AIM RELEASE
31 October 2007
Discovery Metals Limited ("DME")
Quarterly Report - 1 July to 30 September 2007
Maun Copper Project
* A report prepared by Snowden Mining Industry Consultants
("Snowden") in July 2007 indicates that due to an increase in the
average grade of the Inferred mineral resources, the Maun Copper
Project has the potential to be economically viable at copper
prices of US$1.50/lb and above;
* Snowden has completed an updated assessment of the
potential for the development of an open pit mining operation which
has showed that for copper prices varying between US$2.00/lb and
US$2.50/lb, and based upon the currently defined Inferred mineral
resources at the Zeta and Petra Prospects only, the potential Net
Present Value (NPV) of an open cut mine ranges from US$80 million
to US$210 million. This assessment does not allow for the ongoing
exploration success that the Company has experienced over the past
6 months;
* Two strike kilometres of potentially open pittable
copper-silver mineralisation has been identified at the North East
Zeta Prospect;
* Drilling completed at the Plutus Prospect has confirmed
historical drill results with copper-silver mineralisation grading
1 - 2.5% Cu being intersected over 5km of strike and this
mineralisation is potentially amenable to open pit extraction;
* Initial results from the new metallurgical test work on
the Maun copper-silver mineralisation have confirmed historical
metallurgical results and indicate a premium quality copper
concentrate grading in the range of 35-42% Cu is capable of being
produced;
* Copper recoveries on copper-silver mineralisation from the
main Zeta Prospect at Maun are excellent at 95% and previous work
has shown that silver recoveries are 80%.
Dikoloti Nickel Project
* Initial tests on the Dikoloti nickel sulphide
mineralisation indicated that high nickel extractions could
potentially be achieved using a bacterial leaching process;
* A column test, simulating the heap-leach bacterial
process, achieved 50% nickel extraction at the end of the quarter
and with the nickel extraction rate continuing to accelerating
rapidly, a high nickel extraction value should be obtained at the
conclusion of the test.
Corporate Activities
* Discovery completed an institutional fundraising in
Australia, Botswana and the United Kingdom raising AUD$11.4
million in order to progress the Maun Copper project through its
feasibility stages.
1.) EXPLORATION ACTIVITIES
Maun Copper Project, North West Botswana, (Discovery Metals 100%)
The Maun Copper Project comprises seven prospecting licences covering
an area of 6,333 square kilometres in north-western Botswana. Located
within the project area is the Zeta Inferred Copper Resource (the
"Zeta Resource" - 27.1Mt @ 1.3% Cu and 21 g/t Ag at a cut-off of 0.6%
Cu) and the Petra Inferred Copper Resource (the "Petra Resource" -
4.5 Mt @ 1.1% Cu at a cut-off of 0.6% Cu). Other occurrences of
copper mineralisation occur at the Plutus and North East Zeta
prospects (Figure One).
Open Pit Potential of the Zeta and Petra Mineral Resources
During last Quarter following infill drilling at the Zeta Prospect
and initial drilling at the Petra Prospect an upgraded Inferred
mineral resource was reported for the Zeta prospect and an initial
Inferred mineral resource was reported for the Petra resource.
Following the definition of the Petra Resource and the significant
increase to the Inferred mineral resource at the Zeta Prospect,
Discovery retained the services of Snowden Mining Industry
Consultants ("Snowden") to undertake an assessment of the open pit
potential of the new Zeta and Petra resources.
The open pit assessment comprised a Whittle optimisation study of the
Zeta and Petra resources using the following parameters:
* Pit slope angle - 45o, 50o, 55o
* Production rate - 2 Mtpa and 3 Mtpa
* Mining Base Cost - US$2/tonne
* Processing cost for flotation - US$8 per tonne of ore for
3 Mtpa, US$10 per tonne for 2 Mtpa
* Copper recovery for flotation - 95%
* Silver recovery for flotation - 83%
* Copper price - US$1.50/lb, US$2.00/lb and US$2.50/lb
* Silver price - US$8/oz
* Treatment Charges / Refining Charges and transport - 22.6%
of copper metal
* Treatment Charges / Refining Charges and transport - 10%
of silver metal
* Government Royalty - 3% of gross revenue
* Discount 10%
The base case scenario for the Zeta Resource of 45o pit slopes,
$1.50/lb Cu and 2 Mtpa processing rate produces an open pit with a
potential mining inventory of 4.5Mt @ 1.34% Cu and 22 g/t Ag with an
undiscounted cash flow of US$52 million and average discounted cash
flow of US$44 million. Steepening the pit walls to 50o, increasing
the processing rate to 3 Mtpa and using US$2.00/lb for the copper
price increases the undiscounted cash flow to US$151 million and the
average discounted cash flow to US$127 million. A further increase
in the copper price to US$2.50/lb increases the undiscounted cash
flow to US$240 million and increases the average discounted cash flow
to US$197 million.
