral occurrences and targets generated by
the Farno Group within the central exploration licences E47/590-591 and 755, which were the only accessible areas
at the time. Minor rock chip and soil sampling was completed, and eleven RC holes totalling 690 metres were
drilled at the Station Peak and Egina Prospects. At Egina, four shallow holes were drilled targeting the historical
copper/gold workings. All intercepted varying amounts of copper oxides in a clay-rich zone in the weathered
zone. Minor quartz veining did not produce any significant gold anomalism. The best result was 15 metres at 1.22%
copper from 20 metres depth from a composite sample taken from hole BYRC001.
At Station Peak, seven RC holes for 462 metres were drilled to test for possible strike and depth extensions of the
North Reef Main Lode. BYRC007 and BYRC008 both intersected the lode in its anticipated position, with BYRC007
reporting 2 metres at 8.5 g/t Au from 47 metres above a 1 g/t Au cut-off and BYRC008 reporting 2 metres at 4.3 g/t
Au from 26 metres and 2 metres at 6.4 g/t Au from 71 metres. The mineralisation is accompanied by quartz veining
and semi-massive pyrite. The remaining drillholes failed to report any significant mineralisation.
During this time, Bullion actively pursued the granting of the northern exploration licences with a view to
searching for Indee-style targets in areas of poor outcrop. The tenements were granted early in 2003, and a
more comprehensive regional exploration program commenced. A low-level aeromagnetic survey on 200 metre
line spacings was commenced over the northern half of the project area, eventually covering approximately
1,000 square kilometres with the acquisition of 4,987 line kilometres of data. Following data compilation, a full
interpretation was completed which identified numerous targets for follow-up.
Subsequent to this, extensive low impact geochemical sampling was completed over a number of areas. Initially,
around 1,800 auger holes were drilled in areas of interpreted transported cover, however, it was later realised
that much of this work was ineffective. Areas under transported cover with minimal sub-crop/outcrop were lag
sampled (-5 millimetre/+2 millimetre), while areas with good outcrop in well dissected erosional landscapes were
sampled by collecting the -80 mesh fraction of the soils. Soil and lag sampling was generally completed on a 400
metre by 100 metre GPS-based grid, with any anomalism followed-up by increasing the sample density. Nearly
3,500 lag samples and 4,400 soil samples were collected.
Recent geochemical work includes a program of vacuum drilling comprising 1,666 holes for 7,871 metres designed
to sample the transported cover/upper saprolite interface. Following on from this, a program of -200 mesh partial
leach sampling was completed over areas of the Central Shear Zone where this is located under transported
cover south of mineralisation identified in previous surface sampling. Several new soil anomalies were identified.
The RAB and aircore drilling, whilst predominantly targeting Indee-style mineralisation, also includes some drilling
within the West Pilbara Greenstone Belt. A total of 24,306 metres in 220 RAB and 342 aircore holes has been
completed over a number of campaigns.
The work completed by Bullion is summarised in Figure 11.
Outercropping BIF – Langernbeck Ranges, Yandeearra Project
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Figure 11 : Yandeearra Project – geology and summary of Bullion work
5.4.1 Results of Exploration for Indee-style Targets
Exploration for Indee style deposits has been focussed within the more northerly of the tenements where a number
of structural corridors have been identified under partial sand cover. Some of these are splays off the Mallina Shear
which hosts the Indee deposit to the north. The two more significant structures are the Central and Wohler Shear
Zones which have been the subject of on-going investigations by geochemical sampling, rock chip sampling and
geochemical vacuum drilling. This work has produced significant gold and arsenic anomalism and generated a
number of encouraging prospects.
Five soil anomalies have been partially tested by broad spaced regional RAB and aircore drilling (Figure 12).
Widespread mineralisation has been reported, however, for the most part, the mineralised intercepts average 0.5
g/t Au to 1 g/t Au, with occasional assays to 5 g/t Au over down-hole intercepts of 1 to 2 metres from relatively
shallow depths. The stand-out result was from BYAC080 at the Fir prospect where a 1 metre interval from 7 metres
reported 268 g/t Au. Attempts to replicate the intercept by scissor drilling were not successful. The next best
intercept at Fir was 2 metres at 6.58 g/t Au from 37 metres in BYAC351. At the Holly prospect, the best intercepts
were 4 metres at 24 g/t Au from 51 metres in BYRB139 and 2 metres at 7.10 g/t Au from 47 metres (including 1
metre at 13.64 g/t Au) in BYAC113. At Mistletoe, the best result was 1 metre at 23.32 g/t Au from 25 metres in
BYAC047, at Spruce, 1 metre at 8.62 g/t Au from surface in BYAC102, and at Aspen, 1 metre at 2.24 g/t Au from
36 metres at hole bottom in BYAC260. A drill section through one of the main target areas at Holly Prospect is
shown in Figure 13.
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Figure 12 : Yandeearra Project – drilling results for Indee-style targets
Yandeearra Project - looking toward Mt Langenbeck
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Yandeearra Project- heritage site clearance team
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Figure 13 : Yandeearra Project – Holly Prospect drill section 7685400mN
Numerous soil anomalies remain untested, and CGML believes that further RAB and aircore drilling and followup RC drilling has an excellent chance of outlining significant gold mineralisation. Although generally weak and
sporadic, mineralisation is widespread, with occasional high grades reported over albeit narrow intervals. Many
of the zones of gold and arsenic anomalism remain open along strike and at depth and have only been partially
tested. Additional drilling is warranted.
5.4.2 Pilbara Well Greenstone Belt Exploration Results
Historically, gold mineralisation within the Pilbara Well greenstone belt has been associated with east-northeast
trending quartz veins or the structural contact between greenstones and the Yule Granitoid Complex. The
aeromagnetic interpretation and soil geochemistry has outlined layer parallel shear zones with coincident goldin-soil anomalies. Five large discrete gold-in-soil anomalies have resulted from this work, with the most prospective
of these the John Bull Shear Zone, where significant gold anomalism is present over 5 kilometres of strike.
Within the John Bull Shear Zone, the Arizona prospect has yielded rock chip results up to 110.5 g/t Au with visible
gold present. This is associated with quartz stockwork veining in porphyry units and carbonate altered mafic units.
A nine hole, 834 metre RC drilling program has been completed at Arizona targeting the porphyry units. The holes
intersected only low tenor mineralisation, with best results of 9 metres at 1.7 g/t Au from 42 metres in BYRC013,
and 7 metres at 1.9 g/t Au from 35 metres in BYRC015. Similar lithologies and results were reported by the Farno
Group from a number of RAB traverses drilled over soil anomalies approximately 5 kilometres along strike to the
southwest. CGML believes that there is reasonable potential to find a significant high grade mineralised zone due
to the extent of the gold-in-soil anomalism and the relatively limited testing which has been completed to date.
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Elsewhere in the belt, recent RAB and aircore drilling at the West Kangan Prospect targeted a Wingina Well-style
target. Gold anomalism can be traced over a strike of 400 metres and is open in all directions. Better results
include 1 metre at 4.97 g/t Au from 11 metres and 10 metres at 0.44 g/t Au from 20 metres in BYAC361, and 1 metre
at 3.50 g/t Au from 9 metres in BYRB197. Only a small section of the structural contact and favourable stratigraphy
has been tested, and further work is required to fully evaluate the area.
Several greenstone associated soil anomalies remain untested or are open along strike. A strong anomaly derived
from conglomerate at the base of the Fortescue Group has been detected, however, similarly sourced anomalies
are widespread in the Pilbara.
5.4.3 PGE Exploration
The primary PGE target in the region is mineralisation associated with the Millindinna Intrusion. De Grey has
reported PGE mineralisation within the intrusion at the Three Kings Prospect near Mt Dove, where low tenor PGE
values and very low order nickel and copper values occur in a peridotite unit about 20 metres below its contact
with a pyroxenitic unit. The regional aeromagnetic interpretation has identified approximately 140 strike kilometres
of prospective Millindinna Intrusion within the project area, in up to five separate bodies. Each body may contain
differing amounts and types of contaminants and has the potential to host its own unique mineralisation style.
Bullion has completed a reconnaissance soil and rock-chip sampling program over the exposed parts of the
Millindinna Intrusion within its tenements. In total, 217, -80 mesh soil samples and 130 rock chip samples were
collected from 15 traverses in the Langenbeck, Millindinna, Satirist and East areas. All samples were assayed for
platinum, palladium, gold, copper, nickel and chromium. At Langenbeck, anomalous PGE values occur on all six
traverses, confirming the anomalism reported from previous exploration. The anomalous values however, occur in
the middle of the pyroxenite unit, not near the top of the underlying peridotite as at Three Kings. Maximum values
were 57 ppb platinum + palladium-in-soil on a traverse in an area where a previous soil survey detected 102 ppb,
and 165 ppb platinum + palladium in a feldspathic pyroxenite on another traverse. The anomaly extends over 5
kilometres of strike. Outside the Langenbeck area, PGE values are at times slightly elevated, mainly in the upper
gabbroic unit. In the East area, slight PGE enrichment occurs near the top of a peridotite as at Three Kings.
5.5
EXPLORATION TARGETS
CGML considers Yandeearra a highly prospective project in an emerging metallogenic province, based on newly
discovered resources in adjacent ground at Indee and Wingina Well. Outside of these, there has been only very
limited modern exploration. The principal targets examined to date have been Indee-style gold mineralisation in
the northern tenements and shear hosted gold mineralisation in the Pilbara Well Greenstone Belt. Geochemical
prospecting techniques have delineated nineteen gold-in-soil anomalies, of which eleven have been partly
tested by first pass drilling. Each of these reported significant gold mineralisation, with the results at two of these
warranting RC follow-up. Eight targets remain untested by drilling, each of which is considered moderate to high
priority and warranting first pass RAB or aircore drilling. The main gold prospect areas and a drill summary plan of
the northern part of the project area are presented in Figure 12.
Regional geochemistry has also generated a number of potential PGE ± nickel-copper targets, as well as nickel
targets. A 5 kilometre long zone of PGE anomalism has been outlined in the Langenbeck area which warrants
follow-up testing. Elsewhere, localised, but prominent magnetic units have been identified in areas mapped as
Satirist Suite gabbros. These may represent serpentinised olivine-bearing cumulate phases in basal depressions
within the sills, and if so, have the potential to host accumulations of magmatic sulphides containing PGE ±
nickel-copper mineralisation. Some 35 kilometres of strike of gabbroic sill are mapped in the western part of the
tenements. There has been no further investigation of these targets due to the primary focus on the gold potential
of the project. First pass testing of the 90 kilometres of strike of Millindinna Intrusive bodies interpreted within the
project is proposed.
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A priority nickel target is presented by generally thin, but extensive basalt and high-Mg basalt flows within the
Mallina Basin that were only mapped in 2000. Schists after these basalts form units up to 300 metres thick with
locally preserved spinifex textures. The detailed aeromagnetic interpretation identified strongly magnetic units
within the generally non magnetic high-Mg basalt flows, which may represent olivine cumulate filled channels
with potential to host magmatic nickel sulphides akin to those at Kambalda.
With the world-class Wodgina tantalum/tin deposit located in the vicinity, there is potential for hard rock tin/
tantalum mineralisation in the Friendly Creek area, where tin concentrates have been won from small alluvial
deposits. The source of the alluvial tin has not been identified, although potential buried targets have been
pinpointed from regional aeromagnetics. Additional alluvial occurrences in the region may also be identified with
further investigations.
5.6
CGML’s proposals for further work at Yandeearra are summarised below:
• Exploration for Indee-style gold deposits in the Mallina Formation turbiditic sediments - high priority. This will
include RC drill testing for primary gold mineralisation down dip from the oxide mineralisation reported in previous
drilling at the Holly Prospect, and infill and extensional aircore drilling of mineralisation in previous drilling at the
Holly, Aspen and Spruce prospects. First pass aircore drilling of already defined surface geochemical anomalies
is also proposed, as well as drill verification of the effectiveness of the partial leach surface geochemistry.
Additional surface geochemistry programs are to be completed over the strike extensions of previously defined
prospects and over structural and conceptual targets in areas of transported cover.
• Exploration for shear-hosted gold deposits in the Pilbara Well Greenstone Belt - high priority. Further RC drill
testing of the surface geochemical gold anomaly over the John Bull Shear Zone is proposed.
• Exploration for PGE ± nickel-copper deposits within Millindinna Intrusion and Satirist Suite gabbroic sills - low
priority. Field confirmation of magnetic interpretations, comprising mapping and rockchip sampling of
outcropping targets and surface geochemical programs over targets where the regolith is amenable to these
techniques. Drill testing of priority targets defined by the mapping and surface geochemistry will follow.
• Exploration for nickel deposits at the base of high-Mg basalt flows within the Mallina Basin and within ultramafic
rocks within the Pilbara Well Greenstone Belt - low priority. Outcropping targets will be mapped and rockchip
sampled, with surface geochemical sampling to be completed over targets where the regolith is amenable to
this approach. Priority targets defined by the mapping and surface geochemistry will be drill tested.
CGML proposes to spend $497,450 in Year 1 and $464,550 in Year 2 if the full $7.5 million is raised. This will be reduced
to $424,000 in Year 1 and $298,200 in Year 2 by adopting a similar strategy to the other projects should only the
minimum subscription be raised. The exploration budget is summarised in Table 3 and the principal exploration
targets are shown in Figure 14.
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Figure 14 : Yandeearra Project – gold, nickel and platinum group element targets
Table 3: Yandeearra Project Program and Budget
support
Drilling
Geological studies
GIS
Tenements & associated
costs
Total
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Year 1
Year 2
Total
$101,000
$96,000
$197,000
Year 1
Year 2
Total
$87,000
$82,000
$169,000
$218,500
$93,250
$12,500
$6,000
$66,200
$208,000
$65,850
$12,500
$6,000
$76,200
$426,500
$159,100
$25,000
$12,000
$142,400
$178,500
$75,200
$12,500
$4,600
$66,200
$88,000
$34,900
$12,500
$4,600
$76,200
$266,500
$110,100
$25,000
$9,200
$142,400
$497,450
$464,550
$962,000
$424,000
$298,200
$722,200
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WILGA
A single exploration licence, E39/1003, comprising 7 sub-blocks, or about 21 square kilometres, and lying about 55
kilometres south of Laverton, is held by Bullion south of Wilga Well (Figure 15). Access is via the graded gravel road
from Laverton to Sunrise Dam (the Bindah Haul Road) and thence via good station tracks throughout the area.
The Wilga project was visited on 12 November 2005.
Figure 15 : Wilga Project – location, regional geology and major deposits
6.1
E39/1003 is located near the eastern margin of the Laverton greenstone belt in the north east of the Eastern
Goldfields Province of the Yilgarn Craton (Section 3.2.1). Wilga lies within the Burtville Domain, adjacent to the
Laverton Tectonic Zone (“LTZ”) which separates the Burtville Domain from the Laverton Domain to the west. The
LTZ is dominated by acid to intermediate volcanic and volcaniclastic rocks, including fault bounded polymict
conglomerates, and minor mafic and ultramafic rocks. It is characterised by structurally disrupted stratigraphy,
with extensive faulting, folding and shearing, variable metamorphic grade, and extensive alteration and
metasomatism. The LTZ is host to world class gold deposits at Cleo/Sunrise Dam (>7.2 million ounces), Granny
Smith (>1.3 million ounces) and Wallaby (>3.8 million ounces), as well as several lesser deposits including Keringal,
Golden Delicious, Jubilee, Red October and Fortitude.
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The sequence to the east of the LTZ is dominated by extensive high-Mg basalt and komatiite, with lesser basalt,
dolerite, gabbro and BIF. Minor clastic sediments and shales are present on a localised scale. The sequence is
less deformed than the adjacent LTZ, with metamorphism generally to greenschist facies, reaching amphibolite
facies near contacts with external granitoids. Near the centre of the Wilga tenement is an outcropping, northsouth trending sequence of basalts, peridotite/dunite and thin BIF (Figure 16). The area of outcrop has been the
focus for much of the past exploration effort as the western and eastern parts of the licence are dominated by
Quaternary colluvium and transported alluvium on the northern margin of Lake Carey.
Figure 16 : Wilga Project – geology and exploration results
Gold mineralisation in the immediate area is hosted by BIF/chert formations, quartz veining, and shear zones
within the basaltic sequences. At the RSVG prospect, visible gold has been noted in association with BIF, and
reconnaissance rock chip sampling of the outcrop has reported assays of 7.8 g/t Au and 5.1 g/t Au (Figure 16).
6.2
PREVIOUS EXPLORATION
The first exploration in the area was conducted by US Steel International Inc. and Australian Selection Pty Ltd
during the 1970s and early 1980s, targeting nickel-copper mineralisation. Investigations were limited to ground
reconnaissance, ground magnetic surveys and nickel/copper soil geochemistry. It was concluded that further
work in the region would require drilling due to the lack of outcrop. Early gold exploration was undertaken by Nord
Resources Pacific Pty Ltd, which drilled 88 airtrack holes averaging 9 metres deep at the RSVG prospect in 1981-83.
Reporting of the work is however incomplete, and the exact location of the drillholes is unknown. WAMEX reports
that the highest gold assay was 0.3 g/t Au and the highest arsenic value 350 ppm. It is not known whether these
are from the same sample.
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In 1986 Delta Gold NL (“Delta”) commenced the first major gold exploration program in the region based on a
broad spaced, 500 metre by 500 metre offset grid. BLEG soil sampling outlined anomalous gold concentrations in
soils at Wilga, with results up to 26 ppb gold. The mineralised BIF at the RSVG Prospect was also targeted, with 5 RC
holes drilled. Scissor drillholes WRC14 and WRC23 intersected 1 metre at 2.95 g/t Au from 47 metres to end-of-hole,
and 3 metres at 1.15 g/t Au from 45 metres respectively.
Follow-up work by Delta included gridding, soil sampling, rock chip sampling and RAB drilling. The -80 mesh soil
sampling identified anomalous gold-in-soil values coincident with the mineralised BIF, with a peak value of 297 ppb
gold. The anomaly is open towards the south where first pass BLEG sampling had produced only minor anomalism.
The soil anomaly was tested by 31 RAB drillholes totalling 455 metres which reported a best result of 2 metres at 4.7
g/t Au from 10 metres in WHR129. This intercept remains open at depth and towards the south. Other intersections
include 8 metres at 2.95 g/t Au from 2 metres in WHR12, which appears to be closed off by scissor drilling, 4 metres
at 1.35 g/t Au from 24 metres to end of hole in WHR08, and 4 metres at 1.7 g/t Au from 2 metres in WHR07.
6.3
EXPLORATION TARGETS, WORK PROPOSALS AND BUDGET
CGML has identified two gold exploration targets, namely, the strike and depth extensions of the mineralisation
defined by Delta’s drilling, and potentially mineralised structures under cover. Although grass roots in nature, the
tenement is located within a fertile, well endowed gold belt, adjacent to a major mineralised structure in the LTZ.
The work proposed at Wilga Project comprises:
• acquisition and interpretation of multi-client and company aeromagnetic data.
• field inspection followed by geological and regolith mapping and interpretation.
• extension of the surface geochemical coverage in areas of amenable regolith, particularly to the south of the
identified gold anomalies.
• auger or vacuum geochemical sampling in areas where the transported cover is interpreted as thin.
• RAB or aircore drilling to test the strike continuity of known gold mineralisation and first pass drill testing of
geochemical anomalies generated from the surface geochemical programs.
A review of the nickel sulphide exploration potential of the tenement has also been recommended.
First year expenditure of $134,300 is proposed, with $175,000 scheduled for Year 2 if the maximum amount is raised.
Expenditure in Year 1 will be reduced to $125,600, and in Year 2 to $97,500 if only the minimum subscription is
raised. Table 4 summarises the exploration budgets.
