ACAP RESOURCES LIMITED 28 104 028 542 Directors ASX RELEASE 28 July 2010 QUARTERLY REPORT TO 30 JUNE 2010 Robert Pett (Chairman) Dr. Andrew Tunks (Managing Director) Dr. Paul Woolrich Harry Stacpoole Paul Ingram Stock Code ACB 162M Ordinary shares 9M Options (unlisted) Australian Stock Exchange (ASX) Botswana Stock Exchange (BSE) Level 36, Exchange Plaza 2 The Esplanade Perth WA 6000 www.acap.com.au Telephone: +61 8 9220 9850 Facsimile: +61 8 9220 9820 info@acap.com.au www.acap.com.au HIGHLIGHTS OF THE QUARTER High grade mineralisation intersected in resource drillout across Gorgon South and Kraken confirming the continuity of mineralisation in preparation for further resource reclassification. Metallurgical testing of oxide and secondary ores suggests recoveries of above 80% can be achieved using an acid leach, and positive agglomeration results on both ore types were achieved. Initial results from radiometric sorting testwork on oxide and primary ores show significant promise. Larger scale testwork of the radiometric upgrading technique will be conducted in July. Testwork on the upgraded radiometric sorted Primary Ore indicates recoveries of up to 80% in columns using a strong acid leach. Drilling to test the quantity and quality of potential process water in an underground aquifer has commenced and initial results are promising. Memorandum of Understanding between A Cap Resources and KORES, the South Korean Resources Department, to work towards an agreement on the development of the Letlhakane Project was completed.
PROJECT SUMMARY Since commencing exploration in late 2006, A Cap Resources Limited has discovered one of the world s largest undeveloped Uranium Deposits in north eastern Botswana. The Letlhakane Uranium Project is located adjacent to Botswana s main North South infrastructure corridor, that includes a sealed all weather highway, railway line and high tension power lines. The Project has a JORC compliant Mineral Resource as reported on 27 th Nov 2009. Indicated Inferred Project Total Project Inventory All ore types Mt U 3 O 8 ppm U 3 O 8 Mlbs Mt U 3 O 8 ppm U 3 O 8 Mlbs Mt U 3 O 8 ppm U 3 O 8 Mlbs 143 159 50 320 152 108 463 154 157.8 A Cap announced the results of a Scoping Study (completed by SRK) in early 2009 that reported operating cash costs of US$33/lb U3O8 and capital costs for plant construction of US$170M. Following on from these positive results A Cap commissioned a Feasibility Study (managed by Lycopodium Australia). Currently in progress, the study is focussed on Metallurgical treatments paths, including recovery optimisations and beneficiation techniques designed to reduce operating expenditures and enhance recoveries. At the same time, A Cap s exploration team continues to manage a drill out of the ore zone that is designed with four concrete objectives in mind; 1. Discover additional near surface, high value secondary ores. 2. Grow the current Resources. 3. Improve geological knowledge to enable better target generation for higher grade zones. 4. Provide material for metallurgical testwork. Figure 1. Shows the position of A Cap s PL s within Botswana. Figure 2. Covers the area inside the blue box on Figure 1 and shows the relative locations of the Letlhakane and Serule Uranium projects within PL45/2004. Also highlighted is the excellent infrastructure in the area that includes a dual lane highway, railway and high tension power lines.
Figure 3. Shows the location of the main prospects at the Letlhakane Uranium Project as well as the major infrastructure present in the area. The background image is the radiometric anomaly map. In the image areas of red and white represent high levels of background radiation highlighting the exploration potential of the area. EXPLORATION AND RESOURCE DEVELOPMENT GORGON WEST The Gorgon West prospect is a prominent radiometric anomaly to the west of the main resource area (Figure 3). A new zone of surface secondary (carnotite) style mineralisation was discovered there early in 2010 by trenching. A Cap subsequently followed up with hollow auger drilling, completing a drill pattern similar to that used to define a JORC compliant Indicated resource at Mokobaesi. Mineralisation discovered by drilling is predominantly within 5m of the surface and is covered by less than a meter of windblown sand. The proximity of this ore type to surface and its excellent metallurgical recoveries result in this being a high value exploration target.
