China Yunnan Copper Australia earning 70% from joint venture partner Goldsearch Limited's 30% (ASX: GSE)

Under the terms of the agreement CYU is obligated to carry out exploration programs to investigate a number of high priority targets identified by GSE and previous tenement holders within a period of 3 years. Upon sole funding expenditure of $750,000, CYU will have gained the right to earn an initial 49% participating interest in the tenements.

In addition to this CYU will issue to GSE unlisted options to purchase ordinary shares in CYU at a price of $0.40 per share. The options will be issued in two tranches.

• 2,000,000 options to be exercised on or before 20th August 2011. [agreement altered]
• 1,000,000 options to be exercised on or before 20th August 2012. [agreement altered]

By contributing additional expenditure to a cumulative amount of $1.5 million within a 3 year period from the commencement of the farm-in and joint venture agreement, CYU will have gained the right to earn a 70% participating interest in the tenements. During the farm-In period, CYU will solely fund and manage the exploration for all minerals within the tenement area.

Upon completion of the farm-in period a joint venture will be formed with participating interests of CYU 70% : GSE 30%. Both parties will contribute to the joint venture in proportion to their participating interest with normal dilution applying thereafter.

Mount Isa East Project

China Yunnan Copper Australia has entered a Farm-In/Joint Venture agreement with Goldsearch Limited (ASX:GSE) over three exploration permits (EPM 14019, EPM 14022 and EPM 15257) comprising the Mount Isa East Project (Mary Kathleen Joint Venture). These tenements, which are contiguous with CYU's EPM 15248 of the Mount Isa Project, are located approximately 60km to the west of Mount Isa with the groups of tenement blocks effectively straddling the main Barkly Highway between Mount Isa and Cloncurry.

The project area covers a portion of the Kalkadoon-Leichhardt, Mary Kathleen (Wonga Belt) and Quamby-Malbon Tectonic Belts within the Eastern Succession of the Mt Isa Inlier.

The Mount Isa Inlier is a world class mineral region, hosting numerous major deposits of copper, gold, lead, zinc, silver and uranium. The Inlier has yielded two significant new mineral discoveries in recent years, Merlin (Mo, Cu, Au) and Kalman (Mo, Cu, Au). 
Exploration to date undertaken by Goldsearch has targeted fertile structures for Cu-Au+U mineralisation emplaced as indicated by surficial historic copper workings, geochemical Cu and U anomalism and limited shallow drilling. A number of high priority targets with potential for the discovery of significant deposits of copper, gold, uranium and rare earth elements (REE) have been defined. Target areas include uranium potential at the Elaine Dorothy and economic copper/gold deposits at Hardway, Pindora, Prince of Wales, Jubilee, Mount Dorothy and King Solomon.

Figure 1 (click for larger image) : Projects within the Mary Kathleen JV are located an average of 50 kilometres southeast of Mount Isa.

Mount Dorothy (Wee Wyeems/Three Threes) (Copper)

Significant copper-cobalt sulphide mineralisation assays returned from the recently completed Mount Dorothy RC drill program, include:

High grade intersection in MDR002 forms part of a lower grade mixed oxide-sulphide mineralised zone of:

Additional significant cobalt mineralisation intersected include:

Mineralisation remains open at depth and along strike.

Traditionally, the Mount Dorothy prospect has been referred to by the names of its two outcropping lodes: 'Three Threes' and 'Wee Wyeems'. The copper mineralisation occurs in these two outcrops as malachite staining on gossans in fault quartz breccias and as disseminations in adjacent sheared porphyry. The mineralisation appears to be controlled by a northwest striking fault.

Table 1: Mount Dorothy Prospect drill collar locations

The mineralised zone, as defined by a >200ppm copper soil geochemical anomaly, was partially tested, concentrating on the Wee Wyeems area by five drill holes in the 1990's returning a best intercept of 110m @ 0.57% Cu from 22m in drill hole WW201 including 26m @ 1.05% Cu from 106m (Open at Depth).

3D interpretation undertaken by CYU suggested that WW201 may have been drilled down dip within a northeast trending mineralised zone. Potential still exists for significant mineralisation to be intersected at depth associated with brecciation extending from Wee Wyeems to Three Threes.

MDR001 and MDR002 were drilled as a pair of scissor holes testing for the potential northeast trending mineralised zone. MDR001 intersected patchy zones of oxide copper mineralisation ("oxide"), predominately as native copper and minor malachite, with the best intersections returned of 32m @ 0.18% copper, 44ppm cobalt from 122m and 12m @ 0.19% copper, 301ppm cobalt from 181m (Open at Depth). MDR002 intersected a broad zone of oxide and primary sulphide mineralisation ("primary"), as pyrite+chalcopyrite+/-chalcocite, of 89m @ 0.74% copper, 190ppm cobalt from 17m. Within this zone two shallow high grade primary sulphide intersections of 22m @ 2.03% copper, 591ppm cobalt from 17m and 6m @ 1.27% copper, 81ppm cobalt from 46m were returned. All mineralisation from 52m to the end of the hole is predominately oxide (Figure 3). MDR003 was drilled on the same drill pad as MDR002 but on an orientation to test the prominent mineralised northwest trending gossanous quartz breccia structure. MDR003 intersected patchy oxide and primary mineralisation with the best intersection of 11m @ 0.30% copper, 116ppm cobalt from 59m (oxide) returned.

MDR004 was drilled to test under the historic shallow underground workings at the Three Threes area. Historically this outcrop has only been tested by a single shallow diamond core hole (DDH1) drilled in the mid 1950's. MDR004 also intersected patchy primary mineralisation with minor oxide mineralisation. Best intersection returned was 7m @ 0.28% copper, 509ppm cobalt from 56m (primary).

