Condor Metals Ltd : Quarterly Activities Report

Quarterly Report

March 2012

Highlights:

• Completed successful merger with Inca

Minerals Limited

Date: 26 April 2012

ASX Code: CNK www.condormetals.com Share Capital

188 million ordinary shares

Market Capitalisation: A$7.5 million

Share Price $0.040

Board

Laurence Freedman AM, Chairman Ross Brown, Managing Director Ross Gillon, Non Exec Director

Robert Schuitema, Company Secretary and Non Exec Director

Laurie Ziatas, Non Exec Director

Senior Management

Ross Brown, Managing Director Mobile: 0407 242 810 ross.brown@condormetals.com Mailing Address

GPO Box 2567

Perth WA 6001

Media & Investor Relations

Ron Cameron

Radar Group / Mercury Consulting

+61 2 8256 3308

ron.cameron@mercuryconsulting.com.au

• Acquired exciting Peru portfolio including

Chanape Gold-Copper Porphyry Project

• Completed $1.0M capital raising

• Striking geophysical results confirms porphyry potential at Chanape

• Commenced drill target generation exploration at Chanape

Condor Metals (ASX: CNK) has entered a new phase of exploration development through a merger with Inca Minerals Limited.
The merger was successfully completed this quarter and has resulted in the acquisition of two highly prospective projects - the Chanape Gold-Copper Porphyry Project located in the Pierina Gold Belt of Peru (Figure 1), and the Moquegua Copper- Molybdenum Project located in the Southern Copper Porphyry Belt (Figure 1).
Condor is continuing its project appraisal and valuation programs for its Western Australian projects.

Chinalco's Toromocho

1970Mt @ 0.69% Cu eq

Nyrstar's Coricancha

Au,Ag,Cu, Pb,Zn mine

Figure 1: Condor's projects are located within the prolific Peru porphyry belt, which hosts many world class economic deposits

Peru Operations

Peruvian Projects acquired this quarter
Through its merger with Inca Minerals Limited, successfully completed this quarter, Condor has acquired two highly prospective projects in Peru; the Chanape Gold-Copper Porphyry Project and the Moquegua Copper-Molybdenum Porphyry Project. Both projects are located within Peru's prolific porphyry belt (Figure 1).
Chanape Porphyry Project
Condor's newly acquired flagship project, Chanape Gold-Copper Porphyry Project, is located in the Pierina Gold porphyry belt, and comprises 20 mining concessions, covering an area of approximately 805ha. Chanape is located approximately 90km east of Lima, and is well- positioned in close proximity to existing mining operations - approximately 35km south-west of Chinalco's Toromocho porphyry deposit, and approximately 10km south from the Nyrstar-owned Coricancha gold, silver, zinc and lead mine, within the Viso Aruri mining precinct.

Figure 2: Chanape is located in a mining area that hosts numerous mining operations, including the giant Toromocho porphyry mine development, owned by Chinalco, and the Coricancha gold-base metals mine operated by Nyrstar

The Chanape Porphyry Project (Figures 2 & 3) hosts a number of spatially coincident geological, geochemical and geophysical features that make it highly prospective for gold- copper porphyry mineralisation:
A Large breccia zone, with over 50 individual breccia bodies (pipes and vein-fill structures), occurs within the project area. Breccia pipes and breccia veins are characteristic geological features of porphyry systems (Figure 4)
Some breccia veins were the subject of small scale mining operations in the past
Many of breccia bodies are hydrothermally altered
Only approximately 25% of the breccia bodies have been accurately mapped and rock- chip sampled. Several breccias have elevated levels of gold
An Induced Polarisation - Self Potential ("SP") anomaly is coincident with the breccia zone. SP anomalism is commonly associated with phyllic alteration (high pyrite zone)
above porphyry systems
Geophysical data acquired this quarter has revealed the presence of a ring-like, magnetic high anomaly around the SP anomaly. Magnetic anomalies such as this, are commonly associated with propylitic alteration (magnetite - at depth) lateral to porphyry
systems
Only one breccia pipe within the geophysics-defined target zone has been drilled (Table
1). Gold, silver and copper mineralisation occurs from the surface and the breccia pipe is open at depth.

