Pioneer Nickel Ltd - Golden Ridge Joint Venture Project

Golden Ridge Joint Venture Project

Summary

[Golden Ridge Joint Venture geology and location plan]

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Pioneer Nickel Limited (PIO) has entered into the Golden Ridge Joint Venture (GRJV) with Australian Mines Limited (AUZ) to explore more than 100 square kilometres of highly nickel-prospective tenements covering more than 20 strike kilometres of ultramafics of the Golden Ridge Belt, which host the Blair and nearby Carnilya Hill nickel sulphide mines. The immediate Blair Mine area is excluded from the GRJV, as are all gold rights. The basic terms of the GRJV are outlined below.

As the tenure is mostly granted mining leases, in close proximity to the Kambalda concentrator, a nickel sulphide discovery could be brought into production quickly.

A review of the exploration data from the surrounding Golden Ridge area has highlighted numerous Ni anomalies as well as under-explored areas, that require drilling. Eleven prospects have anomalous Ni intercepts in drilling, with four receiving high-priority status, namely: the Anomaly 11, Blair South, Anomaly 20SW and Marshall prospects. Data from Duplex Hill and Anomaly 20 prospects will also be reviewed.

Pioneer has realised that sand cover has hampered the efforts of earlier explorers to generate a geological map of basal ultramafic contacts that is sufficiently detailed to use for nickel sulphide exploration in many areas. The Company has embarked on a large drilling program, which will exceed 50,000m when complete, to precisely locate ultramafic contacts and provide geochemical data. When compiled, targets that are resolved will be tested using TEM and RC drilling.

Basic terms of the Golden Ridge Joint Venture

Pioneer may earn an initial 51% in the Golden Ridge Joint Venture expending $2,250,000 within three (3) years.
Following Pioneer earning a 51% Interest, AUZ will have a once only election to either:
- Contribute to exploration expenditure in proportions equal to their Interest, in which case Pioneer will fund 51% and AUZ will fund 49%; or
- Not contribute, in which case Pioneer may earn a further 19% (for a total of 70%) by the earlier of expending an additional $3.0 million (for a total of $5.25 million) or completing a feasibility study, within a further 3 years;
Once Pioneer has earned a 70% Interest the Parties will contribute to further exploration expenditure in proportions equal to their Interest. If AUZ elects to not contribute then Pioneer's Interest will immediately increase to 80% (and AUZ's decrease to 20%) and Pioneer will then free-carry AUZ until the completion of the first feasibility study;
Should AUZ elect to not contribute to the mining operation it will convert its Interest to a 1.5% net smelter return royalty.
Pioneer must spend a minimum of $600,000 on an agreed work programme to test a number of specific targets before it may retire from the GRJV. Pioneer will be deemed to have earned a 25% Participating Interest in the Project on completion, presuming it continues.

Historical production

Historical production (prior to 2003) from the Blair tenements has been approximately 1 million tonnes at 2.53% Ni for 26,000t of contained nickel metal. AUZ re-opened the mine at the end of 2003. Ore is treated at the BHPB (ex-WMC) Kambalda concentrator located 30km to the south under the terms of the Ore Tolling and Concentrate Purchase Agreement ("OTCPA"). Only ore produced from M26/220 (which includes the Blair Mine and the Blair South Prospect) is part of the OTCPA; ores produced from other Blair tenements could be processed elsewhere.

Geology

The Golden Ridge Project is located approximately 30km south east of Kalgoorlie, and 30km north of Kambalda, in the Eastern Goldfields of Western Australia.

The Golden Ridge Ultramafic Sequence is a series of north-northwest striking, westerly dipping ultramafic, mafic and sedimentary rocks. The sequence is folded, with mafic-sediment-cored antiforms and ultramafic-cored synforms. The basal contact to the ultramafic is commonly felsic sediment ranging from argillite to greywacke. The ultramafic rocks are komatiites displaying high MgO and low MgO differentiates. Chert and sulphidic black shale is commonly present as contact and interflow sediments within the ultramafics.

Previous Work

Exploration on the Golden Ridge Belt for nickel sulphides was first conducted by AMAX in a JV with Conwest from 1969 to 1973. AMAX then entered into a JV with Anglo American with exploration continuing without economic success until withdrawing in 1975. WMC acquired tenements in the area following the vacation of AMAX. Exploration identified numerous areas of anomalous nickel sulphides, with follow up of Locality 2, initially identified by AMAX, becoming the Blair mine. Blair began production in 1990. The Blair mine and lease was purchased by McMahon Underground in February 2000. Mining ceased at Blair in October 2001 and the mine was placed on care and maintenance. The mining leases were acquired by Blair Nickel Mines (a wholly owned subsidiary of AUZ) in February 2003 and mining at Blair recommenced in March 2004.

Latest News (September 2007)

A 12,000m RAB program was recently completed to test prospective ultramafic contacts, generating over 3,000 samples which have been submitted for analysis. Highlights from the first batch of assays received are listed in Table 1. Anomalous samples will be further tested for the presence of platinum group elements, an indicator of a magmatic nickel source.

Table 1 — Rotary Air Blast Drilling Golden Ridge JV:
Significant Mineralisation Summary
Hole ID	Easting GDA94-51 (m)	Northing GDA94-51 (m)	Dip	Azimuth	Hole Depth (m)	From (m)	To (m)	Intercept (m)	Ni (ppm)	Cu (ppm)
GRA0064	375997	6578377	-60	090	60	44	60	16	5392	115
GRA0130	376334	6575572	-60	090	80	28	32	4	3475	184
and						50	53	3	3657	154
GRA0133	376568	6575637	-60	090	71	66	71	5	5187	76
Assays were completed by Genalysis Laboratory Services Perth, using a 4 acid digest, ICP-OES finish. * Intercepts are "down-hole" metres. No estimate regarding true thickness is made or implied.

Pioneer's focus is to fully test known targets while looking for new mineralisation in this very prospective ultramafic province.

This includes RAB drilling to confirm prospect geology and provide geochemical data, EM surveys to locate conductive rock units which may include nickel sulphide mineralisation and RC drilling to test resultant targets.