For the period ending 30 June 2008 Exploration and Development Activity Over the last year, exploration and development work at the Company s Nullagine Gold Project in Western Australia s eastern Pilbara has been focused on increasing the resource base of the highgrade Blue Spec deposit to underpin Northwest s development strategy together with building up a pipeline of high priority gold targets as a basis for future exploration success. The Company s current global JORC resource for the Nullagine Gold Project totals 1.33 Mt grading 8.3 g/t gold for 353,000 oz and 7,300 tonnes of antimony grading 1.02%. The global resource comprises: The advanced Blue Spec deposit (323,000t grading 24.3 g/t gold for 253,000 oz and 5,550t of antimony grading 1.72%). A series of satellite deposits within development distance of Blue Spec (738,000t grading 3.9g/t gold for 92,000 oz of gold and 1,550t of antimony grading 1.13%). Assessment of updated Blue Spec JORC resource The updated Blue Spec resource is divided into two zones (the Upper Zone and Lower Zone) based on contained metal and drilling density. The Upper Zone of the Blue Spec deposit (320 440m vertical) contains greater than 1,000 ounces per vertical metre of gold over 120m immediately below the existing underground access. The Lower Zone of the Blue Spec deposit (440 850m vertical), whilst defining highgrade mineralisation down to the 850m vertical level, indicates a resource containing approximately 320 ounces per vertical metre of gold over a depth extent of 410m. The Company s assessment of the updated resource for the Blue Spec deposit indicated that there is some uncertainty in relation to the current grade estimation in the Lower Zone of the resource primarily related to low drilling density. Figure 1. (Opposite) Blue Spec deposit showing the existing shaft and decline (green) and indicative decline design (purple) over the 320470m vertical zone Northwest Resources Limited ACN 107 337 379 ASX code: NWR www.nwresources.com.au
During drilling, the Company experienced difficulties successfully targeting the interpreted highergrade zones of mineralisation within the Lower Zone from surface. Accordingly, the gold grade estimation in the Lower Zone may not reflect the true potential of the Blue Spec ore body at depth. Further opportunities at Blue Spec Following the assessment of the updated Blue Spec JORC resource and the Company s review of a number of potential development options for the Blue Spec deposit, the Company believes that there are significant opportunities to increase the current JORC resource at the Blue Spec deposit by undertaking further exploration and development, including: 1. Underground drilling aimed at confirming higher grade mineralisation in the Lower Zone resource (234,000t grading 17.5 g/t gold for 132,000 oz from 440850m vertical) which could contribute to a resource upgrade The Company has identified several areas within the Lower Zone which it considers have the potential for higher grade mineralisation if subjected to additional successful drill testing. This could contribute to an upgrade of the resource estimation within the Lower Zone. Extensional diamond drilling of the Lower Zone has recorded some very significant intersections, including 2.5m grading 156.2 g/t Au & 14.75% Sb from 715m downhole. The difficulties associated with successfully targeting the interpreted highergrade zones of mineralisation within the Lower Zone from surface could be addressed by underground drilling following on from developing the Upper Zone of the Blue Spec resource. 2. Drilling and bulk sampling aimed at converting nonjorc Remnant Zone target mineralisation potential (85100,000t grading 1418 g/t gold for 4550,000 oz from surface to 180m vertical) into JORC resources. The Company has also identified a significant amount of remnant mineralisation potential within the historical upper levels of the Blue Spec underground (referred to as the Remnant Zone). This is thought to reflect a combination of poor development in the historical upper levels of the underground and a poor understanding of the ore body morphology with depth. A target mineralization (nonjorc) of approximately 4550,000 ounces (grading 1418g/t gold) of remaining gold has been projected for the Remnant Zone 1. The quantification of mineralization (nonjorc) in four pillars in the Remnant Zone has been completed by previous owners from historical surface drilling. The pillars which have been drilled are estimated to contain 1416,000 oz of gold mineralisation with pillar grades averaging 16g/t gold. Future development plans In order to realise the full potential of the Blue Spec deposit, the Company has decided to seek a coventurer with underground mining expertise to progress the development of the Blue Spec deposit. The Company believes that the involvement of a coventurer will minimize development and production risk to the Company whilst enabling it to benefit from any development success. This decision has been reinforced by the industry wide shortage of suitably qualified mining engineers and skilled underground miners available in Western Australia. The Company is in discussions with a number of parties who have expressed an interest in participating in the project s development. The Company proposes to undertake further engineering and preliminary metallurgical investigations as part of scoping studies on development options for the Blue Spec deposit. Page 2 of 11
