EXPLORATION

During the 2006-07 financial year the Company acquired a number of advanced nickel projects to add to a growing exploration portfolio. Highlights included –

• Exercise of purchase option on Marriott’s Nickel Project
• Acquisition of 86km² of tenements adjoining the Blair Nickel Mine and surrounding tenements
• Acquisition of Lake Yindarlgooda Nickel Project

MARRIOTT’S PROJECT

The Marriott’s Nickel Deposit is located on granted mining lease M37/96 and situated 70km south west of the Leinster Nickel Concentrator. Previously owned by BHP Billiton, the Company exercised a purchase option in late June 2007 and acquired the lease after conducting an encouraging initial diamond drill programme aimed at testing previous drill results (WMC 1970’s), up dip potential and metallurgical recovery. The Company has previously reported the project to contain an inferred resource of 550,000 tonnes at 1.4% for 7,700 tonnes of nickel metal. 

Marriott's Project Location Map

During the June Quarter 2007, a 2,700 metre programme of diamond holes commenced. This phase of infill drilling is designed to increase the category of the known resource from inferred to indicated. To date the programme has provided excellent results, as follows -

Marriott's Intercept Section

BLAIR PROJECT AREA

Blair Project Tenements (tenements in grey acquired May 2007)

Australian Mines is continuing to explore within the Blair Underground Nickel Mine, and in JV with Pioneer Nickel is actively exploring for nickel on the regional tenements around the Blair Mine.

The recent acquisition of Location 45 and surrounding tenements represents a priority exploration target for the Company. East Location 45 contains the historic Mt Martin gold mine and several identified nickel lodes below the pit base, the Goodyear nickel resource and additional untested nickel anomalies.

Location 45 has historically been explored for gold, with limited nickel exploration completed. Previous nickel exploration at the Goodyear project located on the Carnilya Hill - Mt Martin nickel belt was successful in identifying nickel resources based on nickel sulphide intercepts varying in depths from 200m – 500m that included 3.8m @ 7.3%, 1m @ 12.7%, 3m @ 4.9% and 1m @ 8.5%.  The Company is currently in the process of designing an exploration program for this region, with exploration drilling to commence in the near future.

BLAIR MINE NICKEL EXPLORATION

The exploration strategy at Blair Nickel Mine involves drilling and electromagnetic probing of the Blair Deeps below current workings, as well as drilling at shallower depths for extensions to the Area 57 and L01C shoots.

(a) Blair Deeps Drilling
The deepest workings at the Blair Nickel Mine are at 390 m level. Recent diamond drilling at Blair Deeps indicates that the 3 main ores shoots continue strongly at depth–

C01C Shoot:

Two diamond holes drilled below the current workings have returned the following high grade down hole intercepts -

• AMUG 223 :4m @ 10.60 % Ni from 375m RL
• AMUG 252:5.9m @ 4.30% Ni from 350m RL

   

E03C Shoot::

Seven diamond holes drilled to define the orebody between the 400mRL and 350mRL have returned the following down hole intercepts -

• AMUG 225 : 5.7m @ 4.70 % Ni from 385m RL  
• AMUG 226 : 3.1m @ 2.62 % Ni from 365m RL
• AMUG 227 : 5.0m @ 3.24 % Ni from 378m RL
• AMUG 228 : 5.9m @ 7.67 % Ni from 375m RL
• AMUG 229 : 7.6m @ 8.83 % Ni from 360m RL  
• AMUG 232 : 8.0m @ 8.20% Ni followed by 4.0m @ 10.97% Ni from 385 RL

   

N03C Shoot:

The programme targeting E03C shoot has also intersected the N03C shoot in a number of the holes with encouraging down hole intersections. Results include -

• AMUG 225 : 10.0m @ 1.78 % Ni from 402m RL
• AMUG 226 : 2.2m @ 2.55 % Ni from 400m RL
• AMUG 227 : 17.8m @ 2.04 % Ni from 396m RL
• AMUG 228 : 2.0m @ 1.03 % Ni from 400m RL
• AMUG 229 : 5.0m @ 1.96 % Ni from 383m RL

Blair Deeps Exploration: Shoot intercepts

Further resource definition drilling is continuing on the nickel shoots at Blair Deeps as the Company targets the 300m RL (90m below the current deepest operating level).

(b) Area 57 Exploration and L01 Shoot
Although the Area 57 orebody as currently defined has essentially been mined out, there is considerable potential for finding a down plunge ‘repeat’ orebody by diamond drilling from a suitable platform underground. The L01 decline development on the 900 m level, after it intersects the L01 shoot, will provide a suitable opportunity for a diamond drill cuddy to be established from which a staged programme of diamond holes and electromagnetic probing can then commence to explore for a repetition of Area 57. 

 Area57 and L01 Shoot

The low level detailed aeromagnetics flown in early 2004 have proven invaluable in defining the position of the open contact and in prioritising drill targets. There is excess of 6 kilometres of folded basalt – ultramafic contact immediately south of the Blair Nickel Mine which is particularly prospective for nickel orebodies, and there are numerous programmes to be focussed on in the coming year.

Blair Regional Nickel Exploration

GOLDEN RIDGE JOINT VENTURE WITH PIONEER NICKEL LTD

On 24 January 2006, Australian Mines announced the Golden Ridge Joint Venture with Pioneer Nickel Limited (ASX: PIO) to advance nickel exploration on the areas surrounding the company’s Blair Nickel mine.  Australian Mines retains a 49% interest in Golden Ridge, Pioneer to fund up to A$2.25 million in exploration activities over 3 years for its 51% interest and can earn another 19% by spending a further $3.0m over additional 3 years.  

