Exploration

Last updated: March 2011

Bare Hill Gold Project

The Bare Hill tenement E25/413 is held by Heron 100% covering an area of 36.4 km² located 71 km south-east of Kalgoorlie and 8 km north-east of Integra Minings Salt Creek gold mine.

A total of 41 RAB holes for 1,728 metres were completed during the Quarter testing gold-in-soil anomalies identified by previous tenement holders. Three anomalous areas were identified, one in the north of the project area and two in the south, which may be interpreted to be one continuous zone with the geochemical response broken by deeper transported cover.

RAB drilling returned 23m @ 0.416g/t gold from 36 metres to end of hole in hole BHRB0003 from the southern zone, within a wider zone of sheared altered and anomalous mafic rocks.

Drilling in the central zone returned 12m @0.25g/t gold from 44 metres to 56 meters in hole BHRB0011 from what is interpreted to be the northern extension of the BHRB0003zone located 1.3 kilometres to the south.

Drilling in the northern zone returned the best result of 4m @ 0.439g/t gold from 24 metres to 28 metres in hole BHRB0039 within a weakly sheared and altered saprolite.

Initial sampling was based on 4 metres composite samples analysed at Ultratrace Laboratories Perth for gold. One metre resamples were analysed by the Fire Assay technique confirming the initial composite results and included 18 metres @ 0.54 g/t gold with a peak gold result of 2.54 g/t gold over 1 metre in hole BHRB0003. Details of anomalous holes are presented are:

Bare Hill Gold intercepts based on 4m composite samples

Hole_ID	Easting	Northing	Depth From	Depth To	Interval Width	Intercept Description
BHRB0003	414400	6559280	0	4	4	4m @ 0.067g/t
BHRB0003	414400	6559280	36	59	23	23m @ 0.419g/t
BHRB0009	415120	6560480	48	52	4	4m @ 0.233g/t
BHRB0011	414880	6560480	44	56	12	12m @ 0.250g/t
BHRB0015	415200	6560640	36	40	4	4m @ 0.074g/t
BHRB0016	415120	6560640	32	36	4	4m @ 0.080g/t
BHRB0027	414880	6560960	44	48	4	4m @ 0.059g/t
BHRB0027	414880	6560960	68	69	1	1m @ 0.064g/t
BHRB0039	413760	6564400	24	28	4	4m @ 0.439g/t
BHRB0040	413680	6564400	32	36	4	4m @ 0.053g/t

Bare Hill gold intercepts based on 1m resamples

Hole_ID	Easting	Northing	Depth From	Depth To	Interval Width	Intercept Description
BHRB0003	414400	6559280	41	59	18	18m @ 0.548g/t
BHRB0009	415120	6560480	48	51	3	3m @ 0.436g/t
BHRB0011	414880	6560480	45	48	3	3m @ 0.405g/t
BHRB0011	414880	6560480	51	58	7	7m @ 0.252g/t

An infill RAB drilling program to close the drill hole spacing on each drill line to 40 metres surrounding the anomalous intercepts and a further 10 lines of infill drilling was completed in early January with results pending.

These are encouraging initial drill results from the project. The anomalies located by drilling are interpreted to be hosted in sheared mafic rocks on the eastern margin of the large regional fold structure which hosts the Salt Creek gold mine on its western margin.

Mt Zephyr Base Metal Project

The Mt Zephyr Base Metals Project is located 70 km north east of Leonora in the Eastern Goldfields of Western Australia. Base metals anomalism interpreted to be the geochemical signature of a Volcanic Massive Sulphide (VMS) mineralised system was first identified by ESSO minerals in the late 1970s and early 1980s. Heron acquired and consolidated the package over the last 18 months and completed a surface Electromagnetic (EM) survey supported by mapping and geochemical sampling. The EM survey identified conductors associated with anomalous surface geochemistry. One conductor was drill tested by diamond drilling in May 2010 resulting in three holes intersecting massive sulphides with elevated zinc and copper grades, probably associated with the distal part of a VMS system.

During the Quarter Heron completed a rotary air-blast (RAB) drilling program, with 264 holes drilled for 12,137 metres over a 6.7 km strike length of prospective units. The program mapped the geology and geochemical responses associated with the EM conductors and confirmed by diamond drilling to be part of a VMS system.

The drilling intersected a sequence of mafic, felsic volcanic and sedimentary rocks with zoned alteration (sericite, chlorite and sulphides) consistent with a VMS mineralized belt. Laboratory geochemical assays show elevated copper, lead and zinc, together with typical VMS pathfinder elements (arsenic and barium) in a number of linear stratiform zones along the belt. Where these geochemical anomalies are associated with EM conductors they form priority diamond drill targets for testing in the December quarter.

