VYSARN LIMITED - Capital/Financing Update 2007

Macquarie Harbour Mining Ltd prospectus

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Prospectus

Mining for the future

02 Project review

Corporate Directory

DireCtorS

Basil Conti – Non Executive Chairman Frank Rogers – Managing Director Benjamin Mead – Executive Director Dr Neil Allen – Non Executive Director Peter Robertson – Non Executive Director

iNDePeNDeNt geoLogiSt

Dr Tony Gifford Featherstone Geological Consultants 58 Calais Road Scarborough WA 6019

SoLiCitor to the oFFer

CoMPANy SeCretAry Jade D’Andrilli

regiStereD oFFiCe

1st Floor, 20 Kings Park Road West Perth WA 6005

PriNCiPAL PLACe oF BuSiNeSS 20 Recreation Street Kingston Beach TAS 7050

Pullinger Readhead Lucas

Level 2, Fortescue House 50 Kings Park Road West Perth WA 6005

iNDePeNDeNt SoLiCitor rePortiNg oN teNeMeNtS

Simmons Wolfhagen 168 Collins Street HOBART TAS 7000

iNveStigAtiNg ACCouNtANt

ShAre regiStry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

BDO Kendalls Corporate Finance (WA) Pty Ltd Level 8, 256 St Georges Terrace Perth WA 6000

AuDitor

FiNANCiAL ADviSer AND LeAD MANAger

Sonray Corporate Pty Ltd Level 7, 14 Martin Place Sydney NSW 2000

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street Subiaco WA 6008

ASX CoDe:

MHM

IMPORTANT NOTICE

This Prospectus is dated 5 October 2007 and was lodged with the ASIC on that date. No Shares will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. Neither the ASIC nor ASX take any responsibility for the content of this Prospectus or the merits of the investment to which this Prospectus relates. No person is authorised to provide any information or make any representation in connection with the Offer contained in this Prospectus which is not contained in this Prospectus.

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of those laws. This Prospectus does not constitute an offer of Shares in any jurisdiction where, or to any person to whom, it would be unlawful to issue this Prospectus.

It is important that you read this Prospectus carefully, in its entirety and seek professional advice where necessary before deciding to invest in the Company. In particular, in considering the prospects for the Company, you should consider the risk factors that could affect the performance of the Company. The Offer does not take into account your investment objectives, financial situation and particular needs. Accordingly, you should carefully consider the risk factors in light of your personal circumstances and seek professional advice from your accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest. The Shares the subject of this Prospectus should be considered speculative.

No person is authorised to provide any information or make any representation in connection with the Offer contained in this Prospectus which is not contained in this Prospectus.

WEB SITE – ELECTRONIC PROSPECTUS

A copy of this Prospectus may be downloaded from the Company’s website at www.mhml.com.au and at www.sonray.com.au. Any person accessing the electronic version of this Prospectus for the purpose of making an investment in the Company must be an Australian resident and must only access the Prospectus from within Australia. Persons who access the electronic version of this Prospectus should ensure that they download and read the entire Prospectus. The Corporations Act prohibits any persons passing onto another person an Application Form unless it is attached to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus. Any persons may obtain a hard copy of this Prospectus free of charge by contacting the Company by telephone on (03) 6229 9955 during normal business hours.

Macquarie Harbour Mining Ltd prospectus

Chairman’s letter

Dear Investor,

On behalf of the Board I am pleased to introduce this Prospectus to you and to provide you with an opportunity to invest in Macquarie Harbour Mining Limited (“MHM”).

MHM will provide investors with exposure to the gold, copper, nickel, zinc, iron ore, tin, silver and platinum group metals and to two of Tasmania’s most prospective and historically active mining regions.

MHM is seeking to raise up to $6,000,000 with the issue of 30,000,000 new Shares at an Offer Price of 20 cents per Share. The minimum subscription required is $4,000,000.

The Company’s projects are all within well known mineralised areas and have each been subject to previous prospecting and exploration activity which has assisted in enhancing the projects’ prospectivity. The Directors believe that the Company’s projects all have significant resource potential.

MHM’s primary objective is to actively grow Shareholder wealth by successfully developing the Company’s potential. The Company plans to initially target the gold and tin prospects within the North East Tasmanian project area. These tenements contain 10 old gold mines and 13 alluvial tin deposits.

In many cases the old gold mines ceased operation whilst still in high-grade ore, with reported grades up to 90 grams per tonne. The cessation of operations was often due to either water inundation or problems associated with recovery from sulphide-hosted ore. These issues can now be overcome with advances in technology, and therefore these tenements present excellent opportunities for MHM.

The North East Tasmanian tenements also contain extensive tin workings that cover some 75 km[2] . MHM believes that the area has the potential to support an alluvial tin mining operation, and grades have been reported by previous explorers of up to 11.6kg/m[3] .

The Company’s tenements on Tasmania’s West Coast contain major extensions of the highly prospective Mount Read Volcanics, a structure that continues to demonstrate its ability to deliver world-class deposits. MHM will target “company-making” deposits of porphyry copper-gold, VHMSstyle copper, zinc, lead, gold and silver, and ultramafic-hosted nickel sulphides, as indicated by previous work conducted in the area.

We are confident that the Company will successfully achieve its stated objectives and quickly become a dynamic Australian mining company.

The Company believes that Tasmania is re-emerging as an important future contributor to world gold, nickel, tin and base metals markets. MHM is well placed to become a dynamic Australian metals exploration and development company. The Company plans to draw on the extensive process engineering, project development and mining experience of its Directors to capitalise on the Company’s potential. A central philosophy for growth will also involve the active, ongoing appraisal of external projects for joint venture and acquisition, and the strength and experience of the management should present many opportunities in this respect.

The Directors are confident that the Company will successfully achieve its stated objectives and quickly become a dynamic Australian mining company. I commend this issue to you and look forward to welcoming you as a Shareholder.

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Basil Conti CHAIRMAN

Investment highlights

ProjeCt & CorPorAte highLightS

Old Gold Mines & Unexploited Mineralisation

MHM will drill its gold targets with a view to extending 5 old gold mines that fall along a 10 kilometre strike length. Many of these mines stopped in high-grade ore – with reported grades as high as 90 g/t – often due to either water inundation or the occurrence of sulphidic ore. Modern methods have resolved these difficulties. MHM is confident of finding sufficient ore in the region of a mineralisation style to support open pit mining operations.

Alluvial Tin Potential

The tenements in North-Eastern Tasmania include 13 tin deposits over an area of 75km[2] . This presents the Company with an opportunity to develop substantial deposits of alluvial tin. Reported grades from historical drilling have been as high as 11.6kg/m[3] .

AGSO Heat-Flow Data Anomalies

Areas of high crustal heat flow related to the radiogenic decay of granites in Australia show a strong correlation with known mineral deposit provinces such as Broken Hill, Mt Isa, Tennant Creek, the Palmer Goldfields and the Ballarat/ Bendigo Goldfields.

The research by the Australian Geological Survey Organisation (“AGSO”) and others supports MHM’s belief that the correlation is an important cornerstone of the prospectivity of the North Eastern tenement area and the regional potential for significant resource development.

One of the fundamental philosophies of MHM is to adopt leading edge technology in its exploration program.

Platform For Future Growth

The tenements on the West Coast of Tasmania cover extensions to the highly prospective Mt Read Volcanic Belt. This belt hosts worldclass deposits and continues to demonstrate its potential with significant new discoveries.

The MHM tenements in this region have 14 identified prospects for gold, copper, nickel, zinc, iron ore, tin, silver and platinum group metals. MHM will target significant “company-making” size deposits (Mt Lyell/Rosebery/Hellyer/Que River/Henty/Avebury proportions) for resource development. The potential range of metals also provides a hedge against any individual commodity downturn.

Regional Metals Endowment

The Macquarie Harbour tenements on the West Coast of Tasmania have the potential for the discovery of significant deposits of gold, copper, nickel and zinc. The area draws similarities to other West Coast Tasmania deposits hosted by similar rock assemblages to the north, including;

Mount Lyell: 311 Mt @ 0.97% Cu, 0.31 g/t Au
hellyer: 16.5 Mt @ 13.9% Zn, 7.2% Pb, 0.38% Cu, 169 g/t Ag, 2.55 g/t Au
Que river: 3.3 Mt @ 13.3% Zn, 7.4% Pb, 0.7% Cu, 195 g/t Ag, 3.3 g/t Au
henty: 2.83 Mt @ 12.5 g/t Au
Avebury: 16.27 Mt @ 0.97% Ni

Experienced Board and Management

Fundamental to the success of the Company will be the skills and experience of its management. The Directors and senior management of MHM are well experienced in the mid-sized mining and exploration industry and have strong and diverse technical backgrounds, including corporate and project management, exploration and mine geology, metallurgy, legal and corporate governance and metal and minerals marketing.

Macquarie Harbour Mining Ltd prospectus

Processing Expertise

Due to the Company’s strong technical expertise we plan to embark on investigations into mineral processing opportunities for joint venture and acquisition. This has the potential to facilitate increased revenues, diversification of interests and growth of the Company beyond “Junior Explorer”.

Future Options Entitlement Issue

The Company plans to offer a non-renounceable issue of options to all Shareholders approximately 3 months after Official Quotation of the Shares on the ASX. That offer will be on the basis of 1 new option for every 2 Shares held at a future record date. The options will have an issue price of 1 cent per option, an exercise price of 20 cents per Share and an expiry date of 31 August 2012. The Company will apply to ASX for official quotation of the options.

Due to the Company’s strong technical expertise in mineral processing we plan to embark on investigations into mineral processing opportunities for joint venture and acquisition. This has the potential to facilitate increased revenues, diversification of interests and growth of the Company beyond “Junior Explorer”.

SuMMAry oF the oFFer

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Minimum Maximum
Subscription Subscription
Offer price per Share $0.20 $0.20
Shares to be issued pursuant to the Offer 20 million 30 million
Amount to be raised pursuant to the Offer $4 million $6 million
Total Shares on issue at the Listing Date 47 million 57.5 million
Market capitalisation at the Offer price $9.4 million $11.5 million
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Macquarie Harbour Mining Ltd prospectus

Key DAteS

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Opening Date 22 October 2007
Closing Date (5.00pm WST) 16 November 2007
Allotment of Shares under this Prospectus (anticipated) 22 November 2007
Trading of Shares to commence on ASX (anticipated) 4 December 2007
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The above dates are indicative only and may vary. The Company reserves the right to change the key dates of the Offer without prior notice which may have a consequential impact on other dates.

iNterPretAtioN

Certain words have defined meanings when used in this Prospectus. A glossary of defined terms is set out at the back of this Prospectus.

WeBSite ADDreSS

PhotogrAPhS

This Prospectus can be downloaded from the following web sites:

www.mhml.com.au
www.sonray.com.au

The people and assets depicted in photographs in this Prospectus are not employees or assets of MHM, unless otherwise stated. Diagrams appearing in this Prospectus are illustrative only and may not be drawn to scale.

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Birchs Inlet: Deep water access point to MHM West Coast Tenements

Macquarie Harbour Mining Ltd prospectus

1.1 ShAreS oFFereD For SuBSCriPtioN

This Prospectus invites investors to apply for Shares at a price of $0.20 per Share. The Company seeks to raise a minimum $4 million through the issue of 20 million Shares and a maximum of $6 million through the issue of 30 million Shares.

All Shares offered under this Prospectus will rank equally with existing Shares. Details of the rights attaching to the Shares are set out in Section 8 of the Prospectus.

All application monies are payable in full on application.

1.2 PurPoSe oF the oFFer

The purpose of the Offer is to provide the Company with sufficient funds to enable it to carry out its exploration programs, finance development, acquire other mineral properties and provide working capital.

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Previous workings at Birthday Bay

Table 1.1 Proposed application of funds over two calendar years from the date of listing.

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$4 million $6 million
Minimum Maximum
Area/Activity Subscription Subscription
EL2/2007 Gladstone Gold Project $550,000 $765,000
EL3/2007 Musselroe Tin Project $705,000 $1,550,000
EL20/2007 Strahan Nickel Zinc Project $205,000 $325,000
EL21/2007 Double Cove Copper Gold Zinc Nickel & Iron Project $295,000 $505,000
EL22/2007 Hibbs Nickel Gold PGM & Birchs Polymetallic Projects $410,000 $620,000
EL23/2007 Thomas Creek Copper Gold Project $265,000 $490,000
Total Exploration Budget $2,430,000 $4,255,000
Working Capital/Corporate Costs $922,000 $922,000
Expenses of the Offer $648,000 $823,000
Total $4,000,000 $6,000,000
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The above table deals with the proceeds of the Offer only and excludes application of the additional cash at bank immediately pre-IPO of approximately $400,000.

Details on the intended exploration programs are set out in Section 2 of the Prospectus. The Directors are satisfied that, upon completion of the Offer, the Company will have sufficient funds to meet its stated objectives as set out in this Prospectus.

01 Details of the offer

1.3 CAPitAL StruCture

The proposed capital structure of the Company following completion of the Offer is as set out below:

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$4 million $6 million
Minimum Subscription Maximum Subscription
Directors Shares on issue 15.5 million 15.5 million
Promoters Shares on issue 4.5 million 4.5 million
Seed Shares on issue 6.0 million 6.0 million
Shares to be issued pursuant to the Offer 20.0 million 30.0 million
Sonray Shares (refer Section 8.4.5) 1.0 million 1.5 million
Total [1] 47.0 million 57.5 million
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1 Subject to completion of the IPO, the Company will issue a total of 2.0-2.5 million options to directors and Sonray, details of which are set out in Section 8 of the Prospectus.

A number of important rights attaching to the Shares are summarised in Section 8 of this Prospectus.

Some of the Shares currently on issue will be subject to the restricted security provisions of the ASX Listing Rules for periods of up to two years.

In addition, all existing Shareholders have entered into voluntary restriction agreements under which they may not dispose of Shares for six months after date of listing. These restriction agreements are summarised in Section 8 of this Prospectus.

1.6 APPLiCAtioN For ShAreS

Applicants should read this Prospectus in its entirety in order to make an informed decision on the prospects of the Company and the rights attaching to the Shares offered by this Prospectus before deciding to apply for Shares. If you do not understand this Prospectus you should consult your stockbroker, accountant or other professional adviser in order to satisfy yourself as to the contents of this Prospectus. The Shares offered by this Prospectus are speculative in nature.

Exposure Period

1.4 DiviDeND PoLiCy

The Company anticipates that significant expenditure will be incurred in the evaluation and development of the Company’s projects. These activities are expected to dominate the two year period following the issue of this Prospectus. Accordingly, the Company does not expect to declare any dividends during that period.

Subject to the Company achieving sustained profitability, the Directors will consider paying dividends, subject to available cash flow and capital expenditure commitments.

1.5 riSK FACtorS

Investment in Shares under this Prospectus should be considered as speculative because of the inherent risks in mineral exploration. There are also inherent risks in the delineation of mineral reserves and in mineral production. A summary of some of the risk factors that face the Company is set out in Section 4 of this Prospectus. Potential investors should read this Prospectus in full and consult their stockbroker, accountant or independent financial adviser if they require further information on the risks associated with investing in MHM, before submitting the Application Form.

This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. Potential investors should be aware that this examination may result in the identification of deficiencies in the Prospectus and, in those circumstances, any application that has been received may need to be dealt with in accordance with Section 724 of the Corporations Act.

Applications for Shares under this Prospectus will not be accepted by the Company until after the expiry of the Exposure Period. No preference will be conferred on persons who lodge applications before the expiry of the Exposure Period.

Applications

An Application for Shares can only be made on the Application Form contained at the back of this Prospectus. The Application Form must be completed in accordance with the instructions set out on the reverse of the Application Form.

Applications must be for a minimum of 10,000 Shares (being minimum application monies of $2,000), and thereafter in multiples of 1,000 Shares ($200).

Macquarie Harbour Mining Ltd prospectus

The Application Form must be accompanied by a cheque in Australian dollars, for the full amount of your application monies. Cheques must be made payable to “Macquarie harbour Mining Limited – Application Account” and should be crossed “Not Negotiable”.

Application Forms must not be circulated to prospective investors unless accompanied by a copy of this Prospectus.

Completed Application Forms and accompanying cheques must be received by no later than 5.00pm (WSt) on 16 November 2007 and should be delivered or posted to either:

Macquarie harbour Mining Limited Share issue c/o Sonray Corporate Pty Ltd Level 7, 14 Martin Place SYDNEY NSW 2000 (GPO Box 5485 SYDNEY NSW 2001)

OR

Macquarie harbour Mining Limited Share issue c/o Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153 (PO Box 535 APPLECROSS WA 6953)

The Company reserves the right to extend the Offer or close the Offer early without notice. Applicants are therefore urged to lodge their Application Form as soon as possible.

An original, completed and lodged Application Form, together with a cheque for the application monies, constitutes a binding and irrevocable offer to subscribe for the number of Shares specified in the Application Form. The Application Form does not need to be signed to be a valid application. An Application will be deemed to have been accepted by the Company upon allotment of the Shares.

If the Application Form is not completed correctly, or if the accompanying payment of the application monies is for the wrong amount, it may still be treated as valid. The Directors’ decision as to whether to treat the Application as valid and how to construe, amend or complete the Application Form is final. However, an Applicant will not be treated as having applied for more Shares than is indicated by the amount of the cheque for the application monies.

No brokerage or stamp duty is payable by Applicants in respect of Applications for Shares under this Prospectus. The amount payable on Application will not vary during the period of the Issue. All application monies will be deposited into a separate bank account of the Company and held in trust for Applicants until the Shares are issued or application monies returned. Any interest that accrues will be retained by the Company and will not be paid to Applicants.

Privacy

The Application Form accompanying this Prospectus requires you to provide information that may be personal information for the purposes of the Privacy Act 1988 (Cth) (as amended). The Company (and its share registry on behalf of the Company) may collect, hold and use that personal information in order to assess your Application, service your needs as a Shareholder and provide facilities and services that you request and to administer the Company.

Access to information may also be provided to the Company’s agents and service providers on the basis that they deal with such information in accordance with the Company’s privacy policy. If you do not provide the information requested of you in the Application Form, the Company’s share registry may not be able to process your Application or administer your holding of Shares appropriately. Under the Privacy Act 1988 (Cth) (as amended), you may request access to your personal information held by (or on behalf of) the Company. You can request access to your personal information by telephoning or writing to the Company to the attention of the Privacy Officer.

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Rogers & Richardson discuss targets for aerial reconnaissance program

01 Details of the offer

1.7 Key DAteS

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opening Date 22 October 2007
Closing Date
(5.00pm WST) 16 November 2007
Allotment of Shares
under this Prospectus
(anticipated) 22 November 2007
trading of Shares to
commence on ASX
(anticipated) 4 December 2007
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The above dates are indicative only and may vary. The Company reserves the right to change the key dates of the Offer without prior notice which may have a consequential impact on other dates. Applicants are encouraged to submit their applications as early as possible.

1.8 uNDerWritiNg

The Offer contained in this Prospectus is not underwritten.

1.9 ALLoCAtioN AND ALLotMeNt oF ShAreS

The Company reserves the right to reject any Application or to allocate to any Applicant fewer Shares than the number applied for. The Company also reserves the right to reject or aggregate multiple applications in determining final allocations.

In the event an Application is not accepted or accepted in part only, the relevant portion of the application monies will be returned to Applicants, without interest.

The Company reserves the right not to proceed with the Offer or any part of it at any time before the allocation of the Shares to Applicants. If the Offer or any part of it is cancelled, all application monies, or the relevant application monies will be refunded. No interest will be paid on any returned monies.

The Company also reserves the right to close the Offer or any part of it early, or extend the Offer or any part of it, or accept late Application Forms either generally or in particular cases.

The allotment of Shares to Applicants will occur as soon as practicable after Application Forms and application monies have been received for at least the minimum subscription of Shares being offered, following which statements of shareholding will be dispatched. It is the responsibility of Applicants to determine their allocation prior to trading in the Shares. Applicants who sell Shares before they receive their statement of shareholding will do so at their own risk.

1.10 MiNiMuM SuBSCriPtioN

The minimum subscription to be raised under this Prospectus is $4 million.

No Shares will be issued pursuant to this Prospectus until the minimum subscription has been achieved. Should the minimum subscription not be reached within 4 months after the date of this Prospectus, all applications monies will be dealt with in accordance with the Corporations Act.

Macquarie Harbour Mining Ltd prospectus

1.11 BroKerAge AND hANDLiNg FeeS

MHM has an agreement with Sonray Corporate Pty Ltd to act as Financial Adviser and Lead Manager. Under the agreement (the terms of which are summarised in Section 8) Sonray is to assist the Company to obtain subscriptions to the Issue. Brokerage and/or handling fees on Applications for Shares will be payable to member firms of ASX or licensed investment advisers on such Application Forms bearing their stamp and accepted by the Company. Any such brokerage or handling fees will be paid by Sonray out of its brokerage fee in accordance with the provisions of the Corporations Act.

1.12 ASX LiStiNg

The Company will apply to ASX within 7 days after the date of this Prospectus for admission to the Official List and for Official Quotation of the Shares, other than those existing Shares that the ASX is likely to treat as restricted securities as defined in ASX Listing Rules.

If the Shares are not admitted to official quotation within 3 months after the date of this Prospectus, none of the Shares offered by this Prospectus will be allotted or issued. In that circumstance, all Applications will be dealt with in accordance with the Corporations Act. No interest will be paid on returned monies

The fact that ASX may admit the Company to the Official List is not to be taken in any way as an indication of the merits of the Company or the Shares. ASX, its officers and employees, take no responsibility for the contents of this Prospectus.

1.13 Future oPtioNS eNtitLeMeNt iSSue

A further issue of options to acquire Shares is planned to be made by the Directors approximately 3 months after Official Quotation of the Shares on the ASX. This issue will be a non-renounceable pro rata entitlement issue to all shareholders on the basis of 1 new option for every 2 Shares held. The options will be issued at a price of 1 cent per option and be exercisable at a price of 20 cents per Share, expiring on 31 August 2012. The Company will apply to ASX for official quotation of the options, which will otherwise be on terms considered standard for listed company options.

1.14 iNveStor eNQuirieS

Additional copies of the Prospectus or further advice on how to complete the Application Form can be obtained by telephoning or visiting:

Sonray Corporate Pty Ltd Level 7, 14 Martin Place SYDNEY NSW 2000 Telephone: (02) 8022 4919 Facsimile: (02) 8022 4969 Email: [email protected] Contact: Gregory Wood

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Aerial reconnaissance of West Coast tenement area

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The Company, its projects
and proposed exploration
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Macquarie Harbour Mining Ltd prospectus

2.1 iNtroDuCtioN

The world is experiencing an extended period of unprecedented growth in demand for mineral commodities, driven primarily by persistent high growth levels in China, India and other developing countries. Demand is predicted to continue to increase at current rates for some time, stimulating a sustained improvement in mineral commodity prices as has been seen since 2001.

This increasing demand for mineral commodities is occurring at a time when the mining industry is struggling to cope with the demand. The industry has undergone significant rationalisation over the past decade, particularly in the exploration sector, resulting in reduced exploration expenditures particularly at green fields sites. Coupled with decreasing exploration success rates, this rationalisation has led to a failure to develop new resource projects.

2.2 CorPorAte StrAtegy

MHM is an exploration company committed to the identification and exploration of new mining projects that can create wealth. The Company has positioned itself to take advantage of the growth opportunities in the mining industry through the securing of highly prospective exploration targets in two of Tasmania’s historically active mining regions.

MHM will present its shareholders with exposure to the gold, copper, nickel, zinc, iron ore, tin, silver and platinum group metals markets in regions that show significant promise. The Company’s prospects are within well-known mineralised areas that have been subjected to previous prospecting and exploration. Recent technological developments will enable the Company to capitalise on this previous activity.

Fundamental to the success of the Company will be the skills and experience of its senior management. The Directors of MHM are well experienced in the mid-sized mining and exploration industry and have strong and diverse technical backgrounds, including corporate and project management, exploration and mine geology, metallurgy, legal and corporate governance and metal and minerals marketing. The Directors will ensure that funds raised will be utilized appropriately in furthering the aims of the Company and creating value for shareholders.

responsible practices to the benefit of MHM, its employees, local communities and the environment.

The focus of activities is currently in Tasmania, which is attractive because of its mineral endowment in the commodities sought. MHM will not be limited to this region if appropriate opportunities arise elsewhere. The Company will pursue quality exploration opportunities with high upside values. The ongoing identification of new prospects will remain a key focus.

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Tenement Locality Map of Tasmania

In pursuing its prospects, MHM has identified the importance of building relationships with the communities with which it works. MHM’s objectives are not only to achieve positive cash flow and long-term success, but safe and

02 The Company, its projects and proposed exploration

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Tenement Map of
West Coast Tasmania
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2.3 StrAtegy For groWth

The Company believes that Tasmania is re-emerging as an important future contributor to world gold, copper, nickel, tin, zinc and other base metals markets. MHM’s aim is become a dynamic Australian metals exploration and development company. The Company aims to achieve this goal through implementing a progressive growth strategy including:

Exploring the potential of the Musselroe alluvial tin prospects. MHM plans to commence a program of bulk sampling and deposit definition;
Commencing modern exploration and drilling of the high potential NE Tasmanian Gladstone Gold prospects which have previously yielded high grade returns for early prospectors. The Company has numerous identified targets and drilling scheduled during Q1 of 2008.
Concurrently exploring the high potential Macquarie Harbour prospects on Tasmania’s West Coast, particularly the porphyry copper-gold, nickel sulphide and VHMS-style ultramafic targets.
Acquiring interests in new exploration projects on commercially attractive terms, which may ultimately include overseas prospects.

The individual prospects and identified targets are detailed below.

2.4 ProjeCt overvieW

2.4.1 Introduction

The Company holds strategic exploration tenements in two major mineral provinces of Tasmania, both of which reflect a long mining history and rich metal endowment.

The Gladstone tenements in North East Tasmania lie within an area of historical gold and tin production and offer opportunities for developing unexploited deposits using the latest mining and processing technology to improve efficiency and boost recoveries. Excellent use can also be made of new geological and geophysical data to be released progressively by the Tasmanian Government over the next twelve months.

The Macquarie Harbour tenements on the West Coast of Tasmania hold significant potential for the discovery of “company-making” deposits of gold,copper, nickel and zinc.

The West Coast of Tasmania and in particular the Mt Read Volcanics are considered to be highly prospective regions for metalliferous potential and continues to demonstrate its ability to deliver world class resource deposits.

Macquarie Harbour Mining Ltd prospectus

MHM has acquired an extensive section of this region covering the North-South extensions of the Mount Read Volcanics for some 68 kilometres, with a total exploration area of 759km[2] . The opportunity for MHM is to take advantage of modern exploration techniques and the right type of drilling equipment in an area of known prospectivity but minimal detailed exploration.

An indication of the level of prospectivity can be determined by the number of mines and prospects that occur on the MHM ground outlined in the Independent Geologist’s Report. In the North East tenements there are 10 old gold mines and 13 tin deposits. On the West Coast there are 14 identified prospects for gold, copper, nickel, zinc, iron ore, tin, silver and platinum group metals. The number of old mines and prospects underpins the Company’s future and the range of metals provides a hedge against any individual commodity downturn.

North eASterN tASMANiAN ProjeCtS

2.4.2 Gladstone Gold Project EL 2/2007 (217 km[2] )

• Exploration of five old gold mines over a 10 kilometre strike length

• Previous gold grades up to 90 grams per tonne

The Company’s main gold targets in the Gladstone area are auriferous quartz reefs within the Lower Palaeozoic Mathinna Group sediments. The Beaconsfield Mine (3Mt @ 20g/t Au) is of a similar style, and comparisons can be made with the Lachlan Fold Belt in Victoria which contains the Ballarat and Bendigo Gold Fields.

The known occurrences are found within a broad magnetic anomaly which has a general SSW – NNE trend, which is also the orientation of the reefs, although E-W reefs are recorded in at least two localities. Arsenopyrite is by far the dominant sulphide associated with the gold, which led to uneconomic recoveries in the primary ore by the early miners. This represents an opportunity for MHM using modern processing methods such as bacterial leaching as practiced at Beaconsfield.

Perhaps the most significant conclusion from the historical research and field sampling is that the reported high gold grades are real. Mining was stopped in the last century due to an inability to extract gold from the increasingly sulphidic ore encountered at depth, although still carrying plenty of gold. Although veins can be relatively narrow, widths of 2 metres are not uncommon, and there is no reason for believing that the veins may peter out at depth.

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Tenement Map of North East Tasmania

Potential also exists for several other deposit styles including disseminated mineralisation associated with a younger suite of intrusive rocks and lavas known as the Portland Complex.

02 The Company, its projects & proposed exploration

Significance of AGSO Heat-Flow Data Anomalies

Areas of high heat flow related to the radiogenic decay of granites in Australia show a strong correlation with known mineral deposit provinces (e.g. Broken Hill Block, Mt Isa Inlier, Tennant Creek, and Ballarat/Bendigo Goldfields).

It has been shown that there is a strong correlation between radiogenic decaying granites and known mineral deposits in SW England, Australia, Africa and the USA.

Some mineral deposits have been shown to be as much as 40 million years younger than a spatially associated intrusive, and the origin of their mobilising and transporting fluid(s) remains unresolved.

Research has proposed a model for radiogenic decay initiating a second stage of hydrothermal circulation, and therefore resulting in an alternative mechanism for mineralisation that is spatially associated with granites.

Recent mineral exploration has also been developing new tools that incorporate heat flow data as a vector to ore for Iron ore, copper, gold and uranium mineralisation.

AGSO Heat-Flow Anomaly over Australia and Tasmania

This presents an intriguing correlation between known mineralization involving world-class orebodies and geothermal anomalies. The research by AGSO and others supports MHM’s belief that the correlation is an important cornerstone of the prospectivity of the NE tenement area.

One of the fundamental philosophies of MHM is to adopt leading edge technology in its exploration program.

A renewed interest in this old gold mining district over the past twenty years has encouraged companies to use modern exploration methods such as airborne geophysics to investigate its potential. Although this approach has provided some excellent data and the identification of additional structural and geochemical targets for follow-up, no drilling has been carried out. This situation provides a strong incentive for MHM to instigate an early programme of drill testing.

Exploration Program

The Company’s exploration program is to complete the database of past mining and exploration, finalise the work currently being undertaken on the geophysical targets and then proceed to drilling. An RC drill rig has been booked for Q1 2008 to carry out an initial 40 hole program totalling 2000 metres. This program will provide information on the extensions to the existing mines and test some of the geophysical and geochemical anomalies.

Further detail on the proposed exploration budgets and exploration program is provided in sections 2.5 and 2.6 below.

2.4.3 Musselroe Tin Project EL 3/2007 (204 km[2] )

• Alluvial tin deposits

• Previous reported grades of up to 11.6 kg per cubic metre

This area was selected because of the extensive tin workings that cover some 75 km[2] , including 13 deposits and previous mines. Examination of the mining and recovery methodology showed that the previous miners would have incurred considerable losses and been restricted to the more recent alluvials with limited incursion into the higher grade Tertiary leads. This provides the Company with a significant opportunity to use modern technology and large scale mining operations to develop an early cash flow.

The region has a record of tin production, though early documentation is somewhat incomplete and very often only rough estimates from early Department of Mines annual reports.

The main period of operations from the deep leads appears to be 1900-1930 with the most

Macquarie Harbour Mining Ltd prospectus

productive mine during this time being the Edina which was producing about 1.5 tonnes of concentrate (at approx 73% Sn) a month in 1901. The richest mine in the 19th century was evidently the Empress, 7 kms NE of Gladstone, which at its peak produced 100 tonnes of tin (at least) for the period 1885-1886.

One of the better known alluvial tin deposits is Amber Creek, located about 6km due south of Gladstone. A government drilling programme was conducted on the area in 1937, with reported tin grades up to 11.6kg/m[3] . The significant intersections are detailed in table 2.1.

Table 2.1: Significant Intersections From Amber Creek Drilling Programme 1937

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Overburden Alluvial Grade Grade
Hole Depth Tin Zone g/m [3] g/m [3 ]
No. (m) (m) SnO2 Sn
1 17.9 4.33 3,128.3 2,459
2 20.1 4.34 361.3 284
4 17.9 1.57 126.8 113.6
17 15.6 0.36 12,987 11,636
20 17.9 4.24 1,255 1,124
22 13.4 3.15 3,977 3,563
24 20.1 2.21 1,231 1,103
26 22.4 0.66 441 395
27 21.4 3.35 147 132
30 10.2 1.47 9,423 8,443
31 8.9 1.30 2,147 1,924
32 8.9 0.60 375 336
33 4.5 1.40 1,655 1,483
34 4.5 4.47 424 380
35 12.2 2.36 1,840 1,649
36 15.9 3.05 12,544 11,239
37 16.0 6.55 2,463 2,207
40 17.9 3.20 2,661 2,384
48 9.0 2.13 100 89.6
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Portions of the Amber Creek deposits have been mined and further exploration is required to determine the extent of the high grade deep lead deposits that remain.

The Wood’s Flat property and adjacent areas were investigated by Utah Development Company (“UDC”) in 1963 and 1964. UDC entered into an option agreement over the Wood’s Flat and adjacent Eastern Terrace deposits with a view to developing an economic deposit. UDC believed the region had the potential to host significant alluvial tin deposits but were not confident that the drilling technique was totally reliable though grades as high as 510g/m[3] tin (Sn) were reported.

UDC discontinued work in the region due an internal policy shift, and a renewed focus on the Company’s core coal projects.

Exploration Program

An early part of the work by MHM on this project will be to examine all the existing records from production and drilling in order to prioritise targets for bulk sampling. This will enable an inventory of targets to be established at the Wood’s Flat and Eastern Terrace sections, Amber Creek and in other areas of historical mining operations.

MHM will conduct a bulk sampling program utilising an excavator and trailer mounted gravity plant. The Company has already determined that in order to exploit this type of mineralisation a moveable mining-pulping module would need to be used delivering ore to a centralized tin recovery plant. The Directors and management have extensive experience in this type of mining and processing.

Further detail on the proposed exploration budgets and exploration program is provided in sections 2.5 and 2.6 below.

WeSt CoASt tASMANiAN ProjeCtS

2.4.4 Strahan Nickel and Zinc Project ELA 20/2007 (253 km[2] )

Extensions to known nickel sulphide anomalies south of Macquarie Harbour
25 kilometre strike length of prospective Mt Read Volcanics

This area was targeted as a consequence of the extensions to the Hibbs ultramafic nickel occurrences to the south of Macquarie Harbour. In addition a north west trending extension of the Mt Read Volcanics occurs on the northern side of the property. This sub-structure to the main run of the Mt Read belt is anomalous in its structural setting and requires exploration to test it for copper-zinc mineralisation.

