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CAZALY RESOURCES LIMITED ACN 101 049 334

Annual Report

QUARTZ HILL PROJECT EL25296

For the Period 02 November 2009 to 01 November 2010

Exploration Activities EL25296 on Tenement: Sheet 1:250 000: Illogwa Creek (SF53-15) Sheet 1:100 000: Quartz (5951) Project Operator: Cazaly Resources Limited Author: Eduardo Ruaro Date: January 2011 Distribution: 1. Department of Resources – Minerals and Energy 2. Cazaly Resources Limited

2010 Annual Report EL25296

Cazaly Resources Limited January 2011 2

CONTENTS Page 1.0 SUMMARY 3 2.0 INTRODUCTION 4 3.0 TENURE 4 4.0 GEOLOGY 6

4.1 Regional Geology 6 4.2 Mineralization 8 5.0 PREVIOUS EXPLORATION 11 6.0 EXPLORATION ACTIVITIES 12 7.0 CONCLUSION 12 8.0 REFERENCES 13

List of Tables

Table 1: Tenement Status 4

List of Figures

Figure 1: Project Location Plan 5

Figure 2: Regional Map of the Arunta Inlier 6

Figure 3: Regional Geology 10



1.0 SUMMARY The Mineral Exploration Report on the Quartz Hill Project details exploration activities

undertaken by Cazaly Resources Limited during the reporting period from 02 November

2009 to 01 November 2010.

Exploration Licence 25296 lies within the Harts Range province of the eastern Arunta

block in the Northern Territory, approximately 150 km east-northeast of Alice Springs

(Figure 1). The area is considered prospective for base metals, Nickel, Rare Earth

Elements (REE’s) and uranium.

EL 25296 was acquired by Cazaly Iron Pty Ltd, a wholly owned subsidiary of Cazaly

Resources Limited, in November 2006. The lease was subsequently packaged and

vended into the listing of Newera Uranium Ltd (Newera), which occurred on 6 June

2006. Newera withdrew from the Joint Venture on 5 August 2009 and Cazaly regained

management of the Project.

Exploration activities undertaken by Cazaly during the reporting period were limited to

desk-top studies, including a review of the project geology and Newera’s recent

exploration.



2.0 INTRODUCTION The Mineral Exploration Report on the Quartz Hill Project details exploration activities

undertaken by Cazaly Resources Limited (Cazaly) during the reporting period from 02

November 2009 to 01 November 2010.

The Quartz Hill Project is located approximately 150 km east-northeast of Alice Springs

and 46 km southeast of the Harts Ranges settlement, on the Illogwa Creek 1:250, 000

map sheet (Figure 1).

Access is good with the major graded tourist route of the Ross Highway from Alice

Springs to the Arltunga Tourist Camp (~105km), then after Arltunga there is a graded

road north to the Claraville (~15km), there after are a number of station tracks which

head east to the tenement.

3.0 TENURE

EL 25296 was acquired by Cazaly Iron Pty Ltd, a wholly owned subsidiary of Cazaly

Resources Limited, in November 2006. The lease was subsequently packaged and

vended into the listing of Newera Uranium Ltd (Newera), which occurred on 6 June

2006. Newera withdrew from the Joint Venture on 5 August 2009 and Cazaly regained

management of the Project. In November 2009 Cazaly relinquished 11 sub-blocks from

EL25296, as part of the statutory agreement as per the Mining Act. Table 1: Tenement Status.

Tenement Area (ha) Registered Holder Grant Date

EL 25296 6,945 Cazaly Iron Pty Ltd* 02 November 2006

* Cazaly Iron Pty Ltd is a wholly owned subsidiary of Cazaly Resources Ltd.

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4.0 GEOLOGY

4.1 Regional Geology

The Quartz Hill Project area is situated towards the SE extent of the Arunta Inlier. This

inlier is a complex of high grade metamorphic sedimentary and igneous rocks, located at

the southern margin of the North Australian Craton. The contact with the Central

Australian Craton is overlain by the Neoproterozoic Amadeus Basin (Figure 2).

Figure 2: Regional Map of the Arunta Inlier.

The Arunta complex is transected by a series of regional and local scale east-west and

northwest-southeast trending faults, which have been the loci of multiple phases of

north-over-south thrusting during the Proterozoic and later the Carboniferous Alice

Springs Orogeny. This orogeny was responsible for retrograde metamorphism along the

east-west structures, more widespread in the Harts Ranges than in the Central Province

where it is intensely focussed on these structures. Metamorphic grades range from



green schist to granulite in the Northern Province and from amphibolite to granulite in the

Central and Southern Provinces, with greenschist grades being associated with the

retrogression in the south and central provinces.

Stratigraphy is largely overprinted by the structural thrusting and the division of the Inlier

into structural provinces, but there are divisions of groups based on age dating and

relationships. The older basement rocks have been considered to be the Strangways

Metamorphic Complex, but age dating by AGSO suggests the Weldon and Aileron

Metamorphics in the Napperby area to the west may be older.