The base case scenario for Petra of 45o pit slopes, $1.50/lb Cu and 2
Mtpa processing rate produces an open pit with a potential mining
inventory of 0.82Mt @ 1.13% Cu and 18 g/t Ag with an undiscounted
cash flow of US$7.4 million and average discounted cash flow of
US$7.13 million. Steepening the pit walls to 50o, increasing the
processing rate to 3 Mtpa and using US$2.00/lb for the copper price
increases the undiscounted cash flow to US$24 million and the average
discounted cash flow to US$21 million. A further increase in the
copper price to US$2.50/lb increases the undiscounted cash flow to
US$38 million and increases the average discounted cash flow to US$35
million. The Petra open pit optimisations include the value of
silver which currently is not classified a part of the Inferred
resource.
Discounted Cash Flow Analysis
A discounted cash flow analysis was completed for the Zeta and Petra
Resources by combining the outcomes from the Whittle optimisation
studies for each resource. In order to calculate Net Present Values
("NPV's") for the combined resources the capital cost of a flotation
processing plant was estimated at US$55 million for a 2 Mtpa plant
and US$62 million for a 3 Mtpa plant. A discount rate of 10% was
applied.
The results from the economic analysis of the combined Inferred
mineral resources for the Zeta and Petra resources are shown in Table
One. Based upon these results Snowden concluded that there is
potential to establish a cash flow positive operation based upon the
current Zeta and Petra resources at copper prices of US$1.50/lb and
above.
Using a copper price of US$2.00/lb, 2 Mtpa processing rate and 50o
pit walls the combined Inferred mineral resources of Zeta and Petra
have the potential to deliver a project NPV of US$80M with an
Internal Rate of Return ("IRR") of 180%. If the processing rate is
increased to 3 Mtpa and a copper price of US$2.50/lb is used the
project NPV increases to US$180M. The most optimistic scenario
considered during the modelling was assuming 55o pit walls, 3 Mtpa
processing rate and US$2.50/lb copper price and this produced a
project NPV of US$210M.
Adding additional open pittable copper resources to the existing
resources at Zeta and Petra has the potential to significantly
increase the overall Project NPV. It should be possible to bring a
third open pit resource in to production in addition to Zeta and
Petra for only an incremental increase in capital expenditure. The
Company estimates that a further 10 million tonnes of 1.3% open
pittable copper mineralisation could increase the project discounted
cash flow by US$150 million at US$2.00/lb copper.
Table One - Results of Economic Analysis of the Zeta and Petra
Mineral Resources
+-------------------------------------------------------------------+
| Pit Wall | Assumed Copper | Mining | Ore | | Ag | NPV |
| Slope | Price | Rate | (Mt) | Cu % | g/t | (US$M) |
| | (US$/lb) | (Mtpa) | | | | |
|----------+------------------+--------+------+------+-----+--------|
| 50o | 1.50 | 2 | 6.6 | 1.3 | 22 | 17 |
|----------+------------------+--------+------+------+-----+--------|
| 50o | 2.00 | 2 | 9.3 | 1.3 | 21 | 80 |
|----------+------------------+--------+------+------+-----+--------|
| 50o | 2.50 | 2 | 11.7 | 1.3 | 21 | 154 |
|----------+------------------+--------+------+------+-----+--------|
| 50o | 1.50 | 3 | 7.3 | 1.3 | 22 | 25 |
|----------+------------------+--------+------+------+-----+--------|
| 50o | 2.00 | 3 | 9.8 | 1.3 | 21 | 97 |
|----------+------------------+--------+------+------+-----+--------|
| 50o | 2.50 | 3 | 12.2 | 1.3 | 21 | 183 |
|----------+------------------+--------+------+------+-----+--------|
| 45o | 1.5 | 2 | 5.3 | 1.3 | 22 | 2.5 |
|----------+------------------+--------+------+------+-----+--------|
| 45o | 1.5 | 3 | 6.0 | 1.3 | 21 | 8.7 |
|----------+------------------+--------+------+------+-----+--------|
| 55o | 2.50 | 2 | 13 | 1.3 | 21 | 176 |
|----------+------------------+--------+------+------+-----+--------|
| 55o | 2.50 | 3 | 14.5 | 1.3 | 21 | 210 |
+-------------------------------------------------------------------+
North East Zeta Prospect
The North East Zeta prospect occurs four kilometres immediately along
strike to the northeast of the Zeta Resource (Figure One). Northeast
of the Zeta Resource the closest historical drill hole was hole GD21,
four kilometres north-east of the northern termination of the Zeta
Resource. No other historical drilling had been completed in the
four kilometre section of strike between Zeta and GD21. Hole GD21
had intersected encouraging copper-silver mineralisation of 3.5m @
3.3% Cu from 105m down hole depth. The historical drill results of
all historical holes completed at the North East Zeta Prospect are
given in Table Two.
In order to determine if the shallow copper-silver mineralisation
intersected in hole GD21 was the immediate northern extension of the
Zeta Resource 11 diamond drill holes were drilled on 500m sections
extending from hole GD21 back south-west towards the Zeta Resource.
One section was drilled 500m to the north-east of hole GD21.