Work undertaken by BHP indicated stream sediment Cu-Zn anomalism in the south west of the tenement and a comparison was made to the Que-Hellyer and Mt Read Volcanics.

The Company believes that modern geophysical exploration will provide drill targets and a program of works has been planned to achieve this outcome.

The tenement forms an integral part of the Company’s strategy in exploring the West Coast of Tasmania and is particularly important as it provides a road accessed base for the Company.

Exploration

This tenement will be explored using modern geophysical techniques. The use of such technology in this region has proved successful and recent enhancement of the existing magnetics has shown new targets. On completion of this work the targets will be drilled using a new RC drill with the capacity to provide results quickly and accurately.

02 The Company, its projects & proposed exploration

Regional Prospectivity – Comparison of West Coast Tasmanian Geology and Magnetics

Regional Magnetic Map and Major Deposits of The Mt Read Volcanics

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Macquarie Harbour Mining Ltd prospectus

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Regional Geology and Major Deposits of The Mt Read Volcanics

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02 The Company, its projects & proposed exploration

2.4.5 Double Cove Copper, Gold, Zinc, Nickel & Iron Project EL 21/2007 (113 km[2] )

• Identified Copper-Gold, Zinc and Nickel occurrences

• Haematite-Magnetite mineralisation

Potential for economic copper and gold mineralisation within iron rich fault zones and volcano-sedimentary sequences of Neoproterozoic age. Within the tenement are several sub-projects hosting copper, gold, zinc, nickel and iron ore.

Birthday Bay Copper

Copper minerals were discovered and collected in small amounts from the foreshore at Birthday Bay at the beginning of last century. Assistant Government Geologist George Waller, on a visit in 1902 makes the following observations.

“What is known as the main rock...is a calcareous claystone...work has shown that the claystone is traversed by small quartz veins carry iron and copper pyrites while the whole rock is rather sparingly impregnated with the latter mineral. The dark blue covellite (Copper sulphide) is also present in small quantities.”

“All the sedimentary rocks of the district are traversed by innumerable quartz veins and stringers...those in the vicinity of the copper discoveries are of a more complex nature... composed of fibrous quartz and dolomite, with a little chlorite, and in places a good deal of specularite (crystalline hematite), together with copper and iron pyrites.”

“There is a bed of dolomite, altered in places to a compact hornstone containing blebs of red oxide of copper, carbonate of copper, and copper sulphide (chalcocite)...”

“...lode formation here, some 20 feet in width, consisting of graphitic slate, with some pyrite and bunches of gossan...Samples of the gossan have been assayed and have yielded 2 per cent of copper, a trace of gold and 7 ozs of silver.”

Hematite-Magnetite-Pyrite

An airborne magnetic and electromagnetic survey over the Cape Sorell area in 1959 highlighted several magnetic anomalies associated with strike faulting in the south west of the Double Cove – Birthday Bay Belt.

One of these was drilled in 1968, with a west-dipping hole of 100 metres depth, which intersected a metre of massive sulphide/oxide (70% pyrite, 30% hematite) at 96 metres. At surface the body averages about 130 m wide with a maximum length of approximately 500 m along strike.

Albina Area Copper-Gold-Zinc

This area, about 4 km north of Birthday Bay, was found as a result of a regional airborne survey that highlighted a broad, high magnitude magnetic anomaly. Although geological reconnaissance was inconclusive, later stream sediment sampling indicated anomalous zinc values in a subsidiary of Albina Creek.

Geophysical work comprised airborne EM as well as ground magnetics and VLF. The field survey included detailed soil, rock chip and stream sediment sampling. High background levels of gold (several samples assayed from 0.1 to 0.27ppm Au) and associated barium are of considerable interest, particularly as the concentration of pyrite was not related to the amount of gold in samples.

High copper (up to 485 ppm Cu) was also found and concluded to be due to trace amounts of chalcopyrite in shales and siltstones.

Pelias Cove Project Copper, Gold, Nickel, Zinc & Lead anomalies

A previous discovery of a sulphide zone containing copper on the beach of Pelias Cove led to a considerable amount of work on the prospect. Two lines of soil samples were taken 50 – 70 m inland from the occurrence with encouraging results of up to 5000 ppm Cu. Geological mapping and two EM traverses were followed by a 5 hole diamond drilling programme. Two of these were angled holes drilled to the south of the Pelias sulphide zone but did not intersect a landward extension of the mineralisation other than 1 metre of 1.05% Pb from 36 m, while the remaining three were vertical holes drilled into the gossan on the beach. The results were inconclusive (core recovery was extremely poor) but 1.5 m of 2.5% Cu was intersected from surface in the hematite-pyrite gossan and the hole abandoned after 2.5 m.

Extensive soil sampling in the area south of Pelias Cove in 1997-98 shows a general coincidence between gold anomalies and elevated copper geochemistry, while significant gold values were also found in panned heavy concentrates. An IP survey produced two strong resistive anomalies under a cover of Tertiary gravels. Three diamond holes, for a total of 761 m, tested one of the IP anomalies, a Cu-Au soil anomaly, and a zone close to the sulphide outcrop. Although no gold or base metals were encountered extensive silica flooding and some silica-talc alteration was noted. This indicates possible mineralisation nearby.

Lucas Creek Copper, Nickel & Zinc anomalies

The most significant feature of the results of regional geochemistry in 1967-68 was the high order anomalies for copper, nickel and zinc

Macquarie Harbour Mining Ltd prospectus

in Lucas Creek, which drains into Macquarie Harbour at Double Cove, just west of Pelias Cove. These are associated with andesitic/basaltic lavas and breccias (referred to by BHP as the Lucas Creek Volcanics) which are characterised by a strong aeromagnetic response. Field work concluded that the metal content of the rock types present was high enough to cause the geochemical values without any mineralisation being present.

A heliborne EM survey was flown by Dighem in 1984, followed up by ground traverses. Interpretation of the Dighem data led to the recognition of several anomalies but the ground follow-up was inconclusive as to their cause. A generally high concentration of copper and nickel in soils correlates well with the position of the volcanics which are often highly weathered and indicated at surface by stiff orange clays. Low levels of nickel in soils with continued high copper values correlated with units interpreted as argillite, siltstone and greywacke.

North Butler Creek Gold

Reconnaissance work in 1997-98 found an extensive outcrop with disseminated pyrite and accompanied by significant alluvial gold. A limited grid, totalling 3000 m was cut, with soil samples returning up to 564 ppb Au and rock chips up to 477 ppb Au as well as 1060 ppm Cu. Detailed follow-up included IP and geological mapping and a programme of six diamond holes totalling 1955 m was completed in 1999-2000. These drill holes intersected a volcanic and intrusive sequence with underlying carbonaceous black shales and siltstones grading into sandstone, quartzite and debris flow units. The best intersections were from 0.10 – 0.14 ppm Au (with >10% pyrite) over 4 – 6 m in three holes. Carbonate silica – pyrite-sericite alteration was pervasive, particularly in the sedimentary sections. It was stated that while some of the pyrite in the shales may be syngenetic most is probably epigenetic and related to the more widespread alteration event associated with the introduction of hydrothermal fluids.

Exploration

The numerous targets on this tenement require the Company to firstly compile a database of the existing information. Any new geophysical program will be determined by the outcome of this research but it is anticipated that the new technologies available today will greatly assist in targeting zones of mineralisation for subsequent drilling.

An examination of the viability of the iron mineralisation is currently underway.

Further detail on the proposed exploration budgets and exploration program is provided in sections 2.5 and 2.6 below.

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Magnetic Map of
the Double Cove –
Birthday Bay Area
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02 The Company, its projects & proposed exploration

2.4.6 Hibbs Nickel, Gold & PGM Project Birchs Polymetalic Project EL 22/2007 (222 km[2] )

Nickel Sulphide Mineralisation

• Gold, Chromium and Platinum Group Metal (PGM) Occurrences

• Potential VHMS & Porphyry Style Mineralisation

This area is considered to be an extension of the Mount Read Volcanics, a region that hosts world class deposits and continues to demonstrate its potential with significant new discoveries (Mt Lyell, Rosebery, Hellyer, Que-River, Henty, Avebury).

There is also possible zinc-lead mineralisation in the Ordovician Gordon Limestone of the Timbertops Syncline and volcanic hosted massive sulphide (VHMS) base metal and gold deposits as well as intrusive related (porphyry-style) copper gold mineralisation within the middle Cambrian Mt Read Volcanics.

The tenement contains an ultramafic structure now thought to be a southern extension of the structure that hosts the Allegiance (Avebury) Nickel Mine to the north. This structure runs for about 30 kilometres in a SSW direction with nickel and PGM anomalies occurring at intervals along its length. In addition the tenement hosts the northern section of a porphyry intrusive that has copper-gold intersections in its southern half. Recent geophysical work has shown structural units within this intrusive that are providing new drilling targets.

Gravelly Beach Nickel

Early reports indicate that the creeks draining north into Gravelly Beach contained grains of chromium, together with osmiridium and gold.

A single diamond drill hole (DDH 1) targeting the peak of an EM anomaly penetrated serpentinised pyroxenite and laminated siltstone before being abandoned at 95 m. The cause of the anomaly was explained as 3 m of graphite.

In 1968-69 when more work was done on the serpentinite, the following occurrences of nickel were found:

(a) A zone of disseminated pentlandite (a nickel sulphide) about 12 m wide occurring as small blebs up to 4 mm in slightly sheared olive green serpentinite. Three samples were assayed and contained 1200 ppm, 1000 ppm and 400 ppm nickel.
(b) Specks of pentlandite in shear planes in an asbestos costean about 320 m to the south of (a).
(c) Smears of pentlandite in shear planes in a drill hole about 130 m south of (b).

Birchs Inlet Copper, Gold, Zinc & Lead mineralisation

This area is considered prospective for volcanic hosted massive sulphide (VHMS) deposits and Henty-style gold deposits.

This section of the tenement covers the area of Cambrian rocks which extends north from Timbertops to the coast. It is of interest in that it contains mapped units of more felsic volcanic rocks as well as those of andesitic/basaltic composition that are more common in the Mt Read Volcanics.

In an interpretation of the aeromagnetic and Dighem surveys over the Cape Sorell Peninsula in 1984 Mitre Geophysics listed 26 prospects in order of prospectivity (not necessarily on geophysical criteria) and the Muddy Cove Creek area was given top priority as a VHMS target. A follow-up programme of Dighem was recommended and completed a year later, after which no further work seems to have been carried out. At West Baylee highly anomalous stream sediment gold results were supported by moderate soils values and at Hill 99 a copper-zinc anomalous zone (150-511 ppm Cu and 150-684 ppm Zn) extended inland along strike from an outcrop of massive pyrite-quartz mineralisation on the shoreline.

Drilling at West Baylee consisted of three diamond holes totalling 824 m which produced limited results with the gold at surface being attributed to a sheared ultramafic/sediment contact zone and IP anomalism to pyritic black shales.

Indications are that a hydrothermal alteration and mineralised system is present at Hill 99. Fuchsite alteration is present at a number of ore deposits in Tasmania, including Henty and Hellyer and is also an alteration feature in other styles of mineralisation such as lode gold in Western Australia. The carbonate – sericite alteration in the rhyolitic volcaniclastics is also similar to carbonate alteration at Henty and the proximal carbonate footwall zones of the Rosebery and Hercules deposits.

Exploration

Again this tenement has numerous targets that require re-examination and collation of the data into a standardised database. One of the problems encountered by previous explorers was the type of drill rig used. In all cases a small diamond rig was used which when intersecting the broken ground often found associated with mineralisation failed to recover a sample. MHM will use a modern RC/diamond rig specially selected for this task. On completion of the database and detailed mapping, targets will be defined for drilling.

All three of these occurrences are aligned along strike near the base of the ultramafic body.

Macquarie Harbour Mining Ltd prospectus

2.4.7 Thomas Creek Copper-Gold Project EL 23/2007 (171 km[2] )

• Porphyry Copper-Gold Mineralisation

• Major Volcanic Centre of the Mt Lyell Type

In the Thomas Creek area, an intermediate sub-volcanic complex may represent a major volcanic centre for the Mt Read Volcanics. This discovery represents an exciting target for the Company as this style of mineralisation hosts major mines around the world. The Mt Lyell copper-gold mine to the north of this structure hosts a 311 Mt resource @ 0.97% Cu, 0.31 g/t Au (operational since 1888) and the Thomas Creek intrusive has been likened to the Prince Lyell unit, the primary unit that is currently being mined at Mt Lyell. The surrounding volcanics are therefore prospective for caldera – related proximal massive sulphides while the sub – volcanic intrusives could host significant porphyry – style copper-gold mineralisation and related high level vein mineralisation.

Copper and gold mineralisation was first recognised at the Thomas Creek prospect in the mid-1980’s during a ground reconnaissance programme, with a sample assaying 2000 ppm Cu, 0.97 ppm Au and 1050 ppm Ba associated with a diorite intrusion. Geochemical sampling on a grid followed and this outlined a zone of anomalous copper (300 m x 400 m) which was >250 ppm Cu. In addition a large programme of gridding, soil sampling, ground magnetics and IP was carried out. This enlarged the copper anomaly to 600 m x 400 m which was found to lie within a potassic-phyllic alteration zone with coincident IP zones related to extensive pyrite development.

Drilling of 8 diamond holes by a light “Gopher” rig tested areas of high Cu soil geochemistry and corresponding IP chargeability. Core recovered was commonly weathered and broken, with significant core loss, particularly in some clay-rich zones. The drilling revealed widespread copper anomalism, including 58 m @ 0.08% Cu from 40 m in TCD2 and 0.05% Cu from 45 m in TCD3. The low grade disseminated and vein hosted chalcopyrite – pyrite mineralisation is generally associated with magnetite rich silica-chloriteactinolite-potassic alteration surrounding micro-monzodiorite dykes. This indicates that the drilling intersected a zone of alteration that is proximal to an ore deposit of the Mt Lyell type.

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Magnetic Map of Thomas Creek Area

Exploration

The Thomas Creek intrusive and its sister structure are high level priority targets for the Company. At Thomas Creek the concentric zoning is clearly displayed in the geophysics and enhancement of the magnetic and gravity data will aid delineation of drill targets in time for the 2008 summer season. As with other targets on the West Coast of Tasmania the correct drill rig is of paramount importance. MHM plans to complete its collation of the open file data by March 2008 and will then move to selection of drill targets at Thomas Creek. Further geophysical work will be carried out on the sister structure to determine depth of cover and define possible exploratory drill targets.

A second intrusive complex 4 km to the southeast of Thomas Creek under Tertiary cover has been identified by MHM from interpretation of the regional magnetics.

02 The Company, its projects & proposed exploration

2.5 eXPLorAtioN ProgrAM AND SCheDuLe

The schedule for the proposed two year exploration program is summarised in Table 2.2. Early focus will be on drilling in the Gladstone project area based on targets refined by the current geophysical data and structural compilation of known auriferous veining.

The spread of activities gives a balanced program which includes drilling programs scheduled in each quarter of the two year period. The likely program indicated in Table 2.2 is based on the Maximum Subscription to the Issue being received.

value increases at each stage of advance. Results will be constantly monitored to ensure MHM’s funds are applied in an efficient and cost-effective manner. Therefore each component of each program is contingent on previous activities.

Project generation and acquisition will be carried on in parallel with the active exploration program. Emphasis will be on in-house development of concepts with extensive data compilation covering regions selected as key mineralised provinces for the styles in focus. This will lead to area selection and tenure application but also to the identification of external opportunities which will be considered for acquisition where they will enhance shareholder value in a cost-effective manner.

The two year program and priorities are based on present knowledge and assumes potential

Table 2.2 Schedule for the two year exploration program

MHM Exploration Program (Assuming Maximum Subscription)

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Property 1st Quarter 2008 2nd Quarter 2008 3rd Quarter 2008 4th Quarter 2008 2009
EL2/2007 Complete the Mapping quartz Mapping quartz Reverse Circulation (RC) Reverse Circulation (RC)
Gladstone Gold Project compilation of the veining and structures veining and structures. Drilling Program 2 Drilling for resource
publicised data into a 1:2500 scale. Infill geophysical 20 hole program 100 definition - Program 3.
standardised database. Soil geochemical program to better metres deep. Estimated Diamond
Gridding old mines for sampling define structures. Data compilation Drilling for stratigraphic
drill control. RAB Drilling for deeper Reverse Circulation (RC) and geological control.
Reverse Circulation (RC) geochemical sampling. infill Drilling of target interpretation of new RC Drilling 40 hole
Drilling, 2000 metres 100 holes totalling zones deliniated in RAB data from drilling. program 100 metre deep
over approximately 2000 metres. program 2000 metres 10 diamond drill holes
40 holes to test beneath over approximately totalling 1000 metres.
old mines. 40 holes.
EL3/2007 Compilation of previous Mapping at 1:2500 scale Bulk sampling of target Bulk sampling of target Feasibility study.
Musselroe Tin Project data detailing former tin to accurately locate zones using excavator zones using excavator Pilot Plant construction
workings, drilling and previous workings and portable gravity and portable gravity and process study if
grades. to grid. plant. plant. warranted.
EL20/2007 Complete the Interpretation of Infill geophysics on Mapping at 1:25000
Strahan Nickel & compilation of the regional and previous target areas. scale.
Zinc Project publicised data into a geophysics. Ground geophysics.
standardised database. Soil, stream, rock
chip and sediment
geochemistry.
EL21/2007 Complete the Interpretation of Geological Mapping Ground geophysics.
Double Cove - compilation of the regional and previous at 1:2500 scale. Drilling selected
Birthday Bay publicised data into a geophysics. Ground geophysics. anomalies.
Copper, Gold, Zinc, standardised database. Soil, stream, rock 20 hole RC Drilling to
Nickel and Iron chip and sediment 100 metres.
Projects geochemistry.
EL22/2007 Complete the Interpretation of Geological Mapping Ground geophysics.
Hibbs Nickel,Gold,PGM compilation of the regional and previous at 1:2500 scale. Drilling selected
Birchs Polymetallic publicised data into a geophysics. Ground geophysics. anomalies.
Projects standardised database. Soil, stream, rock 20 hole RC Drilling to
chip and sediment 100 metres.
geochemistry.
EL23/2007 Geological Mapping at Interpretation of Planning drill targets. RC Drilling existing RC Drilling of defined
Thomas Creek Copper- 1:2500 scale. geophysics. Mapping of anomalies targets & selected targets.
Gold Project Soil, stream, rock Data compiliation. and constructing new anomalies. 40 hole program to
chip and sediment exploration grid. 20 holes 100 metres 200 metre depth.
geochemistry. deep. 5 Diamond Drill holes
Ground geophysics. to 200 metre for core
logging.
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Macquarie Harbour Mining Ltd prospectus

2.6 eXPLorAtioN eXPeNDiture

The funds raised from the Offer are predominantly for the purpose of mineral exploration.

The proposed expenditure is summarised in the following two tables indicating expenditure levels likely if Minimum Subscription is raised in the first case and Maximum Subscription in the second case.

Table 2.3 Expenditure assuming Minimum Subscription

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Project Year 1 Year 2 Total
EL2/2007 – Gladstone Gold Project $265,000 $285,000 $550,000
EL3/2007 – Musselroe Tin Project $287,000 $418,000 $705,000
EL20/2007 – Strahan Nickel Zinc Project $92,000 $113,000 $205,000
EL21/2007– Double Cove Copper Gold Zinc Nickel $106,000 $189,000 $295,000
& Iron Project
EL22/2007 – Hibbs Nickel Gold PGM & Birchs $133,000 $277,000 $410,000
Polymetallic Projects
EL23/2007 – Thomas Creek Copper-Gold Project $113,000 $152,000 $265,000
total $996,000 $1,434,000 $2,430,000
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Table 2.4 Expenditure assuming Maximum Subscription

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Project Year 1 Year 2 Total
EL2/2007 – Gladstone Gold Project $295,000 $470,000 $765,000
EL3/2007 – Musselroe Tin Project $305,000 $1,245,000 $1,550,000
EL20/2007 – Strahan Nickel Zinc Project $136,000 $189,000 $325,000
EL21/2007– Double Cove Copper Gold Zinc Nickel $183,000 $322,000 $505,000
& Iron Project
EL22/2007 – Hibbs Nickel Gold PGM & Birchs $210,000 $410,000 $620,000
Polymetallic Projects
EL23/2007 – Thomas Creek Copper Gold Project $173,000 $317,000 $490,000
total $1,102,000 $3,153,000 $4,255,000
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Directors and management
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Macquarie Harbour Mining Ltd prospectus

Basil Conti FCA, FCIS, FTIA

Non-Executive Chairman

Mr Conti is a fellow of the Institute of Chartered Accountants in Australia, the Taxation Institute of Australia and the Chartered Secretaries Australia.

He commenced his professional career with Arthur Young & Co and has been a Partner/ Director in the firm of Harden East & Conti Pty Ltd since 1978.

Mr Conti is experienced in management accounting, taxation, secretarial practice, corporate and financial planning, consulting to small and large businesses and has been associated with the mining industry in a professional capacity for the past 25 years.

Frank Rogers

Managing Director

Mr Rogers has been involved in the management of mining companies, mineral and chemical process operations, materials handling projects and waste processing industries for 38 years. For most of that time Mr Rogers has operated as CEO of both public and private companies and as a consequence has developed skills in management, financial control and project development and implementation. Mr Rogers has the experience to offer a mature and innovative approach to problem solving both technically and administratively.

Mr Rogers has been involved in the exploration, development and/or operation of the following projects:

Youanmi Mine;

financial and business consulting experience, and is involved in the Australian aluminium industry at an executive level. Mr Mead also currently holds several Directorships of US based organisations with interests in the aluminium industry and marine electronics. He is responsible for commercial management and business development for the Company.

Dr Neil Allen B.Sc, PhD

Non-Executive Director

Dr Allen is a mineral physicist and provides geophysical analysis and mineral dressing expertise to the company. Dr Allen has over 20 years experience in exploration in Tasmania, including the tenement areas in which MHM holds an interest. Further, Dr Allen provides a consulting service to the mining industry specialising in mineral magnetism and the recovery of minerals using new technologies.

Peter Robertson B.E. (Met), MBA

Non-Executive Director

Mr Robertson is a metallurgist with over 20 years experience in mineral processing, smelting and rolling of aluminium and the development of new technologies. He commenced his career with Warman Equipment and was involved in the processing of Uranium ores. Mr Robertson was the Remelt Plant Metallurgist for Comalco at their Sydney plant and for the past 20 years has been involved in the supply of consumables and consulting services to the aluminium industry through Leymont Pty Ltd. More recently Mr Robertson has been employed as a Director of Alichem Limited, a company involved in the processing of waste from that industry.

Speewah Fluorite Deposit;
Cadjebut Lead-Zinc Mine;
Gidgee Gold Mine; and
Delineation of Mineral Sands in the Eucla Basin

Mr Rogers also has extensive experience in mechanical and process design and implementation over a broad range of industries. The provision of new and innovative solutions to processing and operational problems led to the design, construction and operation of:

the first continuous carbon-in-pulp gold plant in Australia;
the first methanol gold desorption plant; and
new processes for the aluminium industry.

Benjamin Mead B.Econ

Executive Director

Mr Mead has had several years of international banking experience, having worked at Coutts & Co (London) in their commercial banking and money market divisions. Mr Mead has diverse

John Richardson B.Sc

Consulting Geologist

Mr Richardson has a long association (over 35 years) with the exploration industry, both as a field geologist in Australia and overseas and more recently as a Senior Geologist with MIM (Mount Isa Mines) Exploration based in Brisbane.

Mr Richardson’s range of experience has included:

Photogeology, structural interpretation and field mapping in Iran, Libya, and Indonesia for oil and uranium with Hunting Geology and Geophysics, based in the United Kingdom;
Nickel exploration in the Fraser Range area of Western Australia with Newmont Pty Ltd; and
Sourcing and evaluation of mineral exploration joint ventures and business opportunities in Australia, Mexico, Chile, Argentina, Russia and Kazakhstan for MIMEX and MIM Holdings Business Development section.

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Risk factors
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Macquarie Harbour Mining Ltd prospectus

The Shares offered under this Prospectus should be considered speculative because of the nature of the business activities of the Company. Whilst the Directors commend the Offer, potential investors should consider whether the Shares offered are a suitable investment having regard to their own personal investment objectives and financial circumstances and the risk factors set out below. This list is not exhaustive and potential investors should read this Prospectus in its entirety and if in any doubt consult their professional adviser before deciding whether to participate in the Offer.

4.2 eXPLorAtioN, DeveLoPMeNt, MiNiNg AND ProCeSSiNg riSKS

The business of mineral exploration, project development and mining by its nature contains elements of significant risk. Ultimate and continuous success of these activities is dependent on many factors such as:

the discovery and/or acquisition of economically recoverable ore reserves;
successful conclusions to bankable feasibility studies;
access to adequate capital for project development;

4.1 geNerAL eCoNoMiC riSKS AND BuSiNeSS CLiMAte

Share market conditions may affect the listed securities regardless of operating performance. Share market conditions are affected by many factors such as:

general economic outlook;
movements in or outlook on interest rates and inflation rates;
currency fluctuations;
commodity prices;
changes in investor sentiment towards particular market sectors; and
the demand and supply for capital.

Commodity prices are influenced by physical and investment demand for those commodities. Fluctuations in commodity prices may influence individual projects in which the Company has an interest.

design and construction of efficient mining and processing facilities within capital expenditure budgets;
securing and maintaining title to tenements and compliance with the terms of those tenements;
obtaining consents and approvals necessary for the conduct of exploration and mining; and
access to competent operational management and prudent financial administration, including the availability and reliability of appropriately skilled and experienced employees, contractors and consultants.

Adverse weather conditions over a prolonged period can adversely affect exploration and mining operations and the timing of revenues.

Whether or not income will result from projects undergoing exploration and development programs depends on the successful establishment of mining operations. Factors including costs, actual mineralisation, consistency and reliability of ore grades and commodity prices affect successful project development and mining operations.

Mining is an industry which has become subject to increasing legislative regulation including but not limited to environmental responsibility and liability. The potential for liability is an ever present risk. The use and disposal of chemicals in the mining industry is under constant legislative scrutiny and regulation. The introduction of new laws and regulations or changes to underlying policy may adversely impact on the operations of the Company.

04 Risk factors

4.3 NAtive titLe

The Native Title Act 1993 (Cth) recognises and protects the rights and interests in Australia of Aboriginal and Torres Strait Islander people in land and waters, according to their traditional laws and customs. There is significant uncertainty associated with native title in Australia and this may impact on the Company’s operations and future plans.

Native title can be extinguished by valid grants of land or waters to people other than the native title holders or by valid use of land or waters. It can also be extinguished if the indigenous group has lost their connection with the relevant land or waters. Native title is not extinguished by the grant of mining licences, as they are not considered to be grants of exclusive possession. A valid mining lease prevails over native title to the extent of any inconsistency for the duration of the title.

All tenements granted prior to 1 January 1994 are valid or validated.

Tenements granted between 1 January 1994 and 23 December 1996 may be invalid if they fail to comply with the Native Title Act or for certain other reasons because of native title. However, such invalid tenements may be validated if certain statutory criteria are met.

For tenements to be validly granted (or renewed) after 23 December 1996 the special “right to negotiate” regime established by the Native Title Act must be followed.

It is important to note that the existence of a native title claim is not an indication that native title in fact exists to the land covered by the claim, as this is a matter ultimately determined by the Federal Court.

The Company must also comply with Aboriginal heritage legislation requirements which require heritage survey work to be undertaken ahead of the commencement of mining operations.

A detailed discussion of native title and the claims is contained in the Independent Solicitor’s Report in Section 6 of this Prospectus.

4.4 riSKS SPeCiFiC to the CoMPANy’S ProjeCtS

The Company’s projects represent the main business activity and focus of the Company. Risks specific to these projects include the following:

Competition

The resource markets involve a number of participants. Current levels of demand may see an increase in production from existing market participants, the potential for past participants in the market to re-enter or new start ups to emerge.

Resource Estimate

Resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates, which were valid when made, may change significantly when new information becomes available. In addition, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. Should the Company encounter mineralisation or formations different from those predicted by past sampling and drilling, resource estimates may have to be adjusted and mining plans may have to be altered in a way which could have either a positive or negative effect on the Company’s operations.

Operating Risks

The current and future operations of the Company, including exploration, appraisal and possible production activities may be affected by a range of factors, including:

geological conditions;
limitations on activities due to seasonal weather patterns and cyclone activity;
alterations to joint venture programs and budgets;
unanticipated operational and technical difficulties encountered in geophysical surveys, drilling and production activities;
mechanical failure of operating plant and equipment, adverse weather conditions, industrial and environmental accidents, acts of terrorism or political or civil unrest and other force majeure events;
industrial action, disputation or disruptions;
unavailability of aircraft or drilling equipment to undertake airborne electromagnetic and other geological and geophysical investigations;

Macquarie Harbour Mining Ltd prospectus

shortages or unavailability of manpower or appropriately skilled manpower;
unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment; and
prevention or restriction of access by reason of political unrest, outbreak of hostilities, and inability to obtain consents or approvals.

Commodity Prices

The Company expects to derive its revenue from the sale of a range of commodities.

Consequently, the Company’s expected earnings will be closely related to the price of these commodities together with the terms of the off-take agreement(s) under which these metals will be sold.

Commodity prices fluctuate and are affected by numerous factors beyond the control of the Company. These factors include worldwide and regional supply and demand for the specific commodity, commodity trading on the futures markets, general world economic conditions and the outlook for interest rates, inflation and other economic factors on both a regional and global basis. These factors may have a positive or negative effect on the Company’s exploration, project development and production plans and activities, together with the ability to fund those plans and activities.

Currency

The Company’s expected revenue will be in US$ while its cost base will be in A$, consequently the US$/A$ exchange rate will have an impact on the Company’s expected earnings in A$.

The US$/A$ exchange rate is affected by numerous factors beyond the control of the Company.

Environment

The Company’s Projects are subject to Tasmanian and Federal laws and regulations regarding environmental matters and the discharge of hazardous wastes and materials. As with all mining projects, these projects would be expected to have a variety of environmental impacts should development proceed.

The Company intends to conduct its activities in an environmentally responsible manner and in accordance with applicable laws and industry standards. Areas disturbed by the Company’s activities will be rehabilitated as required by applicable laws and regulations.

Title

The exploration licences comprising some of the Tenements which the Company holds or in which it has an interest may be the subject of applications for extension in the future.

If a Tenement is not extended, the Company may suffer significant damage through loss of the opportunity to discover and/or develop any mineral resources on that Tenement.

In addition, the Company cannot guarantee that those Tenements that are applications for tenements will ultimately be granted in whole or in part.

For more details on the issue of title to the Tenements, refer to the Solicitor’s Report in Section 6 of this Prospectus.

Joint Ventures

The Company may wish to develop its projects or future projects through joint venture arrangements. Any joint ventures entered into by, or interests in joint ventures assigned to, the Company could be affected by the failure or default of any of the joint venture participants.

These factors include Australia’s and the USA’s economic conditions and the outlook for interest rates, inflation and other economic factors. These factors may have a positive or negative effect on the Company’s exploration, project development and production plans and activities, together with the ability to fund those plans and activities.

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Independent consulting
geologist’s report
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Macquarie Harbour Mining Ltd prospectus

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Dated September 2007 The Directors, Macquarie Harbour Mining Ltd Dear Sirs,

iNDePeNDeNt CoNSuLtiNg geoLogiSt’S rePort

PreAMBLe

This report has been prepared at your request for inclusion in the Macquarie Harbour Mining Ltd (MHM) Prospectus to be dated 4 October 2007. The details of the Issue are set out elsewhere in this Prospectus.

For the purpose of the Corporations Act 2001 Dr. A.C. Gifford, ABN 64 204 165 472, Principal of Featherstone Geological Consultants, has prepared this Independent Geologist’s Report to be published in Macquarie Harbour Mining’s Prospectus and has not been involved in the preparation, authorization, or issuance, of any other part of the prospectus. This report will also be available as a pdf copy on the web. The substantial list of references has not been included in the prospectus but is included in the pdf copy and is available on request.

Dr Gifford has completed an independent geological assessment of the exploration and mining interests held by MHM in Australia. Dr Gifford is an expert as defined by the Valmin Code and is a Member of the Australian Institute of Geoscientists and a Fellow of the Australasian Institute of Mining and Metallurgy. This report has been prepared in accordance with the rules and guidelines of the Valmin Code 2005, the Australian Securities & Investments Commission, and the ASX. Neither Dr Gifford nor Featherstone Geological Consultants has any material interests in the tenements being reviewed or the Company nor will they receive any shares from the proposed issue nor hold any shares in any mining companies. Fees are being charged at a commercial rate for the preparation of this report and are not contingent on the conclusions of the report or the success of the IPO.

The assessment of the Company’s properties did not include a field inspection of the properties. The prospective ground is covered by five granted Exploration Licences and one application for an Exploration Licence so the location of the boundaries of the tenements are accurately defined with respect to the geology. Previous work on the ground is documented in reports available from Mineral Resources Tasmania (MRT), a division of the Department of Infrastructure, Energy, and Resources, Tasmania. None of the prospects are at an advanced stage of exploration and typically have been the subject of remote sensing with limited ground follow up. Some drilling has been conducted. It is considered that a field visit would not advance the appraisal of the identified deposits.

All information conveyed to Featherstone by the officers of MHM was warranted to be complete, accurate, and true, and that none of it is confidential. Featherstone has researched reports held by Mineral Resources Tasmania. Virtually all the data on the tenement areas being acquired by MHM have come from this source and are listed in the Selected Bibliography at the end of this report. No additional reports or data are known of which could substantially alter the appraisals that have been made. The data available from Mineral Resources Tasmania is in the public domain and the references include the report numbers used by MRT which enable the reports to be readily accessed through their website.

Featherstone has been informed by MHM that the exploration licences and application are in the name of Goldstock Mining Pty Ltd which is a wholly owned subsidiary of MHM and the Licences will be 100% controlled by the Company.

Tenement maps have been compiled for the various properties and Featherstone has verified that these tenements cover the areas and the geology described. Featherstone has also verified that the tenement licences and the application are current but otherwise has not investigated the status, standing, or registered owners of the tenements and has not investigated if there are any land rights issues, reserves for water, flora and fauna, forestry, etc. on the ground covered by the tenements and accepts no responsibility for these aspects of the tenement holding.

