Breakaway Resources - Operations

Operations Report

EASTERN GOLDFIELDS, WESTERN AUSTRALIA

SCOTIA PROJECT (100%)

The Scotia Nickel Project, which is located 65 kilometres north of Kalgoorlie in Western Australia, covers 40 strike kilometres of the nickel sulphide bearing Highway Ultramafic which regionally correlates with the same ultramafic unit that hosts the Kambalda nickel deposits located approximately 120 kilometres to the south.

The Scotia Project covers an area of approximately 238km² , encompassing two centres of nickel sulphide mineralisation approximately 15 kilometres apart (the former Scotia Mine and the St Patricks/St Andrews mineralised zone), as well as several near surface nickel geochemical anomalies.

The Scotia Deposit itself consists predominantly of disseminated nickel sulphides that were mined by underground methods during the 1970’s to a depth of 360 metres, resulting in the production of some 14,700 tonnes of nickel from ore with an average grade of 2.2% nickel. The Scotia Mine ceased production in 1977 due to a pillar collapse.

The Scotia deposit appears to be structurally confined below 360 metres, prompting questions regarding the occurrence of extensions. Very limited wide spaced historical drilling down dip and along strike to the south of the deposit has not previously succeeded in discovering depth extensions. However, based on an understanding that other nickel sulphide occurrences in the Eastern Goldfields commonly comprise a series of disconnected lenses with extensive down-plunge lengths and a much shorter strike dimension, Breakaway believes that the historical down-plunge holes do not represent an effective test and further drilling is required to test a broader range of down-plunge options.

During the year, Breakaway drilled a curtain of six wide-spaced diamond drill holes (07BSGD002, 017, 019,023,024 and 032) across the Scotia Mine environment to further test the potential at depths of between 350 and 600 vertical metres below the surface. With intersection points up to 400 metres apart, this wide-spaced drilling is considered to be a preliminary first-pass test of the broader potential of the Scotia Mine environment.

While several holes encountered favourable geology, only minor mineralisation was intersected in two holes (07BSGD002 intersected 2 metres at 0.69%Ni and 07BSGD0032 intersected minor sulphides. An off-hole, downhole EM (DHEM) conductor was identified in adjacent holes 07BSGD002 and 17 which requires follow-up drilling.

Hole 07BSGD0024 intersected a broad zone of anomalous gold mineralisation (44 metres at 0.72g/t Au in composite samples) hosted by alteration and quartz veining in a shear zone 200 metres south of the Scotia Mine. Subsequent 1 metre sampling has returned results of up to 2 metres at 4.85 g/t Au. Further drilling options for the Scotia Project are under review in conjunction with the overall project priorities and the Company’s other exploration commitments.

At the Saints Prospect, 15 kilometres north of the Scotia Mine, previous exploration located two mineralised zones, 600 metres apart, termed St Patricks and St Andrews. Previous drilling was limited to testing these occurrences down to depths of up to 300 vertical metres and did not satisfactorily close off the occurrences or test for extensions in the broader system.

The St Patricks Deposit, which has been delineated by previous explorers, occurs in two coherent zones, the S2 (upper) and S1.5 (lower), in the hanging wall of the host ultramafic, with the S2 mineralisation predominantly comprising dense disseminated nickel sulphides. Based on a 1% nickel cut-off grade a JORC compliant Inferred Resource of 135,000 tonnes at 3.7% nickel for 5,000 tonnes of contained nickel was calculated by RSG Global (“RSG”) for the St Patricks Deposit in 2006.

The mineralisation at St Andrews, which was only sparsely drilled by previous explorers, occurs at several levels in particular on the S1 horizon at the base of the ultramafic in contact with the footwall basalt.

During the year, a total of 14 diamond and 17 RC holes were drilled at the Saints area, to better define the limits of the two known deposits and to commence exploration for extensions and potential new mineralised zones within the prospect area. At St Patricks this drilling has extended the zone to a strike extent of 100 metres and increased the level of confi dence in the existing resource with no signifi cant extensions located at depth to the north. Intersections are summarised in the table.

