Uranium Exploration

Above: Batchelor Exploration Office

Despite the previous priority on base metals Compass was well aware of the outstanding exploration potential of its Northern Territory tenements for uranium. The marked improvement in projected demand and price for this commodity, driven by the growing acceptance of nuclear energy as a clean and efficient power source, influenced the Company to commence an active uranium exploration programme in 2005.

The old uranium mines that comprised the historic Rum Jungle uranium field all fall within the Company’s granted exploration tenements. They illustrate that commercial quantities and grades of uranium exist and underscore the outstanding potential of this area compared to many uranium exploration areas.

In addition to the discovery potential beneath and adjacent to these old mines a number of other uranium exploration prospects were identified during the period of mining activity and again during increased uranium exploration in the late 1970s and 1980s related to the first oil price shock. No uranium exploration has occurred in this area for the past 20 years until Compass recommenced exploration in 2005.

The exploration model for uranium mineralisation at Rum Jungle is the unconformity model. An important feature of this deposit type is the presence of prospective uranium rich source rocks in Archean granites and Lower Proterozoic formations as well as proximity to the Middle Palaeozoic unconformity surface. Examples of this deposit type include Ranger and other East Alligator River region deposits and Canadian parallels in the Athabasca Basin including Cameco’s McArthur River deposit. They are characterised by above average grades which are locally extremely rich.

A number of prospects on the Company’s tenements show wide intercepts of moderate or even low grade containing zones of moderate and high grade uranium mineralisation. At current prices even lower grade material is considered potentially ore when it occurs in a metallurgically simple form. The Company’s programme in 2006 will seek to define both lower and higher grade uranium resources in this highly prospective region.

In July 2006 KnoxPartners estimated the Mt Fitch Uranium resource using a variety of cut offs. Using a 0.75 lbs cut the resource comprises 8.9 million pounds of contained U308 aat a grade of 1.01 lbs/tonne which increases to 14.5 million pounds at a cut off of 0.5 lbs/tonne. For details see Resources/Northern Territory section.

Above: Northern Territory Tenements and Uranium Prospects

Mt. Fitch Uranium Prospect

The Mt Fitch uranium prospect was discovered as a result of regional base metal exploration in 1965. A total of 118 holes for over 13,000 metres of drilling had been completed by the time exploration ceased in 1970. Not all holes were logged or assayed and the mineralisation without additional drilling could not be classified under current resource definition standards. A parcel of potential uranium ore was tested and gave “uranium recovery better than 85% ... with acceptable acid consumption” (1969 archive 4603).

Compass drilled additional holes in 2005 to verify the quality of the historic data, to assess potential ore controls and to plan step out drilling. The prospect is characterised by wide intercepts of low to moderate grade mineralisation containing restricted higher grade zones within. Comparison of historic results with the latest drilling demonstrated that the data could be used in association with new drill results for resource estimates.

A uranium resource is currently being estimated for this prospect using both Compass and historic data and will also be used to plan the 2006 drill programme. Synergies with a possible future copper oxide operation in this area will result in the application of lower cut-off grades for resource definition.

In July 2006, KnoxPartners estimated the Mt Fitch Uranium resource using a variety of cut offs. Using a 0.75 lbs cut the resource comprises 8.9 million pounds of contained U308 at a grade of 1.01 lbs/tonne which increases to 14.5 million pounds at a cut off of 0.5 lbs/tonne. For details see Resources section.

*6 Using a uranium price of $40 per pound and an exchange rate of $0.70

Rum Jungle East

The Rum Jungle East prospect is located between the old Whites and Dysons open pits. A synclinal axis closure in this area has expanded the surface area of the Whites Formation and Coomalie Dolomite. This area also appears to have been proximal to the Middle Proterozoic unconformity surface as evidenced by the presence of a haematite quartz breccia regolith. This is a prospective level for uranium mineralisation and concentration and will be further evaluated during the 2006 drill season.

Operations Review

Two other high priority uranium prospects – the northern extension of the Rum Jungle Creek South deposit (NX prospect) and Kylie are also planned for drilling in 2006. The latter prospect is located adjacent to a reverse fault where Middle Proterozoic sandstone and conglomerate has been downthrown into the Lower Proterozoic sequence. This is a very prospective environment for uranium mineralisation and will be further tested this field season.

Uranium mineralisation has also been intersected along the northern continuation of the Rum Jungle Creek South deposit which is referred to as the NX prospect. Rum Jungle Creek South was the largest and richest of the Rum Jungle field mines and was buried to a depth of approximately 30 metres. A drill programme is planned to further test the extension of this deposit.

Extensive data compilation undertaken during the NT wet season has identified a number of other uranium exploration drill targets to be tested during 2006.

Above: Cross-section Kylie

*7 at Exchange rate $0.70 and price per pound US$2.00 Cu, $12.00 Co, $6.50 Ni

Base Metal Exploration

Above: Northern Territory Tenements and Base Metal Prospects

The Company’s base metal exploration targets in the Batchelor region are best described as strata bound sedimentary deposits. The characteristics of these deposits world wide are relatively large size, high grade and the presence of several valuable metals in the ore. A major deposit for this model type would be plus 30 million tonnes. There is also a tendency for several deposits to cluster close to the same geological contact, resulting in multiple mines that may comprise distinct mineral districts. Exploration of the Company’s Batchelor tenements over the past 15 years has identified several mineral deposits which Compass believes reflects an emerging mineral district of some importance.