Table 4: Wilga Project Program and Budget
Exploration staff & field support
Drilling
Geological studies
Geophysics
GIS
Tenements & associated costs
Total
Year 1
Year 2
Total
$13,000
$8,000
$21,000
$57,500
$145,000
$202,500
$37,000
$15,000
$52,000
$12,000
$12,000
$3,000
$3,000
$2,000
$2,000
$4,000
$9,800
$5,000
$14,800
$134,300
$175,000
$309,300
Year 1
Year 2
Total
$13,000
$8,000
$21,000
$52,500
$75,000
$127,500
$33,300
$7,500
$40,800
$12,000
$12,000
$3,000
$3,000
$2,000
$2,000
$4,000
$9,800
$5,000
$14,800
$125,600
C H A L I C E
$97,500
$223,100
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G N A W E E D A
Bullion holds interests in 447 square kilometres of tenements at the Gnaweeda project, about 30 kilometres east of
Meekatharra in the Murchison District of Western Australia. The tenements extend over a north-south distance of
about 50 kilometres (Figure 17). Access is via the Great Northern Highway and/or the Meekatharra to Wiluna road,
thence by a network of pastoral station tracks throughout the area. The Gnaweeda tenements were inspected
on 13 November 2005.
Figure 17 : Gnaweeda Project – location and regional geology
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The tenements comprise four exploration licences and two prospecting licences. Exploration licences E51/926 and
E51/927 are subject to an agreement under which Bullion may acquire a 100% interest in the tenements by the
payment of $100,000 in either shares or cash within a 3 year period from 31 July 2004, by which time, Bullion was to
have spent $30,000 on exploration. E51/1027 is subject to an option agreement under which Bullion may acquire
a 100% interest by the payment of $5,000 within 18 months of 25 January 2005, with the vendors retaining a 1%
net smelter royalty. E51/1074, P51/2514 and P51/2515 are held by Bullion. The combined expenditure commitment
for the tenements is $149,380 per annum. Standard heritage agreements have been negotiated with Native Title
claimants which enable exploration access.
On 10 January 2006, Bullion entered into a Heads of Agreement with Teck Cominco Australia Pty Ltd (“Teck”)
for the formation of an exploration joint venture over the Gnaweeda tenements. The agreement provides for
Teck to earn an initial 51% interest by spending $750,000 over 3 years. Teck may then elect to spend a further
$750,000 to earn an additional 19% interest for a total of 70%. Teck must spend a minimum of $140,000 before it
can withdraw.
7.1
Gnaweeda covers a small greenstone belt that is interpreted to be the northern-most extension of the Southern
Cross Province of the Yilgarn Craton. The 56 kilometre long greenstone sequence is narrow, up to 10 kilometres
wide, and arcuate. It is bounded to the west by a 6 to 10 kilometre wide belt of gneissic and massive granitoids
which separate it from the Murchison Province, Meekatharra – Mt Magnet greenstone belt, and to the east by a
major granitoid belt. The bulk of the greenstones are covered by shallow Quaternary colluvial to alluvial material,
whilst to the north, and along its eastern margin, the belt is partially concealed by west-northwest trending outliers
of basinal sediments and volcanics of the Proterozoic Yerridah Basin.
Several narrow litho-tectonic sub-domains have been identified within the belt. The Western sub-domain comprises
a broadly conformable package of non-magnetic mafic volcanics and intrusives, with extensive, continuous,
narrow, interbedded, strongly magnetic units which are probably ultramafic rocks. The latter define large-scale
isoclinal folds and possible stratigraphic repetitions wherein the layering is conformable with the greenstone
margins.
The Central sub-domain comprises either gabbro or dolerite, within which there are discontinuous and locally
weakly magnetic ultramafic rocks, and discrete lenses or packages of felsic volcanics, sediments and felsic
intrusives, which again, broadly parallel the gross strike of the greenstone belt. Stratigraphic dips appear to be
to the east. This apparently foliated or lineated magnetic package, termed by Bullion the Fairway Magnetic
Package (“FMP”), is moderately irregular and patchy, and appears to represent a high strain or broad shear zone
developed within the greenstones.
The Eastern sub-domain contains a sequence of complexly folded, variably magnetic, mainly mafic and ultramafic
volcanics, including strongly magnetic remnants of olivine orthocumulate which are possibly disaggregated
fragments of a larger layered mafic-ultramafic intrusion. Layering is often at a high angle to the gross strike of the
greenstones, and appears to have been intruded or truncated by the eastern granitoids.
The boundary between the Central and Eastern sub-domains appears to be a major structure, or at least the
eastern margin of a broad high strain zone including the Western and Central sub-domains. Gold mineralisation
in the FMP appears to be related to this structure. A province-scale crustal feature, the Evanston-Edale Fault, has
been mapped to the south of Gnaweeda, and the high strain zone referred to above may be the extension
of this structure. Numerous predominantly northeast-southwest and east-west oriented mafic dykes are evident
throughout the area.
The Quaternary cover is typically around 20 metres thick, with locally, narrow palaeochannels to 80 metres
deep which appear to parallel the north westerly trend of the modern drainage channels. North of the Turnberry
prospect (Figure 18), the cover decreases to around 4 metres, whilst over the Western sub-domain, cover ranges
from around 10 metres to 50 metres in depth. Throughout the bulk of the Turnberry and St Annes prospects the
depth of cover is less than 40 metres.
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The transported cover is draped over
a
variably
profile.
preserved
Tertiary
laterite
weathering
caps
are
developed around Mistletoe and
Bunarra, whilst some remnants of the
basal
Proterozoic
Yerridah
Group
are present along the eastern and
northern margins of the belt. Limited
outcrops of greenstone are present in
the northeast near the old Mistletoe
mine, where laterite is developed
over heavily weathered mafic and
ultramafic rocks and interbedded
shales. In the southern part of the belt
around Bunarra, extensive outcrops
of
weathered
felsic
volcanic,
volcaniclastic and sedimentary rocks
are interlayered with minor mafic
volcanics and dolerite.
Figure 18 : Gnaweeda Project – image of total magnetic intensity showing RAB
geochemical anomalies and principal prospects
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Old gold workings have been mapped at Mistletoe and Bunarra. There is no record of production from Bunarra,
however, the Mistletoe mine has reported production of 15 kilograms (around 490 ounces) of gold from 444 tonnes
of ore mined, as well as 37 kilograms (around 1,200 ounces) of dollied and alluvial gold. The extensive transported
cover would have rendered the bulk of the belt non-amenable to traditional prospecting techniques.
7.2
PREVIOUS EXPLORATION
Modern exploration commenced in 1978 with Esso Australia Ltd (“Esso”) searching for volcanic-hosted massive
sulphide (“VHMS”) style base metal deposits in the central parts of the project area. Esso’s efforts were focussed
on gossanous outcrops which occur in association with felsic volcanics in the vicinity of Bunarra Bore. Dominion
Mining Ltd explored the Bunarra Bore area for gold between 1986 and 1992 and in 1985, St Joe Minerals completed
some sampling and shallow drilling to the west of the Bunarra Bore base metal prospects. More recent base
metals exploration, including some drilling, was conducted by Outokumpu Exploration Australia Pty Ltd in 1991-92.
BHP Minerals Pty Ltd (“BHP”) drilled a magnetic anomaly within the greenstones in 1983 and intersected olivine
orthocumulate rocks.
Between 1993 and 1999 Newcrest Mining Ltd (“Newcrest”), and then Australian Gold Resources Ltd (“AGR”) in a
joint venture with Newcrest, completed extensive exploration for gold within the project area. Newcrest initially
drilled four widely spaced RAB traverses across covered parts of the greenstone belt in 1993. An intersection of
12 metres at 8.7 g/t Au prompted a series of drilling programs over the next 5 years wherein RAB, aircore, RC and
diamond drilling outlined significant, but irregular gold mineralisation around the original intersection, by then
named the Turnberry prospect. Several other anomalous prospects were identified over a north-south strike length
of 15 kilometres. Intersections at Turnberry included 12 metres at 8.7 g/t Au, 24 metres at 2.7 g/t Au, 3 metres at
6.2 g/t Au, 16 metres at 2.58 g/t Au and 1 metre at 21 g/t Au.
Mines and Resources Australia Pty Ltd (“MRA”) explored the area around the old Mistletoe gold workings and to
the east of Newcrest’s ground between 1992 and 1999. In addition to gold around Mistletoe, MRA identified the
MRA-Bunarra gold prospect to the north east of the old Bunarra gold workings. MRA also explored over ground
now covered by E51/1074 and E51/1027.
Helix Resources Ltd joint ventured into the area in 2002-03 and compiled various datasets, including an interpretation
of aeromagnetic data, and undertook heritage surveys, but did not complete any on-ground exploration.
7.3
WORK COMPLETED BY BULLION
All open file reports relating to the project area have been reviewed, and all pertinent reports copied and filed.
An Access digital database of drillhole and soil geochemical data has been assembled and validated using data
sourced from Newcrest, AGR and MRA archives. Soil, rockchip and drillhole data from old exploration programs
not readily available in digital format, comprising principally, results from base metal exploration programs in the
Bunarra area, has been manually entered into the electronic database. Maximum down-hole gold and arsenic
values, and end-of-hole lithologies have been identified and converted into Mapinfo format. Depth of cover was
derived from the logged geology, or where this data was incomplete, by interpreting down-hole geochemistry.
Image enhancements of total magnetic intensity have been prepared using all available open file, public domain
or multi-client aeromagnetic survey data.
Following compilation of the digital database, areas of drilling with significant gold anomalism, significant bedrock
gold intersections or interesting geology were identified and drilling cross sections plotted. All drillhole sections
from the top of the Mistletoe prospect to the base of the Bunarra prospect have been plotted and reviewed
for potential gold exploration targets. The interpretation work also included the preparation of plans showing
maximum down-hole gold and arsenic values, depth of cover and end-of-hole lithology.
Sections warranting follow-up work, either as supergene targets requiring bedrock definition by RAB or aircore
drilling, or bedrock targets to be tested by RC drilling, were flagged for future action. The database and target
inventory have been passed on to Teck.
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EXPLORATION OPPORTUNITIES AND PROSPECTIVITY
Gnaweeda is considered prospective for gold mineralisation developed either within the FMP, or in other structures
along the 50 kilometres of greenstone strike within the tenements. Historically, exploration through most of the
project area has comprised shallow RAB or aircore drilling due to the transported nature of the regolith. North
and south of the denser drilling completed at the Turnberry and St Annes prospects, drill testing has been by 200
metre spaced vertical holes on 400 metre spaced lines, with vertical infill drilling on either 50 metre by 100 metre,
or 50 metre by 50 metre spacings around anomalous results. The drilling achieved only limited penetration into the
Archaean basement.
Notwithstanding, extensive gold and arsenic anomalism has been identified under cover over 15 kilometres of
strike within the FMP mafic and felsic rocks. Anomalous thresholds have been determined at 100 ppb gold and
200 ppm arsenic, generally in bottom-of-hole samples. Arsenic values up to several thousand ppm have been
reported. The spread of gold and arsenic anomalism has been interpreted to indicate the development of an
extensive alteration zone or plumbing system, with aeromagnetic data indicating that the host structure to the
system may extend a further 8 kilometres to the north and 30 kilometres to the south.
Detailed drilling has been undertaken over only 5 kilometres of strike, with drilling in the Turnberry - St Annes area
identifying gold-arsenic mineralisation over 6 kilometres of strike in a zone up to 750 metres wide within a (probably)
east dipping sequence of mafic and felsic volcanic, and sedimentary rocks. Extensive, but generally low grade
mineralisation is developed in mafic rocks, with higher grade material associated with quartz veining in altered
felsic intrusives. Extensive, strong arsenic anomalism extends along and across strike. A series of mineralised targets
that warrant further RC drilling has been developed.
Broad spaced vertical reconnaissance drilling over a further 9 kilometres of strike north and south from Turnberry
and St Annes has identified extensive supergene gold and arsenic anomalism, potentially developed above
or dispersed laterally from mineralised systems similar to those drilled at Turnberry-St Annes. For the most part,
this drilling only just intersected bedrock beneath the cover. Almost no work has been completed within the
sequence to the west of the FMP, although anomalous supergene gold and arsenic has been reported from
broad spaced drilling. No follow-up work has been completed. Relatively little work has been completed on the
Eastern sub-domain.
In addition to the gold exploration potential, further targets may be developed for VHMS style copper-zinc-goldsilver deposits within the FMP. A series of weakly copper-zinc-silver mineralised gossans in felsic volcanic rocks
has been located near Bunarra Bore. Drilling beneath the gossans intersected massive sulphide mineralisation
in rocks correlated with the eastern margin of the FMP. Despite this, no base metals assays or other exploration
was completed in conjunction with the gold exploration. Fifteen kilometres of strike of the FMP remains untested
for base metals, including the area around and to the north of Turnberry where the FMP thickens, has a highly
variable magnetic character, and has extensive gold anomalism.
Historical drilling by BHP suggests that several large, north westerly trending magnetic anomalies hosted within
the Eastern sub-domain are sourced either from a large, dismembered layered mafic-ultramafic intrusion (e.g.
Windimurra and Narndee which are hosted within the Southern Cross Province approximately 200 kilometres to the
south), or from a large, dismembered komatiitic lava lake (analogous to Mt Keith, to the southeast). Both scenarios
have potential for the development of nickel-copper-PGE bearing sulphide deposits. At least 7 kilometres of strike
of this material is interpreted within the project tenements, with no exploration reported other than BHP’s limited
work. Limited drilling in the Western sub-domain suggests extensive discrete magnetic units may be sourced from
ultramafic rocks, possibly after komatiite. Up to 30 kilometres of strike of these units are evident, with no reported
nickel exploration.
Teck has not yet commenced field work on the project.
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PRINCIPAL SOURCES OF INFORMATION
• Avoca Resources Limited, April 2004. Acquisition of the Higginsville Gold Project. ASX Announcement dated 5th
April 2004. www.avocaresources.com.au
• Avoca Resources Limited, October 2005 Spectacular Intersection from Trident. ASX Announcement dated 5th
October 2005. www.avocaresources.com.au
• Avoca Resources Limited, October 2005. Quarterly Report for the three months ending 30 September 2005.
www.avocaresources.com.au
• Blockley, J.G., 1980. The Tin Deposits of Western Australia with Special Reference to the Associated Granites.
Western Australia Geological Survey, Mineral Resources Bulletin 12.
• Bonwick, C.M., 1995. Discovery of the Chalice Gold Deposit, in New Generation Gold Mines: case histories of
discovery. Australian Mineral Foundation.
• Brinkley, M., 2001. The Chalice in-wall ramp and the mining of the north wall remnant. Unpublished report for
Resolute Limited.
• Bucci, L.A., Hagemann, S. G., Groves, D. I., and Standing, J. G., 2002. The Archaean Chalice gold deposit: a
record of complex, multistage, high-temperature hydrothermal activity and gold mineralisation associated
with granitic rocks in the Yilgarn Craton, Western Australia in Ore Geology Reviews, 19, pp 23- 67.
• Bucci, L.A., McNaughton, N. J., Fletcher, I.R., Groves, D. I., Stein, H.J., and Hagemann, S. G., 2004. Timing and
duration of high temperature gold mineralisation and spatially associated granitoid magmatism at Chalice,
Yilgarn Craton, Western Australia. Economic Geology, 99, pp 1123-1144.
• Chalice Gold Mines Limited Business Plan, November 2005. Unpublished company report.
• Croesus Mining NL. Website www.croesus.com.au and company Annual Reports.
• De Grey Mining Ltd, October 2005. Quarterly Operations Report for the three months ending 30 September 2005.
• Gindalbie Gold NL. 1998 Annual Report.
• McIntyre, J.R., 2003. Interpretation of Airborne Magnetic Data, Yandeearra Project, North Pilbara Region,
Western Australia. Unpublished report No: LF09/03 for Bullion Minerals Limited.
• McIntyre, J.R., 2004. Chalice Gold Project. Information Memorandum. Unpublished report for Bullion Minerals Limited.
• McIntyre, J.R., and Kerr, L., 2004. Chalice Mining Lease. Technical Review and Proposed Program, June 2004.
Unpublished report for Bullion Minerals Limited.
• Newman, C., Williams, R., Collis, G., Brown, G., and Parker, B., 2005. The discovery of the Trident gold deposit
Western Australia in NewGenGold 2005 Conference Proceedings pp 73-84.
• Ruddock, I., 1999. Mineral Occurrences and Exploration Potential of the West Pilbara. Western Australia
Geological Survey, Report 70.
• Range River Gold Ltd, March 2005. Market Update – Indee Gold Project. ASX Announcement dated 4 March 2005.
• Resolute Limited. 2002 Annual Report.
• Smithies, R.H., and Farrell, T.R.., 2000. Geology of the Satirist 1:100,000 Sheet. Western Australia Geological
Survey, 1:100,000 Geological Series Explanatory Notes
• Williamson, G., 2005. Higginsville Gold Project. Proposed Exploration Program, March 2005. Unpublished report
for Bullion Minerals Limited.
Northwind Resources Pty Ltd
R CARY BSc., FAusIMM (CP), FAIG, MMICA, MAICD
Director & Principal
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GLOSSARY OF TECHNICAL TERMS
aeolian
Wind blown.
aeromagnetic survey
Measurement of the earth’s magnetic field from a surveying aircraft, for the purpose of
recording magnetic characteristics of rocks.
aircore drilling
A method of rotary drilling whereby rock chips are recovered by air flow returning inside
the rods.
albite
A common rock-forming mineral, sodic plagioclase.
alluvium
Unconsolidated detrital material deposited by a stream or river.
alteration
A change in mineralogical composition of a rock commonly brought about by reactions
with hydrothermal fluids or weathering.
amphibolite
A metamorphic rock composed predominantly of the minerals amphibole and
plagioclase.
amphibolite facies
Mineral assemblage produced by medium to high grade regional metamorphism, and
consisting mainly of amphibole minerals and plagioclase feldspar.
anomaly
A value or group of values different from the expected norm.
apatite
A mineral group with the general composition calcium phosphate.
arsenic
An element, usually occurring as arsenopyrite.
arsenopyrite
A mineral, iron arsenic sulphide or arsenical pyrite. Frequently associated with primary
gold mineralisation.
Archaean
The oldest rocks of the Precambrian era, older than about 2,500 million years.
assay
Accurate determination of metal content of ore, concentrates and metal products.
auger drilling
Drilling technique for use in relatively soft rocks or unconsolidated materials wherein a
rod fitted with auger flights is used for sample recovery.
banded iron formation
Finely banded sedimentary rock comprised of alternating layers of silica and iron oxides
and of Precambrian age.
basalt
A volcanic rock of low silica (<55%) and high iron and magnesium composition,
composed primarily of plagioclase and pyroxene minerals.
base metal
Referring to the transition elements, including copper, zinc and lead.
basement
The igneous and metamorphic crust of the earth, underlying sedimentary deposits.
basin
A large depression in the earth’s crust in which younger sedimentary and volcanic rocks
are progressively deposited.
batholith
Large, generally circular or elliptical body of intrusive rock at least 40 square kilometres in
area; usually granite.
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bedrock
In situ solid rock either at surface or overlain by unconsolidated material.
BIF
Banded iron formation.
billion
1,000 million.
biotite
Iron mica; a common, rock forming, black platy mineral.
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BLEG
R E P O R T
Bulk Leach Extractable Gold, a semi quantitative measure of cyanide extractable gold
contained in a sample.
boudinage
A structure developed in strongly deformed rocks in which an original competent or
stronger layer lying between more easily deformed layers has been stretched and
broken at regular intervals to form bodies resembling boudins or sausages.
carbonate
A compound containing the radical CO3; commonly calcium carbonate or calciummagnesium carbonate.
calcite
A mineral composed of calcium and carbonate.
calc-silicate
A rock composed of calcium-silicate minerals.
chalcopyrite
A copper-iron sulphide, an important copper ore mineral.
chert
Fine grained sedimentary rock composed of cryptocrystalline silica.
chlorite
A platy hydrous silicate related to mica.
clastic
Components of a sedimentary rock that were deposited by erosion and transportation
of mineral and rock fragments.
colluvium
Loose soil or rock fragments accumulated by slow down-slope creep or rain-wash, as
found at the base of slopes or hills.
conglomerate
Cemented clastic rock comprised principally of rounded gravel or pebble sized fragments.
craton
Large, and usually ancient, stable mass of the earth’s crust.
cumulate
Igneous rock containing a framework of touching crystals which were concentrated by
fractional crystallisation of an igneous melt.
