Yeneena Project

(E45/2500-2503, E45/2561, E45/2657-2658, ELA45/2805 & ELA45/2806) - Encounter earning a 75% interest from Barrick Gold of Australia

The Yeneena project covers a major land position (1300km ²) of the Paterson Province in Western Australia and is located 40km SE of the Nifty copper mine, 30km NW of the Kintyre uranium deposit and 70km SE of the Woodie Woodie manganese mine. The project area is considered highly prospective for unconformity related uranium, SEDEX lead-zinc, Proterozoic copper and high grade manganese mineralisation.

The Yeneena project area captures the northern margin of an area of anomalously thick Yeneena Group sedimentary rocks (Throssel Graben). This margin replicates the geological setting seen on the southern margin some 40kms to the south, where the Kintyre uranium deposits are located (Figure 1). Simplified geological stratigraphy for the region comprises the Palaeo-Proterozoic Rudall complex as the lowermost unit, overlain by the Neo-Proterozoic Coolbro Sandstone. The Broadhurst formation sits stratigraphically above the Coolbro and is the host to the base metals targets and the Nifty Copper Mine. The Kintyre uranium deposit sits directly below the unconformity between the Coolbro and the Rudall.

Since 2007, Encounter has acquired new geochemical and geophysical datasets over the area. Initial efforts focused on the assimilation of historical exploration data into the Encounter database together with newly acquired multi-element geochemical data from the re-analysis of over 5400 drill pulps from 18,000m of historical drilling completed by Barrick up to 2006. In addition, a program of end-of-hole hyperspectral logging was completed utilising the aircore and RC chip trays provided by Barrick.

During 2008, Geoscience Australia ("GA") completed a 30,000 line km AEM survey over a large portion of the Paterson Province. This survey was funded by the Federal Government's Onshore Energy Initiative. The survey lines were flown in an east-west orientation at 1km or 2km line spacing. Encounter contracted Fugro Airborne to fly an additional 1000 line kms within the Yeneena JV to infill line spacing to 500m. Encounter delineated a number of priority target regions through structural targeting and historical and geochemical data compilation (see Figure 1).

Figure 1 - Yeneena Project leasing and target areas on regional TMI magnetics

BM1 Target

The BM1 target is a coincident magnetic and airborne electromagnetic (AEM) anomaly located along a NNE trending splay structure to the regionally significant McKay Fault (see Figure 1). The anomaly is hosted within sediments of the Broadhurst Formation in a similar geological setting to the Nifty copper deposit (total resource of 148.3mt @ 1.3% Cu - Straits Resources Ltd, 2001).

Drilling by CRA in the mid 1980s focused on the outcropping ironstone unit at the northern end of the magnetic anomaly. Three holes were drilled by CRA and intersected copper up to 1000ppm and broad anomalous zones of uranium mineralisation. A water bore hole (WTWB2) drilled to the south of the ironstone returned highly anomalous copper results of 15m @ 0.14% Cu from 25m, including 3m @ 0.35% Cu. A second water bore (WTWB1) drilled 350m to the north west of WTWB2 ended in mineralisation with 8m @ 0.08% Cu from 52m to the end of hole, including 6m @ 0.10% Cu from 52m.

A decade later Normandy completed two broadly spaced lines of shallow RAB drilling across the target area and intersected additional copper regolith anomalism of 10m @ 0.12% Cu from 15m and 26m @ 310ppm from 17m .

The historical drilling defined a regolith copper anomaly that extends over 1.2kms and is open to the north, south and east. This regolith anomalism includes thick intersections in three holes grading in excess of 0.1% Cu over 800 metres in strike.

During June 2009 three aircore drill traverses at 400m x 100m spacing were completed across the northern and eastern (up dip) extents of the AEM conductor at the BM1 target (Figure 2). This drilling successfully defined a coherent, under cover, near surface copper regolith anomaly that is open and strengthening towards the south.

Figure 2 - BM1 Summary on Channel 12 TEMPEST image

The anomalism is focused along two contacts between black shale and carbonate units of the Broadhurst Formation (refer to drill sections in Figures 3 and 4). The western contact sits above the EM conductor on the interpreted splay fault and the eastern contact lies directly up dip of the modeled EM plate.

Prominent copper anomalism is focused along the eastern carbonate-shale contact. Anomalous results include 16m @ 0.23% Cu from 24m and 12m @ 0.23% Cu from 54m (refer to Figures 3 and 4). Numerous regolith intersections over 0.1% Cu and results of up to 2m @ 0.89% Cu highlight the potential of this area to host a substantial body of copper oxide mineralisation. The area to the south of the June 2009 aircore program will be tested for high grade copper oxide mineralisation in 2010.

Associated with the zone of anomalous copper on the eastern contact are extensive and pervasive silica, carbonate and hematite "red rock" alteration together with elevated cobalt and uranium. This association of alteration and metal anomalism shows similarities to the Zambian style copper deposits.

Copper anomalism focused along the western carbonate-shale contact is coincident with a magnetic anomaly along the NNE trending splay structure from the regionally significant McKay Fault. Anomalism associated with this structure includes 8m @ 0.12% Cu from 68m in pervasively carbonate altered fresh rock. The anomaly on the western contact includes thick intersections of regolith copper such as 42m @ 243ppm Cu from 18m and is also strengthening to the south.