Area 55

The Area 55 prospect is located 3 kilometres to the west–southwest of the Browns deposit.

As part of our reassessment of Area 55 in 2005 a single hole 05A5501 was drilled to 48 metres to twin hole DG17 that was drilled in the late 1950s. Both holes are located within the current Area 55 resource. The new hole showed significantly higher grades of copper, cobalt and nickel than its twin DG 17. It seems likely that the discrepancy in grades between holes can be put down to advances in drill technology resulting in improved recoveries as well as more reliable modern assay techniques rather than variations in mineralisation.

The latest resource model (see page 8) does not take into account this hole. Additional drilling is planned for Area 55 in 2006.

Mt. Fitch Copper Prospect

The 2005 field season exploration programme was the most comprehensive completed by the Company to date. The Mt. Fitch area, located 7 kilometres northwest of Browns was one of the centres of activity for the base metal drill programme. In addition to the 22 holes drilled in this area to evaluate the uranium potential, a further 72 R/C drill holes for 2,510 metres were completed to help delineate the copper cobalt oxide mineralisation at the Mt. Fitch copper prospect and to test its extension.

Drilling showed that the controls on base metal mineralisation were more complex than at Browns which is a simple steeply dipping sheet of mineralisation. It seems likely that the Mt. Fitch oxide deposit comprises a northern and southern lens with a zone of weaker mineralisation between. The prospect remains open along its northern and southern extensions and further drilling is planned for the 2006 field season.

Above: Batchelor Northern Tenements

Operations Review

*7 at Exchange rate $0.70 and price per pound US$2.00 Cu, $12.00 Co, $6.50 Ni

Mt. Fitch South

Twenty four R/C holes and three diamond drill holes were completed at the Mt. Fitch South base metal prospect in 2005. This mineralisation appears to have been deposited adjacent to a growth fault. In places slump breccias have disrupted the mineralisation. Both oxidised and sulphide mineralisation were intersected in last year’s programme and there are strong similarities to the Browns deposit.

The Mt. Fitch South deposit remains open and further drilling is planned for 2006 before considering resource calculations.

*7 at Exchange rate $0.70 and price per pound US$2.00 Cu, $12.00 Co, $6.50 Ni

Browns East

Browns East base metal prospect is the contiguous extension of Browns and 30 R/C holes were completed into the near surface oxidised copper cobalt target zone for a total of 1,722 metres. Results were encouraging showing continuity of near surface oxidised copper cobalt and nickel mineralisation between the Whites and Intermediate open pits. This area was not drilled for copper at shallow depths previously as it was the former site of copper leach pads at the time of mining the Intermediate deposit. Browns East shows potential to provide additional mill feed the Browns Oxide plant.

Deeper drilling in the past mainly in the 1960s and 1970s, intersected mainly base metal sulphide mineralisation. This drilling defines the current Browns East resource. The 2005 drill data is being compiled and integrated with the historical drill data with a view to providing a new resource for Browns East and to assist planning of the upcoming drill programme. This programme will also follow up on potential uranium mineralised structures including that identified in hole 05BE26 which apart from the copper intercept reported in the table above, also intersected 8 metres at 0.19% U₃O₈ (4.4 lbs/t U₃O₈) from 39 to 47 metres.

The principal objectives for 2006 at this prospect are to define the oxidised resource and upgrade the previous Browns East estimate which currently is categorised as inferred resources. In addition the significance of uranium mineralisation in possible cross structures will be investigated.

*7 at Exchange rate $0.70 and price per pound US$2.00 Cu, $12.00 Co, $6.50 Ni

Castlemaine Prospect

A single drill hole for 108 metres was drilled to investigate base metal potential near the Rum Jungle Creek South uranium mine and the Castlemaine Hill phosphate prospect. The hole intersected favourable Whites Formation stratigraphy but did not continue through to the prospective Coomalie Dolomite contact zone. Anomalous lead zinc mineralisation was intersected from 25 to 30 metres averaging 0.71% lead, 0.32% zinc. Further drilling is planned.

Iron Ore

In late 2004 Compass entered into an agreement with Territory Iron Ltd for Territory Iron to evaluate and purchase iron ore within a restricted area of the Company’s tenements (MLN 1163). The area had an existing iron occurrence delineated and in 2005 Territory Iron drilled 36 holes for 1,340 metres. Using a cut-off of 58% iron they reported 25 metres at 61.9% iron from 19 metre depth in hole YR 22 and 19 metres at 62.5% iron from 11 metres in hole YR 26.

Territory Iron paid Compass (90%) Guardian (10%) a non refundable advance of $50,000 against future production payments and further drilling is planned. Compass retains the right to any iron ore discoveries outside the Territory Iron agreement area.