Target 1

Located in the southern part of the area, this target returned elevated RAB geochemistry in 4m composite samples to 3,030ppm zinc (0.3% Zn) and 793ppm lead associated with a subtle EM conductor. This area was also the subject of exploration by ESSO in the early 1980s, however Heron's drilling will test a deeper target defined by the conductor. The drilled rock sequence here consists of strongly sericite/chlorite altered intermediate volcanic units with fine stringers of gossanous material, probably after weathered base-metal sulphides.

Target 2

This target is located in the central part of the area where the RAB geochemistry returned up to 400ppm copper and 1,880ppm zinc in the up-dip position of an EM conductor. A subtle gossan unit was also identified at surface in the up-dip position of this conductor and returned consistently anomalous copper, lead and zinc with a handheld Niton XRF analyser.

Target 3

This target is located in the northern part of the area where the three initial diamond drill holes were located. Anomalous copper results in the RAB drilling warrant follow-up drilling as does the western EM conductor.

Current Diamond Drill Program

Early in October 2010 the Company commenced a further program of diamond drilling to test these targets. To date three holes have been completed for 1,159m on Targets One and Two. All three holes have intersected variably mineralised zones with massive sulphides and stringer sulphides intervals.

At Target One, stringers of sphalerite (zinc sulphide) were observed over a 5m interval from 149m depth within a broader 15m zone of intense sericite alteration. While not economic in itself, this intercept warrants follow-up drilling once it has been fully assessed.

On the western conductor at Target Two an exciting intercept of massive and semi-massive sulphides was made over a 27m interval from 220m depth hosted within carbonaceous shales. From Niton XRF analysis these sulphides are enriched in copper, lead and zinc and represent a thick accumulation of probably distal VMS mineralisation. Encouragingly, rounded clasts of massive copper sulphide were observed in this interval that returned 0.4 - 3% copper with the Niton XRF suggesting proximity to a higher grade body of VMS mineralisation which has been re-worked. Follow-up drilling on this target is underway.

Rocky Gully Project

The Company's wholly owned Rocky Gully Project is located some 80km north-west of Albany, Western Australia.

The rocks of the Albany-Fraser mobile belt are Proterozoic in age (1350-1140 Ma) which is the same age as the rocks hosting the Voisey Bay nickel sulphide deposit in Canada (1333 Ma) in a similar geological environment. In 2005 the Company identified the presence of potential ultramafic intrusives and weakly anomalous laterite geochemistry from review of historical reports and regional datasets. Over the next few years the company built up a land package of some 1200km² covering the prospective zones and identified up to 13 potential ultramafic intrusives.

In late 2008 Heron drilled some 5km southwest from the current target. This drilling identified disseminated primary magmatic nickel sulphides within a mafic-ultramafic intrusive, demonstrating the fertility of this area for nickel sulphide mineralisation.

With the potential targets covering such a large area, surface-based electromagnetic methods were not practical and an airborne VTEM survey was commissioned covering some 574 line kilometres over an area of 55km². While the previously drilled targets were identified as weak VTEM anomalies, the current drill target stood out as an order of magnitude better conductor. This combined with the anomalous surface geochemistry and the presence of an interpreted intrusive clearly make this a high priority drill target.

Further work completed this year has led to better understanding of the nature of the potential carbonatite intrusive body intersected in reverse circulation drilling earlier this year. Carbonatites are often rich in rare earth elements (REE), phosphate, niobium and other economic minerals.

Closer modelling of the magnetic data indicates the circular feature is related to a sub-vertical pipe like body at depth. A geophysical program of induced polarisation (IP) was commenced in October and results are currently being assessed. The purpose of this program was to better understand the connection between the potential carbonatite intersected in the drilling and the modelled intrusive body at depth. IP surveys are similar to EM surveys and can directly detect mineralisation associated with disseminated sulphides.

If targets are generated by this IP program they will be drill tested in the current Quarter.

Shay Gap Iron Project

During 2010 the Company conducted reconnaissance surface sampling of detrital iron-ore material at its Shay Gap project, located some 160km east of Port Hedland, Western Australia. The Company holds applications for Exploration Licences covering 290 square kilometres adjacent to BHP Billiton's iron ore mining operations at Shay Gap. These operations produce iron ore that is railed to Port Hedland for export.

The work identified detrital-iron ore occurrences on the colluvial and alluvial slopes adjacent to the ranges hosting the iron-ore mining operations. Assays results indicate potential for high-grade iron-ore material with over 65% iron being returned in a number of the samples with low levels of elements deleterious to potential product marketing such as alumina, phosphorus and silica (see Table 1).

