Havilah Resources - Benagerie Dome

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Portia Gold Project

Summary

Portia contains a 67,000 ounce Inferred Resource of gold in a 1-4 metre thick layer of silty material lying immediately on the bedrock. A native title agreement and Mining Lease (ML 6346) are in place over the Portia deposit and mining may progress subject to lodgement of an acceptable mining and rehabilitation plan (MARP). At recent gold prices, this project may be viable for a conventional open pit operation and gravity separation of the free gold.

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History

Copper mineralisation was first discovered in the area in a deep drillhole completed by Marathon Petroleum in the 1980s. The Pasminco-Werrie Gold joint venture followed up the Marathon copper hit in the mid-to late 1990s and discovered widespread copper, gold, molybdenum, lead and zinc mineralisation in the Benagerie Dome. They completed a considerable amount of high quality drilling and geophysical work and outlined numerous promising prospects, including Portia and North Portia. Portia is covered by more than 70 metres of younger sediments and hence has no surface expression.

Havilah acquired Pasminco's 70% interest in the joint venture from the receivers of Pasminco, and subsequently purchased the remaining 30% to give it 100% ownership of the entire area.

Havilah Exploration

The Pasminco-Werrie joint venture found the Portia gold mineralisation hard to define on account of abundant coarse-grained gold, which made conventional sampling and assaying techniques unreliable. Havilah resolved this problem by washing certain drill samples in a trommel / Knelson concentrator and obtaining a gravity concentrate, from which gold was picked under a binocular microscope and weighed on a precision analytical balance.

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To date Havilah has completed more than 200 drillholes at Portia targeting both a rich eluvial or detrital gold layer that rests on weathered bedrock (known as base of Tertiary or BOT mineralization) and the primary gold source in the underlying bedrock.

The BOT gold mineralization is closely drilled and has proven to be consistently gold mineralized over an area of at least 600m x 100m, and ranging from 1 to 4 metres in thickness. An Inferred Resource of 720,000 tonnes @ 2.9 g/t for 67,000 ounces of gold has been estimated, using a high grade cut of 60 g/t for the BOT mineralization. The effects of using different high grade cutoffs on the resource grade and tonnage is summarized below:

High grade cut g/t	uncut	60	30
Grade g/t	3.1	2.9	2.6
Total oz	72,000	67,000	60,000
Total tonnes	720,000

A table summarizing the important criteria related to the assessment and reporting of the Portia BOT gold resource is appended to this report.

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Interpretive model showing the location of the base of Tertiary (BOT) gold resource that is sitting in a shallow depression in the
bedrock. The gold is thought to have eroded from the underlying bedrock, possibly from the contact zone between footwall pyritic
albitite rocks and overlying graphitic pelites.

To date, it has not been possible to determine a gold resource in the bedrock from surface drilling owing to poor sample quality and unreliable assays, combined with the erratic and patchy gold distribution. Significant bedrock gold mineralisation is suspected however from the high gold grades that have been obtained by washing certain weathered bedrock drill samples, such as:

26 metres of 15.4 g/t Au in drillhole PTAC 191
13 metres of 33.5 g/t Au in drillhole PTAC 193

The gold in these samples is of similar character to that in the BOT resource, but is notably more "dirty" due to coating and contamination with secondary iron oxides formed during the weathering process.

In the past high waste to ore ratios and modest gold prices have rendered open pit mining at Portia economically challenging. However, with the current high gold prices, the project can produce a substantial cash surplus using cost assumptions summarised in the following table.

Portia Gold Project - Operating Economics
Portia Project JORC resource of 720,000 t @ 3.1 g/t (uncut) for 72,000 ounces Mining Reserve within optimised open pit design is 355,000t @ 4.7 g/t for 53,822 ounces Waste removed to expose ore 7m cm
Revenue	A$
53,822 ounces @ 95% recovery
x A$1750 / ounce	89,480,000
Expenses
Waste mining cost @ $3.30/cm	23,100,000
Ore mining cost @ $2/t	710,000
Ore processing cost @ $5/t	1,775,000
Admin and overheads est.	1,500,000
Site works including road upgrading	2,000,000
Royalties @ 3%	2,685,000
Capex (process plant, camp)	4,000,000
Total Costs	35,770,000
Cash Surplus	53,710,000

Havilah is presently progressing final mining approvals for the Portia open cut and is in discussion with potential financiers and mining and construction contractors

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Resource Assessment and Reporting Criteria

The following table provides a summary of important criteria related to the assessment and reporting of the Portia base of Tertiary gold resource.