D1, D2 etc.
Successive phases of deformation.
deformation
A general term for the process of folding, faulting, shearing, compression or extension of
rocks as a result of stress.
diamond drilling
A method of obtaining a cylindrical core of rock by drilling with a diamond impregnated bit.
diopside
A pyroxene group mineral.
dip
The angle at which a planar feature is depressed from the horizontal; always measured
perpendicular to strike.
dolerite
A medium grained mafic intrusive rock composed mostly of pyroxene and
plagioclase minerals.
domain
Zone within a region or a mineralised body exhibiting relatively consistent structural
characteristics.
dome
A roughly symmetrical up-fold; may be used to describe a small dome-shaped
granite intrusive.
drilling
Penetration of sub-surface strata by rotational cutting equipment in order to obtain
samples from depth.
dunite
An ultramafic rock consisting almost entirely of olivine.
dyke
Thin, sheet-like intrusion of magmatic rock.
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extrusive rock
R E P O R T
Rock which formed from the solidification of molten rock which flowed on the
earth’s surface.
F1, F2, etc.
Successive generations of folding resulting from D1, D2, etc. deformation.
facies
The aspect belonging to a geologic unit of sedimentation, including mineral composition,
type of bedding, fossil content, etc.; rocks of any origin formed within certain pressuretemperature conditions.
fault
A fracture in rock along which there has been relative displacement of the two sides
either vertically or horizontally.
feldspar
A group of abundantly occurring potassium, sodium and calcium alumino-silicate
minerals which are constituents of virtually all igneous rocks.
felsic
Descriptive of light coloured rocks containing an abundance of feldspars and quartz.
fire assay
Assay technique for precious metals in which a relatively large sample is fused with fluxes
to separate the contained metals from gangue minerals.
fold
A bend in strata or any planar structure.
footwall
Rock mass below a fault or ore deposit.
g/t Au
Grams gold per tonne
gabbro
Coarse grained, dark coloured igneous rock of similar composition to basalt and dolerite,
i.e. low in silica with relatively high levels of iron and magnesium minerals.
gangue
Non-valuable component of ores.
garnet
A group of distinctive metamorphic minerals of variable composition.
geochemical survey
Systematic sampling of rocks, soil, soil gas and/or plants to identify areas with anomalous
concentrations of metals or other elements.
geochemistry
The study of the abundance and distribution of elements in rocks, or their weathering
products, by chemical methods.
geological mapping
Process of identifying and recording the surface distribution of rock types, their age
relationships and the structures affecting their distribution.
gneiss
gossan
A foliated rock formed by regional metamorphism.
Hydrated iron oxides produced near surface by the oxidation and leaching of
sulphide minerals.
GPS
Acronym for Global Positioning System, a satellite-based navigation system.
grade
The concentration of the valuable component in an ore, generally expressed as a
percentage for base and other metals, or as grams per tonne for precious metals.
granite
A coarse-grained igneous rock containing mainly quartz and feldspar minerals and
subordinate micas.
granitoid
A granite-like rock in which the mineral crystals lack either external faces or have
uncharacteristic shapes; a field term for a coarse grained felsic rock resembling granite.
granophyre
Rock displaying granophyric texture, that is, fine grained intergrowths of quartz and
alkali feldspar.
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greenschist facies
Facies of weakly metamorphosed rocks produced under low temperature conditions.
greenstone
A term commonly applied to low metamorphic grade rocks of basic composition and
comprised of the minerals chlorite and amphibole. Commonly applied to Archaean
rock sequences dominated by these rock types.
greenstone belt
Generally elongate, tightly folded sequence of Archaean volcanic and sedimentary
rocks enclosed by granite.
hanging wall
Rock mass above a fault or ore deposit.
hornblende
A common mineral of the amphibole group.
hydrothermal
Pertaining to hot aqueous solutions having temperatures up to 400°C. These transport
metals and chemicals in solution and may deposit them under specific conditions to
form mineral concentrations.
image enhancement
Computer manipulation of two dimensional digital data such as aeromagnetic or
geochemical data to give the impression of three dimensionality or topographic relief.
intrafolial
Occurring within a fold.
isoclinal fold
A fold in which the limbs have parallel dips.
intrusive
A mass of rock formed by magma cooling beneath the earth’s surface.
igneous
Rocks that have solidified from molten rock (magma).
JORC Code
Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
2004 Edition. Prior editions original (1989,1992,1996 and 1999) were also known as the
JORC Code. The JORC Code sets out minimum standards, recommendations and
guidelines for the public reporting within Australasia of Exploration Results, Mineral
Resources and Ore Reserves wherein these terms are rigidly defined. The JORC Code
is binding upon members of the Australasian Institute of Mining and Metallurgy and the
Australian Institute of Geoscientists, and is included in the listing rules of the Australian
and New Zealand Stock Exchanges.
komatiite
An ultramafic rock of volcanic origin with high magnesium content.
laterite
Surface induration of re-precipitated iron oxides derived from tropical climate weathering
of underlying bedrock.
lava
Liquid rock which issues from a volcano or fissure, or the solidified equivalent of same.
lithology
The physical character of a rock; rock type.
lode
A tabular or vein like deposit of valuable mineral between well defined walls.
mafic
Descriptive of rocks composed dominantly of magnesium, iron and calcium-rich rockforming silicates.
magnetic anomaly
Zone where the magnitude and orientation of the earth’s magnetic field differs from
adjacent areas.
magnetic susceptibility Measure of the degree to which a substance is attracted to a magnet.
magnetite
Magnetic iron ore, and oxide of iron.
metamorphic grade
The extent to which a rock has been changed from the original as a result of
metamorphism; generally determined by the development of assemblages of minerals
which are characteristic of the temperature and pressure attained at the peak of
metamorphism.
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metamorphism
R E P O R T
Process of change in rock composition, structure, texture and mineralogy induced
by increases in temperature and pressure, other than changes resulting from
progressive burial.
metamorphosed
A rock that has been modified by the effects of pressure, heat and fluids within the
earth’s crust.
metasediment
Metamorphosed sedimentary rock.
metasomatic
Descriptive of processes relating to the chemical alteration of a rock.
mineralisation
Naturally occurring concentration or accumulation of metals or their ore minerals.
Mineral Resource
Concentration or occurrence of mineralised material for which there are reasonable
prospects for eventual economic extraction. Within Australasia, the definition,
classification and reporting of Mineral Resources is strictly governed by JORC Code.
normal fault
A fault on which the hanging wall has moved downwards relative to the footwall.
olivine
An olive green magnesium-iron silicate (Mg,Fe)2Si04, common in mafic and ultramafic
igneous rocks.
open pit mining
Mining process whereby waste or overburden is progressively removed from the natural
ground surface down to expose the ore for mining.
ore
Mineral-bearing rock that may be mined and treated at a profit.
Ore Reserve
Economically recoverable portion of a Mineral Resource, including allowances for mining
dilution and mining losses. Within Australasia, the definition, classification and reporting of
Ore Reserves is strictly governed by the JORC Code.
orthocumulate
Cumulate rock with a high proportion of crystallised trapped intercumulus liquid, with the
crystals displaying well developed crystal faces.
outcrop
An exposure of bedrock at surface.
outlier
Part of a stratified sequence that has been detached from the main body by erosion.
palaeochannel
Ancient river channel now infilled with younger sediments.
palaeohigh
Topographic high on a buried landscape.
partial leach analysis
Analytical technique whereby weakly bound elements of interest, typically on the surface
of sample grains, are dissolved for analysis. Most often used for soil samples to improve
detection limits and reduce interference from high background values of elements of
interest which may be bound up in soil particles.
pegmatite
Coarse grained rock formed from crystallisation of end stage volatiles from a large
cooling rock mass. Generally granitic in composition, and often containing valuable, or
rare and unusual minerals.
pelite
Mudstone
percussion drilling
Drilling technique where an air driven hammer is used to penetrate hard formations.
peridotite
A general term for intrusive ultramafic igneous rocks dominantly consisting of olivine and
lacking feldspar.
PGE
An abbreviation for the platinum group elements, referring to ruthenium, rhodium,
palladium, osmium, iridium and platinum.
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playa or playa lake
R E P O R T
Shallow central basin in a desert plain in which water gathers after rain and is
quickly evaporated.
plunge
The departure of a fold nose or other essentially linear geological structure from the
horizontal as measured in a vertical plane.
polymict
Comprising many different rock types, usually with reference to a conglomerate.
porphyry
A rock with conspicuous crystals in a fine grained ground mass.
ppb or ppm
Parts per billion or parts per million.
pre-collar
Top part of drillhole usually drilled by percussion or RC methods as a pre-cursor to
diamond drilling.
Proterozoic
The younger part of the Precambrian Era, being between 545 and 2,500 million years ago.
psammite
Rock composed of sandy particles; a sandstone.
pyrite
An iron sulphide mineral.
pyroxenite
A coarse grained igneous intrusive rock dominated by the mineral pyroxene.
pyrrhotite
An iron sulphide mineral.
quartz
A common rock forming mineral, silicon dioxide; often occurs as discrete veins or veinlets
occupying fractures or openings within rocks and shears. Quartz veins are common hosts
for gold mineralisation.
Quaternary
Post-Tertiary era from about 1.8 million years ago to the present.
RAB drilling
Rotary airblast drilling; a rotary drilling technique in which sample is returned to surface
outside of the drill rod string by compressed air.
RC drilling
Reverse circulation drilling; a method of drilling whereby rock chips are recovered by
airflow returning inside the drill rods rather than outside, thereby [usually] providing more
reliable samples.
reconnaissance
A general examination or survey of a region with reference to its main features, usually
preliminary to a more detailed survey.
regolith
Mantle of weathering and erosional products covering bedrock.
resource
In-situ mineral occurrence from which valuable or useful minerals may be recovered.
S1, S2, etc.
Schistosity or cleavage associated with D1, D2, etc. deformational events.
saprolite
A soft, earthy clay-rich, thoroughly decomposed rock formed in place by chemical
weathering of rocks.
scheelite
A tungsten mineral, calcium tungstate, CaWO4.
schist
A metamorphic rock with a platy or foliated texture.
screen fire assay
Assay technique for precious metals in which the pulverised sample is screened to
recover coarse fraction of pulp which is assayed separately, before a relatively large
sample is fused with fluxes to separate the contained metals from gangue minerals.
sediment
Rocks formed by the deposition of solids from water.
serpentinised
Hydrothermally altered magnesium rich rock dominated by serpentine minerals.
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shale
R E P O R T
Finely laminated sedimentary rock in which the constituent particles are predominantly
clay or silt sized.
shear
A planar zone of dislocation in rock similar to a fault.
shoot
Relatively small, generally steeply plunging zone of higher grades within a larger
mineralised body.
soil sampling
Systematic collection of samples of soil at a series of locations in order to study the
distribution of geochemical values in the soil.
stockwork
Network of fine veining in a rock mass.
Composition, sequence and correlation of stratified rock in the earth’s crust.
structural
Pertaining to geological structure.
sulphide
A mineral compound characterised by the linkage of sulphur and a metal
supergene
A term to describe a mineral deposit or enrichment formed near the surface generally
by descending groundwater.
tantalum
An unusual metal which is used in the manufacture of semi-conductors. Often found in
association with tin.
tectonic
Of, pertaining to or designating the rock structure and external forms resulting from the
deformation of the earth’s crust.
tectonic zone
Zone of structural dislocation, usually on a large scale.
tenement
Area of land to which access has been granted for mineral exploration or development
under the relevant mining act or statute.
tenor
Average metallic content of an ore (or its grade), mineral, matte or impure metal.
Tertiary
A subdivision of geological time covering the period from 65 to 1.6 million years ago.
tholeiite
A mafic rock of volcanic origin containing a higher proportion of silica than a
normal basalt.
thrust or thrust fault
A low angle (shallowly inclined) fault or shear on which the rocks on the top have moved
up and over the rocks on the bottom.
titanite
Another name for the mineral sphene, calcium titanium silicate.
turbidite
Sediment formed by deposition from turbidity current.
ultramafic
Igneous rocks consisting essentially of ferromagnesian minerals with trace quartz and
feldspar.
unconformity
An erosional surface or depositional break that separates younger strata from
older rock.
vacuum drilling
Drilling technique whereby a hole is drilled by a rotating blade bit and the sample
recovered through the bit and into the drilling rods by a vacuum.
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vein
A thin sheet-like intrusion into a fissure or crack, commonly bearing quartz.
volcanic
Descriptive of rocks originating from extrusive igneous activity.
volcaniclastic
Rock formed of volcanic ejecta and fragments of volcanic rock.
weathering
The group of processes that change the character and composition of rocks by decay.
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R E P O R T
3 February 2006
The Board of Directors
Level 2
1292 Hay Street
WEST PERTH WA 6005
Dear Sirs,
SOLICITOR’S REPORT
Level Two
1
Fortescue House
INTRODUCTION
50 Kings Park Road
This Report is prepared for inclusion in a Prospectus to be issued by Chalice Gold Mines Limited
(“Company”) for the issue of up to 37,500,000 fully paid ordinary shares at $0.20 each in the
Company to raise up to $7,500,000, to be dated on or about 3 February 2006 (“Prospectus”).
West Perth WA 6005
Australia
This Report relates to Western Australian mining tenements and tenement applications
(“Tenements”). An overview of the Tenements is contained in Schedule A which is attached to
and forms part of this Report.
This Report also contains a summary of the material contracts which affect the Tenements,
PO Box 630
West Perth WA 6872
in Schedule B (“Material Contracts”). A summary of other material contracts is contained in
section 10 of the Prospectus.
T: (08) 9320 4999
2
SEARCHES
F: (08) 9320 4900
For the purpose of this Report, we have reviewed “Mining Tenement Register Searches” of the
Tenements provided by the Western Australian Department of Industry and Resources (“DOIR”).
The DOIR searches were conducted on 24 October 2005 and repeated prior to the issue of the
E: [email protected]
www.prllawyers.com.au
Prospectus, on 17 January 2006.
We have obtained “Quick Appraisal” reports from the DOIR summarising information
available in the “TENGRAPH” system maintained by the DOIR to determine if any native title
claims were registered over the area of the Tenements. These searches were conducted on
27 October 2005.
3
PRL Co. Pty Limited
ABN: 43 109 326 463
An incorporated legal
practice
OPINION
As a result of the searches and enquiries, but subject to the assumptions and qualifications set
out in this Report, we are satisfied that, as at the date of the relevant searches:
(a)
the details of the Tenements included in this Report are accurate as to their status and
the Company’s interest; and
(b)
where an application for a Tenement has been lodged, details included in this
Report are accurate.
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4
S O L I C I T O R ’ S
R E P O R T
ASSUMPTIONS AND QUALIFICATIONS
In this Report:
(a)
we have assumed the accuracy and completeness of the “Mining Tenement Register Searches”, “Registered
Reports” and other information obtained from DOIR;
(b)
we have assumed the accuracy and completeness of all the documentation and information which has
been provided to us by Bullion Minerals Limited (“Bullion”);
(c)
the continued holding of the Tenements is subject to compliance with the terms and conditions of the
relevant legislation and any applicable agreements;
(d)
we have assumed the accuracy and completeness of any instructions, documents and information given
by the Company or any of its officers, agents or representatives;
(e)
with respect to any application for the grant of a Tenement, we express no opinion as to whether such an
application will be granted;
(f)
with respect to applications which are not capable of being legally transferred, we have assumed a
constructive trust as the means by which a beneficial interest is created in the application;
(g)
where compliance with the requirements necessary to maintain a tenement in good standing is not disclosed
on the searches obtained, we express no opinion on such compliance;
(h)
where plaints or objections have been lodged against the Tenements we make no comment on the
likelihood of success of such plaints or objections;
(i)
where a tenement has been granted we have assumed that the future act provisions of the Native Title Act
1993 have been complied with;
(j)
references in Schedule A to any area of land are taken from details in the searches obtained. It is not
possible to verify the accuracy of the land area without conducting a survey; and
(k)
where Ministerial consent to any agreement or dealing in relation to a Tenement is being or will be sought,
we express no opinion as to whether such consent will be granted or the consequences of being refused.
This Report only relates to the mining, native title and aboriginal heritage laws applicable to the Tenements as at
the date of this Report. This Report is limited to the matters expressly contained within it.
5
TENEMENTS GENERALLY
At the date of this Report, the Company is not the registered holder of any of the Tenements.
The Company’s interest in the Tenements arises out of a Tenement Purchase Agreement dated 18 January 2006,
(“Purchase Agreement”), summarised in the Material Contracts in Schedule B to this Report. The acquisition of
the Company’s interest in the Tenements depends upon fulfilment of certain conditions precedent, as set out in
Schedule B.
Where the vendor under the Purchase Agreement, Bullion, is not the registered holder of any of the Tenements
as indicated in Schedule A, the results of our due diligence investigations show that subject to the Assumptions
referred to in paragraph 4 of this Report, Bullion is entitled to become the registered holder of a legal interest in line
with its beneficial interest as indicated in Schedule B, subject to the satisfaction of requirements which are detailed
in the Notes to Schedule A or in Schedule B.
6
LEGISLATION
The Tenements in Western Australia comprise granted exploration licences, prospecting licences and mining
leases, and applications for exploration licences, prospecting licences and mining leases under the Mining Act
1978 (WA) (“Mining Act”).
Amendments to the Mining Act were passed by Parliament on 26 October 2004 and are anticipated to be
proclaimed to operate from 10 February 2006.
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6.1
R E P O R T
Prospecting Licence
A prospecting licence remains in force for four years from the date of grant. A prospecting licence may be
converted into a mining lease and a holder has priority in applications for a mining lease over any area covered
by the prospecting licence. A prospecting licence for which such an application has been lodged remains in
force until the application is determined.
The Mining Amendment Act 2004 will change the conditions attaching to prospecting licences which are granted
under the new legislation for example, a prospecting licence will have a term of 4 years with provision to extend
for one further period of 4 years.
6.2
Exploration Licence
An exploration licence remains in force for a period of five years and may be extended by a further period
or periods of one or two years on application. An exploration licence cannot be assigned or any legal or
equitable interest dealt with during the first year of its term without the prior written consent of the Minister for State
Development (“Minister”).
At the end of the third year of the licence, half of the exploration licence must be relinquished or converted to a
mining lease. At the end of the fourth year half of the remaining licence must again be relinquished or converted
to a mining lease.
The holder of an exploration licence may apply for a mining lease in relation to the same land (or part thereof). If
the exploration licence expires prior to determination of the Mining Lease application, the rights and obligations
of the licence apply as if it is current until the determination of the Mining Lease application.
The Mining Amendment Act 2004 will change the conditions attaching to exploration licences which are granted
under the new legislation for example, such exploration licences will be larger in size, and capable of extension
for an initial term of 5 years and by a further period or periods of 2 years.
6.3
Mining Lease
Holders of both prospecting and exploration licences can apply to convert their licences to a mining lease over
the land the subject of the prospecting or exploration licence.
A mining lease remains in force for a period of 21 years and may be renewed for successive periods of 21 years.
In the case of mining leases the period of 21 years commences from the date of notification by the Minister. A
mining lease cannot be assigned or sublet without the prior written consent of the Minister.
Pursuant to the Mining Amendment Act 2004 a mining lease application may only be applied for when
accompanied by a notice of intent to commence productive mining operations or a “mineralisation report”.
Applications made for mining leases made before the commencement of the act will not be subject to these
new requirements.
6.4
Applications for Exploration Licences and Mining Leases
Applications for exploration licences and mining leases are not capable of being transferred. Where an exploration
licence underlying an application for a mining lease is transferred, the transferee will be entitled to become the
first registered holder of the mining lease when it is finally granted. It is possible for a beneficial interest in relation
to an application to be held on trust.
6.5
Tenement Conditions
Tenements are granted subject to various conditions prescribed by the Mining Act. The conditions regulate the
payment of rent and expenditure and also reporting requirements. Additional conditions may also be imposed,
such as those to address environmental issues.
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R E P O R T
LAND ACCESS
Access to much of the land in Australia for the purpose of conducting commercial activities, such as mining,
is governed by certain Commonwealth and State legislation which outlines procedures that must be followed
to gain access to land and also steps that must be taken to ensure that Aboriginal sites are protected from
any damage.
