North Queensland

The Watershed Scheelite Deposit – 15.1 Million tonnes at 0.46% WO3 – ranks in the top ten unexploited tungsten deposits worldwide. This JORC (2004) compliant Indicated Resource of 69,300 tonnes (6.93 million metric tonne units – mtus) of contained WO3 occurs in both scheelite-bearing quartz-feldspar veins and as disseminated scheelite in the altered metamorphosed host rock.

The Watershed tungsten deposit was originally located and explored by Utah Development Company Limited (“Utah”) in the early 1980’s with limited further work conducted by Peko-Wallsend Operations Limited – Geopeko Division (“Geopeko”) in the mid-1980’s. Vital acquired the project in 2005 and has been investigating the deposit since that time.

Watershed is located in hilly open woodlands, at the headwaters of the Palmer and Mitchell Rivers, about 160km NW of Cairns, Far North Queensland, Australia.  The deposit is around 35km northwest of the historic Mount Carbine tungsten deposit, which produced 10,000t WO3 over 16 years, between 1970 and 1986.

The deposit has been defined by more than 44,000m of drilling diamond and 3,800m of RC drilling . Mineralization has been encountered over a strike length of approximately 1500m and down dip to 450m. The deposit is open at depth and along strike.  In addition to the Watershed deposit there are also exploration prospects at the Watershed South, Desailly and Desailly North prospects.

The Watershed Scheelite Project, is located 35 km northwest of Mount Carbine, 160 kilometres northwest of Cairns in north Queensland.  Access to the site is via a graded track off of the Peninsula Developmental Road.

The Watershed project area is dominated by arenaceous and argillaceous metamorphosed sediments of the Hodgkinson Formation. These rocks form a prominent ridge that hosts the known tungsten mineralisation.  Minor chert and quartz feldspar porphyry have been mapped within the project area, the latter as a persistent dyke to the east of the Watershed deposit.

The dominant structural fabric is an upright, north-northwest trending cleavage.  This cleavage corresponds broadly with the fabric developed during the fourth regional deformation.  The nearest exposure of granitoid lithologies to the Watershed property is a northwest-trending porphyritic granitoid exposed approximately two kilometres to the east of the project area.

Tungsten mineralisation occurs exclusively as scheelite over a strike length of approximately 3,000 metres sub-parallel to the regional north-northwest trend.  The scheelite is hosted by calc-silicate and albite-muscovite altered rock units and by quartz-feldspar veins invading both the altered units and the enclosing unaltered host rocks.  Disseminations of scheelite may also be present in the vein selvedges and nearby fracture planes.

The mineralisation is observed to occur predominantly in quartz-scheelite vein swarms. These are usually oriented east-west with some locally developed north-northwest trending veins (parallel to the dominant foliation) although observation from closely spaced drilling indicates that some shallow dipping mineralised structures may also be present.  Vein widths observed in drill core range from 0.5cm to 100cm.  Minor pyrrhotite, pyrite and arsenopyrite may sometimes be present.

The veins display the highest tungsten grade, where biotite is present in addition to calc-silicate alteration.  The mineralisation vein swarms are best developed in the arenaceous units and are relatively attenuated in the argillaceous units.  Quartz-scheelite veins are most abundant in the arenite in the hinge zone of the anticline which forms the Watershed Ridge.

The Watershed Project contains an Indicated Resource at 0.10% WO3 cutoff of 15.1 million tonnes at 0.46% WO3 for 69,300 tonnes (6.93 million metric tonne units – mtus) of contained WO3.

WO3 occurs in both scheelite-bearing quartz-feldspar veins and as disseminated scheelite in the altered metamorphosed host rock.  The mineralisation at Watershed is open at depth and along strike in both directions.

Watershed is at an advanced stage in the development cycle, with a Pre Feasibility Study (PFS) completed in late 2008.  This comprehensive study looked at all aspects of the development of possible mining and processing  scenarios for Watershed:

• Mine planning – pit designs, scheduling and wall stability,
• Waste dump and tailings design,
• Metallurgical flowsheet and plant design,
• Bulk sampling program – the company drove 2 underground adits into the resource,
• Environmental approvals – are well advanced with an EIS having been submitted and approved.  Further work is required on the Environmental Management plan (EM) plan,
• Heritage – significant progress has been made with an ILUA being drafted and is ready to sign,
• Mining leases – applications have been lodged,
• Marketing studies.

Vital will be able to use this work as a foundation for the development of the Watershed resource.

Conclusion

Vital is greatly encouraged by prices being obtained for Tungsten, which are at a level where the development of Watershed as  contemplated in the PFS will be economically viable.  Vital will be reviewing the results of the  PFS and developing a strategy to provide for the commercialisation of the Watershed resource.

Additional information can be found in our Watershed Tungsten Deposit Information Memorandum, upon request.

Please contact our CEO, Mark Strizek, on 08 9436 9644 or e-mail us at vital@vitalmetals.com.au.