Sampling Techniques, Assay Data, Drilling Details

Criteria	Status
Havilah drillholes used in resource estimation	205 Havilah aircore (AC) drillholes totaling approximately 21,000 metres are included.
Non-Havilah drillholes used in resource estimation	Approximately 65 earlier Pasminco-Werrie Gold JV AC and RC drillholes totaling approximately 8,500m were not used in the resource estimation. There is a reasonable correlation of the geology and assay data between these earlier drillholes and Havilah’s drillholes.
Drilling techniques	All AC holes were drilled using a blade bit and minimal air pressure to avoid collapsing the holes. Drilling is extremely challenging and special techniques were used to ensure good sample return from the BOT layer.
Sampling techniques	AC drill samples were bagged. 1 kg was split off for conventional laboratory assaying. The remainder of the sample for the entire BOT interval was washed in a specially designed gravity separation plant operated by Havilah.
Drill sample recovery	AC sample recoveries through the BOT layer were good and are adequate for interpretation purposes.
Logging	All AC samples were logged by experienced geologists and later holes were logged directly into a digital logging system with data uploaded into an Access database. Representative samples were stored in chip trays for later reference. Chip sample trays and some back-up samples are stored on site and at the Adelaide office.
Quality of assay data and laboratory tests	For the BOT gold mineralization, all conventional laboratory assay data that used a small sample size is suspect owing to a known coarse-gold nugget effect. This problem expressed itself as widely varying and unrepeatable assays from the same sample or nearby samples. Consequently, no conventional assay data was used in the resource estimate. To overcome this problem Havilah designed and built a simple gravity treatment plant and treated the entire AC metre sample weight (typically 18-22 kg) remaining after removal of a 1 kg split for conventional laboratory analysis. •The concentrate from a small Knelson concentrator was further concentrated on a Gemini table (vibrating table) and finally by panning. The coarse gold was then hand-picked and weighed on a sensitive balance. This assay methodology is unlikely to produce significant errors, except possibly on the downside if some fine gold is lost during the processing. The consistency of results from the BOT by this methodology is considered the best evidence that the washing and weighing method of gold assaying is appropriate in this case.
Verification of drilling methods and sampling	Twinned, repeat or nearby AC holes gave almost identical results for the washed BOT samples. Three diamond core drillholes gave comparable results to the AC holes for the BOT gold mineralization. The AC method was considered most reliable of all drilling techniques because it caused minimal disturbance to the BOT layer, and also gave the highest sample volume for washing.
Location of drillholes	Drillhole collar coordinates were surveyed in UTM coordinates using a differential GPS system with an x:y:z accuracy of 20cm:20cm:40cm. Havilah AC holes were not surveyed and were assumed not to have deviated significantly from their collar azimuth and inclination owing to the large drill rod size used.
Drillhole spacing and distribution	Havilah drilling was completed on nominal 20m sections perpendicular to the interpreted strike of the BOT layer. Holes were mostly drilled towards the west at -60 to -75º in order to cut the bedrock approximately perpendicular to layering. Earlier non-Havilah holes were drilled with a similar azimuth and dip. Some Havilah AC holes were drilled vertically or towards the south, but this did not appear to effect the intersection widths or gold grades in the BOT mineralization. Resource drilling is predominantly concentrated between 447600E and 448000E and between 6521300N and 6522000N. The deposit is largely untested deeper than 110m below surface.
Estimating and Reporting of Mineral Resources
Database integrity	Examination of the database has not revealed any issues of concern that could significantly affect the current resource estimation.
Geological interpretation	The Portia gold mineralization consists of two main components: A base of Tertiary (BOT) gold rich layer that sits directly on the bedrock. Bedrock gold mineralization that has been eroded to produce the BOT gold layer. The nature of the bedrock gold mineralization is poorly understood at present but appears to be locally extremely high grade and patchy. The primary gold possibly occurs in thin veins along a formation boundary between pyritic footwall rocks and highly graphitic black shales. The BOT gold mineralization is well defined by the drilling and quite well understood. It is hosted by a distinctive silty “light grey clay” that sits in a depression on the weathered bedrock surface. Gold in the BOT layer varies from fine- to coarse-grained, and appears to have moved only a short distance from its bedrock source. The BOT mineralization is therefore interpreted to be of eluvial origin – ie accumulated in a shallow depression down-slope from its source (see diagram).
Estimation and Modelling Techniques	Polygons and hence triangulations are based on interpretations completed on 20m and 40m sections for Portia BOT mineralisation. Sectional interpretations are made perpendicular to the strike. Only samples that fell inside the triangulation model representing the BOT gold resource were used in the estimation of gold grades. 1m composite assay intervals were used. Gold grades were estimated using the inverse distance squared method, as provided in Maptek Vulcan software. Estimation was carried out initially using all sample data within a 20m x10m x5m search ellipsoid in order to restrict the area of influence of the high grade assays. Then a search radius of 50m x 25m x 10m was run using all samples below the high grade cut value to estimate into any intervening void areas. The results of the two estimation passes were combined to obtain the total resource figure
Moisture	Tonnes have been estimated on a dry basis.
Cut-off parameters	Mineral resources have been reported at a 30 and 60 g/t gold grade cut. High grade gold assays (>50g/t) are common in the BOT mineralization, and are likely to be real. Applying an upper cut is a conservative approach that ensures higher grade gold assays do not overly influence the average grade for the deposit.
Bulk density	An average SG of 1.8 was used for the BOT layer, based on numerous SG determinations of similar material from Kalkaroo.
Classification	There is a high level of confidence in the continuity of the BOT mineralization at Portia and in the assay results used in the resource estimate. The overall grade and hence total contained gold, is critically dependent on the gold cutoff value applied, owing to the frequent high gold grades (>50g/t). This creates a degree of uncertainty in the total amount of gold that can ultimately be recovered, causing the resource to be assigned an inferred status.