Work at Gorgon West during the quarter focussed on defining the extent of secondary mineralisation and testing the mineralisation variability in preparation for future resource calculations. A total of thirteen (13) Hollow Auger holes were drilled to outline the extent of the mineralisation. Four (4) diamond and a further thirty (30) Hollow Auger holes were completed for variability purposes. Assay results are expected in the September quarter. GORGON SOUTH The Gorgon South resource is situated immediately to the south of the Gorgon resource (Figure 4) and comprises both primary and oxide mineralisation. Gorgon South, which is currently classified as an inferred resource, has returned some of the highest grades and thicknesses in the Letlhakane area and is open to the south. The area will be a focus for the exploration team during the third quarter with programs designed to infill the resource to allow a resource category upgrade and to extend the resource to the south and south west. During the June quarter, eleven (11) PQ diamond holes were drilled in the Gorgon South resource area to supply material for the primary mineralisation metallurgical test work program. The samples have been processed and metallurgical test work results are awaited. All holes have been logged with the Gamma Probe and significant intersections are presented in Table 1. Infill drilling will commence at the project in early July. HOLEID EAST NORTH FROM WIDTH GRADE GT GODD0036 527727 7582922 17.55 3.3 439 1427 GODD0037 527725 7582722 35.9 5.6 425 2380 GODD0039 527913 7583229 37.15 11.8 173 2033 GODD0040 528016 7582923 40.3 7.6 232 1763 GODD0041 528019 7583125 39.1 11.2 394 4393 GODD0042 528154 7583201 37.65 4.1 306 1255 GODD0044 528325 7583304 47.75 3.4 332 1112 GODD0046 528328 7582928 24 6.0 412 2451 GODD0050 527729 7583112 45.75 7.8 200 1560 GODD0051 527860 7582829 38.4 3.2 405 1276 GODD0052 527129 7583418 26.95 6.5 196 1274 Table 1: Gamma Probe Significant intersections from the Gorgon South Metallurgical program KRAKEN The Kraken resource occurs in the east and southern portion of the main resource area. Mineralisation at Kraken is dominantly oxide and primary style associated with carbonaceous sediments of the Karoo Supergroup (figures 3 & 4). A small zone of near surface carnotite mineralisation in calcrete and calcretised mudstone has recently been discovered at Kraken. Secondary Mineralisation Five (5) trenches were excavated at Kraken in an effort to expose the recently discovered secondary mineralisation. Three (3) of the trenches confirmed the presence of carnotite in the nodular calcrete at depths of around 1.2 3m.
A total of fifty two (52) hollow auger holes were drilled at Kraken during the quarter designed to outline the extent of secondary mineralisation. These shallow holes have intersected carnotite mineralisation of about 2m thickness over an area of approximately 700m x 400m. Geochemical assay results for the drilling are expected early in the September quarter. As mentioned previously, the proximity of this ore type to surface and its excellent metallurgical recoveries, make the discovery of any additional ore zones very significant. Resource Upgrade Drilling Infill drilling within the Kraken area commenced in June. A total of thirty (30) RC holes were completed for 1775m. The drilling intends to bring the drill spacing at Kraken to a 100m x 100m pattern (Figure 4), enabling the next resource calculation to convert the majority of the Kraken inferred resource into an indicated category. The drilling is concentrated around areas where initial optimised pit shells were located as a result of the November 2009 resource calculation. The program is expected to be complete in early July. Twelve (12) diamond holes, for a total of 508m, were also completed in the Kraken area during the quarter, as part of the resource upgrade program and to supply material for the primary mineralisation testwork program at SGS. All Reverse Circulation and Diamond drill holes have been logged with the Gamma Probe and the significant intersections are presented in Tables 2 and 3. HOLE ID EAST NORTH FROM WIDTH GRADE GT MOKR1988 530640 7583130 23.35 5.4 222 1199 MOKR1998 530830 7583030 25.55 3.4 458 1557 MOKR1999 530830 7583130 22.3 8.5 246 2091 MOKR2008 531230 7582930 30.55 4.1 319 1292 MOKR2012 531430 