read this and have patience

31 January 2008
The Manager
Company Announcements Office
Australian Stock Exchange Limited
4th Floor, 20 Bridge Street
SYDNEY NSW 2000
Dear Sir / Madam
QUARTERLY REPORT FOR THE PERIOD ENDING 31 DECEMBER 2007
HIGHLIGHTS
Major events and achievements during the quarter were as follows:
CORPORATE
�� During November 2007, the Company announced its intention to focus on the development of iron ore projects;
�� As a result, the Company proposes to spin-off its nickel and other assets into a separate entity. Details of the structure of the spin-off and timing have yet to be finalised;
�� The Company commenced and is continuing negotiations with Mineralogy Pty Ltd in order to acquire additional iron ore assets adjacent to its current Balmoral South Iron Ore Project.
BALMORAL SOUTH IRON ORE PROJECT
�� Initial feasibility drilling programme has been completed. Samples are currently being processed at a core processing facility at Indee (via agreement with Range River Gold Ltd) to yield samples for project test work and resource evaluation.
�� Continued advancement of the Feasibility Study, including:
o Three major Australian mine contracting companies have submitted proposals for contract mining, which are currently being evaluated, with the intention to complete the first round of clarifications during first quarter 2008 and then continue negotiations with a preferred contractor;
o Process flow diagrams (PFDs) and general arrangement drawings were completed for the concentrator and made ready for materials quantification for cost estimating purposes;
o Samples were delivered to laboratories in Perth and China for verification test work;
o Further consultation with vendors to expedite delivery of turn-key engineering proposals for major processing, services, utilities and infrastructure packages;
o Agreement that Shougang will submit a proposal to construct and locate the pellet plant in China via its Beijing Shougang Design Institute (BSDI);
Australasian Resources Limited December 2007 Quarterly Report
Page 2
o Discussions held with CP Mining Management Pty Ltd (CPMM) and Mineralogy Pty Ltd to agree on an in-principle design for a barge loading and marina layout that will be suitable for the proposed shared port facility;
o Submission of the Environmental Scoping planning document to the Environmental Protection Authority (EPA) for review. EPA have subsequently responded with questions and clarifications that the Company is addressing;
o Confirmation that Shougang have appointed its international construction arm, China Shougang International T&E Corp, to submit a comprehensive construction proposal for the project;
o Frequent visits by Company representatives to Shougang offices in China during the quarter to advance project development.
SHERLOCK BAY NICKEL PROJECT
o URS Australia have completed a draft of the Mining Proposal required by the Department of Industry and Resources in order to secure final approval for the proposed 5,000 tonne heap leach trial;
o Aker Kvaerner has now supplied full costing for the construction of the Heap Leach plant. These are currently being reviewed.
MANAGEMENT
�� A new General Manager, Mr. Stephen Abbott, commenced employment with the Company.
BALMORAL SOUTH IRON ORE PROJECT
The Company continues to advance key studies associated with its flagship Balmoral Project Iron Ore Project, located 80km to the west of Karratha, in the Pilbara region of Western Australia.
The Company has a strategic relationship with entities associated with China’s 4th largest steelmaker, Shougang Corporation. By June 2008, Shougang can elect to fund the entire project interest free in order to earn a 50% stake.
GEOLOGY & MINING
�� Initial feasibility drilling programme has been completed. Diamond core is currently being processed at a core processing facility at Indee mine site (via agreement with Range River Gold Ltd) to yield samples for project test work and resource evaluation.
�� Resource and reserve updates are envisaged for the first quarter 2008 on the basis of the schedule for sample processing.
�� A proposal for further drilling in the near term has been prepared and is currently under further review on the basis of its expected impact to the technical and commercial status of the project.
�� Three major Australian mine contracting companies have submitted proposals for contract mining, which are currently being evaluated, with the intention to complete the first round of clarifications during first quarter 2008, and then continue negotiations with a preferred contractor.
CONCENTRATOR AND PELLET PLANT
�� The process flow diagrams and general arrangement and section drawings for the concentrator were completed and ready for materials quantification for cost estimating purposes.