Notes specific to Scotia Project Exploration Results:
i) 07BSGC = RC Percussion hole, 07BSGD = Diamond hole
ii) Intersections are not weighted by bulk density measurements
iii) NSA – No significant assays.
All Reverse Circulation drill hole results were obtained from analysis of 1 metre samples. Sample quality in all cases was good and dry. All samples were prepared and analysed at UltraTrace’s Perth facility using dual stage crush and pulverisation. Analysis was by four acid digest and ICP/OES fi nish (ICP102, Ni, Cu, Cr) and fire assay/ICPMS fi nish (FA003, Au, Pt, Pd). The location of drill holes were determined using a handheld GPS achieving +/- 4 metres accuracy and reading AMG co-ordinates (AGD84, Zone 51 datum). Downhole surveys were conducted on the RC holes every 30 metres downhole using an Eastman single shot survey camera, and cased for future gyro directional downhole surveying.

At St Andrews, where historic drilling was limited, the mineralisation occurs on the basal contact of the ultramafic as well as in the hangingwall of the ultramafic with the former occurrence more prevalent. Breakaway has placed greater exploration emphasis on this deposit and during the year has succeeded in extending the +1% nickel contact comprising disseminated to matrix sulphide mineralisation over a maximum strike length of 200 metres within a broader mineralised footprint to include sub - 1% nickel mineralisation up to 350 metres along strike. The deposit is open at depth.

Drilling is taking place on a broader spacing to explore for both strike and depth extensions. Better intersections achieved from recent drilling are summarised in the table below.

Follow-up of anomalous aircore geochemistry some 400 metres west of the Saints trend intersected a significant new zone of nickel sulphide mineralisation during the year, with intersections of up to 6.29% nickel over downhole widths of up to 2 metres as veins in basalt adjacent to the ultramafi c. Subsequent drilling located a second zone 600 metres to the south with results of up to 4 metres at 1.1% Nickel in the ultramafic. These are considered to be encouraging discoveries, identifying a second prospective contact to the west and, while the structure is at this stage not fully understood, it may indicate structural repetition of the Saints trend by folding, increasing the potential for additional discovery opportunities. Intersections are summarised in the table below.

Breakaway intends to continue intensive drilling programmes in the Saints region in light of the encouraging results received to date, the presence of coherent deposits at St Patricks and St Andrews, the widespread distribution of nickel suphides and the localised nature of historical drilling, with extensive portions of prospective contacts remaining untested.

The project also offers gold potential, particularly at the Chameleon prospect, which is located 3.5 kilometres north of Apex Minerals Limited’s (“Apex”) Aphrodite refractory gold deposit (1.44 million tonnes at 6.2g/t gold for 287,000 ounces of gold). The Chameleon mineralisation has been delineated by wide-spaced drilling over a strike length of 300 metres and to a depth of 150 metres. Historical drill intersections in this zone include 32 metres at 3.78g/t gold, 22 metres at 5.43g/t gold, 5 metres at 5.08g/t gold and 2 metres at 5.54g/t gold. The system remains open at depth and along strike.

KALGOORLIE NICKEL PROJECT (EARNING 60% INTEREST)

The Kalgoorlie Nickel Project commenced in January 2005 as a joint venture in which LionOre Australia Pty Ltd (“LionOre”) obtained the right to earn 60% of the nickel rights held by Jackson Gold Ltd (“Jackson”) under several projects. As part of the transaction completed last year with LionOre, Breakaway acquired LionOre’s right to earn into the nickel rights.

The joint venture tenements are located some 20 kilometres east of the city of Kalgoorlie in the Eastern Goldfields region of Western Australia. The project covers an area of some 504km² encompassing approximately 160 strike kilometres of nickel-prospective ultramafics which, at least in part, are related to the unit hosting the Scotia deposit to the north-west and the Black Swan Nickel Project (Norilsk Nickel) (approximately 170,000 tonnes of pre-mined contained nickel reserves) to the west.

Previous nickel exploration in the region was principally carried out during the nickel boom in the late 1960’s and early 1970’s by a number of explorers. It was during this period that the majority of known nickel occurrences and prospects were delineated, including the 20N, 69N and 88N prospects in the Golden Valley area. Since then, only limited, sporadic nickel exploration has been undertaken, with the most noteworthy period of exploration since the nickel boom being undertaken by Outokumpu during 2001-02. However, that phase of work was limited and mainly involved the drilling of several deeper diamond drill holes into the existing prospects at Golden Valley.

