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MUSGRAVE BLOCK MANOEUVRING - 15 June 2001

Once again the eyes of Australia's mineral exploration community are on WMC as four drill rigs go to work on its tenements on the Western Australian side of the Musgrave Block.

“At the moment there's a pregnant silence as we wait for the results of WMC's drilling,” said Don Boyer, managing director of West Musgrave Mining (WMM), whose Mt Morphett tenements lie 10km south east of WMC's.

It was in May 2000 that the smoldering Musgrave Block story burst into flames when WMC released the results of two drill holes into its Nebo and Babel prospects.

At Nebo a single diamond-drillhole intersected 26.5m grading 2.45% nickel, 1.78% copper, 0.09% cobalt and 0.74g/t platinum group elements. The rich grades immediately sparked comparisons with Inco's Voisey's Bay – one of the pre-eminent mineral discoveries of the last 10 years.

WMC confirmed the discovery's rich potential shortly after when it described its West Musgrave discovery as being “important”… “with initial indications that we may have discovered a major new nickel-copper province”… “which has the size and grade potential to fundamentally change our nickel business in WA.”

Since WMC's last announcement, and in the absence of hard news, there has been a lot of jockeying for position in the 600,000 sq.km Musgrave Block. Joint ventures have been consumated; floats are in the offing; and geological models refined.

So far most of the activity has been in Western Australia and South Australia, which appear to harbour more of the prospective Giles Complex rocks.

“There's minimal nickel, copper and platinum prospectivity in the Northern Territory because there are no large mafic complexes,” explained Dennis Gee, director of Geological Survey, Northern Territory. “These occur south and west of us. There is potential for diamonds, but I'm not aware of any companies embarking on exploration programmes on the Northern Territory side.”

Land access issues have hindered the pace of exploration in Western Australia and South Australia, with most ground under Aboriginal ownership.

In South Australia the proclamation of the Pitjantjattjara Land Rights Act (PLRA) in 1981 effectively put 60,000sq.km of the Musgrave Block off-limits to miners. A laborious one-at-a-time approach to processing tenement applications by the Pitjantjatjara has created a huge backlog, with only ten exploration licences granted to date.

In Western Australia negotiations with the Ngaanyatjarra Land council have also been slow, although not so tortuous as in South Australia.

With the remoteness of chunks of the Musgrave Block, limited infrastructure looks likely to escalate development costs. Don Boyer of West Musgrave Mining dubbed the West Musgrave “the remotest place on the planet.”

Conversely, Norman Kennedy, general manager, exploration, Goldsearch observed that the East Musgrave is relatively well served by the Tarcoola to Alice Springs railway and Stuart Highway.

In the South Australian portion of the Musgrave Rio Tinto and a joint venture of Rio and Delta Gold have secured most of granted exploration licenses.

The largest holders of tenement applications are the Pitjantjatjara Mining Company, with 20,000sq.km under application, and Goldsearch NL, which with joint venture partner Independence Gold NL holds tenement applications for around 36,000sq.km of ground in SA and the Northern Territory.

Independence Gold, backed by Ranger Minerals, can earn up to 51% from Goldsearch's tenements, providing it meets various expenditure requirements.

“We targeted the area well before the WMC drilling,” said Chris Bonwick, a director of Independence Gold and former chief geologist at Resolute. “The premise was that it was a Proterozoic belt where no-one had made a big find. It hadn't had modern exploration, and Aboriginal owners were allowing access and tenements were being released.

Our conceptual targeting favoured Goldsearch ground. We hope to float Independence Gold in the next six months.

“We've got lots of great targets. Nickel targets, some Broken Hill targets, gold targets and copper gold Ernest Henry style targets.”

In the West Musgrave WMC has a dominant position over prospective Giles Complex rocks. Other majors with ground holdings include BHP, Falconbridge and Normandy.

Smaller players active in the region include West Musgrave Mining, ReLODE and Acclaim Exploration.

ReLODE and its wholly owned subsidiaries PayLODE and LODEd have a holding of around 12,000sq.km of tenement applications in the Musgrave Block of WA and SA.

ReLODE started operations in July 2000 following WMC's release of drill results from Nebo and Babel two months earlier. The company, run by experienced geologists Robin Morritt and Wayne Dimech, produced an influential reinterpretation of the geology of the region which shows more extensive areas of Giles Complex rocks than previously published.

This reinterpretation was used by JB Were in a research report of September 2000 into WMC entitled West Musgrave – A Major Discovery?

ReLODE, which counts the Rothschild Golden Arrow Fund as a significant shareholder, is in the midst of an IPO underwritten by D & D Tolhurst Ltd.

Proceeds of the float are earmarked for the acquisition of airborne EM and magnetic data in six target areas. This will be used to identify conductors associated with massive nickel sulphides.

Hugging the border of WA, SA and the Northern Territory lies Acclaim Exploration's Wingelinna project. Comprising Australia's largest undeveloped nickle-cobalt laterite resource, Wingelinna was successfully drilled by Inco in the 1960s and 1970s. 1200 drill holes revealed an inferred resource of 200 million tonnes grading 1.26% nickel.

Having successfully resolved native title issues with traditional owners, Acclaim completed a 400sq.km electromagnetic fly-over of its three adjoining leases in May 2001. The company plans to shortly begin RC drilling.

With holdings in and around WMC's premier tenement package, West Musgrave Mining is well-positioned in the West Musgrave region. The unlisted company headed by mining personality Don Boyer applied for its tenements in 1998. It was then called First Mineral Resources Limited.

“In those days there was some free ground,” commented Boyer. “There's not an inch left nowadays.”

In early May WMC backed down at the eleventh hour from legal action that alleged it had a joint venture claim over WMM's tenements.

“The end to the court action will enable West Musgrave Mining to proceed with its exploration programme and advance its plan for an IPO later this year,” said Boyer, shortly after WMC's back-down.

“WMM is currently negotiating an access agreement with the traditional owners and anticipates being able to commence on-ground exploration in the near future.

“The company is also actively reviewing acquisition and joint venture opportunities in the region that have the potential to add further value to its existing highly-regarded project portfolio.”

WMM's IPO is being led by broker DJ Carmichael. Shareholders in the listed Australian Heritage Group Limited, chaired by Tony Barton, which owns nearly 19% of WMM, will receive a priority application in what is expected to be a highly sought after float.

And so the excitement builds over the Musgrave. Whether the region is the real McCoy and progenitor of some major mines, or a fizzer in the Gawler Craton tradition, remains to be seen.