The Hillgrove Kanmantoo joint venture project is located 50 km east of Adelaide in the Mount Lofty Ranges of South Australia, and covers 497 square km of the highly prospective Early Cambrian Tapanappa Formation, which offers outstanding potential for discovering economic copper-gold and silver-lead-zinc mineralisation. Hillgrove's contribution to the project involves a 90% interest in EL 3277 (with Argonaut Resources NL trading as Kelaray Pty Ltd having 10%), and 100% of ML 5776 and EL 3298. The JV tenement holding incorporates the old Kanmantoo copper-gold mine, a vein and replacement style deposit lying in the axial region of an upright Delamerian syncline. The deposit was discovered in the late 1960s, and went into production in 1971. The mine produced a total of 4.05 million tonnes of ore grading 1.1% copper (39,000 t of copper concentrate) and an unknown gold grade, before it closed in 1976 due to falling copper prices and the rising Australian dollar value. When Hillgrove commenced exploration in the Kanmantoo area in early 2005, the project had a published remaining ore reserve of 8.1 Mt @ 1.1% Cu, plus an unknown gold resource. Through its conduct of an aggressive exploration program over the past 12 months (19 RC drillholes for 2299 m plus 4 diamond drillholes for 683 m), Hillgrove has more than doubled this resource to 18.37 Mt @ 1.1% Cu, and 0.2 g/t Au. Identified mineralisation currently extends over a 1320 m strike length, and covers the Emily Star satellite ore body 500 m south of the Kanmantoo open pit (best intersection 14 m @ 4.46% Cu), plus near-pit oreshoots at the O'Neil (39 m @ 1.38% Cu), Main (26 m @ 2.04% Cu), South-eastern (16 m @ 2.81% Cu and 0.48 g/t gold) and North-eastern (41 m @ 1.28% Cu and 18 m @ 2.02% Cu) intra-mine (ML 5776) area zones. Significant potential exists to further expand the identified scale of mineralisation in all five of these zones, which presently remain open along strike and down dip. Hillgrove's exploration programme is continuing, with the aim of defining a much larger overall resource base originating from both the Kanmantoo mine vicinity and from other highly prospective greenfields targets within its tenement holdings. Recent results from exploration drilling work that has been partially funded by a PACE Initiative Year 2 subsidy are as follows: [In Phase 1, which comprised additional stepout drilling at Kanmantoo conducted during February 2005] - 4 RC drillholes (KTRC149a,b-151) totalling 560 m were first put in at the North-eastern Zone prospect along the Kanmantoo mine area main structural corridor, where target selection was based on the recently completed structural study by consultants RSG Global, which had concluded that oreshoots were likely to be controlled by intersections of foliation on north-plunging fold axes with north-easterly trending secondary fault shears. - a fence of 4 RC holes (KTRC152-155) totalling 593 m was next drilled along the southern pit boundary, to look for possible mineralisation down-strike from the Main Lode Zone; - Another 4 RC holes (KTRC49-52) totalling 374 m then tested for a possible extension to the Green Zone at locations between the Emily Star and Main Lode orebodies; - 2 RC holes (KTRC53,54) for 257 m tested the Paringa prospect; and - Hole KTRC156 to 89 m investigated part of the O'Neil Zone. The results from this initial phase of PACE drilling were generally poor, which highlighted the need for more geophysical data to refine existing drill targets. Accordingly, a gradient array IP survey was carried out over the near-mine area in March 2005. [In Phase 2 of the PACE work, which consisted of drilling on more regional, mainly surface-mineralised targets in the broader Kanmantoo vicinity] - a new prospect called Coopers Find was discovered and delineated in March 2005 on newly accessible ground within EL 3298 that lies north of the Kanmantoo mine open pit. 4 RC drillholes (KTRC55-58) totalling 514 m were put down here on soil/rock chip geochemical anomalies, yielding a best intercept of 26 m @ 0.66% Cu + 0.06 g/t Au in KTRC55; - a more distant target at the Kanappa prospect in EL 3277 was diamond drilled due to access difficulties on very steep terrain near the old underground mine. A single hole, KPDD001, which was declined at an angle of 55 degrees to probe underneath the old workings, was drilled to TD 252 m, with disappointing results. Only a 5 metre-thick interval having 0.92% Cu was intersected below 189 m depth, suggesting the probability that observed fault stoping has broken up a fairly small, poddy and steeply plunging ore lens. - In another area, nearer Kanmantoo and within EL 3298, 2 RC holes (KTRC59,60) for 214 m were drilled to test a line of old shallow workings on the Alex Wells prospect, revealing 7 m @ 0.57% Cu in KTRC59. Other old workings on the North Callington prospect near Wheal Maria, 4 km east of Kanmantoo, were then tested by 4 RC holes (NCRC001-004) for 386 m, returning a best intercept of 4 m @ 2.06% Cu, 1.7 g/t Au and 9.5 g/t Ag in hole NCRC001, from above an old underground stope cavity. To end this PACE project, one last test hole was drilled on one of the newly defined IP anomalies in an area devoid of workings (the North-western Zone) that lies close to the Kanmantoo open pit. KTRC61 to TD 113 m intersected 17 m grading at 1.06% Cu. Although the outcome of Hillgrove's PACE drilling was much less successful than that of its previous drilling campaigns, the work has nevertheless been important in the development of exploration during a transitional period of target recognition methods. The generation of two new prospects to the north of the Kanmantoo open pit in areas that had seen no work since 1970, and where bedrock lies under shallow cover or a ferricrete cap, indicate that such IP and ground magnetic anomaly-rich prospects warrant close attention during the next drilling round.