The Harts Range Group in the south eastern Arunta is essentially a pelitic and

calcareous metasedimentary assemblage metamorphosed predominantly to amphibolite

facies. The basal unit, the Entia Gneiss, has attained granulite facies but has been

retrogressed to amphibolite facies and affected by the Palaeozoic Alice Springs

Orogeny. The bulk of the Harts Range Group, the Irindina Gneiss and the younger Brady

Gneiss, show little evidence of having exceeded amphibolite facies and are clearly

younger than the Entia Dome. The Bruna Gneiss, a felsic intrusive, or less likely a part-

extrusive porphyroblastic rock, has been dated at 1750Ma but this date only puts a

minimum age to the sequence.

Post-orogenic platform cover sediments are sporadically distributed throughout the

Arunta Inlier. At least three age groups were named but the Hatches Creek Group

(1830-1800Ma) and the Reynolds Range Group (1820-1780Ma) are now both

considered SMC equivalents. The Simpsons Gap Metasediments of the Iwupataka

Metamorphic Complex (1660Ma) are truly covered.

The youngest sediments are the neo-proterozoic Amadeus Basin to the south and the

Ngalia Basin in the centre (Figure 2), which cover substantial portions of the Inlier.

The Arunta Inlier has a complex and virtually continuous history of igneous activity.

There are at least six major recorded felsic igneous intrusive episodes. Of these the

Ngadarunga Granite (1880Ma), the Napperby-Huckitta-Jervois Granites (1780-1760Ma)

and the Yarangunyi Granite (1600-1570Ma) are the most extensive and geologically

most important. Other recorded igneous events, of relatively small areal extent, are the

Andrew Youngs Igneous Complex (1635Ma), Mordor Igneous Complex (1200Ma), Stuart



(mafic) Dyke Swarm (1050Ma), Gum Tree Granite (990Ma), Mud Tank Carbonatite

(730Ma) and the Harts Range Pegmatites (520,400Ma).

4.2 Mineralization

Previous work in the project has identified uranium and Rare Earth Element (REE)

mineralisation within a series of radioactive pegmatites and associated quartz veins

which have been intruded along NW-SE trending structures.

These fractionated pegmatites and more importantly the minerals within them, are a

prime target at Quartz Hill. The garnets contain Samarskite and Euxenite. These

minerals occur as garnet-shaped crystals in the pegmatites, and as inclusions within

garnets themselves.

Garnet aggregates are known to grow to very large sizes in the Harts Ranges, with a

reserve to the north of the project said to contain a specimen over 10m in size.

Newera has identified uraniferous Samarskite and Euxenite, grading to in excess of

1000 ppm U, within the Spartacus pegmatite system on E25296 with a strike extent of

over 1300 m. The host pegmatites outcrop as a pair of overlapping, sub-parallel units

each in excess of 650m long and with a lateral extent of in excess of 100m. Smaller

parallel external units surround the main pegmatites and they contain internal rafts of the

host granitoid gneiss.

The volume at Spartacus gives ample scope for scale. Concentrations have yet to be

determined, but mapping evidence suggests the minerals occur throughout the

pegmatites with higher density clusters or patches.

Rare Earth Elements

Rare earth designated minerals consist of the 15 elements between atomic numbers 58

and 71. Today the metal derivatives of rare earths are essential components to products

relating to the electronics and technology industries, energy efficiency and greenhouse

gas reduction.

The Samarskite and Euxenite found at Quartz Hill are highly radioactive minerals

forming a solid solution, and contain significant amounts of Niobium, Tantalum and other



REEs in an iron oxide matrix which also contain up to 38% U. Both massive and

crystalline forms are present on the project and specimens found to date are up to 55mm

in diameter.

Markets for rare earth metals and/or their alloys have enormous future world wide growth

potential. Production of REEs is currently dominated (97%) by China, and currently

China controls 100% of the refining of these strategic metals.

Reflecting rising demand, prices of rare earth elements have continued to rise over the

past several years and of late have increased strongly.

Quartz Hill ProjectEL 25296

Regional GeologyFigure 3

CAZALY RESOURCES LIMITED

0 2.5 5

kilometres

10

Author: ER

Office:

Drawing:

Date:11/1/2011

Scale: 1:250000 Projection: MGA Zone 53 (GDA 94)



5.0 PREVIOUS EXPLORATION

Pacific Nuclear Corporation (PNC) explored Quartz Hill in 1992. Prior work to that had

been poorly recorded mica mining from the depression era, with re-opening of the mica

mines allegedly using POW labour during the war. Many of the Italians who had worked

here during the war may have returned in the post-war era, as the anecdotal evidence

from prospectors and station managers in the area is that much of the post-war work in

what would have been very isolated, primitive and remote camps was carried out by the

newly immigrated Italian community.

Some geological work had been done on the mica mines however, as PNC report that

one of the mica mines on the Qtz Hill project was known to contain uraniferous minerals.

This was probably related to the burst of exploration for uranium that occurred shortly

after the war in the 1950’s.