Prior to signing, a final copy of this report was provided to MHM complete with illustrations in order to identify any errors of fact that might be present.

05 Independent consulting geologist’s report

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Contents
Preamble	33
Regional Geology and Tenements	35
The Exploration Properties of
Macquarie Harbour Mining Ltd	36
The North East Tenements	36
Exploration Licence EL2/2007	38
Exploration Licence EL3/2007	46
The West Coast Tenements	52
Exploration Licence Application
ELA20/2007	52
Exploration Licence EL21/2007	55
Exploration Licence EL22/2007	61
Exploration Licence EL23/2007	66
Final Review	69
Grade Nomenclature and Assay Data	72
Resource and Reserve Nomenclature	72
Glossary of Technical Terms	73

Macquarie Harbour Mining Ltd prospectus

regioNAL geoLogy AND teNeMeNtS

Exploration tenements have been applied for over two regions in Tasmania with exploration potential. The main area is on the West Coast of Tasmania in the vicinity of Macquarie Harbour and the other in the North East of Tasmania east of Gladstone. The locations of the tenements are shown on Figure 1 and Figure 2.

In the West one Exploration Licence Application and three granted Exploration Licences extending over a total area of 741 km[2] cover parts of the southern sections of the Mt Read Volcanics which to the north contain a number of significant deposits (Hellyer Zn, Pb, Ag, Au, – Que River Zn, Pb, Cu, Ag, Au, – Mt Lyell Cu, Ag, Au, – Rosebery Zn, Pb, Cu, Ag, Au, – Hercules Zn, Pb, Ag, Au, Cu, – Henty Au, Ag, – Renison Sn, – Avebury Ni). The locations of these deposits are shown on Figures 7 and Figure 8.

The Mt Read Volcanics are Cambrian in age and most of the mineralization is syngenetic however the Renison and Avebury deposits are Devonian in age but have been emplaced in the Cambrian volcanic succession. At Avebury the mineralization is associated with ultramafic rocks, that may be early Cambrian or Late Proterozoic, which have been caught up in subsequent tectonic events and been squeezed into new positions within the Cambrian rocks. In the Devonian Period the emplacement of a nearby granite intrusion was accompanied by the production and mobilisation of mineralizing fluids which leached nickel from the ultramafics and redeposited it the form of nickel sulphides in adjacent areas. Similar ultramafic rocks are present on Macquarie’s ground to the south. At Renison mineralizing fluids carrying tin were channelled up a major fault and as well as mineralizing the fault also mineralized carbonate horizons in the country rock forming the walls of the fault.

In the Gladstone area in North East Tasmania the Company has two Exploration Licences EL2/2007 (229km[2] ) and EL3/2007(183km[2] ). The location and boundaries of the licences are shown on the tenement map Figure 2.

The ground applied for in the North East consists mainly of Silurian and Devonian sediments which have been intruded by Devonian granites. This geology is prospective for lode style mineralization containing gold or tin together with base metal sulphides. The upper oxidised levels of the gold lodes were worked in the late nineteenth century and early twentieth century. The primary ore is typically sulphidic and could not be treated economically at that time so the gold mines were limited to shallow depths where the ore had been weathered. Current metallurgical techniques are able to treat these

Figure 1 Tenement Map of West Coast Tasmania Compiled by Featherstone Geological Consultants for this Prospectus

05 Independent consulting geologist’s report

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Figure 2 Tenement Map of North East Tasmania

Compiled by Featherstone Geological Consultants for this Prospectus

ores so the deeper levels of these lodes could be profitable to mine today. The tin lodes have not been extensively worked but the alluvial deposits produced during weathering and erosion of tin mineralization in the granites attracted attention during the late nineteenth and early twentieth centuries. Alluvial deposits in current drainages, in previous drainages, and in Tertiary Deep Leads provided numerous targets for the early miners. Tertiary Deep Leads or other alluvial deposits of sufficient size provide viable exploration targets at present day tin prices.

The North East Tasmania tenements will be described first because they have the potential to provide early cash flows to the Company. If found, economic lode style gold and/or the deep lead tin projects, are anticipated to be of modest size but could provide a valuable income to the new company. On the west coast there is potential for more significant deposits but the exploration effort will need to be greater and longer if success is to be achieved.

the eXPLorAtioN ProPertieS oF MACQuArie hArBour MiNiNg LtD

The North East Tenements

Economic Geology

Two metals have been of economic importance in this area. Gold was first found in the district in 1870 with the discovery of the Bluebell Reef about 10km north east of Gladstone. This stimulated prospecting activities. Tin, in the form of the mineral cassiterite (SnO2), was first discovered in Tasmania by Mr. Geo. Renison Bell, also in 1870, on the banks of the Boobyalla River. Since both gold and tin are prospected for by panning tin was discovered soon after in 1870 near Gladstone.

Primary gold mineralization is found in reefs and veins along lodes in the Mathinna Beds. Mining to the north east of Gladstone started in 1870 reaching a peak in the 1880s. The gold bearing veins may be large enough and of sufficient grade to be mined individually but more commonly today zones of rock containing numerous small veins can be bulk mined by open pit methods. The weathering of the primary gold mineralization may release gold into the drainage system where it can become concentrated in alluvial deposits. Total production from Gladstone is quoted as 57.9kg of gold from hard rock mines and the total production from all sources is estimated at 200kg. The figures for recorded production are low because records were not kept for the early mining and significant amounts of gold were taken directly to the mint in Victoria by the miners.

Macquarie Harbour Mining Ltd prospectus

The primary cassiterite mineralization occurs in quartz veins, greisen veins, and zones of greisen, in the marginal phases of the granite intrusions. The tin mineral is heavy with a density of 6.8 to 7.1 and a hardness of 6 to 7 and resists weathering and abrasion. Once freed from the rock by weathering processes the cassiterite accumulates in the basal sediments of the streams where it can form deposits which are profitable to mine.

In this region the primary gold mineralization is typically accompanied by base metal sulphides containing arsenic. These sulphides are broken down by weathering freeing up the gold particles. This enabled the early miners to recover the gold from the near surface portions of the reefs but once they started mining ore with fresh sulphides they could not process it. This ore can be processed today and MHM plans to drill the areas with gold mineralization to determine if economic deposits are present. Only a very few of the past alluvial tin workings within the Company’s tenements contained significant gold.

In comparison the primary tin mineralization has not been a major contributor to production in the Gladstone region but there has been notable tin production from numerous alluvial operations. The alluvial deposits in this region are of several ages with the earliest being Tertiary in age when rising sea levels resulted in the shoreline moving inland at least to Gladstone. The tertiary sediments filled pre-existing drainage channels to form deep leads. Some of these contain some gold as well as tin. When the sea retreated it left a flat plain that extends north and east of Gladstone and the drainages on this plain have since meandered about partially eroding old deposits and depositing new deposits. This complicates mining with the miner discovering a good lead which he follows for a way but then finds it is cut off by a later channel. This was difficult for the miners since they did not generally have access to drilling like modern explorers and the drilling that was available may have been of unknown quality.

The Mines Department did provide assistance in the drilling of bores which was first recommended by the geologist Twelvetrees in 1901. In 1904 Cybele Tin Mines mounted a drilling programme on Garfield Ridge of 142 Bores. Then a more extensive government campaign was mounted in 1916 by Roach with 515 bores for 2,810m (Blake 1937A). This drilling was undertaken by the government with the prospector paying half the cost of the programme. More drilling programmes were mounted by the Mines Department in 1937, 1945, and 1953. Other forms of assistance were also given to miners including cash to purchase equipment.

Table I: The Main Boring Programmes in the Alluvial Area

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Year Number Average Grade Locality Financed by
of Bores g/m [3 ] SnO2
1901 11 – East of Edina Mines Dept.
32 – Watt’s Mines Dept.
3 – Tamar Creek Mines Dept.
1904 142 Garfield Ridge Cybele Tin Mines
1916 13 – South East Purdue Mines Dept.
13 100 Jewel Flat Mines Dept.
32 120 Edina Flat Mines Dept.
8 – Lark Creek Mines Dept.
11 105 Ridge North of Edina Mines Dept.
30 75 East of Moores Mines Dept.
10 205 Garfield Creek Mines Dept.
16 160 Lawry’s Hill Mines Dept.
11 100 Harden’s Ravine S of Tamar Ck Mines Dept.
1937 15 Tr North East of Edina Mines Dept.
1945 27 185 East side of Musselroe Mines Dept.
1953 144 160 North of Musselroe/Garfield Ck Mines Dept.
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(Average grade is calculated over the full depth of the bore including low grade sections) (The grades are of cassiterite SnO2 which is 78.6% Sn when pure) After Appleyard et al 1964

These alluvial mines were not mechanised during the main period of mining and the preferred method of operation was “sluicing” which required a good water supply at an adequate pressure. One of the factors which supported the tin miners was The Mount Cameron Water Race. The first portion of this race was built in 1884 by the Mount Cameron Hydraulic Tin Mining Company of Melbourne. Unfortunately they exhausted their funds on the section of race that they built before it became operational. The assets of the company were offered to the Government and were purchased after recommendations by the Geological Survey. In 1887 the Mount Cameron Water Race Board was established and was responsible for the distribution and sale of water to miners on the field and the maintenance and extension of the race. The race was deigned to draw its water from the headwaters of the Musselroe River and the section completed by the company was 34km long and the race itself was 1.7m wide and 0.6m deep. An idea of the extent of the race can be gained from Figure 4 which shows the alluvial tin deposits near Gladstone. Generally speaking the race was able to service those deposits to the east of the Ringarooma River and lying within 3km of it. The users of the race had to provide the connection from the race to their property. This facility is quite a feat of engineering and certainly enabled a number of deposits to be worked that would not otherwise have been viable.

05 Independent consulting geologist’s report

The efficiency of the sluicing system is not known and probably varied from one operator to another. Modest recovery figures are offset by the processing of large quantities of alluvium by a small work force. The system is not fully described but from the reports it seems that the full alluvial section of the gravels was exposed in a face from the surface down to the granite floor. This face was then mined by washing down with a powerful jet of water to form a flowing slurry which then was channelled through the sluice box which had riffles in the floor which hopefully trapped the cassiterite. The treated slurry then flowed into a tailings area. Using this system means that it was not possible to remove any low grade upper portions of the profile as waste and only treat the better grade lower gravels. For additional discussion of the old results refer to the Amber Creek section under EL3/2007.

Exploration Licence EL2/2007

The Tenement

This licence covers an area of 217 km[2] extending to the east from just east of the town of Gladstone and then north and northwest extending to the coast at the northern end of Ringarooma Bay. The boundaries of the tenement are shown in detail on Figure 2. The western boundary is mainly governed by the existence of mining tenements and the eastern boundary by the boundary of the Mount William National Park. The topography of the ground secured by this tenement is one of very low relief with gentle slopes towards the coasts. Moving inland to the south west out of the tenement this coastal plain gives way first to hills and then to mountainous country The area is covered by the Launceston 1:250,000 map sheet, the Eddystone, Boobyalla, and Blue Tier 1:50,000 map sheets, and the Lyme Regis South, Musselroe, and Gladstone, 1:25,000 map sheets.

Geology

The country covered by this licence has been subjected to erosion in the past by rising and falling sea levels which have left a wave cut platform gently sloping to the sea. This flat terrane is now drained by meandering rivers and the country rocks are often mantled in varying thicknesses of unconsolidated marine and terrestrial /alluvial sediments.

The central area of the licence is underlain by metamorphosed Palaeozoic mudstones and greywacke sequences and these extend down to the south western and south eastern corners of the licence. The geology of EL2/2007 is shown on Figure 3. The identified deposits are marked on the geology map and are named on Figure 4 The metamorphosed Silurian / Devonian sediments are the Mathinna Beds which have been folded

and cleaved and have undergone low grade metamorphism.

They typically have a very subdued topography in this area. They also extend to the north towards Great Musselroe Bay and to the northwest to Ringarooma Bay. In the Ringarooma Bay area they are unconformably overlain by Lower Carboniferous to Triassic fluvio–lacustrine and shallow glacio-marine sediments which are referred to as the Parmeener Super Group. The upper part of this Supergroup is intruded by large volumes of Jurassic dolerite forming major sills, dykes, and irregular bodies. The Parmeener Super Group is unconformably overlain by terrestrial, alluvial, and minor marine sediments which locally contain basalt of Miocene age. Dolerite of the upper part of the Supergroup is present in the north west of the licence in the area near Ringarooma Bay.

Granites have been emplaced in the Mathinna Beds in a number of places. In the mid southern parts of the tenement biotite hornblende granodiorite of the Blue Tier Batholith is present but the granitic rock is covered by Tertiary sands, gravels, and clays and outcrops are rare. The Tertiary cover faithfully follows the contacts of the granite. This granite is the northern portion of the Gardens Pluton which is part of the early George River Phase of the Blue Tier Batholith. A fuller description of the various granite phases is given in the geology section under EL3/2007. The Mathinna Beds up to 2km from the granite contact have been metamorphosed by the heat from the granite intrusion producing a contact metamorphic aureole with classical spotted textures in the slates. The extent of the metamorphic aureoles is shown on Figure 3. A greisen selvage is often present along the granite contact and it may carry some tin in the form of cassiterite (SnO2) but the grades are usually modest. A small dyke of greisen has also been reported within the Mathinna Beds. Cassiterite is a hard, resistant, and heavy, mineral and the weathering of the granites and the tin bearing lodes releases the cassiterite grains which are then concentrated by alluvial processes.

Inland from the coast at Stumpys Bay and Cod Bay and extending south into the north of the Bay of Fires a porphyritic coarse grained biotite garnet adamellite of the Eddystone Granite Batholith is exposed inland for a few kilometres and continues out under the sea. Along the western contact of this granite, in the north, a long narrow intrusion of equigranular medium grained granite is also present. These features can be seen on the geology map of the tenement Figure 3. Along the contact of these two granites with the Mathinna Beds there is a contact metamorphic aureole which extends about 1km from the contact. South of Great Musselroe Bay and continuing to the west porphyritic coarse grained biotite garnet

Macquarie Harbour Mining Ltd prospectus

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Figure 3 The Geology of EL2/2007 Compiled by Featherstone Geological Consultants for this Prospectus

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05 Independent consulting geologist’s report

Figure 4 Identified Deposits North East Tasmania

Compiled by Featherstone Geological Consultants for this Prospectus.

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adamellite of the Eddystone Granitic Batholith again intrudes the Mathinna Beds. The Mathinna beds along this granite contact exhibit a contact metamorphic aureole about 1km wide.

The old miners found a number of the high grade gold lodes which were usually an attractive style of mineralization for them. In the Gladstone district the gold is typically associated with sulphides including arsenopyrite which they could not treat. This mineralogy can be treated today and if the reefs are thick and of high enough grade could be profitable for MHM to mine. The prospectors who discovered the Blue Bell Mine in 1870 did not have ready access to an assay laboratory and therefore could not determine the grade of the sulphide rich ore. It is understood that sometimes samples were sent to Victoria for assaying but this would have been slow and expensive. With deposits containing free gold prospectors can dolly up samples and pan the crushed ore to determine the grade.

In addition to the lode style mineralization other styles of mineralization may be present that would have been of no interest to the early miners. Epithermal quartz sulphide breccia zones and zones of quartz sulphide stockwork veining are typically found in the contact zones of the granites and can be large but low grade. They are attractive today because they are amenable to bulk mechanised mining methods. Similarly stressed country rock can fracture along numerous close spaced planes which when mineralized form “a sheeted vein system” that may also be amenable to modern mining methods. Exploration for these styles of gold deposit has not been undertaken.

The sulphide rich lodes of Gladstone could not be treated by the early miners and after they won some of the free gold present in the oxidized ore near the surface they had no income to finance further underground work. Little exploration has been undertaken since these mines were abandoned and none has included any drilling of these deposits. In order to assess lode style mineralization today pattern drilling using an appropriate technique such as RC drilling is required. This style of mineralization usually varies in grade and thickness along strike and down dip and since most of these reefs have only been sampled at one or two places along strike they have not been properly assessed.

Previous Work

Only company work undertaken in the second half of the twentieth century is being reported.

Anglo Australian Resources held EL15/95 from 1995 to 1999. The licence covered the town of Gladstone and ground to the north and east so included a number of old mines which are outside EL2/2007. Only work carried out on deposits

Macquarie Harbour Mining Ltd prospectus

within this licence is discussed. The first work included sampling of mullock heaps. These were selected samples with the highest grade sample coming from the Portland Mine. In year two a soil sampling programme by hand augering was conducted on a 1.6km long grid covering the Bluebell Mine and including the Prince Imperial and extending NNE to the Grand Flaneur workings and 500m further to the north. A total of 496 samples were collected and assayed. Soil sampling results were considered to be of no value due to several metres of transported overburden being present which gave rise to spurious results. Four trenches were dug in the vicinity of the Portland Mine but generally only low gold and arsenic values were returned. One of the trenches intersected a 10cm wide white quartz vein which could have been the southern end of the Portland Reef. There was associated narrow quartz veining in the wall rock adjacent to the vein which assayed 12.8 g/t Au and 32 ppm As with the wall rock assaying up to 770 ppb Au and 350 ppm As. Two trenches were dug 200m south of the Grand Flaneur Mine on an arsenic soil anomaly. Results were interpreted to indicate that the anomaly was spurious and was related to past mining activities. No further work was undertaken. In 1997 a detailed ground magnetic survey was carried out over the Bluebell and Portland deposits by third year exploration geophysics students from the University of Tasmania. The data were collected at a spacing of 0.5m to 0.7m at a height of 2m on lines spaced at 10m. The results identified faults and also stratigraphic structures within the Mathinna Beds. Previous airborne geophysical data was also re-analysed but the readings of the airborne surveys are not close enough to give the geological detail achieved by the ground surveys. This work did identify some new targets for further work. An MMI sampling programme was mounted over the Bluebell and Empress deposits but the samples were not analysed and the tenement was surrendered in 1999. It is disappointing that this programme was not completed because the Mobile Metal Ion technique could be very effective in the geological environment that exists north east of Gladstone. (Leading Reference Anon 1999).

Billiton Australia, the metals division of the Shell Company of Australia Ltd, carried out reconnaissance gold exploration in North East Tasmania without tenements during 1989 – 1990. Office studies were carried out and a regional scale stream sediment survey completed during 1989 together with rock chip samples where possible. No targets were identified within the MHM tenements. (Leading Reference Randell 1991).

During 1987 Placeco Australia Pty Ltd held EL34/1986 and Bass Strait Oil and Gas (Holdings) NL entered into a JV to earn a 20%

interest by expending $75,000 on exploration during the first year of the licence. The target was open pittable gold and silver mineralization in quartz veins and stockworks. A grid was put over the Portland Mine and various exploration techniques were trialed over the deposit such as : – geophysical : magnetic, self potential, and resistivity surveys and geochemical : soil, and rock chip. A detailed magnetic and radiometric survey was then flown over the licence at a mean terrain clearance of 60m on lines spaced at 125m. Little work was undertaken during 1988 and 1989 and the licence was then surrendered. (Leading Reference Hofto & Morrison 1989A). The magnetic images of the tenement area that were available were almost featureless and of no value so have not been presented in this report. Better magnetic surveys could be a useful exploration tool.

During 1989 a consulting geologist, working for a group of companies, conducted an exploration programme for heavy mineral sands along the north coast of Tasmania. One of the licences held for this work was EL43/1987 which shared coastal areas of ground with EL2/2007. The work was reconnaissance in nature to establish the potential for heavy mineral accumulations. An E – W line of twelve hand auger holes were drilled to the water table. Results indicated only limited concentrations of heavy minerals of sub economic grade were present and the licence was surrendered. (Leading Reference Dove 1989).

In 1958-1959 Rio Tinto conducted an assessment of the alluvial tin potential in the Eddystone Quadrangle. Attention of this work was focussed on areas to the west of Gladstone and no data relevant to Macquarie’s tenements was discovered.

There are various earlier reports on and investigations of the alluvial tin deposits but these are generally of little relevance today. Details of subsequent mining operations are inadequate to determine exactly what areas have been mined since a particular report was made. There certainly is potential for modern exploration techniques to be applied to the search for deep leads which were hard to locate by the miners operating during the main period of alluvial mining. Due to this situation a review of all the individual alluvial tin deposits is not considered to be viable or constructive for this report and will not be attempted. Available data will be presented on a few of the more prominent deposits.

Identified Gold Deposits

Table II lists the identified gold and tin deposits within the MHM tenements. The gold deposits will be described first and then a selected tin deposit second. The location and names of the deposits are plotted on Figure 4.

05 Independent consulting geologist’s report

Table II: Identified Deposits Within EL2/2007

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Co-Ords AMG66
Deposit Other Names MRT No. Easting Northing Metal Type Comment
Big Musselroe 300 591300 5473500 Au Lode In river bank
Blue Bell 292 589060 5473720 Au Lode Early discovery
Butlers 293 591200 5473700 Au Lode Modest Grade
Cybele Watts 336 589200 5464000 Sn Placer
Elizabeth Lower Musselroe 326 590700 5466300 Sn Placer
Empress Lead Empress Hill 327 586100 5465500 Sn Placer
Eureka 331 587050 5465000 Sn Placer
Garfield 332 588190 5464650 Sn Placer
Grande Flaneur 299 589300 5475300 Au Lode
John Foster Lot 83 303 586200 5472600 Au Lode Low Grade
Lawry 343 587400 5465500 Sn Placer
McGowan’s 303 588500 5466600 Au Lode No Data
Portland Brisbane 309 588820 5470330 Au Lode [email protected]/t
Prince Imperial 310 589100 5474000 Au Lode
Ross’s Reef 321 591300 5472900 Au Lode Low Grade
Star Hill Lawry 328 587700 5465150 Sn Placer
Tamar 345 586700 5465400 Sn Placer
Traceys 335 590450 5464050 Sn Placer
Watts East 334 589300 5464150 Sn Placer
Unnamed 330 586150 5465200 Sn Placer
Unnamed 359 589200 5467200 Sn Placer
Unnamed 360 589300 5467500 Sn Placer
Unnamed 358 591100 5472700 Au Lode No Data
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BIG MUSSELROE

This lode deposit is exposed in the western bank of the Great Musselroe River. Its location is shown in the north east of Figure 5. The first reports were by Thureau 1981 and Twelvetrees 1916. The large quartz reef is exposed in a bank and forms a “cliff” with the reef exposed over a length of 25m and the true width was estimated to be 15m. The area contains numerous veins ranging in size down to fine veins. The Big Musselroe reef strikes N-S and contains a number of xenoliths of country rock. In places it is rich in pyrite, arsenopyrite, and galena. A selected sample assayed 3 g/t gold and 4 g/t silver. A second reef a short distance to the north assayed 5 g/t gold and 7 g/t silver. These selected samples would not be representative of the reef as a whole. (Leading reference Twelvetrees 1916).

THE BLUE BELL MINE

This mine lies 8km NNE of Gladstone and was discovered by D. Campbell in 1870 starting a gold rush in the area. Two east-west reefs are present 40m apart. A 5m shaft was sunk on the Southern Reef which was 60cm wide and dipped north at 80°. A trial crushing of one tonne returned a grade of 44.4 g/t gold. A shaft was sunk to the north of the reef and at 10m depth a 12m cross cut to the south intersected the reef. Here it averaged 75cm and dipped south at 87°. A trial crushing returned 15.3 g/t gold. In 1881 the Blue Bell Mine Co. was formed. The company sunk a main shaft between the two reefs 3.35m by 1m to a depth of over 30m and prepared to drive north and south to intersect the reefs which were 25m apart. Water was encountered and a steam pumping plant installed together with a ten head battery at the same time. No detailed report is available but a crushing or crushings are believed to have been made but no grades reported and the company was wound up in 1884. In later years some shallow shafts were sunk in the vicinity but in this the low lying country water has been a big deterrent. (Leading reference Nye 1933).

Macquarie Harbour Mining Ltd prospectus

BUTLERS

This deposit is located 220m NNW of Big Musselroe. Although not named Twelvetrees 1916 describes mineralization in this area as being “a formation of quartz veins traversing indurated sandstone in a north and south direction”. The assay of a sample gave 5 g/t gold, 7 g/t silver.

No other data have been found. (Leading reference Twelvetrees 1916).

GRANDE FLANEUR

This mine is located 1.4km north of the Blue Bell Mine and was discovered in 1870 by C.Hazell. The main workings are thought to have been carried out from 1881 to 1883 by the Grande Flaneur Gold Mining Co. who operated the mine and sank the main shaft to 19m. The reef is up to a metre thick, strikes E-W, and dips at 30° to the south. The quartz is vitreous with abundant arsenopyrite and some pyrite. In places vertical veins rise from the reef. The main shaft passed through the reef and a crosscut south was put in at 17m to access the reef. The company is believed to have carried out trial crushings and assaying but no reports of results obtained are extant. It would seem that it is typical of the area and that it carried good values in sulphide rich patches which the miners could not treat. (Leading reference Keid 1946).

JOHN FOSTERS

At this locality 8km north of Gladstone on the Rushy Lagoon road weakly mineralized quartz veining strikes across the road. A selected sample returned an assay of 2 g/t gold, 1 g/t silver. (Leading reference Twelvetrees 1916).

PORTLAND MINE

Also known as the Brisbane. This mine was discovered in 1880 by prospectors Moore and King 5km south of the Blue Bell Mine and 6.5km NE of Gladstone. The Portland Gold Mining Company was not formed until 1896 when a main shaft was sunk to 64m with levels at 24m, 46m, and 60m. Some ore was raised but had to be sent away for treatment so it was not profitable. Operations were renewed in 1902 then in 1903 the Brisbane Consols G.M.Co. was formed to work it. No further reports have been located so this company appears to have been unsuccessful. The reef strikes at 320° and dips steeply to the SW with a typical width of 30cm and extends over at least 30m. It carried a fair proportion of free gold down to the No.1 Level but was narrow varying from 15cm to 30cm thick.

Between the No.1 and No.2 Levels the reef was closer to 30cm thick but contained abundant arsenopyrite with galena and sphalerite. Gold grades were good varying between 30 g/t and 90 g/t gold. Below the No.2 Level gold values declined and were patchy. Numerous assays in this range were quoted by Mr.Windred of the New Portland Gold Mining Company. This company re-established access to the underground workings in 1902 and undertook sampling. A sample collected by Twelvetrees (1916) was assayed at 68 g/t gold and 172 g/t silver (this reef was typically richer in silver than gold). This mine is unusual in having a recorded production. This is 90t at 32.5 g/t Au for 2.924kg of gold. Placeco Australia Pty Ltd carried out trial geophysical surveys over the old workings in 1987 but there is no record of any assessment of the mineralization since 1903. (Leading reference Nye 1933).

PRINCE IMPERIAL MINE

This mine is located 400m north of the Blue Bell Mine and was discovered shortly after it. A group of parallel reefs is present striking at 335°. A shaft was sunk on a reef and at a depth of 7m the reef split up into auriferous veins with arsenopyrite with some galena. The mineralization also penetrated the sandstone between the veins. In following years pits and trenches were dug at various places along strike. In 1907 it was taken up again as the New Imperial and the shaft was deepened by 2m still in the veins. A new prospecting shaft 8m deep was then sunk close to the old one. At the bottom of this shaft the rock underfoot was metamorphosed sandstone which was veined with quartz about 1m wide. A cuddy was cut into the west wall of the shaft and exposed 1.2m of slate then 45cm of quartz and 15cm of pyritic veining. The quartz in the floor of the shaft only carried 0.5 g/t gold. A sample from the cuddy assayed 20 g/t gold, 11 g/t silver. A little further work revealed the ore was very pyritic with arsenopyrite, galena, and cassiterite. A trial crushing in the early 1930s by prospectors Murray and Carney returned 3 g/t gold with some individual assays of selected samples from the dump at Murrays Shaft up to 31 g/t gold. (Leading reference Nye 1933).

05 Independent consulting geologist’s report

Selected Tin Deposit

GARFIELD

This ground was one of the earlier alluvial tin mines in the Gladstone District. Chinese miners are believed to have been the first to exploit it but they only worked an upper bed of tin ore. This may have been because they could not handle the major development necessary to mine the richer deep lead or they may have thought they were at the bottom of the formation. It is mentioned by Montgomery 1891 when he discusses the geology of the tin leads and distinguishes between the marine and alluvial deposits and tries to make sense of the complexity of the deposits. The Mathinna Beds are exposed on the eastern side of the workings and granite is exposed nearby so Garfield is located close to the granite margin which is present in the nearby Tamar workings. Twelvetrees 1901 states that Garfield had been profitable years ago but pumping costs had caused the mine to close. The drift is thick here ranging to 20m. In 1904 The Cybele Tin Mines NL mounted a drilling programme on the property which was being completed in 1906 (Dawson et al 1906). This programme is reputed to have consisted of 142 holes but no details of this work have been sited by Featherstone and later reports have cast doubts over the reliability of the work. Many of the holes were outside of the boundaries of the leads and those that intersected the tin gravel are said to have overestimated the grades by two to three times. This company was preparing the mine for production. In 1926 a new company was formed and money was raised to purchase the leases at the Garfield Mine and equip it for production. After much of the operation had been established drilling was undertaken and showed the main alluvial lead extended over 2km. Although the greatest thickness of drift was 20m commercial concentrations of tin were present in the uppermost bed which is less than 6m thick. In addition to drilling a number of shafts were sunk to more accurately assess the grades of the wash. A total of 1,350,000 m[3] was estimated to be available for sluicing from the top bed and the basal deposits were not being worked. No grades were quoted. (Reid A.M. 1928 and Scott 1928). No further reports on this operation have been located and it is not known if it was financially successful or not.

Proposed Exploration Programme and Budget

The company’s exploration programme is to complete a database of past mining and exploration. Finalise the work currently being undertaken on the geophysical targets and then proceed to drilling. An RC drill rig has been booked for November 2007 to carry out an initial 40 hole programme totalling 2000 metres. This programme will provide information on the extensions to the existing mines and test some of the geophysical and geochemical anomalies.

Budgets for first and second year programmes are presented in Tables X & XI in the Final Review at the end of this geological report in addition to the Directors Report.

Summary

Prospecting in the 1880s discovered several gold lodes in the area now covered by EL2/2007. Due to the presence of a number of sulphide minerals the ore could not be successfully treated at that time but it can be treated today. Some of these veins and reefs were quite rich in gold but assays were required to determine the gold grade whereas the prospectors are usually able to pan samples to ascertain the grade. Due to these difficulties most of these veins have only been sampled at one or two points. The prospectors also soon turned their attention from the gold to tin and little further exploration for gold was carried out. Details of production from the area during the nineteenth century are very limited and it is reported that it was not unusual for producers to take their gold directly to the mint in Victoria. Gold was produced from the oxidized upper levels of the mines but it is impossible to compile a reliable set of figures.

No modern programmes of exploration involving appraisal of the mineralization have been conducted. The veins and reefs that develop along a lode typically vary in thickness and grade along strike and down dip. To assess them they have to be pattern drilled and the optimum rig for an initial drilling programme is the RC drilling rig. MHM plan to test the identified gold lodes with RC drilling.

The gold lodes are present in the Mathinna Beds (Palaeozoic slates and siltstones). These rocks are not very well exposed in the licence area and it is considered that there is a good chance of discovering reefs that the old miners did not find. Recent work has been done on the applicability of some geophysical techniques of remote sensing and such techniques together with suitable geochemical techniques are being considered for use by MHM. Anglo Australian Resources held tenements covering this ground during the late 1990s and collected samples for a Mobile Metal Ion (MMI) geochemical programme but then relinquished the ground before having the samples analysed. This technique could be very useful and should be trialed in the Gladstone environment.

Macquarie Harbour Mining Ltd prospectus

The alluvial tin mineralization that is present within EL2/2007 is a very different story. It was possible to work these alluvial deposits with modest equipment. The Tasmanian Mines Department also supported tin mining by setting up the Mt Cameron Water Race to provide a supply of water at a suitable volume and pressure to enable sluicing of the deposits. The areas containing alluvial tin have therefore been mined by numerous companies and partnerships and because of the varying price of tin many areas have seen a number of periods of reworking or additional working. Detailed follow up of the available information together with site investigations will be necessary to review and select particular areas for assessment of their potential for further mining.

Exploration Licence EL3/2007

The Tenement

This licence covers an area of 204 km[2] and its northern boundary is common with the southern boundary of EL2/2007 but extends a further 3km to the east as shown in Figure 2. The tenement then covers about 6km of ground to the south at full width with two arms extending to the south south east from the east and west sides. The shape of the tenement is controlled by the boundaries of the Mount William National Park in places. The arms cover some zones of Palaeozoic metamorphic sediments considered to be prospective. The topography within this tenement is moderate and is not as flat as that to the north. The area is covered by the Launceston 1:250,000 map sheet, the Eddystone and Blue Tier 1:50,000 map sheets, and the Gladstone, Lanka, Spurrs Rivulet, and Ansons Bay, 1:25,000 map sheets. The tenement does extend over ground to the south of that covered by the Ansons Bay map sheet onto The Gardens 1:25,000 map sheet but the geological edition of this sheet area has not yet been released.

Geology

The geology of the surface in this licence is basically similar to that in EL2/2007 to the north but the level of the plateau is higher and the drainages have eroded valleys producing an area of moderate relief. Alluvial tin deposits have been worked in the past in the north western areas of the licence as shown in Figure 4 and also on the geology map in Figure 5. Most of the licence is underlain by granite but in the northerly areas the granite is overlain by Tertiary to recent sediments which are host to the alluvial tin deposits. These Tertiary deposits are only found as isolated patches in the south.

The geology of the licence is presented in Figure 5. The granite covered by the licence is Devonian in age and forms one of a series of granite plutons that together form the Blue Tier Batholith. It is referred to as the Gardens Pluton and consists almost entirely a medium to coarse grained biotite hornblende granodiorite. Within this granite are a few small bodies of different types of granitic rock. It can be seen from the geology map that the western leg of the licence covers a narrow band of Mathinna Beds with a band of equigranular coarse grained biotite adamellite along its western contact. The granite to the west of this is a biotite granite forming the Poimena Pluton. The band of Mathinna Beds terminates at the contact with an intrusion of granite to the south that is referred to as the Mount Pearson Pluton which is also a biotite granite. The extension of the licence in the east widens as the coast at the Bay of Fires is reached and here the tenement is underlain by Palaeozoic Mathinna Beds which are intruded by a generally N-S striking dyke of quartz feldspar porphyry about 200m wide.