Table Two - North East Zeta Prospect Historical Drill Results
Easting Northing Total From To Assay
Hole WGS84 WGS84 Dip/Azi Depth (m) (m) Results
SUTM34 SUTM34 (m) (0.3% Cu cut-off)
-60° to 163.22 172.5 9.3m @ 0.8% Cu
ZG020 714563 7725074 140°' 176 including
168.5 171.97 3.5m @ 1.6% Cu
-60° to 134.21 3.7m @ 1.7% Cu
ZG9 715335 7725714 140°' 142 137.87
-60° to 104 108.65 4.7m @ 2% Cu & 7g/t Ag
GD021 713784 7724313 140°' 112 including
105.5 108.44 2.9m @ 3% Cu & 10g/t Ag
The best result was returned in hole GD093-07 which intersected 6m @
1.3% Cu and 33g/t Ag from 193m. Hole GD087-07 returned 6m @ 1.2% Cu
and 13g/t Ag from 70m. Both holes GD093-07 and GD087-07 were drilled
on the same section as GD021. The results from all North East Zeta
drill holes, completed by Discovery, are given in Table Three.
The results from the drilling at the North East Zeta prospect
indicate that the copper-silver mineralisation does not extend at
shallow open pittable depth from the current northern boundary of the
Zeta Resource to hole GD021. However, there is the potential to
define a modest open pittable resource within the 1100m of strike
length from hole GD021, northeast to holes GD095-07, GD096-07 and
further northeast to historical hole ZG20 (intersected 3.2m @ 1.4% Cu
from 168.5m). Infill drilling on 250m spaced sections will be
required in order to determine if an Inferred resource can be
defined.
Plutus Prospect
Five kilometres to the northeast of the Petra Inferred mineral
resource (4.5 Mt @ 1.1% Cu at a 0.6% Cu cut-off) a series of
historical diamond drill holes intersected >1.5% Cu over a strike
length of 5km. The historical copper intersections include ZP021
which intersected 12.8m @ 1.6% Cu from 158m. This area of historical
copper-silver intersections has been named the Plutus Prospect.
During the quarter in order to determine the extent of the shallow
copper-silver mineralisation intersected in the historical drill
holes, Discovery completed 18 RC/diamond drill holes on 500m spaced
sections covering 5km of strike. A further three holes have been
completed following the end of the quarter and the Plutus
copper-silver mineralisation is now defined by twenty seven diamond
drill holes, which includes six historical drill holes.
Table Three - North East Zeta Drill Results
Northing Easting Total Min. Min. Geochemical
Hole (m) (m) Dip/Azi Depth Results
WGS84 WGS84 (m) From To (m) (0.3% Cu cut-off)
SUTM34 SUTM34 (m)
70 76 6m @ 1.2% Cu, 13 g/t Ag & 63g/t
-58° to Mo
GD087-07 713801 7724297 140°' 85.89 including
3m @ 1.5% Cu, 19g/t Ag & 120g/t
73 76 Mo
GD088-07 -58° to 115.47 48 50
713173 7723798 140°' 2m @ 1.2% Cu, 7g/t Ag & 17g/t Mo
GD089-07 -58° to 150.47 144 145.71 1.71m @ 0.8% Cu, 14g/t Ag &
713126 7723854 140°' 15g/t Mo
GD090-07 -58° to 80.54 65 68
712532 7723325 140°' 3m @ 1% Cu, 5g/t Ag & 70g/t Mo
GD091-07 -58° to 169.02 155 156 1m @ 1.2% Cu, 6g/t Ag & 6g/t Mo
712487 7723361 140°'
GD092-07 -58° to 171.27 2m @ 1.4% Cu, 33g/t Ag & 135g/t
711877 7722859 140°' 162 164 Mo
6m @ 1.3% Cu, 33g/t Ag & 112g/t
-58° to 193 199 Mo
GD093-07 713732 7724344 140°' 199.47 including
3.09m @ 1.7% Cu, 43g/t Ag &
194.91 198 130g/t Mo
GD094-07 713088 7723909 -58° to 241.17 1.94m @ 1.5% Cu, 52g/t Ag &
140°' 237 238.94 26g/t Mo
5m @ 0.75% Cu, 9g/t Ag & 28g/t
248 253 Mo
including
GD095-07 711821 7722907 -58° to 285.22 2m @ 1.2% Cu, 18g/t Ag & 15g/t
140°' 249 251 Mo
2.18m @ 1.13% Cu, 20g/t Ag &
270 272.18 108g/t Mo
7m @ 0.5% Cu, 33g/t Ag & 135g/t
124 131 Mo
including
124 126 2m @ 1% Cu, 3g/t Ag & 17g/t Mo
GD096-07 714140 7724659 -58° to 154.07
140°' 8.32m @ 0.6% Cu, 7g/t Ag & 11g/t
142 150.32 Mo
including
3m @ 1.1% Cu, 14g/t Ag & 14g/t
146 149 Mo
GD098-07 714168 7724623 -58° to 100.17 Awaiting Assays
140°'
Discovery completed two RC/diamond holes per section with the
drilling focussed on shallow mineralisation. The maximum
intersection depth of the mineralised horizon was approximately 120m
vertically below the surface. Indications from all sections drilled
during the quarter, was that the copper-silver mineralisation extends
to the surface and below the depth of maximum drilling.
