report out here+++++++

Uncut gem
Adjacent to De Beers’ South African Finsch diamond mine, TAW has
a 40% interest with BHP Billiton in the diamondiferous Daniel
alluvials and kimberlite projects, and a 100% interest in other
diamondiferous alluvials and kimberlites in the district.
Project schedule
2005 Quarters

Q1

Q2

Q3

Q4


Feeder channel bauer drilling Alluvial ------
Feeder channel processing Alluvial --------- ---------
Eastern gravels percussion drilling Alluvial ------
Eastern gravels bauer drilling Alluvial ----- -----
Eastern gravels processing Alluvial --- --------- ---
Scoping study Alluvial --- --------- --

Test plant construction Kimberlite --- ----------- ---
KV sample processing Kimberlite ----- -----
PV sample processing Kimberlite -------- ---
Source: Tawana Resources

Diamondiferous Daniel alluvials and Falcon kimberlite targets
Tawana has a 40% interest (BHPB 60%) in the Main Channel of the diamondiferous
Daniel alluvials project, which is located 4 km from De Beers Finsch mine, and
extends over 7km downstream, up to 2km wide. The main focus for this project is
evaluation of potential kimberlite targets, defined by BHPB’s proprietary FalconR
system. Drilling is scheduled for mid 2005.
Early development options for alluvials
TAW has a 100% interest in the Feeder Channel upstream of the Main Channel, and
in the Eastern Gravels, with BHPB holding a 2.5% royalty. Drilling of 2.5m diameter
holes in the Feeder Channel has recovered 217 diamonds, the largest 1.54cts, from
processing 28% of the 9,000 cubic metres extracted by Bauer drilling. In the Eastern
Gravels, processing 15% of the 4,000 cubic metres of material from drilling has
recovered 42 diamonds with the largest 2.02cts. Processing continues, and ongoing
drilling will evaluate potentially high grade alluvial “potholes”, and underlying
kimberlite targets.
Determining grade, size distribution and value
The preliminary feasibility study into the Kareevlei Wes and Perdevlei diamond
projects will be completed Dec Q ‘05. Processing of 6,500 tonnes of kimberlite from
the 5 Kareevlei pipes has commenced to more accurately define the grade, stone size
distribution and value. Previous work involving underground exploration and sampling
of the K1 pipe – one of the two Perdevlei diamondiferous kimberlites – returned
grades of 15 to 18 cts per hundred tonnes, and as with Kareevlei, TAW will continue
to process kimberlilte to more accurately define grade, size distribution and value.
Corporate & finance
TAW reported cash of A$2.3m at 31 March. Now that the processing plant has been
completed it can maintain its evaluation programme until the exercise of A$0.75
options in November, which will contribute a further A$13m. Further funding is
required to step up the programme.
Mining
Australia
www.abnamromorgans.com.au
Analysts
Chris Brown
ABN AMRO Equities Australia Limited
+61 7 3334 4885
[email protected]
John Moorhead
+61 7 3334 4557
[email protected]
Important disclosures regarding companies that are the subject
of this report and an explanation of recommendations and
volatility can be found at the end of this document.
Priced at close of business 8 June 2005.
ABN AMRO Morgans Limited (A.B.N. 49 010 669 726) AFSL235410 A Participant of ASX Group
Price
A$0.85