The mineralized gold veins in the Mathinna Beds west of Gladstone and those to the north and northeast that lie within EL2/2007 were formed during at least two of the six phases of granite intrusion that make up the Blue Tier Batholith. Associated with the granites are zones and also veins of greisen. The term greisen refers to parts of the granite that have been considerably altered by late stage fluids and these may contain minerals of economic interest such as cassiterite.

Previous Work

A little modern exploration for gold was carried out on EL2/2007 to the north during the second half of the twentieth century but the lack of identified gold mineralization within this tenement has resulted in no interest being shown in gold in EL3/2007 to the south. This ground is at least as prospective for tin as that to the north and is possibly more prospective.

Identified Deposits

There are no lode style gold deposits recorded in this southern licence but some of the alluvial tin deposits along the Great Musselroe River do contain low gold values. Table III lists the identified alluvial tin deposits. Because these deposits were mostly worked during the early days of mining, and more often by individuals rather than companies, little can be found in the way of detailed production records, and what records there are, are suspect. It is therefore impossible to say what areas have been successfully mined and no longer contain any economic deposits or where resources of interest are still present. The locations of the deposits are plotted on Figure 4.

05 Independent consulting geologist’s report

Figure 5 The Geology of EL3/2007 Compiled by Featherstone Geological Consultants for this Prospectus

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46
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Macquarie Harbour Mining Ltd prospectus

Table III: Identified Alluvial Tin Deposits in Within EL3/2007

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Co-Ords AMG66
Deposit
Deposit Other Names MRT No. Easting Northing Metal Type Comment
Amber Creek 1280 586100 5460200 Sn Placer
Amber Hill / Groves & Torley 585200 5460000 Sn Placer
Arcadia 339 588200 5460800 Sn Placer
Browns 585900 5460500 Sn Placer
Dawes 324 588800 5462400 Sn Placer
Edina and New Edina 337 588700 5461750 Sn Placer
Enterprise Star Hill 338 586650 5461700 Sn Placer
Great Musselroe 1273 589800 5455900 Sn&Au Placer Low gold
Lanka North 340 587200 5460800 Sn Placer
Lanka South 1281 587350 5460600 Sn Placer
Moores 377 588900 5463100 Sn Placer
North Musselroe 1292 590300 5460000 Sn Placer
Ogilvies 585400 5461000 Sn Placer
Purdue 344 587200 5461500 Sn Placer
Wood’s Flat Gt Musselroe 587600 5458100 Sn Placer Utah
Unnamed 323 585600 5462200 Sn Placer
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Because available data is not very meaningful only two deposits will be reviewed. These are Amber Creek and Wood’s Flat.

Amber Creek provides information which gives some idea of the deposits which were worked. The deposit was drilled by the Mines Dept. in 1937 and details of this programme are presented. Study of the detailed drill logs reveals that the low grades reported in the final report on the drilling are due to the averaging of the tin grades over the total depth of the gravels. Featherstone Geological Consultants believe this was done because the method of mining/ treatment, which is referred to as sluicing, did not allow the removal of the almost barren overburden as waste. Therefore the average grade of the total depth of gravels was more useful for the miners. With sluicing the recovery of the cassiterite is achieved with a sluice box and at the Garfield Mine the box was 62m long with the base sloping at 0.8/100. The main drawback with sluicing is that fine cassiterite is not recovered. (Leading reference Keid 1945B).

Wood’s Flat consisted of two larger lower grade deposits that were explored by the Utah Development Co. in 1963 and a third smaller area at Carrick’s Flat. Their work is virtually the only comprehensive and professional recent assessment of any of the tin deposits within MHM’s tenements and gives a frank appraisal of the difficulties of sampling these unconsolidated deposits by drilling especially if they are beneath the water table. Utah did not consider the Wood’s Flat deposits were viable in 1963.

AMBER CREEK

This is one of the better known alluvial tin deposits and is located about 6km due south of Gladstone and about 700m south of the Ringarooma River. It is mentioned in Twelvetrees 1916 but little detail is given. A government drilling programme was conducted on the area in 1937 and reported in Blake 1937A. The drilling was subsidized 50% by the Mines Department. This programme consisted of 53 holes for 3,155 feet (962m) using a Mines Department “Victoria Drill” of the calyx type. This bored a 5 inch hole (130mm) and samples were collected every 7 Feet 4 inches (2.2m) which gave a sample volume of 1 cubic foot (0.0283m[3] ) in situ. The holes were spaced 20m apart on lines 40m apart. Only 17 of the holes intersected “wash” (cassiterite bearing gravel) at the base of the gravel profile and this wash was of variable grade. The thickness and grade of the intersections of wash are given in Table IV. Only intersections in excess of 1m at 100 g/m[3] SnO2 are quoted. There is 78.6% tin in pure cassiterite but in Blake 1937A he gives a conversion figure of 70%. It is not known if this figure allows for some contamination of the concentrate or not so the higher figure has been used in converting the tin oxide figures in Table IV. A plan of the drill hole locations is available in King 1963 but is not presented here. This plan also shows locations of some holes by Siamese Tin Syndicate and the Pioneer Tin Mining Co. but no data on these companies has been discovered. Portions of the Amber Creek deposits have been mined but it is not known if any part of the high grade deep lead remains. It is reported (Keid 1952) that production was halted in 1952 when the lead narrowed and the height of the overburden made working it unsafe. It is not known if any further work was attempted at a later date.

05 Independent consulting geologist’s report

Table IV: Significant Intersections From Amber Creek Drilling Programme 1937

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Hole Overburden Alluvial Tin Grade Grade
No. Depth (m) Zone (m) g/m [3] SnO2 g/m [3] Sn
1 17.9 4.33 3,128.3 2,459
2 20.1 4.34 361.3 284
4 17.9 1.57 126.8 113.6
17 15.6 0.36 12,987 11,636
20 17.9 4.24 1,255 1,124
22 13.4 3.15 3,977 3,563
24 20.1 2.21 1,231 1,103
26 22.4 0.66 441 395
27 21.4 3.35 147 132
30 10.2 1.47 9,423 8,443
31 8.9 1.30 2,147 1,924
32 8.9 0.60 375 336
33 4.5 1.40 1,655 1,483
34 4.5 4.47 424 380
35 12.2 2.36 1,840 1,649
36 15.9 3.05 12,544 11,239
37 16.0 6.55 2,463 2,207
40 17.9 3.20 2,661 2,384
48 9.0 2.13 100 89.6
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WOOD’S FLAT and EASTERN TERRACE (deposits at Great Musselroe Prospect 1273)

Utah Development Co. was granted an exploration licence of 777 km[2] for six months from 29 October 1963 and secured a six month option agreement with Mr V. Wood to purchase his properties on the Great Musselroe River for £95,000. These consisted of freehold land of 90ha on the valley flats, a 20ha lease, and two 4ha mining leases covering a small portion of the Tertiary terrace deposits. These properties lay within the Utah exploration licence and the option was extendable for six months by payment of £1,000. Utah estimated that there was the potential to be a reserve of 3.8 Mm[3] at a grade of 600 g/m[3] . Initial feasibility studies made before the option was entered into estimated that a total resource of 3.25 Mm[3] at a recoverable grade of 255 g/m[3] mined at a rate of 750,000 m[3] /y would be viable. Production records of Mr Vern Wood’s operation for 1960 to 1963 inclusive totalled 108,720 m[3] for 75.86t of concentrate containing 55.46t of metallic tin which gives a calculated head grade of 510 g/m[3] Sn. Production records supplied by MRT are presented below. They are not detailed and only give the tonnnages of tin concentrate produced and do not match the figures above. This may be due to reporting periods or sales versa mine output etc.

Musselroe Tin Mine Concentrate Production

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Year Tonnes
1960 7.87
1961 23.37
1962 30.48
1963 28.45
1964 24.39
1965 15.24
1966 18.29
1967 20.32
1968 3.1
1969 14.22
1970 14.22
1971 0.76
total 200.67
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Government drilling of six holes was carried out on the Eastern Terrace in 1902 (Twelvetrees 1916) but the accurate location of the holes is not known. Drilling was carried out by other companies but only the results obtained by the Endurance Tin Mining Company were traced by Utah. Utah results were about half the grade of the results of Endurance.

During March and April 1964 Utah mounted a drilling programme on Wood’s Flat and the Eastern Terrace. The Tertiary sediments at Wood’s Flat and the Eastern Terrace occur in separate depressions in the granitic bedrock and were considered to be remnants of separate drainages. The tin occurs as detrital cassiterite grains in the alluvial deposits. Tin is concentrated in the basal gravel at Wood’s Flat but in an upper gravel in the Eastern Terrace. The results indicated that Wood’s Flat contained 940,000 m[3] 7.3m deep at a grade of 160 g/m[3] and the Eastern Terrace 380,000 m[3] 2.7m deep at 166 g/ m[3] . These volumes and grades were so far below the feasibility study requirements that the option was not exercised. The work undertaken by Utah was the best exploration programme mounted on the alluvial tin deposits in the licence area but the Utah geologists were not confident that the drilling technique used was totally reliable. (Leading Reference Appleby and McEwan 1966).

Proposed Exploration Programme and Budget

An early part of the work by MHM on this project will be to examine all the existing records from production and drilling in order to prioritize targets for bulk sampling. This will enable an inventory of resources to be established at the Wood’s Flat and Eastern Terrace sections and in other areas of historical mining operations.

MHM will conduct a bulk sampling programme utilizing an excavator and trailer mounted gravity plant. The Company has already determined that in order to exploit this resource a moveable

Macquarie Harbour Mining Ltd prospectus

Figure 6 Magnetic Map of Macquarie Harbour Area

Compiled by Featherstone Geological Consultants for this Prospectus

mining-pulping module will be used delivering ore to a centralized tin recovery plant. The Directors and Management have extensive experience in this type of mining and processing. Once the test work is completed it is hoped to move quickly to producing a cash flow for the Company.

Budgets for first and second year programmes are presented in Tables X & XI in the Final Review at the end of this geological report in addition to the Directors Report.

Summary

The drilling undertaken by Utah was carried out as carefully as possible but when drilling unconsolidated sediments it is almost impossible to ensure that any intersection has been sampled accurately. RC drilling is a good drilling system and can be used in the early stages to explore for an alluvial deposit but when data on the grade of the wash is required for feasibility studies a more reliable system is required. MHM plans to use a small mobile/transportable processing plant to treat bulk samples of the wash collected by pitting or costeaning. This will ensure that data used for any assessment of the economic viability of a deposit is as reliable as possible.

Past mining operations on the alluvial tin deposits have mostly employed sluicing as the method of treatment. This is a somewhat crude technique but with minimal labour performs the mining and transport of the slurry to the sluice box, where much of the tin is recovered, and then the transport of the tailings to the tailings area. The percentage of tin recovered by this method is not stated in any of the reports on the area but it is stated that the fine tin is not recovered. Sluicing does require significant volumes of water at an adequate pressure. The method also results in the processing of the full alluvial profile which is less desirable in the areas with deeper profiles where the high grade material is usually at the base of the profile and therefore gets considerably diluted.

The complex ownership and treatment history of most of the tin deposits results in the necessity for these deposits to be carefully studied to determine which might host some remaining viable resources. The current buoyant metal prices suggest that there is a good possibility that a modest sized profitable operation can be established. The primary mineralized zones of greisen were only worked to a limited extent in the past. While exploration is being conducted the possibility of broader greisen zones being amenable to modern mechanized extraction techniques should also be considered.

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05 Independent consulting geologist’s report

Figure 7 Regional Magnetic Map and Major Deposits of The Mt Read Volcanics Compiled by Featherstone Geological Consultants for this Prospectus

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Macquarie Harbour Mining Ltd prospectus

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Figure 8 Regional Geology and Major Deposits of The Mt Read Volcanics Compiled by Featherstone Geological Consultants for this Prospectus

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05 Independent consulting geologist’s report

The West Coast Tenements

Economic Geology

Three of the Company’s tenements in the West are contiguous. They are EL21/2007 (235 km[2] ), EL22/2007 (113 km[2] ), & EL23/2007 (171 km[2] ). These tenements lie west and southwest of Macquarie Harbour and cover outcrops of Neoproterozoic and Cambrian stratigraphy which extend south, along the Southern Ocean coastline, from George Point on the Sorell Peninsula to just north of the Wanderer River as shown in Figure 1. These rocks have long been regarded as probably being extensions of the Mt Read Volcanics and a programme of work by Mineral Resources Tasmania (MRT) has confirmed this. This programme included a new aeromagnetic survey and a major field mapping programme running from1986 to 1993, referred to as the Mt Read Volcanics Project. The field work was followed up with associated dating, assaying, and petrological studies of samples collected in the field. The coverage of these tenements with respect to the regional geology is shown on Figure 8. The Mount Read Volcanics are Cambrian in age and on Figure 8 the Cambrian outcrops are coloured green.

A fourth tenement has been applied for in the West which is ELA20/2007 (235 km[2] ). It covers ground surrounding the town of Strahan, north of Macquarie Harbour, and extending to the southeast. The Company has informed Featherstone Geological Consultants that it expects ELA20/2007 to be granted shortly. This tenement covers a body of sub-outcropping Mt Read Volcanics in the central portion of the tenement and the extension of these rocks to the south under Tertiary cover. The strike of these Mt Read Volcanics can be followed south under the Tertiary cover using the aeromagnetic data presented in Figure 6 (Richardson 2006) and the strike then swings SSW under Macquarie Harbour to outcrop in the companies tenements along the Sorrell Peninsula. The northern portion of tenement ELA20/2007 covers ground to the coast west of Strahan containing a section of the Mt Read Volcanics striking northwest under Tertiary and Quaternary cover. These Cambrian rocks continue to strike northwest extending out under the sea. Refer to Figures 7 and Figure 8. The magnetic image map, which is derived from the airborne magnetic survey data, shows a magnetic low to the west of the north end of the Sorell Peninsula, level with the mouth of Macquarie Harbour, and this low is interpreted to indicate that a body of granite is located here. It is referred to as the Grandfathers Granite. The interpretation of granite in this area is supported by an outcrop of granite on the western shore of the Sorell Peninsular.

The part of the Cambrian succession known as the Mt Read Volcanics hosts a number of major bodies of mineralization in western Tasmania. The improved understanding of the geology resulting from the work of mining companies and Mineral Resources Tasmania has confirmed that this geological unit is present in the Macquarie Harbour area. Figure 7 and Figure 8 are magnetic image and geology maps covering the tenements of MHM and the extension of the Cambrian/ Mount Read Volcanics to the north. The locations of the numerous significant metalliferous deposits are plotted on these maps. It can be seen from these maps why the MHM tenements on the Sorrell Peninsula are considered to be very prospective. Previous ground based exploration has been limited and this area warrants thorough exploration with adequate drilling of identified targets.

Exploration Licence Application ELA20/2007

The Tenement

The northern portion of this licence application, which is 235 km[2] in area, covers the town of Strahan and then extends to the east and south covering sub-outcropping sections of the Mt Read Volcanics. The boundaries of this tenement and the geology that it covers are shown in Figure 9. The tenement area is located on the Cape Sorell 1:100,000 topographic map sheet and on the Strahan and Macquarie 1:50,000 geological map sheets. More up to date and detailed geology is available on the Strahan East, Strahan West, Teepookana, and Philips 1:25,000 geological map sheets.

The lower reaches of the King River flow over the section of the Cambrian Belt south east of Strahan before entering the Macquarie Harbour just north of King Point. At the mouth of the King River a delta has formed which contains a significant proportion tailings derived from the Mt Lyell Copper Mines. These have been deposited in a black shale environment within the deltaic deposits and have been assessed as a source of base metals, gold, and pyrite (Jinks 1976, Harvey 1980 &1984, Harvey & Taylor 1995). It has been estimated that there are 100Mt of sediment in the delta of which 15% is tailings containing 45% sulphides. While recovery of metals and sulphur from these tailings is possible the studies carried out conclude that it is not profitable at the present time. These deposits are not covered by the MHM licence.

Macquarie Harbour Mining Ltd prospectus

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Figure 9 The Geology of ELA20/2007 Compiled by Featherstone Geological Consultants for this Prospectus

05 Independent consulting geologist’s report

Geology

The geology of this licence is presented in Figure 9. West of Strahan the licence extends to the coast covering Cambrian/Mt Read Volcanics beneath Tertiary cover. The strike of the Volcanics can be traced using the airborne magnetic geophysical data. Magnetic imagery produced from this data is presented in Figure 6. This figure covers the Company’s tenements and adjoining areas of interest. Certain members of the succession have a high magnetic susceptibility and show up as highs on the magnetic map. Tracing the magnetic trends reveals that the general strike of the Cambrian rocks swings to the north west at the northern end of Macquarie Harbour around the town of Strahan where they are covered by a significant thickness of Cainozoic sediments. In the eastern central areas of the tenement the strike is generally NNW-SSE and the Cambrian rocks outcrop. In the south the strike continues to be NNW-SSE but they are again covered by Cainozoic sediments. A magnetic low is centred approximately 5km west of that portion of the Sorell Peninsula lying immediately west of the entrance to Macquarie Harbour. This magnetic low indicates that rocks of low magnetic susceptibility exist beneath this area. About 5km south of the northern end of the Sorell Peninsula, on the western coast, are outcrops of granite. It is therefore concluded that a body of granite is probably causing this magnetic low and it is referred to as The Grandfathers Granite. The presence of this granite considerably enhances the prospectivity of the Volcanics in the vicinity of Strahan.

This ground is considered to be prospective for base metal mineralization but there are no identified deposits indicated on the MRT online database. Sub-economic base metal mineralization has been reported from the Devonian sediments which outcrop to the east of the Cambrian succession. Exploration of the areas on the West Coast of Tasmania is difficult due to the often dense vegetation due to the heavy rainfall which limits access. Prospecting is often restricted to the vicinity of roads and drainages.

Tracing the Volcanics SSE from the King River they disappear under Tertiary sediments with the contact lying roughly along the course of Pine Cove Creek. South of the southern boundary of the licence the strongest magnetic zone crosses the eastern shoreline of Macquarie Harbour in the bay north of Coal Head and then crosses the harbour to the western shoreline at Bryans Bay and the general strike becomes N-S. A weaker magnetic zone to the northwest branches off to the west and crosses the western shoreline of the harbour near Double Bay on the Sorrell Peninsula. It can be seen from Fig.7 that as one moves south on to the Sorell Peninsula the strike swings to become SSW in the MHM tenements on the peninsula.

Previous Work

In 1956 a JV between The Electrolytic Zinc Company of Australasia Limited and Mt Lyell Mining and Railway Co Ltd (Lyell – EZ Explorations or the LEE JV) was formed to explore the Mt Read Volcanics in the southwest of Tasmania. In 1958 an airborne magnetic survey by the JV identified an anomaly at Ocean Beach (Rodda 1958B). This was investigated and was due to magnetite in beach sands. In 1960 the LEE JV mounted field exploration programmes in the area (Scott 1960D). On the east coast of the harbour they undertook a study of the Tertiary cover. This was reported to consist of unconsolidated sands and gravel containing bands of clay and lignite in a central zone. The total thickness was calculated to be 225m minimum with 170m being below sea level. Dating by fossils in the lignite suggested a Pliocene age for these deposits. The exploration programmes mounted by this JV were mainly focussed on the Sorell Peninsula and will be reported under the Company’s tenements on this peninsula.

In 1981 CRA Exploration Pty Ltd mounted a drilling programme to assess the brown coal potential of the Cainozoic succession. The drilling rig was not capable and the programme was abandoned. The limited results obtained were interpreted to indicate there was little potential for brown coal.

In 1987-1990 a JV between BHP, Utah, and New Holland explored the sub outcropping rocks of the Cambrian Period north of the King River with EL29/1987. They report that the Cambrian rocks appear to have a dominantly felsic provenance. There are few indications that hydrothermal activity has been intense in the area. Stream sediment sampling revealed low level Cu-Zn anomalism in the SW of the area (up to 228 ppm Zn, 63 ppm Cu). An airborne GEOTEM EM survey did not detect any responses that could be attributed to conductive sulphide mineralization so no further work was undertaken. This JV also explored an easterly area of the Cambrian stratigraphy to the south of the King River with EL30/1987. They reported evaluation of previous geophysical and geological data suggested that the volcanics are possible time equivalents of the Que-Hellyer and Noddy Creek volcanics. Several additional structures were delineated. A significant structural zone was located in which a major NW-SE trending magnetic lineament abruptly truncates magnetic mafic volcanics. Seven rock chip samples showed weak anomalism in Zn and Cu. An airborne EM survey was carried out but did not detect any responses that could be attributed to bedrock conductors such as sulphide mineralisation. No further follow up work was undertaken. BHP-Utah withdrew from the JV and New Holland relinquished the tenements (Leading Reference Read J.J. 1990). The exploration programme conducted by this JV did not include any drilling. This is an area of interest and more exploration is required.

Macquarie Harbour Mining Ltd prospectus

Proposed Exploration Programme and Budget

This tenement will be explored using modern geophysical techniques. The use of such technology in this region has proved successful and recent enhancement of the existing magnetics has revealed new targets. On completion of this work the targets will be drilled using a new RC drill with the capacity to provide results quickly and accurately.

Budgets for first and second year programmes are presented in Tables X & XI in the Final Review at the end of this geological report in addition to the Directors Report.

Summary

Exploration Licence Application ELA20/2007 contains a significant strike length of the Mt Read Volcanic succession although a major part of it is under Tertiary sedimentary cover. This highly prospective geology has not received the attention that it warrants by past explorers and MHM’s exploration programme is designed to locate and appraise occurrences of mineralization within the licence area.

Exploration Licence EL21/2007

The Tenement

The tenement covers a prospective section of Neoproterozoic rocks striking SW across the Sorell Peninsula. Its location in the Macquarie Harbour area is shown in Figure 1 and on the geology map Figure 8. This ground will be referred to as the Double Cove Belt in this report. In the west, on the ocean shoreline of the peninsula, the tenement extends from Discovery Beach in the north to Varna Bay in the south as can be seen on Figure 10. In the east, on the harbour shoreline, the tenement extends from Liberty Creek in the north to Hogan Cove in the south. The total area covered is 113 km[2] . The tenement area is located on the Cape Sorell 1:100,000 topographic map sheet and on the Macquarie 1:50,000 geological map sheet. More up to date and detailed geology is available on the Table Head, Philips, Albina, Sarah, Varna, and Birchs, 1:25,000 geological map sheets.

Geology

The detailed geology of the Double Cove Belt is presented on Figure 10. Along the north-western boundary of the tenement and extending to the northwest of the Double Cove Belt are Proterozoic rocks of the Rocky Cape Group consisting of metamorphosed quartzite, mudstone/siltstone, and conglomerate. These rocks have been thrust over the top of the Neo-Proterozoic rocks to the southeast and lie on an almost level thrust plane. Proterozoic rocks previously covered the rocks now outcropping within the tenement but have since been largely eroded. Some inliers of thrust Proterozoic rocks can be found as remnants on higher ground within the licence.

Figure 10 The Geology of EL21/2007

Compiled by Featherstone Geological Consultants for this Prospectus

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05 Independent consulting geologist’s report

The north-western boundary of the prospective rocks covered by this tenement is somewhat irregular. The location of this boundary results from the advance of erosion to the north west and the present boundary generally parallels the regional strike of the Neo-Proterozoic geology which can be seen in Figure 10. Several small inliers of Proterozoic rocks are present near the boundary and SE of it. The south eastern boundary of the prospective rocks is a major strike fault trending NE with Neoproterozoic rocks of the Oonah Formation lying to the SE of the fault. The north-eastern and western boundaries of the licence are the shorelines of Macquarie Harbour and the Southern Ocean respectively.

Within the licence a number of major faults strike NE-SW. These faults divide the succession into a number of strips. The Double Cove rocks are considered to be correlates of the Crimson Creek Formation and the Success Creek Group which are hosts to numerous deposits southwest of Zeehan. The fault bounded strips of NeoProterozoic have suffered major displacements on the faults. These displacements result in repetition and disorder of the stratigraphy. In the field the faults are typically marked by zones of strongly brecciated rock. In general the succession is sedimentary and youngs from the SE to the NW with the correlates of the Success Creek Group mainly in the central and southeast. These rocks are metamorphosed mudstones, siltstones, and sandstones, and are often calcareous or dolomitic. The correlates of the Crimson Creek Formation are mainly in the northwest where they are referred to as the Albina Creek Belt. The Albina Creek rocks are at the top of this succession and contain basaltic lavas and breccias. Some gabbro dykes of Cambrian age are present at the bottom of the succession. Lenticular haematite bodies with or without pyrite have been emplaced along some sections of the NE-SW faults in the middle of the succession. These are of Cambrian age and are of possible economic interest. At the northern end of Varna Bay on the ocean coast is a stock like intrusion of lamprophyre, of Devonian age, about 500m in diameter. Lying outside this licence to the south east between this licence and the Company’s EL 22/2007 is a coherent block of slightly younger Neoproterozoic rocks (correlate of the Oonah Formation) bounded by major faults. The limestone unit of this formation, which is covered by the extreme southern portion of the licence, is shown on Figure 10 and is prospective for base metal and gold mineralization.

Previous Work

In 1902 Assistant Government Geologist G.A.Waller (Waller 1902) visited Birthday Bay and reported on a number of occurrences of low grade

chalcopyrite mineralization. These were mostly located along the shore line. Three deposits that were prospected by the Birthday Copper Syndicate are currently identified by Mineral Resources Tasmania near the shore at Birthday Bay (deposit numbers 3620, 3621, and 3622). High grade small patches of secondary copper minerals were present on the rock surfaces in places and the prospectors knocked these off, hand dressed them, and shipped out a couple of tons of concentrate. It is reported that there is little sign of these patches left. Pemberton 1993 refers to this mineralization but little further work has been carried out on it. A fourth deposit (3619) was prospected by the Strahan Copper Co.NL. This mineralization is present in a strongly sheared graphitic slate about 6m wide. An assay of a selected sample of gossan was reported to be grading 2% copper and 200 g/t silver with a trace of gold. A tunnel was driven across the formation at about 10m depth but only minor chalcopyrite veining was present. No further work was reported.

In March 1959 the LEE JV mounted an investigation of Airborne Geophysical Anomaly 10/8 (Paltridge 1959). This anomaly (also known as anomaly 129 or Deep Creek) lies on the north bank of Iron River about 1.6km east from the coast. Anomalous magnetic and electromagnetic responses were obtained in the airborne and follow up ground surveys. Assaying of a sample indicated that the exposure was almost entirely haematite. Further work was reported on in May 1960 (Scott 1960B). The outcrop was gridded and the haematite/magnetite vein was found to extend over a strike of 450m and was up to 52m wide. The southern portion of the vein is mainly haematite with magnetite increasing to the north and there is very little else than iron oxides present. Scott estimated a tonnage of 5Mt to a depth of 100m but points out that sulphides may become significant at depth. The mineralization is considered to be Cambrian in age.

From 1965 to 1972 The Broken Hill Propriety Company Limited was granted EL13/65. The

Macquarie Harbour Mining Ltd prospectus

part of the Double Cove Belt within this licence is covered by MHM’s EL21/2007. Initially airborne scintillometry was flown to fill in some areas that had not been covered by previous work and a new helicopter aeromagnetic survey was flown. Aerial photographs and photo mosaics were produced at a scale of 1:23,760. Geology was mapped using coastal outcrops and stream sections. Systematic stream sediment sampling was undertaken at 400m intervals. Anomalous copper, zinc, and nickel values were obtained in the Lucas Creek area. The country rocks in this area are andesitic and basaltic lavas and breccias which BHP termed the Lucas Creek Volcanics. The anomalous geochemical values were not considered to be due to the presence of mineralization but due to the metal content of the rocks. The magnetic high was considered to be due to a gabbro sill (McGregor 1969). The nickel values obtained could be explained by the nickel content of the gabbro but the copper values are considered to be less convincingly explained. Three anomalous lead values could not be explained. No assaying for gold or tin was undertaken. The geochemical anomalies of the Lucas Creek Volcanics are considered to be of interest and have not been sufficiently investigated by work to date. Further work is also warranted to investigate these prospective volcanics along strike.

A limited Diamond drilling programme was commenced at Deep Creek (Anomaly 129) in 1968. At this locality the country rocks strike NNE, dip vertically, and are typically isoclinally folded. The haematite/magnetite body has been emplaced along a fault striking N 15° E and has been traced over 480m with a maximum width of 120m and an average width of 45m. Pyrite is disseminated throughout the central and northern portions of the body and was estimated at up to 5%. A diamond core hole was drilled at an azimuth of 305° and depressed 50° but had to be abandoned at 101m. This hole intersected massive pyrite (70%) and haematite (30%) over 0.9m from 96.6m to 97.5m. A second hole was recommended but not drilled (Hall et al .1969). More work was recommended on another haematite/sulphide zone bearing copper at Pelias Cove but not undertaken. The various recommendations for additional work were later revised and no more work was done on the Double Cove Belt. This work is not considered to have been adequate.

In 1981 Geopeko conducted Dighem airborne EM surveys over selected areas on the Sorell peninsula.

In 1983 three exploration licences (EL35, 36, & 37/83) were granted to Placer Developments Ltd. A 50:50 joint venture was agreed between Amoco Minerals Australia Co. and Poseidon Ltd to fund exploration of the ground with Amoco as manager and Placer to earn 5% net profit. Planned exploration is reviewed in Ferris 1984.

Amoco1984-1986 (later Cyprus Gold Australia Corp.) was mainly seeking volcanic hosted massive sulphide deposits of the Rosebery or Que River/Hellyer style. EL35/83 covered the ground now held by MHM as EL21/2007. Initially Amoco carried out additional Dighem airborne EM surveys covering selected areas. The EM survey consisted of 659 line km with 150m line spacing at a bird height of 35m and was reported on by Dighem (Fraser 1984). A new aeromagnetic survey covering all the tenements was then flown by Austirex International Ltd employing a Nomad aircraft flying at 70m on a line spacing of 150m for 4,204 line kilometres. These data were processed by Pitt Research Pty Ltd and analysed by Mitre Geophysics (Bishop 1984). EM anomalies identified by this work were then followed up in the field and the new data reviewed and compared with that obtained by BHP. The ground follow up included geology, the collection and assaying of stream and soil samples, and ground magnetometry, and possibly ground EM. Amoco advanced assessment of the magnetic anomaly in the Albina Creek area which was identified by LEE but not vigorously followed up. Soil, rock chip, and stream sediment, sampling produced anomalous background values of gold with associated barium and a separate copper anomaly. These were not followed up. Amoco considered that the radiometric data was useful for regional mapping and photogeological interpretation. Image processing of the magnetic data was carried out by Mitre Geophysics at the BMR in Canberra. The exploration programme only gave minor emphasis to the search for tin and gold. The main target for exploration was a polymetallic volcanogenic massive sulphide orebody of the Rosebery or Que River/Hellyer style. No further work was done by the JV on the area covered by EL21/2007 after 1985. No drilling was undertaken.

In 1986 Citco International Mining Co. mounted a bottom sediment geochemical survey of Macquarie Harbour which located a copper high of 915 ppm at Double Cove, one of two highs in the survey.

In 1998 Pacific Nevada Mining Pty. Ltd. (Reid, R. 1998) conducted regional scale exploration on the Sorell Peninsula. The area’s prospectivity was assessed by geological mapping and collection of 248 rock chip samples, 122 panned concentrates, 27 bulk samples and 116 – 80# stream sediment samples. This work was primarily focused upon structurally controlled magnetite-hematite bodies and an alluvial gold bearing drainage located in and south of the Double Cove area. Panned concentrate samples returned up to 55 gold grains per 2 pan sample and check analysis of these samples ranged up to 1,800 ppb Au. Rock chip analyses include 1.14% Cu from known outcropping sulphides at Pelias Cove and 477 ppb Au from pyrite veined graphitic schists at the North Butler Prospect.

05 Independent consulting geologist’s report

Alluvial gold, silicified rocks, and outcropping sulphides in the Pelias Cove area, were followed up with 15,000m of gridding and collection of 410 C-horizon soil samples. Gold geochemistry returned a peak analysis of 285 ppb Au from the Pelias Cove Prospect vicinity. Elsewhere, gold forms coherent, although weak anomalies with values ranging from 2 to 14 ppb. Gold anomalies are coincident with elevated Cu geochemistry, which ranged up to 716 ppm Cu. Extensive outcrops bearing disseminated pyrite and accompanied by significant alluvial gold were located in the “North Butler Creek” area. An access track and a limited grid, totalling 3,000m, were cut in this area. Soil samples returned up to 564 ppb Au, whereas rock chip samples returned up to 477 ppb Au and 1,060 ppm Cu. This work identified two prospects for follow up – North Butler Creek and Pelias Cove. In 1999 the Pelias Cove targets were drilled with three DC holes (Morritt 1999). North Butler Creek was drilled in January 2000 (Newnham 2000B).

Identified Prospects

The locations of the prospects listed below are shown on Figure 10.

Birthday Bay (3619, 3620, 3621, & 3622)

Along the coast at Birthday Bay and extending a short way inland there are a number of exposures containing low grade copper mineralization in the form of chalcopyrite. A few high grade small patches of secondary copper minerals were present on the rock surfaces in places and the prospectors knocked these off, hand dressed them, and shipped out a couple of tons of concentrate around 1900. The overall grade of the host rock is low and previous explorers have not paid much attention to this mineralization but it is considered that investigation is warranted to determine if these occurrences indicate the presence of more significant mineralization in the vicinity.

Albina Creek

A magnetic anomaly and anomalous gold and copper together with barium have been discovered but the source of these anomalies has not been explained by the limited follow up to date.

iron Creek or Big Creek (5308, 3627, 3628, 3623 [Anomaly 10/8 and 128].

Lenticular haematite bodies with or without magnetite and pyrite have been emplaced along some sections of the NE-SW faults. Limited drilling has been attempted on this mineralization which may become more sulphide rich in depth. The mineralogy and zonation of these bodies has not been elucidated by work to date but the base metal values are low. The only potential would appear to be as a source of iron or sulphide. More work is justified if the available results suggest that these bodies of mineralization could be economically viable. Work to date has done little to determine the composition and size of these bodies.