Copper-silver mineralisation was intersected in seventeen of the
initial eighteen drill holes, completed by Discovery, confirming that
at the Plutus Prospect the mineralisation extends over at least 5km
of strike (Figure Two). The Plutus mineralisation is still open to
the northeast and southwest. During the quarter the results from six
drill holes were received and are given in Table Four.
Currently the best sections drilled are Sections 42,650N and 42,150N
with the mineralisation defined by both historical and Discovery
drilling.
Section 42,650N
On Section 42,650N, historical drill hole ZP021 intersected 12.8M @
1.6% Cu from 158m down hole including 4m @ 2.5% Cu. Discovery drill
hole PD018-07 was drilled above ZP021 and intersected 5m @ 1.2% Cu
and 15g/t Ag from 100m down hole depth including 4m @ 1.4% Cu and
18g/t Ag on the footwall - hangingwall contact (Figure Three).
Section 42,150N
On Section 41,150N historical drill hole ZP032 intersected 11m @ 1%
Cu from 165m down hole including 2.1m @ 2% Cu. Discovery drill hole
PD019-07 was drilled up dip of ZP032 and intersected 7m @ 1.2% Cu and
17g/t from 92m down hole including 4m @ 1.7% Cu and 24g/t Ag from
95m.
The results from sections 42,650N and 42,150N suggest the
copper-silver mineralisation significantly thickens at depth in the
northeast of the Plutus prospect and the higher grade mineralisation
gently plunges to the northeast. A northeast plunge to the higher
grade mineralisation also occurs at both the Zeta and Petra
Prospects.
The drilling completed at Plutus is on relatively wide spaced 500m
sections. The results returned from the drilling to date are similar
to those returned from the Zeta Prospect at a similarly early and
wide spaced stage of drilling. Infill drilling on 250m spaced
sections will be required to gain a better understanding of the
plunge and extent of the higher grade and thicker mineralisation
(intersected in holes ZP021 and PD019-07 for example).
Following receipt of all results from the drilling completed at
Plutus, a consultant will be engaged to assess the data and if
possible, define an Inferred mineral resource. If it is possible to
define an Inferred mineral resource, it is expected that this
resource will be able to be announced in early December 2007. A
mineral resource defined at Plutus could significantly increase the
overall resource base of the Maun Copper Project, particularly the
proportion of the mineral resource which is potentially open
pittable. Infill drilling at Plutus will be conducted before the end
of 2007.
Table Four - Drill Holes Results from the Plutus Prospect
Northing Easting Total Min. Min. Assay Results Down
Drill (m) (m) Section Dip/Azi Depth Hole
Hole WGS84 WGS84 Number (m) From To (0.3% Cu cut-off)
SUTM34 SUTM34 (m) (m)
PD017-07 7728599 706348 43150mN -58 to 112.21 104 108 4.0m @ 1.5% Cu, 3g/t Ag &
140' 128g/t Mo
ZP033* 7728659 706302 43150mN -60 to 174.85 170.9 174.1 3.2m @ 1% Cu
140'
100 105 5.0m @ 1.2% Cu, 15g/t Ag & 11
-58 to g/t Mo
PD018-07 7728311 705945 42650mN 140' 120.07 including
101 105 4.0m @ 1.4% Cu, 18g/t Ag &
11g/t Mo
158 170.8 12.8m @ 1.6% Cu
ZP021* 7728363 705908 42650mN -60 to 171.32 including
140'
164 168 4m @ 2.5% Cu
92 99 7.0m @ 1.2% Cu, 17g/t Ag &
-60 to 14g/t Mo
PD019-07 7727998 705533 42150mN 140' 106.33 including
95 99 4.0m @ 1.7% Cu, 24g/t Ag &
7g/t Mo
165 176 11.0m @ 1%
ZP032* 7728052 705503 42150mN -60 to 177.00 including
140'
170.8 176.2 4m @ 1.4% Cu
-60 to 29 33 4m @ 1.4% Cu & 17g/t Ag
PD020-07 7727698 705160 41650mN 140' 45.00 including
30 33 3m @ 1.7% Cu & 19g/t Ag
111 118 7.0m @ 1.3% Cu, 14g/t Ag &
-60 to 65g/t Mo
PD021-07 7727756 705117 41650mN 140' 124.15 including
115 118 3.0m @ 1.75% Cu, 21g/t Ag &
134g/t Mo
29 33 4.0m @ 1.4% Cu & 17g/t Ag
ZP006* 7727477 704617 41150mN -60 to 147.32 including
140'
30 33 3.0m @ 1.7% Cu & 19g/t Ag
63 72 9m @ 0.8% Cu, 5g/t Ag & 32g/t
-60 to Mo
PD022-07 7727465 704732 41150mN 140' 78.54 including
67 70 3m @ 1.2% Cu, 7g/t Ag & 80g/t
Mo
* Indicates historical drill hole
Maun Copper Project Metallurgical Test Work
Discovery contracted Brisbane-based HRL Testing Pty Ltd ("HRL") to
undertake metallurgical flotation test work on samples of
copper-silver mineralisation from the Zeta and Petra Inferred mineral
resources on the Maun Copper Project. Of the total resource base on
the Maun Copper Project, Zeta comprises 86% of the total resource
base and Petra 14%. The goal of the test work was to confirm the
results from historical metallurgical test work completed on the Maun
Project in 1978 by Outokumpu. The metallurgical test work being
completed by HRL forms a part of the Maun Copper Project
pre-feasibility study which commenced at the start of August.
