Borroloola

Overview & Background

The Borroloola Project comprises a total area of 13,400 square kilometres of granted tenements and tenements under application in the Northern Territory. The Project encloses a significant proportion of the Batten Fault Zone, host to the giant McArthur River lead and zinc mine deposit. This deposit is the second largest SEDEX base metal deposit in the world.

The Project also covers near-coastal areas of Cretaceous rocks considered to be highly prospective for sedimentary manganese mineralisation, similar to the world-class Groote Eylandt manganese deposits north of the Borroloola Project in the Gulf of Carpentaria.

Manganese Exploration

During the second half of 2008, Sandfire undertook a widespread drilling program exploring for concealed manganese mineralisation, particularly in the Rosie Creek catchment. This work focused on assessing the previously known Rosie Creek deposit and also exploring south-westerly along the southern flank of the Rosie Creek valley for repetitions of this style of mineralisation.  

The reconnaissance component of the program was successful in discovering the Rosie Creek SW reconnaissance manganese deposit, which remains only partially delineated. However, most of the middle reaches of the Rosie Creek catchment – which is thought to be the most prospective area – have not yet been tested for other possible zones of manganese mineralisation.

In the two known deposits, the mineralisation is typically composed of manganiferous nodules in a poorly consolidated manganiferous sand and shale unit. Within the sequence, the ratio of nodules to sand and to shale is highly variable. This variability is also reflected in the overall assay grade of the raw manganese drill intersections and precludes a simple assessment of the two manganese deposits.

Accordingly, Sandfire has defined three separate areas in order to more accurately determine potential manganese product resources and grades within this area. Two of these have been identified within the Rosie Creek Deposit and one within the SW Reconnaissance Deposit.

Drill cuttings from these three areas have been composited into bulk samples for metallurgical test work, which is designed to determine the grade and content of the coarse and fine manganese nodules that can be separated from the in situ mineralisation. This test work is currently underway in an independent laboratory and results are expected during 2009.

During the September 2009 Quarter, Sandfire entered into an agreement with the ASX-listed mining services and contracting company, Mineral Resources Limited (ASX: MIN), to fund the ongoing exploration and development of its highly prospective Borroloola Manganese Project.

The agreement will see Mineral Resources – through its wholly-owned subsidiary, Process Minerals International (PMI), which has a successful track record in the manganese industry – solely fund and operate an exploration and development program at the Borroloola Project.

Mineral Resources/PMI will also solely fund the full cost of any mining operation (including all capital costs) established at Borroloola as well as meeting all associated operating expenses of any manganese operations. In return, Mineral Resources/PMI will be entitled to 70% of profits (before interest and tax) flowing from the future sale of manganese products.

Essentially, under the agreement Sandfire will receive 30% of the profit (before interest and tax) from all manganese operations undertaken by Mineral Resources/PMI and importantly at no risk or cost to Sandfire.

The deal also provides for full accommodation of Sandfire’s agreement with Korean steel maker POSCO, under which POSCO is entitled to buy 30% of all manganese produced from any operation. POSCO is Sandfire’s largest shareholder with a stake of 17.5%.

Base Metal Exploration

The primary exploration targets within the Borroloola Project area sedimentary zinc and lead deposits similar to the giant McArthur River Mine deposit, located south of the Project. Sandfire has delineated an area of high lead, zinc and silver prospectivity flanking the Emu Fault Zone, which extends some 100 kilometres through the property.

Sandfire has completed initial diamond drilling programs at the Yalco and Warramana Prospects, with two holes (747.7m) completed in October 2008. While no significant base metal mineralisation was intersected, ongoing exploration continues to confirm the prospectivity of this region for potentially world-class base metal deposits.

A detailed soil geochemistry program completed over the Alice Prospect has confirmed the prospectivity of this area, which covers an 800 metre length of the middle units of the Balbarini Dolomite of the Nathan Group.

Anomalous lead-in-soil results to a peak value of 514 parts per million (ppm) were reported from the soils, forming a discrete zone of anomalism. Further field work will be carried out on this target during 2009.

A 1,235 line km airborne electromagnetic survey (VTEM) was flown during August 2008 over the Rosie Creek lower catchment area, north of the Warramana Prospect.
 
This sector of the McArthur Basin is underlain by the Barney Creek Formation and is highly prospective for lead-zinc-silver mineralisation.

The results of this survey will enable Sandfire to define stratigraphic and structural elements of the underlying geology and identify possible targets for future drill testing.

Uranium Exploration

Sandfire has identified a 40km strike length of the basal unit of the McArthur Basin which is prospective for uranium mineralisation.

The Yiyintyi Sandstone is in unconformable contact with the underlying Scrutton Volcanics, an acid volcanic unit. This geological setting is comparable to that of the basal McArthur Basin, Paleoproterozoic unconformity related uranium deposits in the East Alligator Uranium field, some 420 kilometres to the northwest.

The unconformity occurs at shallow depths, typically under 20 to 50 metres of flat-lying Cretaceous cover which would have concealed any uranium mineralisation from ready detection by airborne radiometric surveys.

Interpretation of Sandfire’s airborne electromagnetic survey data over the prospective Scrutton Volcanics indicates that conductive features in these basement rocks that may have acted as focus localities for deposition of uranium.