PNC initially flew airborne radiometrics, and followed up the data in 1993-4. In general

their work consisted of large-scale airborne magnetic and radiometric surveys followed

by ground mapping and rock chip sampling.

Follow-up of two airborne anomalies resulted in the discovery of the Quartz and Felspar

pegmatite prospects. The Feldspar pegmatite prospect coincides with the Spartacus

prospect.

Felspar was a strong anomaly caused by float of a uranium rich mineral associated with

a large E-W pegmatite. The mineral was massive, black, glassy, had a conchoidal

fracture and didn’t show weathering. It was identified as a Y-Nb>U mineral of the

fergusonite series plus alteration products. They found only one anomaly roughly 30 X

30 m in extent and claimed it was caused by a small mineral occurrence spread by

movement of float downhill, though they did mention other hot-spots. The mineral

assayed 6.8% U. Further prospecting was limited.

During 2007 reporting period, CSA Australia was commissioned by Newera to

summarise previous exploration efforts across the Quartz Hill Project. They concluded

that the area was prospective for base metals, Nickel, Rare Earth Elements (REE’s) and

uranium. They summarized the findings from various reports and found that of all the



work done, that undertaken by PNC Australia is by far the most exhaustive and of the

greatest value.

During 2008 reporting period Newera undertook an exploration programme including

database compilation, aboriginal areas authority certificate, landsat TM acquisition and

GIS review. Two Landsat TM scenes were acquired by EarthScan Pty Ltd, merged and

processed to produce 14 Mapinfo images mapping the various channels and useful

ratios that reflect potential mineral alteration and bedrock lithology changes. These were

systematically reviewed in conjunction with the magnetics and radiometric images to

assess zones of interest worthy of field reconnaissance.

6.0 EXPLORATION ACTIVITIES

Exploration activities undertaken by Cazaly during the reporting period were limited to

desk-top studies, including a review of the project geology and Newera’s recent

exploration.

7.0 CONCLUSION

Having received the Project back from the previous operator, Newera Uranium Limited, a

review of the uranium and Rare Earth Element (REE) potential has been on-going, as

well as the search for a new Joint Venture partner to manage the next phase of

exploration.



8.0 REFERENCES

Afmeco, 1980. Afmeco Pty. Ltd, Report No. P.E.80.1M: Quartz Hill W.A. TR’s 6328H, 6329H, 6330H, 6331H, 6623H Final report June 1980. WAMEX Open File Report No. A.9068, Item No. 1171

Arnold J, Sandiford M and Wetherley S, 1995. Metamorphic events in the eastern Arunta Inlier, Part 1, Metamorphic petrology. Precambrian Research, 71, 183-205.

Ding P and James P.R, 1985. Structural evolution of the Harts Range area and its implication for the development of the Arunta Block, central Australia. Precamb. Research. 27, p. 251-276.

Drake-Brockman J, Gee G, Thevissen J and Vieru C, 1996. Harts Range Project. Annual company report 1995 field season E.L’s 7967, 7990, 7991, 7992, 7994, 80836, 8148, 8220, 8675, 8906. PNC Exploration (Australia) Pty. Ltd. Northern Territory Geological Survey, Open File Company Report CR1996-0286.

Fairburn, W.A. 1977. Afmeco Pty. Ltd, Report No. WA262D: Quartz Hill W.A. TR’s 6328H, 6329H, 6330H, 6331H, Annual Report June 1977. WAMEX Open File Report No. A.7164, Item No. 1171

Flint, DJ and Abeysinghe, PB, 2000: Geology and Mineral Resources of the Gascoyne Region. Geological Survey of Western Australia, Record 2000/7.

Hand M, Mawby J, Kinny P and Foden J, 1999. U-Pb ages from the Harts Range, central Australia: evidence for early Ordovician extension and constraints on Carboniferous metamorphism. Journal of the Geological Society 156, 715–730.

Kwitko, G. 1978. Afmeco Pty. Ltd. Annual Report on Carnarvon Basin TR 6323H, TR 6328H, TR 6329H, TR 6330H, TR 6331H, TR 6623H. WAMEX Open File Report No. 1171.

Mawby J, 2000. Metamorphic and geochronological constraints on the Palaeozoic tectonism in the eastern Arunta Inlier. PHD thesis, School of Earth and Environmental Sciences, University of Adelaide, Adelaide.

McMahon J, 2008. Annual Report for the Quartz Hill Project, EL24838 and EL25296 for the period April 2007 to April 2008 for Newera Uranium Ltd.

Miles, G. 2010. Partial Surrender Report for the Quartz Hill Project, EL 25296 for the period 2 November 2006 to 1 November 2009 for Cazaly Resources Ltd. Report for the Department of Resources – Minerals and Energy.

Selway K, Heinson G and Hank M, 2006. Electrical evidence of continental accretion: Steeply dipping crustal-scale conductivity contrast. Geophysical Research letters 33, L06305, doi:10.1029/2005GL025328.

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