The Doolgunna Project DeGrussa Copper Gold Deposit E52/1650

By Conrad Brookes 16037395 Date: 12/09/2012

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Table of Contents
Section 1 2 3 4 5 Description Introduction and Location Geology and Mineralisation DeGrussa Deposit Mining Operations Oxide Copper Processing Page 2-3 6 7 8 9

List of Figures
Figure 1 2 3 4 5 6 7 8 Description Doolgunna Project Map Doolgunna Project Tenements Peak Hill Group Map Geological Setting Doolgunna Map Geological Setting DeGrussa Geological Summary Assay Result Photo of VMS 26% Copper DeGrussa 3D Mine Map DeGrussa Open Cut Page 2 3 4 5 6 7 8 9

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Introduction and Location The Doolgunna Project comprises of three exploration licences E52/1650, 1661 & 1663 and is located in the Peak Hill Mineral Field of Western Australia. The project is within the Murchison Province of Western Australia and lies on the northern margin of the Yilgarn Craton. (Hocking, 2005) Sandfire obtained 100% interest in the Doolgunna Tenements package from Peak Resources. The Doolgunna Project is on the northern margin of the Yilgarn craton, in the Nabberu Basin a synclinorial fold belt lying between the Goodin Dome and the Marymia Dome. The area has is well known for its history of gold mining, Horseshoe, Marymia, Plutonic and Peak Hill and has been explored for gold, copper, iron ore and diamonds. The second most important Proterozoic goldfield in the state of Western Australia is The Peak Hill area. (Hocking, 2005) The Doolgunna Project is located approximately 150km north of Meekatharra. It is owned 100% by Sandfire resources. Its 900km North from Perth, located in what is known as the Peak Hill mineral field of Western Australia. The Doolgunna Tenements cover 400 sq. km if the Bryah Basin that is an emerging class gold-copper mineralisation. (Sandfire, 2012) Near to this project there are a number of existing gold and base metal historical mines, as well and being close to the Great Northern Hwy and the Goldfields Gas Pipeline. (Sandfire, 2012) A high-grade VMS (Volcanogenic massive sulphide) copper-gold deposit was discovered in August of 2009 and is known at DeGrussa. This has become the companies flag-ship project. A number of other explorers are currently operating in the district including Sipa Resources, Talisman Mining and Alchemy Resources. None of these explorers have achieved significant exploration success to date. Its worth noting that prior to this discovery the company had very little cash reserves and struggling when a relatively inexperienced Geo named Margaret Hawke saved the company. The Doolgunna discovery is under about 70 metres of surface cover and was made thanks to the inexperience of youth. Like nearly all small cap exploration companies Sandfire was scorched in last year's crash. Nearly everyone was laid off, and at that point there were only three full- time staff members, including Margaret Hawke, a geologist just four-years out of university. Ms Hawke was at Doolgunna in May when her boss, John Evans, was at another Sandfire project, and it was Hawke who authorised the drilling of a vertical hole to allow the ground crew to get a better look at early, but inconclusive gold and copper intersections. "She phoned me to say what was happening, but I found later that they had already started drilling", Evans said. How fortuitous. And it was that hole which returned 47 metres at 5.3% copper, 20.1 grams of gold a tonne, and 1% zinc, from a depth of just 93 metres. (topstocks.com.au, 2012)

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Fig 1 Regional Location Diagram(Sandfire, 2012) Since this discovery there has been more than 200,000 meters of diamond drilling completed. This has resulted in the discovery of delineation of the DeGrussa lens, the underlying Conductor 1 lens and the adjacent Conductor 4 and Conductor 5 Lenses. (Sandfire, 2012) Mining commenced at DeGrussa in 2012 and amazingly the mining operations is set to become Western Australias biggest copper mine, with total resources of 652,000t of contained copper and 742,000oz of gold. (Sandfire, 2012) Sandfire has proceeded with a highly aggressive strategy of exploration as a result of these four VMS lenses at DeGrussa. The exploration program is targeting potential repeats of the DeGrussa deposits. As can be noted that the majority of VMS deposits around the world have been discovered in clusters or close proximity and intern lead to major sources of global copper, zinc and lead production. (Sandfire, 2012) A 30km long 1.2km wide prospective corridor has been identified that is yet to be explored, surrounding the DeGrussa mine. Suffice to say on minimal drilling has been done and there is huge potential.

