Quarterly Report for the period ended 31 December 2009

Highlights

• Completion of an extensive geochemistry soil sampling program conducted over the entire 17km of the Prairie Downs Fault represented in the Company’s tenure. This represents the first stage in the Company’s revised exploration strategy that is targeting significant strike extensions of the existing base metal system. The results of this program are expected to be published in February 2010.

• The successful extension for a period of two years of Prairie’s Exploration Licence No. 52/1758. This is the licence for the principal tenement that contains the Prairie Downs Base Metal Project.

• Continuing discussions with a range of interested parties in potential joint venture development of the Prairie Downs Base Metal Project.

• New assets that will complement the Company’s current portfolio continues to be assessed with the aim of delivering long-term growth to shareholders.

• The Company identified, completed initial due diligence, and negotiated terms on behalf of Colonial Resources Ltd’s (ASX:CLN) (“Colonial”) for the acquisition of certain West African gold projects from Central African Gold plc (“CAG”). Prairie has earned an equity fee and will be issued 5 million ordinary shares and 5 million options in Colonial on completion of the acquisition in early March 2010. The options will have an exercise price of 15 cents and expire on 31 December 2011.

• The Company has relocated to a new head office in Perth to accommodate broader technical and operational requirements for the Company’s revised exploration strategy and project acquisition function.

Prairie Downs Base Metals Project

Completion of Geochemistry Soil Sampling Program

The comprehensive soil sampling programme that commenced in November was completed on-time and on-budget prior to closing the site camp for the Christmas break. The primary purpose of the survey is to identify potential strike extensions to the existing base metal system. The data will be used to generate better defined base metal drill targets along and adjacent to the Prairie Downs Fault.

 

Figure 1: Prairie Downs Base Metal Project – Soil Geochemistry

Please click on the map for an enlarged view

 

The sampling grid comprised 400m spaced lines, with 100m spaced sample points, totalling approximately 900 samples. The survey represents the first time the total length of the Prairie Downs Fault has been sampled and will significantly add to the Company’s database of the potentially fertile source stratigraphy. The soil anomalies may represent local host structures on the margin of the Proterozoic basin which promote the mineralisation to surface.Previous surveys (shown above in Figure 1) comprised short, close spaced lines of 360m length, oriented perpendicular to the fault, and covers the mineralisation at the main resource area. Elements assessed were Zn, Pb and Cu. Anomalies of similar dimensions and higher interest to the resource area were identified west of the deposit.The legacy soil geochemistry data identified four significant base metal in-soil anomalies in addition to the main load area, demonstrating the effectiveness of the technique in the regolith regime of the project and, offering potentially the most effective rapid targeting tool for the system. Further to reassessing historic surveys, the current survey will provide a framework for further ranking of targets for drill testing outside previously tested stratigraphy.The collected samples of the current program were submitted to ALS laboratories for analysis utilising high resolution methods and providing a broad suite of elements covering base metals, precious metals and pathfinder elements. The samples were submitted in batches and it is expected the results of the program will soon be available for release.

Extension of Exploration License E52/1758

The Department of Mines and Petroleum of the Government of Western Australia advised that the extension requested by Prairie of Exploration License E52/1758 has been granted for a further period of two years. Accordingly, the term of the license has been extended to 9 December 2011.  This exploration license is the principle tenement containing the Prairie Downs Base Metal Project. It was noted by the Company’s tenement manager, Austwide Mining Title Management Pty Ltd, that the determination by the Department was one of the quickest they have seen and can be credited to the quality of the Company’s supporting statement. The granting of the extension is an endorsement of Prairie’s revised exploration strategy and commitment to the development of the Prairie Downs Base Metal Project. The company is now exempt from any reduction in tenure for the extended term of the license. This will allow Prairie the opportunity to revise the Company’s previous mining lease application to incorporate an expected larger resource base and footprint. The Company’s base metal exploration strategy is focused on significantly adding to the Company’s current resource inventory and has two primary elements.  The first is the identification of new potential near surface ore positions along strike from the known deposit.  The second is the identification of the possible deeper source of the high grade vein style near surface mineralisation.

Prairie to be issued equity interest in Colonial Resources Ltd 

Prairie will receive a fee of 5 million ordinary shares in Colonial and 5 million options in Colonial with an exercise price of 15 cents and expiring on 31 December 2011 for identifying, negotiating, and nominating Colonial as the successful purchaser of CAG’s West African gold projects.

The shareholders of Colonial approved the allotment and issue of the shares and options mentioned above at a General Meeting on 22 January 2010.