The applicable legislation is summarised below.
7.1
Native Title Legislation
On 3 June 1992, the High Court of Australia held in Mabo v. Queensland (no. 2) that the common law of Australia
recognises a form of native title. Generally, native title rights to land will be recognised where:
(a)
the claimants can establish that they have maintained a continuous connection with the land in
accordance with their traditional laws and customs; and
(b)
the native title rights have not been lawfully extinguished.
The High Court held that native title rights can be lawfully extinguished by voluntary surrender to the Crown,
death of the last survivor of a community entitled to native title, abandonment of the land in question or
certain government legislation and actions.
In order for extinguishment to be lawful it must comply with obligations imposed by the Racial Discrimination Act
1975 (Cth).
The Commonwealth Parliament responded to the Mabo decision by passing the Native Title Act 1993 (“NTA”)
which came into operation on 1 January 1994. The NTA was extensively amended in 1998 by the Native Title
Amendment Act 1998. These amendments include the ability of a State Parliament to validate any titles which may
have been invalidly granted over pastoral leases and certain other leasehold interests during the period 1 January
1994 to 23 December 1996. Other significant amendments include a revised threshold test for the acceptance of
native title claims, confirmation of extinguishment of native title by the grant of “exclusive possession” leasehold
interests, provisions intended to deal with overlapping claims and provisions for a negotiation process between
government, native title and non-native title parties in relation to certain future uses of native title land.
7.2
Native Title Claim Process
Persons claiming to hold native title may lodge an application for determination of native title with the Federal
Court. The Court will then refer the application to the Native Title Registrar of the National Native Title Tribunal
(“NNTT“) for the registration test. If the Native Title Registrar is satisfied that the lodged claim meets the registration
requirements set out in the NTA, it will be entered on the Register of Native Title Claims (“Register”) maintained
by the NNTT. Registered Claimants are given certain procedural rights in relation to “Future Acts” under the NTA
including the “right to negotiate” procedure.
7.3
Future Act Procedures
A Future Act is a proposed activity or development on land and/or waters that may affect native title, including
the grant of mining or exploration tenements. Claimants’ gain the right to negotiate in relation to the grant of
those interests if their native title registered at the time the government issues a notice (known as a section 29
notice), stating it intends to do the act (i.e. grant the tenement) or is registered within four months of that time.
Claims which do not meet the registration requirements are recorded on the Schedule of Applications Received.
Such claims may be entered on the Register at a later date if additional information is provided by the claimant
that satisfies the Registration Test.
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(a)
R E P O R T
Right to Negotiate Procedure
Under the right to negotiate procedures parties are required to negotiate in relation to the grant of the
proposed future act, eg the grant of a mining tenement.
Negotiations are initiated to obtain
the agreement of the relevant native title parties to the carrying out of the proposed Future
Act on the native title land. The right to negotiate procedure consists of a statutory six month period of
negotiation between the relevant government party, the native title party and the grantee, during
which time the parties must negotiate in good faith.
Generally, the grantee party and the registered native title claim group come to an agreement in
relation to the grant of the tenement. Where the tenement is an exploration or prospecting tenement the
grantee party and the native title party generally reach an agreement in relation to heritage clearance
and protection (see further below in relation to the expedited procedure). Agreements in relation to
mining leases are generally more extensive and often, in addition to heritage protection, make
provision for employment and training, environmental rehabilitation, cultural awareness issues
and compensation.
If parties cannot reach agreement as to the terms of grant, a negotiation party may apply to the NNTT
(as the arbitral body) to make a determination as to whether the grant may proceed (and if so, on
what conditions). Subject to Federal Ministerial intervention the agreement of the parties, or the decision
of the NNTT, will determine whether the mining interest is granted.
As previously indicated, the right to negotiate procedures only apply to native title claimants whose claims
have been accepted for registration at the relevant time.
In addition, the right to negotiate procedures do not have to be followed in cases where an Indigenous
Land Use Agreement (“ILUA”) is negotiated with the relevant Aboriginal people and registered with the
NNTT. In such cases, the procedures prescribed by the ILUA must be followed to obtain the valid grant of
the tenement.
(b)
Expedited Procedure
Some Future Acts might have minimal impact on the native title rights and interests and many qualify
for “fast tracking”. This process is known as “expedited procedure” and applies to the grant of exploration
and prospecting licences and mining leases in Western Australia.
If the proposed grant is advertised under the expedited procedure, native title parties can lodge an
objection. An objection by a native title party is not an objection to the tenement being granted, but
is an objection to the application being fast-tracked. If there is no objection lodged, the tenement can be
granted without delay.
If an objection is lodged to the grant of the tenement under the expedited procedure, the parties may
either negotiate and reach agreement that the expedited procedure does apply, or apply to the NNTT for
a determination.
The grant of tenements by agreement usually follows the entry into an agreement between the applicant
for the tenement and the claimants or objectors, which relates to the protection of both Aboriginal heritage
and Aboriginal sites during exploration.
It is now State Government policy that applicants for exploration licences and prospecting licences
will have to sign a Standard Heritage Agreement or prove they have an existing Alternative Heritage
Agreement before the applications will be submitted to the expedited procedure. In the absence of such
an agreement the applications will be processed under the NTA right to negotiate regime.
If the parties do not reach an agreement that the expedited procedure applies, this issue is determined by
the NNTT. If the NNTT determines that the expedited procedure does not apply, the process for the grant
of the tenement must comply with the right to negotiate provisions in the NTA mentioned above.
C H A L I C E
P R O S P E C T U S
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85
6
7.4
R E P O R T
NATIVE TITLE STATUS OF THE TENEMENTS
Some of the Tenements relate to land which is currently the subject of one or more registered native title claims.
In addition some of the Tenements relate to land the subject of a native title determination. Those claims and the
determination are identified in Schedule A. It is possible that additional claims may be made in the future.
Where the land the subject of a tenement application is the subject of more than one registered native title claim,
the tenement applicant will need to reach agreement with each of the registered native title claim groups prior
to the tenement being granted.
Schedule A identifies any agreements reached with a relevant native title claim group in relation to the grant
of the tenement. Those agreements have been reviewed, are relatively standard in form and do not appear
to impose any unusual or onerous obligations on the tenement holder. We note that a number of tenement
applications presently do not have native title agreements in place and presume that the tenement holder is in
the process of negotiating agreements in relation to their grant.
In relation to granted or live tenements we presume that the future act provision of the NTA have been complied
with prior to grant and that all relevant agreements have been provided to us.
Where native title is found to exist, the nature of the native title may be such that consent to the grant of a mining
tenement may be required by the native title holders.
To the extent that native title has not been extinguished with respect to the underlying land, it is important to note
that where it is proposed to convert from an exploration or prospecting licence to a mining lease and native title
claims are lodged and registered, it will be necessary to go through the right to negotiate process with any native
title holders or claimants whose claims are accepted for registration at the relevant time, unless the Company
enters into agreement with the claimants relating to conversion.
We have not undertaken the considerable historical, anthropological and ethnographic work that would be
required to determine the likelihood that existing claims may be successful, or the possibility of any further native
title claims being made in the future. In addition, we have not undertaken any investigations that would determine
the content of any individual rights claimed in or under any native title claim over the Tenements.
7.5
PROTECTION OF ABORIGINAL SITES
Tenements in Western Australia are granted subject to an endorsement reminding the tenement holder of its
obligation to comply with the requirements of the Aboriginal Heritage Act 1972 (WA) (“Heritage Act”).
The Heritage Act protects sites and areas of significance to Aboriginal people. The Minister’s consent is required
where any use of land is likely to result in the excavation of or damage to an Aboriginal site or any object on or
under that site.
There is no requirement or need for a site to be registered in any public manner or be in any way acknowledged
as an Aboriginal site for it to qualify as an Aboriginal site for the purposes of the Heritage Act. A register of sites is
maintained by the Aboriginal Affairs Department of Western Australia.
We have not conducted a search of that register for the purposes of this Report. The Heritage Act applies to all
Aboriginal sites and objects, whether or not they are registered under the Heritage Act.
In respect of any Aboriginal sites that are ultimately identified on any of the Tenements, the Company will need to
ensure that any interference with such sites is in strict conformity with the provisions of the Heritage Act.
The Commonwealth Aboriginal and Torres Strait Islander Heritage Protection Act 1984 also affords some protection
to Aboriginal sites.
This Act applies to all of the Tenements and is aimed at the preservation and protection from desecration of
significant Aboriginal areas and significant Aboriginal objects. An area or object is found to be desecrated if it is
used or treated in a manner inconsistent with Aboriginal tradition.
We have not conducted any searches in this regard.
86
C H A L I C E
P R O S P E C T U S
0 6
6
7.6
R E P O R T
ABORIGINAL RESERVE LAND
The Mining Act provides that mining may not be carried out on reserve land without the written consent of the
Minister for State Development. Before granting the consent the Minister for State Development must consult the
Minister for Indigenous Affairs and obtain his/her recommendation as to whether mining or exploration should be
allowed and whether an access permit may be issued to enter the reserve. The requirement for an entry permit
is in addition to the approvals necessary under the Mining Act. In order to grant an entry permit, the Minister for
Indigenous Affairs will consult the Aboriginal Lands Trust who in turn consult the Aboriginal communities that are
either living on the land or responsible for the land affected.
8
MATERIAL CONTRACTS SUMMARY
We have examined the Material Contracts relevant to the Tenements, a summary of which is contained in
Schedule B to this Report.
We have assumed:
(a)
that the Material Contracts have been duly executed and have been, or are, in the course of being
stamped and lodged in compliance with the relevant legislation;
(b)
the authenticity of all seals and signatures;
(c)
all of the Material Contracts are within the capacity and powers of, and have been validly authorised,
executed and delivered by and are binding on each of the parties to them;
(d)
the Material Contracts comprise the entire agreement of the parties with respect to the subject matter of
the Material Contract; and
(e)
each party to the Material Contracts had, and has full corporate power and authority to observe and
perform all of its obligations under the Material Contracts.
9
CONSENTS
This Report is provided solely for the benefit of the Company and the directors of the Company in connection with
the issue of the Prospectus and is not to be relied on or disclosed to any other person or used for any other purpose
or quoted or referred to in any public document without our prior written consent.
Pullinger Readhead Lucas consents to being named in this Prospectus as the authors of this Report.
Pullinger Readhead Lucas have given, and have not before the lodgement of this Prospectus, withdrawn their
consent to the inclusion of this Report in the Prospectus.
10
DISCLOSURE OF INTEREST
Pullinger Readhead Lucas will be paid normal and usual professional fees for the preparation of this Report and
related matters, as set out elsewhere in the Prospectus.
Yours faithfully
PULLINGER READHEAD LUCAS
C H A L I C E
P R O S P E C T U S
0 6
87
6
R E P O R T
SCHEDULE A
Tenements
Registered
Holder/
Applicant
Grant
Date
Expiry
Date
Status
Annual
Minimum
Expenditure
Commitment
E47/590
Bullion
30/07/99
29/07/06
Live
$50,000
E47/591
Bullion
30/07/99
29/07/06
Live
$50,000
E47/755
Bullion
30/07/99
29/07/05
Live
$20,000
E47/1041
FM
N/A
N/A
Pending
N/A
Tenement
Number and
Type
Encumbrances
Tenement
Notes
Native Title
Notes
1-4, 29, 40
& 52
1, 2, 16 and 18
Yandeearra Project
Caveat
992H/056
Royalty
Caveat
993H/056
Royalty
Caveat
994H/056
Royalty
1, 4, 6,
7, 40, 52
& 45
1, 4, 8,
9, 40, 52
& 46
1, 2, 16 and 18
1, 2, 16 and 18
Royalty
43
1, 2 and 4
Caveat
995H/056
Royalty
Caveat
996H/056
Royalty
10, 11,
40, 52, 47
& 44
3
8, 40, 52,
48 & 44
2 and 15
E47/1161
Bullion
16/04/03
15/04/08
Live
$25,200
E47/1162
Bullion
14/03/03
13/03/08
Live
$44,100
E47/1163
FM
N/A
N/A
Pending
N/A
Royalty
52
1, 2 and 3
Caveat
997H/056
Royalty
9, 10, 40,
52, 49
& 44
1, 2 and 15
Caveat
998H/056
Royalty
Caveat
999H/056
Royalty
10, 11,
40, 52, 50
& 44
1, 2 and 15
10, 40, 52,
51 & 44
1, 2 and 15
E47/1164
Bullion
14/03/03
13/03/08
Live
$63,000
E47/1165
Bullion
14/03/03
13/03/08
Live
$63,000
E47/1166
Bullion
14/03/03
13/03/08
Live
$63,000
E47/1207
Bullion
N/A
N/A
Pending
N/A
1 and 3
M47/560
Bullion
N/A
N/A
Pending
N/A
1, 2
M47/561
Bullion
N/A
N/A
Pending
N/A
1, 2
E47/1318
Bullion
N/A
N/A
Pending
N/A
1 and 2
Caveat
802H/034
Royalty
Caveat
803H/034
Royalty
Caveat
798H/034
Royalty
Caveat
799H/034
Royalty
P47/1060
T J Pascoe
and R A Sirr
31/05/01
30/05/05
Live
$7,200
P47/1082
L I Ponta
04/12/96
03/12/00
Live
$2,160
M47/354
T J Pascoe
24/11/94
23/11/15
Live
$11,000
M47/373
T J Pascoe
27/11/95
26/11/16
Live
$14,600
M47/374
T J Pascoe
27/11/95
26/11/16
Live
$14,900
M47/380
T J Pascoe
27/11/95
26/11/16
Live
$15,900
M47/498
L I Ponta
T J Pascoe
and R A Sirr
N/A
N/A
Pending
N/A
N/A
N/A
Pending
N/A
M47/783
Bullion
N/A
N/A
Pending
N/A
1 and 2
M47/784
Bullion
N/A
N/A
Pending
N/A
1 and 2
M47/785
Bullion
N/A
N/A
Pending
N/A
1 and 2
P47/1223
Bullion
N/A
N/A
Pending
N/A
1 and 2
P47/1224
Bullion
N/A
N/A
Pending
N/A
1
P47/1225
Bullion
N/A
N/A
Pending
N/A
1
P47/1226
Bullion
N/A
N/A
Pending
N/A
1 and 2
P47/1227
Bullion
N/A
N/A
Pending
N/A
1 and 2
P47/1245
Bullion
N/A
N/A
Pending
N/A
2 and 17
P47/1246
Bullion
N/A
N/A
Pending
N/A
1 and 2
E47/1459
Bullion
N/A
N/A
Pending
N/A
1 and 2
M47/638
88
C H A L I C E
P R O S P E C T U S
0 6
Caveat
800H/034
Royalty
Caveat
801H/034
Royalty
12, 13 &
43
1 and 2
14, 15 &
43
2
16, 17, 18
& 43
2
19, 20 &
43
2
21, 22, 23
& 43
1 and 2
24, 25 &
43
2
13
1 and 2
2
6
Registered
Holder/
Applicant
Tenement
Number and
Type
Annual
Minimum
Expenditure
Commitment
R E P O R T
Tenement
Notes
Native Title
Notes
$35,700
42
10 and 21
Live
$35,700
26, 27 &
42
10 and 21
Grant
Date
Expiry
Date
Status
31/07/02
30/07/07
Live
31/07/02
30/07/07
Encumbrances
Gnaweeda Project
E51/926
E51/927
J A Bunting
& Associates
Pty Ltd
J A Bunting
& Associates
Pty Ltd
E51/1074
Bullion
29/06/05
28/06/10
Live
$63,000
10 and 14
P51/2514
Bullion
06/09/05
05/09/09
Live
$4,960
10 and 14
P51/2515
Bullion
06/09/05
05/09/09
Live
$4,920
10 and 14
E51/1027
Benjay Pty Ltd
17/02/05
16/02/10
Live
$26,100
10
Bullion
23/09/05
22/09/10
Live
$20,000
9 and 19
E15/821
Bullion
15/04/05
14/04/10
Live
$20,000
28 & 41
5, 6, 7, 8 and
11
E15/822
Bullion
17/11/04
16/11/09
Live
$20,000
41
6, 8 and 11
E63/873
Bullion
21/12/04
20/12/09
Live
$20,000
41
6, 8 and 11
P15/4594
Bullion
18/11/04
17/11/08
Live
$8,000
41
5, 6, 8 and 11
P15/4595
Bullion
28/09/04
27/09/08
Live
$7,960
41
6, 8 and 11
P15/4596
Bullion
28/09/04
27/09/08
Live
$7,880
1 & 41
6, 8 and 11
P15/4597
Bullion
28/09/04
27/09/08
Live
$7,880
6, 8 and 11
P15/4598
Bullion
28/09/04
27/09/08
Live
$7,960
6, 8 and 11
P15/4599
Bullion
28/09/04
27/09/08
Live
$8,000
6, 8 and 11
P15/4600
Bullion
28/09/04
27/09/08
Live
$7,960
6, 8 and 11
P15/4601
Bullion
28/09/04
27/09/08
Live
$7,600
6, 8 and 11
P15/4602
Bullion
28/09/04
27/09/08
Live
$7,880
41
6, 8 and 11
P15/4603
Bullion
28/09/04
27/09/08
Live
$7,680
1
6, 8 and 11
P15/4605
Bullion
28/09/04
27/09/08
Live
$7,720
1 & 41
6, 8 and 11
P15/4606
Bullion
28/09/04
27/09/08
Live
$7,640
41
6, 8 and 11
P15/4607
Bullion
28/09/04
27/09/08
Live
$7,400
41
6, 8 and 11
P15/4608
Bullion
28/09/04
27/09/08
Live
$7,280
41
6, 8 and 11
P15/4609
Bullion
28/09/04
27/09/08
Live
$7,040
41
6, 8 and 11
P15/4610
Bullion
28/09/04
27/09/08
Live
$6,920
1
6, 8 and 11
P15/4611
Bullion
28/09/04
27/09/08
Live
$7,560
P15/4612
Bullion
28/09/04
27/09/08
Live
$7,600
41
6, 8 and 11
P15/4613
Bullion
28/09/04
27/09/08
Live
$7,600
41
6, 8 and 11
P15/4614
Bullion
28/09/04
27/09/08
Live
$7,480
41
6, 8 and 11
P15/4619
J L Morton
and A J
Sandercock
09/06/05
08/06/09
Live
$2,000
P15/4634
Bullion
28/09/04
27/09/08
Live
$5,840
6, 8 and 11
P15/4635
Bullion
28/09/04
27/09/08
Live
$8,000
6, 8 and 11
P15/4636
Bullion
28/09/04
27/09/08
Live
$7,800
6, 8 and 11
P15/4671
Bullion
13/10/05
12/10/09
Live
$4,280
41
6, 8 and 13
P63/1248
Bullion
09/07/04
08/07/08
Live
$7,640
1
6, 8 and 11
P63/1249
Bullion
09/07/04
08/07/08
Live
$7,640
1
6, 8 and 11
P63/1250
Bullion
09/07/04
08/07/08
Live
$5,520
Wilga Project
E39/1003
Chalice Project
6, 8 and 11
Royalty
6 and 8
8 and 11
C H A L I C E
P R O S P E C T U S
0 6
89
6
Registered
Holder/
Applicant
Grant
Date
Expiry
Date
Status
P63/1251
Bullion
09/07/04
08/07/08
Live
P63/1252
Bullion
09/07/04
08/07/08
P63/1253
Bullion
09/07/04
P63/1257
Bullion
P63/1258
P63/1259
Tenement
Number and
Type
Annual
Minimum
Expenditure
Commitment
R E P O R T
Tenement
Notes
Native Title
Notes
$5,480
1 & 41
8 and 11
Live
$7,520
1 & 41
6, 8 and 11
08/07/08
Live
$7,640
1 & 41
6, 8 and 11
09/07/04
08/07/08
Live
$7,960
41
8 and 11
Bullion
09/07/04
08/07/08
Live
$8,000
1 & 41
8 and 11
Bullion
09/07/04
08/07/08
Live
$8,000
1 & 41
8 and 11
P63/1260
Bullion
09/07/04
08/07/08
Live
$7,880
1 & 41
8 and 11
P63/1261
Bullion
09/07/04
08/07/08
Live
$7,960
1 & 41
8 and 11
P63/1262
Bullion
09/07/04
08/07/08
Live
$8,000
1 & 41
8 and 11
P63/1263
Bullion
09/07/04
08/07/08
Live
$8,000
1 & 41
8 and 11
P63/1264
Bullion
09/07/04
08/07/08
Live
$7,840
1 & 41
8 and 11
P63/1265
Bullion
09/07/04
08/07/08
Live
$7,680
1 & 41
8 and 11
P63/1266
Bullion
09/07/04
08/07/08
Live
$7,640
1
8 and 11
P63/1267
Bullion
09/07/04
08/07/08
Live
$7,960
1 & 41
8 and 11
P63/1268
Bullion
09/07/04
08/07/08
Live
$7,960
1 & 41
8 and 11
P63/1269
Bullion
09/07/04
08/07/08
Live
$6,920
1 & 41
8 and 11
P63/1270
Bullion
09/07/04
08/07/08
Live
$4,160
1 & 41
8 and 11
30-34 & 41
6, 8 and 20
35 & 41
6, 8 and 11
Encumbrances
Chalice Project
M15/786
Caveat
150H/990
Bullion
27/04/95
26/04/16
Live
$95,500
E15/828
Bullion
17/11/04
16/11/09
Live
$23,400
E15/829
Bullion
06/08/04
05/08/09
Live
$20,000
41
6, 8 and 11
E15/838
Bullion
28/09/04
27/09/09
Live
$20,000
36 & 41
6, 8 and 11
P15/4615
Bullion
28/09/04
27/09/08
Live
$5,880
37 & 41
6, 8 and 11
P15/4616
Bullion
28/09/04
27/09/08
Live
$4,280
6, 8 and 11
P15/4617
Bullion
28/09/04
27/09/08
Live
$4,400
6, 8 and 11
P15/4618
Bullion
28/09/04
27/09/08
Live
$7,680
P15/4620
Bullion
28/09/04
27/09/08
Live
$7,760
8 and 11
P15/4621
Bullion
28/09/04
27/09/08
Live
$7,960
8 and 11
P15/4622
Bullion
28/09/04
27/09/08
Live
$7,560
8 and 11
P15/4624
Bullion
28/09/04
27/09/08
Live
$3,680
8 and 11
P15/4625
Bullion
28/09/04
27/09/08
Live
$7,840
1 & 41
8 and 11
P15/4626
Bullion
28/09/04
27/09/08
Live
$2,840
1 & 41
8 and 11
P15/4627
Bullion
23/12/04
22/12/08
Live
$7,680
1
8 and 11
P15/4628
Bullion
25/11/04
24/11/08
Live
$5,200
1
8 and 11
P15/4629
Bullion
28/09/04
27/09/08
Live
$7,400
1 & 41
8 and 11
P15/4630
Bullion
28/09/04
27/09/08
Live
$7,280
1 & 41
8 and 11
P15/4631
Bullion
28/09/04
27/09/08
Live
$2,000
P15/4632
Bullion
28/09/04
27/09/08
Live
$7,520
41
6, 8 and 11
P15/4633
Bullion
28/09/04
27/09/08
Live
$7,120
41
6, 8 and 11
P63/1271
Bullion
09/07/04
08/07/08
Live
$7,280
1 & 41
8 and 11
P63/1272
Bullion
09/07/04
08/07/08
Live
$6,320
1 & 41
8 and 11
Higginsville Project
90
C H A L I C E
P R O S P E C T U S
0 6
38 & 41
6, 8 and 11
6, 8 and 11
6
Registered
Holder/
Applicant
Grant
Date
Expiry
Date
Status
P63/1273
Bullion
09/07/04
08/07/08
Live
P63/1274
Bullion
09/07/04
08/07/08
P63/1275
Bullion
09/07/04
08/07/08
P63/1276
Bullion
09/07/04
P15/4644
Bullion
P15/4645
Tenement
Number and
Type
Annual
Minimum
Expenditure
Commitment
R E P O R T
Tenement
Notes
Native Title
Notes
$7,920
1 and 41
8 and 11
Live
$7,760
1 and 41
8 and 11
Live
$8,000
1 and 41
8 and 11
08/07/08
Live
$7,720
1 and 41
8 and 11
28/09/04
27/09/08
Live
$2,000
41
6, 8 and 11
Bullion
28/09/04
27/09/08
Live
$7,200
41
6, 8 and 11
P15/4646
Bullion
28/09/04
27/09/08
Live
$2,320
41
6, 8 and 11
P15/4655
Bullion
28/09/04
27/09/08
Live
$2,000
E15/740
Bullion
16/08/04
15/08/09
Live
$20,000
41
6, 8 and 12
E15/860
Bullion
01/07/05
30/06/10
Live
$15,000
39 and 41
6, 8 and 13
P15/4647
Bullion
N/A
N/A
Pending
N/A
41
6, 8 and 11
P15/4648
Bullion
28/09/04
27/09/08
Live
$2,000
41
6, 8 and 11
Encumbrances
Higginsville Project
6, 8 and 11
Key to Tenements Schedule
Bullion
- Bullion Minerals Limited
FM
- Farno-McMahon Pty Ltd
References to numbers in the “Tenement Notes” column refers to the notes set out below.