7583230 30.8 4.9 234 1147 MOKR2013 531430 7583170 33.6 2.9 581 1656 MOKR2016 531430 7582930 36.75 5.7 250 1413 MOKR2017 531430 7582830 32.25 4.4 261 1135 MOKR2018 531430 7582730 28.2 7.1 155 1101 MOKR2035 531020 7582530 34.35 6.3 183 1144 Table 2: Gamma Probe Significant intersections from the Kraken Resource infill Reverse Circulation Drill program. HOLEID EAST NORTH FROM WIDTH GRADE GT MOKD0080 530031 7583027 21.05 5.3 357 1874 MOKD0081 530241 7582730 23.7 3.9 302 1163 MOKD0082 530539 7583018 27.3 2.6 688 1754 MOKD0083 530548 7582374 32.35 7.5 276 2056 MOKD0084 530736 7582719 32.4 3.3 480 1560 MOKD0085 530919 7582560 37.55 6.8 505 3434 MOKD0088 531129 7582725 37.45 8.4 263 2209 MOKD0057 530031 7582936 15.4 5.8 215 1236 MOKD0058 530147 7583075 24.3 5.8 241 1386 MOKD0061 530333 7582825 21.15 7.3 252 1840 MOKD0065 530542 7582518 34.2 5.2 539 2776 MOKD0066 530546 7582318 30.9 7.0 278 1946
MOKD0067 530549 7582427 32.6 3.0 450 1350 MOKD0068 530920 7582565 37.9 5.5 347 1891 MOKD0069 530438 7582970 22.6 4.3 497 2112 MOKD0070 530437 7582873 24.1 7.0 201 1417 MOKD0071 530536 7583026 27.6 2.9 640 1824 MOKD0073 530542 7582677 34.4 7.1 253 1784 MOKD0076 530545 7582382 32.25 6.2 483 2995 MOKD0078 530735 7582715 32.5 2.8 579 1592 Table 3: Gamma Probe Significant intersections from the Kraken Metallurgical and Resource infill Diamond Drill program Figure 4: Collar Plan of the Letlhakane Resource area highlighting holes drilled during the June quarter. Red Spots Reverse Circulation, Green Spots Hollow Auger, Orange Spots Diamond Drilling, Grey Spots previous drill holes. FEASIBILITY STUDY Column Leach Testwork on oxide and secondary ores As part of the ongoing Bankable Feasibility Study, additional metallurgical testwork aimed at assessing the suitability of heap leaching as a processing option for The Letlhakane Uranium Project was conducted. For these tests the ore was agglomerated and loaded into cylindrical columns. Chemical reagents were added to leach the target metal from the host rock simulating the conditions of a heap leach pad. The recent testwork was carried out in mini columns which allows multiple metallurgical variables using a large number of columns to be tested.
The results from the testwork indicate that: All the secondary and oxide ores respond well to agglomeration and percolation tests with high percolation rates observed in both ore types. Agglomerate stabilities and strengths were found to be consistently positive. Larger scale (3m high) column tests will be required to test the robustness of the agglomerated material in a full scale heap leach situation. The secondary ores within 8m of the surface are high acid consumers due to the presence of carbonate minerals in the host rocks. Recoveries in the secondary ore types of up to 80% were achieved under both alkaline and acid conditions, with leach kinetics (speed of leaching) being significantly faster under acid conditions. These recoveries confirm previously published results announced as part of the Scoping Study on the Letlhakane Project. Radiometric Ore Sorting During the quarter, six (6) bulk samples (<300kg) of oxide and primary mineralisation were tested using a portable laboratory Radiometric Sorter. In this sorter, coarsely crushed ore is passed over a scintillometer which detects radiation emitted from the rock fragments and mechanically sorts the fragments into radioactive (accepted fraction) versus non radioactive (rejected fraction) sub samples. Initial results from the trial Radiometric Sorting are encouraging with significant increases in uranium grade seen in all samples. Further work needs to be completed on larger samples to test and optimise this process, particularly for lower grade samples. Additional larger tonnage samples will be trialled during July and August. Sample Beneficiated Initial grade Grade U Accepted Mass accepted U ppm U ppm % % A 265 590 68 30 B 106 181 36 21 C 128 226 41 23 D 138 222 33 20 E 249 511 76 37 F 403 589 75 52 Table 4. Results from the radiometric testwork completed on The Letlhakane Uranium Project samples. Samples A, E and F were representative run of mine material. B, C and D were samples specifically blended to observe how the technique preformed at lower grade ranges. All samples received a significant increase in grade when processed through the Radiometric Sorter.