Prairie initially identified the opportunity to acquire from CAG their 80% equity interests in each of Mali Goldfields SARL (“Mali Goldfields”) and Songhoï Resources SARL (“Songhoi Resources”), (collectively referred to as “Malian Assets”).

The Malian Assets consist of early stage gold exploration assets, consisting of 18 prospecting authorizations and research permits spanning circa 1883km². The assets are located within the Kedougou-Kenieba window, a major Lower Proterozoic Birimian outlier on the NE margin of the West African Shield.

After conducting initial due diligence including a site visit and technical review and commissioning an independent economic analysis conducted by Optimum Capital Pty Ltd, Prairie’s assessment of the Malian Assets was that the assets had substantial exploration upside and were best suited to a single focus company and required significant commitment. On this basis Prairie decided not to acquire the Malian Assets in its own right and to investigate the market potential of leveraging the completed due diligence and transaction opportunity for the benefit of the Company.

Prairie conducted detailed negotiations with CAG and submitted a formal offer to CAG for the purchase of the Mali Assets. The terms and conditions contained in this offer, including a total purchase price of US$5 million and Prairie’s ability to nominate the Purchaser, were subsequently accepted by CAG.

Prairie subsequently negotiated an agreement with Colonial that outlined the terms upon which Prairie agreed to nominate Colonial as the Purchaser of the Malian Assets. The key terms of the agreement between Prairie and Colonial were announced to the market in December 2009.

Completion of Colonial’s acquisition should occur in early March 2010.

Corporate

The Company continued to evaluate corporate opportunities during the quarter.  Prairie Downs is actively seeking new assets which complement our current portfolio and capabilities. 

The Company’s cash balance as at 31 December 2009 was $3.46 million.

Prairie Downs is seeing the benefits of a focus on cost efficiencies and remains committed to retaining a strong financial position in the current economic climate. 

As at 29 January 2010 the Company had 2,374 shareholders and 72,890,598 ordinary fully paid shares on issue with the top 20 shareholders holding 27.24% of the total issued capital.

Prairie Downs Metals limited continues to explore potential joint ventures and new investment opportunities designed to deliver long-term growth to shareholders.

Effective 21 December 2009 the registered office and principal place of business of Prairie changed to:

Level 21, Allendale Square
77 St Georges Terrace
Perth 6000
Western Australia
Tel: (+61 8) 9225 5755
Fax: (+61 8) 9225 4599

 

John Welborn
Managing Director

For further information contact:

John Welborn
Managing Director
Prairie Downs Metals Limited

Tel: (+6 18) 9225 5755
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Information in this release that relates to Exploration Results or Mineral Resources is based on information compiled by Mr Luke Kerr who is a member of The Australasian Institute of Mining and Metallurgy. Mr Kerr 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 Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Kerr consents to the inclusion in this report of the statements based on their information in the form and context in which it appears.

 

Prairie Downs Base Metals Project Overview

Currently the Project hosts a total global inferred and indicated resource of 4.7 million tonnes at a grade of 6.3% zinc, 18g/t silver and 1.8% lead at a nominal lower cut off grade of 1% zinc (refer to Table 1.0 attached). This resource contains 295,000 tonnes of zinc, 2.6 million ounces of silver and 83,000 tonnes of lead. Included is a high grade indicated and inferred resource of 1.6 million tonnes at a grade of 12.3% zinc, 36g/t silver and 3.7% lead.

The Project is located approximately 60 kilometres southwest of Newman in the Eastern Pilbara region of Western Australia and is therefore proximal to significant infrastructure including rail, road and gas pipeline. Furthermore, Newman is a hub for mining activity providing expertise and supplies to many significant operations.

The Prairie Downs Base Metals Project is surrounded by actively explored prospects held by, amongst others, Rio Tinto Ltd, BHP Billiton Ltd, Fortescue Metals Group Ltd, Ausquest Ltd, U3O8 Ltd, Warwick Resources Ltd, Independence Group NL and Dynasty Metals Australia Ltd. Exploration activity of these companies is focused upon iron ore, gold, uranium and base metals.

 

Prairie Downs Project Location Plan

Please clickon the map for an enlarged view

Resource Statement

The resource statement provides the classification of the Global Resources including the Indicated Resource and Inferred Resource for the respective lodes.