Tenement Notes
1.
Expenditure status is under expended for the year end preceding the date of this Report.
2.
Conversions 178684 and 178685 pursuant to section 67 of the Mining Act to convert to M47/560 and M47/561
recorded on 27 March 2003.
3.
The prior written consent of the Minister must be obtained before commencing mining on Water Reserves
10550 and 12801.
4.
Consent to mine on Use and Benefit of Aborigines Reserve 31427 granted on 30 July 1999.
5.
10635, 12258 and 12791.
6.
Conversions 220634, 220631 and 220633 pursuant to section 67 of the Mining Act to convert to M47/783,
M47/784 and M46/785 recorded on 27 July 2005.
7.
The prior written consent of the Minister must be obtained before commencing mining on
Water Reserve 12251.
8.
The prior written consent of the Minister must be obtained before commencing mining on Watering Place
for Travellers Reserve 1448.
9.
11584 and 12247.
10.
Consent to mine on Use and Benefit of Aborigines Reserve 31427 granted on 14 March 2003.
11.
The prior written consent of the Minister must be obtained before commencing mining on
Water Reserve 12802.
12.
Caveat 802H/034 forbidding dealing lodged by Bullion Minerals Ltd registered 22 April 2004.
13.
Conversion 214222 pursuant to Section 49 of the Mining Act, to convert to M47/638, recorded
5 May 2005.
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14.
15.
Conversion 40482 pursuant to Section 49 of the Mining Act, to convert to M47/498, recorded 24 October 2000.
16.
17.
Bond PE9474 lodged on 20 January 2004 for $5,000.00 (Security), recorded 20 January 2004.
18.
Consent to mine on Water Reserve 10634 granted on 3 November 2004.
19.
20.
Bond PE9476 for $5,000.00 (Security), recorded 20 January 2004.
21.
22.
Bond PE9475 for $5,000.00 (Security), recorded 20 January 2004.
23.
The prior written consent of the Minister must be obtained before commencing mining on Use & Benefit
of Aborigines reserve 31427 and Water Reserve 12792.
24.
Caveat 801/034 forbidding dealing lodged by Bullion Minerals Ltd registered 22 April 2004.
25.
Bond PE9473 lodged on 20 January 2004 for $5,000.00 (Security), recorded 20 January 2004.
26.
Amalgamation ME1/045 lodged on 16 July 2004 (in respect to the portion of Prospecting Licence
51/2381), granted 25 July 2005.
27.
The prior written consent of the Minister must be obtained before commencing mining on Water
Reserve 18525.
28.
Reserve 7039.
29.
Caveat 992H/056 lodged by FM in respect to 100/100ths shares in the name of Bullion Minerals Ltd.
30.
Caveat 150H/990 forbidding dealing lodged by Resolute Ltd in respect to 15/100ths shares in the name
of Geographe Resources Ltd, registered 7 October 1999.
31.
Agreement 64H/956 (Deed of Charge) between Resolute Samantha Ltd and Macquarie Bank Ltd,
registered 18 August 1995.
32.
Agreement 162H/956 between Resolute Samantha Ltd, Geographe Resources Ltd and Great Southern
Mines NL, registered on 17 November 1995.
33.
Agreement 58H/990 (Deed of Partial Release of Cross Change and Partial Release and Transfer of Mortgages)
between Resolute Ltd, Geographe Resources Ltd and Great Southern Mines NL, registered 27 April 2000.
34.
Bond 206396 lodged on 23 November 2004 for $159,000.00, recorded 23 November 2004.
35.
Reserve 11692.
36.
Reserve 10654.
37.
The prior written consent of the Minister must be obtained before commencing mining on Higginsville
Townsite, Water Reserve 10654 and Recreation Reserve 10952.
38.
The prior written consent of the Minister for State Development must be obtained before commencing mining
on CR 32552, PNR 0000104.
39.
Reserve 11692.
40.
Royalty in favour of Farno-McMahon Pty Ltd pursuant to Farmin Agreement dated 8 August 2002.
41.
This tenement is the subject of the Cowan Nickel Joint Venture between Bullion, Equinox Resources Ltd
and Equinox Minerals Limited.
42.
Area and minimum expenditure commitments will be reduced by 50% on 27 December 2005.
43.
Alluvial exploration rights are retained by the registered holders, by clause 3 of the Option Agreement
(Friendly Creek) dated 11 March 2004.
44.
Repegging and reduction in sub blocks to these tenements is planned in the first half of 2006 to maximise
the Company’s tenement management position under the new legislation commencing in February 2006.
45.
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46.
47.
48.
49.
50.
51.
52.
Alluvial exploration rights are retained by FM , Farno Pty Ltd and Dorsch Resources Pty Ltd by clause 11 of
the Farmin Agreement dated 8 August 2002
Native Title Notes
1.
Crown Reserve for the Use and Benefit of Aborigines.
2.
Kariyarra Native Title Claim WC99/3.
3.
Ngaluma Injibandi Native Title Determination WC99/14.
4.
Bullion Minerals Ltd and Yamatji Marpla Barna Baba Maaja Aboriginal Corporation as agent for the Kariyarra
Claim Group undated
5.
Widji Native Title Claim WC98/27.
6.
Gubrun Native Title Claim WC95/27 (presently deregistered).
7.
Central West Goldfields Native Title Claim WC99/29.
8.
Ngadju Native Title Claim WC99/2.
9.
Wongatha Native Title Claim WC99/1.
10.
Yugunga Nya Native Title Claim WC99/46.
11.
Agreement for Heritage Protection over Exploration and Prospecting Tenure between Bullion Minerals
Limited and the Goldfields Land and Sea Council on behalf of the Ngadju Native Title Claim Group dated
20 January 2004.
12.
Limited and the Goldfields Land and Sea Council on behalf of the Ngadju Native Title Claim Group dated
4 March 2004.
13.
Agreement between Bullion Minerals Ltd and Yamatji Marpla Barna Baba Maaja Aboriginal Corporation as
agent for the Yugunga Nya Claim Group undated.
14.
Limited and the Goldfields Land and Sea Council on behalf of the Ngadju Native Title Claim Group
dated 29 September 2004.
15.
Kariyarra / Farno Deferred Heritage Agreement between Farno-McMahon Pty Ltd and the Kariyarra Native
Title Applicants dated 17 December 2002.
16.
Kariyarra, Farno and Pilbara Aboriginal Land Council Exploration Agreement between Teddy Roberts and
others, Farno-McMahon Pty Ltd and the Pilbara Aboriginal Land Council Aboriginal Corporation dated
22 April 1999.
17.
Bullion Minerals Ltd and Yamatji Marpla Barna Baba Maaja Aboriginal Corporation as agent for the Kariyarra
Claim Group dated 29 July 2005.
18.
Mugarinya, Farno and Aboriginal Lands Trust Agreement for Exploration on an Aboriginal Reserve between
Mugarinya Community Association Inc, Farno-McMahon Pty Ltd and the Aboriginal Lands Trust dated
7 October 1999.
19.
Limited and the Goldfields Land and Sea Council on behalf of the Wongatha Native Title Claim Group
dated 14 April 2005.
20.
Native Title, Training, Employment, Compensation and Heritage Agreement (as amended) between
Resolute Samantha Limited, Tim Champion and Gubrun Aboriginal Corporation dated 3 July 1996 (as
amended) and Deed of Novation between Resolute Limited, Bullion Minerals Limited, Brian Champion and
others and Gubrun Aboriginal Corporation undated, presently not fully executed.
21.
Yamatji Land and Sea Council Contract for Services between Yugunga-Nya People and Helix Resources
Limited and JA Bunting and Associates Pty Ltd dated 12 July 2002.
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SCHEDULE B
Summary of Material Contracts affecting the tenements
1
OVERVIEW
There are five discrete projects in which the Company will acquire an interest subject to completion of the
Purchase Agreement defined in paragraph 2 below. This summary covers the relevant agreements to which
Bullion is a party, and demonstrates the extent of Bullion’s interest, to be acquired by the Company subject to
completion of the Purchase Agreement.
2
Project
Material Agreement
All Projects
Tenement Purchase Agreement with Bullion dated 18 January 2006.
Yandearra
Farmin Agreement with Farno-McMahon Pty Ltd, Farno Pty Ltd and Dorsch
Resources Pty Ltd dated 8 August 2002.
Option Agreement (Friendly Creek) dated 11 March 2004.
Gnaweeda
Letter Agreement with Benjay Pty Ltd dated 25 January 2005.
Letter Agreement with JA Bunting & Associates Pty Ltd dated 8 July 2004.
Heads of Agreement with Teck Cominco Australia Pty Ltd dated 10 January 2006.
Chalice
Sale of Interests Agreement with Resolute Limited dated 9 October 2003.
Chalice and Higginsville
Joint Venture Agreement with Equinox Resources Limited and Equinox Minerals
Limited dated 19 November 2004.
Letter Agreement with A Sandercock and J Morton dated 23 September 2004.
Wilga
No material agreements.
All Projects
Letter Agreement dated 24 January 2006 between Bullion Minerals Limited and
Equinox Minerals Limited Cowan Nickel Joint Venture Deed of Consent dated
24 January 2006 between Bullion Minerals Limited, Equinox Resources Limited,
Equinox Minerals Limited and Chalice Gold Mines Limited.
TENEMENT PURCHASE AGREEMENT BETWEEN THE COMPANY AND
BULLION MINERALS LIMITED (“BULLION”)
On 18 January 2006, the Company and Bullion entered into an agreement pursuant to which Bullion agreed
to transfer to the Company all of Bullion’s legal and equitable interest in the tenements (excluding the nickel
exploration rights the subject of the Letter Agreement and Deed of Consent summarised in paragraph 7) which
are listed in Schedule A (“Tenements”) (“Purchase Agreement”). The consideration paid is the issue of 34,999,998
fully paid ordinary shares in the Company at a deemed issue price of $0.078 each comprising no less than 40%
of Chalice’s issued share capital following any issue of securities by Chalice. In addition Chalice has agreed to
reimburse Bullion for reasonable costs paid for Chalice’s capital raising.
Completion requires satisfaction of certain usual and appropriate conditions, including Chalice obtaining funding
of not less than $6 million on terms acceptable to Chalice, by 30 April 2006.
The Company is entitled to lodge a caveat to protect its rights under the Purchase Agreement.
Bullion has provided standard warranties (as at the execution date and the completion date) to the Company in
respect of the Tenements in the Purchase Agreement.
Chalice has granted Bullion a non exclusive assignable licence to use the technical information relating to the
Cowan Joint Venture. Bullion is also permitted to grant a sub licence in relation to such information, to any entity
that Bullion sells or proposes to sell assets to.
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3
R E P O R T
YANDEARRA PROJECT
The Yandearra Project comprises tenements:(a)
which are 100% legally and beneficially owned by Bullion, pursuant to a Farmin Agreement dated
8 August 2002 with Farno-McMahon Pty Ltd, Farno Pty Ltd and Dorsch Resources Pty Ltd (“Holders”)
(“Farmin Agreement”);
(b)
which are the subject of an option to purchase pursuant to an option agreement dated 11 March 2004
between Bullion, Tim Pascoe, Louise Ponta and Robert Sirr (“Option Agreement”), which option has not yet
been exercised; and
(c)
which remain applications, in the name of Bullion.
3.1
Farmin Agreement
Bullion has earned a 100% interest in the tenements in (a) mentioned above, subject to the royalties in favour of
Farno-McMahon Pty Ltd if Bullion produces any gold or minerals as follows:
(a)
(b)
Gold – up to $2.00 per tonne of ore mined and milled depending on recovered grade; specifically,
(i)
$1.00 per tonne up to 1.5g/t gold,
(ii)
$1.50 per tonne up to 3.0g/t gold, and
(iii)
$2.00 per tonne at a grade greater than 3.0g/t gold.
Other minerals – 2% from the net smelter return of any metal or mineral (other than gold) from which Bullion
derives any income.
Alternatively, if Bullion produces gold from an underground operation in which the recovered grade exceeds
10g/t gold (over any given quarter), Farno-McMahon Pty Ltd is entitled to a 3 % royalty on revenue received from
gold sales, replacing the royalty mentioned above.
Bullion has a pre-emptive right in respect of the royalties mentioned above if Farno-McMahon assign or transfer
the royalties.
The Holders retain the right to alluvial production from the tenements, defined as the top three metres. In the event
that an area is delineated as a bedrock resource by drilling, any alluvial deposits above the bedrock resource are
deemed to be the property of Bullion and the Holders’ rights in relation to alluvial deposits cease to apply.
The Holders are, and remain, responsible for complying with all statutory requirements in relation to any alluvial
mining undertaken. The Holders are responsible for the posting of any environmental bonds required for all
ongoing rehabilitation.
Farno-McMahon Pty Ltd has granted a power of attorney in favour of Bullion in relation to the current remaining
tenement applications.
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3.2
R E P O R T
Option Agreement
Bullion has an option to acquire the tenements in 3 (b) mentioned above pursuant to the Option Agreement,
which expires on 29 March 2007. During the option period Bullion is responsible for paying annual rents and rates,
and half of the minimum expenditure commitments on the relevant tenements. The parties granting the option
(“the Syndicate”) have warranted legal and beneficial title to the tenements free of encumbrances. The option
is exercisable upon payment of $125,000.
4
GNAWEEDA PROJECT
4.1
Option to Purchase with Benjay Pty Ltd
Bullion has an option to purchase E51/1027 for 9 months from 25 January 2005 from Benjay Pty Ltd for $5,000 and
a 1% net smelter return of any metal and minerals produced. Bullion may extend the option by a further 9 month
period upon payment of $2,000, and Bullion is responsible for payment of all rents, rates and minimum expenditure
commitments. Bullion may assign its interest provided the assignee agrees to be bound by the terms of the
Option Agreement.
4.2
Option to Purchase with JA Bunting & Associates Pty Ltd (“Bunting”)
By completing an initial exploration program of $30,000 of exploration expenditure, Bullion has acquired an option
to purchase E51/926 and E51/927 pursuant to an option agreement dated 8 July 2004 for 3 years expiring on 7
July 2007, exercisable by payment of $100,000 in cash or Bullion fully paid ordinary shares. Bullion is responsible
for the minimum expenditure commitment, and rehabilitation of its work. Bullion may assign its interest in the
option to a third party which Bullion has demonstrated has the financial and technical resources necessary to
undertake Bullion’s obligations, and the third party entering into a Deed of Assumption agreeing to be bound by
the terms of the option. Bunting has confirmed its consent to Bullion’s assignment to Teck Cominco Australia Pty
Ltd (pursuant to the Heads of Agreement summarised in paragraph 4.3 below), subject to a Deed of Assignment
and Assumption being entered into. If Bullion exercises the option a 1% net smelter royalty is payable in respect
of metals and minerals produced from E51/926 and E51/927 and Bullion’s interest in tenements within a 5km
radius from their boundaries excluding those which are the subject of the Heads of Agreement summarised in
paragraph 4.3 below;
4.3
Heads of Agreement for a Farm-in and Joint Venture
Bullion entered into a Heads of Agreement dated 10 January 2006 (“HOA”) with TeckCominco Australia Pty
Ltd (“Teck”) whereby Teck may earn a total 70% interest in E51/926, E51/927, E51/1027, E51/1074, P51/2514
and P51/2515.
