Abu Dabbab - Tantalum-Tin-Feldspar (50% Gippsland)

Introduction

The Abu Dabbab tantalum-tin-feldspar deposit is located within the Central Eastern Desert in Egypt. The deposit is located about 16km inland from the western shore of the Red Sea. The deposit is covered by two Exploitation Leases (1658 & 1659) granted in the name of Tantalum Egypt JSC, a company incorporated in Egypt and owned 50% by the Egyptian Government via the Egyptian Mineral Resources Authority (EMRA) and 50% by Tantalum International Pty Ltd which is a 100% owned subsidiary of Gippsland Ltd. The proposed plant site located 6km from the Red Sea coast has been secured under Ministerial Decree No. 11/2003 and provides for an area of 14km².

Tantalum applications

Tantalum is a grey metal, classed as a refractory metal because it is resistant to chemical attack. For industrial use, its important properties are a high melting point, ductility which allows it to be drawn into wire, and malleability which allows sheets and tubes to be made. Once exposed to air, the metal is covered with a thin layer of oxide which allows it to resist fluids in the human body, and also acids and other corrosive liquids, in the chemical industry. It has a high dielectric, which makes it so valuable in capacitors for the electronics industry. Tantalum capacitors form an integral component in the production of mobile telephones, telecommunication infrastructure, laptop computers, auto-electrics plus still and video digital cameras.

Because of the metal’s resistance to corrosion it is used in chemical plant and equipment. Its high melting point (2,997oC) and low thermal coefficient of expansion make it a crucial component of jet engine turbine blades. As tantalum carbide, one of the hardest substances known to man, it is used for cutting tools.

TANTALUM MARKET

The majority of the world’s tantalum is sold by way of long-term offtake agreements between the miner and the tantalum refiner/metal producer. Tantalum is not sold via a regulated market as is for gold, copper, zinc and tin. The global tantalum Ta2O5 market is estimated to be in the order of 4.7 – 5.1 million pounds (approx. 2,200 tonnes) per annum for the years 2005 - 2006. Industry commentators suggest that the market is growing at a rate of about 7% per annum.

HC Starck GmbH, a subsidiary of the German company Bayer AG, is generally considered to be the world’s leading tantalum concentrate consumer/processor followed (not in order) by Cabot Corporation (USA), Ulba OJSC (Kazakhstan), Mitsui-Kinzoku (Japan) and Ningxia Non-Ferrous Metals (China) plus various other Chinese groups.

Previous exploration

Tin-tungsten mineralisation at Abu Dabbab has been known since the 1940s but it was not explored until the early 1970s when a joint Soviet-Egyptian team, completed an extensive exploration programme. In the early 1990s the project was further explored by a joint venture between the Egyptian Government and Geominera Italiana. The previous work included 28 diamond drill holes, three adits, one crosscut, numerous trenches, surface sampling, bulk sampling and metallurgical tests. Gippsland carried out some re-sampling of the adits to verify the previous results, collected bulk samples totalling 43 tonnes which were used to conducted additional detailed metallurgical test work in Australia. Encouraged by the results of the test work, Gippsland commenced a Bankable Feasibility Study which was completed in October 2004 by the international engineering Group Lycopodium Pty Ltd.

Geological setting

The Ta-Nb-Sn mineralization of Abu Dabbab is represented by disseminated cassiterite and niobio-tantalite, hosted in a stock of apogranite. The apogranite at Abu Dabbab is leucocratic, holocrystalline, white grey to greenish blue and with manganese oxide spots and dendrites. It is mostly fine to medium grained and occasionally has a porphyritic texture.

The characteristic alteration processes in the apogranite are greisenisation, microclinisation, silicification and albitisation.

The shape of the host apogranite intrusion is generally ellipsoidal except in the north-western part where there is a narrow off-shoot, about 150m in length. The apogranite mass is elongate in an east-west direction with a maximum length of about 400m. Maximum width in a northeast-southwest direction is nearly 200m. The body extends about 130m above the level of the adits and has been intersected in drilling at a depth of 350m below the adits.

No significant disseminated mineralisation is present in the country rocks surrounding the intrusive mass, therefore the ore deposit limits correspond to the limits of the apogranitic body.

Resources

Abu Dabbab resources at 0.01% Ta2O5 cut-off.