Table 1

Category	Tonnes	Zinc (%)	Lead (%)	Silver (g/t)	Zinc Metal (tonnes)	Lead Metal(tonnes)	Silver Metal (ounces)
Global Indicated	2,257,835	7.7%	2.1%	22	174,350	47,332	1,612,981
Global Inferred	2,397,223	5.0%	1.5%	13	120,635	36,093	1,017,900
High Grade Indicated	1,116,283	12.9%	3.6%	33	144,414	40,742	1,191,942
High Grade Inferred	529,805	10.9%	3.8%	42	57,544	20,020	720,319
High Grade Total	1,646,088	12.3%	3.7%	36	201,958	60,762	1,912,261
Global Total	4,655,058	6.3%	1.8%	18	294,985	83,425	2,630,881

 

Annexure 1 – Table 2 Channel Iron Drill Hole Details

Hole_ID	North (MGA)	East (MGA)	RL (m)	Final Depth (m)	Dip	Magnetic  Azimuth
PD09RC001	7389806	736850	615	24	-90	0
PD09RC002	7389994	736846	615	30	-90	0
PD09RC003	7390199	736842	615	30	-90	0
PD09RC004	7390404	736846	615	48	-90	0
PD09RC005	7390586	736839	615	36	-90	0
PD09RC006	7390201	737264	615	30	-90	0
PD09RC007	7390398	737247	615	18	-90	0
PD09RC008	7390595	737230	615	36	-90	0
PD09RC009	7390200	737646	615	24	-90	0
PD09RC010	7390403	737644	615	18	-90	0
PD09RC011	7390605	737640	615	18	-90	0
PD09RC012	7389791	738444	615	18	-90	0
PD09RC013	7389982	738452	615	18	-90	0
PD09RC014	7390194	738449	615	24	-90	0
PD09RC015	7389800	739250	615	30	-90	0
PD09RC016	7389600	739250	615	18	-90	0
PD09RC017	7389400	739250	615	18	-90	0

Table 3 RC Drill Results September quarterTable 3

Hole Number	From	To	Fe	SiO2	Al2O3	TiO2	Ca	Mg	P	S	LOI
PD09RC001	6	8	23.84	42.63	15.61	0.93	0.13	0.16	0.03	<0.01	7.27
PD09RC001	8	12	25.95	37.66	15.81	1.07	0.12	0.20	0.03	<0.01	8.34
PD09RC002	0	2	29.31	32.71	17.52	1.20	0.11	0.18	0.04	<0.01	5.98
	2	4	27.12	33.63	18.92	1.17	0.09	0.17	0.03	<0.01	7.06
PD09RC006	9	10	24.01	41.82	14.20	0.95	0.15	0.26	0.05	<0.01	7.21
PD09RC006	10	11	28.34	36.08	13.68	0.96	0.13	0.28	0.03	<0.01	7.40
PD09RC006	11	12	22.68	42.67	PD09RC00214.99	0.95	0.15	0.28	0.03	<0.01	7.67
PD09RC007	9	11	21.27	48.36	12.46	0.60	0.19	0.34	0.04	0.03	5.01
PD09RC008	17	18	28.62	38.44	6.88	0.04	0.17	0.34	0.31	0.02	7.64
PD09RC011	8	9	27.44	40.72	12.25	0.78	0.16	0.26	0.03	<0.01	5.49
PD09RC011	9	10	27.23	44.52	11.58	0.83	0.16	0.23	0.03	0.01	4.77
PD09RC011	10	11	22.43	52.80	11.13	0.79	0.17	0.31	0.04	<0.01	4.67
PD09RC011	12	13	26.21	42.29	12.62	0.74	0.17	0.29	0.03	<0.01	5.59
PD09RC011	13	14	26.23	41.25	13.24	0.75	0.16	0.29	0.03	<0.01	6.01
PD09RC011	14	15	21.84	49.38	12.02	0.70	0.16	0.28	0.03	<0.01	5.43
PD09RC014	12	14	27.71	39.09	12.93	0.85	0.16	0.31	0.04	0.01	5.72
PD09RC014	19	20	24.05	46.89	11.50	0.85	0.14	0.32	0.03	<0.01	5.65
PD09RC015	23	24	25.36	42.40	10.91	0.83	0.12	0.22	0.03	<0.01	6.34
PD09RC016	14	15	34.94	30.11	11.60	0.88	0.20	0.46	0.02	0.02	6.09
PD09RC016	15	16	28.95	37.44	10.76	0.72	0.22	0.48	0.03	0.01	6.27
PD09RC017	14	15	28.62	37.24	12.25	0.78	0.16	0.28	0.03	<0.01	6.49
PD09RC017	15	16	31.13	33.58	12.54	0.77	0.15	0.27	0.03	0.01	7.47

 

Footnotes:

1.    Samples were analysed by XRF

2.    LOI determined using thermo-gravimetric analysis at 1000°C

3.    Results reported on a dry sample basis