Market capitalisation
A$49.04m
Avg (12mth) daily turnover
A$0.68m
Reuters
TAW.AX
TAW50608
Wednesday 8 June 2005
Tawana Resources (TAW)
T A W A N A R E S O U R C E S N L 8 J U N E 2 0 0 5 2
Background
Tawana Resources NL (TAW) holds diamond exploration and evaluation projects in
South Africa, Australia and Botswana. Recent results have focused the company on
the projects in the Limeacre district, approximately 130km west of Kimberley, South
Africa, centred on De Beers’ Finsch Diamond Mine. The Finsch mine commenced
operations in the mid 1960s, and is currently in production at 2 million carats per
year. It is the largest kimberlite pipe in the Kimberley region with a surface area of
17.9 hectares.
Drilling and sampling programs undertaken by Tawana confirm that the Daniel
gravels downstream from the Finsch mine are diamondiferous. Proprietary Falcon
geophysical surveys undertaken by BHP Billiton identified a number of anomalies
interpreted as kimberlite pipes, beneath the diamondiferous alluvials. The drilling and
sampling of the alluvials by Tawana has supported this interpretation.
Tawana has a structured joint venture with BHP Billiton within the defined area for
both alluvials and kimberlite pipes. It holds a 30% interest in the exploration for
kimberlite pipes, which it can increase to 40% by taking a 25 tonne bulk sample of a
kimberlite. It also holds a 40% interest in the alluvials, sourced in part from the
eroded Finsch diamond pipe. In a move designed to enable TAW to move into early
production at a lower size threshold than is of interest to BHP Billiton, BHPB has
ceded a 100% interest in two of the alluvial areas within the joint venture area – the
Feeder Channel and the Eastern Gravels – to Tawana, subject to a 2.5% gross
royalty.
TAW is currently processing material from these alluvials to evaluate the
commerciality of diamond production from the Feeder Channel and the Eastern
Gravels. It is also evaluating the Falcon-defined kimberlite pipe targets beneath the
Main Channel of the Daniel alluvials in which it has a 40% interest (BHP Billiton 60%)
as well as beneath the Feeder Channel, and drilling has now commenced.
A Dense Media Separation Plant has been constructed to enable TAW to evaluate the
Kareevlei Wes kimberlite pipes and the Perdevlei pipes. Both lie outside the BHP
Billiton joint venture area. The initial evaluation has proven positive, and the current
programme is designed to determine the grade, stone size distribution and value of
the diamonds from the KV2 and 3 pipes at Kareevlei, and the K1 pipe at Perdevlei.
Map 1 : Project overview – Limeacre district
Source: Tawana Resources
T A W A N A R E S O U R C E S N L 8 J U N E 2 0 0 5 3
South African projects
Daniel Alluvial Project – TAW 40%, BHPB 60%
The currently accepted geological model is that 1,400m of the originally emplaced
Finsch pipe has been eroded, with this 2.1 billion tonnes of diamondiferous kimberlite
estimated to contain US$170 billion of diamonds. Some of the material, including
diamonds, is transported to the ocean. Much of the pipe material (and associated
diamonds) is deposited in the stream and river valley, and forms diamondiferous
alluvial deposits.
The Main Channel was located by BHP Billiton’s proprietary Falcon airborne gravity
gradiometer survey technique, and has an interpreted length over 7km and a width
over 1km. The Bow River Mine in Western Australia, which was an alluvial channel
fed from the Argyle deposit, was 5.5km long and 1km wide.
TAW is operator of the Daniel Alluvial Project, with a 40% interest. Sampling by
percussion drilling has proven the Main Channel alluvials to be diamondiferous, with
the diamonds distributed throughout the alluvial profile, and not restricted to the
base.
Map 2 : Landsat image of TAW projects
Source: Tawana Resources
Feeder Channel and Eastern Gravels – TAW 100%, BHPB 2.5% royalty
These two project areas contain more limited volumes of alluvial material than the
Main Channel. As with the Main Channel, the bedrock is dolomite, and drilling
confirms the formation of “potholes” which can provide preferential depositional sites
leading to higher diamond concentrations in the alluvial material. Both project areas
have been drilled with Bauer rigs, which drill 2.5m diameter holes, and recover
significant quantities of alluvium.
T A W A N A R E S O U R C E S N L 8 J U N E 2 0 0 5 4
The Feeder Channel is estimated to contain 100 million tonnes of material, and to
date 93 holes have been drilled to recover 8,728 cubic metres. Of this, approximately
2,500 cubic metres has been processed, with 217 diamonds recovered. The largest
stone is 1.54 cts. These results confirm the presence of the pot holes in the profile,
and have also confirmed higher grades associated with these traps.
In the Eastern Gravels, containing an estimated 80 million tonnes, 3,819 cubic
metres of material has been recovered by Bauer drilling, with 570 tonnes processed.
This has yielded 42 diamonds, with the largest stone 2.02 cts, and the highest grade
reported from surface.
To eliminate the nugget effect on sampling, and accurately predict mining grades,
stone size distribution and carat value, further processing and sampling is required.
This is now underway, with a scoping study scheduled for completion in the
December 2005 quarter.
Daniel Kimberlites – TAW 40%, BHPB 60%
TAW currently has a 30% interest in the Daniel Kimberlite Project, covering
exploration for and exploitation of kimberlite pipes within the joint venture area. This
area incorporates the area of the alluvials as well as surrounding areas. TAW can
earn a further 10% in the project by taking a 25t bulk sample. BHPB has flown the
region with their proprietary Falcon technology and identified a number of gravity
anomalies.
Kimberlites are readily weathered and commonly from topographic depressions.
Drilling of the alluvials, and analysis of the bedrock profile, confirms that some
circular structures identified by the Falcon survey are coincident with areas where the
depth to bedrock is greater than would be anticipated. In a number of cases, drilling