Table 1: Assay Results for Reconnaissance Surface Samples of Iron Ore Material

Sample	Grid	Easting	Northing	Fe (%)	SiO2 (%)	Al2O3 (%)	P (%)	S (%)	LOI (%)
SG001	MGA94_50	811687	7737600	66.0	2.9	0.72	0.044	0.111	1.04
SG002	MGA94_51	190422	7735727	68.1	1.1	0.62	0.054	0.009	0.51
SG003	MGA94_51	192068	7732666	61.9	5.7	1.48	0.096	0.006	3.54
SG005	MGA94_51	206700	7722905	66.5	3.4	0.76	0.029	0.007	0.66
SG007	MGA94_51	206673	7722790	66.5	2.7	1.22	0.023	0.021	0.91
SG009	MGA94_51	207018	7722419	64.9	4.4	1.23	0.037	0.013	1.16
SG011	MGA94_51	207249	7722415	46.6	31.1	1.03	0.022	0.009	0.81
SG013	MGA94_51	207449	7722265	31.9	53.8	0.21	0.013	0.006	0.18
SG015	MGA94_51	207752	7722053	37.3	46.0	0.14	0.011	0.005	0.28
SG017	MGA94_51	206497	7722952	54.2	21.5	0.34	0.014	0.012	0.33
SG019	MGA94_51	206272	7723146	65.4	5.2	0.51	0.027	0.016	0.59
SG021	MGA94_51	206012	7723382	20.7	69.9	0.32	0.019	0.025	0.21
SG023	MGA94_51	205736	7723600	54.4	20.6	0.53	0.032	0.011	0.71
SG025	MGA94_51	205597	7723309	66.4	3.7	0.68	0.039	0.014	0.25
NB Other samples in sequence submitted for beneficiation testwork and not reported here.

Drilling is required to determine depth, extent and potential grade in both these areas. There is also potential to discover covered detrital and cemented canga deposits along the range front which may be delineated with drilling.

The Company continues to progress the grant of the Shay Gap tenements through the native title procedure. A program of reconnaissance drilling has been planned and is to be implemented once the tenement is granted and heritage protection complied with. Providing there are no delays with the native title procedure the tenement can be granted later this year.

Previously reported surface sampling in the area, demonstrated the potential for detrital iron-ore deposits with several samples returning over 60% iron. The detrital iron-ore material is being shed from the iron-ore deposits on the adjacent range which are currently being mined by BHP Billiton.

Mt Zephyr Copper-Gold Project

The Mt Zephyr North Copper-Gold Project is located in the far north of Mt Zephyr project area, some 80km north-east of Leonora.

Diamond core drilling intersected some 85m (from 190m depth) of strongly altered basaltic and granitic rocks associated with a discrete magnetic anomaly. The target is located in the far north of its Mt Zephyr Project area, some 80km north-east of Leonora. The alteration consists dominantly of magnetite and epidote with lesser, hematite, diopside and biotite. Such alteration can be described as "skarn-type" related to the high-temperature intrusion of the granitic unit. Some minor copper sulphides (chalcopyrite) were observed lower down in this zone at around 250m depth where biotite becomes the more dominant alteration phase.

A subsequent gravity survey identified a subtle gravity high directly south of the magnetic high.

Systematic aircore drilling (40 holes for 2,120m) completed over the combined magnetic and gravity anomaly and intersected zones of calc-silicate alteration in predominantly granitic rocks. Results here indicate a skarn-style zoned alteration over some 1.2 kilometres of strike. However geochemical assays were generally low indicating little potential for significant mineralisation in this area.

No further drilling is currently planned, however an assessment of the regional context of this skarn mineralisation will be made to look for potentially related copper/gold mineralisation in the broader area.

Kalpini Nickel Project

The Company is targeting Kambalda-style nickel sulphide deposits at its wholly owned Kalpini Nickel Project, located some 70km north-east of Kalgoorlie. Within the project area the Company has identified a fertile ultramafic horizon containing disseminated nickel sulphides. A total of 5 diamond core holes for 1,741m were drilled over the course of the year with a best intersection to date of 24m at 0.39% Ni and 0.04% Cu from 242m depth in diamond hole KPDD01.

Subsequent detailed analysis of magnetic, electromagnetic and soil geochemistry surveys have identified a number of exploration targets to the south of this intercept within the approximately 5km of prospective strike extent. While these results are encouraging, given this early stage of exploration, the Company has decided to seek a suitable partner to co-fund further exploration within this project.