Uranium Projects

PacMag Metals Limited ("PacMag") has signed a heads of agreement with Peninsula Minerals Limited ("Peninsula") with intent to combine the international uranium assets of the two companies. The merged assets will be managed and explored by Peninsula who will provide a dedicated team to accelerate the development of these exciting uranium assets, which cover 3 continents. The transaction is subject to regulatory approvals, Peninsula shareholder approval and the positive outcome of final due diligence of both companies.

RATIONALE FOR THE TRANSACTION
PacMag is a focused copper-molybdenum-gold exploration and development company with two advanced projects; Ann Mason in Nevada USA, and Blue Rose in South Australia. The Board has decided to maximise returns to shareholders by enabling two separate commodity specific companies to simultaneously fast track the exploration and potential development of Ann Mason, Blue Rose and the Company's uranium projects through a merger of PacMag's uranium assets with a well funded dedicated uranium explorer (Peninsula).

This divestment model was preferred to several alternative opportunities, as it enables PacMag and its shareholders to retain an interest in the assets and share in the upside potential of PacMag's uranium projects and in addition obtain exposure to the equally exciting Karoo uranium province of South Africa where Peninsula has cemented a solid position in several advanced uranium projects.

URANIUM PROJECTS COMBINED
The combined portfolio of international uranium projects will provide existing and new shareholders with exciting exposure to assets in 3 countries (Figure 1). The two advanced uranium projects, Karoo in South Africa and Sundance in Wyoming (USA) have excellent potential for the definition of multiple uranium deposits. The dedicated uranium exploration team and focused funds provided by Peninsula which held $4.5 million in cash at 31 December 2006, will ensure rapid resource definition on the advanced stage uranium plays of Karoo and Sundance. The merged assets that will be owned by Peninsula are detailed below.

Sundance Uranium Project - Wyoming USA
PacMag's Sundance project in the north-east Powder River Basin in Wyoming USA, includes major portions of the Oshoto uranium deposits (Figure 2). Wyoming is host to several former and currently operating uranium mines owned by companies such as Cameco, Rio Tinto and Cogema.

The Sundance district hosts a significant amount of uranium mineralisation over a large area (35 kilometres by 8 kilometres). The mineralisation, which is related to an extensive system of roll fronts, is hosted in several discrete uranium deposits, and along the oxidation-reduction interfaces throughout the area. The uranium mineral deposits in the area of Oshoto, where the claims are situated, are amenable to in situ leaching, as demonstrated by the results of the pilot plant program undertaken in the late 1970's.

Technical data covering the project including drilling database is owned by PacMag, which will facilitate conversion of the previous resources and reserve estimates to JORC compliance. The technical data purchased by PacMag covers the full extent of the roll front systems in the Sundance district, whilst the Company's mineral rights (~1000 acres) cover important parts of two of the Oshoto deposits, and further state mining leases (1500 acres) cover portions of the projections of the roll fronts south of the deposits.

The deposits owned by PacMag vary in thickness and dimension, the largest accumulation is approximately 700 metres x 600 metres as stacked roll-fronts varying in thickness from less than 1 metre to 10 metres, averaging greater than approximately 3 metres. The next largest zone has mineralisation defined over 1.3 kilometres in length and is approximately 150 metres in width and averages approximately 2 metres in thickness. Mineralisation in both deposits shows excellent continuity as sub-horizontal zones.

In 1970, a joint venture between Nuclear Dynamics Inc and Bethlehem Steel Corporation ("NuBeth JV") discovered several substantial zones of uranium mineralisation, including the Oshoto deposits, associated with an extensive system of roll fronts. The NuBeth JV drilled more than 5,000 exploration and development holes over an eight year program, totalling more than 912,000 metres (2.9 million feet), in the vicinity of the Sundance project. The program defined a new uranium district that has been estimated to contain significant uranium mineralisation at grades in the range of 0.05% U3O8. PacMag controls key properties hosting a portion of the defined mineralisation, as well as properties south of the mineral deposits, in an area that has excellent exploration potential. Better uranium intersections from ground held include; 3.8 metres (12.5 feet) @ 0.243% eU3O8; 3.5 metres (11.5 feet) @ 0.159% eU3O8; 6.2 metres (20.5 feet) @ 0.083% eU3O8 and 9.1 metres (30 feet) @ 0.056% eU3O8.