Pelias Cove (3613)

This Prospect occurs on the northeast coast of the Sorell Peninsula and has attracted more attention, probably because it is more accessible. The outcrop was discovered by Dan Sampey for the LEE JV in 1957 (Sampey 1957). The sulphide mineralization outcrops on the beach and subsequent trenching across the vein revealed a total width of 12m of which 6m is sulphide (predominately pyrite). The sulphides are present as bands within the country rock, which was identified as a tuff or greywacke, and have a streaky appearance. Another outcrop was found about 25m inland from the shore. Two soil sampling traverses were made 45m inland (samples spaced at 3m) and 60m inland (samples spaced at 1.5m) from the shore. Samples ranged up to 5,000 ppm copper. In 1960 further field investigations were carried out employing a small DC drill and a ground EM survey. The drill was capable of around 30m depth and six holes were completed. Two were inclined holes (45°) collared 11m and 30m south of the outcrop on the beach and four were vertical and drilled on the beach. The drilling on the beach showed that the haematite was a capping 2m to 3m thick with country rock extending for at least another 14m. No haematite was intersected in the inclined holes. The country rock weathers to a very friable state and core recovery was extremely poor in the inclined holes at 4% to 6%. The sulphide zone was not cored at depth in any of the holes. One of the vertical holes only reached 2.25m and was abandoned with a lost core barrel and another was abandoned at 1m. This drilling was unsuccessful and assay results from the samples collected are generally not meaningful. Hole L4 cored 1.4m of haematite/sulphide with 65% recovery which assayed 2.6% copper. The EM survey was interpreted to indicate that there was no extension of the mineralization along strike (Scott 1960C).

In 1969 BHP mounted a follow up programme at Pelias Cove. This consisted of two lines of soil sampling inland from the shore and each line had a well defined copper anomaly. Aligning these anomalies with the outcrop on the beach indicated the mineralization did not strike parallel to the bedding but was oriented in a NW direction and the drilling by LEE had not covered the mineralization. McGregor 1969 recommended further work consisting of more soil sampling to define the location and extent of the lode and then possibly drilling. No more work was conducted by BHP.

In 1999 Pacific Nevada Mining Ltd mounted a drilling programme at Pelias Cove (Morritt 1999B). The drill targets were developed from significant gold in panned heavy concentrates and the coastal occurrence of outcropping massive copper sulphides. Soil geochemistry produced a small base metal anomaly flanking Tertiary gravels.

Macquarie Harbour Mining Ltd prospectus

An IP survey produced two strong resistive anomalies under the cover of Tertiary gravels. Four diamond drill holes were planned to test the two IP anomalies, one soil base metal anomaly and the outcropping sulphides. The programme mounted consisted of three diamond drill holes, for 761m of core, and tested three of the anomalies; one of the IP anomalies was not tested. Analytical results were disappointing. The source of gold in local creeks was not identified. However, an approximately 50m wide and highly silica-flooded fault system, accompanied by brecciation, was present in each of the holes. The structural control, the extensive silica flooding and the abundant gold in the creeks suggests that its source is nearby. There is, however, a possibility that the gold could have been derived from Tertiary gravels. Examination of this gold reveals that it can be quite coarse, with grains up to match head size, and many grains are quite angular in shape. This suggests that it is derived from a local source and not the Tertiary gravels. The source of the anomalous gold has not been satisfactorily explained and additional work is warranted in this area. Copper and nickel geochemical anomalies have been located striking SW and these should be followed up. The highly silica-flooded fault system, accompanied by brecciation, requires more investigation.

Lucas Creek volcanics

Attention was drawn to the area where these volcanics were found by the BHP geochemical sampling programme. No body of mineralization was located as a source for the anomalies and they were attributed to high background values in the volcanics. Even if this is the explanation of the anomalies volcanics of this style with high background levels of base metals should be followed up along strike.

North Butler Creek (3631)

A programme of six DC holes for 1,955m was completed at North Butler Creek in January 2000 (Newnham, L.A. 2000B). These holes were targeting an area with geophysical IP and magnetic anomalies, several gold geochemical anomalies, anomalous soil and rock samples, and a regional fault. The holes intersected a volcanic and intrusive sequence overlying carbonaceous black shales and siltstones grading down into sandstone, quartzite and debris flow units. Carbonate-silica-pyrite-sericite alteration was pervasive. The highly pyritic and graphitic carbonaceous shales were responsible both for the IP and airborne EM responses of earlier surveys. The volcanic and intrusive units produced the magnetic responses. Only minor gold and base metal mineralization was intersected in the drill holes.

Best intersections were : NB001 4m 0.13 g/t Au 14.3% S NB002 3m 0.10 g/t Au >10% S NB003 6m 0.14 g/t Au 13.8% S

Whilst assay results were disappointing, the programme did succeed in defining a major sulphide rich alteration system within a deformed zone of Eo-Cambrian volcanics and sediments adjacent to a regional structure. In the context of Tasmanian economic geology this is viewed as substantially encouraging, being broadly analogous to the setting of the Henty gold deposit to the north. More work is justified on this anomalous geological feature.

Proposed Exploration Programme and Budget

The numerous targets on this tenement require the Company to firstly compile a database of the existing information. Any new geophysical programme will be determined by the outcome of this research but it is anticipated that the new technologies available today will greatly assist in targeting zones of mineralization for subsequent drilling.

An examination of the viability of extending the iron ore reserves is currently underway and the Company has had discussions with transport and logistic groups to see if ore could be economically shipped from the West Coast.

Budgets for first and second year programmes are presented in Tables X & XI in the Final Review at the end of this geological report in addition to the Directors Report.

Summary

Because of the difficulties of mounting the ground based exploration programmes in this area the exploration carried out to date has been very heavily biased towards airborne techniques. This has resulted in much duplication taking place. Many of the stronger anomalies produced by IP and EM surveys are not related to economic mineralization and much more ground based exploration is required to follow up on the surveys that have been carried out. The quantity of drilling undertaken on this ground is woefully inadequate and the two areas on which very limited drilling has been undertaken require more drilling to satisfactorily test the targets identified. There are also other targets such as the magnetitepyrite bodies along the fault zones and the copper mineralization on the shores of Birthday Bay that have not been investigated and may warrant testing. Only a few of the ground based EM anomalies have been followed up but there are more that require attention. All the past work needs to be put onto a digital database so that it can be carefully appraised and interpreted to provide more targets for ground based follow up.

05 Independent consulting geologist’s report

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Figure 11
The Geology of
EL22/2007
Compiled by Featherstone Geological
Consultants for this Prospectus
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Macquarie Harbour Mining Ltd prospectus

Exploration Licence 22/2007

The Tenement

Exploration Licence 22/2007 is 222 km[2] in area and is considered to cover the most prospective ground of the four licences of MHM in this region. It covers the south easterly portion of the Sorell Peninsula as shown in Figure 1 and Figure 8. The tenement boundary is more clearly presented on Figure 11. The north eastern and eastern boundary of the licence follows the coastline extending from Bryans Bay on the harbour shoreline in the north to Rum Point in the east then in a southerly direction along the shoreline of Birchs Inlet. From the southern end of Birchs Inlet the boundary runs almost due south to the southern boundary of the tenement. From Bryans Bay the western boundary of the licence then covers the strike of the geology SSW to the ocean shoreline of the peninsula at Hibbs Bay with the southern boundary being east-west from that point. The licence area lies on the Macquarie Harbour and Point Hibbs 1:50,000 map sheets and the Sarah, Birchs, and Hibbs West 1:25,000 geological map sheets.

Geology

The main stratigraphy covered by EL22/2007 is now firmly established as being of the Cambrian Period containing units which are correlates of units of the Mount Read Volcanics and other prospective geology to the north. The detailed geology is presented on Figure 11. The western contact of the belt is a major fault striking at N 15° E with Proterozoic rocks to the west and faulted strips of Late Cambrian and possibly Ordovician to the east. This contact runs from Bryans Bay in the north to the northern end of Hibbs Bay in the south where the E-W southern boundary of the licence is present. Immediately to the east of these contact rocks are fault bounded strips of early Cambrian ultramafic rocks with associated serpentinites and in places gabbroic rocks which are referred to as the Hibbs Ultramafic Belt or the Point Hibbs Melange Belt. The body of the licence is largely composed of volcano-sedimentary sequences of sandstone, siltstone, and conglomerate, with intercalated andesitic volcanics and intrusives, felsic volcanics and intrusives, and minor basalts. These are known as the Noddy Creek Volcanics. In the central to south east of the licence a synclinal basin of Ordovician sedimentary rocks forming an oval outlier with an axis 11km long striking NW-SE. This is referred to as the Timbertops Syncline and consists of sandstones and siltstones with a core of limestone. The eastern boundary of this licence closely follows the boundary of the exposed Palaeozoic rocks with the overlying Tertiary cover rocks to the east. A body of early Cambrian volcanics is interpreted to be present beneath Birchs Inlet with an outcrop between the middle of the western shore of the

inlet and the Ordovician Inlier. These are the Birchs Inlet Volcanics which are equivalents of the Mainwaring Volcanics in the Cypress Creek/ Mainwaring River area 30km to the south.

Previous Work

In general this ground has been held in the past by the same companies that held the Double Cove Belt. The major items of exploration are described below but in most instances ground follow up included some ground geophysics to verify the location and soil and/or stream sediment sampling to provide additional data. Exposures may have to be produced or improved by pitting or costeaning.

From 1956 to 1962 a JV between The Electrolytic Zinc Company of Australasia Limited and Mt Lyell Mining and Railway Co Ltd (Lyell – EZ Explorations or the LEE JV) was formed to explore the Mt Read Volcanics in the southwest of Tasmania. The first programmes were mainly airborne geophysical surveys and aerial photography followed by photogeological interpretation. Follow up was mainly by ground geophysical surveys (magnetometer, gravimeter, A.F. mag., and I.P.). This work was carried out on two Special Prospectors Licences but in 1959 these were replaced with EL3/59 (the Gordon Concession). In 1957 three Special Prospectors Licences were granted and these were replaced with EL1/59 (the Arthur Concession). These two licences were allowed to expire in 1961 and 1962. These tenements were large and covered all the prospective areas in the South West Initially the coastal areas were targeted because access was easier. In 1957 the JV investigated two prospects on the shores of Macquarie Harbour which were brought to it by a prospector. They were Gravelly Beach and Birchs Inlet, and at the same time the JV also investigated Pelias Cove in the Double Cove Belt (Scott 1957D). Birchs Inlet was visited but was declared not of interest. Three geophysical anomalies in the area of the source of the Modder River were followed up and were not of interest.

From 1965 to 1972 The Broken Hill Propriety Company Limited was active in the South West region. Initially airborne scintillometry was flown to fill in some areas that had not been covered by previous work and a new helicopter aeromagnetic survey was flown. Aerial photographs and photo mosaics were produced at a scale of 1:23,760. Some follow up geochemistry was performed within this licence area. Comprehensive stream sediment sampling was carried out on certain drainages. The Hibbs Ultramafic Belt is a group of narrow N-S striking ultramafic rocks which are readily picked out on the airborne magnetic images. They were initially identified in the headwaters of the Hibbs River in the central and northern areas of what is now EL22/2007. From 1966-68 the Hibbs Ultramafic Belt was mapped for 30km from Asbestos Point on Macquarie

05 Independent consulting geologist’s report

Harbour SSW to Hibbs Bay on the Southern Ocean coast. This mapping only assessed the asbestos potential of the rocks (Hall et al 1969). In 1968 BHP drilled a DC hole (DDH1 see Table V) to test an EM anomaly on the western margin of the ultramafics at Noddy Creek. The anomaly was caused by a 3m graphitic contact zone. Logging of the drill core recorded modest quantities of nickel sulphide (pentlandite) at several depths. Limited reconnaissance to the east and northeast of the grid located weakly mineralized intermediate intrusives (Close & Reid 1997A). Geological mapping was undertaken to define the distribution of asbestos. This work identified disseminated nickel sulphide (pentlandite) in outcrops at two localities 300m and 600m north of Helipad 3 in the Muddy Cove Creek Area. The mineralized zone 600m north is the strongest mineralization reported to date and is about 12m wide and the nickel sulphide mineral pentlandite (Fe, Ni )9S8 is present as small blebs up to 4mm in diameter and evenly distributed in a slightly sheared olive green serpentinite. Specks of pentlandite were found on shear planes cutting a serpentinite in a costean 300m north. Galena and sphalerite blebs are present in gabbro near Helipad 3 indicating that sulphide bearing solutions have penetrated this area.

Asbestos was located at locations from Asbestos Point in the north to the Spero River in the south. Additional work was then done in the Hibbs Bay area (Arnt et al 1969). In the 1970-1971 season eight DC holes were drilled to assess asbestos fibre. Vigorous attention was focussed on the Eastern Ultramafic Belt (McGregor 1972) and four of the DC holes were drilled in the Noddy Creek – Timbertops area (DHNC6-9) with hole 7 reporting disseminated sulphides in the ultramafic rock at a number of places down the hole (Langlands & Rees 1971, Langlands 1971A & 1971B). Hole 8 ended in heavily carbonated and carbonate veined ultramafic.

Asbestos is not an exploration target today however the presence of nickel sulphides is considered most prospective for nickel mineralization of the Avebury geological model.

The location data for the drill holes is presented in Table V.

Sludge sample collection was attempted but for various reasons the samples were deemed to be unreliable and of no practical use. The programme was for assessment of the potential for asbestos and the holes were designed to sample the zones of fibre at least 60m below surface.

Amoco1984-1986 (later Cyprus Gold Australia Corp.) was mainly seeking volcanic hosted massive sulphide deposits of the Rosebery or Que River/Hellyer style. Parts of EL35/83 and EL36/83 covered the ground now held by MHM. Initially Amoco carried out additional Dighem airborne EM covering selected areas. The EM survey consisted of 659 line km with 150m line spacing at a bird height of 35m and was reported on by Dighem (Fraser 1984). An aeromagnetic survey covering all the tenements was then flown by Austirex International Ltd employing a Nomad aircraft flying at 70m on a line spacing of 150m for 4,204 line kilometres. These data were processed by Pitt Research Pty Ltd and analysed by Mitre Geophysics (Bishop 1984). Prominent EM anomalies identified by this work were then followed up in the field and the new data reviewed and compared with that obtained by BHP. The ground follow up included geology, the collection and assaying of stream and soil samples, and ground magnetometry, and possibly ground EM (Ferris 1984). Work conducted during 1984-85 was focussed on tin and gold and included fieldwork on Noddy Creek and Thomas Creek. An area of anomalous copper and gold values was identified at Thomas Creek with one sample assaying 2,000 ppm Cu, 0.97g/t Au, 1,050 ppm Ba associated with a diorite intrusion. No encouragement was given at Noddy Creek. Follow up at Thomas Creek defined an area of 300m by 400m at better than 250 ppm Cu but there was no associated lead or zinc anomaly and no further work was done by Amoco (Kary 1985, Jones 1986).

In 1992 Plutonic Operations Ltd were granted EL4/92 (Muddy Cove) and EL 7/92 (High

Table V: Drilling in the Hibbs Ultramafic Belt

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Hole I.D. Co-ordinates MGA94 Az. Dep. EOH Start
mE mN Deg. Deg. m Date
DDH1 2328 368000 5301395 311.25 45 91.14 Apr 1968
DHNC2 2329 368125 5302125 257.75 45 156.06 Jan 1971
DHNC3 2330 368110 5302130 81.5 45 153.47 Feb 1971
DHNC4 2331 367925 5302295 86.5 45 130.27 Mar 1971
DHNC5 2332 367990 5302105 79 45 165.96 Apr 1971
DHNC6 2333 368110 5302320 86 45 182.88 Apr 1971
DHNC7 2334 368010 5301840 108.5 45 181.36 Apr 1971
DHNC8 2335 368125 5301810 108.5 45 155.45 May 1971
DHNC9 2336 367590 5300810 319 45 118.87 May 1971
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Macquarie Harbour Mining Ltd prospectus

Rocky Point) which covered most of the ground currently held by MHM. These tenements covered the Noddy Creek Volcanics Belt which is now identified as part of the prospective Mt Read Volcanics. In 1992-93 Plutonic considered that this belt was prospective for volcanogenic massive sulphide deposits and had not received the ground based follow up that it justified. Plutonic firstly undertook detailed checking of previous results reported by earlier explorers. Amoco had conducted airborne EM surveys but in 1993-94 Plutonic decided to carry out its own airborne EM survey using improved Geotem equipment. Delays meant this was not eventually carried out until March 1996. In the meantime Plutonic undertook reprocessing of Amoco data to form the basis for reinterpretation of the geology and an updated geological map of the tenement area. Several areas were selected for follow up but fieldwork failed to give encouragement until Thomas Creek was targeted. Plutonic identified an area for drilling which lies in EL23/2007 just south of the southern boundary of this licence. This drilling gave encouraging results and that part of the Thomas Creek Volcanics that lie within this licence should be thoroughly explored.

Pacific-Nevada Mining Pty Ltd acquired ELA9/1997 in June 1997 from Morritt Holdings Pty Ltd which covers a similar area to that of EL22/2007. The licence EL9/1998 was granted in 1998. This company considered that the ground was prospective for copper and gold mineralization (Morritt R.F.C. 1997). After reviewing previous work a reconnaissance field assessment programme of regional stream sediment and rock chip geochemical sampling was mounted. This work identified the West Baylee and Hill 99 Prospects. Grids were put in over these and ground geophysics (IP and TEM) were carried out.

Hill 99 is located just south of Asbestos Point and the target here is volcanic hosted massive sulphide base metal mineralization (VHMS) or copper-gold of the Mt Lyell model. Geochemical results defined a copper – zinc anomaly, with

some associated gold values, extending along strike to the south of an outcrop of massive pyrite/quartz on the shore. A subtle coincident IP anomaly was also identified. In 1999 a three hole DC drilling programme was designed to test this anomaly and a fourth hole to test the IP anomaly. Only three DC holes were drilled from a single drillpad totalling 668.8m. Two were fanned out to make two intersections under the base metal anomaly (296m and 255.5m) and the third to test the IP anomaly. The third hole had to be abandoned in a shear zone at 117.3m (Morritt, R.F.C. 1999B). The holes intersected mafic and felsic volcaniclastic rocks that had suffered intense chlorite/carbonate alteration. No massive sulphide mineralization was intersected but fine veins and disseminated base metal sulphides were identified in the drill core. Within the sequence fuchsite-carbonate-pyrite alteration zones are a distinctive feature. The geology intersected in the drilling is considered to be very prospective and further exploration should be undertaken in the Hill 99 area.

West Baylee is located 400m SW of the Gravelly Beach Prospect. Anomalous gold values were roughly coincident with an IP anomaly. A programme of three DC holes was completed in early 2000 (Newnham L.A. 2000A). DC hole WB001 tested a nickel soil anomaly showing that it was present over a sub outcropping serpentinite with a nickel content below that of the soil anomaly. DC hole WB002 was targeting a coincident IP and geochemical anomaly. The IP anomaly was due to pyritic carbonaceous shales and no mineralization was found to explain the geochemical anomaly. DC hole WB003 was drilled to test various rock and soil geochemistry along an ultramafic – Cambrian sediment contact. Poor ground conditions resulted in significant core loss in these three holes and the casing and drill string were not retrieved from the last hole. No significant mineralization was intersected in these holes. The Drill hole locations are detailed in Table IV and the programme reported on in Newnham 2000A. No further work on this area was reported and EL9/1998 was relinquished in June 2001.

Table IV: West Baylee Drill Hole Locations

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Hole ID Co-ordinates MGA94 Az. Dep. EOH m Start
mE mN Deg. Deg. Date
WB 001 19853 367990 5306160 280 51 278.5 Jan 2000
WB 002 19854 368210 5305840 300 50 273.2 Jan 2000
WB 003 19855 368230 5306390 292 50 272.2 Jan 2000
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05 Independent consulting geologist’s report

Discovery Nickel Ltd was granted EL22/2004 in July 2004 and then acquired and compiled available data on the area. They then undertook processing of the geochemical results. The nickel and copper anomalies in the area of the Modder River magnetic anomalies were then followed up with a field visit to collect rock chip samples. Geochemical analysis of the rock chip samples indicated that the ultramafics were not prospective for magmatic nickel-copper deposits but were favourable for the formation of hydrothermal related “Avebury Style” nickel sulphide deposits. In 2006 the board of Discovery Nickel had a change of focus away from Australia to Africa and in June relinquished EL22/2004 (Johnstone A. 2007).

Identified Prospects

The locations of the prospects listed below are shown on Figure 11.

gravelly Beach Prospect (3611)

Located approximately 1km south of Bryans Bay. Anomalous gold, chromium, and osmiridium, occurs in stream sediment from a branch of Baylee Creek. The LEE JV investigated this prospectors find in 1957 for chromite but declined to follow it up because of its small size. The chromite is probably sourced from Cambrian ultramafic rocks in the vicinity (Scott 1957 and Sampey 1957). The available data on this anomalous geochemistry should be reviewed to determine if further work should be undertaken to locate the source.

West Baylee (52)

This prospect is located 400m SW of the Gravelly Beach Prospect. Anomalous gold values were roughly coincident with an IP anomaly. A programme of three DC holes was completed in early 2000. The targeted IP anomaly was due to a pyritic black shale. It was stated that the relatively strong nickel anomalies may have been derived from the ultramafic rocks by weathering processes but the processes were not explained. It was therefore considered that they probably do not indicate the presence of economic grade mineralization but this has not been established by work to date (Newnham L.A. 200A).

the thomas Creek Prospect (3712)

The mineralization and alteration discovered at Thomas Creek may indicate the presence of a major volcanic centre with the possibility of economic porphyry style copper gold mineralization. The drilling programme mounted by Plutonic lies just south of the southern boundary of this licence but the prospective rocks extend into this licence and further work is recommended to thoroughly investigate this prospective geology. If this interpretation is correct there could be related massive sulphide

bodies in adjoining areas and future field exploration should investigate this geological model and thoroughly explore the Thomas Creek Volcanics that lie within this licence. A full description of the work undertaken is given in Close & Reid 1997A.

the Muddy Cove Creek Area (3624, 3629, & 3630)

This area forms the northern part of the Noddy Creek Area which has seen the most intense exploration activity on any part of the Hibbs Ultramafic Belt. This activity was largely involved in the assessment of the asbestos potential of the belt and focussed on the eastern arm of the ultramafics. During this work the nickel sulphide, pentlandite, was identified at three localities. The most northerly occurrence (3624), 600m north of Helipad 3, is the strongest mineralization discovered to date with blebs of sulphide in serpentinite in a zone 12m wide. The other occurrences are specks and smears on shear planes in a costean (3630) 300m north of Helipad 3 and in DC drill hole DDH1 (3629) 260m north. Further work to determine the extent of the mineralization in the north should be carried out followed by drilling to test it in depth.

hill 99 (51)

The outcrop of massive pyrite and quartz on the coast at Asbestos Point drew attention to this prospect. This area produced modest geochemical anomalies and the limited drilling programme conducted from a single drill site intersected very prospective geology but no economic mineralization. More exploration is warranted here.

the hibbs ultramafic Belt

While some work has been undertaken in the Muddy Cove area this belt is under explored and requires more attention. The belt extends over a strike length of more than 30km Previous work has been heavily biased to the application of airborne geophysical techniques. This is readily understood when the difficulties of mounting fieldwork are taken into account but it is work on the ground that finds deposits. This belt of ultramafics deserves to be adequately explored and is prospective for nickel, copper, gold, and PGM.

PgM Prospects at Bryans Bay (11250)

These are reviewed together with Spero River under the Prospects of EL23/2007. The reference Reid 1920 quotes the location of this deposit as Birchs Inlet but it shown on the map as Bryans Bay and is said to be at the northern end of the Hibbs Ultramafic Belt. An alluvial deposit on ultramafic rocks is plotted on the Sarah 1:25,000 scale geology map, in the right area, just over 1km south of the coast and a second alluvial deposit

Macquarie Harbour Mining Ltd prospectus

Figure 12 The Geology of EL23/2007

Compiled by Featherstone Geological Consultants for this Prospectus

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05 Independent consulting geologist’s report

is plotted 300m to the SSE of the first. These workings form part of the group of anomalous soil sampling results which are grouped together as Gravelly Beach.

by the Macquarie Harbour and Point Hibbs 1:50,000 map sheets and by the Hibbs West and Endeavour West 1:25,000 geology map sheets.

Geology

Proposed Exploration Programmes

Again this tenement has numerous targets that require re-examination and collation of the data into a standardized database. One of the problems encountered by previous explorers was the type of drill rig used. In all cases a small diamond rig was used which when intersecting the broken ground often found associated with mineralization failed to recover a sample. MHM will use a modern RC/diamond rig specially selected for this task. On completion of the database and detailed mapping targets will be defined for drilling. Budgets for first and second year programmes are presented in Tables X & XI in the Final Review at the end of this geological report in addition to the Directors Report.

Summary

This tenement covers a sequence of Cambrian sediments and volcanics which have been identified by the geological section of Mineral Resources of Tasmania as a southern section of the Mt Read Volcanics. Older bodies of ultramafic rocks of Proterozoic age have been forced into the Cambrian stratigraphy and Eo-Cambrian rocks are present in the east, on the shore of Birchs Inlet. The Mount Read Volcanics host a number of major mines to the north producing copper, lead, zinc, nickel, tin, tungsten, gold, silver, and PGM. Mineral exploration of the rocks present in EL22/2007 has been undertaken by a series of mining companies since the 1950s but most of the work consisted of airborne geophysical surveys with analysis and spot checking of the strongest identified anomalies in the field. Due to the limited field season and with no roads on the Sorell Peninsula field work progresses slowly and companies find new opportunities elsewhere which attract their attention. There has not been much sustained or thorough exploration on the ground and it is ironic that one of the best programmes with a high budget was the assessment of the asbestos potential of the area which is now of no interest.

Exploration Licence EL23/2007

Exploration Licence EL23/2007 is 171 km[2] in area and covers a further section of the Mount Read Volcanics extending south of EL22/2007. The northern boundary of the licence is common with the southern boundary of Licence EL22/2007. The western boundary follows the ocean coastline to the south nearly to the Wanderer River. The southern boundary is east-west and the eastern boundary follows the geological boundary between Cambrian rocks and Tertiary Rocks. The licence area is covered

This licence covers the Mount Read Volcanics extending south from EL22/2007. The areas covered are usually referred to as Hibbs Point and Spero River. The geology of the licence is presented on Figure 12. The Mt Read Volcanics extend south of the licence area which covers a section of this prospective geology that has not received the attention it warrants. Sections of the Hibbs Ultramafic Belt are present in the northwest and in this area they have been subjected to numerous faults and folding which have resulted in the strike being swung to a little east of south. At Hibbs Point the headland is formed of dolerite of Jurassic age with segments of Carboniferous, Devonian, Silurian, and Ordovician, sediments occurring along this peninsula to the east. On the mainland Noddy Creek Volcanics are present between the later Palaeozoic rocks and the ultramafics and then beyond the ultramafics the Noddy Creek Volcanics occupy the rest of the licence area. Inland from Spero Cove a body of early Cambrian gabbro is present.

Previous Work

Most of the licence area was covered by the airborne geophysical surveys carried out by the LEE JV (1956 to 1962 a JV between The Electrolytic Zinc Company of Australasia Limited and Mt Lyell Mining and Railway Co Ltd under the name “Lyell – EZ Explorations”). No major anomalies were identified by LEE for follow up in this area.

BHP was active in southwest Tasmania from 1965 – 1972 but it was not until 1971 that any exploration was carried out in this area and then a short ground survey was conducted over ultramafics at Hibbs Lagoon and Spero River as part of the assessment of the asbestos potential.

Macquarie Harbour Mining Ltd prospectus

work were then followed up in the field and the new data reviewed and compared with that obtained by BHP. The ground follow up included geology, the collection and assaying of stream and soil samples, and ground magnetometry, and possibly ground EM (Ferris 1984). Work conducted during 1984-85 was focussed on tin and gold and included fieldwork on the Thomas Creek. An area of anomalous copper and gold values was identified at Thomas Creek with a sample assaying 2,000 ppm Cu, 0.97g/t Au, 1,050 ppm Ba associated with a diorite intrusion. Follow up at Thomas Creek defined an area of 300m by 400m at better than 250 ppm Cu but there was no associated lead or zinc anomaly and no further work was done by Amoco (Kary 1985, Jones 1986).

In 1992 Plutonic Operations Ltd were granted EL4/92 (Muddy Cove) and EL 7/92 High Rocky Point) which covered most of the ground held by MHM with EL22/2007 and EL23/2007. These tenements cover the Noddy Creek Volcanics Belt which is now identified as part of the prospective Mt Read Volcanics. In 1992-93 Plutonic considered that this belt was prospective for volcanogenic massive sulphide deposits and had not received the ground based follow up that it justified. Plutonic firstly undertook detailed checking of previous results reported by earlier explorers. Amoco had conducted airborne EM surveys but in 1993-94 Plutonic decided to carry out its own airborne EM survey using improved GeoTem equipment. Delays meant this was not eventually carried out until March 1996. In the meantime Plutonic undertook reprocessing of Amoco data to form the basis for re-interpretation of the geology and an updated geological map of the tenement area. Several areas were selected for follow up but fieldwork failed to give encouragement until Thomas Creek was targeted.

The Thomas Creek prospect lies 12km NE from the mouth of the Spero River and 6km SW from the southern end of Birchs Inlet and just south of the northern boundary of EL23/2007. In this area the geology was interpreted to indicate the presence of a dioritic intrusive with associated alteration and mineralization supporting a copper-gold porphyry model for this prospect. Exploration results confirmed its prospectivity and assaying returned values up to 1 g/t Au, 3,360 ppm Cu (Close & Reid 1995). Subsequent fieldwork by Plutonic focussed on Thomas Creek which was drill tested by eight DC holes in 1996. Results were disappointing in that only low grade (0.1-0.2% Cu) disseminated pyrite- chalcopyrite mineralisation with minor vein mineralisation was intersected in a diorite intruded by micro-monzodiorite dykes. However the geology indicates potential at depth and probably elsewhere in this largely as yet undefined sub-volcanic system. Two principal rock types

were encountered in the area drilled. The primary rock is a cream and green feldspar-augite porphyritic diorite which is cut by thin dykes up to several metres in width of light brown weakly to moderately porphyritic micro-monzodiorite or andesitic intrusives. The density of dyke intrusion is variable. Identification of the rocks is difficult due to widespread potash feldspar/ silica alteration. The strongly porphyritic diorites are early with respect to all other intrusive rock types and brecciation may have accompanied emplacement. Sulphide filling of the breccia matrices is a common feature and important for localization of mineralization. Various later stage alteration and/or veining may be present including : – pyrite, chalcopyrite, magnetite, epidote, tourmaline, chlorite, sericite, and smectite, which are typically accompanied by silica. The mineralization was described as disseminated and vein hosted but vein or fracture controlled mineralization in the holes that were drilled was considered to be weak.

Table VII: 1996 Thomas Creek Drill Hole Locations

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Hole I.D Co-ordinates MGA94 Az. Dep EOH Start Date
mE mN Deg Deg m
TCD1 19166 370100 5286100 180 -45 88.9 20/05/96
TCD2 19167 369900 5286158 180 -45 127.8 26/05/96
TCD3 19168 369900 5285990 180 -45 122 31/05/96
TCD4 19169 369900 5285910 180 -45 28.5 3/06/96
TCD5 19170 369900 5285867 180 -45 100.5 4/06/96
TCD6 19171 369700 5285950 180 -45 120 18/06/96
TCD7 19172 369700 5286015 180 -45 124.4 20/06/96
TCD8 19173 369700 5286125 180 -45 94.5 25/06/96
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The 1996 drilling campaign consisted of eight holes drilled on three N-S lines spaced at 200m. Three holes were drilled on the westerly line, four holes on the central line (one hole abandoned), and one on the easterly line. All holes were oriented at an azimuth of 180° and depressed at 45°. The locations of the holes are given in Table VII. Total metreage was 806.6m. The results of the drilling are summarized in Table VIII. The drill core recovered was commonly highly broken with significant core loss which considerably reduces the reliability of the assay results. The most core loss often occurred in the first 20m of a hole but some holes suffered substantial core loss in sections throughout the hole. Sludge samples were not reported but should be collected in this situation. However once there is core loss there is no way of allowing for it. RC drilling would be much more effective for this geology at shallower depths.

05 Independent consulting geologist’s report

Table VIII: Thomas Creek Prospect – Mineralized Intervals in 1996 DC Drilling

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Interval from to Cu Au
Drill hole
(m) (m) (m) % (g/t)
TCD1 15 35 50 0.046
TCD2 58 40 98 0.084
inc. 9 50 59 0.130
inc. 27 71 98 0.100
TCD3 12 8 20 0.055
TCD3 76 45 121 0.047
inc. 8 49 57 0.065
inc. 20 60 80 0.060
inc. 5 74 79 0.097
inc. 3 94 97 0.089
inc. 9 108 117 0.090
TCD5 8 31 39 0.170
inc. 5 32 37 0.208 0.124
TCD5 7 73 80 0.052
TCD6 3 74 77 0.076
TCD6 7 94 101 0.038
TCD7 8 69 77 0.042
TCD7 6 116 122 0.039
TCD8 6 78 84 0.038
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(based on a cut off of >300 ppm Cu and <2m internal dilution) Hole TCD4 had to be abandoned at 28.5m due to ground conditions

The assay results from these first holes drilled in this area are sub economic but the results do support the proposed geological model. The magnetic anomaly associated with this mineralization is presented on Plate E in the Directors Report and this image shows that this mineralization is of significant size and extends over about 4km east to west. The limited drilling undertaken to date has not tested this deposit and thorough exploration of the Thomas Creek Volcanics is required.

Amoco Minerals Australia Ltd/Cyprus Minerals Australia Ltd carried out some geological mapping and geochemical sampling for gold and PGM in 1987 shortly before surrendering their tenements. The mapping was reported to be a big improvement over that which had been available and more work was recommended on geochemistry. The main focus for PGM was the Spero River area near its mouth. Stream sediment samples were not found to be very successful in this locality near the coast and rock chip samples gave better results. A 40mm magnetite – sulphide vein in gabbro assayed 22 ppb Pd, 250 ppm Cu, 290 ppm Ni, 580 ppm Co. A sheared ferruginous serpentinized gabbro assayed 32 ppb Pt, 580 ppm Ni, 2,200 ppm Cr. The Cyprus geologists considered there was potential for PGM and/or gold within the unexplored parts of Hibbs Ultramafic Belt but no further work was done.

Plutonic Resources Ltd was active from 1992 until 1997 with their main target being VHMS deposits. A major exploration programme was mounted at Thomas Creek, just north of this exploration licence, in 1996 and more work on this mineralization could extend into this tenement.