Start (m's

Finish (m's

Total Interval

Grams per tonne %

Drill Hole

Geology

down hol e)

down hol e)

m's

Au Ag Cu

CH002 Brecci a # 8 0.14 100.96 100.96 1.19 16.12 0.10

CH003 Brecci a # 8 0.00 101.30 101.30 1.23 35.87 0.16

CH004 Brecci a # 8 0.00 116.00 116.00 1.43 24.59 0.23

Table 1: Gold, silver and copper mineralisation in drilling at Breccia #8. This drilling was

completed in 2009
All previous exploration points to a large porphyry being present at Chanape
Condor has the right to secure 100% of Chanape through a five year "Mining Option and
Assignment Agreement." The principal terms and conditions are listed below:
• Payment of US$1.5M by US$25,000 monthly payments for five years
• Payment of US$2.5M at the expiry of the five years
• Issue of US$0.5M Condor shares after first year (if proceeding)
• Net smelter return (NSR) of US$20 per ounce of gold equivalent (oz Au eq)
• Exploration commitment of US$3.6M over five years
• Right to purchase in full at any time
• Right to withdraw at any time (no separation penalty)

Figure 3: The Chanape Project area. The drill access track that was used during a program in

2008/09 by the previous owner is just visible. The approximate location of Breccia 8, which contains +100m of +1g/t Au (from surface and open at depth), is indicated by the arrow

Breccia #8

SP anomaly

Mag anomaly

Figure 4: Schematic model of a porphyry deposit, porphyry geology and associated mineral occurrences (top); alteration zones and geophysics associated with a porphyry (bottom)

Field work to commence at Chanape next quarter
Following the success of the geophysics, field work is set to commence at Chanape ahead of a drilling program planned for mid-year. Field work will seek to locate priority drill platforms for the holes designed to intersect porphyry-style mineralisation at depth.
Among other activities, the work will include core re-logging and sampling, detailed mapping of the breccia bodies, underground mapping of the extensive mine shafts that exist at Chanape and rock chip contour sampling.
Moquegua Porphyry Project
Moquegua is located within the Palaeocene Southern Peru Copper Porphyry Belt (Figure 1), approximately 60km south-east of Arequipa. Moquegua comprises four separate concession areas: Virgen De Chapi, Oscar Alberto, Jose Alonso and Agua Blanca.
Virgen De Chapi, Oscar Alberto, Jose Alonso and Agua Blanca occur within a rectangular area of approximately 40km x 15km, in close proximity to many substantial operating mines, including Freeport McMoran's Cerro Verde Mine and Southern Copper Corporation's Cuajone porphyry mine.
Condor has secured the Virgen De Chapi, Oscar Alberto concessions through a legally- binding Mining Option, Mining Assignment and Option of a Future Asset Agreement. The total acquisition cost is US$6M, comprising a combination of back-ended cash payments and an expenditure commitment. Condor has secured Jose Alonso and Agua Blanca concessions in its own name for a consideration of 1.3M shares,
payable to a Mr Daniel Chavez.

Figure 5: Location plan of the Moquegua Project

Peru is a globally important mining destination
Peru plays an important role in the global minerals exploration and mining sector, and is currently ranked fifth in the world in terms of committed exploration budgets (accounting for 5% of global exploration expenditure). Many of the major global mining houses are present in Peru, including Aluminium Corporation of China Limited (Chinalco), Anglo American Inc., Barrick Gold Corporation, BHP-Billiton Limited, Freeport-McMoran Copper & Gold Inc., Gold Fields Limited, Newmont Mining Corporation, Nyrstar N.V., Rio Tinto Group and Southern Copper Group. These companies either currently operate mines, or are proceeding through feasibility stages for project development, or both.
In terms of world mineral production, Peru ranks first in global silver production, second in global zinc production, fourth in global copper production and sixth in global gold production - In
2010, Peru produced 5.25 million ounces of gold.
It is interesting to note that the majority of mineral production in Peru is derived from porphyries and porphyry-related deposits. With over US$40 billion dollars earmarked by major mining players for investment in Peru over the next 10 years, the importance of continued effort to develop Peruvian porphyries is apparent.

