PACE Initiative Year 3 drilling project funds were secured by Adelaide Resources to evaluate a number of previously detected IP anomalies inferred to originate from sources in the Mesoproterozoic basement and saprolitic cover in the vicinity of the Barns and Baggy Green gold prospects, which are situated north of Wudinna on the northern Eyre Peninsula. 8 reverse circulation drillholes totalling 797 m were drilled during April 2006. The drilling intersected weak to strong propylitic hydrothermal alteration in a number of holes, but failed to identify significant gold mineralisation. The very low sulphide volumes intersected in the drilling are considered unlikely to be sufficient to account for the geophysical anomalies. Of the eight holes drilled, only three effectively tested targets. Five holes were abandoned at shallower than planned depths due to insurmountable drilling difficulties caused by the weathered regolith, aeolian sand cover and Tertiary channel sediments. Bedrock penetrated in the successful hole at Barns West comprises granodiorite with narrow units of possible metasediment (interpreted to be blocks of country rock) and mafic material. Bedrock in the two holes at Baggy Green North that successfully penetrated into fresh basement rock is dominated by gneiss, which is considered to have a granodiorite parent. Minor lithologies at Baggy Green include mylonites and mafic units, the mafic units including both amphibolite and dolerite or lamprophyre dykes or sills. Weak to strong hydrothermal alteration is present in each hole that penetrated bedrock. The alteration is of a distal propylitic style, and is the type found to be extensively developed around both the Barns and Baggy Green prospects. Very minor sulphides, typically marcasite in weathered rock and pyrite in fresh rock, are present in all holes, but are considered to be in insufficient volume to give rise to the IP anomalies tested by the programme. Rare secondary copper sulphides and small flakes of native copper were observed in panned concentrates in hole BGRC1058. Small and rare grains of gold were also panned from two holes at Baggy Green. A single grain was observed in BGRC1056 in basal palaeochannel sediments, while two grains were recovered from the lower saprolite in hole BGRC1058. At Baggy Green a maximum gold assay of 0.53g/t Au was returned from weathered saprolite in hole BGRC1058. Abandoned holes drilled in the vicinity of the same hole also intersected weakly anomalous gold in saprolite. Weakly anomalous gold is also present in the channel sediments overlying the saprolite at Baggy Green. No anomalous gold results were returned for the two PACE-funded holes drilled near Barns (one of which was abandoned before reaching bedrock). Weakly anomalous Ni and Zn is present in saprolite in abandoned holes BGRC1054 and BGRC1055 and in successful hole BGRC1058, all of which were collared in close proximity to each other. Other trace element contents were at insignificant levels in all holes. Considering the very low volumes of sulphide disclosed in the drilling, it appears unlikely that this sulphide is the source of the induced polarisation anomalies being targeted. A possible exception is the layer of secondary marcasite which occurs in the saprolite penetrated in the abandoned western hole at Barns. Flat-lying layers of marcasite are common in the regolith on Eyre Peninsula, and could potentially source IP anomalies. The style and intensity of the propylitic hydrothermal alteration intersected in the drilling is interpreted as being relatively distal to more prospective parts of a hydrothermal system. At both Barns and Baggy Green gold mineralisation is hosted by phyllic alteration. No alteration of this style was identified in unweathered rock encountered during the PACE drilling. The strongest alteration encountered occurs in hole BGRC1058 in weathered rock, making identification of the alteration style difficult. This material also returned the weakly anomalous secondary gold in saprolite which may be either in-situ or remobilised from a nearby source. The weak gold anomalism evident in samples collected from the cover sediments intersected in the upper parts of the holes at Baggy Green, together with the gold grain panned from the channel sediments in hole BGRC1056, is interpreted to be placer gold sourced from the Baggy Green deposit.