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

The project is a 70:30 joint venture between Continental Nickel Limited (Continental Nickel) and IMX Resources NL of Australia (IMX), formerly Goldstream Mining NL. Continental Nickel is the operator. Under the terms of the joint venture, Continental Nickel is to sole fund C$15 million in expenditures on the project upon which its interest will increase by 5% to hold 75%. Should Continental Nickel also complete a feasibility study of a mineral resource on the project, its interest will increase by an additional 5% to hold up to 80%. Both parties must fund their respective share of expenditures once Continental Nickel has satisfied the sole funding requirement or dilute. To December 31, 2009, Continental Nickel has expended approximately C$13.6 million on exploration.

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. Work completed includes 11,731 line kilometres of airborne magnetic and VTEM surveying, 295 line kilometres of ground TDEM surveying and the completion of 191 drill holes totalling 30,043 metres. Program expenditures total $13.6 million to December 31, 2009.

To date, six separate, near surface, nickel-copper sulphide deposits have been discovered at Ntaka Hill for which NI 43-101 compliant Minerals Resources were reported in July 2009 (see Table I and figure below). Many of the deposits remain open and require additional drilling to evaluate the potential to increase the Mineral Resources.

Table I: NI 43-101 Compliant Mineral Resources at Ntaka Hill, Nachingwea (Calculated at US$23, US$50 and US$100 / tonne NSR Cut-offs) as at July, 2009

Classification	Tonnes (000)	% Ni	% Cu	% Co	Contained Ni (tonnes)
Resources at a US$23/tonne NSR Cut-off
Measured (M)	1,827	1.58	0.27	0.04	28,900
Indicated (I)	1,258	0.92	0.21	0.04	11,600
Total (M + I)	3,085	1.31	0.24	0.04	40,400
Inferred	72	0.55	0.16	0.04	400
Resources at a US$50/tonne NSR Cut-off
Measured (M)	1,480	1.83	0.30	0.05	27,000
Indicated (I)	355	1.76	0.34	0.04	6,200
Total (M + I)	1,835	1.82	0.31	0.05	33,200
Resources at a US$100/tonne NSR Cut-off
Measured (M)	983	2.35	0.38	0.06	23,100
Indicated (I)	156	2.93	0.51	0.05	4.600
Total (M + I)	1,139	2.43	0.40	0.06	27,700

Notes on Mineral Resources:

The NI 43-101 compliant Mineral Resource estimate was prepared by Scott Wilson 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 5 x 2.5 x 5 metres. Grade interpolation to assign grade values to cells used Ordinary Kriging and 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$7.50/lb, US$2.25/lb, and US$20.00/lb, respectively; preliminary metal recoveries estimated at 89% for nickel, 65% for copper and 50% 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$2.00/t mined, US$15.00/t processed and US$8.00/t G&A.
A minimum mining width of 2.0 metres was used.
A copy of the Ni 43-101 Technical Report relating to the Mineral Resource Estimate completed by Scott Wilson RPA is posted on SEDAR and the company’s web site.

Ntaka Hill “In Pit” Measured and Indicated Mineral Resources
- click on map to view larger

In 2009, further exploration at Ntaka Hill discovered a new sulphide nickel sulphide zone while testing a TDEM anomaly. The new discovery referred to as C Zone returned a best drill intersection from hole NAD09-180 of 2.52% nickel and 0.43% copper over 5.3m, including massive sulphide mineralization grading 4.31% nickel and 0.60% copper over 2.4 metres. This new discovery, along with several other sulphide zones previously intersected in drilling, have potential to be upgraded to Mineral Resources which would add to the Mineral Resources already defined in the Ntaka Hill area (see figure below).

Ntaka Hill Area magnetics (background) showing outlined sulphide deposits (red), areas of drilling where nickel sulphide mineralization has been previously intersected (red circles) and TDEM anomalies for further drill testing
- click on map to view larger

Regionally, ongoing exploration continues to identify target areas for evaluation focusing on the follow up of numerous airborne VTEM targets, geochemical anomalies and the presence in outcrop of favourable ultramafic intrusions. At Lionja, located 8 kilometres south of Ntaka Hill, drilling completed in 2009 intersected new nickel sulphide mineralization grading 0.91% nickel and 0.20% copper over 7.75 metres including 2.03% nickel and 0.41% copper over 2.25 metres.

2007 - 2008 VTEM Survey Late Time EM Response
- click on map to view larger

For 2010, a $4.0 million exploration program is planned. Objectives of the program include: drilling at Ntaka Hill to increase the current Mineral Resources by expanding the existing deposits and evaluating other identified sulphide zones; as well as drilling to evaluate the newly discovered sulphide mineralization at Lionja. Regionally, exploration will continue to evaluate and prioritize various exploration targets for drill testing in order to continue the search for additional nickel sulphide deposits. It is anticipated that some 5,000 metres of diamond drilling will be completed at Ntaka Hill and 3,000 metres of reverse circulation (RC) drilling will be completed regionally as part of the 2010 program.