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Figure 2 Project Tenure (Peak Resources, 2008)

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Figure 3 Regional Geology (Batten, 2006)

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Figure 4 Project Geology & Mineralisation (Peak 2008)

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Geology and Mineralisation The Peak Hill district covers a marginal part of a Proterozoic orogenic belt that developed around the northern edge of the Yilgarn Craton. The Capricorn Orogen separates the Archaean rocks of the Yilgarn Craton to the south from the Pilbara Craton to the north. (Hocking, 2005) The area represents remnants of a Proterozoic fold belt, the Glengarry Fold Belt, comprising completely deformed trough and shelf sediments and mafic volcanics. The Proterozoic sequence has been tightly folded into a complex synclinorium jammed in the middle between the Archaean Goodin and Marymia Domes. To the east of Peak Hill in the project area, the fold axes trend to the northeast. Regional scale faults in the Peak Hill district form two major directions, north-easterly and northwesterly sets of faults. (Hocking, 2005) Tertiary laterite is variably exposed on watersheds and is best developed in areas of Archaean basement. Elsewhere vast areas of depositional clays of Quaternary sands conceal bedrock, while calcrete development is essentially confined to areas surrounding Lake Gregory. (Hocking, 2005) The Proterozoic sediments form the eastern edge of the Nabberu basin and are overlain unconformably by the sediments of the Earaheedy Sub-basin. To the northeast two greenstone belts, the Baumgarten and the Plutonic Well, are encompassed within the Marymia granite dome. (Hocking, 2005) Teritary laterite is exposed on watersheds and is best formed in Archaean basement areas. In other places there are vast areas of depositional clays of Quaternary sands conceal bedrock, while calcrete development is essentially confined to areas surrounding Lake Gregory. (Hocking, 2005) Traditionally the most important economic mineralisation in the Peak Hill district has been Gold until this significant gold-copper discovery at DeGrussa. Prior to this discovery the area had produced 6 million ounces from mining and prospecting. Regional controls on the mineralisation appear to be stratigraphic with lithological and structural control becoming important at the mine scale. The Horseshoe Fontnum group of deposits West of the Peak Hill district, the western Peak Hill deposits and the southern deposits, Heines Find, Mikhaburra, Harmony, Wembley, Ruby Well and Cashman are all hosted in cherty or quartz rich units at or close to the top of the Narracoota Volcanic rocks of the Glengarry Group. The basalts of the Narracoota Volcanics and the overlying Thaduna Greywacke consists of a faulted contact and is considered highly prospective throughout the Nabberu Basin. Mineralisation is thought to be volcanic exhalative and generally gold occurs in quartz veins locally. Thickening of gold mineralisation may be associated with regional northwest trending crosscutting faults and mineralisation along the Narracoota Volcanics contact is associated with structural dislocations. (Batten, 2006) The main Peak Hill deposits and the central deposits, Wilsons Find, Hit or Miss, Goodin Find and St Crispin are characterised by quartz vein stockworks in the same stratigraphic units as the previous deposits. These deposits are hosted by arenaceous sediments correlating to the Peak Hill Metamorphics and the Doolgunna Formation. (Batten, 2006) In the northeast the major gold mining district hosting the Plutonic and Marymia mines and deposits is located in the greenstone, Plutonic Well and Baumgarten respectively, belts within the Marymia granitic dome. Within laterites and shear zones associated with mafics, banded iron formations, ultramafics, cherty metasediments and granite mineralisation of gold is found. The Three Rivers Project with the Trapper Hawkeye gold deposit sits in the western extension of the Marymia Dome and is mineralised in a similar style, shear hosted, to the larger Marymia and Plutonic deposits. (Hocking, 2005) By 1971 copper production has ceased in the Thadunda mining Area and an approximate total of 40,000 tons of copper at approximately 8.3% had been produced. This mainly was produced from five deposits associated with the northwest trending shear zones that cut the closely folded Thadunda Grewwacke at a high angle. The mineralised zones were anastomosing quartz filled vertical fault zones with the copper presenting as chalcopyrite. Production came from supergene enrichment that reached a depth of 50 metres during lateritisation. (Hocking, 2005)

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Figure 5 DeGrussa Project Geology (Peak Resources, 2008) DeGrussa Deposit In 2009 a high grade VMS copper-gold mineralisation was discovered at DeGrussa by Sandfire. It was discovered in the north-eastern portion of its Doolgunna Project tenements, which comprises of the Conductor 1 Lenses of DeGrussa. A third and fourth lens were found after at Conductor 4 and Conductor 5. (Sandfire, 2012) Drilling at the start returned some of the very best intersections seen in the WA mining industry in recent times. For example, the discovery hole, DGDD-001, intersected a total of 78.3 metres of high-grade copper-gold mineralisation including: 53.2m @ 17.3% Cu and 2.5g/t Au in DeGrussa; and 25.1m @ 3.4% Cu, 3.4g/t Au and 1.6% Zn in Conductor 1 Additionally to in-fill drilling within the main resource envelope, drilling was commenced to the immediate surrounds of the DeGrussa deposit to test for more copper-gold-zinc lodes. This led to the discovery in October 2009 of the Conductor 4 deposit, which is located just adjacent on the eastern side of the DeGrussa and Conductor 1 deposits, stratigraphically some 120 metres below Conductor 1. With you youse of geophysical surveys additionally the exploration drilling has continued to test the ground adjacent to the DeGrussa deposit. (Sandfire, 2012) This additional exploration led to the discovery in June 2010 of the Conductor 5 deposit, which is closely located approximately 900 metres north-east of the DeGrussa/Conductor 1 deposits. With the use of follow up diamond drilling Conductor 5 was discovered, it was to test a strong off-hole conductor generated by down-hole electro-magnetic (EM) surveys undertaken on recently completed drill holes to the north-east of the Conductor 4 deposit. (Sandfire, 2012)