Drill core samples from the Zeta and Petra Inferred Resources were
selected to provide a degree of spatial coverage of the two
mineralized zones, and were combined for testing purposes into a
composite grade sample, similar to that anticipated from the mineable
resource. Preliminary flotation work was undertaken over a range of
grind sizes at the HRL laboratory.
In rougher flotation testing copper-silver mineralisation from the
Zeta Prospect gave near identical performance to the results achieved
in the previous work conducted by Outokumpu. The recovery of copper
was 95% to a 12% copper rougher concentrate grade, which is excellent
for a preliminary test. Cleaner flotation work is being completed on
the Zeta samples to define the final recovery and product grade. In
the 1978 Outokumpu test the final concentrate contained 35-42% Cu, at
92-94% recovery and 450g/t silver at 80% recovery. The Outokumpu
test was completed on a composite sample of mineralisation from the
Zeta Prospect grading 1.6% Cu and 23g/t Ag.
The preliminary test results received during the quarter indicated
that it is probable the HRL test work will produce a final
concentrate with similar copper and silver grades to that produced by
the earlier Outokumpu testing. Furthermore, the Zeta copper-silver
mineralisation may be amenable to processing via a simple flow sheet
with a two stage cleaning process.
Copper-silver mineralisation from the Petra Inferred Mineral Resource
ore returned lower copper recoveries of 78%. This appears to be
attributable to partial oxidation of the samples, as the samples were
taken from 40m down-hole depth. The Petra Resource contributes only
14% to the total copper-silver resource base on the Maun Project.
Due to the excellent metal recoveries and high copper grades attained
in the rougher concentrates, it is probable that the Zeta and Petra
copper-silver mineralisation will produce a high quality, premium
quality copper-silver concentrate. If the final metallurgical test
results are consistent with the historical test results then the
copper-silver concentrate should be well sought after by metal
trading companies and copper smelters due to its significantly higher
than average copper content and its silver credits.
Maun Copper Project Prefeasibility Study
At the start of August Discovery commenced a pre-feasibility study of
the Zeta and Petra Inferred mineral resources on the Maun Copper
Project. The main components of the pre-feasibility study are as
follows:
i. Resource Upgrade to Indicated Status
ii. Hydro-geological Study
iii. Geotechnical Study
iv. Depth of Weathering Study
v. Environmental Impact Study
vi. Infrastructure Study
vii. Processing Study
viii. Metallurgical Test Work
ix. Labour Study
x. Marketing Study
xi. Project Development Study
xii. Capacity Optimisation Study
xiii. Underground potential
The main component of the pre-feasibility study is a 5000m infill
drill program on the Zeta Inferred mineral resource. This infill
drill program will drill out the Zeta resource to a maximum section
spacing of 200m. A part of the higher grade centre section of the
Zeta resource will be drilled out to 100m spaced sections. By
combining a section of the Zeta resource drilled to 100m sections and
the remainder of the resource at 200m spaced sections it is
anticipated that the Zeta resource will be able to be classified in
the Indicated category.
Water Resource Consultants (Botswana) have been engaged to undertake
a study of the water resources available from aquifers in close
proximity to the Zeta and Petra resources. It has been estimated
that a 2Mtpa flotation processing plant will require approximately
2Mtpa of water for processing the copper-silver mineralisation.
Water Resource Consultants will complete a two phase study in order
to define the required water resource. The first stage of the study
will be a desktop study in order to provide recommendations for the
drilling of water bores. The second phase of the study will comprise
the drilling of 10-15 water bores in order to define the required
water resources for the processing plant.
Rockland Geoscience has been engaged to assist with the collection of
geo-technical data from the Zeta infill drill program and to assist
in the assessment of the data. Modifications were made to the Zeta
infill drill program in order to collect additional geotechnical data
on the footwall rocks to the mineralisation such that a more accurate
assessment of the ability of the footwall to sustain a steep slope to
the open pit wall can be made. The ability to maintain steep pit
walls is critical to decreasing the strip ratio, and hence lowering
costs, for an open pit operation at Zeta.
