Khartoum  –  Tin & base metal potential, Qld Australia

• Work to date indicates the potential for 80 - 120 million tonnes of ore, averaging 0.2% - 0.3% tin + associated silver, zinc, bismuth, copper, indium, tungsten and molybdenum in potentially recoverable quantities.
• Preliminary metallurgical testwork on one bulk indicates typical recoveries for this style of tin mineralisation of 70%
• Serious potential for world class deposit with extensive outcropping of mineralised formations across 50 km² mapped to date.
• 360 rock samples were collected with best results including 15.25% tungsten, 3.78% tin, 0.13% bismuth, 438 g/t silver and 3.39 g/t gold.
• Site is well serviced with road, power and water and approx 100km by sealed road to Cairns.
• Project area contains more than 250 recorded historical workings.
• Comparable with the Pitinga tin, REE deposit in Brazil (190MT at 0.17%Sn) recently acquired by Minsur for US$374m.
• Project 100% Auzex Resources held under exploration tenure (EPM 14797) granted 13 Jan. 2006 and covering approximately 250km² (75 sub-blocks).

Khartoum project details here

Geology

Located approximately 100km south-west of Cairns in North Queensland, the geology of the Khartoum tenement is dominated by highly fractionated coarse-grained granites with excellent potential to host economic tin-tungsten mineralisation.  The project area covers a Late Carboniferous-Early Permian felsic intrusive (the Elizabeth Creek Granite), containing over fifty tin, tungsten, molybdenum and gold occurrences.  Historic production is estimated to be 15,000t tin.

Outcropping tin mineralisation is associated with 107 recognised greisen zones covering a combined area exceeding 50km².  Exploration at this early stage indicates the potential for Khartoum to be a new world class tin deposit, with a conceptual target tonnage/grade potential of 80 – 100 million tonnes at 0.2%-0.3%Sn with valuable zinc, silver, indium, bismuth and tungsten credits.

Khartoum was identified by the Company’s prospectivity modelling as highly prospective for tin and tungsten mineralisation and moderately prospective for gold mineralisation.

Exploration

Regional mapping and soil sampling initially identified a 9km by 3km zone of highly anomalous tin geochemistry. Reconnaissance exploration identified fifteen key areas with soil values up to 1.8% tin.

Key target areas relate to zones of greisen alteration.  The greisen zones may be flat-lying / shallow dipping, steeply dipping and traceable for up to 1km in length, or forming sub-vertical 'pipes' (average width approx. 50m) and exposed as prominent topographical features.  Results from rock chip sampling indicate that tin occurs as disseminated cassiterite in greisen and to a lesser extent in quartz veins.

Channel sampling was completed in the second half of 2007 over selected greisen bodies to assess potential grade and widths of tin mineralisation in the near surface. The sampling targeted twelve greisen zones where rock chip samples were collected over metre intervals and composited into 5m samples. Most samples came from subcrop and appear representative of in situ greisen pipe. Results were very encouraging with six of the ten pipes sampled averaging greater than 0.1% tin. Best results included 5m at 1.0% tin, 35m at 0.38% tin and 40m at 0.30% tin.

A six hole initial scout drilling program was completed in December 2007, just before the onset of the wet season. Tin mineralisation was intersected in all six holes from an area with a 2,500m strike extent and over wide intervals from surface to a depth of 132m with grades between 0.13% and 0.26% tin intersected. Narrow zones of higher grade were also intersected. Best results include 104m at 0.21% tin from 12m and 34m at 0.26% tin from 99m.

Similar zones of mineralisation have been mapped in the 2.8km by 2.5km area, which along with several tin soil anomalies within the larger 9km by 3km area, provide numerous new targets for future resource drilling. Spectral processing of satellite imagery was used to highlight the considerable potential to increase the scale of the project within the Company's tenement, outside of the area defined by the initial exploration.

By the end of 2008, detailed geological mapping and channel sampling had identified 107 greisen zones containing significant tin mineralisation. Sampling to date has totalled 1,373 channel samples (each sample represents a 5m length) in 309 traverse lines, 65 rock chip samples and 749 soil samples.

Exploration to date suggests a mineralised system with a conceptual target tonnage of 80 - 120 million tonnes, averaging 0.2% - 0.3% Sn based upon the areal extent of greisen tin mineralisation discovered within the project area, and the reported results of the Company's geological mapping, sampling and drilling program.

Metallurgical

Initial metallurgical testwork undertaken on diamond drill core of a bulk sample of fresh greisen mineralisation indicate a combined tin recovery from gravity and flotation of 71%.  This result is considered highly encouraging because significant improvements are likely to be made with modification to the grinding and flotation circuit parameters.  Mineralogical studies indicate the cassiterite is generally of fine grain size, free from sulphide and contains only trace stannite (an uneconomic tin mineral).

Future

In general, the Company’s view is that this project’s immediate future is resource drilling and it expects a ready conversion because of the continuity of the mineralisation in 3D.  An important issue is the recoverable grade and the testwork the Company has undertaken to date provides comfort that this will not be an issue.

$5m - $10m is the level of investment Auzex would like to see in Khartoum to establish an initial JORC resource that will make the market take notice.  A smaller 20,000m drilling program should establish something in the order of a 20Mt-30Mt resource (50,000t Sn).  Auzex has spent in excess of$ 1m to this point but does not have the financial resources to do this project justice with an estimated development cost (prior to Capex) of $20m-$30m.

Ultimately Khartoum could be floated in its own right but any investor having a positive outlook on the tin price will look seriously at Khartoum.

Comparison

The Khartoum deposit is a highly prospective tin discovery and ready for resource drilling.  The following provides a comparison between Australian and Global tin deposits.

The Khartoum discovery is potentially a world class deposit when compared with existing deposits

WORLD PORPHYRY TIN DEPOSITS

*  There has been insufficient exploration undertaken to define a Mineral Resource and it is uncertain if further exploration will result in a Mineral Resource

AUSTRALIAN HARDROCK TIN DEPOSITS

Notes:

Khartoum deposit is based on initial geological data including limited drilling. Khartoum estimates are not JORC resources.

The Taronga Deposit resources were estimated in 1981, before the implementation of the JORC Code (2004).

The Queen Hill, Montana and Severn resources were estimated prior to the implementation of the JORC Code.

They, and the Taronga estimates, are, according to the December 2007 JORC Code Release, classified as historic mineral resources.

Figures quoted for other deposits have been published in the public domain as complying with the JORC Code (2004).

Competent Person Statement

The information in this report that relates to Exploration Results is based on information compiled by John Lawton who is a Member of The Australasian Institute of Mining and Metallurgy. He is a full-time employee of the Company and has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. John Lawton consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.