The three nickel sulphide prospects at Golden Valley comprise mainly low-grade hangingwall (0.5-1.0% nickel) disseminated sulphides, intersected over down hole widths of up to 17.25 metres. Encouragingly, the drilling also intersected narrow remobilised massive sulphides over widths of up to 0.25 of a metre at grades of up to 8% nickel.

Breakaway drilled four diamond holes on the three prospects and only intersected minor nickel sulphides with grades of up to 0.58% nickel. No downhole geophysical conductors were located from the diamond holes. Infill RAB and aircore drilling were undertaken in the area between the three prospects to test for evidence of additional near-surface geochemical anomalism. Several holes intersected anomalous nickel with grades up to 0.56% nickel, and associated anomalous pathfi nder results. Given that this initial exploration programme was limited, Breakaway believes that further work is warranted considering the presence of favourable, mineralised ultramafics in the area.

As the geology of the broader project area is generally obscured by transported cover, Breakaway will further investigate the regional potential to identify additional areas of interest for nickel sulphide mineralisation.

WILDARA – MOUNT CLIFFORD BELT

Breakaway holds a commanding tenement position, incorporating several projects (Mount Clifford, Wildara and Yillaree) and covering approximately 60 strike kilometres of nickel mineralised ultramafi cs extending southwards of the Perseverance nickel complex in the Northeastern Goldfields of Western Australia.

The potential of this area is enhanced by the occurrence of interpreted structural repetitions of the prospective ultramafics along the entire strike extent of the projects with nickel deposits in the region occurring on at least four separate units. Historical exploration in this belt has been variable and generally localised. The recent discoveries of the Waterloo and Sinclair nickel deposits, respectively by Norilsk Nickel and Jubilee Mines NL (“Jubilee”), in previously explored terrain highlights both the nickel sulphide potential of this area and the need for more extensive and detailed exploration for blind deposits.

It is planned to resume exploration in the December 2007 quarter with drilling on known mineralised positions and geophysical targets, subject to available drill rigs.

MOUNT CLIFFORD (100%)

These project areas are located in the southern portion of the belt, covering a total area of 97km² .

The tenements cover most of a large shallow north-east dipping complex of ultramafi cs. Previous exploration focused mainly on the better-exposed, southernmost portion of the area, where Western Mining Corporation (“WMC”) discovered the Marriott Nickel Deposit in the late 1960’s and early 1970’s. The mineralisation in this deposit consists of blebby, disseminated nickel sulphides with a published Inferred Resource of 550,000 tonnes of 1.4% nickel for some 7,000 tonnes of contained nickel.

The Marriott Deposit, which was purchased recently by Australian Mines Limited (“Australian Mines”) from BHP Billiton, is located on a small tenement area within the broader Breakaway holding. Recent in-fi ll drilling of the resource by Australian Mines has been encouraging with intersections returning increasing grades at depth of up to 20 metres at 2.46% nickel. Nickel exploration immediately beyond the deposit is limited and potential down plunge positions have been identified on Breakaway’s ground.

There are indications of nickel sulphide mineralisation of a similar style elsewhere within the Breakaway tenement package, particularly at Mt Newman, which was discovered by WMC in 1969. This prospect was drilled more recently at depth by LionOre, encountering further disseminated nickel sulphides with intersections including 23 metres at 0.90% nickel, 11 metres at 1.16% nickel (including 1 metre at 3.17% nickel) and 1.1 metre at 2.26% nickel. A recent re-evaluation of this prospect has confirmed the potential for further drilling.

At the Salute prospect, located to the north of Mt Newman and east of Marriott, surface gossans after nickel sulphides have been discovered. Although depth extensions have not been located by previous drilling, a recent surface transient electromagnetic (TEM) geophysical survey has identified a nearby conductor, which is currently under investigation. Strong nickel geochemical anomalism has also been identified along strike from the excised Randal’s Find prospect, where drilling has intersected narrow zones of nickel sulphide mineralisation (0.75 metres at 5.12% nickel, 3.78g/t platinum + palladium and 0.16 metres at 4.43% nickel, 2.34% copper and 4.2g/t platinum + palladium).