Figure 6: General landscape of the Oscar Alberto Project area - southern Peru

Western Australian operations

Western Australian projects have been reviewed this quarter as part of an ongoing strategy to maximise value and the exploration dollar. While a number of early-stage exploration projects have been released, some of the more mature projects warrant further investigation.
Dingo Range
The Dingo Range project consists of 11 tenements covering a combined area of 411km2 in the
Dingo Range Archean Greenstone Belt.
During the site visit in the previous quarter, four rock chip samples were taken from the Johnnie Walker Cu prospect and one from an area of gossanous outcrop 300m to the west. The Johnnie Walker Cu prospect consists of two shallow pits which have exposed malachite mineralisation in a siltstone. The four rock chip samples returned 20%, 14.45%, 12.05% and 8.52% Cu, while the gossanous sample to the west returned 0.32% Cu. In addition, the samples returned highly anomalous levels of the Rare Earth Elements cerium (Ce) and lanthanum (La) with the highest levels from sample ADR4 of 9,954ppm Ce and 3,524ppm La.
Detailed field mapping and surface geochemistry is planned for the Johnnie Walker Cu prospect in the coming quarter.
Wyo Well
Wyo Well is located approximately 100km north-east of Kalgoorlie. Condor previously identified an area of zinc soil anomalism (peak 2,099ppm Zn) (Figure 7) with a copper soil anomaly (peak 590ppm Cu) within the project area. Geological mapping of the same area in the previous quarter, identified iron- rich rock units, some of which have returned elevated zinc (peak 0.3%) and silver (peak
4.8 g/t). As a follow up, a program of nine
200m-spaced moving loop electromagnetic (MLEM) traverses for 14 line km was also completed during the previous quarter. Preliminary results, available this quarter, indicate the presence of a discrete EM anomaly on the eastern side of the soil anomaly, along with a longer strike anomaly. The longer strike anomaly probably represents the pyritic black shale unit present in the area.
A mapping program was completed this quarter in the vicinity of the MLEM/soil coincident anomaly. A gossan has been identified and samples were taken. Results are pending.
A two-hole drilling program is scheduled for completion later in the year to test the occurrence of metal sulphides in the target area.

Figure 7: Soil and MLEM anomalism at Wyo

Well

Grey Dam
The Grey Dam project is located approximately 90km north-east of Kalgoorlie. The project contains a JORC-compliant inferred nickel laterite resource defined in 2008 by RC and diamond drilling (14.5Mt @ 0.7% Ni). The 2008 drilling also identified the presence of nickel and copper sulphides between depths of 130-150m in a limited number of drill holes. These sulphide intersections were not followed up.
Previous deeper drill holes returned thin nickel and copper intersections at the contact between komatiitic, ultramafics and dolerite. Although the recorded drill intersections are thin, petrographic analysis has confirmed that the nickel minerals present are millerite and violarite, and the copper mineral present is chalcopyrite. It appears that these intersections are not
related to the laterite style nickel mineralisation.

Table 2: Previous encouraging nickel intersections

During the previous quarter, a 25 line km moving loop electromagnetic (MLEM) survey was completed to test for conductive bodies that may be related to primary nickel sulphide mineralisation. The MLEM survey consisted of initial 200m-spaced traverses and covered the area of anomalous drill intersections and the ultramafic-dolerite contact along strike, 1.2km to the north-west and 1.2km to the south-east. Surveying identified areas of conductive response and three areas were in-filled, or had lines extended.
Raw data from the ground EM and downhole EM surveying has been processed by the company's geophysical consultants and results have been plotted on prospect-scale geological maps. During the quarter, follow-up RC holes were marked on the ground and access surveys planned. Testing of these MLEM anomalies is intended for the upcoming quarter.
Southern Cross
Condor's Southern Cross Project was granted in the previous quarter. It is a single tenement project (E77/1898) located between the townships of Southern Cross and Marvel Loch, 350km east of Perth. The project covers part of the Archean Southern Cross Greenstone Belt which hosts a number of gold mines in close proximity to the Southern Cross project area.
During the previous quarter, an exploration database containing historical drilling and soil sampling data was obtained for the project area. This database contains 231 aircore drill holes,
225 RAB drill holes, four RC holes and 6,100 soil sample points, all from within the area of
Condor's exploration licence.
The exploration database, along with open file exploration reports, was reviewed last quarter and a three day field visit to the area was completed in December 2011. Gold deposits in the Southern Cross region generally have a strong structural control. The company is now acquiring closely- spaced airborne magnetic data over the project area to allow a structural interpretation to be completed. The structural interpretation, in conjunction with soil and drilling data, will assist with further target generation.
The proposed soil sampling program is intended to identify zones of elevated gold and path-finder elements in association with previously un-sampled high-mag zones within the project area. Land access is
currently being sought (Figure 8).

