An area of southern Eyre Peninsula consisting of two separate tenement subgroups located in the Port Lincoln west and Cummins districts respectively is being explored for possible economic shallowly buried stratabound occurrences of haematite and magnetite iron ores, which are thought to be hosted by banded iron formation (BIF) units of the Palaeoproterozoic Middleback Subgroup metasedimentary sequence. Previous exploration drilling of this ground is scant, and only a few holes reached Precambrian basement. Most of these holes have not been adequately sampled to assess the polymetallic mineral potential of the basement rocks, which are also thought to contain base metals, gold and uranium mineralisation. With respect to inferred iron ore potential within the four subject tenements, the aggregate strike length of possible subcropping BIF strata, based on the licencee's interpretation of aeromagnetic data, is ~50 km. The main high intensity aeromagnetic anomaly at Rifle Range prospect has been interpreted by Lincoln Minerals to be caused by a magnetite unit ~2 km in strike length and similar in width and composition to the Greenpatch jaspilite. Other smaller high intensity aeromagnetic anomalies in the Rifle Range area define additional potential magnetite resources. The cumulative length of high intensity aeromagnetic anomalies in the Rifle Range area is ca. 5-6 km, and it outlines an exploration target for magnetite (and lesser haematite) BIF iron ore that could be more than 250 Mt at grades of 30-50% Fe (based on an average thickness of 45-75 m, downdip extent of 200 m and SG of 3.4). Several possible hematite targets have been identified but, in addition to iron ore, the Middleback BIF horizons of the Hutchison Group in this area are closely associated with sulphide-rich banded calc-silicate units that, elsewhere, are host to numerous small but interesting base metal prospects. Thirdly, there is also a significant uranium radiometric anomaly on EL 3422 Gum Flat, coincident with the aeromagnetic anomaly, extending south-westwards from Coomunga to the Rifle Range prospect. The source of this anomaly has not yet been identified. Other potential uranium targets occur along the Kalinjala and associated mylonite zones south-west of the Port Lincoln Hospital uranium prospect located in the east of the tenement. Middleback Subgroup BIF does not outcrop in the Gum Flat Project area, however, several scattered outcrops of jaspilite and ferruginous quartzite occur in the nearby Greenpatch region, within the core of an overturned N-plunging antiform. Lincoln Minerals' recent drilling has shown that the magnetite-rich BIF at Gum Flat is a strongly banded rock, typically with monomineralic magnetite bands alternating with quartz, dolomitic marble and iron-rich silicate bands. Generally this rock is strongly recrystallised by high-grade metamorphism, with upgrading and thickening of magnetite in the axial regions of folds. The jaspilite can be classified as carbonate to silicate-facies BIF with bands of quartz magnetite. Host rocks comprise a sequence of diopside-quartz dolomitic marble, calcsilicate gneiss, graphitic mica schist, amphibolite and gneiss, all of which have undergone deep weathering, locally down to at least 100 m. While the BIF units are not as deeply weathered as adjacent units, the depth to fresh magnetite on the prospect is 60-80 m, with enriched haematite-goethite above the magnetite. During the first year of the project, Lincoln Minerals' exploration activities included: - Planning, site preparation (including vegetation removal) and supervision of an RC and diamond core drilling program (July 2008 – Jan 2009); - Completion of 4 vertical aircore holes (total penetration 107 m), 120 inclined RC holes (total 11,166 m) and 15 inclined diamond cored holes (total 4376 m); - The conduct of ongoing Aboriginal heritage surveys over drill targets; - Ongoing environmental rehabilitation of drill sites; - Ongoing processing, modelling and interpretation of gravity and aeromagnetic data; - Revision of independent vegetation DEF (SKM Pty Ltd); - Assaying and analysis of aircore and RC drill cuttings and diamond drill core samples; - Interpretation and analysis of drilling results; - Ongoing community consultation; and - Commissioning of metallurgical testwork and an independent scoping study on the processing and beneficiation of drilled massive and banded haematite/magnetite iron ore. The Gum Flat Iron Ore Project targets on EL 3422 lie in two main areas, the Rifle Range and Barns prospects. Only limited drilling was completed over the Barns prospect because of delays in getting government approvals for access to the Vegetation Heritage Agreements areas, and then owing to the iron and steel industry downturn. RC and diamond drill core samples were assayed by XRF, firstly on bulk samples (to give “head” assays) and subsequently, for selected samples with high magnetic susceptibility, on iron ore