Pacific Nevada Mining Pty Ltd was granted EL9/98 in June 1998. The main targets were gold and PGM. The southernmost areas of this licence are covered by the northernmost areas of MHM’s tenement. No reports of exploration in this area were located.

Discovery Nickel Ltd held EL22/2004 from July 2004 but after reviewing the available data the company changed its focus from Australia to Africa and relinquished the tenement in June 2004. Their main conclusion was that the geology was not prospective for magmatic nickel – copper sulphide deposits but there was potential for hydrothermal nickel sulphide deposits similar to the Avebury – Viking deposits to the SW of Zeehan.

Identified Prospects

The location of the Spero River prospect is shown on Figure 12 and Bryans Bay on Figure 11.

PGM deposits at Spero River and Bryans Bay (11250).

These deposits are briefly described in Reid 1920. They are named Spero River and Birchs Inlet in this reference but the locality map clearly indicates that the correct name for the second locality is Bryans Bay (see under EL22/2007). The deposits are alluvial or eluvial and occur lying on serpentinized olivine bronzite peridotite or in alluvial placer deposits derived from this rock type. At Spero River the deposit is plotted as being on the north side of the river about 1km inland from the beach and 300m from the river. They were described as osmiridium deposits which is typically an alloy largely composed of the elements osmium and iridium. These are two members of the Platinum Group Metals (PGM) and are usually accompanied by variable percentages of the other members of the group. These metals were separated and identified during the first half of the nineteenth century and are listed in Table IX.

Table IX: The Platinum Group Metals

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Metal ChemicalSymbol AtomicWeight Density MeltingPoint °C
Ruthenium Ru 101.1 12.26 2,250
Rhodium Rh 102.9 12.41 1,966
Palladium Pd 106.4 12.02 1549
Osmium Os 190.2 22.48 2,700
Iridium Ir 192.2 22.42 2375
Platinum Pt 195.1 21.45 1773.5
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Macquarie Harbour Mining Ltd prospectus

The composition of the naturally occurring alloy is variable but when the osmium and iridium contents are roughly equal the resulting alloy is very hard and was used for the tips of fountain pen nibs. This alloy is rhombohedral and typically crystallizes as hexagonal prisms with a strong basal cleavage but may occur massive and cellular. Osmium is the heaviest element known. The pure PGM metals are mostly silvery white but iridium is steel grey. They are used for making alloys with each other and other metals which have exceptional properties such as : hardness, resistance to corrosion, high melting point, electrical resistance, ductility, infusibility, etc.. Platinum was first discovered in Columbia, South America in 1735 and significant deposits were identified in the Russian Ural Mountains in 1822. Russia dominated world production until 1934 then Canada became the leading producer of platinum until the Merensky Reef in Sudbury, South Africa, took over in 1954.

There is no information on these two deposits regarding what production there was from them. Tasmania was a major producer of PGM in the early twentieth century. This production was from very small operations, often only one or two men with pans. This enabled the working of isolated deposits with no infrastructure and difficult access. The main problem would have been the supply of food but the transport of the product was not a problem.

the thomas Creek Prospect (3712)

The mineralization and alteration discovered in the Thomas Creek Volcanics may indicate the presence of a major volcanic centre with the possibility of economic porphyry style mineralization. Further work is recommended to thoroughly investigate this area. If this interpretation is correct there could be related massive sulphide bodies in adjoining areas and future field exploration should investigate this geological model and thoroughly explore the Thomas Creek Volcanics that lie within this Licence. A full description of the work undertaken is given in Close & Reid 1997A.

Proposed Exploration Programmes

Budgets for first and second year programmes are presented in Tables X & XI in the Final Review at the end of this geological report in addition to the Directors Report.

Summary

The ground covered by EL23/2007 did not produce any big EM responses and therefore there has been very little ground based exploration in this area. The tenement covers the Extension of the Mount Read Volcanics as they strike south. The larger EM anomalies in other areas did not relate to economic mineralization and this ground is prospective and warrants adequate exploration. The mineralization discovered at Thomas Creek is considered to be very significant and requires more exploration. The Hibbs Ultramafic Belt in the west should be properly assessed. The previous data on the tenement needs to be placed into a digital database and reviewed in detail.

The various company reports generally make little mention of PGMs and exploration specifically targeting them may not be warranted. The occurrence of them should be kept in mind, especially considering the unusually large eluvial deposits that can be found in this area of Tasmania.

Final Review

The gold projects of Macquarie Harbour Mining Ltd in the Gladstone area were discovered and actively prospected during the late Nineteenth Century. Some near surface zones were mined but the presence of strong sulphide mineralization accompanying the gold prevented treatment of the ore. Since that time very minor on site exploration has been undertaken. The known gold lodes require assessment employing modern drilling equipment to determine the extent of the reefs along strike and down dip and to obtain reliable grade and thickness data. It also seems likely that by employing current exploration techniques there is a good chance of discovering lodes that were missed by the early miners or other styles of gold mineralization that were not attractive to them such as vein deposits. The identified gold deposits are all located in EL2/2007 which is 217 km[2] in area and it is possible that primary gold mineralization could be present in some areas of EL3/2007.

The alluvial tin deposits in the Gladstone area were numerous and of various ages. This usually means at various depths. Detailed information on past work and production statistics is generally non existent since most of the activity was during the period from 1880 to1930 and was carried out by private miners working in small numbers. These miners depended on discovering a tin lead and then following it.

05 Independent consulting geologist’s report

Some areas of interest may be identified from published information but basic exploration will be necessary to locate and sample the resources which remain. MHM staff are experienced in assessing alluvial deposits and consider that the drilling of unconsolidated deposits is not reliable enough for establishing ore reserves. The most reliable method is the processing of bulk samples through a small relocatable plant which has the advantage of establishing the recoverable grade of a mineralized layer. The identified alluvial tin deposits are present in EL3/2007 which is 204 km[2] in area and in EL2/2007 of 217 km[2] .

MHM have an experienced exploration team and the programmes and budgets that have been developed for these gold and tin prospects are considered by Featherstone Geological Consultants to be well conceived and adequately financed. MHM has supplied outlines of the proposed programmes which have been included in the section under each of tenements and budgets for these programmes are given in Tables X & XI below. These two tables provide alternative budgets for two possible total subscriptions to the float. The budgets provide sufficient funds to conduct exploration, meet expenditure and rental commitments, and keep the tenements in good standing.

Modern Exploration of the southern extensions of the Mount Read Volcanics began in 1956 with a joint venture between The Electrolytic Zinc Company of Australia and Mt Lyell Mining and Railway Co. Ltd. from 1956 to 1962. Since that time a number of companies have held ground in the area and carried out some exploration. Due to the very heavy rainfall along the West Coast of Tasmania and the resulting vegetation cover these programme made maximum use of airborne geophysical surveys. The results from these surveys were analysed and targets selected for field follow up. While the strongest anomalies were followed up by mapping, soil sampling, ground geophysics etc. the short field season meant that exploration advanced slowly and over time other exploration opportunities became available to the companies. Due to the lack of roads drilling was not readily undertaken so very little was done and what was done was not very successful. Overall past exploration has been unbalanced with a strong bias to airborne geophysical techniques and only modest field work. MHM intends to employ a suitable drill rig that can perform RC and DC drilling and is compact and preferably self propelled.

Table X: Exploration Budget Summary Assuming Minimum Subscription

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Project Name Exploration Budget Budget
and Tenement No. Programme Year 1 Year 2 Totals
Gladstone Gold Historical data compilation 265,000 285,000 550,000
Project Reinterpretation of geophysics and
EL2/2007 compilation of new MRT data
Selection of drill targets
RAB drilling for geochemical anomalies
RC drilling to test anomalies and extensions to
previous workings
Musselroe Tin Project Assessment of previous data 287,000 418,000 705,000
EL3/2007 Mapping at 1:2500 scale
Bulk sampling
Resource definition
Strahan Nickel and Geophysical interpretation 92,000 113,000 205,000
Zinc Geological mapping
EL20/2007 Infill geophysics on target areas
Double Cove Belt Geological mapping at 1:2500 106000 189000 295,000
Copper Gold Project Soil, stream sediment & rock chip
EL21/2007 geochemistry
Ground geophysics
Drilling selected anomalies
Hibbs Nickel Gold Geological mapping 133,000 277,000 410,000
PGM Soil, stream sediment & rock chip
Birch’s Polymetalic geochemistry
Projects Ground geophysics
EL22/2007 Drilling selected anomalies
Thomas Creek Geological mapping 113000 152000 265,000
Copper-Gold Project Soil, stream sediment &rock chip geochemistry
EL23/2007 Ground geophysics
Drilling selected anomalies
totals 996,000 1,434,000 2,430,000
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Macquarie Harbour Mining Ltd prospectus

Table XI: Exploration Budget Summary Assuming Maximum Subscription

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Project Name Exploration Budget Budget
and Tenement No. Programme Year 1 Year 2 Totals
Gladstone Gold Project Historical data compilation 295,000 470,000 765,000
EL2/2007 Reinterpretation of existing geophysics and
compilation of new MRT data
Selection of drill targets
RAB drilling for geochemical anomalies
RC drilling to test anomalies and extensions to
previous workings
Musselroe Tin Project Assessment of previous data 305,000 1,245,000 1,550,000
EL3/2007 Mapping at 1:2500 scale
Bulk sampling
Resource definition
Plant construction & commissioning
Strahan Nickel and Zinc Geophysical interpretation 136,000 189,000 325,000
EL20/2007 Geological mapping
Infill geophysics on target areas
Birthday Bay Copper- Geological mapping at 1:2500 183,000 322,000 505,000
Gold Project Soil, stream sediment & rock chip
EL21/2007 geochemistry
Ground geophysics
Drilling selected anomalies
Hibbs Nickel, Gold, PGM Geological mapping 210,000 410,000 620,000
Birch’s Polymetallic Soil, stream sediment & rock chip geochemistry
Projects Ground geophysics
EL22/2007 Drilling selected anomalies
Thomas Creek Copper- Geological mapping 173,000 317,000 490,000
Gold Project Soil, stream sediment & rock chip
EL23/2007 geochemistry
Ground geophysics
Drilling selected anomalies
totals 1,102,000 3,153,000 4,255,000
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There are already identified areas requiring more drilling and a number of geochemical anomalies that have not been satisfactorily explained. The really strong geophysical targets have been investigated to some degree, but these strong anomalies are often false and the subtler anomalies have not received the attention they deserve. The Company intends to focus on effective field work and considers that this approach will result in more success than has been achieved in the past.

The Company’s four tenements on the West Coast of Tasmania cover geological units which have now been reliably identified by the Geological Survey Division of Mineral Resources of Tasmania as being part of the Mount Read Volcanics. These very prospective rocks are host to many of the well known mines on the West Coast that are or were significant deposits of a variety metals. The four exploration licences cover a total area of 741 km[2] .

MHM have an experienced exploration team and the programmes and budgets that have

been developed for these base and precious metal prospects are considered by Featherstone Geological Consultants to be well conceived and adequately financed. MHM has supplied outlines of the proposed programmes which have been included in the section under each of tenements. Budgets for these programmes are given in Tables X & XI. These two tables provide alternative budgets for two possible total subscriptions to the float. The budgets provide sufficient funds to conduct exploration, meet expenditure and rental commitments, and keep the tenements in good standing.

Featherstone Geological Consultants has given permission for this Independent Geological Report to be included in the published Macquarie Harbour Mining Ltd Prospectus and within the context of that Prospectus.

Signed

Dr A.C.gifford Featherstone geological Consultants

05 Independent consulting geologist’s report

grADe NoMeNCLAture AND ASSAy DAtA

from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.

Grade:

The grade is the concentration of a particular element. In the case of gold it is expressed in grams per tonne (g/t). Base metals are quoted in parts per million (ppm) or percent (%). In alluvial gold mining grades are quoted in grams per cubic metre (g/m[3] ). With certain geochemical techniques gold content is quoted in parts per billion (ppb) or even parts per trillion (ppt). (Note a content of 1 g/t is 1ppm).

Grade of: The grades quoted for mineralization “in situ” are the grades of the

Mineralization:

mineralised zone calculated from the results of sampling. They do not take into account possible dilution of the ore by barren rock during mining and hauling.

Head Grade:

The grade of ore supplied to the mill including the effect of any dilution occurring during mining and hauling.

Recovered Grade:

The grade obtained by dividing the quantity of metal recovered by the tonnage treated. This ignores losses in tailings.

Tailings Grade:

The metal content of the tailings which are left after treatment of the ore. This is the metal which is not recovered.

All grades are quoted in metric units and data in imperial units have been converted using the following conversion factors:

1 long Ton = 1.016047 tonnes 1 ounce troy = 31.103grams 1 dwt/Ton (L) = 1.53061 g/t. 1 oz/cu.yd = 37.07978 g/m[3]

reSourCe AND reServe NoMeNCLAture

The following definitions are extracts from the 2004 Edition of the JORC Code.

Mineral Resources

A ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are subdivided, in order of increasing geological confidence, into Inferred, Indicated, and Measured, categories.

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.

A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity.

Ore Reserves

An ‘Ore Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are subdivided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves.

A ‘Probable Ore Reserve’ is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

A ‘Proved Ore Reserve’ is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques

Macquarie Harbour Mining Ltd prospectus

gLoSSAry oF teChNiCAL terMS

Terms not included in the glossary are used in accordance with their definition in the Concise Oxford Dictionary.

AC:	Air Core drilling – a rotary percussion RC technique in which the central part of the hole is not pulverised and forms
	a core which breaks off irregularly and provides more geological information than can be obtained from the usual
	percussion chips.
Adamellite:	A coarse grained crystalline igneous rock of the granite family, consisting of approximately equal proportions of
	plagioclase feldspar and orthoclase feldspar withquartz and minor mica.
Adit:	Horizontal tunnel from the surface into a mine. The lowest possible adit is usually driven to provide natural drainage
	to the workings.
Aeolian:	Sediments formed of mineralgrains transported and deposited bywind.
Ag:	The chemical symbol for the metallic element silver.
Analysis:	Laboratory determination of the content of a specifed element in a sample. Although the accuracy and the sensitivity
	maybe evengreater than in agenuine assaythe results do not have the sameguarantee as an assay.
Alluvial:	Transported and deposited bythe action of rivers and streams.
Amygdaloidal:	A rock containing gas cavities flled with secondaryminerals – amygdales.
Anomalous:	Deviatingfrom the normal: usuallyrefers to signifcant or unusual data.
Anticline:	The form of strata folded into an arch-like attitude.
Aplite:	A fnegrained dyke rock formed ofquartz and alkali feldspar.
Apparent Width	The width of a vein or other geological structure measured down a drill hole which is not at right angles to the
	geological contacts.
Archaean eon:	The frst of the three eons Archaean, Proterozoic, and Phanerozoic, ranging in age from approximately 4,800Ma to
	2,500Ma.
Arenaceous:	A sedimentaryrock mainlycomposed of sand sizedgrains.
Arsenic:	A metallic element.
Arsenopyrite:	Iron sulpharsenide FeAsS(Mispickle)theprincipal ore of arsenic.
As:	The chemical symbol for the metallic element arsenic.
Assay:	Accurate laboratory determination of the concentration of a given element in a sample. The term should be reserved for a particular class of analysis for which an assay certifcate is issued by the laboratory. Current usage tends to refer
	to any geological orgeochemical analysis as an assay.
Au:	The chemical symbol for the metallic elementgold.
Auriferous:	BearingGold.
Axial Plane:	When applied to a fold refers to theplane containingthe axis of the fold and the hinge lines of the strata formingthe fold.
Axis:	When applied to a fold refers to the line about which the beddinghas been symmetricallyfolded.
Banded ironstone	Sedimentary ironstone, thinly to massively layered.
Formation:
Basalt:	A fnegrained mafc volcanic lava.
Base Metal:	Anyof the non-precious metals - usuallyrefers to nickel,copper,lead and zinc.
Basement:	Usuallythe crystalline rocks underlyingthe sediments and regolith.
Basin:	A tectonicallydepressed area in which sediments mayhave been deposited.
Batholith:	A verylargegranitic intrusion.
Battery (Mining):	Refers to a battery of stamps which are primitive machines for crushing ore. Because of their simplicity they can be
	fairlyeasilycleaned upafter use and can therefore be used for small crushings.
Bed:	The smallest distinguishable unit of a sedimentaryor fragmental volcanic succession.
Bedding:	The characteristics of a succession of beds.
BiF:	Banded Ironstone Formation.
BLeg:	Stands for “Bulk Leach Extractable Gold” and refers to a very sensitive analytical technique that can give a detection of
	0.00005g/t Au or 0.05ppb Au.
Biotite:	A common rock formingmica dark brown to black in colour.
Breccia:	A rock formed of angular fragments.
Bulk Sample:	A large sample -possiblyof several tonnes.
Cambrian Period:	The earliest period of the Palaeozoic Era extending from 545Ma to 490Ma. Originally thought to contain the earliest
	fossils and beingfollowed bythe Ordovician Period.
Carboniferous	The second youngest period of the Palaeozoic Era extending from 354Ma to 298Ma coming after the Devonian and
Period:	before the Permian Period.
Cassiterite:	Theprincipal ore of tin SnO2formingdark brown to black crystals.
Chalcopyrite:	Theprincipal ore of copper CuFeS2formingbright brassy yellow crystals.
Channel Sample:	A sample obtained bycuttinga regular channel across a rock face.

05 Independent consulting geologist’s report

Chert:	Hard fintysedimentaryrock comprised chiefyof silica.
ChipSampling:	A series of chips taken in a continuous line or at regular intervals across an exposure.
Concentrate:	Many mines do not undertake smelting but produce a concentrate of the sought after mineral from the ore which is
	sold to a smelter.
Costean:	A trench or pit through the surface soil or debris to expose the bedrock or undisturbed weathered rock for mapping and
	sampling.
Chlorite:	Typically green micaceous minerals
Collar	The drill hole collar is thepoint at which drillingcommenced.
Countryrock:	Rock surroundingand containingmineralized rock units.
Craton:	An old and stable area of the earths crust.
Cu:	The chemical symbol for the metallic element copper.
Cupola:	An area of upward doming in the upper contact of a granite which has resulted from the escape of mineralizing fuids
	from thegranite.
DC:	Diamond Core drilling. A method of obtaining a cylindrical core of rock by drilling with a diamond impregnated annular bit, or a bit with small diamonds mounted on it. This grinds away the rock and the cuttings are fushed back to the
	drilling machine with water. The core gathers in a core tube which may be able to be pulled back to the machine to retrieve the core when it flls up.
Decline:	A slopingtunnelprovidingtrackless access to a mine or ore body.
Depressed:	Refers to the angle from the horizontal of a drill hole.
Devonian Period:	The fourth oldest period in the Palaeozoic Era extending from 410Ma to 354Ma coming after the Silurian and before
	the Carboniferous.
Dextral:	In structuralgeologyrefers to displacement to the right(c.f. sinistral).
Diorite:	A coarse grained plutonic rock of the granite family composed of plagioclase, hornblende, pyroxene, and possibly minor
	quartz.
Dip:	Angle of inclination of rock strata or othergeological features from the horizontal.
Dolerite:	Mediumgrained dark mafc igneous rock formingminor intrusions.
Dolomite:	A mineral Ca Mg(CO3)2commonlyfound in limestones and also a rock mainlycomposed of this mineral.
Dyke:	A tabular body of igneous rock that was injected into a fssure when molten and that cuts across the structure of
	adjacent rocks.
eluvial:	Weathering products and residual material (e.g. gold nuggets) formed in place and which have not suffered signifcant
	transport.
electromagnetic	A geophysical surveying technique which is designed to locate conducting sulphide bodies.
Survey (eM):
eo-Cambrian:	The boundary between the late Neoproterozoic rocks and Cambrian rocks is not clear cut and undated rocks that are
	similar and conformable to the Cambrian rocks and which maybe earlyCambrian are referred to as Eo-Cambrian.
erosion:	The wearingawayof rock and soil byweatheringand transport.
Facies:	A lateral subdivision of a stratigraphic unit delineatingrocks of differingcomposition.
Fault:	A fracture or fracture zone within the rock strata on which movement has occurred.
Fluorite:	The mineral calcium fuoride CaF2.
Fold:	The older rocks of the earths crust have often been subjected to stress during their history and this may result in strain
	in the form foldingof strata or otherplanar structures.
Foliated:	Having a laminated structure due to the segregation and orientation of mineral grains during deformation which
	results in the rock fracturingalong preferredplanes.
Footwall:	The mass of rock beneath a fault,vein,lode,or bed of ore.
gabbro:	Coarsegrained dark mafc igneous rock forminglarge intrusions.
galena:	The silvery greyore mineral lead sulphide PbS.
geochemical	The location of economic grades of mineralization by the detection of trace amounts of elements dispersed by primary
exploration:	and secondary processes in rocks and soils.
geophysical	Techniques of remotely sensing mineralization by its physical properties or those of associated geological features.
exploration:
gossan:	The weathered surface expression of sulphide mineralization - composed of hydrated oxides of iron.
granite:	A coarsegrained crystalline igneous rock,consistingessentiallyof orthoclase feldspar andquartz with minor mica.
granodiorite:	A coarse grained crystalline igneous rock of the granite family, consisting of plagioclase feldspar and quartz with
	subordinate orthoclase and minor hornblende and mica.
granulite:	A regional metamorphic rock consistingof even sized interlockingmineralgrains of thepyroxene hornfels facies.
greenstone:	A feld term commonlyapplied to metamorphosed Archaean mafc and intermediate rocks.
greisen:	Apneumatolyticallyalteredgranite mainlycomposed ofquartz,mica,and topaz.
grid:	Systematic arrayofpoints or lines at or alongwhich feld observations are made.

Macquarie Harbour Mining Ltd prospectus

hangingWall:	The mass of rock above a faultplane,vein,lode,or bed of ore.
horizon:	Aparticular bed or bedding plane in a stratigraphic sequence.
hydrothermal:	Of orpertainingto heated waters which transport minerals in solution.
imagery:	Computergenerated images that assist in interpretingdata.
in Situ:	In its naturalposition orplace – has not been transported.
indicator	In the search for kimberlite pipes, indicator minerals include: pyrope garnet, picroilmenite, chrome-diopside, kimberlitic
Minerals:	zircon, chromite and diamond. When stream sediments contain these minerals in association it indicates a possible
	kimberlite occurrence in the vicinity.
induced	A ground based electrical geophysical surveying technique that detects disseminated sulphides.
Polarisation(iP):
intercept:	In drillingrefers to aparticular section of the drill hole and is defned byits distance down the hole and length.
intermediate:	An igneous rock containingbetween 30% and 60% dark minerals.
intersection	Refers to the length of mineralization or other geological unit intersected in a drill hole.
(drilling):
intrusive:	An igneous rock formed bythe forcible emplacement of magma and its subsequent solidifcation bycooling.
isoclinal:	With respect to folding refers to a style of folding that is particularly characteristic of Archaean tectonics in which particular strata are tightlyfolded with longfat limbs that areparallel to each other with numerous adjacent folds.
jorC:	Joint Ore Reserve Committee formed of representatives from a number of bodies representing the mining and
	exploration industryand responsible for establishingthe criteria for thequotation of ore reserves and resources.
joint venture:	A popular agreement between exploration companies whereby one partner gains interest in a particular exploration area byfnancingand conductingexploration.
Lamprophyre:	A mafc rich igneous rock typicallyoccurringas dykes or other small intrusions.
Laterite:	Residual soil and weathering profleproduced bytropical weatheringconditions.
Lead:	Accumulations of heavy minerals that developed in a fowing stream or river. They are typically found at the base of the alluvial profle and may be narrow and winding in smaller streams or relatively wide and fat in larger rivers. Those
	in bigger and older rivers are called Deep Leads. The two metals most commonly won from alluvial deposits are gold
	and tin.
Level:	With shaft access to a mine the ore is developed by establishing “Levels” at regular intervals which are comparable to foors in a tall building.
Leaching:	The solution and transport of an element or compound.
Lithology:	The character and composition of a rock.
Lineament:	An extensive rectilinear or curvilinear feature commonly identifed on aerial photographs and typically resulting from a
	fault or contact zone.
Lode:	A structure,usuallya fault,alongwhich mineralization is found.
Lode Drive:	A tunnel driven along the lode to expose the mineralization for sampling. The drives are usually put in spaced at depths that are optimum for extracting the ore from the block between the lode drives. The lode drive usually forms the frst
	stage of the miningsequence to stope the ore.
Mafc:	Referringto igneous rocks composed dominantlyof iron and magnesium minerals.
Magnetic Survey:	Geophysical survey which records the magnetic intensity of the earth’s feld and any local distortions caused by
	immediatelyunderlyingrocks.
Massive	A term referring to deposits consisting mainly of metal sulphides which are formed by volcanic processes.
Sulphide:
Metamorphism:	Aprocess bywhich rocks change structure andproperties from the effects of heat andpressure over time.
Metasomatism:	A chemical change in the composition of a rock effected bycirculatingfuids from some other source.
MgA:	Map Grid Australia – the geocentric datum based grid set up in 1994 and generally adopted in 2000 which complies
	with international standards and facilitates the use of GIS databases.
MMi:	Mobile Metal Ion – ageochemical technique that can detect blind bodies of mineralization.
Neoproterozoic:	The youngest era of the three eras forming the Proterozoic Eon extending from about 1,000Ma to 545Ma.
	Neoproterozoic III forms the third andyoungestperiod of this era which is followed bythe Cambrian Period.
oligoclase:	A more sodic member of theplagioclase series of feldspars.
open Pit:	Method of miningby pittingfrom the surface which allows maximum mechanisation of the operation.
open Cut:	A long narrow open pit particularly as employed in open cast coal mining but also in metal mining when the shape of
	the ore bodyis longand narrow.
open Stope:	In earlier days, when less safe work practices were used, underground stoping along a mineralized lode was often
	continued up to the surface. The ore was extracted underground and not mined from the surface. The result is a
	dangerouslysteepsided hole in theground which is referred to as an open stope.
ordovician	The second oldest period in the Palaeozoic Era extending from 490Ma to 434Ma coming after the Cambrian and
Period:	before the Silurian.
orthogneiss:	Agneiss derived from an igneous rock.

05 Independent consulting geologist’s report

outcrop:	An exposure of bedrock at the surfaceprojectingthrough the overlyingsoil cover.
PAB:	Percussion Air Blast drilling employing a hammer to break up the rock and air to bring the drill cuttings up to the surface
	between the drill rods and the walls of the hole. The quality of the technique depends to some extent on the rock being
	drilled but open hole drillingis not usuallyconsidered to be satisfactoryfor ore reserve assessment.
Panning:	The concentration of heavy particles in soils, stream sediments, and crushed rocks, by washing in a pan. In the case of
	gold it provides a very sensitive exploration tool that has been the basis of historical gold exploration and is still used because itgives an immediate result in the feld that canguide further exploration.
Pegmatite:	A verycoarsegrained rock typicallyfound on the margins ofgranites.
Pelite:	A metamorphosed argillite i.e. a rock originatingas mudstone or shale.
Percussion Drilling:	Method of drilling which utilises a rotating hammer action to penetrate rock and break it up into cuttings which are fushed out.
Pneumatolytic:	Refers to the stage of differentiation and alteration between pegmatitic and hydrothermal when gas phases are
	believed to bepresent.
Phenocrysts:	The large crystals in aporphyritic rock.
Phanerozoic eon:	The third of the three eons Archaean,Proterozoic,and Phanerozoic,rangingin age from approximately545Ma to thepresent
Phosphorite:	Aphosphorous rich sedimentaryrock that can formphosphorous ore.
Pillars:	Blocks of rock, possiblycontainingore,which are left to support theground while ore is extracted.
Plunge:	The inclination of a fold axis or other linear feature in the verticalplain.
Primary	Mineralization situated below the depth of weathering and unaffected by surface processes.
Mineralization:
Pneumatolytic:	Agaseousphase of differentiation and alteration betweenpegmatitic and hydrothermalprocesses.
Porphyritic:	A rock with conspicuous large crystals in a fnergrained matrix.
Project	An administrative entity covering tenements, legal agreements, exploration programmes, budgeting etc which is based
(exploration):	on one or moreprospects.
Prospect:	An area ofground defned for exploration.
Proterozoic eon:	The second of the three eons Archaean, Proterozoic, and Phanerozoic, ranging in age from approximately 2,500Ma
	to 545Ma.
Pyrite:	Ironpyrites FeS2.
Pyrrhotite:	Magnetic Pyrites.
Quartz:	Silicon dioxide,the most common of the rock formingminerals.
rAB:	Rotary Air Blast drilling employing a blade or roller bit. with the drill cuttings being brought to the surface by the air fow between the drill rods and the wall of the hole. Usually considered to be an economical technique for the early
	stages of exploration.
rC:	Refer to Reverse Circulation Drilling.
reef:	Generally a narrow (less than 3m) tabular body of quartz which may carry mineralization and which is typically found
	alonga lode.
regolith:	The mantle of loose incoherent rock material that forms the surface of the land.
reverse	Method of drilling whereby rock chips are recovered by compressed air returning to the surface inside the drill rods. This
Circulation	method results in a clean and accurate sample if the drill rods are blown out after drilling each sample interval.
Drilling:
residual:	When applied to weathering, refers to material left essentially in place after solution and removal of other pre-existing
	minerals in the rock.
retention	This Tasmanian category of licence allows prospects which have had a signifcant amount of work carried out on them
Licence:	to be retained without further work for a limitedperiod.
rotary Air Blast	A method of drilling rock by means of a rotating bit and compressed air which carries the drill cuttings to the surface
Drilling (rAB):	between the drill rods and the walls of the hole. This can mean there is some contamination of the sample.
S:	The chemical symbol for sulphur. Combines with metals to form sulphides.
Sandstone:	A clastic sedimentaryrock composed ofgrains of sand more or less frmlycemented bya matrix of silt,clay,or other cement.
Scheelite:	Calcium tungstate,CaWO4,an ore mineral of tungsten.
Schistosity:	A foliation and fssilitydeveloped in metamorphic rocks due to theparallel orientation ofplatyminerals such as micas.
Sediment:	Rocks formed bythe accumulation of the weathering products ofpre-existingrocks.
Sericite:	A fnegrained varietyof micagenerallyformed bymetamorphicprocesses.
Shaft:	Usually a vertical excavation containing a cage for moving men, a skip for hauling ore, a ladder way, and pipes and
	cables to supply power and water to the mine.
Shale:	A laminated sediment in which the constituentparticles arepredominantlyclay.
Shear:	Fractures at an acute angle to the applied force.
Shoot:	A highgrade zone of mineralization.
Silica:	Silicon dioxide SiO2– c.f.quartz.

Macquarie Harbour Mining Ltd prospectus

Sill:	An igneous intrusion of uniform thickness intrudedparallel to bedding planes or schistosity
Siltstone:	Composed ofparticles that fner than sand but coarser than clay.
Silurian Period:	The third oldest period in the Palaeozoic Era extending from 434Ma to 410Ma coming after the Ordovician and before
	the Devonian.
Sinistral:	In structural geology refers to displacement to the left. Therefore on crossing a sinistral shear the rocks will have been
	moved to the left.
Skarn:	Typicallythe mineral assemblage resultingfrom the metasomatism of a limestone.
Slate:	A fnegrained metamorphosed mudstonepossessinga slatycleavage allowingthe rock to be split into thin sheets
Sluicing:	A simpleprocess of concentratingheavyminerals in an ore.
Soil Sampling:	A geochemical exploration technique in which low concentrations in soils of the element sought, or an element that
	occurs with it,are used toguide further exploration of unexposed bedrock.
Sphalerite:	Zinc sulphide ZnS the ore mineral of zinc.
Splays:	Divergent small faults associated with major faults.
Sn:	The chemical symbol for Tin.
Stannite:	Tinpyrites Cu2FeSnS4. Steelgreywhenpure but zinc is oftenpresent to some degree.
Stock:	A bodyofplutonic rock usuallyless than ten kilometres across with steepsides.
Stockwork:	A network of intersectingveinlets in the countryrock.
Strata:	Layers of sediment or lava,individuallyidentifable,deposited one upon the other.
Stratigraphy:	The succession ofgeological strata and the studythereof.
Stope:	Mine excavations from which ore is being,or has been,extracted
Stoping:	Theprocess bywhich ore is broken and removed from a mine
Stream Sampling:	A geochemical sampling technique based on the assumption that if traces of an element, such as gold, occur in a
	stream sediment,theyhave been derived from the area that the stream drains.
Strike:	The direction or bearingof a bed or layer of rocks in the horizontalplane.
Stringer:	A verynarrow irregular vein,commonlyofquartz,occurringin a rock.
Sulphides:	Minerals containinga metal or metals,and sulphur.
Supergene:	Ore minerals that have been mobilised and redeposited bydescendingwater often resultingin enrichment.
Syncline:	The form of strata downfolded into a U-shape.
Syngenetic:	Refers to a mineral deposit formed at the same time as the enclosingrock.
tectonic:	Pertainingto crustal movement and deformation of rocks.
tertiary:	The frst period in the Cainozoic Era and after the Cretaceous Period extending from 65Ma to 2Ma and followed by
	QuaternaryPeriod.
tholeiitic:	Refers to a type of basaltic magma and the rocks produced from it. The typical tholeiitic basalt contains little or no
	olivine andproduces oversaturated differentiates.
throw:	The relative movement on a faultplane either in distance or direction or both.
tier:	Relativelyfat topped mountain ranges typical of Tasmania.
topaz:	An aluminium silicate mineral with fuorine found in pegmatites that can form good clear prismatic crystals which may
	be coloured and be used as a semi-preciousgemstone.
triassic Period:	The frstperiod in the Mesozoic Era extendingfrom 251Ma to 205Ma and is after the Permian and before theJurassic Period.
tributer:	A self employed miner thatpays to have access to a mine and extracts his own ore for sale.
true Width:	The width or thickness of a vein or other formation measured at right angles to its sides. When the angle of incidence of
	a drill hole to a vein cannot be ascertained,the width of the intersection is termed the “apparent width”.
tungsten:	A steel grey heavy metallic element with a high melting point. Used for the flaments in electric lamps and in steel
	alloys and the veryhard tungsten carbide. Also referred to as Wolfram.
ultramafc:	Igneous rock composed chiefyof mafc minerals and with a relativelylow silica content.
unconformity:	The contact between sedimentaryrocks which were deposited with different attitudes at different times.
underlay:	An old term to describe and measure the dipof a lode. An underlayshaft is an inclined shaft that follows the lode.
vein:	A narrow fssure or fault along which minerals have been deposited or mineralising solutions have permeated to alter
	and deposit minerals in the wall rock.
volcanic:	Rocks and other features resultingfrom the eruption of a volcano.
W:	The chemical symbol for the metallic element tungsten.
Wallrock:	The rock which forms the walls of the vein or lode.
Weathered:	Refers to material which has been effected bythe chemical and orphysical actions of the atmosphere.
Winze:	A small usuallysteeplyinclined internal shaft mined down togain access below a level.
Wolframite:	The common ore of tungsten(Fe,Mn)WO4chocolate brown to black.
Workings: Zn:	Underground and surface excavations used for the exploration,development,and removal of ore. The chemical symbol for the metallic element zinc.

