Quarterly Report for the Period Ended 31 March 2008

Prairie Downs Copper-Lead-Zinc Project

Exploration

Work at Prairie Downs during the quarter was focused on exploration for the first time. All previous work on the project since listing has been focused on resource definition and development.

Mapping (at the very detailed scale of 1:500) commenced on the "ring structure" that hosts existing zinc resources. The objective was to provide geotechnical data for completion of the Feasibility Study and to better understand the geology.

The geological team then moved to the Costean Seven prospect, 3.2 kilometres west of Main Lode and site of a previously announced lead discovery. This work resulted in a spectacular copper discovery, as detailed in ASX releases dated 17 April 2008 and 22 April 2008.

Mapping is now underway on a very large target area approximately one kilometre to the east of Costean Seven. Extensive copper mineralisation has been discovered and results will be released as soon as mapping and sampling is complete.

A 20,000 metre drill program is planned for the June quarter, comprising both RC and diamond drilling, and is expected to last until the end of the year. Multiple targets require drilling and they include:

Copper will be the priority going forward as it reduces the Company's dependence upon a single commodity and thus effectively provides a hedge against zinc prices and vice versa. In addition, the copper mineralisation occurs at surface and therefore any copper resources that are defined are likely to be amenable to open cut mining. This would be an important benefit to project economics.

This first exploration program at Prairie Downs has been a resounding success and further significant discoveries can be expected. Exploration and drilling to date has covered less than 3 kilometres of a total 17 kilometre long zone that is prospective for copper, lead and zinc.

Resources

An updated resource statement was detailed in an ASX release of 13 February 2008. The total Global Resource in three lodes (Main, Zed and Gabbro) is 4.7 million tonnes at a grade of 6.3% zinc, 1.8% lead and 18g/t silver at a nominal lower cut of 1% zinc.

This resource includes a subset High Grade Resource of 1.6 million tonnes at a grade of 12.3% zinc, 3.7% lead and 36g/t silver.

The global resource contains 295,000 tonnes of zinc, 83,000 tonnes of lead and 2.6 million ounces of silver and at 1 March 2008 (LME 3mo prices) had an in situ value of USD1.1 billion.

This resource commences at or near surface and approximately 500,000 tonnes of the high grade resource is amenable to open cut mining. It is possible that further near surface mineralisation will be discovered in the Zed and Gabbro Lodes.

This near surface potential, along with strike and depth extensions, will be the focus of future resource definition drilling.

Feasibility Study

A Feasibility Study by Abesque Engineering and Construction commenced in October. It is based upon an initial 300,000tpa processing plant with the capacity to expand to 1mtpa. The study is progressing well and remains on schedule for completion in June.

Metallurgical test work is nearing completion. Physical characteristics of the ore indicate that it is amenable to a standard two stage crushing and single stage ball milling circuit. There are no indications of power consumption problems.

Extensive Phase 1 flotation tests have been completed and Phase 2 is about to commence based upon these results. The targets for Phase 2 will be 92% zinc recovery with a concentrate grade of 52% zinc and 85% lead recovery with a concentrate grade of 55% lead.

Test work indicates that zinc can be floated with a coarser grind than initially envisaged. This not only reduces costs but may mean that the base level plant design would be capable of higher throughput than the initial planned throughput of 300,000tpa.

Abesque has advised that the processing plant as now envisaged would only require minor modifications to treat copper ore similar to that discovered at Costean Seven. Metallurgical test work on the copper is planned for the September quarter.

The preliminary capital cost estimate for plant construction is $43 million. This estimate does not include logistic support such as bore field, power generation, roads, accommodation etc. These costs are being finalized and will be available in June.

Operating costs are not yet available as significant further input is required, such as annual treatment rate, source of power etc. However, operating costs are expected to be similar to comparable operations in Australia.

The mining feasibility is not finalised as a result of the new copper discovery, which substantially improves the probability of an increase in open pittable resources. Open pittable mineralisation is a significant advantage as it lowers both capital and operating costs and reduces financial risk.

The updated development target is an operation treating 500,000tpa with up to 5 years open pittable copper and zinc mineralisation treated on a campaign basis. Production scheduling of each metal would depend upon which is most profitable at the time of treatment. Potential open pittable mineralisation, particularly copper, will be a priority for the upcoming drilling campaign.    

Other Projects

No fieldwork was completed on either the Longreach Well or Perenjori projects during the quarter. The Coppermine Bore and Jillary uranium projects had been joint ventured to Western Uranium Limited. That company did not complete any exploration on either project during the quarter and has withdrawn from both joint ventures.   

Corporate

The Company is reviewing several alternatives for financing project development, including discussions with potential end users and off take partners.

The discovery of copper mineralisation at surface has resulted in an increased focus on exploration. While this will of necessity delay project development it is also expected to increase project value, facilitate more effective financing, and reduce project risk.