Nullagine Gold Project

Millennium Minerals Limited is currently reviewing and updating the detailed feasibility study completed in 2007 on its wholly owned Nullagine Gold Project in the East Pilbara District of Western Australia (Figure 1).  The improvement in the Australian dollar denominated gold price dramatically improves project economics and it is now the Company’s view that the current economic outlook makes a compelling case for development of the project.

The Nullagine Gold Project is a 1.1 million ounce gold Mineral Resource, that was subject to a detailed feasibility study completed in early 2006 and revised in early 2007 contained within 5 deposits on granted mining leases. The largest deposit is Golden Eagle located approximately 10 km south of the township of Nullagine and contains 69% of the total Mineral Resource inventory. Much of the permitting and design work for a 1 million tonne per annum Carbon-In-Leach (CIL) processing facility has been completed providing for an early start to development when a decision to mine is made.

The Company has re-examined the basic economics of the Project in light of the improvement in the Australian dollar denominated gold price.  The current Mineral Resource estimate for the five project areas now totals 27.63 Mt @ 1.23 g/t Au using a 0.5 g/t Au lower cut-off grade for approximately 1.1 million ounces of contained gold. This is expected to increase when the Mineral Resource estimates are finalised shortly for the Golden Gate satellite deposits, namely Falcon, Condor, Crow, Harrier and G Vein.

A total of 22.16 Mt at 1.26 g/t Au is contained within the Measured and Indicated Mineral Resource categories (Table 1). This represents approximately 80% of the total Mineral Resource for the Nullagine Gold Project.

We have re-scoped the 2007 base case feasibility study which indicates the potential for an 8-10 year operation milling 1 Mt annually through a CIL processing plant.  The scoping study was based on a series of pit optimisations of the five deposits.  The spot gold price used for the study was US$900/oz and operating cost inputs were internally updated from the 2007 feasibility study base numbers with the US$/A$ exchange rate set at 0.7. The optimisations were conducted on the Measured and Indicated Resources only (22.16 Mt @ 1.26 g/t Au). Various studies were undertaken to assess the potential for CIL stand-alone, heap leach stand-alone and a base CIL operation with heap leaching of medium to low grade material that will be mined and otherwise treated as waste. All cases demonstrated favourable technical and economic outcomes sufficient to warrant completion of the feasibility update and final optimisation studies ahead of an investment decision.

The base case option (excluding the Golden Gate satellite deposits) selected for final update of the feasibility study is a nominal 1 million tonne per annum operation targeting over 500,000 ounces over a mine life of 8-10 years. This case ignores the potential for heap leaching some of the lower grade material (see below).

Depending on the final Ore Reserve established and whether a parallel heap leach operation is possible, a higher throughput rate may be justified and this option will be included in the current studies.

In parallel with this study, the potential for heap leaching the medium to low-grade material will be assessed. The scoping study showed that were this material able to be processed the overall waste to ore stripping ratio of the project could be significantly reduced (under 2:1).  The key work to be completed on the base case includes updating mining and processing operating costs inputs and development capital to provide the basis for Ore Reserve definition and project financing. An independent review of the process design is in progress and will be combined with assessment of the availability of process plant equipment. The Company is targeting process equipment and plant that is available now to set in place rapid development for when the decision to mine is made.

Millennium Molybdenum Project

Molybdenum is truly the metal of the 21st century.

<> Its unique properties, which enhance the strength and corrosion resistance of many steel products (particularly stainless steel), has seen rapidly growing consumption and a consequent price rise.

Molybdenum also plays an increasing role in the petroleum industry, from corrosion resistant pipelines to the catalysts used for the removal of sulphur and other impurities in crude oil. It also has an important role in industries as diverse as nuclear power, automotive and aerospace.

With increasing pressure on supplies to feed a world market of some 400 million pounds of consumption per year, the price of molybdenum oxide (the compound which is generally quoted on world markets) has risen to around US$32 per pound from a price of US$5 per pound in 2003.

Significant progress was achieved during the quarter on the evaluation of the molybdenum mineralisation encompassed by the Millennium Project. The work program mainly focussed on the area of strongest molybdenum enrichment in the soil horizon, in the southwest corner of the broader Millennium surface geochemical and magnetic anomaly, and comprised detailed mapping, rock chip sampling and scout RAB drilling over a strike length of 2.7 km. Figure 2 below shows the full extent of the Millennium magnetic anomaly, which is in excess of 11 sq km , and the area covered by two detailed plans that present the results of sampling and drilling.

Figure 2: First-vertical derivative magnetic image of the south-western corner of the Mosquito Creek Belt showing the regional-scale, 11 km 2 subsurface magnetic anomaly underlying the Millennium Project, which is outlined by the >6 ppm molybdenum-in-soil contour.