Australasian Resources Limited December 2007 Quarterly Report
Page 3
�� The Company is studying the option for pressure filter and conveying of tailings into the waste dump, as opposed to base case of pumped slimes, to achieve capital and operating cost savings and environmental benefits.
�� Samples were delivered to laboratories in Perth and China for verification test work.
�� The Company is currently in the process of receiving proposals from major vendors for the Pellet Plant. Shougang has also indicated an option for designing and constructing the Pellet Plant in China. The base case for the Feasibility Study will be the Pellet plant based at Balmoral South, however the Company is working closely with Shougang to evaluate the opportunity of basing it in China.
�� After mutual agreement between the Company and Shougang, the Hot Briquetted Iron (HBI) plant (that was originally proposed for the Project) was excluded from the FS during the quarter. The design basis for the FS is now the production of 7 Mtpa pellets and 5 Mtpa concentrate for export.
SERVICES, UTILITIES AND INFRASTRUCTURE
�� Studies have indicated a preference for an overland conveyor for the transport of products due to technical, capital and operating cost advantages including more flexibility in accommodating the two existing infrastructure corridor options.
�� Efforts are continuing with sourcing competitively-priced gas for the Project.
�� A submission for a coal-fired power plant from an Independent Power Producer was received. The offer appeared competitive in electricity cost and hence further work is taking place to assess overall value of the proposal, including environmental approvals issues.
�� Following a hydrological study and report by Aquaterra, the intent is to apply for an extraction license from the Department of Water to draw up to 10 Glpa from a borefield designed adjacent to the Fortescue River catchment.
�� Finalisation of the Desalination Plant operating parameters is pending details on potential seawater intake locations (near completion).
�� Consultation work is continuing with CPMM through Mineralogy Pty Ltd to establish the extent of common works as a basis for design requirements along the infrastructure corridor and port area.
EXPORT SYSTEM
�� Discussions held with CPMM and Mineralogy Pty Ltd to agree on an in-principle design for a barge loading and marina layout that will be suitable for the proposed shared port facility. This will allow CPMM and Mineralogy Pty Ltd to finalise the Statutory Authority approvals process, which will then be reflected in the Company’s final Project Public Environmental Review (PER) document.
ENVIRONMENTAL
Environmental approval work is progressing to coincide with the completion of the Feasibility Study.
�� The PER scoping document was submitted during October 2007 and the EPA has responded with clarifications.
�� The Company is in discussions with the Department of Environment and Conservation and consultants in relation to requirements for field works and information necessary to finalise International Minerals’ scoping document for the PER.
CONSTRUCTION PROPOSAL
�� Shougang have appointed its international construction arm, China Shougang International T&E Corp, to submit a comprehensive construction proposal for the project.
Australasian Resources Limited December 2007 Quarterly Report
Page 4
SHERLOCK BAY NICKEL PROJECT
The Company’s Sherlock Bay Nickel Project is located east of Karratha, in the Pilbara region of Western Australia. The Project has a Mineral Resource of 25.4 Mt @ 0.4% nickel in sulphide which equates to 101,000 tonnes of nickel in the ground.
MINING PROPOSAL – 5,000 TONNE HEAP LEACH TRIAL
DoIR have requested that the proposal for a pilot heap leach facility be submitted under a Mining Proposal format.
URS have submitted a very early draft of the Mining Proposal to secure final approval for the 5,000 tonne heap leach trial. The Company is completing the necessary sections.
TREATMENT PLANT
Aker Kvaerner has now supplied full costing for the construction of the Heap Leach plant. These costs are currently being reviewed.
WATER
One of the proposed two dewatering bores has been drilled. The deep (70m) dewatering bore has been drilled to dewater the trial sample shaft. Airlift testing of the bore during drilling resulted in flows of around 25 litres /second. This high flow is causing some water disposal issues both for the 24 hour test and for the dewatering itself.
A new Miscellaneous Licence (ML) will be applied for to build a pipeline to release water to a saline creek and ultimately the ocean. The ML will be long enough that water could also be taken from the ocean at a later date if needed.
