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Home >> Exploration Interests

Uranium: Australia

BIGRLYI Uranium Joint Venture - NORTHERN TERRITORY

The Company's 5% interest in the Bigrlyi Uranium Joint Venture, which is a pre-development mineral project, is classified in the accounts as "Investment in Joint Venture". The Bigrlyi project is located in the Ngalia Basin, approximately 390 km northwest of Alice Springs, in the Northern Territory. The project is characterised by relatively high uranium grades (with vanadium credits) and excellent metallurgical recoveries.

The Bigrlyi Uranium Joint Venture is an important asset which Southern Cross first acquired in 1981 in a purchase from the Commonwealth Atomic Energy Commission in a joint venture with a number of other companies. The project was subject to significant exploration activity in the period 1974 to 1982 and then remained on a care and maintenance basis for many years. Energy Metals Ltd (EME) obtained a majority interest in the project in November 2005 and became Operator.

EME, which is now 60% controlled by one of the largest Chinese nuclear power companies (China Guandong Nuclear Power Holding Co Ltd, holds a 53.3% interest and Paladin Energy Ltd (PDN) (through a subsidiary) holds 41.7%.

The following material is compiled from information provided in the latest Annual Report of the Operator, Energy Metals Ltd (EME):

Several drilling programmes have been completed at Bigrlyi since 2005, with most holes intersecting significant uranium mineralisation. Uranium and vanadium resource models were successively calculated incorporating results from these drilling programmes, with an updated resource estimate (summarised below) released in July 2010. The resources were estimated by consultants Hellman & Schofield (H&S) using the Multiple Indicator Kriging (MIK) method to estimate uranium resources and Ordinary Kriging (OK) to estimate vanadium resources.

At a cut-off grade of 500ppm U3O8 the Bigrlyi resource totals 22.4 million pounds of U3O8 and 24.7 million pounds of V2O5, with 60% of the contained uranium metail currently reporting to the Indicated Resource category.

At a cut-off grade of 250ppm U3O8 the Bigrlyi resource totals 28.8 million pounds of U3O8 and
36.8 million pounds of V2O5.

Indicated and Inferred Mineral Resources at 500ppm U3O8 cut off

Resource Category	Tonnes (Millions)	U3O8 (ppm)	V2O5 (ppm)	U3O8 (t)	V2O5 (t)	U3O8 (Mlb)	V2O5 (Mlb)
Indicated	4.7	1,316	1,426	6,100	6,600	13.5	14.6
Inferred	3.4	1,202	1,369	4,000	4,600	8.9	10.1
Total	8.0	1,268	1,402	10,200	11,200	22.4	24.7

Indicated and Inferred Mineral Resources at 250ppm U3O8 cut off

Resource Category	Tonnes (Millions)	U3O8 (ppm)	V2O5 (ppm)	U3O8 (t)	V2O5 (t)	U3O8 (Mlb)	V2O5 (Mlb)
Indicated	9.1	847	1,083	7,700	9,900	17.0	21.8
Inferred	7.1	753	960	5,400	6,800	11.8	15.0
Total	16.2	807	1,031	13,100	16,700	28.8	36.8

Tonnes are metric (2,204.62 pounds); figures may not total due to rounding.

Detailed metallurgical testwork undertaken as part of previous scoping studies has confirmed the very high dissolution characteristics of the Bigrlyi ore, with extraction rates of 98% uranium and 59% vanadium recorded from base case acid leach tests and 94%-95% vanadium and 45% vanadium under optimum leach conditions.

Activities undertaken by the Operator in the last half of the year were designed to collect sufficient data to enable completion of a Pre-Feasibility Study (PFS), as well as further expand the resource base at Bigrlyi. All site-based technical inputs required for the PFS were obtained by the end of the year, and the PFS remains on track for completion in the first half of 2011.

Further drilling programmes (both RC and diamond drilling) were commenced mid-July, after delays caused by unseasonal heavy rainfall. Data from that drilling are being compiled, with an upgraded resource estimate expected by mid-2011.

Activities at Bigrlyi during the 2011 field season will depend partly on the results of the PFS due mid-2011, with the joint venture likely to approve commencement of a full feasibility study (FFS) should the PFS be positive. However, regardless of the results of the PFS, drilling to increase the resource base at Bigrlyi is expected to recommence early 2011, and metallurgical and engineering studies aimed at identifying opportunities to further improve project economics and de-risk the project will continue throughout the period.