Bankable Feasibility Study – 2Mtpa

The BFS completed during October 2004 by the international engineering group Lycopodium Engineering Ltd determined that the world-scale 40Mt Abu Dabbab deposit has the potential to become a major global supplier of tantalum whilst operating from a low cost basis. Based upon the scheduled mill feed-rate of 2 million tonnes per annum the summarised results of the BFS are:

• 2Mtpa production
• >650,000lb of Ta2O5
• 1,530tpa of tin
• Gross sales revenue in excess of US$630 million over initial 10 years of its estimated 20-year mine life (based upon tantalum and tin sales alone; upside with feldspar)
• Potential for >1.5Mtpa ceramic grade feldspar production

Environmental and Social Impact Assessment

The Abu Dabbab Environmental Impact Assessment (EIA) completed by the Company to World Bank standards has been approved by the Egyptian Environmental Affairs Agency.

10-Year tantalum Offtake

The Company has executed an offtake agreement with the tantalum major HC Starck GmbH of Germany for the sale of 600,000 pounds of tantalum pentoxide per year for a 10 year period.

Project Finance

The company is presently negotiating with the German government owned KfW Bankengruppe for project finance which is anticipated will be arranged on a most favourable 80% debt and 20% equity basis.

Nuweibi – Tantalum, Niobium, Feldspar (Gippsland 50%)

Location

Nuweibi is located 17km to the south-southwest of the Abu Dabbab deposit and 30km inland from the western shore of the Red Sea.

Previous exploration

Tin mineralisation was first discovered at Nuweibi in 1944 but it was not until 1970 that tantalum was recognised. The deposit was the subject of detailed exploration by the same joint Soviet-Egyptian team that explored Abu Dabbab. The work included 23 diamond drill holes totalling 2,746m, four surface trenches and four bulk samples for metallurgical testwork.

Resources

Nuweibi resources at a 0.01% Ta 2O 5 cut-off.

There is the potential for a significant increase in Nuweibi resources to the east as most of the eastern diamond drill holes bottomed in mineralisation.

Geological setting

The Nuweibi mineralisation is hosted by an apogranite intrusive within a sequence of schists, gabbro, serpentinite older granites and dykes of varying composition. The apogranite that hosts the mineralisation is comprised of three main facies, an upper, middle and lower, each separated by transition zones.

Exploration

The nearby Abu Dabbab has adequate resources for at least a decade of mining such that immediate exploration is not warranted. Exploration will in time focus on infill drilling to upgrade the resource categories. This will involve the completion of a series of lines of RC drilling to 150m.

Wadi Allaqi regional overview

Gippsland has the right to explore nine tenement areas located in the Wadi Allaqi region of South-eastern Egypt. Eight of the areas contain historical gold workings with the ninth containing a copper-nickel deposit

The Wadi Allaqi region is located to the southeast of Aswan in the south-western part of the Eastern Desert of Egypt covering an area of about 12,000km2. The area, which is bounded to the west by Lake Nasser and to the east by the Red Sea is accessible via an asphalt road from Aswan located to the northwest. Elsewhere access is available by 4-wheel drive vehicles along the wadis.

Egypt has a long history of gold mining with the earliest references to gold mining in the pre-4,000 BC period. It is estimated that up to 3,000t of gold could have been mined by the Pharaohs from lands held under their control. Within the Wadi Allaqi region the earliest reference to mining is the Twelfth Dynasty of the Middle Kingdom (1991-1786 BC) when the area was known as the region of Akita in the Land of Wawat. Mining probably continued in episodes during the Pharaonic period. Further mining took place during the Roman era from 181 BC to 5 AD and then again during Islamic times from the ninth century up until the fourteenth century. In the early 1900s the area was explored and mined by British and South African companies, principally the Nile Valley Company Ltd at Um Garayat and Haimur, through to the 1920s. Some small time mining continued through to the early 1950s.

The ancient historical mining was focused entirely on the near-surface high grade quartz veins and alluvial gold. Evidence of the historical mining activity is clearly seen in stoped out quartz veins at shallow depths by means of shafts and adits and the presence of numerous stone tools used in crushing the gold ore. Waste dumps and tailing are present at a number of these deposits indicating that they were sites of significant mining activity by the ancients.

Apart from limited regional exploration during the 1960s and 70s under the auspices of the United Nations there has been no significant exploration or mining since the early 1950s when Egypt became a republic.

The nine Wadi Allaqi prospects, each 16km2 in area, include:

Nickel-Copper Mineralisation

Copper at Abu Swayel was mined by the ancient Egyptians during the Twelfth Dynasty of the Middle Kingdom (1991-1786 BC) from shallow open cut workings which can be traced over a length of 180m.

