CONRAD SILVER PROJECT

History and Tenure

The Conrad silver mine is situated about 25 km south of the town of Inverell, in northern NSW. Malachite's existing tenements cover approximately 675 km² and all are held 100% by the Company. The tenements include three mining leases (MLs 5992, 6040 and 6041), one 4 unit EPL (EPL 1050) and two exploration licences (ELs 5977 and 7176).

Historical workings were developed mainly on the Conrad Lode, which was accessed through the Conrad, Moore, Davis and one or two minor additional shafts over about 1.5km of strike length. Some ore also came from the King Conrad and Alwell’s Lodes, each with an access shaft. The deepest mining is the bottom of the Conrad main shaft at 270m below surface but most of the level development and stoping is a lot shallower than that. The first production period extended from 1898 to 1912, when the mine closed due to industrial relations problems. It was then largely inactive until 1948, when Broken Hill South Ltd. commenced underground development. The mine resumed production from 1955 to 1957, but then closed due to falling lead prices; it has been idle ever since. The recorded average grade of historical production was 600g/t silver, 1.5% copper, 8% lead, 4% zinc and 1.5% tin and total production was 3.5 million ounces of silver, or about double that on a silver equivalent basis. Analysis by Malachite has shown that the rare metal, indium, whose value equals or exceeds that of silver, is also a significant component of the mineralisation at Conrad.

Malachite has been exploring at Conrad since 2003, with a major step up in activity from 2006, when resource drilling began. That drilling has been focussed within, beneath and along strike from the old workings that make up the historic Conrad Mine. Up to the end of 2008, approximately 25,000 metres of reverse circulation percussion and diamond drilling hads been completed, in 107 holes. Based on that drilling, a mineral resource estimate was prepared by the Company’s consultants in late 2008. That work identified a resource containing 9.6 million ounces of silver or 19.2 million ounces on a silver equivalent basis. A full report on mineral resource estimation was released to the ASX on 16 December 2008 and a copy can be accessed here.

During 2009 Malachite concentrated on mapping possible extensions of the Conrad Lode to the southeast, where it has now been traced for a distance of at least 2.3km.

New drilling programs commenced in 2010, beginning with reconnaissance RC drilling of the southeast extension. Infill diamond core drilling within the existing resource area also resumed in June, 2010, concentrating initially on the Davis and Princess areas, where earlier drilling had indicated good potential for attractive silver-copper-tin mineralisation.