Strangways

Regional Setting

The Strangways Project continues Flinders association with the G2 Corridor by being located at the G1-G2-G3 intersection, some 100 kilometres northeast of Alice Springs as illustrated on Figure 1. The regional setting is more fully illustrated by Figure 10 which shows the project area in relation to:

• The G1- G2-G3 intersection
• The location of eleven positive kimberlitic indicator mineral results
• The location of one microdiamond
• The location of five intrusive complexes of deep seated affinity. These are the Mordor and Mount Hay Igneous Complexes, the Mud Tank Carbonatite, Johannsen's Phlogopite Mine and the Mount Bleechmore Carbonatite dyke swarm.

It is believed that the confluence of the above features points to a high diamond prospectivity for the project area.

Tenements

The project area consists of four granted ELs, one EL application, one Mineral Claim and two Mineral Lease applications totalling 1,711 square kilometres. Details are shown in the table below:

*ELA 23592 covers the same area as MLAs 23420 and 23421

Agreements

On 17 July 2002, Flinders Diamonds Limited announced that on 16 July 2002 it reached agreement with the TeckCominco BHP Billiton Alliance (The Alliance) to farm out the base metal exploration and mining rights for all tenements in its Strangways Project, NT.

Exploration for, and development of, diamond deposits are exempted from the Agreement. Flinders will be free to manage its own exploration for diamonds and will work with the Alliance to enable mutually co-operative work programs and negotiations with Traditional Owners. Due to recent investigations by the Northern Territory Geological Survey and Geoscience Australia, the Alliance has recognised the potential of the Strangways Project area for world class deposits of zinc-lead-silver and copper-gold.

The agreement allows the Alliance to earn 51% equity in the base-metal rights for an expenditure of $2.0 million. Thereafter the Alliance may increase its equity to 80% by completion of a bankable feasibility study.

At this stage, FDL can either contribute to further expenditure and development at a 20% equity level, convert to 10% free carried interest with development costs repaid from the project's free cash flow, or convert to a 1% NSR royalty.

The Alliance will be the manager of the Joint Venture unless its interest is diluted to less than 50%.

Land Tenure

The entire area is held under Pastoral Leases as illustrated in Figure 9.The grant of ELA 23592 is considered by the NT government to be an act attracting the expedited procedure and will be granted unless a Native Title party lodges an objection before 10 November 2002.

Previous Exploration

Apart from its promising regional setting, the main reason for Flinders' interest in the Strangways Project area is the presence of eleven positive indicator results from previous diamond exploration in the area. Indicator mineral sampling was undertaken over a much larger area, but the current Project encompasses all the catchments to the eleven positive sites. Also other areas of interest as suggested by carbonatite intrusives are covered.

Previous sampling has been carried out by: Stockdale (1968 to 1973); CRA Exploration (early 1980s); Negri River Corporation (1983 to 1985); and Normandy Exploration in 1994. There is some confusion due to the lack of repeatability of some results after resampling. The terrain is difficult for indicator mineral sampling due to a lack of good trap sites in low-lying areas. There is also an abundance of metamorphic heavy minerals such as garnet, diopside and magnetite from the high-grade metamorphic terrain.

Stockdale could not reconfirm all their own results and Normandy could not confirm some of Negri's results. However, some of Negri's results were repeated and microprobe analyses of some of the minerals collected did give kimberlitic compositions.

On a field visit Flinders noted that good trap sites might be available if searched for. The site of one of Negri's best results was re-sampled for orientation purposes.

Proposed Program (Diamonds)

A regolith mapping program is planned to determine which areas can be effectively sampled for kimberlitic indicator minerals. The mapping will also determine the southerly extent and depth of the Tertiary Waite Formation and what influence it has on the distribution of kimberlitic indicator minerals in the northern half of the project area.

High resolution airborne magnetic data has been obtained along with Landsat 7 satellite imagery to further define dipolar magnetic anomalies in the project area that may represent kimberlite intrusives. Ground checking followed by ground magnetic traverses will be carried out before drill testing these anomalies. The drilling is expected to begin in the latter part of the September quarter. Further drainage sampling in anomalous catchments is also planned to locate the kimberlitic sources of the kimberlite indicator minerals discovered to date.

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