Radio Hill & West Whundo Mining Operations

Operating activities during 2005/06 focussed exclusively on the Radio Hill nickel-copper mine, which Fox Resources operates through its subsidiary, Radio Hill Pty Ltd. The mine is located in the mineral-rich Pilbara region of Western Australia. The primary objective of the Radio Hill operations during the year was to maintain production through the transition phase from nickel to high-grade copper production as well as keep the workforce intact.

Mine development activities in the October 2005/06 quarter were centred on mining the new F-Zone at the Radio Hill nickel mine. F-zone had a closer correlation with the B2 deposit at the Sholl project than with Radio Hill. During October 2005 development targeted the new F-zone interpreted massive sulphide zone with face sample assays for the month averaging 6.15% nickel and 3.51% copper.

The production performance from the underground mining operations improved significantly during October due to further identification of additional remnant high-grade ore sources within the traditional ore zones of Radio Hill.

Radio Hill operations were cash flow positive throughout November and December 2005 – a trend which continued in January 2006 despite four days disruption due to cyclones, Clare and Daryl. Costs were well contained and were below budgeted levels resulting in a 16% quarter-on-quarter decrease to the estimated cash cost (C1 cost) which averaged US$4.10/lb nickel for the December 2005/06 quarter.

During the March 2005/06 quarter a total of five cyclonic events unduly impacted on the Radio Hill operations. The direct impact was periodic cessation of operations over the five cyclonic events. Water inflows directly affected the ore delivery schedules. Water quality issues affected the mill performance both in terms of grade of concentrate produced and recovery of product. With lower nickel grades expected as massive sulphides were depleted mill throughput became the key to maintain revenue by processing disseminated nickel ores.

Initial onsite test work showed that reasonable recoveries could be achieved through traditional flotation of the disseminated nickel ore and that production of a saleable concentrate could be achieved through the use of magnetic separation on the nickel concentrate. Where the nickel concentrate was upgraded this was achieved by removing the iron, which was the diluent.

In November 2005, a study was commenced that aimed at identifying critical elements within the process facilities at the Radio Hill concentrator that would limit the plant from achieving an annualised throughput of 500,000 tonnes per annum.

A tertiary crusher was installed in March 2006, along with a magnetic separator and the operation was able to successfully process and recover nickel and copper from the low grade disseminated ore supplied from the underground mining operations.

Underground mining operations at Radio Hill ceased at the end of June 2006 and the mine was put into care and maintenance. Surface mining operations at Whundo commenced on 6 May 2006, with mobilisation of Roche Mining to site and the first delivery of supergene copper ore occurred on 28 June 2006. The start of mining at West Whundo was delayed by two months due to a very active wet season that saw six cyclones impact on the Radio Hill operations between January and April 2006.

In June 2006, concentrator upgrades were completed with the successful installation of the tertiary crushing circuit, a new floatation circuit and pumping circuit upgrade allowed the plant to handle a designed through-put of 500,000 tonnes dependent on ore hardness and characteristics.

The safety of all employees and contractors is of paramount importance to Fox, and continues to be an area of focus for further improvement at the Radio Hill operation. The operation had a definitive improvement in safety with only one recorded lost-time injury and a reduction in the total recordable incident frequency rates. This was achieved despite a sustained period of high activity with plant upgrades, new mine development and significant exploration activities. Safety remains a priority focus at the operation with the introduction of the Company’s positive recognition scheme, which seeks to reward employees nominated by their peers for hazard identification and rectification without instructions by management to enact a change.

The Operation production figures are given in Table 1 below.