Snowden Mining Industry Consultants ("Snowden") have been engaged to
undertake a mine plan and mining schedule for the first two years of
production from the proposed Zeta open pit. The goal of this study
is to have a mine design which maximises copper production and
minimises the strip ratio in order to reduce the capital payback
period and maximize cash flow. Snowden have also been engaged to
further assess the ability of the Zeta resource to be mined
economically underground.
Discussions are currently in progress with several Johannesburg based
consultants regarding the environmental, social, infrastructure,
processing and marketing aspects of the project.
It is anticipated that the pre-feasibility study will be concluded
during the first quarter in calendar 2008.
Exploration Targets
A hand held portable Niton XRF machine has been purchased for the
Maun Project. This will allow soil geochemical data to be collected
quickly and accurately without the need to send soil samples to an
assay laboratory. A number of regional geological targets have been
selected for covering with soil geochemical data in order to define
new targets for drill testing. It is anticipated that a number of
new regional targets areas will be defined before the end of the
year.
Dikoloti Nickel Project, North East Botswana, (Discovery Metals 85%,
XStrata 15%)
The Dikoloti Nickel Project comprises four prospecting licences
covering an area of 612km2 surrounding the three nickel deposits of
BCL Limited in the Selebi-Phikwe region of NE Botswana. Through the
expenditure of $2.5 million DML has earned an 85% interest in the
project from Xstrata, who are currently diluting. An inferred mineral
resource of 4.7Mt @ 0.7% Ni, 0.5% Cu and 1.5 g/t PGE's at a cut-off
of 0.5% Ni for 32,900 tonnes of contained nickel has been defined at
the Dikoloti Prospect.
Dikoloti Bio-Oxidation Metallurgical Test
Previous testing by Discovery on the Dikoloti nickel mineralisation,
indicated that a fine grind would be required in order to liberate
the nickel at acceptable recoveries using traditional flotation
processing techniques. Consequently, Discovery has been evaluating
alternative methods for processing the nickel mineralisation which
would allow Dikoloti to be developed as a standalone operation.
The alternative processing technique which has shown most promise to
date is an oxidation heap leach approach using bacteria to break down
the sulphide mineralisation and release the nickel into solution.
Discovery engaged the services Geobiotics LLC in order to test the
ability of the GeoLeachTM bio-oxidation process to liberate the
nickel and copper from the Dikoloti mineralization.
Preliminary stirred reactor testing demonstrated that the Dikoloti
ore was readily oxidised by bacterially regenerated ferric sulphate
chemistry, and that high nickel extractions (97%) could be achieved.
Following this successful initial test, a 2m column test was
initiated in order to simulate the processes which would occur in a
heap leach environment.
The early column testing indicated that due to large amounts of
pyrrhotite in the Dikoloti mineralisation, acid consumption was high
and breakdown of the pyrrhotite released a significant amount of iron
into solution. The release of the iron affected the ability of the
bacteria to break down the sulphides and release the nickel. As a
result of iron high concentrations in the column, nickel extraction
in the first 40 days of the test was low.
During the next 49 days of the test, a range of techniques was
trialled in order to control the iron release into the column such
that the bacteria would not be seriously affected. As a result of
these techniques nickel extraction has improved markedly from day
99. At the end of the quarter nickel extraction was in excess of 50%
and was increasing steadily.
The GeoLeachTM bio-oxidation test has now been concluded. Once a
final report on the test program has been received Discovery will
make a decision on how to further progress the Dikoloti nickel
project.
Litchfield Project, Northern Territory, (Discovery Metals 100%,
Trajan Minerals earning in to 51%)
The Litchfield Project comprises exploration tenements EL22959, EL
23619 and EL22961 and tenement applications ELA23623 and ELA22960
within the Litchfield Province south-west of Darwin in the Northern
Territory. The mafic and ultramafic rocks ("Wangi Basics") which
intrude the Litchfield metamorphic rocks are thought to have
potential for nickel-copper-platinum mineralisation similar to that
occurring within the Halls Creek Mobile Belt in Western Australia.
The Litchfield Project has been joint ventured to Trajan Minerals who
are managing the exploration program. Trajan Minerals have commenced
their initial exploration of the project area and results will be
reported next quarter.
Musgrave Project, Western Australia, (Discovery Metals 100%, Redstone
Resources earning in to 51%)
The Musgrave Project comprises granted tenements E69/1640, E69/1641,
E69/1642, E69/1663 and E69/1662 within the Musgrave Province of
Western Australia. The project covers an area of 976 km2. The
project tenements cover the target Giles Complex mafic and ultramafic
intrusions which are prospective for Voisey's Bay style nickel
deposits.
The Musgrave Project is currently being managed by Redstone Resources
Limited who are farming in to the Project. Redstone have obtained
access to a number of selected targets from the Traditional Owners
and clearance of the target areas is an ongoing process.
Cat Camp Project, Western Australia, (Discovery Metals 100%)
The Cat Camp Project comprises tenement E15/818 covering 34 km2 of
the Lake Johnston Greenstone Belt which further south hosts the
Maggie Hays and Emily Ann nickel deposits.