Teck is required to spend $140,000 by 31 December 2006. Teck may earn a 51% interest by spending a total of
$750,000 by 31 December 2008 on exploration or cash payments to Bullion. Unless Teck then elects to continue
sole funding to earn a total 70% interest, or Bullion elects to convert its interest to a 0.5% net smelter returns royalty,
a joint venture will then be formed between the parties as to Bullion 49%, and Teck 51%.
Teck is responsible for maintaining the tenements in good standing. Joint venture interest may be diluted in
view of pro rata contributions to budgets and work plans. Dilutions to 10% automatically revert to a 0.5% net
smelter royalty.
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If Bullion proposes to raise equity financing at any stage, the principal purpose of which is to participate in the
project, Teck has the right of first refusal in relation to taking up between 10% and 50% of any public offer, or 10%
of any private placement .
There are mutual rights of first refusal for any disposal by a party of its interest , other than to affiliates, and a
change in control of Teck is deemed to trigger these provisions. The tenement sale to Chalice, summarised in
clause 1 above, is expressly permitted provided Chalice agrees to be bound by the terms of the HOA.
Bullion agrees to procure the amendment of the Option to Purchase with JA Bunting & Associates Pty Ltd
summarised in clause 4.2 above, so that there is no royalty obligation on Bullion in relation to tenements acquired
from third parties within a 5km radius of the tenements the subject of the Option to Purchase.
The parties have agreed to negotiate in good faith sales agreements appointing Teck as Bullion’s sales agent for
Bullion’s joint venture share of base metal products.
An area of interest applies for 5km surrounding the tenements other than tenements held by third parties or the
tenements the subject of the agreement with Benjay Pty Ltd summarised in clause 4.1 above. Any surface or
water rights, or mineral properties must be offered to the joint venture.
5
CHALICE PROJECT
5.1
Sale of Interests Agreement (“Sale Agreement”)
Bullion acquired M15/786 from Resolute Limited in addition to other assets. Resolute is solely responsible for, and
must undertake at its own expense, all statutory rehabilitation obligations arising from any mining or exploration
activity on the tenement at any time by Resolute, and indemnifies Bullion accordingly.
6
CHALICE AND HIGGINSVILLE PROJECTS
6.1
Joint Venture Agreement with Equinox Resources Limited (“Equinox”) and
Equinox Minerals Limited (“Joint Venture Agreement”)
With effect on 4 April 2004 Bullion formed an exploration joint venture for nickel on tenements including the Chalice
and Higginsville tenements listed in Schedule A to this report (“Chalice and Higginsville Tenements”), with Equinox
and Equinox Minerals Limited as guarantor, called the Cowan Nickel Joint Venture. The notes to the tenement
schedule indicate which of the Chalice and Higginsville Tenements are currently subject to the Cowan Nickel Joint
Venture, following the election by Equinox not to proceed with all the originally identified tenements. Equinox was
required to spend $1,200,000 by 4 April 2005 following which Equinox elected to proceed to earn a 50% interest
in the Chalice and Higginsville Tenements by spending a total of $5 million on exploration by 4 April 2007. On
completion of that commitment, Bullion must elect whether to contribute in proportion to its interest, or dilute, and
Equinox may elect to earn a further 10% in the Chalice and Higginsville Tenements by spending a further $5 million
by 4 April 2009. If Equinox elects not to earn a further interest, contributions will be made in proportion to its interest,
or its interest will dilute. Dilution to 5% automatically converts to a 1% net smelter returns royalty.
As at the date of this report Equinox has not yet completed its expenditure obligation and has not earned an
interest in the Chalice and Higginsville Tenements.
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R E P O R T
The parties must during the term of the joint venture offer to the joint venture any interests obtained by a party in
any tenements contiguous to the joint venture tenements or within a 1km radius.
The consent of Equinox to the assignment of Bullion’s interest in the joint venture to Chalice is required, and has
been obtained, referred to in paragraph 7 below, and Chalice will be required to enter into a deed of covenant
agreeing to be bound by the terms of the Joint Venture Agreement.
There is a pre-emptive right applicable where proposed assignees are independent third parties and their offers
are cash only. Chalice falls outside these criteria and accordingly no pre-emptive right continues to exist in relation
to the subject of the Tenement Purchase Agreement.
6.2
Letter Agreement dated 23 September 2004 with A Sandercock and J Morton
By a Letter Agreement dated 23 September 2004 the registered holders have granted a three year option to Bullion
to acquire P15/4619 for consideration which includes a 5% NPI royalty attaching to any economic production of
ore minerals on the tenement (or its’ successor tenement). The option has not been exercised to date.
7
LETTER AGREEMENT DATED 24 JANUARY 2006 BETWEEN BULLION
MINERALS LIMITED AND EQUINOX MINERALS LIMITED, AND DEED
OF CONSENT DATED 24 JANUARY 2006 BETWEEN BULLION
MINERALS LIMITED, EQINOX RESOURCES LIMITED, EQUINOX
MINERALS LIMITED AND CHALICE GOLD MINES LIMITED
By a Letter Agreement and Deed of Consent both dated 24 January 2006, Equinox Minerals Limited as guarantor,
and Equinox Resources Limited consents to the sale of the tenements comprised in the Cowan Nickel Joint
Venture, by Bullion to Chalice pursuant to the Tenement Purchase Agreement dated 18 January 2006, on the
basis that the nickel mining rights for those tenements are reserved to Bullion and the sale does not affect the
nickel mining rights of Equinox Minerals Limited, Equinox Resources Limited or Bullion pursuant to the Cowan Nickel
Joint Venture. In particular Equinox Resources Limited waives any pre-emptive rights conferred upon it by the
Cowan Nickel Joint Venture Agreement dated 19 November 2004, in relation to the disposal of these tenements
by Bullion to Chalice.
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A C C O U N T A N T ’ S
R E P O R T
3 February 2006
The Directors
Level 2, 1292 Hay Street
WEST PERTH WA 6005
Dear Sirs
INDEPENDENT ACCOUNTANT’S REPORT
Introduction
This independent accountant’s report (“Report”) has been prepared for inclusion in a prospectus to be dated on
or about 3 February 2006 (“Prospectus”) for the issue by Chalice Gold Mines Limited (“Chalice” or “Company”) of
up to 37,500,000 ordinary shares at an issue price of 20 cents each, to raise up to $7,500,000 before the expenses
of the issue.
The Company’s Board has elected to accept a minimum subscription of $6,000,000 and this Report has been
prepared on this basis unless otherwise stated.
This Report has been included in the Prospectus to assist potential investors and their financial advisers to make an
assessment of the financial position of the Company.
Structure of Report
This Report has been divided into the following sections:
1. Background information;
2. Scope of report;
3. Historical financial information;
4. Subsequent events;
5. Statements; and
6. Declaration.
HLB Mann Judd (WA Partnership)
15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.
Email: [email protected]. Website: www.hlb.com.au
Partners: Ian H Barsden, Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley
HLB Mann Judd (WA Partnership) is a member of
International and the HLB Mann Judd National Association of independent accounting firms
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1.
R E P O R T
BACKGROUND INFORMATION
The Company was registered on 13 October 2005 and has not traded since that date. The current activities of
the Company are being funded by its parent entity, Bullion Minerals Limited (“Bullion”). The Company entered
into a Tenement Purchase Agreement dated 18 January 2006 with Bullion to acquire certain mineral interests, the
consideration for which is the issue of 34,999,998 fully ordinary shares in Chalice (valued at $2,689,517).
HLB Mann Judd was appointed as the Company’s auditors on 11 November 2005.
As at the date of this Prospectus, the issued share capital of the Company is 2 shares. These shares are owned
by Bullion.
We understand that the funds raised by the issue of shares under the Prospectus will be applied as follows:
•
Finance the planned exploration and drilling program on the gold projects acquired from Bullion;
•
Provide working capital for the Company to meet its general administration and operating costs; and
•
Meet the expenses of the issue.
2.
SCOPE OF REPORT
You have requested HLB Mann Judd (“HLB”) to prepare this Report presenting the following information:
a)
the Historical Financial Information, comprising the historical balance sheet as at 30 November 2005 and
the historical Income Statement, Statement of Changes in Equity and Cash Flow Statement for the period
from registration on 13 October 2005 to 30 November 2005 as set out in Appendix 1 to this Report; and
b)
the Proforma Financial Information comprising the proforma Balance Sheet as at 30 November 2005 and
the proforma Statement of Changes in Equity and Cash Flow Statement for the period then ended.
The Directors have prepared and are responsible for the historical and proforma information. We disclaim any
responsibility for any reliance on this report or on the financial information to which it relates for any purposes other
than that for which it was prepared. This report should be read in conjunction with the full prospectus.
We have performed a review of the historical financial information and the proforma information of the Company
as at 30 November 2005 in order to ensure consistency in the application of applicable Accounting Standards
and other mandatory professional reporting requirements. Our review has been conducted in accordance with
Australian Auditing Standards applicable to review engagements.
Our review of the historical financial information and the proforma information of the Company was carried
out in accordance with Australian Auditing Standard AUS 902 “Review of Financial Reports” and included such
enquiries and procedures which we considered necessary for the purposes of this Report. The review procedures
undertaken by HLB in our role as Independent Accountants were substantially less in scope than that of an audit
examination conducted in accordance with generally accepted auditing standards. Our review was limited
primarily to an examination of the historical financial information and the proforma information, analytical review
procedures and discussions with senior management. A review of this nature provides less assurance than an
audit and, accordingly, this Report does not express an audit opinion on the Historical Financial Information and
Proforma Financial Information included in this Report or elsewhere in the Prospectus.
In relation to the information presented in this Report:
i)
support by another person, corporation or an unrelated entity has not been assumed;
ii)
the amounts shown in respect of assets do not purport to be the amounts that would have been realised if
the assets were sold at the date of this Report; and
iii)
1 00
the going concern basis of accounting has been adopted.
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3.
R E P O R T
HISTORICAL FINANCIAL INFORMATION
Set out in Appendix 1 (attached) are:
i)
The Balance Sheet of the Company as at 30 November 2005, and the Income Statement, Statement of
Changes in Equity and Cash Flow Statement for the period then ended; and
ii)
The proforma Balance Sheet of the Company as at 30 November 2005 and proforma Statement
of Changes in Equity and Cash Flow Statement for the period then ended as they would appear after
incorporating the following significant events and proposed transactions by the Company subsequent to
30 November 2005:
a)
the issue by the Company pursuant to this Prospectus of 30,000,000 ordinary shares at an issue price
of 20 cents each, raising $6,000,000 (minimum subscription);
b)
the transfer of prepaid share issue expenses of $71,610 to Contributed Equity;
c)
the acquisition of various tenements via the issue of 34,999,998 ordinary shares (consideration of
$2,689,517) pursuant to the acquisition agreement with Bullion;
d)
e)
the settlement of the inter-company loan account with Bullion as at 30 November 2005 ($43,213);
the payment of statutory charges of approximately $210,000 in relation to the acquisition of
tenements; and
f)
the payment and write off to the contributed equity account of further prospectus costs,
not already paid or previously provided, of an estimated $447,799 (net of GST) as follows:
Independent Accountant’s Fees
Printing & Associated Offer Costs
Costs to 30/11/05
Further costs
Total
$
$
$
24,742
7,500
7,500
28,356
53,098
ASIC Lodgement Fees
-
2,010
2,010
ASX Listing Fees
-
34,801
34,801
Legal
8,903
13,097
22,000
Brokerage commissions
-
240,000
240,000
Corporate Advisory
-
110,000
110,000
37,965
12,035
50,000
71,610
447,799
519,409
Consultants
iii)
Notes to the historical financial information.
4.
SUBSEQUENT EVENTS
In our opinion, there have been no material items, transactions or events subsequent to 30 November 2005 not
otherwise disclosed in the Prospectus that have come to our attention during the course of our review that would
require comment in, or adjustment to, the content of this Report or which would cause such information included
in this Report to be misleading.
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5.
R E P O R T
STATEMENTS
Based on our review, which was not an audit, we have not become aware of any matter that causes us to
believe that:
i)
the Historical Financial Information of Chalice Gold Mines Limited as at 30 November 2005 as set out in
Appendix 1 of this Report, does not present fairly the financial position of the Company as at that
date in accordance with the measurement and recognition requirements (but not all of the disclosure
requirements) of applicable Accounting Standards and other mandatory reporting requirements in
Australia and its performance as represented by its results of its operations and its cash flows for the period
from registration to 30 November 2005; and
ii)
the Proforma Financial Information of Chalice Gold Mines Limited as at 30 November 2005 as set out
in Appendix 1 of this Report, does not present fairly the financial position of the Company as at that date
in accordance with the measurement and recognition requirements (but not all of the disclosure
requirements) of applicable Accounting Standards and other mandatory reporting requirements
in Australia and its performance as represented by its results of its operations and its cash flows for the
period from registration to 30 November, as if the transactions referred to in Section 3 (ii) of this Report
had occurred during that period.
6.
DECLARATION
•
HLB will be paid its usual professional fees based on time involvement, for the preparation of this Report
and review of the financial information, at our normal professional rates (expected to be $7,500). HLB has
received no amounts since registration.
•
Apart from the aforementioned fee, neither HLB, nor any of its associates will receive any other benefits,
either directly or indirectly, for or in connection with the preparation of this Report.
•
Neither HLB, nor any of its employees or associated persons have any interest in Chalice Gold Mines
Limited or the promotion of the Company.
•
Unless specifically referred to in this Report, or elsewhere in the Prospectus, HLB was not involved in
the preparation of any other part of the Prospectus and did not cause the issue of any other part of the
Prospectus.
Accordingly, HLB makes no representations or warranties as to the completeness or
accuracy of the information contained in any other part of the Prospectus.
•
HLB has consented to the inclusion of this report in the Prospectus in the form and context in which
it appears. The inclusion of this report should not be taken as an endorsement of the Company or a
recommendation by HLB of any participation in the Company by an intending subscriber.
Yours faithfully
HLB MANN JUDD
L Di GIALLONARDO
Partner
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- APPENDIX 1 CHALICE GOLD MINES LIMITED
BALANCE SHEET
AS AT 30 NOVEMBER 2005
Notes
Reviewed
Proforma
$
$
CURRENT ASSETS
Cash assets
2
2
5,298,990
Prepaid share issue expenses
71,610
-
TOTAL CURRENT ASSETS
71,612
5,298,990
7,393
2,906,910
NON-CURRENT ASSETS
Exploration and tenement acquisition
expenditure
3
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
7,393
2,906,910
79,005
8,205,900
CURRENT LIABILITIES
Payables
80,213
37,000
TOTAL CURRENT LIABILITIES
4
80,213
37,000
TOTAL LIABILITIES
80,213
NET ASSETS
(1,208)
8,168,900
2
(1,210)
8,170,110
(1,210)
(1,208)
8,168,900
37,000
EQUITY
Contributed equity
Accumulated losses
5
TOTAL EQUITY
This balance sheet should be read in conjunction with the accompanying notes.
CHALICE GOLD MINES LIMITED
INCOME STATEMENT
FOR THE PERIOD 13 OCTOBER 2005 TO 30 NOVEMBER 2005
Reviewed
Revenue from ordinary activities
Formation expenses written off
Other expenses from ordinary activities
Loss from ordinary activities before income tax
Income tax expense relating to ordinary activities
Loss from ordinary activities after income tax expense
$
(1,210)
(1,210)
(1,210)
This statement should be read in conjunction with the accompanying notes.
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CASH FLOW STATEMENT
Reviewed
$
Proforma
$
Cash Flows From Operating Activities
Payments to suppliers and employees
Interest received
Net Cash Used In Operating Activities
(1,210)
(1,210)
(1,210)
(1,210)
Cash Flows From Investing Activities
Exploration expenditure, tenement acquisition and
reimbursements
Net Cash Provided By Investing Activities
(7,393)
(217,393)
(7,393)
(217,393)
2
43,213
(34,610)
8,605
6,000,002
43,213
(43,213)
(482,409)
5,517,593
Cash Flows From Financing Activities
Cash proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Prospectus and share issue costs
Net Cash Provided By Financing Activities
Net Increase In Cash Held
Cash at the beginning of the financial period
2
5,298,990
-
2
5,298,990
-
Cash At The End Of The Financial Period
STATEMENT OF CHANGES IN EQUITY
Contributed
Equity
$
Accumulated
Losses
$
Issue of shares at date of registration
2
Loss for the period
-
(1,210)
(1,210)
As at 30 November 2005
Issue of shares pursuant to prospectus
2
6,000,000
(1,210)
-
(1,208)
6,000,000
Issue of shares to acquire tenements
2,689,517
Share issue expenses
(519,409)
Proforma total as at 30 November 2005
8,170,110
-
Total Equity
$
2
(1,210)
2,689,517
(519,409)
8,168,900
As set out in Note 5(ii) to the Financial Statements, the Company proposes to issue 6,075,000 unlisted options to
existing Directors and employees on completion of the offer of shares pursuant to the Prospectus (“Offer”). The
Company’s accounting policy in relation to Share Based Payment Transactions requires it to determine a fair
value of the options at the date on which the options are granted and to recognise an expense for this value in
the Income Statement, together with a corresponding increase in equity (Employee Equity Benefits Reserve) over
the period from the date the options are granted to the vesting date.
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The Company has obtained an independent valuation of the options, which determines a theoretical value of
the options to be 8 cents per option. The independent valuer has utilised the Binomial Model in valuing the options
and has made the following assumptions in arriving at this value:
Value of underlying share (IPO issue price)
20 cents
Exercise price of options
25 cents
Expiry date of options
5 years from date of issue
Expected life of options
3 years
Risk-free interest rate
5.3%
Expected volatility
80%
In relation to the 6,075,000 options to be issued to existing Directors and employees, on the above basis an expense
of $486,000 would need to be recognised in the Income Statement, together with a corresponding increase in the
Employee Equity Benefits Reserve, over the period from the date the options are granted to the vesting date.
The Company has also advised in this Prospectus of the potential for it to issue 3,925,000 options to future Directors
and employees if required in the current employment market to secure and retain high quality personnel. In
relation to these options and on the above basis, an expense of $314,000 would need to be recognised over the
period from the date the options are granted to the vesting date. This value is arrived at using the assumptions
mentioned above, however will need to be updated to take into account conditions which will exist when the
options are issued.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD 13 OCTOBER TO 30 NOVEMBER 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies which have been adopted in the preparation of the historical and proforma
financial information reported under Australian Equivalents to International Financial Reporting Standards (“AIFRS”)
are shown below:
Basis of Accounting
The financial statements have been prepared in accordance with the measurement requirements (but not all
of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting
requirements in Australia using the accrual basis of accounting, including the historical cost convention.
Statement of Compliance
The financial information complies with Australian Accounting Standards, which include Australian equivalents
to International Financial Reporting Standards (“AIFRS”).
Compliance with AIFRS ensures that the financial
information, comprising the financial statements and notes thereto, comply with International Financial Reporting
Standards.
Cash
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks and money market
investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts.
Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured.
Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.
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Goods and Services Tax (“GST”)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Taxation Office (“ATO”). In these circumstances the GST is recognised as
part of the cost of acquisition of the asset or as part of the expense item as applicable.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from
or payable to the ATO is included as a current asset or liability in the Balance Sheet.
Cash flows are included in the Cash Flow Statement on a gross basis. The GST components of cash flows arising
from investing and financing activities, which are recoverable from or payable to the ATO are classified as
operating cash flows.
Income Tax
Deferred income tax is provided for on all temporary differences at balance date between the tax base of
assets and liabilities and their carrying amounts for financial reporting purposes. No deferred income tax will be
recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no
effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or
liability is settled. Deferred tax is credited in the Income Statement except where it relates to items that may be
credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available
against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income taxation legislation and the anticipation that the Company will
derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of
deductibility imposed by the law. The carrying amount of deferred tax assets is reviewed at each balance date
and only recognised to the extent that sufficient future assessable income is expected to be obtained.