concentrates derived from Davis Tube Recovery (DTR) magnetic separation. Iron mineral grade and distribution results were processed to define a JORC compliant inferred resource for parts of the BIF orebody, and in April 2009, Lincoln Minerals publically announced this estimate, with key points as follows: - Total Magnetite Inferred Resource (to date) is 55.2 Mt at 20.6% DTR concentrate; - Total Haematite Inferred Resource (to date) is 1.2 Mt at 51.6% Fe (45% Fe cutoff) or 2.5 Mt at 45.5% Fe (35% Fe cutoff); - Haematite enrichment of up to 60.5% Fe exists (in drillhole GFRC103 - 18m @ 58.2% Fe); - Up to 43.9% of BIF magnetite is recoverable as a DTR concentrate; - DTR concentrates produced with up to 71% Fe and low silica, alumina and phosphorus; - Only half of the cumulative 7 km length of aeromagnetic anomalies tested so far; - Magnetite Exploration Target is 125-200 Mt at 20-25% Fe; - Haematite Exploration Target is 3-10 Mt at 45-60% Fe; - Resource lies close to a major shipping port and other infrastructure. RC and diamond drilling carried out along traverses crossing the Rifle Range prospect have identified at least two, quite shallow dipping (10-40º) but relatively thin BIF units that are variably folded to locally define thicker drill intersections. In hole GFRC054, using a cut-off head grade of 20% Fe, there is a 57 m thick band of magnetite-rich BIF from 29-86 m averaging 29.9% Fe (head grade). In this hole, if a cut-off of 10% DTR is used, then folding effects are included, which together form a 42 m thick band of magnetite-rich BIF from 34-76 m averaging 22.5% DTR to give a 68.6% Fe grade concentrate. The BIF units are variably oxidised down to 40-55 m (true depth) and are locally supergene enriched at shallow levels to higher grade haematite-goethite bodies (e.g. in GFRC054 36-46 m and GFRC053 20-28 m). The Sheoak West prospect is one high grade such example, where hole GFRC072 returned whole rock assay iron contents ranging up to 50.7% Fe (average 47.6% Fe over 16 m from 32-48 m). Limited RC and diamond drilling conducted across the high priority Barns exploration target have confirmed the geophysical exploration model of a shallowly west-dipping BIF sequence approximately 80 m thick. Within that sequence, there are bands of high grade magnetite BIF (magnetic susceptibility >400 x 10-3 SI) which have a cumulative thickness in hole GFDH016 of 55 m. The high grade magnetite extends to a depth of at least 230 m below ground level, and remains open at depth. Its strike extent is presently unknown. Beneath the Tertiary cover sequence, magnetite BIF is oxidised to haematite-goethite BIF down to approximately 60 m vertical depth. Supergene iron enrichment grades up to 60.5% Fe in hole GFRC103 (58-60 m). The upper weathered and oxidised BIF sequence is overlain by 12-18 m of Quaternary calcarenite lime sand and by local, variably thick Tertiary ferricrete, ferruginous sand and saprolitic clay. The licensee believes that, in their overall economic properties, the Gum Flat iron orebodies are comparable to the Greenpatch iron ore deposit located on EL 3610 ~5 km along strike north-east of Rifle Range, where haematite-rich BIF (33.7-38.6% Fe) overlies magnetite-rich BIF (cf. Centrex Metals Limited prospectus, 2006). Previous work performed at Greenpatch has demonstrated that a high grade magnetite concentrate (69% Fe, 65% and low P, Al2O3 and SiO2 could to be produced by beneficiation of the Gum Flat Project area's haematite-rich BIF. The cost of beneficiation would be offset in part by the very low mine to port transport costs. The company commenced a scoping study to determine the feasibility and potential cost of undertaking haematite beneficiation either as a stand-alone operation or in conjunction with a magnetite operation. During the second year of the project, activities mainly occurred on EL 3422 and included: - Planning, site preparation and supervision of an RC and diamond core drilling program (November 2009 – March 2010); - Completion of 42 inclined RC drillholes (total 4634 m) and 13 inclined or vertical diamond cored holes (total 2209 m), plus 8 vertical water supply bores - rotary mud (total 563 m, during May-June 2010); - The conduct of ongoing Aboriginal heritage surveys over drill targets; - Ongoing environmental rehabilitation of drill sites; - Ongoing processing, modelling and interpretation of aeromagnetic data; - Pump testing the new water bores; - Commissioning a revision of independent vegetation DEF (SKM Pty Ltd); - Assaying and analysis of RC and diamond drill core samples and geo-modelling wireframes for resource estimation (AMC Consultants); - Interpreting and analysing drilling results; - Conducting ongoing community consultations and arranging compensation payments; - Commencing metallurgical testwork (Ammtec/Calibre Projects) and an independent scoping study (Worley Parsons & AMC Consultants) on the processing and beneficiation of massive and banded