The Company will also continue its review of a proposal to increase project revenue in a production scenario by employing conventional electrowinning of antimony concentrates to produce a higher value antimony metal together with increased gold recoveries. Antimony market fundamentals are very positive with industry forecasts indicating that the current metal price of over US$6,000 per tonne is sustainable over the medium term. Project well positioned for development The Company s Nullagine Gold Project is located approximately two hours drive from the Pilbara hub of Newman and is very well served by existing infrastructure, including: 1. Underground shaft and decline development at Blue Spec A triple compartment shaft down to 195m vertical and a decline from the 165m vertical level of the shaft to 310m vertical level was installed by Anglo American. Future refurbished of the existing underground infrastructure would allow direct access to Blue Spec s current resources. Figure 1. Anglo decline and shaft at Blue Spec in 1976 2. Treatment plant The conventional CIP plant located adjacent to the Blue Spec deposit was commissioned in 1988 and was specifically designed to deal with goldstibnite ores. The CIP plant has a crushing and grinding circuit capacity of 100,000t per annum with leaching and CIP facilities capable of 38,000t per annum throughput. Future refurbishment, together with the installation of additional float cells could result in the plant's throughput being increased to 100,000t per annum without the need for extensive redesigning. The plant s unit processes employed for gold and antimony recovery from ore consist of two stage crushing; conventional ball milling; cyclone classification with gravity separation on the circulating load; float cells; pressure leach vessels and carbon in pulp (CIP) adsorption. 3. Camp A fully serviced mining camp with accommodation and ancillary facilities for up to 32 men is located on site. The camp includes offices, generator facilities, storage facilities and phone and internet connection. Page 3 of 11
4. Bore field and pipes The plant and camp are connected to a bore field located 12kms to the east of the project and the Company has a licence to extract up to 100,000t of water per annum from the field which is anticipated to be sufficient to enable the processing of up to 100,000t of ore per annum. A second bore field and water storage dam are also located within the project. Figure 2. The treatment plant, offices and storage facilities New Exploration Results The Company has identified an exciting new gold target 12 km to the west of its highgrade Blue Spec deposit within the Company s Nullagine Gold Project. The target, named Red Dragon, is over 450m in strike length and is hosted along the interpreted western extension of the Blue Spec Shear. A map showing the Red Dragon target is overleaf. Red Dragon was identified by Northwest s team following analysis of data collected from the Company s innovative airborne HYMAP survey carried out over the entire Mosquito Creek basin (an area of approximately 3,000 km 2 ) which hosts the Nullagine goldfield. The HYMAP survey identified a number of significant alteration anomalies within the goldfield. The Red Dragon target was prioritised owing to the large size of the alteration anomaly and its location along the interpreted western extension of the Blue Spec Shear. Detailed structural mapping over the southern half of the Red Dragon target has confirmed a wide zone of structural complexity in association with multiple zones of quartzcarbonate veining. An extensive follow up geochemical soil sampling and rock chipping programme delineated a +50ppb gold anomaly over 450m in strike length. The potential of HYMAP surveying for remote detection of gold bearing alteration systems Northwest completed its HYMAP survey over the entire Mosquito Creek basin as part of an innovative study to determine the alteration signature of gold mineralisation within the Nullagine goldfield. The Company undertook a rigorous study of existing gold resources, involving the spectral analysis of thousands of drill samples, which resulted in a definitive alteration foot printing model being developed for the goldfield. Using the same response signal recognised around the existing resources, Northwest believes it is able to utilise the HYMAP dataset to remotely detect gold bearing alteration systems within the goldfield. The application of spectral alteration mapping (HYMAP) is unique to the Nullagine goldfield and gives Northwest a competitive exploration advantage. Page 4 of 11
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Red Dragon For the period ending 31 March 2008 The very close correlation between the gold alteration signature identified by the HYMAP survey, the structural complexity recognised from surface mapping and the positive gold assays from the geochemical sampling programme over the target suggest the Red Dragon target is an important new find. The Red Dragon target is interpreted to represent a significant splay position along the western extension of the Blue Spec Shear. Northwest s highgrade Blue Spec deposit is localised by a similar splay structure and these splays are recognised by Northwest as an important structural control for locating highgrade shoot positions along the shear. The Red Dragon target is now being prioritised and included in a list of 17 highpriority targets that are being progressed to drill ready status. Corporate Activity During the, the Company appointed Mr. Peter Richard as a nonexecutive director. Mr. Richard, 62, is a former stockbroker with over 35 years experience in Australian capital markets. During a long career in the stock markets, Mr Richard was a director of Jacksons Ltd, then the largest underwriter of mining and exploration floats in Australia. Mr Richard currently provides consulting services to