Tellus Announces Chandler Project Initial JORC Exploration Target Estimate

  • On : March 26, 2012

Media Release

APPROVED FOR RELEASE

Key points:

  • Tellus is pleased to announce the receipt of a JORC compliant exploration target estimate for its Chandler Salt Mine Project south of Alice Springs in the Northern Territory (NT).
  • This initial exploration target estimate covers two potential project sites:
  • Mt Charlotte site (EL27972)
    • Potentially consists of 4.0-4.8 billion tonnes of exploration target ( halite – NaCl) in the massive halite bed. This amount excludes the minor halite beds below.
    • For comparison this is about the weight of the Uluru rock
    • High quality 80-95% in situ halite is present that with selective mining and basic processing can reach 97%+ halite grades suitable for export of edible, industrial &pharmaceutical salts
  • Charlotte North site (ELA29018)
    • Potentially consists of 0.2-0.5 billion tonnes of exploration target (halite – NaCl) in the massive halite bed. This amount excludes the minor halite beds below.
  • The exploration target estimate was prepared by Terra Search Pty Ltd of Townsville, QLD.
  • Terrasearch has extensive experience in resource characterisation and preparation of JORC compliant Technical Reports.

“The Company is extremely pleased with the Exploration Target Statement from Terra Search as this shows potential for a very attractive world-class salt deposit with all the hallmarks of turning into a first class project, the Managing Director of Tellus Holdings, Duncan van der Merwe said today.”

Tellus has nine leases (six granted, three under application) in the NT, covering an area of 1,432 km2. All granted leases are 100% owned by Tellus and sit over thick salt beds.

The Mt Charlotte site target covers 40% of the lease area and there is potential to extend the target. The upper and lower beds combined are about 230m thick. Tellus is proposing to mine up to 1 million tonnes per year so, with a 50 year mine plan (25+25), we would mine up to 1-1.3% of the exploration target. For comparison Uluru Rock is about 350m high (“thick”). So assuming a 4 billion tonne weight, the exploration target is 1-1.2 Uluru rocks. So after 50 years of mining we would have selectively mined about 1-1.3% the weight of the Uluru rock.

The Charlotte North site exploration target study area covers only 1.2-2.4% of the lease area. There is significant potential to extend the target. The upper and lower beds combined are about 375m thick. With Tellus proposed mine plan that would be 10-25% of the exploration target. Recent Tellus core analysis shows high quality 80-95% in situ halite. With basic processing this can reach 97%+ halite grades which are suitable for export of edible, industrial and pharmaceutical salts. For comparison the exploration target is 5%- 13% of a single Uluru rock.

Tellus evaluated six geological basins with salt beds across Australia before short listing the Amadeus Basin. “What has been technically and commercially advantageous when evaluating this specific part of the Amadeus basin has been the 29 km of drilling results from 14 historical oil and gas wells (in and surrounding the general study area). For Tellus to replicate this today we would need to spend about $17.5 million over two to three years,” Mr van der Merwe said.

“When Tellus selected the specific Chandler study area, we had 145km seismic (15 lines) and 6.6 km of drilling results from two wells to work from. For Tellus to replicate this today we would need to spend about $6.5 million over one to two years,” Mr van der Merwe said.

“The results of the historic oil and gas drilling and seismic programs and recent prefeasibility study work has given us the confidence to progress to an additional drilling and seismic program to move the exploration target to an inferred and measured resource category, better define the extent and composition of the deposit and to evaluate site specific geotechnical and water issues.

“Tellus will be lodging shortly an Exploration Operations Mine Management Plan with the NT Government,” Mr Duncan van der Merwe said.

According to Clause 18 of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2004) it is common practice for a company to comment on and discuss its exploration in terms of target size and type. Tellus has requested Terra Search to discuss the estimated exploration target potential of the Mt Charlotte Block (granted) and the preferred Charlotte North Block (grant pending). The following is an extract from a JORC compliant Exploration Target Estimate Summary Statement prepared by Terra Search.

Exploration Target Estimate Summary Statement for EL27972 (Mt Charlotte Block) and ELA29018 (Charlotte North Block)

Preliminary interpretation of the Charlotte North block indicates that the salt is potentially shallower, thicker and marginally closer to infrastructure (rail and road). The Chandler Salt Mine prefeasibility study being completed by Tellus is evaluating the potential of both blocks.