Primary Ore Metallurgy During the quarter, the results of the metallurgical testwork on the primary ore returned the most positive results to date. The application of a pulse of strong acid during acid leaching resulted in excellent recoveries of over 80% on the radiometrically sorted Primary Ore. This result provides the first positive indication that uranium from the Primary Ore can be recovered at relatively low cost, which significantly changes the potential size of the development of Letlhakane. The Primary Ore contribution to A Cap s total resource base of 158M lbs U3O8 is 67%. The Company therefore recognises that these new and exciting results will drastically impact on the projected mine plans currently being developed as part of the ongoing Bankable Feasibility Study. The Bankable Feasibility Study had previously focused on the Secondary and Oxide ore types for the proposed development of the Letlhakane Project, as previous preliminary metallurgical testwork on the primary mineralisation was not encouraging. 100 Primary Ore Column Leach Tests Uranium Extraction 80 U Extraction, % 60 40 20 0 200 g/l Acid 100 g/l Acid 0 5 10 15 20 Time, days Figure 5. The graph shows the results from recent testwork which demonstrates recoveries of 80% achieved after 10 days leaching. This work was carried out on a sample of radiometrically sorted Primary Ore that graded 316ppm U 3 O 8.(This sample includes both the accept fractions from the sorter and the undersize material that is too fine to be processed through the sorter) Variation in the amount of acid between 200g/L and 100g/L resulted in no change in the recovery. Environmental Impact Assessment The Scoping Document for the Environmental Impact Assessment was submitted to the Department of Environmental Affairs, the International Autonomy Energy Association and other interested parties, for review in March 2010 and initial comments have been received. The scoping report has been modified to incorporate the changes required and it is now anticipated the report will be re submitted in July and that the next review will take place in August. Further specialist studies are ongoing.
Well Field Exploration Bore Holes Through local water resources specialists, Water Surveys Botswana, A Cap has identified a potential bore field to the west of the main project area as a possible water source for the operations. Drilling and pump testing of the first seven (7) exploration boreholes has been completed and a full report received, indicating that water yield is generally good with water quality varying from very good to poor. Investigations are ongoing. It is anticipated that a further eight (8) to ten (10) exploration bore holes will be drilled in Q3 and Q4 in order to gain a better understanding of the hydrogeological regime. Power Supply A formal request for a system survey for project power supply was submitted to Botswana Power Corporation. A response was received in April 2010 stating that power can be supplied to the project from the Serule switching station. CORPORATE ACTIVITY During the quarter A Cap completed a Memorandum of Understanding ( MOU ) with Korea Resources Corporation ( KORES ), in relation to the joint development of the Letlhakane Uranium Project in Botswana. KORES is a government owned company of the Republic of Korea that is in charge of the development of both domestic and overseas mineral resources. Under the terms of the MOU, KORES will investigate the potential to participate in the development of the Letlhakane Project, by itself or with the involvement of other Korean companies. In this respect, A Cap will make available to KORES all mining related information including investment policy, taxation, mineral trade and exploration and development trends in Botswana. A technical team from KORES completed a site visit in early June 2010. SUMMARY The Board of A Cap is pleased with the ongoing exploration and development of their Botswana Uranium Projects and is committed to continuing its intensive drilling campaign and metallurgical work to add value to the Company s Botswana uranium assets. DR ANDREW J. TUNKS Chief Executive Officer A Cap Resources Limited Information in this report that relates to exploration results, data and cut off grades is based on information compiled by Dr Andrew Tunks who is a member of the Australian Institute of Geoscientists. Dr Tunks is a fulltime employee of A Cap Resources. Dr Tunks has sufficient experience which 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. Dr Tunks consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