was unable to penetrate to fresh bedrock. In at least one instance, high diamond
grades were reported from samples at the bottom of the hole.
Profile 1 : Cross section of northern feeder channel
Source: Tawana Resources
The A65 anomlay is coincident with a crater-like pothole, 5km south of the Finsch
mine. It is located beneath the Feeder Channel alluvials, and covers an area of 18 ha,
compared with the Finsch pipe’s 17.9ha.
The A64 anomaly is 200m south of A65, with an area of seven hectares. The third
target, A31, is a 19ha anomaly located 3km south-west of Finsch.
North
T A W A N A R E S O U R C E S N L 8 J U N E 2 0 0 5 5
Kareevlei Wes and Perdevlei kimberlites – TAW 100%
Outside the Daniel Project Area, TAW has a 100% interest in the Kareevlei Wes and
Perdevlei kimberlites. Kareevlei Wes comprises a cluster of five kimberlite pipes which
vary in size from 5.8ha to 0.3ha. Previous work has shown two of these pipes to be
diamondiferous. The pipes at Kareevlei Wes are of interest because of the relatively
large size of the pipes in the cluster and the exceptional quality of the contained
diamonds. A 40.9ct parcel of diamonds has been judged as containing 85% gems,
with an average value of all the diamonds at US$116 per carat. In late 2004, a bulk
sample of 6,500t was taken from the five pipes to a depth of 40m. Construction of a
Dense Media Separation Plant is nearing completion, allowing testing of the sample to
begin in late May. Based on the results, a project pre-feasibility study will be
prepared, with TAW contracting Snowden Mining Consultants to facilitate this study.
The Perdevlei project comprises two kimberlite pipes which are both known to be
diamondiferous. Further analysis and re-treatment of some of the bulk sample
acquired in 2003 is required to confirm grades, stone size distribution and average
diamond values. Based on the results, TAW expects to complete a pre-feasibility
study incorporating operating and capital costs on one of the pipes by October 2005.
The Perdevlei and Kareevlei Wes pipes are 25kms apart, allowing any potential mine
development to share the X-Ray treatment plant and saving overheads, capital and
surveillance costs.
Australian Projects
Timber Creek, NT – TAW 100%
The cluster of 5 kimberlites was discovered by Stockdale Prospecting, De Beers’
exploration subsidiary, in the early 1990s, and retains the right to purchase a 70%
interest by paying TAW an amount three times their exploration expenditure.
Diamonds were recovered from the TC 1 pipe, as well as from two of the other
intrusions. Stockdale subsequently drilled the TC1 pipe to a depth of 60m, and
interpreted a grade in excess of 100 carats per hundred tonnes (cpht), with modest
diamond values and coloured stones. Processing of a bulk sample of 3,802 tonnes
recovered 17,387 diamonds with an aggregate weight of 839 cts – 22 cpht.
While this remains an attractive project, it ranks below the South African projects.
Flinders Island and Eyre Peninsula , South Australia – TAW 80%
Flinders Island was originally targeted by TAW, and represented a high priority target
at the time of listing on the ASX. Soil sampling identified kimberlite indicator
minerals. This was followed by the discovery of 7 diamonds at surface locations. A
drilling programme tested 11 targets, with an anomaly west of the Gem Pan area
returning highly encouraging mineral assemblages. Subsequent geophysical testing
has defined an anomaly, which was further tested by drilling. A concentration of
kimberlite indicators was confirmed by this work.
Tenements on Eyre Peninsula, considered geologically similar to Flinders Island, were
subsequently acquired in partnership with Orogenic Minerals (20%), the JV partner in
Flinders Island. Sampling has reported encouraging mineral assemblages, indicative
of the presence of kimberlites.
While both of these remain attractive projects, they are less advanced than the South
African projects.
T A W A N A R E S O U R C E S N L 8 J U N E 2 0 0 5 6
Botswana diamond exploration.
TAW has been granted Exploration Licences covering 2,000 square kilometres
extending from the Orapa diamond mine in the west to diamondiferous kimberlites in
South Africa and Zimbabwe. Kimberlite indicators have been recovered from soils
overlying geophysical targets. This is highly prospective ground, at an early stage of
exploration.
The people
Managing Director – Wolf Marx has been a Board Member since 1998 and has over 25
years experience in geology, particularly in exploration for gold and diamonds. Wolf
was a part of the team to discover the Bow River diamond mine and the Aries
Kimberlites.
Chairman – Brian Phillips recently joined the board of TAW and brings wide technical
and corporate experience gained as a mining engineer and director with Australian
mining companies will benefit Tawana enormously as we move forward. Brian was
the Managing Director of MPI Mines until the takeover from LionOre in December
2004 and is currently the Non-Executive Chai of Leviathan Resources and Indophil
Resources.
Director Operations – Leon Daniels is a South African national living in Botswana who
has over 25 years experience in gold and diamond mining exploration. Leon has
discovered many kimberlites in Botswana and South Africa.
Financials
At the end of the March quarter, Tawana had A$2.36m cash. Current rates of
expenditure on exploration are $250k per month and $200k per month will see this
cash reserve last until November 2005. TAW currently has 18.3m options on issue
with an A$0.75 strike price and 30 November expiry. Exercise of these options will
raise A$13.5m at that time.
With their surface location, easy mineability and low capital expenditure for startup,
the type of deposits currently being evaluated by TAW provide an excellent
opportunity for early cash flow.
T A W A N A R E S O U R C E S N L 8 J U N E 2 0 0 5 7
RESEARCH TEAM

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REGULATORY DISCLOSURES
Subject companies: TAW.AX
Mentioned companies: BHP.AX, TAW.AX
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