Figure 3 - BM1 Aircore drill section 7543100mN

Figure 4 - BM1 Aircore drill section 7542700mN

A diamond drilling program co-funded through the WA Government Exploration Incentive Scheme was completed in October 2009. Drill hole EPT057 was targeted to test below the zone of regolith copper anomalism identified in a shallow aircore program completed in June 2009. The hole intersected two thick (+80m) zones of brecciated and altered dolomite hosted within carbonaceous shales. The alteration included intense carbonate veining, silicification, disseminated pyrite and sporadic occurrences of chalcopyrite. Several zones of intense hematite alteration were encountered within the lower dolomite unit. The company is encouraged that the hole has identified a major hydrothermal alteration system below an extensive regolith copper anomaly that remains open to the north and south.

BM5 Target

The BM5 target is located along the regionally extensive Kintyre Fault (Figure 1). The area was initially drilled by WMC in the early 1990s, at the end of their exploration program in this area. A series of 800m spaced RC traverses were drilled across the NW trending Kintyre Fault where it separates two large zones of conductive Broadhurst Formation. These were followed up by one deeper diamond drill hole.

This early drilling program intersected thick zones of Fe-Mn rich material below Permian and Recent cover. The Fe-Mn body is over 1km long and is associated with strong Cu-Zn-Pb-Ag anomalism. The body appears to be controlled by the underlying dolomitic basement geology at the intersection with the Kintyre Fault (Figure 5). Initial interpretation by WMC inferred the base metal anomalism was due to manganese scavenging within the regolith. A comprehensive review of the historical data clearly shows that the high Cu-Zn-Pb-Ag values in this zone do not correlate with the high manganese values. It is therefore interpreted that this enriched body represents a potentially significant base metal gossan.

Encounter completed a 7 hole aircore and RC drilling program at the target in June 2009. The compilation and interpretation of the results showed a strong geochemical vector within the gossanous horizon indicating increased prospectivity along the western margin of the dolomite unit located at historical drill hole THRD794. This geochemical target is coincident with an interpreted NW to NNW structural jog along the western dolomite contact. This geochemical and structural target was tested as part of the October 2009 diamond drilling program co-funded through the WA Government Exploration Incentive Scheme.

Drill hole EPT062 was designed to test beneath the gossanous iron manganese horizon associated with copper-lead-zinc-silver geochemical anomalism. Drilling conditions were difficult resulting in the hole being abandoned above the target depth at 306m. A vein of massive sulphide containing sphalerite and galena was intersected within 5m of the end of hole in brecciated dolomite (Figure 6). A downhole electromagnetic survey revealed an off hole EM conductor interpreted to represent a folded prospective body beneath EPT062. Further diamond drilling is planned in 2010 to effectively test the BM5 target.

Figure 5 - BM5 Exploration summary plan

Figure 6 - BM5 Cross Section 7565150N

MN1 Target

Two high grade, near surface manganese intersections were identified in the re-analysis of samples from the drilling program completed by Barrick Gold of Australia in 2006. The intersections are located to the west of the T2 target within the company's Yeneena Project and 70km south east of the operating Woodie Woodie manganese mine (Figure 1). The intersections as are follows:

• 2 metres at 26% MnO from 25 metres in YNAC 168 incl. 1m @ 36% MnO from 26m
• 3 metres* at 20% MnO from 21 metres in YNAC 169

* composite sample

The manganese mineralisation is associated with a low iron content in the range of 4% to 6% Fe. These manganese intercepts are located at the southern end of a 14km long anomalous gravity ridge that sits to the west and parallel to the regionally extensive McKay Fault (Figure 7). The intersections are 200m apart in adjacent vertical aircore holes. The mineralisation is open for 1.7km south and to the north for the length of the gravity anomaly. Further work is required to determine the potential for additional manganese mineralisation along the remainder of the gravity anomaly. A series of detailed orientation gravity lines was completed at this newly identified manganese target during late 2009 and is currently being modelled.

An aircore drill program is scheduled to commence in April 2010 to test this manganese target and will provide information on the significance of the manganese identified and the relationship that this mineralisation has with the 14km long untested gravity anomaly.

Figure 7 - Bouguer Gravity (0-1km layer) and Max MnO in aircore drill holes

T2 Target

The T2 target is a discrete AEM conductor located in the north west of the project along a section of the McKay Fault (Figure 1). The bedrock AEM anomaly is located at a major stratigraphic discontinuity between the deeper water environment of the Coolbro Sandstone on the east and the shallow marine shelf sediments to the west. Significantly, in the area of the AEM anomaly the basement geology is masked by two extensive sand dunes. Geochemistry from historical drilling 5kms to the south of T2 reveals near surface base metal anomalism that is open and increasing in intensity to the north.

A ground EM survey in July 2009 confirmed the AEM anomaly is a 600 metre long conductive body at a depth of 100-150m. The T2 EM conductor is modelled as a northerly plunging synform located on the McKay Fault. There is negligible geological information for this target as it is completely sand covered. A single vertical diamond drill hole to a depth of 183 metres was completed at the T2 target in November 2009 with assay results expected in early 2010.

Figure 8: Conductive depth image (CDI) of T2 target with planned drilling

BM2 Target

The BM2 target is also beneath an area of extensive sand cover at the intersection between a north-south trending, westerly dipping fault and the regional north west striking Tabletop Fault. AEM conductivity depth images indicate a clear structural termination along the eastern margin of a conductive horizon against the Tabletop fault. The AEM target was refined by a ground EM survey completed in July 2009. Copper regolith anomalism up to 521ppm Cu has been intersected in 1km spaced historical aircore drill holes. This broad base metal regolith anomaly extends over an interpreted strike of 3kms.

An aircore drill program is planned to further define the regolith geochemistry at the BM2 target in 2010.