The Hammer Hill project is located about 180 km nort-east of Alice Springs. It lies within the Harts Range Group of the Irindina province (eastern Arunta Region), a volcano-sedimentary succession that was metamorphosed to granulite facies during the Ordovician Larapinta Event. The numerous mafic and ultramafic units found throughout the Irindina Province may have intruded during the Larapinta Event. These intrusions are considered prospective for magmatic nickel-copper-PGE sulphide mineralisation.

In November 2005, Arafura and Mithril Resources Limited announced an option agreement which allowed Mithril to conduct exploration on Arafura's Hammer Hill exploration licences (EL 9725 and EL 10136). EL 26520 was added into the JV during 2008. The farm-in allows Mithril to earn up to 70% interest in the project by spending AUD$5 million over 6 years.

Work conducted by Mithril on the project area since late 2005 includes:

• systematic soil sampling over several areas, which was successful in defining a coherent nickel-chrome anomaly around Hammer Hill and detecting anomalous nickel-cobalt-chrome levels at a number of the other targets.

• acquiring VTEM heli-borne electromagnetic (EM) data in late 2007. The VTEM survey defined a number of high-priority conductive nickel sulphide targets.

• drill testing of three EM targets on EL 10136 in 2008. Significant intervals of sulphide mineralisation returned anomalous copper assays, including 4.52m @ 0.39% Cu.

In December 2007, BHP Billiton elected to participate in the Hammer Hill JV under the Mithril-BHP Billiton Alliance. BHP Billiton will sole fund continued exploration on the project to earn up to a 51% interest.