Information above relating to exploration results, data and cut off grades is based on information compiled by Mr Paul Dunbar and Mr Lindsay Dudfield, of Energy Metals Ltd (Operator). Both Mr Dunbar and Mr Dudfield are members of the AusIMM and the AIG. Mr Dunbar is a full time employee of Energy Metals and Mr Dudfield is a consultant to Energy Metals. They both have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves – The JORC Code (2004)”. Mr Dunbar and Mr Dudfield have both consented to the inclusion of the information in the form and context in which it appears.

Further information may be obtained from the website of the Operator, Energy Metals Ltd (EME), www.energymetals.net.

Other Investment Activities

Southern Cross has for many years invested surplus funds in property, shares and other investment projects.

An investment of $500,000 was made some twenty years ago whereby the Company became a 50% joint first mortgagee over freehold beachfront land at Nadi, Fiji. This investment opportunity was provided by the Chairman who, together with other associated interests, retained the other 50% of the mortgage.

The Company also has a 20% shareholding in the Fijian company which is the registered proprietor of the properties. The freehold land is zoned for Special Uses, related to tourism activities. It is suitable for the development of about 700 holiday apartments and for hotels.

As the Company is a joint mortgagee as well as a joint substantial shareholder in the Fijian company, its interests are closely aligned with the other shareholders and mortgagees. Whilst there may be a view that conflicts of interest could have arisen, all parties are reviewing the strategy for this investment on a regular basis to ensure a transparent process is followed, as well as ensuring that the approach taken maximises the potential return, despite the delays due to political upheavals that have occurred in Fiji in recent years.

As the acquisition returned 230% on $500,000 invested within the first three years, the Directors consider that this investment has already provided a very good return. The book value is comprised of the balance of the revalued figure and the accrued interest thereon.

The Company holds strategic investments in two listed entities - Longreach Oil Ltd (LGO) and Chapmans Ltd (CHP). LGO is concentrating on Oil and Gas, Coal and other Energy exploration. CHP has been operating on a small scale in investment projects, provision of venture capital and general investment. CHP also has a subsidiary company, Hallmark Minerals N L in which it holds about 70% and in which Southern Cross has a 20% shareholding. Hallmark Minerals has recently been re-activated and has invested in a coal mining project in Kalimantan, Indonesia and is also seeking to participate in other mineral exploration and development projects.

URANIUM: BURKINA FASO , WEST AFRICA

The government of Burkina Faso recently increased annual rentals for uranium exploration licences to extraordinarily high levels. This action very markedly increases the costs and risks of grassroots uranium exploration in that country. CrossContinental Uranium Limited (Operator) has since given notice of withdrawal from the joint venture with Southern Cross Exploration and Longreach Oil. Southern Cross will hold a 70% interest in the licences and is reviewing future operations.
URANIUM: MKUJU RIVER, TANZANIA
The Company announced in October 2010 that it has entered into a Conditional Agreement in respect of the acquisition of five uranium exploration licences in Tanzania. After further negotiations, the conditional agreement has been extended and varied to the effect that SXX has now acquired an initial interest of seven percent (7%) of the licences and is entitled to acquire a further 83% interest, in several tranches. The uranium tenements, with a total area of 2,160 km2, are situated in the highly prospective Mkuju River region of south-western Tanzania (see figure attached). They are underlain by Karoo Group sedimentary rocks in which uranium deposits of the sandstone-hosted roll front type have been discovered in South Africa, Malawi and Tanzania. The areas are located immediately north of ASX-listed Mantra Resources Ltd’s (MRU) Mkuju River Uranium Project. In January 2010, Mantra reported JORC Mineral Resources totalling 82.3M tonnes @ 464 ppm U308 containing 84.3M pounds of U308. In mid December 2010, ARMZ, a wholly owned subsidiary of the Russian State Atomic Energy Corp., made a takeover offer for Mantra of $8/share which at that time imputed a value of $10.26 per pound U308 for the Mkuju River resources (offer since revised to $7/share after the tragic events in Japan). Uranex N L (UNX), another ASX-listed company which is exploring for uranium in the same district, announced in early December 2010 the discovery of high grade primary uranium mineralisation in an area adjoining the Mantra Resources deposit. Approximately 300km to the west, in the neighbouring country of Malawi, the Kayelekera Uranium Mine of Paladin Energy Ltd (PDN) is also hosted by Karoo Group sandstones. The Kayelekera Mine has reported mineral resources of 26.2 Mt @780 ppm U308 containing 46.4M pounds of U308. Southern Cross believes the Mkuju River tenements are highly prospective for the discovery of economic uranium deposits and will be inviting other entities into a joint venture for the exploration and development of this project.
Southern Cross Exploration N.L Tanzania Uranium Projects