The western contact of the complex, which continues northwards to Wildara, is obscured by transported overburden and has only undergone localised, superficial evaluation by previous explorers.

The project is currently undergoing a reassessment with preliminary drilling planned to test the Salute target and several adjacent targets. The assessment will continue with further TEM geophysics, geological studies and drilling.

WILDARA (100%)

The Wildara Project covers an area of approximately 154km² and represents the northern continuation of the nickeliferous ultramafics from Mount Clifford. Immediately north of the project, the ultramafics are sheared out against the Mount Keith – Kilkenny Lineament before resuming again at the Perseverance Deposit some 25 kilometres further north.

The broader region, which also covers Breakaway’s adjacent Yillaree project on the western side and Norilsk Nickel’s Waterloo deposit to the eastern side, comprises a multiple series of poorly exposed nickel mineralised ultramafic belts. From west to east, these include the Marsh, Roadside-Mount Clifford, Fly Bore, Weebo and Schmitz Well trends, which are interpreted to be structurally repeated equivalents.

Overall, the geological dips and plunges appear to be relatively shallow, which could result in completely blind prospective zones overlain by other rock types close to the surface.

On the Wildara Project, the main Roadside ultramafic, which commonly comprises prospective high MgO units similar to those hosting the Perseverance Nickel Deposit to the north, is widely obscured by cover. Limited work was carried out in this area prior to LionOre’s exploration activities, with drilling commonly limited to the weathered zone, which meant that the nickel sulphide potential remained uncertain for some 30 years. However, recent drilling by LionOre intersected disseminated to stringer nickel sulphides at several locations, clearly indicating that the unit is prospective for nickel and requires systematic, detailed exploration.

At the Revolution prospect in the north, previous drilling by LionOre intersected 13 metres at 0.96% nickel, 3.08 metres at 0.61% nickel 0.07 metres at 4.18% nickel and 1.3g/t platinum + palladium and 0.15 metres at 5.1% nickel and 3.03g/t platinum + palladium. Further south at the Horn prospect, limited drilling of a TEM conductor intersected nickel sulphides, including intersections of 12 metres at 0.98% nickel and 1.55 metres at 2.34% nickel. The mineralisation here is open in all directions and there are further nearby TEM responses to be followed up by drilling at depth and along strike.

Further to the south, gossans after nickel sulphides have been located at Fly Bore and Hilltop. To the west in the Weebo belt, rock-chip sampling at the Firefl y prospect has returned results of 0.64% nickel, 0.3% copper and 0.5g/t platinum + palladium from gossan scree. Recent TEM coverage in the vicinity of the gossans has located nearby geophysical conductors, several of which remain untested.

YILLAREE (80%)

The Yillaree Project covers an area of approximately 69km² including sections of the Schmitz Well and Weebo ultramafi cunits. BHP Billiton’s Weebo deposit, which comprises a resource of approximately 12 million tonnes at 0.67% nickel, lies immediately north of the area, while Jubilee’s recent Sinclair nickel discovery (Indicated and Inferred Resource of 1.2 million tonnes at 2.8% nickel for 33,700 tonnes of contained nickel) is locatedsome 18 kilometres south of the project on the western most Schmitz Well ultramafic.

The proximity of these significant nickel deposits highlights the potential of this area. It is planned to resume exploration in the area where there are several areas of geological and geophysical interest.

MIRANDA NICKEL PROJECT (100%)

The Miranda Nickel Project occupies an area of approximately 399km² , centred on the township of Agnew, in the Mt Goode belt. The project is located some 40 kilometres northwest of Breakaway’s Wildara project and6 kilometres south of Jubilee’s Cosmos-Prospero nickel complex (approximately 450,000 tonnes of publishedcontained nickel resources).

During the year, Breakaway finalised the acquisition of 100% of the base metal rights in the Miranda project from Gold Fields Australasia Pty Ltd (“Gold Fields”). The project also comprises four tenements to the north which are 100% owned by Breakaway, with the gold rights owned by Gold Fields.

While the surface geology is widely obscured by transported cover, magnetics indicate that, at Miranda North, the prospective Mt Goode ultramafic unit possibly extends for at least 11 kilometres under cover on the tenements. This unit was explored only superficially for nickel in the early 1970’s, with nickel exploration dormant since that time.