EL 27972 (Mt Charlotte Block) - Chandler Formation Salt Beds (710-936m deep and ~230m thick)

The Tellus general study area (Tellus’s 9 NT leases) has data available from three exploration wells that includes a total 6600 m of drilling and 15 lines of 2D seismic that covers 145 km. The basis of the Exploration Target for the Mt Charlotte block study area has data available from two exploration wells that includes a total 4500 m of drilling and 8 lines of 2D seismic that covers 44 km, wire line logging, geological logs, geochemistry analysis and a 3D Geological Block Model. Interpretation of the available data indicate the Chandler Formation occurs as a flat lying, extensive evaporite unit (in excess of 200 m) with a variable halite mineralisation content ranging from a 60-80 m thick massive halite bed of estimated halite grade 80-95% (NaCl) to a 150-170 m thick semi-massive halite beds with inter-bedded siltstone and anhydrite, having an estimated halite grade of 30-40% (NaCl). More drilling would be required to determine the thickness and grade of the massive halite within the target area. The Exploration Target estimate for the Chandler formation in Mt Charlotte study area is shown in Table 1.

The EL27972 tenement covers a total area of 77.8 square kilometres (km2). The Exploration Target covers approximately 40% or 32.9 km2 of the lease area. The target area was selected to include the area with the highest density of seismic lines and core wells. The evaporate bed from seismic appears to be flat, if there are heavy faulting or steeply dipping features found in further work, then this would need to be excluded from the Target.

Table 1: Halite (NaCl) Exploration Target Estimate for the Chandler Salt Mine Project- Mt Charlotte block

Formation Lithology Average depth4 from surface Average thickness 4 Target Surface area Average halite grade Halite Exploration Target A
Volume 5 Tonnage 1
Unit Meters (m) Meters (m) km2 % km3 Billion tonnes (Bt)
Chandler – Gross2 Target 710-940m 230m 32.9 7.9 17.1
In-situ3 Target Upper bed - massive halite 710-780m 70m 32.9 80-95% 1.8-2.2 4.0-4.8
Lower-middle beds – minor halite interbeds 781-940m 160m 32.9 30-40% 1.6-2.1 3.4-4.6
Total 3.4-4.3 7.4-9.3
Bitter Springs – Gillen Salt Halite beds 1,832- 2,078m 388m Not calculated

A) Refer to Proximate Statement – The Exploration Target is conceptual in nature and there has been insufficient exploration to define a Mineral Resource, and it is uncertain if further exploration will result in the determination of a Mineral Resource under the JORC Code (2004).
1) Density (2.17g/cm3) is an average density taken from references: (Handbook of Mineralogy, Mineralogical Society of America) and AUSIMM Field Geologists Manual (AUSIMM Monograph 9, 4th edition, 2001)
2) Gross halite tonnage refers to volume of rock x density of halite, volume calculated from 3D block model
3) In-situ target refers to volume of rock x density of halite x grade of halite, volume is calculated from average thickness x surface area
4) Depth and thickness estimation determined by seismic interpretation, well information and regional modelling.
5) Volume estimated using area of 32.9km2 based on seismic interpretation, well information and assumption of continuity of halite.

Proximate statement

The Exploration Target is conceptual in nature as there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource under the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2004). The Exploration Target is not being reported as part of any Mineral Resource or Ore Reserve.

ELA29018 (Charlotte North Block) – Chandler Formation Salt Beds (450m-825m deep and ~375m thick)

The Tellus general study area (Tellus’s nine NT leases) has data available from three exploration wells that includes a total 6600 m of drilling and 15 lines of 2D seismic that covers 145 km.The basis of the Exploration Target for the Charlotte North block study area has data available from two exploration wells immediately to the south (Mt Charlotte block) that includes a total 4500 m of drilling, wire line logging, geological logs, geochemistry analysis and two lines of 2D seismic that covers 20.3 km over the Charlotte North block. Interpretation so far indicates a potentially thick (in excess of 350 m), extensive evaporite bed called the Chandler Formation. The assumed mineralisation content and grade assumptions are the same as for Mt Charlotte block. More drilling would be required to determine the thickness and grade of the massive halite within the target area. The Exploration Target estimate for the Chandler Formation in Charlotte North is shown in Table 2.

The ELA29018 tenement covers a total area of 127 km2. The Exploration Target covers an area of 1.5 km2 to 3 km2 (1.2%-2.4%) of the lease area. The target area was selected to include the area with potentially the shallowest salt as indicated from seismic interpretation. The evaporate bed within the target area appears to be generally flat lying. If there are steeply dipping areas or heavy faulting features found in further work, then this would need to be excluded from the Target.