EXPLORATION - PILBARA PROJECTS
SHERLOCK BAY EXTENDED - MALAGINE PROSPECT (Base Metals)
The Sherlock Bay Extended exploration area surrounds the main Sherlock Bay Nickel Project area and is a joint venture between the Company (70% interest) and Metals Australia Ltd (30% interest).
�� Outer Rim have completed field electro-magnetic (EM) exploration and preliminary results of the moving loop, ground EM survey indicate encouraging results at one location - “The anomaly is reasonably small but close to the surface and reasonably conductive”. Outcrop in the district is sporadic and includes granite and dolerites, neither of which favour the presence of conductive rock. The Salt Creek (Straits Resources) Pb, Zn, Cu & Ag deposit is only 5km away. Potential exists for this conductive body to be related mineralisation. It coincides with a particular ‘bulls eye’ aeromagnetic anomaly. Other such magnetic anomalies are under review and will be targeted by future work.
�� Drill core samples were selected and sent away for petrographic analysis, with a report expected in the coming quarter.
�� The company plans to design and undertake a drilling program once detailed mapping is completed, which is scheduled for the coming quarter.
SHERLOCK EXTENDED - DOUGHBOY BIF PROSPECT (Iron Ore)
No further work was undertaken on this prospect in the quarter.
Australasian Resources Limited December 2007 Quarterly Report
Page 5
One kilometre north of the Malagine Prospect is a Banded Iron Formation (BIF) present in sub-crop and out-crop. Initial mapping shows the BIF and magnetite altered rocks cover 8.7 hectares, surrounded on all sides by granite. A siliceous goethitic ferruginous cap is present in places, with initial grab samples returning XRF assays of less than 30% Fe. This rock type has been identified elsewhere on the tenement, and is coincident with some aeromagnetic anomalies.
At this stage these BIFs are not seen as holding significant economic value and no work is planned in the coming quarter.
SHERLOCK EXTENDED - OTHER AREAS (Base Metals)
Other areas of this 200 square kilometre tenement have had little previous work completed. After review in December 2007, the company plans to apply a systematic exploration strategy beginning with development of comprehensive local scale geological mapping. This work is scheduled to commence in the coming quarter and be completed during the winter months.
ANDOVER (Base Metals)
Andover is located near the Sherlock Bay Nickel Project and the tenement covers a magnetic feature which is interpreted as being the feeder channel for the Andover layered mafic – ultra mafic intrusive complex.
Ground EM Moving Loop Surveys were temporarily discontinued at Andover due to equipment failure and the Christmas period. The survey will recommence in early 2008. Preliminary results will be available in the coming quarter.
COPPER BORE WELL (Base Metals & Uranium)
The Copper Bore Well uranium, copper, silver prospect (E08/1555) is located some 100km to the southeast of Onslow.
Field work completed in the quarter supported a decision to undertake a bedrock geochemical sampling program, targeting the granite margins present on the tenement. Initial planning for this sampling program was undertaken, with field work planned after the wet season.
MT SALT (Uranium)
The Mt Salt uranium prospect is located near the Pilbara coast, immediately to the west of the Balmoral South Project area.
�� Existing literature and spatial data has been compiled. Consultant Uranium expert Mr Bruce Dickson (ex CSIRO) has designed a sampling programme aimed at determining the significance of the mound spring anomalies in relation to economic uranium mineralisation.
�� Field work is to be undertaken towards the end of February 2008.
EXPLORATION - GOLDFIELDS PROJECTS
CAT CAMP (Base Metals)
The Cat Camp prospect, lies within the Lake Johnston Greenstone Belt and is located approximately 170km south west of Kalgoorlie. It contains lithologies that are consistent with the nickel sulphide deposits that are being mined at the nearby Emily Ann and Maggie Hays operations.
Australasian Resources Limited December 2007 Quarterly Report
Page 6
�� An RC drill program consisting of 1,612m has been completed at Cat Camp. Compilation of assay and geology data for this November 2007 RC drill program has been undertaken.
�� The preliminary outcomes are:
o The Cat Camp South ultramafic remains strongly prospective for the following reasons:
�� The geochemistry and logging confirms ‘Maggie Hays’ stratigraphy. The stratigraphy has a direct correlation with the Ni-sulphide bearing Honman Formation (favourable), which hosts the Maggie Hays and Emily Ann mining operations run by Norilsk Nickel (formerly Lionore).