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Solicitor’s report
on mining tenements
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Macquarie Harbour Mining Ltd prospectus

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168 Collins Street hobart tasmania 7000 Australia gPo Box 146 hobart 7001 DX hobart: 114 telephone: 03) 6224 4133 Facsimile: 03) 6224 4166 email: [email protected]. au Website: www.simwolf. com.au ABN 69 541 148 321

21 September 2007 The Directors Macquarie Harbour Mining Ltd C/ – Harden East & Conti Level 1 /20 Kings Park Road WEST PERTH WA 6005

71470 sde

Dear Sirs

SoLiCitor’S rePort oN MiNiNg teNeMeNtS

Overview

This report has been prepared for inclusion in the prospectus to be issued by Macquarie Harbour Mining Limited (“the Company”) dated on or about 5 October 2007 to raise $4,000,000.00 through the issue of 20 cent shares with the provision to accept oversubscriptions of a further $2,000,000.00 (the “Prospectus”).

We note that the Company changed its name from Macquarie Mining Limited on 22 May 2007.

We have been requested to report on the mining tenement interests to which the Company is entitled or has acquired rights in (“the Tenements”). Details of these mining tenement interests are listed in the attached Schedule of Tenements (“the Schedule”) which, together with the notes to the Schedule (“the Notes”) forms part of this report.

We advise that the Tenements are located in Tasmania and are exploration licences which are either held, or have been applied for, by Goldstock Mining NL (“Goldstock”) and further that the Company has acquired the Tenements by purchasing all of the issued shares in Goldstock.

Searches

We conducted searches of the Tenements listed in the Schedule in the registers including the electronic register maintained by Mineral Resources Tasmania (“MRT”) on or about June 2007 and have subsequently confirmed the status of the Tenements with MRT. We have also conducted searches of the Tenements in the electronic register of native title claimant applications maintained by the National Native Title Tribunal (“NNTT”) on or about 21 June 2007.

As a result of those searches and subsequent discussions and investigations with MRT, we consider that this report provides an accurate statement, as at the date of the respective searches, as to the status of the Tenements and the interests of the Company in those Tenements. We have assumed the information in the registers maintained by MRT and NNTT is accurate. The references in the Schedule to the areas of the Tenements are taken from details shown on MRT’s and NNTT’s electronic registers. No survey was conducted to verify the accuracy of Tenement areas.

06 Solicitor’s report on mining tenements

General Information about Mining Tenements – Exploration Licence (“EL”)

The Mineral Resources Development Act (TAS) 1995 (“the Act”) authorises the holder of an EL to enter on to, and explore the type of minerals specified in the EL. The different categories of minerals applicable to each EL are set out below.

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Tenement Number Category Nos. Type of Minerals
Licence EL2/2007 5(b) Prescribed precious stone
3 Construction minerals
1 Metallic minerals
5(c) Prescribed semi-precious stone
Licence EL20/2007 5(b) Prescribed precious stone
3 Construction minerals
1 Metallic minerals
5(c) Prescribed semi-precious stone
Licence EL21/2007 5(b) Prescribed precious stone
3 Construction minerals
5(a) Industrial minerals
1 Metallic minerals
5(c) Prescribed semi precious stone
Licence EL22/2007 5(b) Prescribed precious stone
3 Construction minerals
5(a) Industrial minerals
1 Metallic minerals
5(c) Prescribed semi-precious stone
Licence EL23/2007 5(b) Prescribed precious stone
3 Construction minerals
5(a) Industrial minerals
1 Metallic minerals
5(c) Prescribed semi-precious stone
Licence EL3/2007 5(b) Prescribed precious stone
3 Construction minerals
1 Metallic minerals
5(c) Prescribed semi-precious stone
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The term of an EL of the category held by the Company is five (5) years subject to any extension or revocation by the Minister. The holder of an EL is under a duty to explore and rehabilitate the land consistent with the code of practice set out by MRT. Any transfer of an EL must be approved by the Minister. The different types of land tenure upon which the area of the Tenements are located are detailed in the EL. Of the original six applications made, the Company has three granted tenements, two applications which have been deferred to the Minister to approve the granting of tenements (which approval will most likely be obtained) and one final application for a tenement which is still being assessed (presently the subject of an objection).

Aboriginal Sites

The Tenements are subject to the provisions of the Aboriginal and Torres Strait Islander Heritage Protection Act (1984) (Cth) (the “Commonwealth Heritage Act”). This Act contains provisions to preserve and protect from injury or desecration areas and objects which are of particular significance to Aboriginal people in accordance with Aboriginal tradition. An area or object is found to be desecrated if it is used or treated in a manner inconsistent with aboriginal tradition.

Native Title Legislation

Judicial recognition of native title at common law occurred in Mabo –v – Queensland (No 2) (Mabo), a decision of the High Court of Australia on 3 June 1992. Generally native title rights to land will be recognised where:

(i) the claimants can establish that they have maintained a continuous connection with the land in accordance with their traditional laws and customs since British settlement in 1788; and
(ii) the native title rights have not been lawfully extinguished.

The High Court held in Mabo that native title rights can be lawfully extinguished by certain government legislation and executive actions which are not inconsistent with native title. In order for extinguishment to be lawful the extinguishment must comply with the obligations imposed by the Racial Discrimination Act 1975 (Cth).

After Mabo, considerable uncertainties existed about the validity of proprietary rights in Australia, including mining tenements. To address those uncertainties the Commonwealth Parliament responded by passing the Commonwealth Native Title Act 1992 (Cth) (“NTA”). The NTA commenced on January 1994 and was substantially amended in 1998 in response to the decision of the High Court in WIK v Queensland.

Macquarie Harbour Mining Ltd prospectus

The WIK case recognised that the granting of a pastoral lease did not necessarily extinguish all native title rights, some of which could co-exist with the rights under a pastoral lease. In summary the NTA:

(i) provides for recognition and protection of native title;
(ii) sets up mechanisms for determining claims for native title such as the “right to negotiate” which allows native title claimants to be consulted in relation to certain mining and other developments;
(iii) makes valid certain “past acts” which would otherwise be invalidated because of a native title;
(iv) establishes ways in which “future acts” (eg the granting of mining tenement applications and converting exploration licences and prospecting licences to mining leases) affecting native title may proceed and how native title rights are protected, including rights to compensation; and
(v) provides a process by which claims for native title and compensation can be determined.

The High Court decision of Ward v Western Australia and South Australia (2002) HCA 28 (8 August 2002) established that where tenure such as a pastoral lease is granted, the native title is extinguished to the extent that it is inconsistent with the rights conferred by the pastoral lease.

Native Title Claims

Persons claiming to hold native title may lodge an application for determination of native title with the Federal Court. Once a native title claim has been lodged, the Court will refer the application to the Native Title Registrar. The Native Title Registrar must determine whether the claim meets certain conditions concerning the merits of the claim, and certain procedural and other requirements set out by the NTA.

If the Native Title Registrar is satisfied the lodged claim meets the registration requirements set out in the Commonwealth Act (“Registration Test”) it will be entered on the Register of Native Title Claims maintained by the National Native Title Tribunal (“Register”). Claimants of registered claims are afforded certain procedural rights under the Commonwealth Act including the “right to negotiate”.

Claims which fail to meet the Registration Test are recorded on the Tribunal’s Schedule of Applications Received. Such claims may be entered on the Register at a later date if additional information is provided by the claimant that satisfies the Registration Test.

We have searched the online records of the NNTT and note that there is only one active claim in Tasmania known as VC 97/2 – Gunai/Kirna/ Boonerwrung. The area claimed is in Victoria and does not touch upon any of the Tenements and as such there are no native issues, except as noted elsewhere in this Report, to consider in relation to the Tenements.

We have not undertaken the considerable historical, anthropological and ethnographic work that would be required to determine the likelihood that the native title determination may be challenged, or the possibility of any further claims being made in the future.

Validity of the Tenements

a) Tenements granted prior to 1 January 1994

The NTA permits a State to validate ‘past acts’. Under the NTA mining tenements granted in Tasmania prior to 1 January 1994 are deemed to be valid. With respect to the Tenements that were granted prior to 1 January 1994, native title (if any exists) has been suspended by their grant. To the extent that the exercise of native title rights and interest is inconsistent with the exercise of the rights conferred by those Tenements, the rights under each particular Tenement will have priority for the term of the relevant grant.

(b) Tenements granted between 1 January 1994 and 23 December 1996

The State governments of Australia granted some mining tenements during the period between 1 January 1994 and 23 December 1996 without complying with the requirements of the NTA. Accordingly, there is a risk that some tenements granted in this period may be invalid as a result of non compliance with the NTA. This risk has been removed by the 1998 amendments to the NTA and corresponding State legislation so far as the Tenements were granted over land which is the subject of a pastoral lease or other prescribed leasehold land.

(c) Tenements granted since 23 December 1996

Mining tenements granted since 23 December 1996 which affect native title rights and interests will be valid provided that the future act procedures set out in (d) below were followed by the relevant parties. We have not been instructed to analyse whether or not the relevant NTA procedures were followed in relation to each tenement, but are of the opinion that they were validly granted.

06 Solicitor’s report on mining tenements

(d) Future Tenement Grants

The valid grant of any mining tenement which may affect the native title requires full compliance with the provisions of the NTA in addition to the compliance with the usual procedures under the relevant State or Territory mining legislation. The primary procedure prescribed under the NTA is the “right to negotiate” process.

The right to negotiate process involves the publishing or advertising of a notice of the proposed grant of a tenement followed by a 6 month period of negotiation between the State or Territory Government, the tenement applicant and the relevant registered native title claimant. If agreement is not reached to enable the grant to occur, the matter may be referred to arbitration before the National Native Title Tribunal (“NNTT”), which has a further 6 months to reach a decision. The decision of the NNTT may be reviewed by the relevant Federal Minister.

The right to negotiate process is not required to be followed in respect of a proposed future act in instances where the expedited procedure applies. Under the NTA, a future act is an act attracting the expedited procedure if:

(i) the act is not to interfere directly with the carrying on of the community or social activities of the persons who are the holders of native title in relation to the land; and
(ii) the act is not likely to interfere with areas or sites of particular significance, in accordance with their traditions, to the persons who are holders of the native title in relation to the land; and
(iii) the act is not likely to involve major disturbance to any land or waters concerned or create rights whose exercise is likely to involve major disturbance to any land.

When the proposed future act is considered to be one that attracts the expedited procedure, persons have 3 months after the notification date to take steps to become a native title party in relation to the relevant act (for example the proposed granting of an exploration licence). The future act may be done unless, within four months after the notification day, a native title party lodges an objection with the NNTT against the inclusion of a statement that the proposed future act is an act attracting the expedited procedure.

Further, the right to negotiate process does not have to be pursued in cases where an indigenous land use agreement (“ILUA”) is negotiated with the relevant Aboriginal people and registered with the NNTT. In such cases, the procedures will vary depending on the terms of the ILUA.

Renewals and Extensions of Tenements

As with the granting of mining tenements, renewals and extensions of mining tenements granted prior to 1 January 1994, to the extent the renewals were invalid due to native title, have been validated by legislation.

Renewals of mining tenements granted between 1 January 1994 and 23 December 1996 have been similarly validated provided certain statutory criteria have been met.

Renewals made after 23 December 1996 of tenements validly granted before that date will not be subject to the right to negotiate process provided:

(i) the area to which the earlier right is made is not extended;
(ii) the term of the new right is not longer than the term of the earlier right; and
(iii) the rights to be created are not greater than the rights conferred by the earlier grant.

There is doubt as to whether the right to negotiate process applies to second and subsequent renewals but this matter is yet to be determined by the Courts.

Other than as stated above, renewals of mining tenements are subject to the same right to negotiate process as is described in paragraph (d) above.

Compliance

The Company’s interest in or rights in relation to the granted Tenements – EL2/2007 and EL3/2007 are subject to the holder continuing to comply with the respective terms and conditions of the granted Tenements under the provisions of the Act and regulations made pursuant to that Act, together with the conditions specifically applicable to any granted mining tenement. The searches that we have carried out in relation to the Tenements do not reveal any failure to comply with the conditions in respect of each of the granted mining tenements.

If there are no objections lodged within the four month period, the act may be done. If one or more native title parties object to the statement, the NNTT must determine whether the act is an act attracting the expedited procedure. If the NNTT determines that it is, the State or Territory may do the future act (i.e grant an exploration licence).

Macquarie Harbour Mining Ltd prospectus

Qualifications

While the status of the Tenements is dealt with in the Schedule and the Notes to the Schedule we point out by way of summary, that:

(i) we have assumed that all searches conducted on our behalf by MRT and NNTT are complete and accurate as at the time the searches were conducted;
(ii) we have assumed that all information or advice, whether oral or written provided to us by the Company, its officers, employees, agents or representatives is accurate and complete; and
(iii) in relation to each tenement application we express no opinion as to whether such tenement application will ultimately be granted, (including whether relevant Ministerial consent will be obtained) nor the conditions to which such tenement application may be granted or may not be granted subject to.

Consent

This report is given solely for the benefit of the Company and the Directors of the Company in connection with the Prospectus and is not and/ or cannot be relied on or disclosed to any other person or used for any other purpose or quoted or referred to in any public document or filed with any government body or other person without our prior written consent.

Yours faithfully

Simmons Wolfhagen

Mark de Vries Partner | Property & Commercial Law

T +61 3 6224 4133 | F +61 3 6224 4166 | mark. [email protected]

SCheDuLe oF MiNiNg teNeMeNtS

To be read in conjunction with the notes at the end of the Schedule.

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2007 Minimum
Tenement Area Expenditure
Registered Holder Number Status/Term (square km) 2007 Rent ($) Commitment ($) Bonds ($)
Goldstock Mining NL EL2/2007 Granted/14 May 2007- 217 4,477 43,400 13,190.00
14 May 2012
Goldstock Mining NL EL3/2007 Granted/13 June 2007 204 4,209 40,800 12,830.00
-13 June 2012
Goldstock Mining NL EL20/2007 Not Granted 235 N/A N/A 11,462.00
Goldstock Mining NL EL21/2007 Granted 113 N/A N/A 8,190.00
Goldstock Mining NL EL22/2007 Granted 222 N/A N/A 10,940.00
Goldstock Mining NL EL23/2007 Granted 171 N/A N/A 9,920.00
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NOTES

A. Rent from 1 July 2007 is $20.63 per square km per annum for the first 2 years of the term and for each subsequent year of the term it is currently $41.25 per square km per annum. Only granted mining tenements pay rent. Rent goes up each year from 1 July under the Fee Units Act (TAS) 1997 which increase in fees/royalties is published on the MRT website.
B. Actual Expenditure Commitment is treated as commercial in confidence with the written consent of the registered licence holder required to release it to a third party. Minimum expenditure requirements per square km are $200.00 for year 1, $300.00 for year 2, $500.00 for year 3, $700.00 for year 4 and $1000.00 for year 5. Only granted mining tenements have an expenditure commitment.
C. EL22/2007 and EL23/2007 have not been formally granted by MRT as yet but have been submitted by MRT to the Minister for recommendation to be granted. Upon the Minister’s approval, the applications will be granted by MRT and such approval from the Minister is most likely.

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Investigating
accountant’s report
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Macquarie Harbour Mining Ltd prospectus

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28 September 2007 The Directors Macquarie Harbour Mining Limited 20 Recreation Street Kingston Beach TAS 7050

BDO Kendalls Corporate Finance (WA) Pty Ltd Level 8, 256 St Georges Terrace Perth WA 6000 PO Box 7426 Cloisters Square Perth WA 6850 Phone 61 9360 4200 Fax 61 9481 2524 [email protected] www.bdo.com.au ABN 27 124 031 045 AFS license No 316158 Our ref: PT:JH

Dear Sirs

iNveStigAtiNg ACCouNtANt’S rePort

1. Introduction

We have prepared this Investigating Accountant’s Report (“ Report ”) on historical financial information of Macquarie Harbour Mining Limited (“ Macquarie ” or “ the Company ”) for inclusion in the Prospectus, to be dated on or about 5 October 2007, relating to the issue of up to 30 million ordinary shares in the company at an issue price of $0.20 each (“ the Public Offer ”).

Under the proposed issue $6 million will be raised before costs. The minimum subscription is for the issue of up to 20 million ordinary shares to raise $4 million before costs.

2. Basis of Preparation

This Report has been prepared to provide investors with information on the Income Statement, Statement of Changes in Equity and the Balance Sheet and the pro-forma Balance Sheet as noted in Appendices 1, 2 and 3.

This Report does not address the rights attaching to the shares to be issued in accordance with the Prospectus, nor the risks associated with the investment, and has been prepared based on the minimum subscription being achieved. BDO Kendalls Corporate Finance (WA) Pty Ltd (“ BDO Kendalls ”) has not been requested to consider the prospects for the Company, the shares on offer and related pricing issues, nor the merits and risks associated with becoming a shareholder and accordingly has not done so, and does not purport to do so. BDO Kendalls accordingly takes no responsibility for these matters or for any matter or omission in the Prospectus, other than responsibility for this Report. Risk factors are set out in the Prospectus.

Expressions defined in the Prospectus have the same meaning in this Report.

3. Background

Macquarie is an Australian company incorporated on 1 March 2007. Macquarie Mining Ltd then changed its name to Macquarie Harbour Mining Ltd on 22 May 2007. Macquarie was established for the purpose of acquiring and developing a portfolio of exploration projects contained within Tasmania.

Prior to the Public Offer, the Company has issued 26,000,013 ordinary shares to raise $620,010. Macquarie proposes to issue a prospectus seeking to raise up to $6,000,000 through the issue of up to 30,000,000 ordinary shares at an offer price of $0.20 per share.

07 Investigating accountant’s report

4. Scope

You have requested BDO Kendalls to prepare an Investigating Accountant’s Report covering the following financial information:

Macquarie’s income statement and statement of changes in equity for the period ended 30 June 2007;
the proforma balance sheet as at 30 June 2007 reflecting the actual position as at that date, major transactions between that date and the date of our report and the proposed capital raising under the Prospectus; and
the accounting policies applied by Macquarie in preparing its financial statements.

The historical financial information set out in the appendices to this Report has been extracted from the financial statements of the Company for the period from incorporation to 30 June 2007.

The Directors are responsible for the preparation of the historical financial information including determination of the adjustments.

We have conducted our review of the historical financial information in accordance with the Australian Auditing and Assurance Standard AUS 902 “Review of Financial Reports”. We made such inquiries and performed such procedures as we, in our professional judgment, considered reasonable in the circumstances including:

a review of work papers, accounting records and other documents pertaining to balances in existence at 30 June 2007;
a review of the assumptions used to compile the pro-forma Balance Sheet;
a review of the adjustments made to the proforma historical financial information;
a comparison of consistency in application of the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Company disclosed in the appendices to this Report; and
enquiry of Directors and others.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Our review was limited primarily to an examination of the historical financial information, the pro-forma financial information, analytical review procedures and discussions with both management and directors. A review of this nature provides less assurance than an audit and, accordingly, this Report does not express an audit opinion on the historical information or pro-forma financial information included in this Report or elsewhere in the Prospectus.

In relation to the information presented in this Report:

support by another person, corporation or an unrelated entity has not been assumed;
the amounts shown in respect of assets do not purport to be the amounts that would have been realised if the assets were sold at the date of this Report; and
the going concern basis of accounting has been adopted.

5. Conclusion

Statement on Historical Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the historical financial information as set out in the Appendices to this report does not present fairly the financial performance for the period ended 30 June 2007 or the financial position as at 30 June 2007 in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia.

Statement of Pro-forma Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the pro-forma financial information does not present fairly the financial position of the Company as at 30 June 2007, in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia as if the pro-forma transactions had occurred on that date.

Macquarie Harbour Mining Ltd prospectus

6. Subsequent Events

Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief, no other material transactions or events outside of the ordinary business of the Company have come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive.

Subsequent to 30 June 2007 and prior to the Company listing on Australian Securities Exchange (“ASX”):

The issue of 1,750,000 fully paid ordinary shares to raise additional seed capital of $175,000.

7. Assumptions Adopted in Compiling the Pro-forma Balance Sheet

The pro-forma balance sheet post issue is shown in Appendix 2. This has been prepared based on the reviewed financial statements as at 30 June 2007 and the transactions and events relating to the issue of shares under this Prospectus:

The minimum issue of 20,000,000 ordinary fully paid shares to raise $4,000,000 pursuant to the Public Offer;
The payment of expenses associated with the preparation and issue of the Prospectus and the listing of the Company amounting to $648,000, assuming the minimum issue. These have been netted off against the share capital;

8. Disclosures

BDO Kendalls Corporate Finance (WA) Pty Ltd is the corporate advisory arm of BDO Kendalls in Perth.

Neither BDO Kendalls Corporate Finance (WA) Pty Ltd nor BDO Kendalls, nor any director or executive or employee thereof, has any financial interest in the outcome of the proposed transaction except for the normal professional fee due for the preparation of this Report.

Consent to the inclusion of the Investigating Accountant’s Report in the Prospectus in the form and context in which it appears, has been given. At the date of this Report, this consent has not been withdrawn.

Yours sincerely

BDO Kendalls Corporate Finance (WA) Pty Ltd

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Peter Toll Director

The issue of 1,000,000 shares and 1,000,000 options to the Financial Advisor and Lead Manager, assuming the minimum issue. The options are exercisable on or before 31 August 2012 at an exercise price of $0.20, and have been valued at $0.0866 per option. These costs have been netted off against the share capital;
The issue of 1,000,000 options to Directors. The options are exercisable on or before 31 August 2012 at an exercise price of $0.20 and have been valued at $0.0866 per option; and
The payment of trade and other payables amounting to $33,526.

07 Investigating accountant’s report

APPeNDiX 1: iNCoMe StAteMeNt

Reviewed Period from incorporation to 30June 2007	$
Revenue from ordinary activities Total Revenue Expenses Consulting Fees Depreciation Other Total expenses Proft/(Loss) from ordinary activities before income tax expense Income tax expense relating to ordinary activities Net Proft/(loss) from ordinary activities after income tax expense attributable to members	2,965
	2,965
	(101,635) (521) (16,056)
	(118,212)
	(115,247)
	–
	(115,247)

The Income Statement is to be read in conjunction with the notes to and forming part of the historical financial information set out in Appendix 4.

APPeNDiX 2: BALANCe Sheet

Notes Reviewed 30 June 2007 $ Subsequent Events $ Pro-forma Adjustments $ Pro-forma After Minimum Issue $	Notes Reviewed 30 June 2007 $ Subsequent Events $ Pro-forma Adjustments $ Pro-forma After Minimum Issue $
CURRENT ASSETS Cash and cash equivalents 2 Receivables TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Capital raising costs 3 Plant and equipment Intangible assets Exploration and evaluation expenditure TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 4 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liability TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 5 Share based payments reserve 6 Accumulated losses 7 TOTAL EQUITY	238,417 175,000 3,340,774 3,754,191 16,043 – – 16,043
	254,460 175,000 3,340,774 3,770,234
	26,020 – – 26,020 22,300 – (22,300) – 11,238 – – 11,238 5,326 – – 5,326 50,244 – – 50,244
	115,128 – (22,300) 92,828
	369,588 175,000 3,318,474 3,863,062

	33,526 – (33,526) –
	33,526 – (33,526) –

	8,854 – – 8,854
	8,854 – – 8,854
	42,380 – (33,526) 8,854
	327,208 175,000 3,352,000 3,854,208
	442,455 175,000 3,265,400 3,882,855 – – 173,200 173,200 (115,247) – (86,600) (201,847)
	327,208 175,000 3,352,000 3,854,208

The pro-forma Balance Sheet after the Offer is as per the Balance Sheet at 30 June 2007 adjusted for the transactions discussed in section 7 of the Investigating Accountant’s Report. The Balance Sheet is to be read in conjunction with the notes to and forming part of the financial information set out in Appendix 4.

The above pro-forma balance sheet has been based on the minimum subscription. If the maximum subscription is achieved the cash and cash equivalents and contributed equity will increase by $2,000,000 less additional costs of the issue of $175,000. An additional 500,000 shares and 500,000 options will be issued, resulting in an increase in share based payments reserve of $43,300 and a decrease in contributed equity of the same amount.

Macquarie Harbour Mining Ltd prospectus

APPeNDiX 3: StAteMeNt oF ChANgeS iN eQuity

	Reviewed 30 June 2007 $ Subsequent Events $ Pro-forma Adjustments $ Pro-forma After Minimum Issue $
Total equity at the beginning of the period Loss for the year Total recognised for the year Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs Issue of share based payments Total equity	– – – – (115,247) – (86,600) (201,847)
	(115,247) – (86,600) (201,847)
	442,455 175,000 3,265,400 3,882,855 – – 173,200 173,200
	327,208 175,000 3,352,000 3,854,208

The Statement of Changes in Equity is to be read in conjunction with the notes to and forming part of the historical financial information set out in Appendix 4.

APPeNDiX 4: NoteS to AND ForMiNg PArt oF the hiStoriCAL FiNANCiAL iNForMAtioN For the PerioD eNDeD 30 juNe 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the historical financial information included in this Report have been set out below.

(a) Basis of Preparation of Financial Statements

The historical financial information which has been prepared in accordance with the measurement, but not all of the disclosure requirements of Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Company Interpretations and the Corporations Act 2001.

The financial report has also been prepared on a historical cost basis, except for derivatives and available-for-sale financial assets that have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged are adjusted to record changes in the fair value attributable to the risks that are being hedged. Non-current assets and disposal groups heldfor-sale are measured at the lower of carrying amounts and fair value less costs to sell.

Compliance with Australian equivalents to International Financial Reporting Standards (AIFRS) ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

(b) Foreign Currency Translation

The functional and presentation currency of Macquarie Harbour Mining Limited is Australian dollars (A$).

Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well as from restating foreign currency denominated monetary assets and liabilities, are recognised in the income statement, except for differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined.

(c) Revenue Recognition

Revenue from the sale of goods or services is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to labour hours incurred to date as a percentage of estimated total labour hours for each contract. Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Revenue from the sale of goods or services is recognised when the service is provided.

Sale of Goods and Services

Revenue from sale of goods or services is recognised when the significant risks and rewards of ownership have passed to the buyer and can be reliably measured. Risks and rewards are considered passed to buyer when goods have been delivered to the customer.

07 Investigating accountant’s report

Interest

Revenue is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial asset.

(d) Income Tax

The income tax expense for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit.

Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities, associates and interests in joint ventures where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances relating to amounts recognised directly in equity are also recognised directly in equity.

(e) Impairment of Assets

At each reporting date the Company assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in the income statement where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose

of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs.

(f) Cash and Cash Equivalents

“Cash and cash equivalents” includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(g) Investments and Other Financial Assets

All investments and other financial assets are initially stated at cost, being the fair value of consideration given plus acquisition costs. Purchases and sales of investments are recognised on trade date which is the date on which the Company commits to purchase or sell the asset. Accounting policies for each category of investments and other financial assets subsequent to initial recognition are set out below.

Held for Trading

Investments held for trading are measured at fair value with gains or losses recognised in the income statement. A financial asset is classified as held-for-trading if acquired principally for the purpose of selling in the short term or if it is a derivative that is not designated as a hedge. Investments held for trading are classified as current assets on the balance sheet.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company has the positive intention and ability to holdto-maturity and are measured at amortised cost subsequent to initial recognition using the effective interest method.

Available-for-sale financial assets

Available-for-sale financial assets comprise investments in listed and unlisted entities and any non-derivatives that are not classified as any other category, and are classified as non-current assets. After initial recognition, these investments are measured at fair value with gains or losses recognised as a separate component of equity (available-for-sale investments revaluation

Macquarie Harbour Mining Ltd prospectus

reserve). Where losses have been recognised in equity and there is objective evidence that the asset is impaired, the cumulative loss, being the difference between the acquisition cost and current fair value less any impairment loss previously recognised in the income statement, is removed from equity and recognised in the income statement.

Reversals of impairment losses on equity instruments classified as available-for-sale cannot be reversed through the income statement. Reversals of impairment losses on debt instruments classified as available-for-sale can be reversed through the income statement where the reversal relates to an increase in the fair value of the debt instrument occurring after the impairment loss was recognised in the income statement.

Loans and receivables

Non-current loans and receivables include loans due from related parties repayable no earlier than 365 days of balance sheet date. As these are non-interest bearing, fair value at initial recognition requires an adjustment to discount these loans using a market-rate of interest for a similar instrument with a similar credit rating. The discount is credited to the income statement immediately and amortised using the effective interest method.

(h) Fair Value Estimation

Fair values may be used for financial asset and liability measurement and well as for sundry disclosures.

Fair values for financial instruments traded in active markets are based on quoted market prices at balance sheet date. The quoted market price for financial assets is the current bid price and the quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market are determined using valuation techniques. Assumptions used are based on observable market prices and rates at balance date. The fair value of long-term debt instruments is determined using quoted market prices for similar instruments. Estimated discounted cash flows are used to determine fair value of the remaining financial instruments. The fair value of forward exchange contracts is determined using forward exchange market rates at balance sheet date.

(i) Payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms.

(j) Employee Benefits

Wages and Salaries, Annual Leave and Sick Leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of balance sheet date are recognised in respect of employees’ services rendered up to balance sheet date and measured at amounts expected to be paid when the liabilities are settled. Liabilities for nonaccumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable. Liabilities for wages and salaries are included as part of Other Payables and liabilities for annual and sick leave are included as part of Employee Benefit Provisions.

Long Service Leave

Liabilities for long service leave are recognised as part of the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees to the balance sheet date using the projected unit credit method. Consideration is given to expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted using national government bond rates at balance sheet date with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(k) Contributed Equity

Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.

Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration.

The fair value of interest rate swaps is calculated as the present value of estimated future cash flows.

The fair value of trade receivables and payables is their nominal value less estimated credit adjustments.

07 Investigating accountant’s report

(l) Exploration and Evaluation Expenditure

Exploration and evaluation expenditure encompasses expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

Exploration and evaluation expenditure incurred by the Company is accumulated for each area of interest and recorded as an asset if:

(i) the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
(1) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and
(2) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

For each area of interest, expenditure incurred in the acquisition of rights to explore is capitalised, classified as tangible or intangible, and recognised as an exploration and evaluation asset. Exploration and evaluation assets are measured at cost at recognition. Exploration and evaluation expenditure incurred by the Company subsequent to acquisition of the rights to explore is expensed as incurred.

A provision for unsuccessful exploration and evaluation is created against each area of interest by means of a charge to the income statement.

The recoverable amount of each area of interest is determined on a bi-annual basis and the provision recorded in respect of that area adjusted so that the net carrying amount does not exceed the recoverable amount. For areas of interest that are not considered to have any commercial value, or where exploration rights are no longer current, the capitalised amounts are written off against the provision and any remaining amounts are charged against profit.

Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

(m) Goods and Services Tax

Revenues, expenses and assets are recognised net of GST except where GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(n) Share Based Payments

The Company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or options over shares (“equity-settled transactions”).

The fair value of options is recognised as an expense with a corresponding increase in equity (share option reserve). The fair value is measured at grant date and recognised over the period during which the holder become unconditionally entitled to the options. Fair value is determined by an independent valuer using a Black-Scholes option pricing model. In determining fair value, no account is taken of any performance conditions other than those related to the share price of Macquarie Harbour Mining Limited (“market conditions”). The cumulative expense recognised between grant date and vesting date is adjusted to reflect the directors best estimate of the number of options that will ultimately vest because of internal conditions of the options, such as the employees having to remain with the company until vesting date, or such that employees are required to meet internal sales targets. No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition was not met.

Where the terms of options are modified, the expense continues to be recognised from grant date to vesting date as if the terms had never been changed. In addition, at the date of the modification, a further expense is recognised for any increase in fair value of the transaction as a result of the change.

Where options are cancelled, they are treated as if vesting occurred on cancellation and any unrecognised expenses are taken immediately to the income statement. However, if new options are substituted for the cancelled options and designated as a replacement on grant date, the combined impact of the cancellation and replacement options are treated as if they were a modification.

Macquarie Harbour Mining Ltd prospectus

NOTE 2. CASH	Reviewed 30 June 2007 $	Pro-forma After Minimum Issue $
Cash at bank Adjustments arising in the preparation of the pro-forma cash balance are summarised as follows: Reviewed balance at 30 June 2007 Proceeds from additional seed capital raised Proceeds from shares issued under this Prospectus Share issue costs Repayment of accounts payable Pro-forma Balance If maximum subscription is achieved, cash and cash equivalents will increase by $2,000,000 less additional costs of the issue of $175,000.	238,417	3,754,191
		238,417 175,000 4,000,000 (625,700) (33,526)
		3,754,191

NOTE 3. CAPITAL RAISING COSTS	Reviewed 30 June 2007 $	Pro-forma After Minimum Issue $
Prepaid capital raising costs Adjustments arising in the preparation of the pro-forma balance is summarised as follows: Reviewed balance at 30 June 2007 Transfer to issued capital upon successful capital raising Pro-forma Balance	22,300	–
		22,300 (22,300)
		–

NOTE 4. TRADE AND OTHER PAYABLES	Reviewed 30 June 2007 $	Pro-forma After Minimum Issue $
Trade and other payables Adjustments arising in the preparation of the pro-forma balance is summarised as follows: Reviewed balance at 30 June 2007 Payment of balance upon successful capital raising Pro-forma Balance	33,526	–
		33,526 (33,526)
		–

NOTE 5. CONTRIBUTED EQUITY	Reviewed 30 June 2007 $ Pro-forma After Minimum Issue $
Contributed equity Adjustments arising in the preparation of the pro-forma balance is summarised as follows:	442,455 3,882,855
	Number of Shares $
Reviewed balance at 30 June 2007 Additional seed capital raised Issue of ordinary shares at 20c each pursuant to this Prospectus Shares issued to fnancial advisor and lead manager Cost associated with shares issued to fnancial advisor and lead manager Cost associated with options issued to fnancial advisor and lead manager Share issue expenses Pro-forma balance	24,250,013 442,455 1,750,000 175,000 20,000,000 4,000,000 1,000,000 200,000 - (200,000) - (86,600) - (648,000)
	47,000,013 3,882,855

If maximum subscription is achieved, contributed equity will increase by 10,000,000 shares, to raise an additional $2,000,000, less additional costs of $175,000. In addition, if the maximum issue is achieved, an additional 500,000 shares and 500,000 options will be issued to the financial advisor and lead manager, resulting in a decrease in contributed equity of $43,300.