Table 2: Halite (NaCl) Exploration Target Estimate for the Chandler Salt Mine Project- Charlotte North block

Formation Lithology Average depth4 from surface Average thickness 4 Target Surface area Average halite grade Halite Exploration Target A
Volume 5 Tonnage 1
Unit Meters (m) Meters (m) km2 % km3 Billion tonnes (Bt)
Chandler – Gross2 Target 450-825m 375m 1.5-3.0 5.6-11.3 1.2-2.4
In-situ3 Target Upper bed - massive halite 450-520m 60-80m 1.5-3.0 80-95% 0.1-0.2 0.2-0.5
Lower-middle beds – minor halite interbeds 521-825m 295-315m 1.5-3.0 30-40% 0.4-1.0 0.3-0.8
Total 0.5-1.2 0.4-1.3
Bitter Springs – Gillen Salt Halite beds 1,832 - 2,078m 388m Not calculated

A) Refer to Proximate Statement – The Exploration Target is conceptual in nature and there has been insufficient exploration to define a Mineral Resource, and it is uncertain if further exploration will result in the determination of a Mineral Resource under the JORC Code (2004).
1) Density (2.17g/cm3) is an average density taken from references: (Handbook of Mineralogy, Mineralogical Society of America) and AUSIMM Field Geologists Manual (AUSIMM Monograph 9, 4th edition, 2001)
2) Gross halite tonnage refers to volume of rock x density of halite
3) In-situ target refers to volume of rock x density of halite x grade of halite
4) Depth and thickness estimation determined by seismic interpretation and regional modelling.
5) Volume estimated using area of 1.5-3km2 based on seismic interpretation and assumption of continuity of halite. No direct drilling evidence.

Proximate statement

The Exploration Target is conceptual in nature as there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource under the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2004). The Exploration Target is not being reported as part of any Mineral Resource or Ore Reserve.

Explanation on the potential quantity and grade of the target

The basis for the Exploration Target range is the following:

  • 3D Geological Block Model of Chandler Formation (Refer to “Overall Resource Potential of EL27972 (Charlotte), South East Amadeus Basin, NT.” Completed in October, 2011 (Terra Search Report TS2011/034, TLH2011001.)
  • The model has been developed from historical geophysical and geochemical data from:
    • two oil and gas exploration holes (Mt Charlotte 1 and Magee 1) available through the Northern Territory Geological Survey,
    • eight lines of 2D seismic that covers 44 km,
    • wireline logging,
    • geological logs and
    • geochemistry analysis
  • The Exploration Target relies on the professional interpretation of grade, thickness, and bed correlations from geophysical logs and seismic interpretation. However there are gaps in the existing information.

Exploration holes

  • In the two drillholes (Mt Charlotte 1 (2116 m) & Magee 1 (395 m)), thickness estimates over the 230 m (average) evaporative bed shows a variable halite content ranging from a massive halite bed (> 80% halite) 60-80 m thick to semi-massive halite beds (30% to 40% halite) 150-170 m thick, interbedded with siltstone and anhydrite.
  • Only one of the holes (Mt Charlotte 1) contains cored intervals. The core recovery was low.
  • Similarly drill chip recoveries in hole (Magee 1) were low with unsuitable drilling fluids dissolving much of the evaporite sequence.

Seismic

  • There is reasonable seismic line coverage within the regional project area (15 lines of 2D seismic that covers 145 km).
  • However, seismic interpretation can be imprecise particularly with the conversion of two way time to thicknesses. It is an indirect technique for such measurements and relies on the calibration with actual down hole data as provided by drilling. The current interpretation of salt thicknesses across the target area is dependent largely on the seismic interpretation. The predictive nature of this interpretation needs to be tested by further drilling.

Wireline logging

  • Downhole wireline logs can provide useful but indirect data to interpret lithological contacts.
  • Radiometric logs have been used to delineate the evaporite sequence.
  • The majority of the geophysical logs were completed by recognizable and reputable contractors to a technical standard compatible with modern exploration.

Geological logs

  • The historical data are expected to be valid and reliable for the purpose of Exploration Target definition.
  • Geological logs are however unclear in relation to actual amount of massive halite present over the Chandler Formation interval. Within the formation there are descriptions of massive halite, massive anhydrite, siltstone interbedded with halite, dolomite interbedded with halite.