Figure 8: Soil sampling at Southern Cross

Corporate and Finance

Headline corporate activity this quarter includes the successful merger with the public unlisted company, Inca Minerals Limited; the appointment of Ross Brown as the new Managing Director of Condor; and the appointment of Laurie Ziatas as Non-Executive Director of Condor.
A geologist by profession, Mr Brown has over 26 years of experience in mineral exploration in Australia, Africa and South America, and has worked in a broad range of commodities including gold, base metals, uranium, phosphate and diamonds. Ross has been a member of AusIMM since 1988, and is also a member of GSA, SEG and AICD.
Headline financial activity includes the successful raising of $980,000 via the placement of
24.5M shares to sophisticated investors.
Expenditure for the quarter was $785K, compared with the previous quarter's expenditure of
$845K (excluding income from interest). Of this, $232K was spent on exploration activity. At the end of the quarter CNK had $1.52M cash (previous quarter $1.27M).
Expenditure for the current quarter is budgeted to be $280K. This budget does not include
expenses related to the Inca takeover offer.

Current Quarter activities

Activities in the current quarter will include:
1. Continuation of exploration at Chanape, including logging and sampling of existing core (from previous owner's drilling campaign), project scale mapping (geology and alteration), rock chip sampling
2. Delineation of drill targets at Chanape (proposed 3,000m diamond core program)
3. Commencement of a diamond drilling program at Chanape
4. Environment and social approvals of drilling programs and Chanape
5. Various field programs in Western Australia, including soil sampling at Southern Cross, rock chip sampling and mapping at Dingo Range, and target drilling at Wyo Well and Grey Dam.

Comment on the Quarter from the Managing Director

Newly appointed Managing Director, Ross Brown, said of the quarter:
"The March quarter has proven to be a defining period in Condor's history. The successful merger with Inca Minerals has diversified the asset base of the company by extending into the Peruvian mining hub. It has also given shareholders exposure to high impact, and profile- boosting exploration targets.
I was particularly honoured to accept the invitation to join the Condor Board of Directors as Managing Director, and I wish to recognise the tremendous efforts of the previous management, in particular COO John McKinstry. I look forward to the continuing support from our new and existing shareholders as we advance our exploration efforts, and hopefully add significant value to all of our assets.
Through its merger with Inca, Condor has acquired a very special project, Chanape. Through investigation of hundreds of projects in South America over a two year period, Chanape stood out to me as among the best exploration projects available. Now it sits comfortably as a flagship project in the Condor portfolio of assets.
This past quarter has been one of adjustment. The Western Australia projects have been reviewed in the context of the broader geographical and commodity portfolio and many of those projects warrant further investigation.
I would like to thank all shareholders for their continued support in what promises to be an active and exciting year for the Company."

Drilling platform of Breccia #8 with the Condor geologists and new MD

Ross Brown
Managing Director

The information in this report that relates to Exploration Results is based on information compiled by Mr. Ross Brown, Managing Director, Condor Metals Ltd., who is a Member of the Australian Institute of Mining and Metallurgy. Mr. Brown is a full time employee of Condor Metals Ltd. He has sufficient experience, which is relevant to the style of mineralisation and types of deposits under consideration, and to the activity which has been undertaken, to qualify as a Competent Person as defined by the 2004 edition of the "Australia Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Brown consents to the report being issued in the form and context in which it appears.

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