Managing director Bill Clayton told RESOURCESTOCKS that work to date had focused on delineating targets at the three areas that make up its large Peak Hill-Doolgunna project.

"We came into the area in early 2010, picking up the ground from a syndicate which pegged the area following Sandfire Resources' high profile DeGrussa discovery - when there was still ground to be acquired," Clayton said.

"At that time there were 13 tenements and nine of those were still in the application phase, so we then had a fairly long period of going through the native title negotiation process before the tenements were granted in October last year. We then were able to become active on the ground.

"Our first drilling program was carried out in January 2011, with our initial targets based on large-scale airborne geophysical work that was completed whilst the tenements were pending grant.

Currently the company is completing a regional geochemical sampling program to be used in conjunction with the geophysics and geological work to prioritise follow-up drilling targets.

"That's going to be invaluable for us; following up on the geophysics and developing robust targets."

A key attribute for Lodestar amongst its peers is its very large landholding and diverse geological terrain, most of which is underexplored and lacks basic exploration data.

With 15 tenements, now covering more than 2200 square kilometres and a strike length of 130 kilometres, it is one of the largest holdings in the region.

"It's a very large area for a company of our size to be exploring," Clayton said.

And while Clayton acknowledges that DeGrussa is the highlight of the district, he points to another deposit as a key to Lodestar's future success.

The Thaduna copper deposit lies within the same geological terrain as Lodestar's McDonald Well targets.

As an analogy, the Red Bore copper gossan was discovered 40 years ago and although it is only 500 metres from DeGrussa there was a significant period of time between that and the DeGrussa find, due to the concealed source of mineralisation.

"Just as Red Bore was the ‘smoke' that signalled DeGrussa, for us Thaduna is the ‘smoke' that is around our targets," Clayton said. "That ‘smoke' suggests a style of mineralisation that is also yet to be discovered."

"Our Neds Creek tenements primarily cover the Yerrida Basin and Proterozoic sediments and from our point of view that's not a negative because adjacent to our tenements we've got a number of copper prospects and mines that were operated through the 1960s.

"The Yerrida Basin is prospective for sediment-hosted copper mineralisation - this was recognised by Western Mining Corporation in the late 1960s when it explored the area for Zambian copper-style deposits. The fact that the Thaduna deposits are located in structural sites suggests that there is a primary source of mineralisation that is yet to be discovered.

"If you look at the age, setting and the geological succession of the Yerrida Basin, it certainly supports our view of prospectivity for this style of mineralisation. It has the right source rock types, it potentially has the right host types and it has major structures running through it, so we are confident that where we are exploring is the right area for us to take the company further."

The drilling of three holes in the McDonald Well area has proved Clayton's hypotheses are correct.

They returned broad zones of base metal and silver anomalies, associated with a black shale unit at the interface between two major sedimentary intervals.

Airborne electromagnetic surveys identified 29 anomalies in the Neds Creek tenements, of which only five have been tested by drilling. Twelve of the anomalies were confirmed by ground electromagnetic surveys and modelled for future drilling.

"Follow-up geochemistry has now yielded interesting results over the McDonald Well area," Clayton said.

"We have identified an eight kilometre zone, anomalous in base metal and pathfinder elements, co-incident with the black shale horizon. Maximum values of up to 700 parts per million copper have been reported from relatively wide-spaced surface sampling.

"Initially these areas need to be sampled in greater detail and then comprehensively drilled to test the lower contact of the black shale unit and the major structures."

Clayton said the company hopes to identify a Nifty copper-style deposit (40Mt at 2.4% copper). "They are significant targets with potentially a very high reward," he said.

Another key area for Lodestar, the Western tenement block, lies immediately northwest of DeGrussa, adjacent to the Jenkin Fault and mid-way between the major gold producing centres of Plutonic and Peak Hill.

"We have completed a thorough geological review which will culminate in a drilling program later this year" Clayton said.

"We are in proximity to major structures such as the Jenkin Fault and to the north, the faulted contact with the Bangemall Basin - with a co-incident, a six kilometre geochemical anomaly evident in Geological Survey of WA data - with only four or five samples in it."

In addition, the area is traversed by northwest trending structures that are an important host to gold mineralisation in the Peak Hill district.

"Historically there has been work completed by Western Mining and Great Central Mines in the area," Clayton said.

"They did some basic field checking, but a lot of that area is undercover, with very limited outcrop.

"So most of the information has been derived from 1990s-era RAB [rotary air blast] drilling traverses up to 1.5 kilometres apart and holes 200 metres apart, which is extremely broad-brush. In spite of this historic work, we still don't have a good understanding of the underlying geology."

The immediate aims for Lodestar are to corroborate the existing geochemical data, identify the underlying geology in areas of transported cover and test recently developed targets.

A third project area, the Marymia tenement block, lies over the Marymia Inlier and Proterozoic sediments.

"This area has largely been explored exclusively for gold, with no base metal exploration," Clayton said.

Lodestar has recently completed an airborne electromagnetic survey over the contact between the granite-greenstone terrain of the older Marymia Inlier and the Proterozoic sediments. It is here that the major structures required for transport of mineralised fluids during basin evolution are likely to have been active. The survey has yielded an early target, scheduled for drilling later this year.

"We have identified two electromagnetic conductors in close proximity to an area where we collected a stream float sample that reported 805 parts per million lead and 10 grams per tonne silver," Clayton said.

"This is firm evidence that this area has seen an influx of the mineralised fluids that we're seeking."

So Lodestar's strategy is now firmly aligned with copper, base-metal or gold discoveries, but it wasn't always that way.

The company was born as a nickel explorer, with a focus on the Penfolds project in Western Australia's Goldfields region.

"Critical mass" has yet to be identified at these tenements and Clayton said it was seeking a joint venture arrangement.

Similarly, Lodestar has a nickel joint venture with Panoramic Resources in the Kimberley region of WA.

But those are sideshows to the real drivers of value in Peak Hill.

"The DeGrussa discovery has highlighted the potential of the Peak Hill area and the idea that the Proterozoic terrain of the north Murchison is a new and under-explored base metal province has helped bring people's attention to it," Clayton said.

"The sedimentary basin sequences and basin margins that we are targeting have the right geological environment for a discovery. You need to have the right source rocks, sufficient volume of mineralised fluids generated from the basin, heat flow to drive fluid circulation and then concentrate the fluids in particular areas through stratigraphy and structures, where the fluids can - under the right chemical conditions - precipitate that mineralisation out as sulphides.

"Those are the factors you need to get a deposit."

*A version of this report, first published in the August 2011 edition of RESOURCESTOCKS magazine, was commissioned by Lodestar Minerals