Current GRJV Activities (June 2007)-

(a) DHTEM testing for nickel sulphides below a large regolith anomaly to the north of the Blair South Prospect found a weak intersection anomaly at 140 metres down hole in hole GRR031, which coincided with a sulphidic black shale , plus a low conductance off-the-end-of-hole conductor in the ultramafic hanging wall which may warrant follow up work.

(b) DHTEM testing for nickel sulphides below extensive regolith anomalism to the south of the Blair South Prospect of existing anomalies to the south of the Blair South Prospect resulted in most anomalies being co-incident with sulphidic black shales but GRR011 produced a broad late time response below the drillhole which may warrant follow up work and a broad late time off-the–end–of-the-hole anomaly was detected in both GRR035 and GRR036.

The SQUID FLTEM programs have been completed and two drill targets have been modelled as follows: 

(a) A short strike-length, moderately conductive anomaly has been identified immediately north of the Blair South prospect. The conductor has a strike length of approximately 150m and a depth extent of approximately 200m. The FLTEM conductor also correlates with the off-the-end-of-hole conductor identified in GRR030. It is planned the conductor will be tested with the next available RC rig.

(b) A sizeable (150mx150m) moderate to strongly conductive anomaly has been identified to the south of the Marshall Prospect. It is planned the conductor will be tested with the next available diamond drill rig.

GRJV - Work Planned for the September 2007 Quarter:

LAKE YINDARLGOODA

The recently acquired Lake Yindarlgooda Nickel Project is comprised of two highly prospective tenements, E28/1134 and ELA 28/1134, located less than 50km north east of Kalgoorlie

The north-west trending mafic-ultramafic volcanic sequence partially exposed within the tenement is interpreted to be the extension of the Jubilee komatiite belt. The belt hosts a number of nickel occurrences including the Acra deposit. The Lake Yindarlgooda nickel laterite (Mindex reports 1 million tonnes @ 1.0%) lies along strike to the South on the adjoining tenement. Previous limited exploration on E28/1134 reported shallow drill intercepts up to 3m @ 0.48% Ni in near fresh ultramafic. Also reported were trace sulphides including violarite and chalcopyrite in chip samples from outcrops at several locations.

The minimal amount of exploration completed at the Lake Yindarlgooda Nickel Project coupled with its ideal geological setting makes this an exciting exploration project. Work is expected to begin in the 2007-08 financial year.

 Lake Yindarlgooda Location Map

BLAIR REGIONAL GOLD EXPLORATION

The Blair Project Area covers an 18-km long section of the prospective NNW trending Boorara-Woolibar fault zone, which is host to the Boorara-Golden Ridge and Mt Martin gold mining centres.  The Golden Ridge mine operated by Harmony Gold, with an endowment of 500,000 ounces, lies immediately north of and along strike from the project area which is also cross-cut by the Boorara Fault. To the east the Mt Monger Fault extends from the Daisy-Milano Mine (150 000 ounces) and the historic Wombola workings before continuing to the north where it intersects the Kanowna Shear Zone.

Regional Gold Exploration

DUPLEX HILL SOUTH PROSPECT

The Duplex Hill South lease, tenement E26/64, is located approximately 36km south east of Kalgoorlie in Western Australia on the Kurnalpi (SH51-10) 1:250,000 map sheet and is contiguous with Australian Mines Blair Project tenement package to the north west .

The prospect has had two phases of surface geochemistry by Niagara and Anglo Gold to define a broad gold in soil anomaly. This anomaly was subsequently RAB and RC drilled by Niagara and Anglo with some good results received, including 18m @ 3.19g/t Au in one RC hole.

Since purchasing the lease in 2006 Australian Mines has had wonderful exploration success, and an economic resource has been defined at Woodline 1.

Woodline 1 Drilling
An infill programme of 11 RC holes for a total of 478 metres was drilled in 2006, to firm up the resource model at Woodline1. Further strong gold mineralisation was encountered, with best results including:- 

• 9m at 10.4g/t Au
• 12m at 6.7 g/t Au
• 8m at 2.1 g/t Au
• 4m at 3.6 g/t Au, and
• 9m at 9.1 g/t Au.

Woodline 1 Geology
The Woodline 1 deposit is characterised by: 

• A peak gold geochemical anomaly of 322 ppb located directly over the orebody. 
• A horizontal blanket of gold mineralisation beneath transported soils at 10 metres vertical depth.
• A ‘carrot shaped ‘ zone of strong gold enrichment in the weathered reef channel
• A supergene blanket of gold mineralisation, sitting directly above fresh Archaean dolerite, at the base of weathering. 

Woodline 1

Goldstar Prospect

The Goldstar Au prospect was highlighted by a pedogenic carbonate sampling programme completed in early 2005; two distinct anomalous zones were thentested with five RAB lines in March 2005, with the best intersection being 15metres at 1.6 grams per tonne.
 
The surface anomaly is spatially associated with an elongate laterite ridge andminor quart veining at the surface. Drilling encountered dominantly gabbroiclithologies with some minor sediments and minor quartz veining with betterresults associated with sheared gabbro / sediment contact. Further RAB drilling will be required to close off the anomalies before RC holes are drilled.