Continental Nickel Limited TSXV:CNI

Location | Agreement with IMX Resources NL | Geological Setting | History | Exploration Program

Location

The Nachingwea project is located in south eastern Tanzania, approximately 180 km west of the port city of Mtwara and 400 km south of Dar es Salaam, the country's main business centre. The project has a large 7,500 km2 exploration land position, held under license and license applications.

Nachingwea Ni-Cu Property Location
- click on map to view larger

Agreement with IMX Resources NL

In 2010, CNI met its sole funding commitment of C$15 million increasing its interest by 5% to hold a 75% interest in the Nachingwea Project. The project is now a 75:25 joint venture between Continental Nickel Limited (“CNI”) and IMX Resources NL of Australia (“IMX”), formerly Goldstream Mining NL. CNI is the operator and both parties now fund their respective share of ongoing expenditures or dilute. Should Continental Nickel ever sole fund the completion a feasibility study of a mineral resource on the project, its interest will increase by an additional 5% to hold up to 80%. Continental Nickel retains a right of first refusal on IMX´s interest.

Geological Setting

Geologically, the property is situated within the Proterozoic age Mozambique Belt (MB) to the southeast of the Archean age Tanzanian Craton. Within the property, the MB consists a mixed assemblage of mafic to felsic granulites, gneisses, amphibolites and metasedimentary rocks which have been intruded by younger ultramafic to felsic intrusions. The lithologies are complexly deformed and have been metamorphosed to amphibolite and granulite grade.

Nachingwea Ni-Cu Property Regional Geology
- click on map to view larger

History

The 2006 greenfield discovery by IMX Resources of high grade, nickel-copper sulphide mineralization associated with the Ntaka Hill ultramafic intrusion on the property renewed interest in the potential for the Mozambique Belt to host magmatic sulphide deposits. Globally, Proterozoic Craton or continental margin settings similar to the Mozambique Belt which have undergone a rifting event are host to a number of significant magmatic nickel sulphide deposits including those at Thompson and Raglan in Canada, Pechenga in Russia and Jinchuan in China.

The first exploration for nickel in the project area was conducted by Inco in the early 1950’s with the drilling of six shallow drill holes (totalling 1,302 metres) to test outcropping oxide copper mineralization associated with the Ntaka intrusion. The best drill intersection returned 1.60% Ni and 0.56% Cu over 3.7 metres. No further exploration for nickel was conducted until 2000-2006 when IMX Resources began exploring in the area. In 2006, IMX completed 17 drill holes totalling 2,153 metres to test various EM conductive targets identified from an airborne VTEM survey associated with the Ntaka intrusion. This resulted in the discovery of high grade nickel-copper sulphide mineralization in drill hole NAD-013 which returned an intersection of 11.23% Ni, 1.74% Cu and 0.15% Co over 3.0 metres, including 15.78% Ni, 2.61% Cu and 0.21% Co over 1.70 metres from a vertical depth of 65 metres.

Exploration Program

Since August 2007, Continental Nickel has carried out extensive exploration and diamond drilling programs on the property in the search for nickel-copper sulphide deposits, largely focused on the Ntaka Hill Intrusion. Work completed includes 33,500 line kilometres airborne magnetic and radiometric survey, 11,400 line kilometres of airborne VTEM surveying, 308 line kilometres of ground TDEM surveying and the completion of 258 drill holes (diamond and reverse circulation) totalling 39,328 metres. Program expenditures total $17.5 million to December 31, 2010.

To date, seven, near surface, nickel-copper sulphide deposits have been discovered at Ntaka Hill, including the newly discovered Sleeping Giant deposit. An updated NI 43-101 compliant Minerals Resource estimate was completed in March 2011 which significantly upgraded the Mineral Resources on the property (see Table I and Figure below)). The Sleeping Giant Deposit which is the largest deposit discovered to date, remains open in all directions and will be the focus of future drill programs to increase Mineral Resources.

Table I: Mineral Resources calculated at US$17 and US$80 /tonne NSR cut-offs for the Ntaka Hill and Sleeping Giant deposits, March 2011 (Note: Ntaka Hill is comprised of the G, H, J, L, M and NAD013 sulphide zones).