Figure 6 Drill core from DeGrussa DGDD001-153-154m (Peak Resources, 2008)

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Mining Operations The DeGrassa mining operation owned by Sandfire with into production in Feb 2012 and is currently increasing production levels of 70 80,000tpa of copper and 36,000ozpa of gold anticipated by the end of 2012. The Project is being developed as an open pit and underground mine, and is set to become Western Australias biggest copper mine with total resources of 652,000t of contained copper and 742,000oz of gold. (Sandfire, 2012) It is expected that extraction from the DeGrussa open put will be able to extract 142,000t of Direct Shipping Ore (DSO) reserves graded at 2.5g/t gold and 25.6% copper, which will contain approximately 37,000 tons of copper. (Sandfire, 2012) The Underground mining operation at DeGrussa will be expected to extract an estimated 10.72 million tonnes of material grading 1.7g/t gold and 5% copper over the mines life, this will contain approximately 541,000 tonnes of copper and 599,000oz of gold. Sulphide ore from the underground mining operation will be processed via a conventional 1.5Mtpa flotation processing facility, which is scheduled to be commissioned in Q3 CY2012. (Sandfire, 2012) A Definitive Feasibility Study in June 2011 indicates that the DeGrussa Project will produce an average annual concentrate production of 300,000tpa grading 27% Cu (FY 2013-2015) and 220,000tpa grading 27% Cu (FY 2016 onwards), generating total payable gold production of 270,000 ounces and total payable copper production (LOM) of 480,000t. The construction of the plant remains on schedule and within the budget target, and is expected to be completed by the third quarter of 2012 leading the way for Sandfire to transition from explorer to producer. (Sandfire, 2012)

Figure 7 Open Cut & Underground Optimisation with Mineralisation Model (Sandfire, 2012)

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Figure 8 Current Open Pit Operations (Sandfire, 2012) Oxide Copper Processing Commencing in 2011, investigations into a processing route suitable for the oxide copper ore, culminating in successful bench-scale processing to produce a saleable concentrate. This has enabled conversion of the higher grade portion of the previously announced Measured and Indicated open pit Oxide Copper Mineral Resources to Ore Reserves. (Sandfire, 2012) The proposed Oxide Copper Processing Plant will include wet scrubbing, crushing, and screening to three size fractions, followed by gravity separation at a scoped processing rate of 350-400,000 tonnes per annum. This will produce an intermediate concentrate suitable for further batch treatment in the 1.5Mtpa DeGrussa concentrator through the addition of sulphidising agents allowing conventional flotation. Test work completed so far is indicating that up to 40% of the material will be removed by the oxide plant, resulting in a 50% increase in grade ahead of delivery to the DeGrussa concentrator.

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References
Batten, P (2006) Independent Consulting Geologists Report, Section 4, pp 30 32, WAMEX, E52/1650 Peak Resources, 2008, ASX Announcement, Doolgunna Project Annual Report on Exploration 1st March 2007 to 28th February 2008, WAMEX, E52/1650 Sandfire Resources, 2009, ASX Announcement, 10/08/09, Flyer- Resources Rising Star Lunch Series. Sandfire Resources, 2012, ASX Announcement, 16/07/12, DEGRUSSA OPEN PIT OXIDE COPPER ORE RESERVE Sandfire Resources, 2012, ASX Announcement, 6/08/12, DEGRUSSA PROJECT PICTORIAL UPDATE Sandfire Resources, Doolgunna Project Overview, http://www.sandfire.com.au/doolgunnaproject/overview (accessed Sep 8, 2012). Sandfire Resources, Doolgunna Project project/degrussa (accessed Sep 8, 2012). DeGrussa http://www.sandfire.com.au/doolgunna-

Sandfire Resources, Doolgunna Project - Mining Operations, http://www.sandfire.com.au/doolgunnaproject/degrussa/mining-operations1 (accessed Sep 8, 2012). Department of Mines and Petrolium, WAMEX, https://wamex3.dmp.wa.gov.au/wamex3/ topstocks.com.au, http://www.topstocks.com.au/stock_discussion_forum.php?action=show_thread&threadid=421871 (accessed, Sep 9, 2012) Doolgunna Project, 2005, Hocking J C, Department of Industry and Resources, pp. 5-6. 2009,

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