Exploration over the Miranda North area has been contingent on the completion of Heritage work. Heritage clearances have been granted over part of the area of interest south of Lake Miranda and approval is still being sought over a larger area.

On the Pinnacles Well ultramafi c belt to the south, there are several TEM anomalies that require follow up.

Preliminary exploration is planned to commence in September 2007 by carrying out a full evaluation of historical results. This phase of work should clarify the future strategy and priority of the project.

KAMBALDA WEST PROJECT (100%)

The Kambalda West Project is located approximately 20 kilometres south west of the town site of Kambalda and comprises three tenement blocks for a total combined area of 44km² . The project encompasses a series of nickel prospective ultramafics which host the historic Spargoville nickel camp (including the Andrews, 5A, 5B, and 1A deposits) on the southern two Mining Leases. These deposits produced some 14,000 tonnes of nickel between 1975 and 1993, but have not yet been closed off by drilling.

Breakaway previously estimated JORC compliant Inferred and Indicated Resources of 224,000 tonnes grading 2.0% nickel for 4,570 tonnes of nickel metal for the 5A and 5B Deposits. The project also hosts the Spargos Reward gold deposit, which produced approximately 26,000 ounces of gold from underground in the late 1930’s and early 1940’s.

Approximately 38 line kilometres of surface TEM geophysics identifi ed several conductors on or close to interpreted ultramafic contacts within the lightly explored Yilmia Belt in the western part of the tenements.

Breakaway is focusing its attention on the down-plunge potential of known nickel sulphide deposits. Historical data is being reconstructed in detail to better identify shoot controls and design drill holes to explore for depth extensions, ahead of a substantial drilling campaign.

QUEENSLAND

ELOISE PROJECT

Background and Geology

The 100%-owned Eloise Exploration Project covers an area of approximately 358km² over the highly prospective Middle Proterozoic Soldiers Cap Group, within the Eastern Succession of the Mount Isa Inlier, some 70 kilometres southeast of the township of Cloncurry.

The Eloise Copper Deposit (Breakaway owns a 30% Net Profit Interest) is located on two Mining Leases on the eastern boundary of the Eloise Project area. The surrounding region also hosts a number of major base and precious metal deposits, including Ernest Henry (copper-gold) to the north and Cannington (lead-zinc-silver) and Osborne (copper) to the south.

The Eloise Project tenements cover several interpreted major structural domains, including approximately 28 strike kilometres of the Levuka Shear, which hosts the Eloise deposit, as well as some 55 kilometres of the Maronan Shear, which is considered to be prospective for Broken Hill Type (BHT) mineralisation. The prospectivity for this style of mineralisation is illustrated by BHP Billiton’s Cannington lead-zinc-silver deposit, located approximately 100 kilometres to the south of the project, the Maronan lead-silver mineralisation, located 10 kilometres to the south (which is currently being evaluated by a joint venture between Red Metal Ltd and BHP Billiton), and the Altia lead-silver deposit delineated in the southern part of the Eloise Project area.

The western side of the Eloise Project area is dominated by the Middle Creek Anticline where a number of gold and base metal occurrences – including Sandy Creek, Roberts Creek, and Surprise Ridge – have been identified by previous exploration.

Historic exploration within the Eloise Project area was carried out in several phases, mainly during the 1980’s and early 1990’s. While previous exploration of the project area was superficial in certain respects, it was sufficiently widespread and detailed locally to highlight the regional potential through the discovery of the Eloise Copper Deposit, the Altia lead-silver mineralisation and numerous other base and precious metal anomalies.

Since those discoveries, there has been a 10-year hiatus in exploration in the region, mainly due to low commodity prices and a related industry-wide decline in interest in exploration. As a result, Breakaway is now in a good position to build on the results of earlier exploration to further unlock the potential of the Eloise Project. This opportunity was reinforced during the year, with the delineation of a major zone of lead-silver mineralisation at Altia.

Eloise Regional Exploration Project (100%)

Following the restructure and recapitalisation of the Company in 2006 – reinforced by the substantial earnings stream from the Eloise royalty – Breakaway was in a position for the first time to undertake a major exploration programme at the Eloise Project, which was initiated at the start of the 2007 financial year.