An in-situ leach pilot plant was constructed and successfully operated at Sundance by the joint venture (which was later joined by Pacific Power and Light) for about eighteen months, however full scale commercial production, although planned, did not proceed due to the prevailing low uranium prices.

Figure 2; Sundance Project location

Karoo Uranium Project - South Africa
The Karoo Project consists of six granted Prospecting Rights covering an aggregate area of approximately 1,986 square kilometres in which Peninsula, via its recent acquisition of Tasman Pacific Minerals Limited (TPML) holds a 74% direct interest in the tenements, with the remaining 26% to be held by a Black Economic Empowerment company. The projects are variously located within the Eastern, Western and Northern Cape Provinces of South Africa, centred approximately 460km east-northeast of Cape Town (Figure 3).

The Karoo properties are reported to include two quantified deposits at Sites 22 and 45 that comprise 1,100t (2.4 million pounds) and 1,200t (2.6 million pounds) uranium respectively. However, as the original documentation relating to these deposits is not available, Peninsula consultants RSG Global have not been in a position to verify their status. While the molybdenum content of these deposits appears not to have been determined, government agency sampling of Site 22, in particular, indicates values up to 0.36% molybdenum and 2.7% uranium. Similarly, high and consistent uranium and molybdenum values up to 1.5% uranium and 0.42% molybdenum have been recorded from government agency sampling at Sites 5, 29 and 49, and all coincide with high priority airborne uranium-channel radiometric targets.

The Karoo properties were applied for following an extensive data review, the majority of which was published since uranium exploration ceased in 1985. TPML is one of the first companies to identify and acquire opportunities afforded by this data, following a rapid increase in the uranium and molybdenum price in 2004. Although not independently verified by Peninsula consultants RSG Global, it is understood that uranium deposits aggregating to approximately 2Mt of mineralisation have previously been defined within the Karoo projects. Excellent potential also exists to discover additional occurrences elsewhere within the Karoo uranium-molybdenum province.

The uranium-molybdenum properties lie within the south-western portion of the Permo-Triassic Karoo Basin and are best developed within fluvial sandstones comprising the Upper Permian Beaufort Group. Mineralisation style is consistent with the model attributed to the Colorado Plateau uranium deposits in the United States, and is either developed within finely laminated sandstones at or near the base of channels, or associated with carbonate cemented sandstones often developed higher in the channel profile. The more significant deposits are preferentially hosted by thicker sandstone units and mineralised lenses are usually less than 600m in length and 200m in width, developed as one or more horizons 1m to 3m in thickness, but may be developed over intervals up to 10m where zones coalesce.

Radioactivity was first detected in the Karoo in 1964 during kimberlite exploration. In early 1970, Union Carbide embarked on a systematic search for Colorado Plateau type uranium occurrences in the Karoo, and the first discovery was made in 1971. By the mid 1970's, no less than 20 companies and agencies were actively engaged in uranium exploration and research in the region.

In 1976, the South African Geological Survey commenced a major regional airborne geophysical survey, resulting in the discovery of a further 150 higher priority uranium occurrences. However this work was not published until 1991, well after all uranium exploration had ceased. In 2001, the South African Council for Geoscience also confirmed that significant levels of molybdenum consistently accompanies uranium mineralisation within the Karoo deposits.

Exploration prior to 1985 is reported to have identified several thousand uranium occurrences within the Karoo uranium province, several of which were delineated by drilling. Six of these deposits exceed 3Mt, while the majority are between 0.5Mt and 1Mt in size. Feasibility studies and trial pits were completed on four deposits, of which at least two were considered to be potentially economic. Financial modelling based on current uranium and molybdenum prices indicates that substantial positive financial returns could once again be generated from typical Karoo deposits. Although molybdenum was recognised prior to 1985, it appears not to have been accounted for in earlier economic evaluations, and its contribution to potential project viability can now be readily demonstrated.

Figure 3: Karoo Project - Uranium Prospect Site Locations

Toro Joint Venture - South Australia
Peninsula has granted Toro Energy Limited, through Minotaur Exploration Limited (“Minotaur”) the uranium exploration rights to earn up to 70% in the Iron Baron, Roopena, Gibraltar and Partridge Ridge tenements which are situated within the Gawler Craton of South Australia, one of the world's most prospective uranium regions.