A review of all previous work on the project has been completed and a
number of ground EM and magnetic anomalies have been selected for
ground follow up. These targets have the potential to be due to
nickel sulphide mineralisation.
2.) CORPORATE ACTIVITIES
On 18th September Discovery announced the completion of a placement
to institutional and sophisticated investors in Australia, Botswana
and the United Kingdom, placing a total of 31.6 million shares at
A$0.36 (£0.145) to raise a total of AUD$11.38 million (£4.58 million)
(before expenses). The placement, which was handled by Capital
Corporate Finance in Botswana and stockbrokers Fox-Davies Capital in
London, was made pursuant to DML's 15% placement facility under
section 7.1 of the ASX listing rules and a pre-placement approval
granted at the Company's recent General Meeting of Shareholders held
on 30th August 2007.
Funds raised from the placement secure the funding required to
complete the pre-feasibility and bankable feasibility studies on the
Maun Copper Project. A proportion of the placement will be for
on-going corporate costs.
The placement was not discounted and was completed at the prevailing
market price for Discovery shares at the time. Through the placement
Discovery gained the support of a number of high quality Botswana and
UK investors, as well as a number of Australian investor groups, and
this is allowing Discovery to gear up the Maun Copper Project
feasibility studies and exploration program.
On 20th September Discovery appointed Mr Christian Heili as Manager
for the Pre-Feasibility and Feasibility Studies into the development
of the Maun Copper Project. Mr Heili is a mining engineer and
project manager with more than 20 years experience in the development
and operation of base and precious mines in Africa. His extensive
experience includes his recent involvement with a major US$430
million brownfield copper/cobalt project in the Congo, which has both
underground and open cut features. Mr. Heili took up his appointment
on 1st of October and will be based at the Discovery office in
Gaborone where the Maun Project team has been assembled.
The information in this report as it relates to Mineral Resources was
compiled by Mr. Jason Hosken and Mr. Stefan Mujdrica, who are Members
of The Australasian Institute of Mining and Metallurgy. Mr Hosken
and Mr Mujdrica are full time employees of Snowden Mining Industry
Consultants. Mr Mujdrica and Mr Hosken have sufficient experience
which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2004 Edition of the
"Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves". The information in this report that
relates to Exploration Results is based on information compiled by
Mr. Jeremy Read who is a Member of the Australasian Institute of
Mining and Metallurgy. Mr Read is a full-time employee of the
Company. Mr. Read has sufficient experience which is relevant to the
style of mineralisation and type of deposit under consideration and
to the activity which he is undertaking to qualify as a Competent
Person as defined in the 2004 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves". Mr. Read, Mr Hosken and Mr Mujdrica consent to the
inclusion in the report of the matters based on information provided
by them and in the form and context in which it appears.
Appendix 5B
Mining exploration entity quarterly report
Rule 5.3
Appendix 5B
Mining exploration entity quarterly report
Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98,
30/9/2001.
Name of entity
Discovery Metals Ltd
ABN Quarter ended ("current quarter")
29 104 924 423 30 September 2007
Consolidated statement of cash flows
Current quarter Year to date
Cash flows related to operating $A'000 (3 months)
activities $A'000
1.1 Receipts from product sales and - -
related debtors
1.2 Payments for
(a) exploration and evaluation (745) (745)
(b) development - -
(c) joint venture Botswana - -
(d) administration (760) (760)
1.3 Dividends received - -
1.4 Interest and other items of a 46 46
similar nature received
1.5 Interest and other costs of finance - -
paid
1.6 Income taxes paid - -
1.7 Other (provide details if material)
GST/VAT Refund 47 47
Net Operating Cash Flows (1,412) (1,412)
Cash flows related to investing
activities
1.8 Payment for purchases of:
(a)prospects - -
(b)equity investments - -
(c) other fixed assets (2) (2)
1.9 Proceeds from sale of:
(a)prospects - -
(b)equity investments 250 250
(c)other fixed assets - -
1.10 Loans to other entities - -
1.11 Loans repaid by other entities - -
1.12 Other (provide details if material) - -
Net investing cash flows 248 248
1.13 Total operating and investing cash
flows (carried forward) (1,164) (1,164)
1.13 Total operating and investing cash flows (1,164) (1,164)
(brought forward)
Cash flows related to financing activities
1.14 Proceeds from issues of shares, options, etc. 7,219 7,219
1.15 Proceeds from sale of forfeited shares - -
1.16 Proceeds from borrowings - -
1.17 Repayment of borrowings - -
1.18 Dividends paid - -
1.19 Other (provide details if material) - -
Net financing cash flows
7,219 7,219
Net increase (decrease) in cash held 6,055 6,055
1.20 Cash at beginning of quarter/year to date 2,867 2,867
1.21 Exchange rate adjustments to item 1.20 - -
1.22 Cash at end of quarter
8,922 8,922
Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the
related entities
Current quarter
$A'000
1.23 Aggregate amount of payments to the parties 60
included in item 1.2
1.24 Aggregate amount of loans to the parties -
included in item 1.10
1.25 Explanation necessary for an understanding of the transactions
-
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had a
material effect on consolidated assets and liabilities but did
not involve cash flows
-
2.2 Details of outlays made by other entities to establish or
increase their share in projects in which the reporting entity
has an interest
-
Financing facilities available
Add notes as necessary for an understanding of the position.