The Company’s strategy was to focus initially on the Altia lead-silver prospect by undertaking additional diamond drilling to determine the local extent and nature of the mineralisation, and secondly to evaluate the regional database to develop additional base and precious metal exploration targets and establish the broader potential of the surrounding region.

Both of these programmes were successful, with a significant zone of mineralisation partially delineated at Altia and a series of promising regional targets identified for follow-up.

Located approximately 4 kilometres southwest of the Eloise Mine, the Altia deposit was originally discovered in the 1980’s, with the original drilling programmes intersecting mineralisation grading up to 8% lead and 2 ounces to the tonne of silver in sporadic holes over a 300 metre strike extent and to a maximum depth of approximately 300 metres.

The Altia deposit is regionally located within the Levuka structural corridor, which also hosts the Eloise Copper Deposit. At its northern end, the Levuka Shear is interpreted to converge with the Maronan Shear, which also hosts the large Cannington lead-silver-zinc deposit, located approximately 100 kilometres to the south, as well as several other prospects of similar mineralisation elsewhere along the trend.

The deposit is associated with a north-striking, moderately east-dipping sequence of intercalated arenite and banded iron formation (BIF) sediments intruded by mafic sills which are totally concealed beneath 30 to 50 metres of flat-lying Mesozoic sediments. It is also associated with coincident, linear gravity and magnetic anomalies which extend over a broader strike extent of 1.8 kilometres and are thought to be related to the BIF units and possibly the mafic sills.

The main body of lead and silver mineralisation occurs within several contiguous, folded and strongly altered BIF units in a variety of forms including as fine grained layers and coarse grained masses within more strongly deformed zones, including breccia zones. Lead and silver mineralisation also occurs external to the main zone, primarily in footwall BIF units with similar lead grades of up to 5% and higher silver grades of up to 262g/t. The current drilling is too sparse to ascertain the potential of these outer lying zones to host significant extensions to the mineralisation, however they could represent the up plunge portions of more substantial zones at depth.

During the year, Breakaway systematically drilled some 21 diamond and RC percussion holes at Altia, which – in conjunction with historic drilling – achieved a nominal 100 x 100 metre hole spacing over a strike length of 500 metres and to a maximum depth of approximately 200 metres below the surface. The overall objective of this initial programme was to broadly determine the gross distribution, nature and controls of the Altia mineralisation, as well as the potential for metal zonation which might indicate the potential for higher grade zones.

Limited drilling is in progress to determine the potential for down-dip extensions.

Following completion of the preliminary drilling programme, a dipole-dipole Induced Polarisation (IP) geophysical survey was completed over the Altia prospect area and its immediate environs. The survey located a chargeability anomaly over the deposit extending some 300 metres further to the north where only sparse drilling has been undertaken by previous explorers. In addition, the survey delineated several discrete chargeability and resistivity anomalies to the north and west of the deposit.

Breakaway plans to follow up these anomalies with drilling during the 2008 Financial Year.

Importantly, the Company is developing regional base metal targets with particular focus being directed at copper to explore for Eloise copper style deposits. This style of target is attractive for a variety of reasons including high copper grades, with likely gold credits, attractive tonnages, detectability by TEM geophysics and potential for operating synergies with the Eloise mine. It is anticipated that drilling of the first of these targets will commence in the September 2007 quarter.

Notes specific to Eloise Exploration Results:

i) Drill intercepts are reported using a 1% Pb bottom cut-off where appropriate. No statistical cutting was applied to the silver in the absence of mineralogical justification and a more representative sample population. No specific gravity measurements been collected to weight estimates of average grades. The location of drill holes were determined using a handheld GPS +/- 4 metres accuracy and reading AMG coordinates (AGD84 datum). Downhole surveys were conducted every 30 metres using an Eastman single shot survey camera.

ii) All diamond drill hole results were obtained from half NQ core. No core loss was present through the sampled intervals above. All samples were prepared at ALS-Chemex’s Townville facility using dual stage crush and pulverisation, and assays ALSChemex’s Brisbane laboratory using a 0.25g multi acid (+HF) digest and ICPAES fi nish (ME-ICP61). Samples with values greater 1% Pb, 1% Zn and/or 100ppm Ag are subject to a repeat 0.5g ore grade aqua regia digest and ICPAES finish (ME-OG46).