emerging mining and technology companies. He has previously been a director of a number of listed public companies in Australia and most recently he was a director of Magnum Exploration NL. The information in this report that relates to exploration results or mineral resources is based on information compiled by Mr. Christian Easterday, who is a Member of the Australian Institute of Geoscientists. Mr. Easterday is employed by Mining Technical Solutions Pty Ltd and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Easterday consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Note 1: Target mineralisation in the Remnant Zone of the Blue Spec deposit should not be misunderstood or misconstrued as a mineral resource or mining reserve as defined by the JORC Code. It is uncertain if further exploration or feasibility studies will result in the determination of a mineral resource or mining reserve in respect of remnant mineralisation. Page 6 of 11
ASX Listing Rules Appendix 5B Mining exploration entity ly cash flow report Name of entity Northwest Resources Limited ABN Quarter ended ( current ) 95 107 337 379 30 June 2008 Consolidated statement of cash flows Cash flows related to operating activities Current Year to date (12 months) 1.1 Receipts from product sales and related debtors 1.2 Payments for: (a) exploration and evaluation (1,170) (5,453) (b) development (c) production (d) administration (212) (972) 1.3 Dividends received 1.4 Interest and other items of a similar nature 179 372 received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 GST 30 14 Net Operating Cash Flows (1,173) (6,039) Cash flows related to investing activities 1.8 Payment for purchase of: (a) prospects (b) equity investments (c) other fixed assets (2) (20) 1.9 Proceeds from sale of: (a) prospects (b) equity investments 1 (c) other fixed assets 27 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows (2) 8 1.13 Total operating and investing cash flows (carried forward) (1,175) (6,031) 1.14 Total operating and investing cash flows (brought forward) (1,175) (6,031) Page 7 of 11
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 8,973 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 9 1.17 Repayment of borrowings (7) (68) 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows (7) 8,914 Net increase (decrease) in cash held (1,182) 2,883 1.20 Cash at beginning of /year to date 9,472 5,407 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end of 8,290 8,290 Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities Current $A'000 1.23 Aggregate amount of payments to the parties included in item 1.2 102 1.24 Aggregate amount of loans to the parties included in item 1.10 1.25 Explanation necessary for an understanding of the transactions NonExecutive director s fees and Executive directors salaries Non cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows Nil 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest Nil Page 8 of 11
Financing facilities available Add notes as necessary for an understanding of the position. Amount available Amount used 3.1 Loan facilities 3.2 Credit standby arrangements Estimated cash outflows for next 4.1 Exploration and evaluation 250 4.2 Development Total 250 Reconciliation of cash Reconciliation of cash at the end of the (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. Current Previous 5.1 Cash on hand and at bank 540 222 5.2 Deposits at call 7,790 9,250 5.3 Bank overdraft 5.4 Other (provide details) Total: Cash at end of (item 1.22) 8,290 9,472 Changes in interests in mining tenements 6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased Tenement reference Nil Nil Nature of interest (note (2)) Interest at beginning of Interest at end of Page 9 of 11
Issued and quoted securities at end of current Description includes rate of interest and any redemption or conversion rights together with prices and dates. 7.1 Preference + securities (description) 7.2 Changes during (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions 7.3 + Ordinary securities 7.4 Changes during (a) Increases through issues (b) Decreases through returns of capital, buybacks 7.5 + Convertible debt securities (description) 7.6 Changes during (a) Increases through issues (b) Decreases through securities matured, converted 7.7 Options (description and conversion factor) 7.8 Issued during 7.9 Exercised during 7.10 Expired during 7.11 Debentures (totals only) 7.12 Unsecured notes (totals only) Total number Number quoted Issue price per security (see note 3) (cents) 132,770,418 132,770,418 Exercise price Amount paid up per security (see note 3) (cents) Expiry date Page 10 of 11
Compliance statement 1. This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX. 2. This statement does give a true and fair view of the matters disclosed. Date: 31 July 2008 John J. Merity Managing Director Notes 1. The ly report provides a basis for informing the market how the entity s activities have been financed for the past and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report. 2. The Nature of interest (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2. 3. Issued and quoted securities: The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities. 4. The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report. 5. Accounting Standards: ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with. Northwest Resources Limited ACN 107 337 379 Corporate Office: Suite 3, 9 Banksia Road, Bellevue Hill, Sydney NSW 2023 Tel: (02) 9365 4550 Fax: (02) 9365 1295 Exploration Office: Level 6, 256 Adelaide Terrace, Perth WA 6000 Tel: (08) 9225 4611 Fax: (08) 9218 8662 Email: info@nwresources.com.au Web: www.nwresources.com.au