07 Investigating accountant’s report

NOTE 6. SHARE BASED PAYMENTS RESERVE	Reviewed 30 June 2007 $ Pro-forma After Minimum Issue $
Share based payments reserve Adjustments arising in the preparation of the pro-forma balance are summarised as follows:	– 173,200 Number of Options $
Reviewed balance at 30 June 2007 1,000,000 options issued to fnancial advisor and lead manager valued at 0.0866c each 1,000,000 options issued to the Directors at listing valued at 0.0866c each Pro-forma balance	– – 1,000,000 86,600 1,000,000 86,600
	2,000,000 173,200

If maximum subscription is achieved, an additional 500,000 options will be issued, resulting in an increase in the share based payments reserve of $43,300.

The following options are to be issued to the financial advisor and lead manager pursuant to the prospectus and options to be issued to directors upon the commencement of their employment contracts, which are expected to be 1 December 2007:

Class	Number Exercise Price Exercise Date Value	$
Financial advisor and lead manager Directors	1,000,000 $0.20 31 August 2012 $0.0866 1,000,000 $0.20 31 August 2012 $0.0866 2,000,000	86,600 86,600
		173,200

Using the Black and Scholes option valuation methodology, the fair value of the options was calculated. The following inputs were used:

The following inputs were used:
Input	Financial Advisor and Lead Manager Options Director Options
Share Price Exercise Price Expected Volatility Expiry Date Expected Dividends Risk free interest rate Value per option	$0.20 $0.20 $0.20 $0.20 40% 40% 31 August 2012 31 August 2012 Nil Nil 6.1% 6.1%
	$0.0866 $0.0866

Option Entitlement Issue

A further issue of options to acquire shares is planned to be made by the Company approximately three months after Official Quotation. Shareholders will be entitled to subscribe for one option for every two shares held at the record date for a subscription price of 1 cent per option. The options are exercisable on or before 31 August 2012 at an exercise price of $0.20. For further details see section 1.13 of this prospectus.

Macquarie Harbour Mining Ltd prospectus

NOTE 7. ACCUMULATED LOSSES	Reviewed 30 June 2007 $	Pro-forma After Issue $
Retained Earnings Adjustments arising in the preparation of the pro-forma balance is summarised as follows: Reviewed balance at 30 June 2007 Issue of share options to directors Pro forma balance	115,247	201,847
		115,247 86,600
		201,847

NOTE 8. RELATED PARTY DISCLOSURES

Transactions with Related Parties and Directors Interests are disclosed in the Prospectus.

NOTE 9. COMMITMENTS AND CONTINGENCIES

At the date of the report no material commitments or contingent liabilities exist that we are aware of, other than those disclosed in the prospectus.

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Additional information
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Macquarie Harbour Mining Ltd prospectus

8.1 iNCorPorAtioN

The Company was incorporated on 1 March 2007 as a limited company.

8.2 rightS AttAChiNg to ShAreS

8.2.1 General

The Shares to be issued pursuant to this Prospectus are ordinary shares and will as from their allotment rank equally in all respects with all ordinary fully paid shares in the Company.

The rights attaching to the Shares arise from a combination of the Company’s Constitution, the Corporations Act, the ASX Listing Rules and general law. A copy of the Company’s Constitution is available for inspection during business hours at its registered office.

A summary of the more significant rights is set out below. This summary is not exhaustive nor does it constitute a definitive statement of the rights and liabilities of the Company’s shareholders. To obtain such a statement, persons should seek independent legal advice.

8.2.2 Voting Rights

Subject to the Constitution of the Company and any rights or restrictions at the time being attached to a class of shares, at a general meeting of the Company every Shareholder present in person, or by proxy, attorney or representative has one vote on a show of hands, and upon a poll, one vote for each Share held by the Shareholder and for each partly paid share held, a fraction of one vote equal to the proportion which the amount paid up bears to the amounts paid or payable on that share. In the case of an equality of votes, the chairperson has a casting vote.

8.2.3 Dividends

Subject to the Corporations Act, the ASX Listing Rules and any rights or restrictions attached to a class of shares, the Company may pay dividends as the Directors resolve but only out of profits of the Company. The Directors may determine the method and time for payment of the dividend.

8.2.4 Winding up

Subject to the Corporations Act, the ASX Listing Rules and any rights or restrictions attached to a class of shares, on a winding up of the Company any surplus must be divided among the shareholders of the Company in proportion which the amount paid on the shares bears to the total amount paid and payable on the shares of all shareholders of the Company.

8.2.5 Transfer of Shares

Generally, shares are freely transferable, subject to satisfying the requirements of the ASX Listing Rules, ASTC Rules, the ACH Clearing Rules and the Corporations Act. The Directors may decline to register any transfer of Shares but only where permitted to do so by the Corporations Act, the ASX Listing Rules, the ASTC Rules, the ACH Clearing Rules or under the Company’s Constitution.

8.2.6 Directors

The Constitution and the ASX Listing Rules contain provisions relating to the rotation and election of Directors.

8.2.7 Calls on Shares

Subject to the Corporations Act and the terms of issue of a share, the Company may, at any time, make calls on the shareholders of a share for all, or any part of, the amount unpaid on the share. If a shareholder fails to pay a call or instalment of a call, the Company may, subject to the Corporations Act and ASX Listing Rules, commence legal action for all, or part of the amount due, enforce a lien on the share in respect of which the call was made or forfeit the share in respect of which the call was made.

8.2.8 Further Increases in Capital

Subject to the Corporations Act, the ASX Listing Rules, the ASTC Rules and the ACH Clearing Rules and any rights attached to a class of shares, the Company (under the control of the Directors) may allot and issue shares and grant options over shares, on any terms, at any time and for any consideration, as the Directors resolve.

8.2.9 Variation of Rights Attaching to Shares

Subject to the Corporations Act, the ASX Listing Rules, the ASTC Rules and the ACH Clearing Rules and the terms of issue of shares in a particular class, the Company may vary or cancel rights attached to shares in that class by either special resolution passed at a general meeting of the holders of the shares in that class, or with the written consent of the holders of at least 75% of the votes in that class.

8.2.10 General Meeting

Each Shareholder will be entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive notices, accounts and other documents required to be furnished to Shareholders under the Company’s Constitution, the Corporations Act and the ASX Listing Rules.

08 Additional information

8.3 CorPorAte goverNANCe

The Company has adopted systems of control and accountability as the basis for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs. To the extent they are applicable, the Company has adopted the Ten Essential Corporate Governance Principles and Best Practice Recommendations (“Recommendations”) as published by ASX Corporate Governance Council.

Further information about the Company’s corporate governance practices is set out on the Company’s website at www.mhml.com.au. In accordance with the recommendations of the ASX, information published on the Company’s website includes charters (for the board and its sub-committees), codes of conduct and other policies and procedures relating to the board and its responsibilities.

As the Company’s activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance structures will be given further consideration.

The Board sets out below its “if not, why not” report in relation to those matters of corporate governance where the Company’s practices depart from the Recommendations.

Principle 2 Recommendation 2.4

There is no nomination committee.

The Board considers those matters and issues arising that would usually fall to a nomination committee. The Board considers that no efficiencies or other benefits would be gained by establishing a separate nomination committee.

Principle 8 Recommendation 8.1

During the Reporting Period there was no performance evaluation of the Board, its committees and individual Directors.

The current Board has been in place since 18 April 2007 and did not conduct a performance evaluation during the Reporting Period. It is proposed the Chairman will conduct a review in the 2007/08 financial year.

Principle 9 Recommendation 9.2

There is no separate remuneration committee.

Due to the small size and structure of the Board, a separate remuneration committee is not considered to add any efficiency to the process of determining the levels of remuneration for the Directors and key executives. The Board considers that it is more appropriate to set aside time at Board meetings each year to specifically address matters that would ordinarily fall to a remuneration committee. When considering matters of remuneration, the Board functions in accordance with the Remuneration Committee Charter which was adopted on 21 September 2007.

In addition, all matters of remuneration will continue to be determined in accordance with Corporations Act requirements, especially in respect of related party transactions. That is, no Directors participate in any deliberations regarding his or her own remuneration or related issues

8.4 MAteriAL CoNtrACtS

8.4.1 Goldstock Mining NL Share Sale Agreement

The Company and Rogers Southern Pty Ltd (“Rogers Southern”) entered into a share sale agreement dated 23 May 2007 whereby Rogers Southern agreed to sell and the Company agreed to purchase all of the issued share capital of Goldstock Mining NL (“Goldstock”) (previously named Goldstock Mining Pty Ltd).

The Company paid Rogers Southern 13 million fully paid ordinary shares in the capital of the Company as consideration for the purchase of all issued share capital in Goldstock.

The settlement date of the sale and purchase was the date of the agreement.

As the solicitor’s report in section 6 of the prospectus confirms, Goldstock is the registered holder of the exploration licences EL2/2007, EL3/2007, EL21/2007, EL22/2007 and EL23/2007 and exploration licence application ELA20/2007.

Macquarie Harbour Mining Ltd prospectus

8.4.2 Executive Service Agreements

Executive Service Agreement – Frank Rogers, Managing Director

The Company has entered into an executive services agreement with Frank Rogers dated 26 September 2007 whereby Frank Rogers has agreed to provide the services of managing director to the Company for a period of three years commencing on the date on which the Company receives in-principle approval in writing for the admission of the Company to the official list of the ASX.

The ordinary hours of work shall be 40 hours per week averaged over 48 weeks plus such reasonable additional hours as are required. Frank Rogers shall receive 20 days paid annual leave per year.

The services of managing director include:

(a) developing and implementing the strategy of the Company and its subsidiaries as agreed to with the Board;
(b) day to day project management of the Company and any of its subsidiaries within the limits approved by the Board;
(c) development of new project opportunities;
(d) management of employees and external contractors (other than those related directly to exploration activities);
(e) external stake holder liaison (including shareholders);
(f) marketing of the Company to shareholders and potential investors;
(g) co-ordination of fund raising activities as agreed to with the Board;
(h) development of the overall Company budget;
(i) general regulatory and ASX compliance issues for the Company and its subsidiaries;

and such other duties as may be reasonably requested by the Board from time to time.

Frank Rogers will receive $200,000 in remuneration annually and will receive 500,000 options on the commencement date (1 December 2007) and 500,000 options on each anniversary of the commencement date for the term of the agreement. The terms of the options are described at paragraph 8.5 below.

Consultancy Agreement – Mead Developments Pty Ltd

The Company and Mead Developments Pty Ltd (“Mead Developments”) entered into a consultancy agreement dated 26 September 2007 whereby Mead Developments agreed to provide consultancy services to the Company through its principal employee, Mr Ben Mead. Mead Developments will provide the consultancy services to the Company from the date on which the Company receives in-principle approval in writing for the admission of the Company to the official list of the ASX.

The consultancy services comprise commercial management and business development including joint ventures, new exploration targets, the potential for diversification of business interests, strategic planning, and industry research.

The consultancy services also include maintaining and promoting investor relations by co-ordinating ASX updates, co-ordinating press releases; managing and publishing the Company eNewsletter, investor interface; database management, and website management.

Mead Developments shall also perform, and shall procure Ben Mead to perform, such other duties as are required of it by the Company from time to time.

The term of the agreement is three years and the remuneration Mead Developments receives is $80 per hour and 500,000 options in the Company on the commencement date and every anniversary of the commencement date for the term of the agreement.

The terms of the options are described at paragraph 8.5 below.

8.4.3 Director & Officer Protection Deeds

The Company has entered into Director and Officer Protection Deeds (“ Deed ”) with each Director and the Company Secretary (“ Officers ”). Under the Deed, the Company indemnifies the relevant Officer to the maximum extent permitted by law against legal proceedings, damage, loss, liability, cost, charge, exchange, outgoing or payment suffered, paid or incurred by the officer in connection with the Officer being an officer of the Company, the employment of the Officer with the Company or a breach by the Company of its obligations under the Deed.

Subject to the Company listing on ASX, the Company is required to insure the Officers against liability arising from any claim against the Officers in their capacity as officers of the Company. The Company will pay insurance premiums in respect of the above insurance.

08 Additional information

8.4.4 Employee Share Option Plan

Under the terms of the Company’s employee share option plan (“Plan”), the Board may offer free options to persons (“Eligible Persons”) who are:

(i) full-time or part-time employees (including a person engaged by the Company under a consultancy agreement); or
(ii) Directors.
of the Company or any subsidiary based on a number of criteria including contribution to the Company, period of employment, potential contribution to the Company in the future and other factors the Board considers relevant.

Upon receipt of such an offer, the Eligible Person may nominate an associate to be issued with the options.

Number of options

The maximum number of options issued under the Plan at any one time is 5% of the total number of Shares on issue in the Company provided that the Board may increase this percentage, subject to the Corporations Act and the Listing Rules.

If, in the opinion of the Board any of the following has occurred or is likely to occur, the Company entering into a scheme of arrangement, the commencement of a takeover bid for the Company’s Shares, or a party acquiring a sufficient interest in the Company to enable them to replace the Board, the Board may declare an option to be free of any conditions of exercise. Options which are so declared may, subject to the lapsing conditions set out above, be exercised at any time on or before their expiry date and in any number.

Future Issues of Shares

New issues

There are no participating rights or entitlements inherent in the options and option holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the options. However, the Company will ensure that the record date for determining entitlements to any such issue will be at least 6 Business Days after the issue is announced. Option holders shall be afforded the opportunity to exercise all options which they are entitled to exercise pursuant to the Plan prior to the date for determining entitlements to participate in any such issue.

Bonus issues

Terms of options

Each option entitles the holder, on exercise, to one ordinary fully paid share in the Company.

There is no issue price for the options. The exercise price for the options will be such price as determined by the Board (in its discretion) on or before the date of issue provided that in no event shall the exercise price be less that the weighted average sale price of Shares sold on ASX during the five Business Days prior to the date of issue or such other period as determined by the Board (in its discretion).

Shares issued on exercise of options will rank equally with other ordinary shares of the Company.

Options may not be transferred other than to an associate of the holder. Quotation of options on ASX will not be sought. However, the Company will apply to ASX for official quotation of Shares issued on the exercise of options.

An option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise satisfied. The Board may determine the vesting period (if any). An option will lapse upon the first to occur of the expiry date, the holder acting fraudulently or dishonestly in relation to the Company, the employee ceasing to be employed by the Company or on certain conditions associated with a party acquiring a 90% interest in the Shares of the Company.

If the Company makes an issue of Shares to Shareholders by way of capitalisation of profits or reserves (“Bonus Issue”), each option holder holding any options which have not expired at the time of the record date for determining entitlements to the Bonus Issue shall be entitled to have issued to him upon exercise of any of those options the number of Shares which would have been issued under the Bonus Issue (“Bonus Shares”) to a person registered as holding the same number of Shares as that number of Shares to which the option holder may subscribe pursuant to the exercise of those options immediately before the record date determining entitlements under the Bonus Issue (in addition to the Shares which he or she is otherwise entitled to have issued to him or her upon such exercise). The Bonus Shares will be paid by the Company out of profits or reserves (as the case may be) in the same manner as was applied in relation to the Bonus Issue and upon issue rank pari passu in all respects with the other Shares issued upon exercise of the options.

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Reconstruction of Capital

In the event of any reconstruction (including a consolidation, subdivision, reduction or return) of the issued capital of the Company prior to the expiry of any options, the number of options to which each option holder is entitled or the exercise price of his or her options or both or any other terms will be reconstructed in a manner determined by the Board which complies with the provisions of the Listing Rules.

Taxation

Under current taxation laws any taxation liability in relation to the options, or the Shares issued on exercise of the options, will fall on the participants. The Company will not be liable to fringe benefits tax in relation to options or Shares issued under the Plan.

Participation by Directors

Although Directors are eligible to be offered options under the Plan, this first requires specific Shareholder approval due to the requirements of the ASX Listing Rules and the Corporations Act.

8.4.5 Sonray Agreement

MHM has an agreement with Sonray to act as Financial Adviser and Lead Manager to the Issue. A financial advisory fee of a minimum $80,000 and a maximum $100,000 (or a prorated value should the amount raised fall between the minimum and maximum subscription) will be paid to Sonray as well as a brokerage fee of 6.5% of the total subscription amount. In addition, MHM will issue to Sonray (and/or its nominees) a minimum of 1,000,000 Shares and 1,000,000 options (if Minimum Subscription is achieved), up to a maximum of 1,500,000 Shares and 1,500,000 options (if Maximum Subscription achieved). In the event the Company accepts Applications exceeding the Minimum Subscription amount ($4.0 million) but less than the Maximum Subscription amount ($6.0 million) the number of Shares and Options issued shall be adjusted on a pro rata basis.

Sonray has also been retained by MHM as exclusive Investor Relations Advisers to the Company for a period of 12 months from listing for a monthly fee of $5,000 with Sonray having first right of refusal to underwrite the future options entitlement issue and being retained exclusively to act for the Company in respect of any capital raising and/or merger and acquisition activity for a period of 24 months after listing.

The terms of the option issue to Sonray are substantially the same as those detailed in paragraph 8.5 (Director’s Holdings) with the exception of items (viii) and (ix).

8.5 iNtereStS oF DireCtorS

Other than as set out below or elsewhere in this Prospectus, no Director holds, or held at any time during the 2 years before lodgement of this Prospectus with the ASIC, any interest in:

8.5.1 the formation or promotion of the Company;
8.5.2 property acquired or to be acquired by the Company in connection with:
(i) its formation or promotion; or
(ii) the Offer; or
8.5.3 the Offer; and no amounts, whether cash or shares or otherwise, have been paid or agreed to be paid, and no benefits have been given or agreed to be given:
8.5.4 to any Director, either to induce them to become, or to qualify as, a Director of the Company; and
8.5.5 for services provided by a Director in connection with:
(i) the formation or promotion of the Company; or
(ii) the Offer.

The Company’s chairman, Basil Conti, is a director of Harden East & Conti Pty Limited. Harden East & Conti has provided accounting, taxation and corporate secretarial services to the Company since its incorporation in March this year. Since incorporation, the Company has paid Harden East & Conti $5,288.80 for the provision of these services. Harden East & Conti will continue to provide accounting, taxation and corporate secretarial services to the Company on normal commercial terms.

Remuneration of Directors

The Directors have resolved that each non-executive Director is entitled to receive fees of $12,000 per annum (plus superannuation) and the Chairman of Directors is entitled to receive $24,000 per annum (plus superannuation). Payments of Director’s fees will be in addition to any payments to Directors in any employment capacity.

A Director may also be paid fees or other amounts as the Directors determine if a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result of their Directorship or any special duties.

Fees in this Section do not include GST.

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08 Additional information

Directors’ Holdings

Under the Constitution, the Directors are not required to hold any Shares in the Company.

The Directors have interests in the following Shares and Options:

Director Basil Conti	Shares 200,000
Frank Rogers	13,000,000
Ben Mead	2,000,000
Dr. Neil Allen	200,000
Peter Robertson	100,000

In accordance with the executive service agreements summarised above, options will be issued to the Directors Frank Rogers and Ben Mead on the date the Company receives inprinciple approval in writing for the admission of the Company to the official list of the ASX. The options will be issued on the following terms:

(i) the exercise price of each option is 20 cents each;
(ii) the options expire at 5.00 pm WST 31 August 2012;
(iii) shares issued as a result of the exercise of any of these options will rank equally in all respects with previously issued shares;
(iv) the options are exercisable by completing the application for exercise of options and delivering the same together with payment for the number of shares in respect of which the options are exercised to the registered office of the Company;
(v) subject to ASX Listing Rules the options are freely transferable in whole or part at any time prior to expiry;
(vi) within 14 days of the receipt of a properly executed notice of exercise and application monies the Company will issue to the option holder the number of shares specified in that notice;
(vii) the Company will apply for official quotation of all shares issued and allotted pursuant to the exercise of the options;
(viii) an option may only be exercised after that option has vested and any other conditions imposed by the Board on exercise satisfied. The Board may determine the vesting period (if any);
(ix) an option will lapse upon the first to occur of the expiry date, the holder acting fraudulently or dishonestly in relation to the Company, the employee ceasing to be employed by the Company or on certain conditions associated with a party acquiring a 90% interest in the shares of the Company;
(x) option holders are permitted to participate in new issues of securities offered to shareholders on the prior exercise of the option in which case the option holder shall be afforded the period of at least 10 business days prior to an inclusive of the books’ closing date (to determine the entitlements to the issue) to exercise the option; and
(xi) in the event of any reorganisation (including consolidation, subdivision, reduction or cancellation) of capital of the Company, the rights of option holders are to be changed to the extent necessary to comply with ASX Listing Rules on a reorganisation of capital at the time of the reorganisation.

8.6 CoNSeNtS

Each of the parties referred to in this section:

8.6.1 does not make, or purport to make any statement in this Prospectus other than those referred to in this section; and
8.6.2 to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this section.

Sonray has given and has not, before lodgement of this Prospectus, withdrawn its consent to being named as Financial Adviser and Lead Manager in the form and context in which it is named.

Pullinger Readhead Lucas has given and has not, before lodgement of this Prospectus, withdrawn its consent to being named as solicitor to the Offer in the form and context in which it is named.

Dr Tony Gifford has given and has not, before lodgement of this Prospectus, withdrawn his consent to being named as the independent geologist in the form and context in which he is named and to the inclusion of the Independent Geological Report included in Section 5 of the Prospectus in the form and context in which it is included.

Simmons Wolfhagen has given and has not, before lodgement of this Prospectus, withdrawn its consent to being named as the independent solicitor reporting on tenements in the form and context in which it is named and to the inclusion of the Independent Solicitor’s Report” included in Section 6 of the Prospectus in the form and context in which it is included.

BDO Kendalls has given and has not, before lodgement of this Prospectus, withdrawn its consent to being named as the independent accountant of the Company in the form and

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Macquarie Harbour Mining Ltd prospectus

context in which it is named and to the inclusion of the Independent Accountant’s Report included in Section 7 of the Prospectus in the form and context in which it is included.

References to Security Transfer Registrars Pty Ltd appear for information purposes only. Securities Transfer Registrars Pty Ltd have not been involved in, authorised or provided cause for issue of this Prospectus.

8.7 iNtereStS oF eXPertS AND ADviSerS

Other than as set out below or elsewhere in this Prospectus:

8.7.1 no person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of the Prospectus, any promoter of the Company or broker to the Issue, holds, or held at any time during the 2 years before lodgement of this Prospectus with the ASIC, any interest in:
(i) the formation or promotion of the Company;
(ii) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or in connection with the Offer; or

BDO Kendalls Corporate Finance (WA) Pty Ltd has acted as the independent account to the Offer and prepared the Independent Accountant’s Report included in Section 7 of this Prospectus. BDO Kendalls will be paid $12,000 (plus GST) in respect of these services.

BDO Kendalls Audit & Assurance (WA) Pty Ltd has agreed to act as auditor to the Company and will receive fees for rendering these services in accordance with its normal time based charges.

8.8 Short ForM ProSPeCtuS

The Independent Consulting Geologist’s Report contained in Section 5 of the Prospectus states that the bibliographical references to the Report are available on the Company website and are available upon request from the Company. This information is provided in accordance with section 712 of the Corporations Act.

8.9 LitigAtioN

Legal proceedings may arise from time to time in the course of the Company’s business. As at the date of this Prospectus, litigation searches confirm that the Company is not involved in any legal proceedings, nor so far as the Directors are aware, are any legal proceedings pending or threatened against the Company the outcome of which will have a material adverse effect on the business or financial position of the Company.

(iii) the Offer; and

8.7.2 no amounts have been paid or agreed to be paid, and no benefits have been given or agreed to be given, to any of those persons in connection with the formation or promotion of the Company or the Offer.

Sonray has acted as Financial Adviser and Lead Manager to the Offer. Total fees payable to Sonray are detailed in section 8.4.5.

Pullinger Readhead Lucas has acted as solicitor to the Offer and provided advice and assistance in relation to certain aspects of this Prospectus, the Company’s due diligence regime and enquiries and in relation to its application and admission to ASX. In respect of these services, Pullinger Readhead Lucas will be paid $25,000.

Dr Tony Gifford has acted as the independent geologist and has prepared the Independent Geological Report included in Section 5 of this Prospectus. Dr Gifford will be paid $65,000 (plus GST) in respect of these services.

Simmons Wolfhagen has acted as the independent solicitor reporting on tenements and has prepared the Independent Solicitor’s Report included in Section 6 of this Prospectus. Simmons Wolfhagen will be paid $5,000 (plus GST) in respect of these services.

8.10 Further iNForMAtioN oN FrANK rogerS

Frank Rogers appears on the National Insolvency Index as an “individual no longer bankrupt” following an annulment in March 2007. He was declared bankrupt on 30 March 2001. The bankruptcy arose as a result of a judgment being entered against him in a civil matter concerning events that occurred in 1990. The judgment was not satisfied and the judgment creditor petitioned for bankruptcy. The value of the judgment was $113,137. The amount owing to creditors at the time of bankruptcy was $643,000. The only other creditor was the Commonwealth Bank as a consequence of guarantees provided by Mr. Rogers. The Commonwealth Bank was repaid from the sale of two of Mr. Rogers’ properties resulting in only $67,000 remaining owing on the guarantee.

Settlement was subsequently reached with the creditors and Mr. Rogers’ status as bankrupt was annulled on 21 March 2007.

103

08 Additional information

8.11 reStriCteD SeCuritieS

ASX may classify certain existing Shares on issue in the Company (as opposed to those to be issued under this Prospectus) as being subject to the restricted securities provisions of the Listing Rules. If so classified, such Shares would be required to be held in escrow for a period determined by ASX and would not be able to be sold, mortgaged, pledged, assigned or transferred for that period without the prior approval of ASX.

In addition, the Company has entered into voluntary restriction agreements with all existing Shareholders. The terms of the voluntary restriction agreements, which apply irrespective and over and above restrictions imposed by the ASX restrict shareholders from directly or indirectly disposing of or granting any security over those Shares for six months after date of Official Quotation.

8.12 CheSS

The Company will apply to participate in the Clearing House Electronic Sub-register System (“ CHESS ”).

CHESS is operated by ASX Settlement and Transfer Corporation Pty Ltd (“ ASTC ”), a wholly owned subsidiary of ASX, in accordance with the ASX Listing Rules and the ASTC Settlement Rules.

Under CHESS, the Company will not issue certificates to Shareholders. Instead, Shareholders will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send a CHESS statement.

8.13 tAX CoNSiDerAtioN

Investors should seek and rely on their own professional taxation advice in relation to an investment in the Company.

8.14 DiStriButioN oF ProSPeCtuS

The Propsectus has been prepared by the Company. In preparing the Prospectus, the Company has taken reasonable steps to ensure that the information in the Prosecptus is not false or misleading. In doing so, the Company has had regard to the prospectus requirements of the Corporations Act.

No persons is authorised to give any information in relation to or to make any representation in connection with the Offer desribed in the Prospectus that is not contained in the Prospectus. Any such information or representation may not be relied upon as having been authorised by the Company in connection with the Offer.

The Prospectus provides information to assist investors in deciding whether they wish to invest in the Company and should be read in its entirety. If you have any questions about its contents or investing in the Company you should contact your stockbroker, accountant or other financial adviser.

8.15 NoN-reSiDeNt iNveStorS

The Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer.

The distribution of the Prospectus in jurisdictions outside Australia may be restricted by law and therefore persons who come into possession of the Prospectus should seek advice on and observe any of these restrictions. Failure to comply with these restrictions may violate securities law.

Intending investors resident outside Australia should first consult their professional advisers as to whether or not governmental or other consents are required, or whether formalities need to be observed to enable them to invest. Intending non-resident investors should also seek advice in respect of the taxation effect of an investment in the Company and dividends that the Company may distribute in the future.

The return of a duly completed Application Form will be taken to constitute a representation and warranty that there has been no breach of such laws and that all necessary approvals and consents have been obtained.

No action has been taken to register or qualify the Shares or the Offer, or otherwise to permit a public offering of the Shares in any jurisdiction outside Australia.

8.16 eXPeNSeS oF the oFFer

The total expenses of the Offer and associated costs payable by the Company are expected to be $798,000 (based on maximum subscription).

Prospective investors should read the full text of the Prospectus as the information contained in individual sections is not intended to and does not provide a comprehensive review of the business and financial affairs of the Company nor the securities offered pursuant to the Prospectus.

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Macquarie Harbour Mining Ltd prospectus

==> picture [596 x 222] intentionally omitted <==

----- Start of picture text -----

Directors’ statements
----- End of picture text -----

DireCtorS’ StAteMeNtS

This Prospectus is used by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospectus with the ASIC and has not withdrawn that consent.

Dated: 5 October 2007

==> picture [92 x 51] intentionally omitted <==

Basil Conti Chairman

For and on behalf of Macquarie Harbour Mining Limited

105

Glossary

The following defined terms apply throughout this Prospectus unless the context requires otherwise:

“$” means Australian dollars unless otherwise specified;

“Corporations Act” means the Corporations Act 2001 (Cth);

“Directors” or “Board” means the Directors of the Company as at the date of this Prospectus;

“EST” means Eastern Standard Time;

“ACH Clearing Rules” means the operating rules of Australian Clearing House Pty Limited ACN 001 314 503;

“AGSO” means Australian Geological Survey Organisation, a Federal Government department;

“Applicant” means a person who completes and lodges an Application Form;

“Application” means an application for Shares pursuant to this Prospectus;

“Application Form” means the application form attached to this Prospectus;

“ASIC” means the Australian Securities & Investments Commission;

“ASTC Rules” means the settlement rules of Australian Settlement and Transfer Corporation Pty Ltd;

“Exposure Period” means the period of 7 days after the date of lodgement of this Prospectus with the ASIC, which period may be extended by the ASIC by not more than 7 days pursuant to Section 727(3) of the Corporations Act;

“Issue” means the issue of up to 30 million Shares under this Prospectus;

“Offer” means the offer of Shares pursuant to this Prospectus;

“Official List” means the official list of ASX;

“Opening Date” means the first date on which Application Forms can be received;

“Prospectus” means this prospectus dated 5 October 2007;

“Shares” means fully paid ordinary shares in the capital of the Company;

“ASX” means ASX Limited (ACN 008 624 691);

“Shareholder” means a holder of a Share(s);

“ASX Listing Rules” means the Listing Rules of ASX as amended from time to time;

“Closing Date” means the last date on which Application Forms may be submitted;

“Company” or “MHM” means Macquarie Harbour Mining Limited (ABN 41 124 212 175);

“Share Registry” means Security Transfer Registrars Pty Ltd;

“Sonray” means Sonray Corporate Pty Ltd (ACN 124 761 557);

“WST” means Western Standard Time.

“Constitution” means the Constitution of the Company;

106

AI assistant

VYSARN LIMITED — Capital/Financing Update 2007

66029_rns_2007-10-15_d600d6f8-f916-4622-85b9-0b438c1f3d9b.pdf

Corporate Directory

DireCtorS

iNDePeNDeNt geoLogiSt

SoLiCitor to the oFFer

CoMPANy SeCretAry Jade D’Andrilli

regiStereD oFFiCe

Pullinger Readhead Lucas

iNDePeNDeNt SoLiCitor rePortiNg oN teNeMeNtS

iNveStigAtiNg ACCouNtANt

ShAre regiStry

AuDitor

ASX CoDe:

MHM

IMPORTANT NOTICE

WEB SITE – ELECTRONIC PROSPECTUS

Chairman’s letter

Dear Investor,

Investment highlights

ProjeCt & CorPorAte highLightS

Old Gold Mines & Unexploited Mineralisation

Alluvial Tin Potential

AGSO Heat-Flow Data Anomalies

Platform For Future Growth

Regional Metals Endowment

Experienced Board and Management

Processing Expertise

Future Options Entitlement Issue

SuMMAry oF the oFFer

Contents

Key DAteS

iNterPretAtioN

WeBSite ADDreSS

PhotogrAPhS

1.1 ShAreS oFFereD For SuBSCriPtioN

1.2 PurPoSe oF the oFFer

Table 1.1 Proposed application of funds over two calendar years from the date of listing.

1.3 CAPitAL StruCture

1.6 APPLiCAtioN For ShAreS

Exposure Period

1.4 DiviDeND PoLiCy

1.5 riSK FACtorS

Applications

OR

Privacy

1.7 Key DAteS

1.8 uNDerWritiNg

1.9 ALLoCAtioN AND ALLotMeNt oF ShAreS

1.10 MiNiMuM SuBSCriPtioN

1.11 BroKerAge AND hANDLiNg FeeS

1.12 ASX LiStiNg

1.13 Future oPtioNS eNtitLeMeNt iSSue

1.14 iNveStor eNQuirieS

2.1 iNtroDuCtioN

2.2 CorPorAte StrAtegy

2.3 StrAtegy For groWth

2.4 ProjeCt overvieW

2.4.1 Introduction

North eASterN tASMANiAN ProjeCtS

2.4.2 Gladstone Gold Project EL 2/2007 (217 km[2] )

• Exploration of five old gold mines over a 10 kilometre strike length

• Previous gold grades up to 90 grams per tonne

Significance of AGSO Heat-Flow Data Anomalies

Exploration Program

2.4.3 Musselroe Tin Project EL 3/2007 (204 km[2] )

• Alluvial tin deposits

• Previous reported grades of up to 11.6 kg per cubic metre

Exploration Program

2.4.4 Strahan Nickel and Zinc Project ELA 20/2007 (253 km[2] )

Exploration

2.4.5 Double Cove Copper, Gold, Zinc, Nickel & Iron Project EL 21/2007 (113 km[2] )

• Identified Copper-Gold, Zinc and Nickel occurrences

• Haematite-Magnetite mineralisation

Birthday Bay Copper

Hematite-Magnetite-Pyrite

Albina Area Copper-Gold-Zinc

Pelias Cove Project Copper, Gold, Nickel, Zinc & Lead anomalies

Lucas Creek Copper, Nickel & Zinc anomalies

VYSARN LIMITED Capital/Financing Update 2007