QUARTERLY REPORT DECEMBER 2008 HIGHLIGHTS TNG attended the Northern Territory Governments sponsored visit to Beijing, China, in November 2008. This formed part of TNG’s strategy for investment or joint venture to further explore and develop its projects. All projects were well received and discussions with 2 Chinese companies are progressing. Final Metallurgical results were received for the Sandy Creek deposit. The report favorably concludes that concentrates acceptable to smelters can be produced by standard metallurgical processes. The report also reveals higher analytical grades than previously reported, with Zinc grades increasing substantially to >4% Zn. The potential to produce Barite as a secondary mineral was also noted. Drilling clearance certificates have been received from the Central Land Council (CLC) for the Mount Peake high grade Ferro-Titanium-Vanadium prospect. New tenement applications in the Mount Peake licence area have been submitted increasing TNG’s strategic land holding in this highly prospective area of the Arunta geological province. Drilling clearance certificates are awaited from the Aboriginal Areas Protection Authority (AAPA) regarding drilling at the high grade Legune Iron Ore prospect. Level 1, 282 Rokeby Road Subiaco, Western Australia 6008 T +61 8 9327 0900 F +61 8 9327 0901 www.tngltd.com.au [email protected] Contact: Neil Biddle, Managing Director Paul Burton, Exploration Director Quarterly Report DECEMBER 2008 1 SUMMARY During the December quarter, TNG participated in the Northern Territory (NT) Governments sponsored trip to Beijing, China, accompanied by The Hon. Kon Vatskalis, Minister for Resources, Northern Territory . During the visit TNG’s exploration Director was able to present the companies projects and have detailed discussions with Chinese companies interested in investing in Australian resources. This was an excellent introduction for TNG into China and forms part of its strategy to obtain investment and joint venture participation to further explore and develop its projects. TNG was one of four companies invited to participate, reflecting the status of its NT projects. In particular the Manbarrum Project and Mount Peake Project were favorably received and discussions with potential suitors are continuing. A significant milestone was also reached during the quarter with the completion of the metallurgical test work on the Sandy Creek Zn/Pb/Ag Deposit. The testwork favorably concludes that Lead and Zinc concentrates acceptable to smelters could be produced by standard metallurgical processes. This is a positive result for the company and a strong endorsement of the Manbarrum Project areas potential. A final report on the metallurgical work on the oxide material from the Djibitgun Ag/Zn/Pb deposit is under review. Initial testwork has concluded that beneficiation and extraction of the ore may be possible, Both sets of metallurgical testwork have highlighted higher average Zinc grades than previously reported, increasing from 1.7% Zn to >4% Zn. Due to the significant effect this will have on the future feasibility of the deposit, possible explanations for this are being addressed and further assessment is in progress. The Iron rich Legune Hematite prospect was unable to be drill tested due to delays in clearance from the Aboriginal Areas Protection Authority (AAPA). TNG is now pleased to be able to confirm that following a second meeting between the Traditional Owners and AAPA, clearance has now been approved. Further drilling at the Mount Peake project was hampered by the delay in clearance from the Central Land Council (CLC), and consequent availability of suitable drill rigs in the area. Clearance from the CLC has now been received. Additional exploration licenses were submitted over areas surrounding the Mount Peake project licenses, giving TNG a dominant strategic position and some new untested drill targets located by previous explorers. TNG has temporarily closed the Kununurra Office until the completion of the wet season. Quarterly Report DECEMBER 2008 2 TNG Operations Figure 1: TNG Limited Tenement Map Quarterly Report DECEMBER 2008 3 PROJECTS • Manbarrum Project: Zinc-Lead-Silver, Iron-Ore, TNG 100%. Figure 2: Manbarrum Project: Exploration Prospects Sandy Creek Deposit: (15.9 mt @ 1.6% Zn, 0.7% Pb, 5.4 g/t Ag). The Sandy Creek deposit is a combination of primary sulphide (11.7mt @ 1.7% Zn, 0.7% Pb, 5.3 g/t Ag) and oxide resources (4.3mt@ 1.4% Zn 0.4% Pb, 4.5 g/t Ag), occurring near surface. Metallurgical work has been completed on the JORC Indicated primary sulphide mineral resource. The final test work report favorably concludes that standard metallurgical processes will produce concentrates acceptable to smelters. Good recoveries and grades were achieved from both the composited mineralized zones: Higher grade Zone: The upper composite zone has the higher