Eloise Net Profit Royalty

The Company holds a 30% net profit royalty interest in the Eloise Copper Mine and the surrounding Mining Leases (covering a total area of 5km² ) as a condition of the sale of the operation to FMR Investments Pty Ltd (“FMR”), which was concluded in February 2004. Earnings under the royalty for the 2006 fi nancial year totalled $13.80 million, with a further $1.7 million received for the September 2006 Quarter, bringing total royalty payments paid to Breakaway since September 2005 to $15.5 million.

The Eloise Deposit is a steeply plunging system of shear controlled copper-gold lodes. The main (Levuka) zone, which has a strike length of up to 200 metres and a maximum width of up to 30 metres, has been mined continuously down to the 150 metre RL, approximately 1,050 vertical metres below the surface.

Depth extensions to the deposit (“Eloise Deeps”) below the current stoping block (150 metre RL) have been evaluated by underground drilling over a vertical extent of 200 metres between the 150 metre RL and -50 metre RL. Following an estimation of the Eloise Deeps mineral resource by FMR, Breakaway contracted Snowden Mining Industry Consultants (Snowden) to provide an independent estimate of the mineral resource, developed in accordance with the 2004 Guidelines of the Australasian Joint Ore Reserves Committee Code for Reporting of Mineral Resources and Ore Reserves (JORC, 2004).

The Snowden estimate of the Eloise Deeps mineral resource (dated 30 August 2007) is summarised in the table below. The Snowden estimate is globally similar to the FMR estimate and is based on data and domain interpretations supplied by FMR.

Note: The resource estimate was developed from underground drill core data, by delineating mineralised zones within a 1.5% copper cut-off grade threshold. Dry bulk densities have been determined for each sample using a stoichiometric equation based on copper and iron contents rather than laboratory measurements. Snowden considers the estimated bulk density values to be appropriate for the Eloise style of mineralisation. The Ordinary Kriging interpolation technique was used to estimate grades and dry bulk density values into parent cell blocks of 5mE by 15mN by 15mRL.

With the completion of this mineral resource update, the Eloise Mine now has a stronger foundation for developing the future production plan to extend the mine life.

Underground drilling has indicated that the Eloise mineralisation continues at depth below the current resource boundary. Deeper drilling is planned to continue, to delineate extensions below the current resource, as mining development advances and suitable underground drilling positions become available.

During the year, FMR implemented a series of initiatives to establish a longer term production future for the Eloise Operation which has a processing capacity of 600,000 tonnes of ore per annum. These included the appointment of additional experienced personnel, the continued delineation of depth extensions to the deposit, improvements in future mining methods and the establishment of improved infrastructure and ventilation to enable mining to proceed to increasing depths.

FMR advised that increased development costs related to the establishment of a $13 million ventilation rise and decline development to access to the Eloise Deeps would adversely affect the mine’s profitability and therefore Breakaway’s 30% net profit royalty for calendar 2007. The profitability of the mine during the year was also adversely affected by unplanned dilution and reduced production from current stoping blocks above the 150 metre RL.

In July 2007, FMR advised Breakaway that many of the mine improvement initiatives had either been completed or were nearing completion, including the extension of the decline to access the upper portion of the Eloise Deeps block and the new ventilation system. The latter will provide a significant increase in the ventilation capacity, enabling mining to continue to at least 400 vertical metres below the current stoping levels, subject to the continuation of the deposit at these depths.

With the development of the decline to the 50 metre RL horizontal development had commenced at the time of preparing this report to provide access to the upper portion of the Eloise Deeps block. FMR intends to adopt a revised mining approach, bottom up shrink stoping, in the Eloise Deeps block in order to improve the management of geotechnical factors and production rates.

With the reporting of a JORC compliant mineral resource and the implementation of the new production plan, the Eloise Mine now has the basis for developing a longer-term production outlook for the first time in a number of years. In addition, the improved resource position and information provided by FMR provide positive indications that royalty payments could resume during calendar 2008, subject to the copper price and the mine achieving its production targets.

Breakaway has been supportive of FMR’s longer-term mine planning initiatives to underpin planned productivity enhancements at Eloise. The Eloise operation represents a strategically located production asset in close proximity to Breakaway’s 100%-owned Eloise exploration asset.