Geochemistry analysis

  • Where halite (NaCl) grades are reported, values are estimated from historic multi-element geochemical analysis (ICP), natural gamma data derived from radiometrically logged drill holes, and recent samples taken by Tellus (Terra Search) and sent away for evaluation by independent laboratories.
  • Regarding the recent analysis, two samples were collected by Terra Search from Mt Charlotte 1 core storage (NTGS Core Facility) in October 2011 from approximately 800 m depth and sent away for analysis, results showed a maximum grade of 95% halite. These are encouraging results but are highly selective and comprise too few data points to be representative across the 230 m bed thickness. The following analysis was completed:
    • portable XRF analysis, Terra Search (Townsville, QLD)
    • soluble species analysis (ICP-OES, SIE, volumetrics), Genalysis Laboratory (Perth, WA)
    • XRF Analysis, James Cook University Advanced Analytical Centre (Townsville, QLD)
    • XRD Analysis, QLD University of Technology X-ray Analysis Facility (Brisbane, QLD).
    • Petrography and Mineralogical Investigation, C&R Consulting (Townsville, QLD)
  • Water soluble species analysis indicated that the core samples from Mt Charlotte 1 consist almost entirely of soluble NaCl with minor soluble Ca, S and trace of K and Mg. Non soluble material ranged from 7% to over 30%.
  • General analysis shows the halite content ranging from a massive (> 80%) halite bed, 60-80m thick to semi-massive (30% to 40%) halite beds 150-170m thick, inter-bedded with siltstone and anhydrite.
  • It is speculated that the original halite content could be higher but much of the interval was washed away during the initial drill phase by the drilling fluids.
  • On the basis of current information, it is difficult to assign a salt grade across the 230 m bed with confidence.

Moving the exploration target to an inferred resource category

To move the exploration target to an inferred resource category, more drilling and seismic data is required, accompanied by better documented geology, assay and physical property information. The additional data will lessen the uncertainty and rectify any shortcomings/gaps in the current data set.

Bitter Springs Formation – Gillen Salt Member (1,832m-2,078m deep & ~388m thick)

Note Terra Search has not estimated a halite Exploration Target for the lower Gillen Salt Member (Bitter Springs Formation) that was discovered in the Magee 1 well approximately 900 m below the bottom of the salt in the Chandler Formation. Conventional mining is considered uneconomical at these depths. However, solution mining may be viable.

COMPETENT PERSON STATEMENT

The information in this report that relates to exploration results is based on information reviewed by Dr. Simon D. Beams, a full time employee of Terra Search Pty Ltd, geological consultants employed by Tellus Holdings Limited. Exploration results and information have been compiled and interpreted by Terra Search’s team of professional geoscientists, all of which have the relevant experience to carry out their assigned tasks.

The interpretation of the seismic and other data reviewed for this report was completed by Geologist Jaime Livesey. Jaime is a geologist with a background in petroleum geology; she graduated in 2000 from the National Centre of Petroleum Geology and Geophysics, University of South Australia with B. Applied Science (Hons). Jaime has four years’ post graduate experience with Wiltshire Geological Services and Schlumberger Information Solutions. Duties included seismic loading, seismic interpretation, wireline data interpretation and 3D modelling. Other industry experience has been in the area of GIS and mineral exploration data research and data management. In recent years at Terra Search, Jaime has carried out a range of consultant work involving interpretation of seismic and other large scale geophysical data sets. Dr. Beams has BSc Honours and PhD degrees in geology; he is a Member of the Australasian Institute of Mining and Metallurgy (Member #107121) and a Member of the Australian Institute of Geoscientists (Member # 2689). Dr Beams has sufficient relevant experience in respect of the style of mineralisation, the type of deposit under consideration and the activity being undertaken to qualify as a Competent Person within the definition of the 2004 Edition of the AusIMM’s “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”.

Dr Beams consents to the inclusion in the Terra Search Draft Report 2011/034 titled “Review of Prospectivity of Evaporite Units, 3D Modelling of Chandler Formation, Overall Resource Potential of EL27972 (Charlotte), South East Amadeus Basin, NT. Project commissioned by Tellus Holdings, September 2011” of the matters that are based on the reviewed information in the form and context in which it appears.

Figure 1: Regional location of Tellus exploration leases and Chandler project area.

Figure 2: Location of Chandler Project and proposed exploration.

Figure 3: Estimated thickness of Chandler Formation, from seismic interpretation. Exploration target within EL27972 has surface area of 39.2km2 and within ELA29018 has surface area of 1.5 km2 (shaded) to 3 km2.

About Tellus Holdings

Tellus Holdings Pty Ltd (“Tellus”) is an Australian-owned mining company adding value to underground rock salt. Tellus is the parent of a group of companies involved in the mining, processing and sale of industrial and edible salts, fertilisers and minerals. Potential complementary businesses include storage in voids created by mining and warehouse storage. (see www.tellusholdings.com.au)

For further information contact:

Duncan van der Merwe, Managing Director on 02 9241 7678
Jane Munday, Michels Warren Munday on 0427 880 083.