Approach to Exploration

Northwest's exploration philosophy revolves around applying state-of-the-art exploration techniques to the classically under-explored Nullagine goldfield with its enormous potential.

Our investment in and use of state-of-the-art exploration modeling and technology is designed to maximise exploration success by allowing Northwest to accurately locate high quality targets, and once located, explore and develop them more efficiently and profitably than our peers.

Northwest's exploration approach is balanced by an innovative three component approach:

significant investment in generative activities that aim to dramatically increase the company's probability of exploration success through the collection and analysis of specialised footprint and fingerprint datasets;
use of next generation 3D targeting software adopted from the oil and gas industry to provide unrivalled targeting capability; and
focus on staged economic evaluation throughout the exploration and development process to ensure high resource/reserve conversion rates and efficient use of exploration funds.

The Company believes that this approach, in combination with a focus on high in-ground expenditure will reap significant rewards by increasing exploration effectiveness and preparing the Company for future successes within the shortest possible timeframes.

Predictive Geological Targeting Model

Northwest is committed to investing in and developing an advanced predictive geological targeting model to unlock the significant potential of its Nullagine projects. This advanced targeting technique is normally the preserve of the major mining and exploration companies owing to the cost and level of expertise required to develop and maintain such a model.

In simple terms, a predictive geological targeting model enables exploration and drilling campaigns to be prioritised and planned on the basis of a comprehensive understanding of regional and deposit-scale structural and geochemical controls along with analysis of complimentary advanced datasets. This offers a competitive advantage over more traditional approaches which fail to recognize and employ developments in science and technology.

The success of exploration using predictive modeling is significantly increased. Northwest's investment in this approach ensures that Northwest extracts the maximum benefit from all of its drilling and exploration programmes.

The predictive targeting model will assist in the identification of large ore deposit targets by providing pattern recognition and vectors to mineralisation over ground which has never been exposed to such rigorous investigation.

Three main datasets are being developed as the basis of the predictive targeting model:

a detailed fact-based structural geology dataset focusing on the paragenetic window of mineralisation and fluid-dynamic controls;
a litho-chemical dataset (footprint); and
an alteration and fluid chemistry dataset (footprint and fingerprint, respectively).

The predictive targeting model, once completed, can be utilised not only over Northwest's Blue Spec Shear and Camel Creek Projects in the Nullagine Gold Field, but will form a template for the Company's exploration approach over new projects which may be acquired in the future.

It is anticipated that the results of this generative work will be available to significantly impact targeting by mid 2006. Work on the collection of data required to develop a predictive geological targeting model is significantly advanced.

GIS and 3D Modeling Technology

The company has recently concluded a 6 month digital data compilation project involving the modernisation of a legacy of historic geological data. This work has provided significant value by enabling Northwest to effectively target and prioritise prospects at an early stage as well as building the framework for an expandable and sophisticated data system.

Along with the establishment of an encompassing 2D GIS data environment, Northwest has also commenced the construction of a holistic 3D geological and structural model which facilitates the integration of a number of exploration datasets (including, assays, geophysics, fluid chemistry, local infrastructure etc) relating to the Nullagine Gold Project.

This will enable our exploration team to overlay different types of information in a 2D and 3D environment to assist the ongoing exploration and development of prospects.

Northwest is also working closely with Mira Geoscience in the construction of a camp-scale quantitative, unified, 3D-GIS earth model for advanced drillhole targeting using Mira Geoscience's unique Gocad software.

Adapted from the oil and gas industry, Gocad software enables Mira Geoscience and Northwest to draw together a vast quantity of spatial data into a consistent, quantitative, 3D framework which can be directly queried for drillhole targets. Utilising this software will put Northwest at the forefront of exploration drill targeting.

Staged Economic Evaluation

Northwest's exploration team uses a proprietary bottom-up economic evaluation tool in the planning of all drilling programmes.

The purpose of this economic evaluation is to ensure the optimal growth and development of each of Northwest 's individual gold prospects by ensuring no prospect is over-drilled having regard to its economic value. This approach avoids the over-capitalisation of prospects and wasted exploration expenditure which are such a feature of exploration in Australia.

As a result of this continuing evaluation, Northwest will only progress gold discoveries from the inferred to the indicated or measured category if they pass Northwest's stringent internal economic return benchmarks.

This ensures that forward exploration drilling momentum is maintained, low-value resources do not litter Northwest's resource inventory and Northwest will achieve a higher resource/reserve conversion rate than its peers. Northwest aims at a 70%+ conversion rate from resources to reserves.

Few of Northwest's peers apply this level of economic modeling throughout the development phase of exploration. Rather, such modeling is normally conducted after the development phase in the context of feasibility studies. The result is an industry average of around a 30% conversion rate from resources to reserves.

Page last updated: 29.01.2007