EAST KIMBERLEY, WESTERN AUSTRALIA

EAST KIMBERLEY PROJECT (60%)

The East Kimberley Nickel-Copper Project is a major exploration project that straddles the great Northern Highway, covering a strike distance of about 110 kilometres and centred south of the township of Warman, in the East Kimberley District. The project is a joint venture with Thundelarra Exploration Ltd (“Thundelarra”), covering an area of approximately 1,000km² , in which Breakaway earned a 60% interest during the year.

On completion of its earn-in, Breakaway did not exercise its right under the joint venture agreement to earn a 60% interest in additional Thundelarra tenements (1,116km² ) in the region, but did exercise a right to acquire at no cost a 10% free carried interest in Thundelarra’s Sophie Downs base metal exploration project.

The East Kimberley project covers the Halls Creek Orogen, which is intruded by numerous Proterozoic ultramafic and mafic intrusive complexes with the potential to host nickel-copper deposits. The Sally Malay nickel deposit, which has a published Proved and Probable Reserve of 3.13 million tonnes at 1.57% nickel, 0.63% copper and 0.08% cobalt, lies on a small excision of tenements owned by Sally Malay Mining Ltd (“Sally Malay”), within the project area.

In addition, the region hosts the Copernicus nickel-copper deposit (published Probable Reserve of 0.78 million tonnes grading 1.1% nickel and 0.7% copper and 0.05% cobalt), which is the subject of a joint venture between Thundelarra and Sally Malay, and the Panton PGE deposit (published resource of 14.3 million tonnes at 5.2g/t combined PGM’s and gold), owned by Platinum Australia Ltd (“Platinum”).

The ultramafic-mafic intrusions on the project tenements have been explored by a number of companies since the 1960’s. From this work, both near-surface and sub-surface indications of nickel-copper-platinum group element mineralisation and airborne EM conductors were located. However, only limited follow-up drilling took place.

Several prospective areas are being followed up by Breakaway. The most prospective is considered to be the Keller Creek prospect, located to the north of the Sally Malay deposit. Wide-spaced drilling carried out by LionOre during 2005 encountered a zone of disseminated nickel sulphides with associated massive sulphides, returning a best intersection of 6.9 metres at 1.96% nickel and 0.53% copper from 36.8 metres.

Breakaway plans to carry out TEM on the Gauss prospect and drilling on the Keller Creek and Eileen Bore prospects, subject to availability of drill rigs.

OTHER PROJECTS

MT FINNERTY NICKEL JOINT VENTURE (EARNING 60%)

During the year, Breakaway entered into a joint venture agreement with Barranco Resources NL (“Barranco”) to earn a 60% interest in the Mt Finnerty Nickel Project located 400 kilometres east-northeast of Perth, between the towns of Coolgardie and Southern Cross. The project covers nickel prospective, high MgO ultramafic rocks which may represent the regional equivalent of the Lake Johnston belt to the south where Norilsk Nickel is producing from the Emily Ann and Maggie Hays Nickel Deposits. Under the terms of the agreement Breakaway can earn a 60% interest in the tenements by spending $2 million over 4 years.

The belt was last explored at a reconnaissance scale in the 1970’s by WMC. Evidence of geochemical anomalism was located but only limited percussion drilling took place. Breakaway has completed reconnaissance auger geochemical work that confirmed the presence of nickel-copper surface geochemical anomalism over prospective ultramafic rocks.

Geological investigations suggest the presence of a channelised ultramafic sequence intruded by mafic dykes and granite, and identifi ed an area where a WMC percussion drillhole contained geochemical anomalism consistent with disseminated nickel sulphides. Follow-up RC drilling is planned. Regional style exploration is planned, including further geological studies, geochemistry, geophysics and preliminary drilling to determine the overall nickel prospectivity.

BUNGALBIN GOLD PROJECT (100%)

The Bungalbin Project comprises a granted Mining Lease located approximately 100 kilometres north of Southern Cross. The tenement has a history of small open cut and underground gold mining for a recorded production of approximately 10,000 ounces of gold. During the year, Breakaway drilled fi ve reverse circulation holes to test a new parallel trend. Hole 06ERC04 returned 8 metres at 10.65g/t gold from 65 metres.