Zinc and Lead grades. Results are: Zinc , 90.8% recovery at a grade of 53.8% Zn. Lead , 70% recovery at a grade of 62% Pb. Quarterly Report DECEMBER 2008 4 Lower grade Zone: The lower composite zone has lower grade Zinc and minor amounts of Lead. Results are: Lead , Head grade too low. Zinc , >50% recovery at a grade of 50% Zn. Composite analytical and recovery results are shown in Table 1 and 2. Sample Zn Pb Fe S S² Ba Ag As Cd Cu Description (%) (%) (%) (%) (%) (%) (ppm) (ppm) (ppm) (ppm) Upper Comp 4.44 1.15 4.24 7.32 6.64 2.21 11 109 165 16 Lower Comp 1.31 0.12 5.96 11.2 7.26 19.8 3 393 24 <5 Table 1: Head grades of composites Sample Circuit Concentrate Grade Recovery Grade Recovery Description Pb Pb (%) Zn (%) Zn (%) (%) Pb Cln Con 1, 2 & 3 52.2 73.0 NaCN / Pb Cln Con 1, 2 & 3 62.4 69.6 Upper Comp ZnSO 4 Zn Ro1CC1, 2 + 50.0 89.0++ Ro2CC1, part of 2 NaCN / Zn Ro1 & 2 ClnCon NCP NCP 50.0++ 48.5 ZnSO 4 Lower Comp Zn Ro 1, 2 & 3 Cln Con NCP NCP 39.0 67.8 A5100 + Zn CI Tail Collector Table 2: Metallurgical test work recoveries and grades Implications: The testwork has proven that good concentrates at grades acceptable to smelters can be produced from the Sandy Creek ore by standard metallurgical processes. The ore is at shallow depth, commencing at approximately 50m below surface, which would be amenable to low cost open cut mining methods. This result therefore provides further impetus for economic evaluation of the deposit without engaging in further exploration work. The test work was undertaken on complete sections of diamond drill core. Head grade results of the composite sections provide an average for the section. Results show that the head grades of 4.44% Zn, and 1.15% Pb (Table 1), are above that of the previous JORC reported grades of 1.7% Zn and 0.7% Pb, in the last Mineral Resource statement. This indicates that potential underreporting of analytical grades possibly due to dilution caused by the drilling conditions and core-cutting has occurred. This will be investigated further in any future evaluation work. Quarterly Report DECEMBER 2008 5 Barite Study: Barite was noted as being very prominent in the lower composite zone: Head grade was almost 20%. The production of Barite concentrate as a secondary objective was noted and will be further explored in any future assessment work. Further Exploration Work The current Sandy Creek resource excludes higher grade zones at deeper levels. Any future drilling will be oriented to delineate the trend of these mineralised zones, and allow inclusion in an updated JORC mineral resource estimate. Djibitgun Deposit: Mineralogical and Metallurgical test work has been ongoing to evaluate the leaching characteristics of the JORC zinc-oxide resource of 6.7mt @ 1.8% Zn, 0.6%Pb, 14 g/t Ag. This occurs within a global JORC inferred mineral resource of 19.9mt @ 16 g/t Ag, 0.5% Zn, 0.2% Pb. Metallurgical work has been completed and a report is being reviewed. The leach testwork conducted has proved that the ore can be leached using elevated temperatures with >90% of the Zn extracted. While it is also reported that the acid consumption is prohibitive due to high carbonate levels, the successful use of heavy liquid separation (HLS) can reject the carbonate minerals and reduce this issue. Implications: The metallurgical testwork has also indicated that the composite grades reported are higher than the initial reported analytical grades. As with the Sandy Creek metallurgical work this appears to be related to a sample size factor, where bulk samples are providing higher grades of Zinc. Initial testwork composites of 2kg samples provided a head grade of 2.02% Zn. Subsequent composites using 5kg and 10kg samples provided head grade averaging 4.1% Zn with a highest Zn grade of 6.6% Zn. This will be investigated but provides further evidence that possible under-reporting of analytical grades has been caused by small sample size due to the wet drilling conditions. Further Exploration Work The Djibitgun deposit was located by reconnaissance broad spaced drilling. Infill drilling to establish the extent of the internal higher grade Zinc and Silver mineralised zone is in preparation. • Legune Prospect A second meeting with the Aboriginal Areas Protection Authority (AAPA) for Drilling clearance at Legune took place on 10 th December 2008. The Traditional Owners confirmed their approval and consent was given. A formal clearance certificate from AAPA is awaited. Quarterly Report DECEMBER 2008 6 • Mount Peake Project: Nickel – Iron – Vanadium, TNG 100% Scheduled drilling of the magnetic and gravity targets at Mount Peake was postponed due to the delay in obtaining clearance to drill from the Central Land Council (CLC).Formal clearance has now been received. Additional exploration licence applications have been submitted to acquire ground immediately surrounding the Mount Peake project licences.