Recoverable Amount
At each reporting date, the Company assesses whether there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the Company makes a formal estimate of recoverable amount. Where
the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written
down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value
of the future cash flows expected to be derived from the asset or cash generating unit. In estimating value in use,
a pre-tax discount rate is used which reflects current market assessments of the time value of money and the risks
specific to the asset.
Exploration, Evaluation, Development and Tenement Acquisition Costs
Exploration, evaluation, development and tenement acquisition costs in relation to separate areas of interest for
which rights of tenure are current, are capitalised in the period in which they are incurred and are carried at cost
less accumulated impairment losses. The cost of acquisition of an area of interest and exploration expenditure
relating to that area of interest is carried forward as an asset in the Balance Sheet so long as the following
conditions are satisfied:
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Exploration, Evaluation, Development and Tenement Acquisition Costs
(i)
the rights to tenure of the area of interest are current; and
(ii)
at least one of the following conditions is also met:
• the exploration and evaluation expenditures are expected to be recouped through successful
development and exploitation of the area of interest, or alternatively, by its sale; or
• exploration and evaluation activities in the area of interest have not at the reporting date reached a stage
which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves,
and active and significant operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation expenditure is assessed for impairment when facts and circumstances suggest that their
carrying amount exceeds their recoverable amount and where this is the case an impairment loss is recognised.
Should a project or an area of interest be abandoned, the expenditure will be written off in the period in which
the decision is made. Where a decision is made to proceed with development, accumulated expenditure will
be amortised over the life of the reserves associated with the area of interest once mining operations have
commenced.
Payables
Trade payables and other accounts payable are recognised when the Company becomes obliged to make
future payments resulting from the purchase of goods and services. Amounts are unsecured and are usually paid
within 30 days of recognition.
Share Based Payment Transactions
The Company currently provides benefits to employees (including Directors and senior executives) of the
Company in the form of share-based payment transactions under the Employee Share Options Plan. The cost of
these equity-settled transactions (options) with employees is measured by reference to the fair value at the date
on which they are granted. The fair value is determined using the Binomial Model.
The cost of equity-settled transactions (options) is recognised (in the majority of cases as an expense in the
Income Statement), together with a corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award
of the options (“vesting date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date
reflects the extent to which the vesting period has expired and the number of awards of options that, in the
opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available
information at balance date. No adjustment is made for the likelihood of market performance conditions being
met as the effect of these conditions is included in the determination of fair value at grant date.
Contributed Equity
Issued capital is recognised at the fair value of the consideration received by the Company.
Transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
Proforma Transactions
The proforma Balance Sheet, Statement of Changes in Equity and Cash Flow Statement have been derived from
the historical financial information as at 30 November 2005 adjusted to give effect to the following significant
events and transactions by the Company subsequent to 30 November 2005:
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Proforma Transactions
a)
the issue by the Company pursuant to this Prospectus of 30,000,000 ordinary shares, raising $6,000,000
(minimum subscription);
b)
the transfer of prepaid share issue expenses of $71,610 to Contributed Equity;
c)
the acquisition of various tenements via the issue of 34,999,998 ordinary shares (consideration of
$2,689,517) pursuant to the acquisition agreement with Bullion;
d)
the settlement of the inter-company loan account with Bullion ($43,213);
e)
the payment of statutory charges of approximately $210,000 in relation to the acquisition of tenements;
and
f)
the payment and write off to the contributed equity account of further prospectus costs, not already
paid or previously provided, of an estimated $447,799 (net of GST).
The proforma financial information has been prepared on the basis that the minimum subscription is received. If
the full subscription is received (additional 7,500,000 shares raising an additional amount of $1,500,000), the cash
balance will initially increase by $1,500,000 with a corresponding increase in contributed equity. In this case,
additional prospectus costs of $83,298 will be incurred.
2.
CASH
Balance as at 30 November 2005
Repayment of loan to Bullion Minerals Limited
Payment of statutory charges in relation to tenement acquisition
Shares issued pursuant to prospectus
Share issue costs
3.
Proforma
$
$
2
2
2
(43,213)
(210,000)
6,000,000
(447,799)
5,298,990
EXPLORATION AND TENEMENT ACQUISITION EXPENDITURE
Balance as at 30 November 2005
Payment of statutory charges in relation to tenement acquisition
Issue of shares pursuant to tenement acquisition agreement
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Proforma
$
$
7,393
-
7,393
210,000
2,689,517
7,393
2,906,910
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4.
R E P O R T
PAYABLES
Reviewed
Proforma
$
37,000
43,213
80,213
$
37,000
37,000
(i) Issued and paid up share capital
Shares issued:
2 fully paid shares issued at $1 each
2
2
34,999,998 fully paid shares issued as consideration for tenement
acquisitions
30,000,000 shares issued pursuant to this Prospectus
-
2,689,517
6,000,000
Share issue costs
-
Balance at end of period - 2 ordinary shares
(Pro-forma: 65,000,000 fully paid)
2
Sundry creditors and accruals
Loan – Bullion Minerals Limited
5.
CONTRIBUTED EQUITY
(519,409)
8,170,110
Movements in number of fully paid ordinary shares since registration:
Details
Balance as at 30 November 2005 (subscriber shares)
Issue of shares pursuant to tenement acquisition agreement
Shares to be issued pursuant to the Prospectus
Number
2
34,999,998
30,000,000
2
2,689,517
6,000,000
Proforma balance (excludes share issue costs)
65,000,000
8,689,519
$
ii) Share Options
As set out in Sections 1.6, 10.3.5 and 10.7 of the Prospectus, the Company has established an Employee Share
Options Plan (“Plan”). Under this Plan, the Company proposes to issue 6,075,000 unlisted options to existing
Directors and employees on completion of the offer of shares pursuant to the Prospectus (“Offer”) and
has advised of the potential to have to issue 3,925,000 unlisted options to future Directors and employees if
required in the current employment market to secure and retain high quality personnel. The first allocation
of options outlined above will be exercisable at 25 cents (and it is assumed that this will also apply for the
second allocation outlined above), on or before the date being five years from the date of issue of the
options, but will not vest until the date being one year from the date of issue.
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6.
R E P O R T
CONTINGENCIES AND COMMITMENTS
Details of planned expenditure commitments are outlined in Section 1.5 of the Prospectus and the Independent
Geological Report included in the Prospectus. The Directors are not aware of any other contingencies.
7.
RELATED PARTY TRANSACTIONS
The names of persons who were Directors of Chalice Gold Mines Limited at any time during the financial period
are Mr Tim Goyder, Mr Andrew Bantock, Mr John McIntyre and Mr Bryan Alexander.
Details of Directors’ interests in the Company’s issued capital and transactions with the Company are included in
Sections 10.4, 10.5 and 10.6 of the Prospectus.
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C O R P O R A T E
G O V E R N A N C E
The Company has adopted systems of control and accountability as the basis for the administration of corporate
governance. The Board is committed to administering the policies and procedures with openness and integrity,
pursuing the true spirit of corporate governance commensurate with the Company’s needs. To the extent they
are applicable, the Company has adopted the Ten Essential Corporate Governance Principles and Best Practice
Recommendations (“Recommendations”) as published by ASX Corporate Governance Council.
Further information about the Company’s corporate governance practices is set out on the Company’s website
at www.chalicegold.com. In accordance with the recommendations of the ASX, information published on the
Company’s website includes charters (for the board and its sub-committees), codes of conduct and other policies
and procedures relating to the board and its responsibilities.
As the Company’s activities develop in size, nature and scope, the size of the Board and the implementation of
additional corporate governance structures will be given further consideration.
The Board sets out below its “if not, why not” report in relation to those matters of corporate governance where
the Company’s practices depart from the Recommendations.
COUNCIL RECOMMENDATION 2.2
The chairperson should be an independent director.
The Company’s Chairman, Mr Andrew Bantock, is considered by the Board not to be independent in terms of the
ASX Corporate Governance Council’s definition of independent director. However the Board believes that the
Chairman is able and does bring quality and independent judgment to all relevant issues falling within the scope
of the role of a Chairman.
The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the
expense of the appointment of an independent Non-executive Chairman.
PRINCIPLE 2 RECOMMENDATION 2.4
There is no nomination committee.
The Board considers those matters and issues arising that would usually fall to a nomination committee. The Board
considers that no efficiencies or other benefits would be gained by establishing a separate nomination committee.
COUNCIL RECOMMENDATION 4.2
The board should establish an audit committee.
The Board considers that the Company is not of a size, nor are its financial affairs of such complexity to justify
the formation of an audit committee. The Board as a whole undertakes the selection and proper application of
accounting policies, the identification and management of risk and the review of the operation of the internal
control systems.
The Board acknowledges this does not comply with recommendation 4.2 of the ASX Corporate Governance
Guidelines. If the Company’s activities increase in size, scope and nature, the appointment of an audit committee
will be reviewed by the Board and implemented if appropriate.
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C O R P O R A T E
G O V E R N A N C E
During the Reporting Period there was no performance evaluation of the Board, its committees and
individual directors.
The current Board has only been in place since 13 October 2005 and did not conduct a performance evaluation
during the Reporting Period. It is proposed the Chairman will conduct a review in the 2007 financial year.
There is no separate remuneration committee.
Due to the small size and structure of the Board, a separate remuneration committee is not considered to add
any efficiency to the process of determining the levels of remuneration for the directors and key Executives. The
Board considers that it is more appropriate to set aside time at Board meetings each year to specifically address
matters that would ordinarily fall to a remuneration committee.
In addition, all matters of remuneration will continue to be determined in accordance with Corporations Act
requirements, especially in respect of related party transactions. That is, no directors participate in any deliberations
regarding his or her own remuneration or related issues.
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R I S K
F A C T O R S
The Shares offered under this Prospectus should be considered speculative because of the nature of the business
activities of the Company. Whilst the Directors commend the Offer, potential investors should consider whether
the Shares offered are a suitable investment having regard to their own personal investment objectives and
financial circumstances and the risk factors set out below. This list is not exhaustive and potential investors should
read this Prospectus in its entirety and if in any doubt consult their professional adviser before deciding whether
to participate in the Offer.
9.1
ECONOMIC RISKS
General economic conditions, movements in interest and inflation rates and currency exchange rates may have
an adverse effect on the Company’s exploration, development and future production activities, as well as on its
ability to fund those activities.
9.2
MARKET CONDITIONS
The market price of securities can fall as well as rise and may be subject to varied and unpredictable influences
on the market for equities and in particular, resources stocks. Neither the Company nor the Directors warrant the
future performance of the Company or any return on an investment in the Company.
9.3
SECURITY INVESTMENTS
Applicants should be aware that there are risks associated with any securities investment. Securities listed on the
stock market, and in particular securities of mining and exploration companies have experienced extreme price
and volume fluctuations that have often been unrelated to the operating performances of such companies.
These factors may materially affect the market price of the securities regardless of the Company’s performance.
Mineral exploration and mining are speculative operations that may be hampered by circumstances beyond the
control of the Company. Profitability depends on successful exploration and/or acquisition of reserves, design and
construction of efficient processing facilities, competent operation and management and proficient financial
management.
Exploration in itself is a speculative endeavour, while mining operations can be hampered by force majeure
circumstances and cost overruns for unforseen events.
9.4
EXPLORATION SUCCESS
The mineral tenements of the Company as described in the Prospectus are at various stages of exploration and
potential investors should understand that mineral explorations and development are high risk undertakings.
There can be no assurance that exploration of the tenements, or any other tenements that may be acquired in
the future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit is identified,
there is no guarantee that it can be economically exploited.
The exploration costs of the Company described in this prospectus and in the Independent Geologist’s Report
are based on certain assumptions with respect to the method and timing of exploration. By their nature, these
estimates and assumptions are subject to significant uncertainties and accordingly, the actual costs may
materially differ from these estimates and assumptions. Accordingly, no assurances can be given that the cost
estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect
the Company’s viability.
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9.5
R I S K
F A C T O R S
RESOURCE DEVELOPMENT RISKS
The success of the Company depends on the delineation of economically minable reserves and resources,
access to required development capital, movement in the price of commodities, securing and maintaining title
to the Company’s exploration and mining tenements and obtaining all consents and approvals necessary for the
conduct of its exploration activities.
Exploration on the Company’s existing exploration and mining tenements may be unsuccessful, resulting in a
reduction of the value of those tenements, diminution in the cash reserves of the Company and possible
relinquishment of the exploration and mining tenements.
Each of the development factors outlined above are subject to inherent uncertainty that may expose the
Company to unforeseen development delays or may render the proposed development to be uneconomic.
9.6
COMMODITY PRICE AND EXCHANGE RATE RISKS
To the extent the Company is involved in mineral production the revenue derived through the sale of commodities
may expose the potential income of the Company to commodity price and exchange rate risks. Commodity
prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include
supply and demand fluctuations for precious and base metals, technological advancements, forward selling
activities and other macro-economic factors.
Furthermore, international prices of various commodities are denominated in United States dollars, whereas the
income and expenditure of the Company are and will be taken into account in Australian currency, exposing
the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the
Australian dollar as determined in international markets.
9.7
ENVIRONMENTAL RISKS
The operations and proposed activities of the Company are subject to State and Federal laws and regulation
concerning the environment. As with most exploration projects and mining operations, the Company’s activities
are expected to have an impact on the environment, particularly if advanced exploration or mine development
proceeds. The Company’s attempts to conduct its activities to the highest standard of environmental obligation,
including compliance with all environmental laws.
9.8
NATIVE TITLE AND TITLE RISKS
Interests in tenements in Australia are governed by the respective State legislation and are evidenced by the
granting of licences or leases. Each licence or lease is for a specific term and carries with it annual expenditure
and reporting commitments, as well as other conditions requiring compliance. Consequently, the Company
could lose title to or its interest in tenements if licence conditions are not met or if insufficient funds are available
to meet expenditure commitments.
It is also possible that, in relation to tenements which the Company has an interest in or will in the future acquire
such an interest, there may be areas over which legitimate common law native title rights of Aboriginal Australians
exist. If native title rights do exist, the ability of the Company to gain access to tenements (through obtaining
consent of any relevant landowner), or to progress from the exploration phase to the development and mining
phases of operations may be affected.
The Directors closely monitor the potential effect of native title claims involving tenements in which the Company
has or may have an interest.
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9.9
R I S K
F A C T O R S
JOINT VENTURE PARTIES, AGENTS AND CONTRACTORS
The Directors are unable to predict the risk of financial failure or default by a participant in any joint venture to
which the Company is or may become a party or the insolvency or managerial failure by any of the contractors
used by the Company in any of its activities or the insolvency or other managerial failure by any of the other
service providers used by the Company for any activity.
9.10 FUTURE CAPITAL REQUIREMENTS
The Company’s activities will require substantial expenditures. There can be no guarantees that the funds raised
through the Offer will be sufficient to successfully achieve all the objectives of the Company’s overall business
strategy. If the Company is unable to use debt or equity to fund expansion after the substantial exhaustion of the
net proceeds of the Offer there can be no assurances that the Company will have sufficient capital resources
for that purpose, or other purposes, or that it will be able to obtain additional resources on terms acceptable to
the Company or at all. Any additional equity financing may be dilutive to shareholders and any debt financing if
available may involve restrictive covenants, which limit the Company’s operations and business strategy.
The Company’s failure to raise capital if and when needed could delay or suspend the Company’s business
strategy and could have a material adverse effect on the Company’s activities.
9.11 POTENTIAL ACQUISITIONS
As part of its business strategy, the Company may make acquisitions of or significant investments in companies,
products, technologies or resource projects. Any such future transactions would be accompanied by the risks
commonly encountered in making acquisitions of companies, products, technologies or resource projects.
9.12 RESOURCE ESTIMATIONS
Resource estimates are expressions of judgment based on knowledge, experience and resource modelling.
As such, resource estimates are inherently imprecise and rely to some extent on interpretations made. Despite
employing qualified professionals to prepare resource estimates, such estimates may nevertheless prove to be
inaccurate. Furthermore, resource estimates may change over time as new information becomes available.
Should the company encounter mineralisation or geological formations different from those predicted by past
drilling, sampling and interpretations, resource estimates may need to be altered in a way that could adversely
affect the Company’s operations.
9.13 RELIANCE ON KEY PERSONNEL
The Company’s success depends largely on the core competencies of its directors and management, and their
familiarisation with, and ability to operate, in the metals and mining industry and the Company’s ability to retain
its key Executives.
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10.1 INCORPORATION
The Company was incorporated on 13 October 2005 as a limited company.
10.2 RIGHTS ATTACHING TO SHARES
General
The Shares to be issued pursuant to this Prospectus are ordinary shares and will as from their allotment rank equally
in all respects with all ordinary fully paid shares in the Company.
The rights attaching to the Shares arise from a combination of the Company’s Constitution, the Corporations Act,
the ASX Listing Rules and general law. A copy of the Company’s Constitution is available for inspection during
business hours at its registered office.
A summary of the more significant rights is set out below. This summary is not exhaustive nor does it constitute
a definitive statement of the rights and liabilities of the Company’s Shareholders. To obtain such a statement,
persons should seek independent legal advice.
Voting Rights
Subject to the Constitution of the Company and any rights or restrictions at the time being attached to a class
of shares, at a general meeting of the Company every Shareholder present in person, or by proxy, attorney
or representative has one vote on a show of hands, and upon a poll, one vote for each Share held by the
Shareholder and for each partly paid share held, a fraction of one vote equal to the proportion which the amount
paid up bears to the amounts paid or payable on that share. In the case of an equality of votes, the chairperson
has a casting vote.
Dividends
Subject to the Corporations Act, the ASX Listing Rules and any rights or restrictions attached to a class of shares,
the Company may pay dividends as the Directors resolve but only out of profits of the Company. The Directors
may determine the method and time for payment of the dividend.
Winding up
Subject to the Corporations Act, the ASX Listing Rules and any rights or restrictions attached to a class of shares,
on a winding up of the Company any surplus must be divided among the Shareholders of the Company in
proportion which the amount paid on the shares bears to the total amount paid and payable on the shares of all
Shareholders of the Company.
Transfer of Shares
Generally, shares are freely transferable, subject to satisfying the requirements of the ASX Listing Rules, ASTC Rules,
the ACH Clearing Rules and the Corporations Act. The Directors may decline to register any transfer of Shares but
only where permitted to do so by the Corporations Act, the ASX Listing Rules, the ASTC Rules, the ACH Clearing
Rules or under the Company’s Constitution.
Directors
The Constitution and the ASX Listing Rules contain provisions relating to the rotation and election of Directors.
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Calls on Shares
Subject to the Corporations Act and the terms of issue of a share, the Company may, at any time, make calls on
the Shareholders of a share for all, or any part of, the amount unpaid on the share. If a Shareholder fails to pay a
call or instalment of a call, the Company may, subject to the Corporations Act and ASX Listing Rules, commence
legal action for all, or part of the amount due, enforce a lien on the share in respect of which the call was made
or forfeit the share in respect of which the call was made.
Further Increases in Capital
Subject to the Corporations Act, the ASX Listing Rules, the ASTC Rules and the ACH Clearing Rules and any rights
attached to a class of shares, the Company (under the control of the Directors) may allot and issue shares and
grant options over shares, on any terms, at any time and for any consideration, as the Directors resolve.
Variation of Rights Attaching to Shares
Subject to the Corporations Act, the ASX Listing Rules, the ASTC Rules and the ACH Clearing Rules and the terms
of issue of shares in a particular class, the Company may vary or cancel rights attached to shares in that class by
either special resolution passed at a general meeting of the holders of the shares in that class, or with the written
consent of the holders of at least 75% of the votes in that class.
General Meeting
Each Shareholder will be entitled to receive notice of, and to attend and vote at, general meetings of the
Company and to receive notices, accounts and other documents required to be furnished to Shareholders under
the Company’s Constitution, the Corporations Act and the ASX Listing Rules.
10.3 MATERIAL CONTRACTS
10.3.1
Corporate Adviser Agreement
The Company has entered into an agreement with Venture Group whereby Venture Group has been appointed
Corporate Adviser of the Offer.