Mapping and rock-chip sampling shows that the highest molybdenum grades in bedrock are associated with quartz veins and surrounding wall rock alteration selvages. The samples were collected in an unbiased, semi-continuous fashion across the strike of veins and/or bedding, over a length varying from 0.5 to 5 m. Assay results for the rock-chip sampling program and contours of molybdenum concentration in the soil horizon are shown in Figure 3. It is pleasing to note from this work that the distribution of molybdenum in the soil horizon closely mirrors the distribution of molybdenum mineralisation in bedrock, which confirms the company’s confidence in soil sampling as a powerful exploration tool in this part of the Pilbara.

To underline the significance of the results of the Millennium rock-chip sampling program by way of comparison, Figure 3 also includes an inset plan of the rock chip sampling undertaken over the world-class Spinifex Ridge Mo-Cu deposit (which is located 115 km to the north of Millennium) which shows that the results for the two areas are of a similar order.

Figure 3: Surface geochemical plan showing the results of rock chip and soil sampling in the south-western corner of the Millennium Project area (main figure) and, to emphasize the significance of the Millennium anomaly, an inset plan that shows (at the same scale) the surface geochemistry above the world-class Spinifex Ridge Mo-Cu deposit (identical geochemical contour levels are used for the inset figure*).

* Soil geochemistry at Millennium is based on composite soil sampling ( i.e. five 20 m-spaced subsamples) along 200 m–spaced lines, and aqua regia digest ICP-MS analyses (maximum individual assay of 42 ppm Mo). Original surface geochemical analyses for the Spinifex Ridge area have been composited to simulate a similar sampling technique; i.e. six 50-foot spaced samples are combined to generate points for contouring (maximum individual composite value is 27 ppm Mo). Soil size fractions sampled at Millennium and Spinifex Ridge are comparable.

Scout RAB drilling at Millennium comprised 81 inclined holes, drilled to an average depth of 92 m. The primary target was the zone of strongest Mo enrichment in soil, which extends over a strike length of 2.4 km in the south-western corner of the magnetic anomaly. Eight, 500 to 700 m-long traverses were drilled across this zone (Fig. 3), and a further two traverses were drilled 1.5 kilometres to the east, to test a secondary target.

Drill holes at the northern end of the primary target encountered pronounced quartz veining, pyritisation and wall rock alteration within interlayered siltstone and sandstone of the Mosquito Creek Formation, over a strike length of roughly 600 m. Multiple zones of molybdenum mineralisation were intersected across strike, generally in association with zones of stronger quartz veining and alteration. The wall rock alteration is characterised by overlapping zones comprising sericite-pyrite and quartz-sericite-pyrite. In other geological terrains around the world, these assemblages are typical of moderate-temperature phyllic alteration resulting from hydrothermal fluid activity around porphyry stocks. Higher temperature alteration assemblages containing biotite and K-feldspar were not intersected, nor were porphyry dykes or stocks, which implies that the magmatic source of the hydrothermal fluids that pervaded the Millennium area is located at depth, below the zone tested by RAB drilling. Alteration and mineralisation relationships observed at well-studied porphyry deposits, including Spinifex Ridge, show that the richest molybdenum and copper grades typically accompany higher temperature alteration zones developed within and/or immediately around the apex of porphyry or granitoid intrusions. Such a geological setting is recognised as the prime target at Millennium.

All significant molybdenum intercepts returned from the scout RAB drilling program are listed in Table 1. In keeping with geological observations, the drill holes at the northern end of the primary target zone returned the most encouraging results, including 8 m grading 0.052%, 12 m grading 0.038%, and 28 m grading 0.015% Mo (Fig. 4). Two cross sections that illustrate the distribution of molybdenum mineralisation intersected by the drilling are presented in Figure 5 (refer to Fig.4 for their locations). The grade of other base metals, such as tungsten, copper, lead and zinc are at, or not significantly above, background levels, and the only metals to show a correlation with molybdenum are bismuth and rhenium, albeit in low concentrations. No significant intercepts were returned from the two traverses which tested the secondary target zone.

Work to be completed at the Millennium Project over the next quarter includes a 4-hole RC drilling program to test for high-grade mineralisation associated with buried or blind porphyry stocks beneath the zone that returned the most encouraging RAB intercepts, and a dipole-dipole, induced-polarisation geophysical survey to locate potential domains of strong wall rock sulphidation. The proposed positions of the four, 400m-deep RC holes are shown on the cross sections in Figure 5.

Figure 4: RAB drill hole collar and intercept* location plan of the south-western corner of the Millennium Project area showing the enhanced development of molybdenum mineralisation in bedrock within the northern part of the primary target zone, directly beneath the area that returned the best results from soil and rock chip sampling.

* Metal factor symbols (ppm x metres) scaled according to intercepts generated using a 20 ppm lower cut-off grade, whereas selected intercepts quoted as width and grade are generated using a 100 ppm lower cut-off grade.

Figure 5: Cross sections showing the better results of recent scout RAB drilling at the Millennium Project and the proposed position of four deep RC drill holes designed to test for higher grade mineralisation associated with the apex of blind porphyry intrusions (refer to the preceding detailed plan for the location of the sections).