The mineralised host unit is an elongated, lenticular amphibolite body which can be traced for some 500m along a northwest-southeast strike and enclosed by a garnet-mica schist. Copper-nickel mineralisation occurs both in the amphibolite body and in enclosing host. The mineralisation contains chalcopyrite, pyrite, nickel-bearing violarite, and ilmenite. The relict textures of the pyrite and the violarite show the primary ores to be pyrrhotite, pentlandite and chalcopyrite. The drilling intersected a persistent, apparently stratiform, sulphide-bearing zone of variable thickness, that hosts the mineralised amphibolite body.

UM GARAYAT – Gold (50% Gippsland)

Location

The Um Garayat gold prospect is the most famous ancient mine known in the south-western part of the Eastern Desert, located 210km southeast of Aswan at Latitude 22o 34' 28.2"N and Longitude 33o 22' 33.7"E.

Historical mining

Um Garayat is an ancient mine that was exploited by the ancient Egyptians and Romans. The old workings consisted of large excavations over a strike length of 260m. A shaft sunk in 1902 intersected the ancient workings at a depth of 23m and it was noted that the workings continued deeper to the north.

The Nile Valley Company worked the mine for a number of years commencing in 1901. The deposit was worked from eight vertical and inclined shafts and winzes linked by levels at inclined depths of 32m, 60m and 96m. A five head battery was reported as having been erected in 1904. The mine was famous for having produced some very rich ore with one shoot having produced over 15,000oz from 1,506 tons.

The thickness of the reef varied from the width of the drive to a few millimetres but averaged 26" (0.66m) throughout the mine. The gold content ranged from 7.75-155.5g/t, with average values on the order of 12.1-13.7g/t. In the upper levels, the vein averaged 0.76m in thickness and 10.85g/t. The average grade of the mine was 7dwt (11.9g/t).

Geological setting

Um Garayat gold mineralisation is confined to a single quartz vein trending north-northwest and dipping 60o-80o to the west, more or less concordantly with the schistosity of the enclosing rocks. The host rocks are quartz-sericite schists (meta-mudstones) with layers of graphitic schist which occur as a lens within andesitic tuffs and lavas metamorphosed to the greenschist facies. The area is strongly schistose and lineated fine grained grey dominantly intermediate volcanics.

There is evidence of widespread pitting over the entire area around Um Garayat and of placer workings to the west and northwest.

Exploration

Exploration completed by Gippsland has included geological mapping, re-sampling of all of the existing trenches and the excavation of two new trenches.



UM GARAYAT REGIONAL

Location

The prospect includes a number of historical workings around the Um Garayat region. It includes the localities of Wells area E, Wells area F and Ivanov.

Previous exploration

Regional prospecting by the Nile Valley Company in 1905 identified a number of bedrock workings away from the larger ancient mines. It is most likely that all of these occurrences were known to the ancient miners. At the Ivanov working the Nile Valley Company sank at least three shafts and may have processed small parcels of ore through the Um Garayat mill. It is not known what work was completed at Wells areas E & F.

Geologic setting

The Ivanov occurrence is located on the southerly extension of the main Um Garayat structure. Areas E & F appear to be on minor splays.

Exploration

A programme of drill testing has been proposed for the areas.

Koleit Um QUARAYAT – Gold (Gippsland 50%)

Location

The prospect is situated on the northern side of Wadi Allaqi at Latitude 22°32' 5" N and Longitude 33°24' 11" E some 5km to the southeast of the Company's Um Garayat deposit.

Previous exploration

The prospect is centred on an electromagnetic (EM) anomaly detected during a regional airborne survey during 1968. The position of the anomaly was confirmed by ground electrical surveys in 1972. A single diamond drill hole of 215.95m was drilled in 1974 but no assays were reported. Limited surface sampling returned gold values in the range of <0.02 to 1.4g/t.

Geologic setting

The prospect is located in an area of felsic to intermediate rocks (dacite and andesite) which have been intruded by granodiorites.

Mineralisation

A concentric arrangement of alteration zones is located in close proximity to the EM anomaly which is similar to those found associated with some styles of copper-gold deposits. The most intensely altered rocks are characterised by the presence of pyrophyllite and biotite.

Exploration

Exploration will initially consist of detailed structural mapping followed by RAB drilling of the alteration zones to obtain geochemical samples. This will be followed by deeper RC drilling to test the geochemical anomalies and the previously identified IP targets.

ETC