�� The ultramafic represents a high MgO (very hot - favourable) eruption with low abundance of Ni in silicate (favourable).
�� The basal contact has been determined from MgO assays (favourable); part of the contact is with a basalt (favourable) and part with a granite (probably unfavourable).
�� There were no nickel laterite intercepts greater than 6m at 0.5% Ni or above; delineation of the nickel laterite mineralisation will take lower priority with future work.
�� A polymetallic anomaly over a 2m interval within the nickel laterite profile possibly relates to a thin, mineralized quartz vein. Assays include 2m @ 54.5g/t Ag, 69.1 ppm As, 0.501% Pb, 792 ppm Zn. The source of these metals is unclear and possibly indicates the presence of a VMS mineral system in the district. Supporting this, iron rich sulphidic sediments were intercepted in Cat Camp North in 2001.
�� The geochemistry associated with the hanging wall basalt and BIF suggests prospectivity for magmatic derived gold mineralization. The presence of granite and porphritic intrusives supports this theory.
�� A re-sampling and assay program to test relevant samples for gold was planned.
Applications for further drilling at Cat Camp will be submitted to DoIR in the coming quarter.
Timing of drilling will be dependent on Board approval and drill rig availability.
EAST BULONG (Gold)
No further work was undertaken during the quarter. Consultant geologists BMGS have been engaged to undertake a strategic review of the prospect, with this work to commence in February 2008.
SIGNIFICANT UPCOMING ACTIVITIES
Significant activities for the period January – March 2008 include:
CORPORATE
�� Progression of tasks to spin-off nickel and other assets into a separate entity. Details of the structure of the spin-off and timing expected to be finalised during the first quarter.
�� Continue negotiations with Mineralogy Pty Ltd in order to acquire additional iron ore assets adjacent to its current Balmoral South Iron Ore Project.
BALMORAL SOUTH IRON ORE PROJECT
�� Ongoing processing and analysis of remaining RC and diamond drilling samples which are expected to contribute to future upgrades to Minerals Resource and Ore Reserve estimates;
�� Evaluation and clarification of bids from mining contractors;
�� Finalise technical packages for vendor bids for key process and infrastructure modules;
Australasian Resources Limited December 2007 Quarterly Report
Page 7
�� Review of Shougang’s proposal to locate the pellet plant in China;
�� Further assessment of energy supply options;
�� Finalise Desalination Plant operating parameters and seawater intake locations;
�� Finalise port and stockyard design based on synergies with CP Mining;
�� Continuing development of the Project Implementation Plan;
�� Continuing liaison with key Shougang entities (BSDI and CSIDEC) towards the finalisation of an Engineering, Procurement, Construction proposal;
�� Preparation of documentation for the Feasibility Study and PER.
SHERLOCK BAY NICKEL PROJECT
�� Commencement of mining and heap leach pad construction for the proposed trial once DoIR approval is received;
�� A new Miscellaneous Licence will be applied for to build a pipeline to release water to a saline creek and ultimately the ocean – will include the potential to take water from the ocean at a later date if required.
EXPLORATION
�� An additional RC drilling program will be designed and approvals sort for the Cat Camp prospect. This program will follow up positive results from the November 2007 drilling program. Furthermore, a re-sample/assay program testing for gold mineralisation will be completed;
�� The Ground TEM team will complete field work at Sherlock Bay Extended and Andover in the first quarter. Associated interpretation and drill target identification is scheduled to follow;
�� Progress field mapping at Sherlock Bay Extended with the aim of designing a Rotary Air Blast (RAB) drilling programme to collect geochemical samples of bedrock. This will be combined with work to identify Portable Infrared Mineral Analyser (PIMA) and geochemical characterisation of local alteration;
�� Complete analysis of Ground TEM data from Sherlock Bay Extended and Andover, followed by design of drill programs to test identified targets;
�� Undertake field work at Mt Salt in mid quarter based on compilation of data and sampling program;
�� Complete strategic review of the East Bulong prospect.
For and on behalf of Australasian Resources Limited
Andrew Caruso
Managing Director