Under the terms of the appointment, Venture Group will be paid a monthly management fee of $5,000 per month
from January 2006, for an initial 2 month period which is subject to continuation by mutual agreement thereafter.
Venture Group will also receive a capital raising fee of 1.5% on funds raised by the Company. Venture Group has the
right to nominate that these fees be satisfied by the issue of Chalice Gold Mines Limited shares, at the market price
at the time of nomination and at no less than $0.20 per share. Venture Group is also entitled to be reimbursed out of
pocket expenses.
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10.3.2
Director & Officer Protection Deeds
The Company has entered into Director and Officer Protection Deeds (“Deed”) with each Director and the
Company Secretary (“Officers”). Under the Deed, the Company indemnifies the relevant Officer to the maximum
extent permitted by law against legal proceedings, damage, loss, liability, cost, charge, exchange, outgoing
or payment suffered, paid or incurred by the officer in connection with the Officer being an officer of the
Company, the employment of the Officer with the Company or a breach by the Company of its obligations
under the Deed.
Subject to the Company listing on ASX, the Company is required to insure the Officers against liability arising from
any claim against the Officers in their capacity as officers of the Company. The Company will pay insurance
premiums in respect of the above insurance.
10.3.3
Corporate Service Agreement
The Company has negotiated the terms of a corporate service agreement with Bullion Minerals Limited in order
to share certain corporate overhead expenses and thereby minimise costs. Pursuant to the agreement, Bullion
Minerals Limited will pay the Company a service and rental fee of $15,000 per month for corporate, personnel
and infrastructure overheads. The amount charged to Bullion Minerals Limited will be reviewed in June 2006 and
annually thereafter.
10.3.4
Independent Solicitor’s Report
Material contracts affecting the tenements (including the Tenement Purchase Agreements with Bullion) are
referred to and summarised in the Independent Solicitor’s Report contained in Section 6 of this Prospectus.
10.3.5
Employee Share Option Plan
Under the terms of the Company’s employee share option plan (“Plan”), the Board may offer free options to
persons (“Eligible Persons”) who are:
• full-time or part-time employees (including a person engaged by the Company under a consultancy
agreement); or
• Directors (both executive and non-executive)
of the Company or any subsidiary based on a number of criteria including contribution to the Company, period of
employment, potential contribution to the Company in the future and other factors the Board considers relevant.
Upon receipt of such an offer, the Eligible Person may nominate an associate to be issued with the options.
Number of options
The maximum number of options issued under the Plan at any one time is 15% of the total number of Shares on
issue in the Company provided that the Board may increase this percentage, subject to the Corporations Act
and the Listing Rules.
Details of the intended issue of options to employees and Directors under the Plan is set out in Section
10.7 below.
Terms of options
Each option entitles the holder, on exercise, to one ordinary fully paid share in the Company.
There is no issue price for the options. The exercise price for the options will be such price as determined by the
Board (in its discretion) on or before the date of issue provided that in no event shall the exercise price be less that
the weighted average sale price of Shares sold on ASX during the five Business Days prior to the date of issue or
such other period as determined by the Board (in its discretion).
Shares issued on exercise of options will rank equally with other ordinary shares of the Company.
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Options may not be transferred other than to an associate of the holder. Quotation of options on ASX
will not be sought. However, the Company will apply to ASX for official quotation of Shares issued on the
exercise of options.
An option may only be exercised after that option has vested and any other conditions imposed by the Board on
exercise satisfied. The Board may determine the vesting period (if any). An option will lapse upon the first to occur
of the expiry date, the holder acting fraudulently or dishonestly in relation to the Company, within 3 months of the
employee ceasing to be employed by the Company or on certain conditions associated with a party acquiring
a 90% interest in the Shares of the Company.
If, in the opinion of the Board any of the following has occurred or is likely to occur, the Company entering into a
scheme of arrangement, the commencement of a takeover bid for the Company’s Shares, or a party acquiring
a sufficient interest in the Company to enable them to replace the Board, the Board may declare an option to be
free of any conditions of exercise. Options which are so declared may, subject to the lapsing conditions set out
above, be exercised at any time on or before their expiry date and in any number.
Future Issues of Shares
New Issues
There are no participating rights or entitlements inherent in the options and optionholders will not be entitled
to participate in new issues of capital offered to Shareholders during the currency of the options. However, the
Company will ensure that the record date for determining entitlements to any such issue will be at least 6 Business
Days after the issue is announced. Optionholders shall be afforded the opportunity to exercise all options which
they are entitled to exercise pursuant to the Plan prior to the date for determining entitlements to participate in
any such issue.
Bonus Issues
If the Company makes an issue of Shares to Shareholders by way of capitalisation of profits or reserves (“Bonus Issue”),
each optionholder holding any options which have not expired at the time of the record date for determining
entitlements to the Bonus Issue shall be entitled to have issued to him upon exercise of any of those options the
number of Shares which would have been issued under the Bonus Issue (“Bonus Shares”) to a person registered as
holding the same number of Shares as that number of Shares to which the optionholder may subscribe pursuant to
the exercise of those options immediately before the record date determining entitlements under the Bonus Issue
(in addition to the Shares which he or she is otherwise entitled to have issued to him or her upon such exercise).
The Bonus Shares will be paid by the Company out of profits or reserves (as the case may be) in the same manner
as was applied in relation to the Bonus Issue and upon issue rank pari passu in all respects with the other Shares
issued upon exercise of the options.
Reconstruction of Capital
In the event of any reconstruction (including a consolidation, subdivision, reduction or return) of the issued capital
of the Company prior to the expiry of any options, the number of options to which each optionholder is entitled
or the exercise price of his or her options or both or any other terms will be reconstructed in a manner determined
by the Board which complies with the provisions of the Listing Rules.
Taxation
Under current taxation laws any taxation liability in relation to the options, or the Shares issued on exercise of the
options, will fall on the participants. The Company will not be liable to fringe benefits tax in relation to options or
Shares issued under the Plan.
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Participation by Directors
Although Directors are eligible to be offered options under the Plan subsequent to the listing of the Company’s
securities on the ASX, this will first requires specific Shareholder approval due to the requirements of the ASX Listing
Rules and the Corporations Act.
Section 10.7 below sets out details on the proposed issue of options to Directors of the Company.
10.4 Interests of Directors
Other than as set out below or elsewhere in this Prospectus, no Director holds, or held at any time during the 2
years before lodgement of this Prospectus with the ASIC, any interest in:
(a)
the formation or promotion of the Company;
(b)
property acquired or to be acquired by the Company in connection with:
(i) its formation or promotion; or
(ii) the Offer; or
(c)
(d)
the Offer; and
no amounts, whether cash or shares or otherwise, have been paid or agreed to be paid, and no benefits
have been given or agreed to be given:
(i) to any Director, either to induce them to become, or to qualify as, a Director of the Company; and
(ii) for services provided by a Director in connection with:
• the formation or promotion of the Company; or
• the Offer.
10.5 Remuneration of Directors
In accordance with the Constitution, the existing Shareholders of the Company as at the date of this
Prospectus have determined in general meeting the maximum Non-executive Director remuneration to be
$150,000 per annum.
Each Non-executive Director is entitled to receive a maximum fee of $50,000 per annum (inclusive of
superannuation). Payments of Director’s fees will be in addition to any payments to directors in any employment
capacity. A Non-executive Director may also be paid fees or other amounts if a Non-executive Director performs
special duties or otherwise performs services outside the scope of the ordinary duties of a Non-executive Director. A
Non-executive Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship
or any special duties.
The remuneration of Executive Directors will be determined from time to time by the Board having regard to the
nature and extent of their responsibilities. Subject to the Company listing, the Executive Chairman of Directors,
Mr Andrew Bantock, will enter into an Employment Contract initially totalling $125,000 per annum (inclusive of
superanuation). This amount is subject to a scheduled review by the Board in May 2006. Mr John McIntyre as
an Executive Director, will enter into an Employment Contract initially totalling $200,000 per annum (inclusive of
superanuation). Remuneration under each of these employment contracts will be reviewed, on an ongoing basis
at least annually against market.
Directors are also entitled to share options under the Employee Share Option Plan discussed in Section 10.3.5.
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10.6
Directors’ Holdings
Under the Constitution, the Directors are not required to hold any Shares in the Company.
Bullion is obtaining shareholder approval to distribute, on a pro rata basis, all of the 35 million Company’s shares to
be acquired under the Tenement Purchase Agreement between the Company and Bullion to its Shareholders at
a record date set 5 business days after shareholder approval has been obtained.
As a result of the completion of the pro-rata distribution, the Directors of the Company (who are also Bullion
Shareholders) are anticipated to hold the following number of shares in the Company upon listing on ASX:
Director
Shares*
Employee Share Options
Mr Tim Goyder
6,277,890
2,000,000
Mr Andrew Bantock
1,610,730
2,000,000
42,105
1,000,000
227,839
500,000
Mr John McIntyre
Mr Bryan Alexander
Note:
•The number of shares held by Directors of the Company is an estimate only, and does not take into account movement in
shareholdings in Bullion between the date of this Prospectus and the record date for the entitlement to the in-specie distribution.
Details on the Employee Share Options are set out in Sections 10.3.5 above and 10.7 below.
The Directors may apply for further shares under the Bullion Priority offer (to the extent they hold Bullion shares) and
under the Public Offer.
10.7 Issue of Options to Directors and Employees
The Company proposes to issue up to 6,075,000 options to existing Directors and employees under the Employee
Share Option Plan summarised in Section 10.3.5 above. The options will vest 12 months after issue and are
exercisable at 25 cents after vesting and within 5 years of the date of issue.
In order to attract future staff and employees, the Directors have determined to reserve a further 3,925,000 options
under the Employee Share Option Plan and subject to assesment and identification of appropriate staff and
employees issue these options subsequent to listing to attract and retain high quality personnel in a competitve
employment market environment. These options will be on the same terms as the options to be issued to Directors
and employees above.
10.8 Consents
Each of the parties referred to in this section:
(a)
does not make, or purport to make any statement in this Prospectus other than those referred to in this
section; and
(b)
to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this
Prospectus other than a reference to its name and a statement included in this Prospectus with the consent
of that party as specified in this section.
Pullinger Readhead Lucas has given and has not, before lodgement of this Prospectus, withdrawn its consent
to being named as solicitor to the Offer in the form and context in which it is named and has given and has
not, before lodgement of this Prospectus, withdrawn its consent to being named as the Independent Solicitor
reporting on tenements in the form and context in which it is named and to the inclusion of the Independent
Solicitor’s Report included in Section 6 of this Prospectus in the form and context in which it is included.
Venture Group has given and has not, before lodgement of this Prospectus, withdrawn its consent to being named
as the Corporate Adviser of the Company.
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S E C T I O N
2 :
C O M P A N Y
O V E R V I E W
Northwind Resources Pty Limited has given and has not, before lodgement of this Prospectus, withdrawn its
consent to being named as the Independent Geologist reporting on tenements in the form and context in which
it is named and to the inclusion of the Independent Geologists Report included in Section 5 of this Prospectus in
the form and context in which it is included.
HLB Mann Judd has given and has not, before lodgement of this Prospectus, withdrawn its consent to being
named as the Independent Accountant and Auditor of the Company in the form and context in which it is
named, to the inclusion of the Independent Accountant’s Report included in Section 7 of this Prospectus in the
form and context in which it is included and to references to the November 2005 reviewed financial statements in
the form and context in which they appear.
Computershare Investor Services have not been involved in the preparation of this Prospectus and references to
Computershare Investor Services appears for information purposes only.
10.9 Interests of Parties
Other than as set out below or elsewhere in this Prospectus:
(a)
no person named in this Prospectus as performing a function in a professional, advisory or other capacity
in connection with the preparation or distribution of the Prospectus, any promoter of the Company or Lead
Manager to the Offer, holds, or held at any time during the 2 years before lodgement of this Prospectus with
the ASIC, any interest in:
•
the formation or promotion of the Company;
•
property acquired or proposed to be acquired by the Company in connection with its formation or
promotion or in connection with the Offer; or
•
(b)
the Offer; and
no amounts have been paid or agreed to be paid, and no benefits have been given or agreed to be given,
to any of those persons in connection with the formation or promotion of the Company or the Offer.
Pullinger Readhead Lucas has acted as solicitor to the Offer and provided advice and assistance in relation
to certain aspects of this Prospectus, the Company’s due diligence regime and enquiries and in relation to its
application and admission to ASX. In respect of these services, Pullinger Readhead Lucas will be paid $15,000
(plus GST).
Pullinger Readhead Lucas has acted as the Independent Solicitor reporting on tenements and has prepared the
Independent Solicitor’s Report included in Section 6 of this Prospectus. Pullinger Readhead Lucas will be paid
$7,000 (plus GST) in respect of these services.
Venture Group has acted as Corporate Adviser to the Offer. In respect of these services, Venture Group will be
paid up to $122,500 (plus GST).
Northwind Resources Pty Limited has acted as the Independent Geologist and has prepared the Independent
Geologist’s Report included in Section 6 of this Prospectus. Northwind Resources Pty Limited will be paid $30,000
(plus GST) in respect of these services.
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HLB Mann Judd has acted as the Independent Accountant to the Offer and prepared the Independent
Accountant’s Report included in Section 7 of this Prospectus. HLB Mann Judd will be paid up to $7,500 (plus GST)
in respect of these services. HLB Mann Judd has agreed to act as Auditor to the Company and will receive fees
for rendering these services in accordance with its normal time based charges.
10.10 Litigation
Legal proceedings may arise from time to time in the course of the Company’s business. As at the date of this
Prospectus, litigation searches confirm that the Company is not involved in any legal proceedings, nor so far as
the Directors are aware, are any legal proceedings pending or threatened against the Company the outcome of
which will have a material adverse effect on the business or financial position of the Company.
10.11 Expenses of the Offer
The total expenses connected with the Offer are estimated to be a maximum of approximately $604,000. These
expenses will be borne by the Company.
10.12 Restricted Securities
ASX may classify certain existing Shares on issue in the Company (as opposed to those to be issued under this
Prospectus) as being subject to the restricted securities provisions of the Listing Rules. If so classified, such Shares
would be required to be held in escrow for a period determined by ASX and would not be able to be sold,
mortgaged, pledged, assigned or transferred for that period without the prior approval of ASX.
ASX has granted Bullion a ruling with respect to the treatment of Shares in the Company issued to Bullion
Shareholders as a consequence of the intended pro rata distribution in-specie of the 35 million Shares to Bullion
Shareholders. The ruling is to the effect that to the extent the recipients of the Shares are not directors or promoters
of either Bullion or the Company (or related or associated with those parties), Shares in the Company received
under the distribution in-specie will not be subject to the restricted security provisions of ASX. These shares will be
distributed in the manner set out in Section 1.7 of this Prospectus.
10.13 CHESS
The Company will apply to participate in the Clearing House Electronic Sub-register System (“CHESS”).
CHESS is operated by ASX Settlement and Transfer Corporation Pty Limited (“ASTC”), a wholly owned subsidiary of
ASX, in accordance with the ASX Listing Rules and the ASTC Settlement Rules.
Under CHESS, the Company will not issue certificates to Shareholders. Instead, Shareholders will receive a statement
of their holdings in the Company. If an investor is broker sponsored, ASTC will send a CHESS statement.
10.14 Tax Consideration
Investors should seek and rely on their own professional taxation advice in relation to an investment in
the Company.
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10.15 Distribution of Prospectus
The Prospectus has been prepared by the Company. In preparing the Prospectus, the Company has taken
reasonable steps to ensure that the information in the Prospectus is not false or misleading. In doing so, the
Company has had regard to the prospectus requirements of the Corporations Act.
Prospective investors should read the full text of the Prospectus as the information contained in individual sections
is not intended to and does not provide a comprehensive review of the business and financial affairs of the
Company nor the securities offered pursuant to the Prospectus.
No person is authorised to give any information in relation to or to make any representation in connection with the
Offer described in the Prospectus that is not contained in the Prospectus. Any such information or representation
may not be relied upon as having been authorised by the Company in connection with the Offer.
The Prospectus provides information to assist investors in deciding whether they wish to invest in the Company and
should be read in its entirety. If you have any questions about its contents or investing in the Company you should
contact your stockbroker, accountant or other financial adviser.
10.16 Non-Resident Investors
The Prospectus does not constitute an offer in any country or place in which, or to any person to whom, it would
not be lawful to make such an offer. The distribution of the Prospectus in jurisdictions outside Australia may be
restricted by law and therefore persons who come into possession of the Prospectus should seek advice on and
observe any of these restrictions. Failure to comply with these restrictions may violate securities law. Applicants
who are resident in countries other than Australia should consult their professional advisers as to whether any
governmental or other consents are required or whether any other formalities need to be considered and followed
to enable them to subscribe for Shares.
The Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful
to make such an offer.
Intending investors resident outside Australia should first consult their professional advisers as to whether or not
governmental or other consents are required, or whether formalities need to be observed to enable them to
invest. Intending non-resident investors should also seek advice in respect of the taxation effect of an investment
in the Company and dividends that the Company may distribute in the future.
The return of a duly completed Application Form will be taken to constitute a representation and warranty that
there has been no breach of such laws and that all necessary approvals and consents have been obtained.
No action has been taken to register or qualify the Shares or the Offer, or otherwise to permit a public offering of
the Shares in any jurisdiction outside Australia.
10.17 Privacy
The Application Form accompanying this Prospectus requires you to provide information that may be personal
information for the purposes of the Privacy Act 1988 (Cth) (as amended). The Company (and its share registry on
behalf of the Company) may collect, hold and use that person information in order to assess your Application,
service your needs as a Shareholder and provide facilities and services that you request and to administer the
Company.
Access to information may also be provided to the Company’s agents and service providers on the basis that
they deal with such information in accordance with the Company’s privacy policy.
If you do not provide the information requested of you in the Application Form, the Company’s share registry may
not be able to process your Application or administer your holding of Shares appropriately. Under the Privacy
Act 1988 (Cth) (as amended), you may request access to your personal information held by (or on behalf of) the
Company. You can request access to your personal information by telephoning or writing to the Company to the
attention of the Privacy Officer.
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D I R E C T O R ’ S
S T A T E M E N T S
This Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.
In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this
Prospectus with the ASIC and has not withdrawn that consent.
Dated: 3 February 2006
Andrew R Bantock
Director
For and on behalf of
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G L O S S A R Y
The following defined terms apply throughout this Prospectus unless the context requires otherwise:
“$” means Australian dollars unless otherwise specified;
“ACH Clearing Rules” means the operating rules of Australian Clearing House Pty Limited (ACN 001 314 503;)
“Applicant” means a person who completes and lodges an Application Form;
“Application” means an application for Shares pursuant to this Prospectus;
“Application Form” means the application form attached to this Prospectus;
“ASIC” means the Australian Securities & Investments Commission;
“ASTC Rules” means the settlement rules of Australian Settlement and Transfer Corporation Pty Limited;
“ASX” means Australian Stock Exchange Limited (ACN 008 624 691);
“ASX Listing Rules” means the Listing Rules of ASX as amended from time to time;
“Bullion” means Bullion Minerals Limited (ABN 74 009 799 553);
“Closing Date” means the last date on which Application Forms may be submitted;
“Company” or “Chalice Gold Mines” means Chalice Gold Mines Limited (ABN 47 116 648 956);
“Constitution” means the Constitution of the Company;
“Corporations Act” means the Corporations Act 2001 (Cth);
“Directors” or “Board” means the directors of the Company as at the date of this Prospectus;
“Exposure Period” means the period of 7 days after the date of lodgement of this Prospectus with the ASIC, which
period may be extended by the ASIC by not more than 7 days pursuant to Section 727(3) of the Corporations Act;
“Issue” means the issue of up to 37,500,000 Shares under this Prospectus;
“Offer” means the offer of Shares pursuant to this Prospectus;
“Official List” means the official list of ASX;
“Opening Date” means the first date on which Application Forms can be received;
“Prospectus” means this prospectus dated 3 February 2006;
“Shares” means fully paid ordinary shares in the capital of the Company;
“Shareholder” means a holder of a Share(s);
“Share Registry” means Computershare Investor Services Pty Limited; and
“WST” means Western Standard Time.
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