haematite/magnetite iron ore. No fieldwork was undertaken on ELs 3703 and 4049 during this second reporting year. The focus of the RC drilling was to further define haematite-goethite resources in the 3 km long central Barns corridor, while diamond holes were targeted to define magnetite resources at depth and along strike. Results were processed to define JORC compliant indicated and inferred resource estimates for parts of the Barns orebody. Out of a total of 5041 m of RC drilling completed to date at Barns, 1814 m of that was used to determine the indicated haematite resource, viz. 0.9 Mt @ 54.8% Fe (using a 50% Fe cut-off), equivalent to 58.8% calcined Fe – this represents potential Direct Shipping Ore; or, 2.4 Mt at 47.7% Fe (40% Fe cut-off), equivalent to 51.6% CaFe. The RC drilling along the south-eastern margin of the Barns corridor has outlined a shallowly west-dipping, medium grade haematite-goethite (+limonite+magnetite) deposit up to 35 m thick and 495 m in strike length. The depth to the top of this supergene mineralisation varies from 20 to 25 m below ground level, and it extends down to 65-70 m below ground level before magnetite becomes the dominant iron mineral. During early 2010, the diamond drilling performed at Barns prospect extended the inferred resource of magnetite there by 32%, by showing that it continues to at least 330 m below ground level, and at present all indications are that the upper and lower magnetite-rich BIF units continue downwards at a ~35 degree north-westerly dip to much deeper levels. In addition, a new zone of mineralisation was delineated along strike to the south-west. DTR primary beneficiation of selected magnetite samples from the latest drill cores, using a grind that was selected to yield 80% passing 53 microns, produced magnetic blast furnace grade concentrates that have an average grade of 67% Fe, with low silica and very low alumina and phosphorus contaminants. The beneficiation test procedure used steps as follows, most of which were recommended by mineral processing consultants Engenium: - Crush core (or ½ core) to -3.15 mm - take 2 m composite samples for testing - Sub sample 150 g from each composite sample - Pulverize in a C125 bowl for 30 seconds - Wet screen at 75 microns - Pulverize oversize for 0.8 sec per g of oversize - Repeat screen and pulverize until oversize <7.5 g - Subsample 20 g - Pass through Davis Tube apparatus, using indicated operational parameters - Collect concentrate, then weigh and assay it via XRF. Assay data, including the Davis Tube magnetic separation test results, were jointly assessed by Lincoln Minerals and Australian Mining Consultants (AMC) to define a new magnetite inferred resource for parts of the Barns prospect orebody, of 99.27 Mt @ 24.37% Fe, equivalent to 66.71% calcined Fe. Lincoln Minerals has engaged AMC Consultants Pty Ltd, WorleyParsons Pty Ltd, and Aldam Geoscience Pty Ltd, to undertake a scoping study on mining, environmental, beneficiation and transport options for its Gum Flat Project. This study will look at mine optimisation of the haematite and magnetite resources, the capital expenditure costs, and operating costs. Early initial findings of the study have indicated the operating costs for a haematite mining operation are in the order of $16-26 per tonne (FOB) depending upon the export port (Port Lincoln or Sheep Hill). A capital cost of $40-50 million has been estimated, that includes the pre-strip of overburden, and the construction of roads, a concentrate storage shed at port, and other facilities. Groundwater monitoring wells have recently been constructed to determine the quality and quantity of groundwater in the various aquifers within the Gum Flat project area, however, at the end of the reporting year no results were to hand. Metallurgical testwork is continuing, to determine what beneficiation parameters are optimal for Gum Flat haematite ore. A preliminary magnetite processing flow sheet has been developed. During the year, Lincoln Minerals obtained settlement of a Contract for Sale of Joint Venture Interest to buy back all of the 40% interest in the Gum Flat Iron Ore Project that it did not own. This 40% stake was formerly held by Indian iron ore miner, Mineral Enterprises Limited (MEL) and MEL's local subsidiary, Mineral Enterprises Australia Pty Ltd (MEA). Lincoln Minerals had entered into a joint venture with MEL and MEA in December 2007, and they had subsequently earned a 40% participating interest in EL 3422 by spending in excess of A$2.5 million on exploration. During that earn-in period, MEL through MEA funded the above-described drilling campaigns that have led to the definition of magnetite and haematite iron ore inferred resources. Their contribution in taking what was a greenfields iron ore prospect in 2007 to a deposit with an inferred resource in April 2009 has been greatly valued by the grant licensee. Lincoln Minerals now owns 100% of the Gum Flat Iron Ore Project.