Fortescue Island Iron

De Grey entered into an option-to-purchase Heads of Agreement with Geotech International Pty Ltd over the 640 square kilometres Fortescue Island Exploration License Application (ELA) on 26 th June 2008 and has pegged an additional 652 square kilometres immediately adjacent to Geotech's ELA (Figure 1).

The target mineralisation in the application areas is accumulations of unconsolidated iron oxide minerals in the seabed sediments formed by erosion from the Brockman Iron Formation. This represents a great conceptual target with huge tonnage potential.

Pre-competitive aeromagnetic data clearly show the seaward extension of the bedrock Brockman Iron Formation BIF units (Figure 2) but also show more subdued magnetic features that may correspond to detrital deposits of iron oxide minerals.

The south eastern boundaries of the applications are located less than 15 kilometres from Citic Pacific's Sino Iron Magnetite Project and Australasian Resources Balmoral South Magnetite Project. These projects are located in an iron province with potential for 60 to 100 billion tonnes of mineralisation with a grade of 30-31% Fe.

In 1970, VAM Limited, exploring for heavy minerals at shallow depths in sediments onshore and offshore of the mainland coast south of Fortescue Island reported shallow deposits containing up to 15% total heavy minerals, of which up to 75% was iron oxides, as goethite and martite (a type of haematite). The area investigated by VAM features subtle, positive magnetic response features similar to those covered by the Geotech and De Grey ELAs.

The concept for potential extraction would involve dredging of iron-containing material from shallow waters (generally less than 20 metres deep) to a barge-mounted gravity concentration plant and would represent a potential new source of export iron ore requiring very modest infrastructure compared to conventional Pilbara iron ore developments.

Figure 1: Location of Fortescue Island Iron Project and neighbouring Iron Development Projects

Source: ¹ASX Media Release: Substantial Resource Upgrade 30 January 2008 . ²CITIC Pacific Mining Webpage www.citicpacificmining.com Announcement: CITIC Pacific acquires magnetite mining rights in Western Australia 31 March 2006 . ³Australasian Resources Ltd Webpage www.austresources.com.au Announcement: High Quality Drill Intersections Continue 29 May 2007.

Project area over TMI magnetic image