GOLD: PHILIPPINES

- BATANGAS PROJECT

During the year, Southern Cross entered into a Conditional Agreement in respect of the acquisition of the Batangas Gold Project, located in the Province of Batangas, some 110 km south of Manila, Island of Luzon, in the Philippines. If due diligence proves satisfactory and it is decided to proceed with the acquisition, Southern Cross will be entitled to acquire up to 100% of the project, payable in several tranches. The property consists of an MPSA and an EP Application covering an area of approximately 3,300 ha and which has been the site of sporadic gold mining activity since the 19th century. In the 1980’s, there was a gold rush to the area by artisanal miners.

The Batangas Gold property has never been drilled. A total of eleven veins are reported in five vein systems within altered andesitic host rocks. The veins appear to exhibit good continuity with consistent widths over 1,000m and more of strike length. The American Vein averages 5m in width, others range 0.30m to 1.0m and reported grades are between 3g/t and 10g/t Au. The Ulanin breccia stock-work in the eastern part is approximately 125m wide with a strike length exceeding 1,000m. Trench samples reportedly range up to 6g/t Au over 8 metres.

The Taysan porphyry copper-gold deposit (presently in confirmatory drilling for pre-feasibility) lies six km to the northeast of the Batangas Project. It is believed the mineralisation of the Batangas epithermal gold province may be associated with emplacement of the Taysan porphyry intrusions.

The Batangas property is considered to offer a major gold exploration opportunity. Subject to confirmatory mapping and sampling, it is likely that the Ulanin breccia stock-work and the American Vein area could provide early drilling targets with potential for developing open pit mining resources.

SXX may invite other parties to participate in this gold exploration project at an appropriate time.
In the meantime, the conditional agreement has been extended and due diligence is continuing.

- GOLD CROSS PROJECT

Southern Cross holds a 20% interest in the Gold Cross Gold Project in the Philippines. This project is located in the Province of Bulacan about 100 kms north-east of Manila, on the main island of Luzon.

It is expected that the Philippines Department of Energy and Natural Resources will provide an update on consolidation of the current applications for Mineral Production Sharing Agreements in the near future. Based on information available, the area is considered to have potential for large gold resources. At least two underground gold mines are recorded as operating in the area up to the 1940s. Although the geology of the area is very favourable for epithermal quartz vein gold-silver deposits, there has been no significant modern exploration or drilling.

Southern Cross can acquire an additional interest in the Gold Cross Gold Project by exercising its rights to purchase the balance of 80% in several tranches.

GOLD: VICTORIA

Royal Standard Group of Gold Mines, Woods Point, Victoria

Application by a joint venture in which Southern Cross had a 50% interest for the grant and/or the renewal of these tenements, near Woods Point, was refused some years ago, after long delays due to unresolved Native Title claims. The matter remains under review by the joint venture parties.

MAGNESITE: IRAN

The Company maintains its indirect 10% interest in several exploration tenements with identified outcropping dolomite/magnesite deposits. Access to cheap power, which is available at the gate of one of the tenements, is vital for commercially successful magnesite and magnesium production. This project is being kept under review.

OIL AND GAS & ENERGY

Southern Cross retains an indirect interest in oil and gas exploration through its substantial shareholding in Longreach Oil Ltd (LGO), an ASX-listed company. LGO has a direct 50% interest in Petroleum Lease 280 in the Surat Basin, Queensland and also holds an 11% interest in three exploration permits in Western Australia. LGO holds a 20% shareholding in unlisted Brisbane Petroleum Ltd LGO, which has two Petroleum Leases - 18 and 40 - in the Surat Basin, with small oil production.

The Company continues to evaluate oil and gas exploration opportunities in Australia and overseas, with a view to direct participation.

A new Oil and Gas Exploration and Investment company, Offshore Oil Ltd, is being promoted jointly by Southern Cross and Longreach Oil Ltd. Offshore Oil Ltd has a target capital raising of $250,000,000. Shareholders in Southern Cross will receive priority entitlement in due course.