Zone	Category	Tonnes (000´s)	% Ni	% Cu	% Co	NSR (US$/t)	Contained Ni (tonnes)
NSR Cut-off: US$17/tonne
Ntaka Hill	Measured	1,871	1.74	0.30	0.05	275	32,500
Ntaka Hill	Indicated	3,110	0.91	0.20	0.04	148	28,400
Total	M + I	4,981	1.22	0.24	0.04	196	60,900
Ntaka Hill	Inferred	1,860	0.68	0.15	0.03	110	13,000
Sleeping Giant	Inferred	15,400	0.77	0.17	0.02	120	119,000
Total	Inferred	17,260	0.76	0.17	0.02	120	131,000
NSR Cut-off: US$80/tonne
Ntaka Hill	Measured	1,575	1.99	0.34	0.05	315	31,400
Ntaka Hill	Indicated	2,108	1.16	0.24	0.05	188	24,500
Total	M + I	3,683	1.52	0.28	0.05	242	55,800
Ntaka Hill	Inferred	1,110	0.90	0.18	0.03	140	10,000
Sleeping Giant	Inferred	9,790	0.99	0.22	0.02	160	96,000
Total	Inferred	10,900	0.98	0.22	0.02	160	106,000

Notes on Mineral Resources:

The NI 43-101 compliant Mineral Resource estimate was prepared by Roscoe Postle Associates Inc of Toronto, Ontario, under the supervision of Chester Moore, P.Eng., Principle Geologist, in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definition standards regarding Mineral Resources and Mineral Reserves.
The estimation employed statistical analysis and variography of nickel and copper values with construction of block models by zone using GEMS software. Block cell size was 2.5 x 5 x 5 metres. Grade interpolation to assign grade values to cells used Inverse Distance squared (ID²) methods.
Mineral Resources are reported at various NSR cut-off values. NSR values derived from grade were determined using average long-term nickel, copper and cobalt prices of US$10.00/lb, US$3.50/lb, and US$20.00/lb, respectively; preliminary metal recoveries estimated at 87% for nickel, 81% for copper and 80% for cobalt, and allowances for transportation of concentrate and standard industry treatment charges for smelting and refining.
Reported Mineral Resources are constrained in preliminary pit shells constructed by Whittle software based on slope walls of 45 degrees, 5 metre bench heights, and production costs of US$2.50/t mined, US$12.00/t processed and US$5.00/t general and administration costs.
No minimum mining width was used.
A copy of the Ni 43-101 Technical Report relating to the Mineral Resource Estimate completed by RPA is posted on SEDAR and the company´s web site.

Ntaka Hill Area Nickel Sulphide Deposits.
- click on map to view larger

An initial mineral characterization study completed on mineralized core samples from Ntaka hill by Xstrata Process Support of Sudbury, Ontario, has estimated that a nickel recovery averaging 88% may be possible using conventional grinding and flotation concentration mineral processing. A more comprehensive metallurgical testing program is required to confirm these encouraging results.

Regionally, exploration continues to identify target areas for evaluation. Targets include airborne radiometric and VTEM anomalies, soil and stream geochemical anomalies and the presence in outcrop of favourable ultramafic intrusions. At Lionja, located 8 kilometres south of Ntaka Hill, diamond drilling completed in 2009-10 intersected nickel sulphide mineralization grading up to 0.91% nickel and 0.20% copper over 7.75 metres including 2.03% nickel and 0.41% copper over 2.25 metres. This area remains a priority target for further work.

Airbourne Radiometric Survey - Total Count
Nachingwea Project Area
- click on map to view larger

In 2011, the Company is planning an aggressive a $6.0 million exploration program with the following objectives:

~ 15,000 metres of diamond drilling to expand the Mineral Resources at the newly discovered Sleeping Giant Deposit
Initiate scoping studies to evaluate the economic viability of possible production scenarios at Ntaka Hill, including metallurgical test work, baseline environmental studies, revised Mineral Resource Estimate (if warranted) and preliminary site and mining engineering studies.
Continue regional exploration activities to identify and prioritize additional targets with potential to host nickel sulphide deposits for drill testing.