Appendix 5B Mining exploration entity quarterly report Appendix 5B Rule 5.3 Mining exploration entity quarterly report Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001. Name of entity ACAP RESOURCES LIMITED ABN Quarter ended ( current quarter ) 28 104 028 542 30 June 2010 Consolidated statement of cash flows Cash flows related to operating activities Current quarter $A 000 Year to date (...12... months) $A 000 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration and evaluation (b) development (c) production (d) administration (1,336) (286) (5,636) (1,812) 1.3 Dividends received 1.4 Interest and other items of a similar nature 97 329 received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows (1,525) (7,119) Cash flows related to investing activities 1.8 Payment for purchases of: (a)prospects (b)equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a)prospects (b)equity investments (c)other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) (78) (351) Net investing cash flows (78) (351) 1.13 Total operating and investing cash flows (carried forward) (1,603) (7,470) + See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 1
Appendix 5B Mining exploration entity quarterly report Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 30 6,830 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows 30 6,830 Net increase (decrease) in cash held (1,573) (640) 1.20 Cash at beginning of quarter/year to date 8,174 7,302 1.21 Exchange rate adjustments to item 1.20 (40) (101) 1.22 Cash at end of quarter 6,561 6,561 Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities Current quarter $A'000 1.23 Aggregate amount of payments to the parties included in item 1.2 221 1.24 Aggregate amount of loans to the parties included in item 1.10 1.25 Explanation necessary for an understanding of the transactions Directors fees, salaries, consulting fees and superannuation paid to directors or related parties. Noncash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows N/A 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest N/A Financing facilities available Add notes as necessary for an understanding of the position. Amount available Amount used $A 000 $A 000 3.1 Loan facilities 3.2 Credit standby arrangements Estimated cash outflows for next quarter $A 000 + See chapter 19 for defined terms. Appendix 5B Page 2 30/9/2001
Appendix 5B Mining exploration entity quarterly report 4.1 Exploration and evaluation 1,462 4.2 Development Total 1,462 Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. Current quarter $A 000 Previous quarter $A 000 5.1 Cash on hand and at bank 360 149 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other term deposits Total: cash at end of quarter (item 1.22) Changes in interests in mining tenements 617 1,018 5,584 7,007 6,561 8,174 6.1 Interests in mining tenements relinquished, reduced or lapsed Tenement reference Nature of interest (note (2)) Interest at beginning of quarter Interest at end of quarter 6.2 Interests in mining tenements acquired or increased + See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 3
Appendix 5B Mining exploration entity quarterly report Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates. 7.1 Preference + securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions 7.3 + Ordinary securities Total number Number quoted Issue price per security (see note 3) (cents) 161,845,078 161,845,078 Amount paid up per security (see note 3) (cents) 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buybacks 7.5 + Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted 7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter 7.11 Debentures (totals only) 100,000 100,000 30 cents 30 cents 140,000 8,000,000 750,000 700,000 Exercise price 80% of market value. 30 cents 40 cents 44 cents Expiry date On the day the employee ceases to be in the employ of the Company or subsidiary thereof. 30 June 2011 30 June 2011 15 June 2014 700,000 44 cents 15 June 2014 100,000 30 cents 12/4/2010 + See chapter 19 for defined terms. Appendix 5B Page 4 30/9/2001
Appendix 5B Mining exploration entity quarterly report 7.12 Unsecured notes (totals only) Compliance statement 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4). 2 This statement does give a true and fair view of the matters disclosed. Sign here:....... Date: 28 July 2010 (Company Secretary) Print name: DENIS RAKICH Notes 1 The quarterly report provides a basis for informing the market how the entity s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report. 2 The Nature of interest (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the re porting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2. 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities. 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report. 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with. == == == == == + See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 5