Thundelarra and Sally Malay settle Copernicus dispute

Perth-based mineral explorers Thundelarra Exploration Ltd and Sally Malay Mining Ltd have signed a formal deed settling their dispute in relation to the Copernicus nickel project in the East Kimberley.

Under the deed, Thundelarra has confirmed that Sally Malay Exploration Pty Ltd, being a wholly owned subsidiary of Sally Malay Mining, has earned a 60 per cent interest in the Copernicus Project, while Sally Malay Exploration will contribute the first $3.5 million to expenditure on the Copernicus Project over the next 4 years.

In April last year, the joint venture agreement between Sally Malay and Thundelarra to develop the Copernicus open pit mining resource was cancelled because of a dispute between the partners surrounding Sally Malay's 60 per cent stake.

As part of the agreement signed in 2003 between the two local companies, Sally Malay was required to produce a feasibility study aimed at determining the viability of mining the resource, which is located 30 kilometres south of Sally Malay's processing plant.

That study was to determine the viability of trucking the ore to the nearby processing plant. Sally Malay submitted the study to Thundelarra in January last year.

However, the board of Thundelarra, at the time, submitted a statement to the Australian Stock Exchange in which it terminated the agreement and outlined the explorer's view that: "Sally Malay has not delivered a feasibility study for the purposes of the Heads of Agreement".

In a reply to the Thundelarra statement, Sally Malay managing director Peter Harold made clear his belief that his company had fulfilled its end of the agreement and that it "will act immediately to protect its rights and seek confirmation that it has earned its 60 per cent interest".

He also said the matter was with the company's lawyers and he was unable to comment further.

In March this year, Thundelarra advised it was in advanced negotiations with Sally Malay with a view to settling the legal dispute concerning the Copernicus project.

Below is the full announcement including further terms under the deed:

COPERNICUS PROJECT - SETTLEMENT OF DISPUTE

Further to the announcements made by Thundelarra Exploration Ltd ("THX") and Sally Malay Mining Limited ("SMY") on 21 March 2006, THX and SMY are pleased to announce that they have signed a formal deed settling their dispute ("Dispute") in relation to the Copernicus Project. Completion has also taken place under the deed.

Under the deed:

• THX has confirmed that Sally Malay Exploration Pty Limited ("SME"), being a wholly owned subsidiary of SMY, has earned a 60% interest in the Copernicus Project;
• SME has agreed to contribute the first $3,500,000 to expenditure on the Copernicus Project over the next 4 years. In the first year not less than $1,000,000 must be contributed to
  expenditure of which not less tha n $500,000 must be contributed to expenditure on drilling of
  the area known as the "Copernicus Deeps" prospect;
• After the first year SME must contribute not less than $500,000 to expenditure before it is able to withdraw from the joint venture.
• THX has issued 2,500,000 shares to SMY at an issue price of $0.20 per share to raise $500,000;
• THX has granted 2,500,000 unlisted options to SMY to subscribe for shares in THX at an exercise price of $0.40 per option. The options may be exercised at any time in the next 3 years;
• SMY and THX have agreed to release each other from any further claims in relation to the Dispute and agreed to formerly discontinue the current action in the Supreme Court of Western Australia with no order for costs.

The deed also sets out the detailed terms of the joint venture between SME (60%) and THX (40%)
moving forward and the basis, in principle, upon which SMY (through its wholly owned subsidiary,
Kimberley Nickel Mines Pty Ltd) agrees to treat THX's share of any ore that may be mined from the
possible Copernicus open pit mine. No decision to develop and mine the open pit has been made at
this time.

Some of the other important elements of the joint venture are as follows:

• THX has the right, should it elect to dilute its interest in the open pit and that interest dilutes to 20%, to transfer its interest in the open pit only (retaining a 40% interest in the Copernicus Deeps) to SME in return for a tonnage based royalty. The royalty will be A$3.50 per tonne of ore mined from the open pit provided that if the average US$ nickel price over any quarter isUS$11,023 per tonne (US$5.00 per pound) or more the royalty for that quarter will increase to A$5.00 per tonne;
• SME has the right to make a decision to develop and mine the open pit at any time. Any decision to develop and mine any other part of the Project (including the Copernicus Deeps) will require a unanimous decision; and
• THX has granted SME a right of first refusal should THX wish to deal with its interest in any tenements within an 80 km radius of the SMY plant - this right does not however apply to any tenements that are the subject of the joint venture between THX and Lion Ore.

The directors of THX believe that the settlement that has been reached is a good deal for both parties
and are excited about the prospects for the Copernicus Project and look forward to progressing the
open pit and drilling the Deeps as soon as possible.


Yours faithfully
THUNDELARRA EXPLORATION LTD