Work has commenced on the Iron Baron and Roopena tenements with a review of historic data to define drill targets. Also an airborne electromagnetic survey was conducted over parts of the Gibralter tenements, flown at 400m spacings at 120m elevation above local terrain. Minotaur has reviewed this dataset together with previous drilling data, with preliminary drill targets defined. Drilling is planned to commence in late March 2007.

Olary Uranium Project - South Australia
PacMag's 1200 km2 Olary joint venture project comprises two exploration licences which are considered highly prospective for hard rock and roll front uranium deposits. PacMag has a 75% interest in the uranium rights that will be assigned to Peninsula, whilst Giralia Resources NL will retain a 25% free carried interest to the end of a bankable feasibility study. The northern Olary tenement is located approximately equidistant (35km) from Pepinnini Minerals Limited's Crocker Well uranium deposit and from the historic Radium Hill uranium mine. Crocker Well contains 12.4 million tonnes @ 0.05% U3O8 and was the subject of a recent MOU with Sinosteel Corporation of China valued in excess of $30 million for a 60% interest. The Olary Project contains similar type and age rock sequences to those at Crocker Well and Radium Hill.

Reconnaissance rock chip sampling (previously reported in PacMag's September 2006 quarterly report) defined strong uranium results on the northern Olary tenement E2939 including 0.73% U3O8, 0.31% U3O8, 0.30% U3O8 and 0.29% U3O8. The high grade samples are quartz veined hematite rock, albitite and gneisses.

Follow up work is required to test the extent of the uranium mineralisation, and to follow up several other uranium channel radiometric anomalies defined by interpretation of airborne geophysical data.

World's End Uranium Project - South Australia
PacMag's Worlds End licence (EL3559) located approximately 30km south of Burra in South Australia contains uranium values up to 0.3% U3O8. Review of historic exploration reports show limited previous exploration for uranium within this 100% PacMag owned exploration license. PacMag has conducted reconnaissance mapping including the collection of 10 rock chip samples. The sampling returned four strongly anomalous samples ranging from 0.02% U3O8 up to 0.05% U3O8 associated with sheared and strongly altered sedimentary rocks (locally copper rich to 0.65% copper) at the Fairview Phosphate occurrence. The samples also returned strongly anomalous rare earth elements cerium and lanthanum. Sampling and reconnaissance mapping using a handheld scintillometer north and south of the workings identified anomalous readings 300 cps (counts per second) to 2400 cps over 375 metres of strike and approximately 5 - 30 metres width. The sampling was of a reconnaissance nature and does not yet provide an indication of continuity or extent of mineralisation; however the company believes that there is significant uranium potential given the lack of previous systematic exploration.

Mount Anna Uranium Project - South Australia
The Mount Anna licence (EL3558) located in the northern Gawler Craton South Australia contains anomalous rock samples (0.04% U3O8 and 1.2% copper) taken from Proterozoic pegmatite rocks of the Denison-Peake Range Inlier is 100% owned by PacMag. The host rocks have similar affinities to the Mt Painter Inlier which is considered the source rock for uranium currently mined at Beverley by Heathgate Resources Pty Ltd in South Australia. Potential exists at Mount Anna for both hard rock uranium mineralisation and for sandstone hosted deposits at the interface between the Proterozoic bedrock and overlying younger sedimentary sequences of a similar style to the Beverley Uranium Mine. Red Metal Limited recently announced to the ASX the commencement of a drilling campaign to test this latter style of uranium mineralisation on their adjacent tenements located to the east and north of PacMag's licence.

Western Australian Uranium Projects
PacMag's Western Australian exploration licence applications are progressing to grant, with five exploration licence applications recently granted. PacMag owns nine tenements that were selected using satellite imagery, airborne geophysical data and geology targeting areas along strike of known calcrete uranium deposits where shallow soil cover is capable of masking surface radiometric anomalies. The Nelson Well project covers an additional 16km of prospective untested calcrete channel to the south and east of the Cogla Downs deposit where previous drilling returned up to 0.44m @ 0.03 % eU3O8. Similar targets exist on the other six Western Australia tenements where previous surface sampling has returned results up to 0.08% U3O8 as shown below.