A summary of all significant intersection from this drill program can be found below in Table 2.

Table 2: Summary of significant intersections for Mount Dorothy RC drill program - July 2010, using a nominal 0.10% copper cutoff w/- max 3m internal dilution. All depths are reported in downhole depths.

Significant broad anomalous cobalt intersections were also returned from assays in all four holes with a peak value of 2,100ppm cobalt. MDR002 returned the best intersection of 19m @ 674ppm cobalt, 2.31% copper from 17m including 7m @ 1,449ppm cobalt, and 2.55% copper from 18m, at a 500ppm cobalt cut-off. MDR003 and MDR004 returned the two broadest intersections of 34m @ 214ppm cobalt, 0.09% copper from 62m and 52m @ 278ppm cobalt, 0.08% copper from 28m respectively. MDR004 remains open with 8m @ 315ppm cobalt, 0.02% copper from 122m (Open at depth) with the last sample returning 857ppm cobalt and 0.03% copper.

A summary of all significant intersection from this drill program can be found below in Table 3.

Table 3: Summary of significant cobalt intersections for the Mount Dorothy RC drill program - July 2010, using a nominal 100ppm cobalt cutoff w/- max 3m internal dilution. All depths are reported in downhole depths.

CYU is currently compiling all the new drill data into the existing 3D model for re-interpretation and planning of a second phase of drilling, targeting depth and strike potential along the Mount Dorothy northwest and northeast structures. A number of untested Sirotem anomalies identified during a 1990's ground geophysical survey will also be re-evaluated for drill targeting.

Figure 2 (click for larger image): Mary Kathleen JV: EPM 14019 – Drillhole Location Map with interpreted > 500m surfical mineralised zones.

Figure 3 (click for larger image): Mary Kathleen JV: EPM 14019 – Section A-A' looking north-northeast highlighting the broad copper mineralisation intersected in MDR001 and MDR002.

Elaine Dorothy (Uranium)

At Elaine Dorothy (and the nearby Elaine 2 and Elaine 3 prospects) previous exploration has highlighted significant Mary Kathleen-style uranium (and REE) mineralisation. Mapping indicates several narrow lenses of mineralisation at surface coinciding with anomalous scintillometer results. The lenses trend approximately east-west, dip moderately north, occur in scapolite-diopside rock and were noted to roughly follow the contact of that rock with garnetite. Drilling to date has returned significant intersections of 2.3m @ 0.262% U3O8, 9.5m @ 0.036% U3O8 and 2m @ 0.134% U3O8.

Hardway (Copper / Gold / Uranium / REE)

The Hardway trend extends for several kilometres as defined by previous open pit mining of oxide copper, soil geochemistry and RC drilling. The mineralisation is generally hosted by re-crystallised limestones, calcareous siltstones and dolerite and is associated in places with silicification and silica/carbonate veining. Goldsearch has defined potential multiple zones of shallow copper mineralisation over a 250m width within the 2.8km long soil geochemical Hardway zone. Drilling intercepted multiple zones of greater than 0.2% copper with a significant intersection of 49m @ 0.26% Cu. The mineralisation is associated with both extensive disseminated sulphides along with minor quartz carbonate veining and minor stock works.

The carbonate dominated host rocks of the Corrella Formation at Hardway represent an attractive exploration target and elevated cobalt, uranium, gold, yttrium and phosphorus are of considerable interest given the metal association at the nearby Mary Kathleen Mine.

At Hardway high copper values in drilling are associated with elevated cobalt (up to 0.24% Co), uranium (up to 74ppm U), phosphorus (>1% P) and yttrium (>500ppm Y). The phosphorus and yttrium values suggest possible associated rare earth element (REE) mineralisation, most likely as the mineral xenotime. The association of copper, uranium and rare earth element mineralisation has similarities to the nearby Mary Kathleen deposit where high grade uranium was associated with high REE mineralisation and copper.

Pindora (Copper / Gold)

At Pindora numerous zones of narrow but high grade copper + gold occur within an extensive zone of mineralisation up to 7km long returning significant drill intersections up to 4m @ 2.5% Cu, 0.24g/t Au have been defined. The mineralised zones are defined by previous shallow oxide copper workings and soil geochemistry. This trend is clearly defined by anomalous copper in soils (up to 0.5% Cu), and elevated gold (up to 132ppm Au) and Mo (up to 65ppm Mo). The Pindora shear zone is located just 4km east of the Kalman deposit and parallels the main structure (Pilgrim Fault), which hosts mineralisation at Kalman.

Prince of Wales (Copper +/- Gold)

At Prince of Wales soil sampling has defined a zone of anomalous copper associated with outcropping iron stones and minor historical copper workings. This area is thought to have significant potential for iron oxide copper gold (IOCG) mineralisation given the nearby development of the large body of iron oxide at Mount Phillip.

Jubilee (Copper / Gold)

At Jubilee a line of shallow workings extending over approximately 800m previously exploited oxide copper and gold mineralisation and associated iron-rich alteration. The southern portion of this zone extends into EPM14019. Rock chip sampling by previous explorers returned assay values up to 26% copper and 7.8 g/t gold.

King Solomon (Copper)

At King Solomon shallow underground and open cut mines have exploited an extensive zone of near surface copper mineralisation hosted by re-crystallised limestones and calcareous siltstones of the Corella Formation. The mineralised zone extends for approximately 1.6km. Previous work consisted of mapping, geochemical sampling and ground magnetic and EM surveys. This work focussed on a small magnetic granite plug north of the extensive zone of workings at King Solomon. No significant exploration appears to have been completed within the main mineralised trend. At the nearby Python and Python South workings oxide copper mineralisation appears to be associated with iron rich alteration and is in places apparently associated within banded iron rocks.

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