Amount available Amount used
$A'000 $A'000
3.1 Loan facilities - -
3.2 Credit standby arrangements - -
Estimated cash outflows for next quarter
$A'000
4.1 Exploration and evaluation 750
4.2 Development -
Total 750
Reconciliation of cash
Reconciliation of cash at the end of the quarter (as Current Previous
shown in the consolidated statement of cash flows) quarter quarter
to the related items in the accounts is as follows. $A'000 $A'000
5.1 Cash on hand and at bank 8,922 -
5.2 Deposits at call - -
5.3 Bank overdraft - -
5.4 Other (provide details) - -
Total: cash at end of quarter (item 1.22) 8,922 -
Changes in interests in mining tenements
Tenement Nature of Interest at Interest
reference interest beginning at end of
(note (2)) of quarter quarter
6.1 Interests in mining
tenements -
relinquished, reduced
or lapsed
6.2 Interests in mining -
tenements acquired or
increased
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or
conversion rights together with prices and dates.
Total number Number quoted Issue Amount
price per paid up
security per
(see note security
3) (see note
(cents) 3) (cents)
7.1 Preference
+securities
(description)
7.2 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns
of capital,
buy-backs,
redemptions
7.3 +Ordinary
securities 127,852,195 127,852,195
7.4 Changes during
quarter
(a) Increases 31,643,765 31,643,765 36 cents 36 cents
through issues 250,000 250,000 30 cents 30 cents
200,000 200,000 35 cents 35 cents
(b) Decreases
through returns
of capital,
buy-backs
7.5 +Convertible
debt securities
(description)
7.6 Changes during
quarter
(a) Increases
through issues
(b) Decreases
through
securities
matured,
converted
7.7 Options Exercise Expiry
(description and 750,000 price date
conversion 750,000 30 cents 1 February
factor) 1,500,000 35 cents 2008
1,550,000 30 cents 1 February
2,000,000 35 cents 2008
1,500,000 30 cents 1 February
718,188 35 cents 2009
1,000,000 26 cents 1 February
30 cents 2009
1 May 2010
1 May 2010
1
September
2010
1
September
2010
7.8 Issued during 500,000 - 30 cents 1 April
quarter 1,000,000 - 30 cents 2010
1,000,000 - 35 cents 1 May 2010
718,188 - 26 cents 1 May 2010
1,000,000 - 30 cents 1
September
2010
1
September
2010
7.9 Exercised during 250,000 250,000 30 cents 1 February
quarter 2009
200,000 200,000 35 cents 1 February
2009
7.10 Expired during
quarter
7.11 Debentures
(totals only)
7.12 Unsecured notes
(totals only)
Compliance statement
1 This statement has been prepared under accounting
policies which comply with accounting standards as defined in the
Corporations Act or other standards acceptable to ASX (see note 4).
2 This statement does give a true and fair view of the
matters disclosed.
Sign here:
(Company Secretary)
Print name: Ros Shand
Date: 31 October 2007
Notes
1 The quarterly report provides a basis for informing
the market how the entity's activities have been financed for the
past quarter and the effect on its cash position. An entity wanting
to disclose additional information is encouraged to do so, in a note
or notes attached to this report.
2 The "Nature of interest" (items 6.1 and 6.2) includes
options in respect of interests in mining tenements acquired,
exercised or lapsed during the reporting period. If the entity is
involved in a joint venture agreement and there are conditions
precedent which will change its percentage interest in a mining
tenement, it should disclose the change of percentage interest and
conditions precedent in the list required for items 6.1 and 6.2.
3 Issued and quoted securities The issue price and
amount paid up is not required in items 7.1 and 7.3 for fully paid
securities.
4 The definitions in, and provisions of, AASB 1022:
Accounting for Extractive Industries and AASB 1026: Statement of Cash
Flows apply to this report.
5 Accounting Standards ASX will accept, for example, the
use of International Accounting Standards for foreign entities. If
the standards used do not address a topic, the Australian standard on
that topic (if any) must be complied with.
A formatted file of the Quarterly Activities and Cashflow Reports for
the period ended 30 September 2007 is available on the Company's
website.
Further information on the Company is available on the Company's
website at www.discoverymetals.com.au
NOTE: For further information contact
Jeremy Read
Managing Director
Tel: +617 3218 0202
Mobile: 0409 484322
Email: jeremy@discoverymetals.com.au
Jamie Wright
RFC Corporate Finance Ltd (Nomad)
Tel: +618 9480 2508
Email: Jamie.Wright@rfc.com.au
Richard Hail
Fox-Davies Capital Ltd (AIM Broker)
Telephone: +44(0) 20 7936 5200
Email: Richard.Hail@fdcap.com
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