Combined Annual ReportFor Exploration Permit for Minerals

EPMs 15264, 15296, 15322

“Auburn gold project”

Second Annual Report for the period

ending 9 January 2008

Authors: Carman, G; Worden, K.For: Paradigm Metals Ltd on behalf of Paradigm Queensland Pty Ltd

Date of Report: 5 February 2008

Table of Contents1 Summary.............................................................................................................................3

2 Introduction..........................................................................................................................42.1 Tenure..............................................................................................................................42.2 Location........................................................................................................................42.3 Exploration Rationale and Work Completed.................................................................5

3 Geology..................................................................................................................................53.1 Regional geology..............................................................................................................53.2 Economic Geology.........................................................................................................8

4 Previous exploration..............................................................................................................8

5 Work carried out during the current year.........................................................................14

6 References.........................................................................................................................14

List of TablesTable 1 Summary of drill intercepts at Great Eastern 10Table 2 Summary of drill intercepts at Brady’s 10

List of FiguresFigure 1 Tenement location of EPMs 15264, 15296, 15322 4Figure 2 Regional geology of the Auburn project 6Figure 3 TMI aeromagnetic image of the project area 7Figure 4 Gold results from rock chip samples, Auburn gold project 11Figure 5 Map of Great Eastern vein 12Figure 6 Longitudinal section of Great Eastern vein 13Figure 7 Map of aircore drilling at Brady’s prospect 14

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1 Summary

EPMs 15264, 15296, and 15322 form a group of tenements called the ‘Auburn gold project’. The tenements are held by Paradigm Queensland Pty Ltd, a wholly owned subsidiary of Paradigm Metals Ltd (formerly Paradigm Gold), an ASX listed exploration company. The Auburn project is located 40 km southwest of Mundubbera in southeast Queensland, about 300 km northwest of Brisbane. The world-class Cracow gold field is located approximately 50km to the northwest.

The Company is exploring the Auburn area for Cracow-style epithermal mineralization hosted by Permian-Triassic age intrusive rocks. Exploration at the Auburn project has discovered epithermal quartz vein mineralization at several of the old gold occurrences in the area hosted by late Permian Rawbelle batholith rocks. Chalcedonic vein material overprints an early bucky quartz event at several of the gold occurrences including Great Eastern, Bottle Tree, and Peter Pan prospects.

No new field work was carried out during the year at the Auburn project. Paradigm has reviewed the extensive data collected by the company during the previous year. Due to a change of focus by the company, Paradigm has decided to farm-out or sell the project, and is advancing discussions with potential buyers of the project.

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2 Introduction

2.1 TenureThis report is a joint exploration report for the three contiguous EPMs 15264, 15296, and 15322. These permits were granted to Paradigm Queensland Pty Ltd on 29 November 2005, 14 December 2005, and 10 January 2006 respectively, each for a five-year term.

The permits consist of 9, 4, and 8 subblocks respectively, following recent subblock reductions.

2.2 LocationThe Auburn project area is located 250 km northwest of Brisbane and 40 km southwest of the citrus town of Mundubbera. Access to the southern end of the tenement is via Durong Road about 10km south from Mundubbera, turning west just after the Burnett River crossing for approximately 40km. The project area is best accessed via the Delubra station road entrance.

The locations of the three EPM’s are shown on Figure 1.

Figure 1. Tenement location map of EPMs 15264, 15296, and EPM 15322 (highlighted) 40km southwest of Mundubbera, SE Queensland.

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2.3 Exploration Rationale and Work CompletedThe principle exploration targets at Auburn are high-grade gold veins associated with epithermal /mesothermal mineralisation hosted by Permo-Triassic intrusive rocks. The Company’s exploration model is epithermal vein mineralisation associated with dilational jogs similar to Cracow.

Previous drill results by Costain during the late 1980s indicated potential for high-grade vein mineralisation in the area. The permit area contains a number of small gold workings which add to the prospectivity. Work completed during the first year at Auburn included:

1. Compilation of geological and geophysical data;2. Research of previous exploration;3. Rock chip sampling of quartz veins, mine dumps and altered rocks;4. Soil sampling;5. RC and aircore drilling;

3 Geology

3.1 Regional geologyA map of the regional geology is shown in Figure 2. The oldest rocks in the region consist of Carboniferous siltstone, mudstone, limestone and conglomerate sandstones which occur a few km outside of the tenement area to the east. Carboniferous sediments outcrop extensively throughout a north-south belt of rocks near Mundubbera approximately 30km east. Permian volcanic rocks occur to the west of the tenement area and extend along the north-south Camboon volcanic arc.

The oldest outcropping rocks within the tenements are intrusive rocks of the Rawbelle Batholith, a suite of mafic layered intrusive rocks ascribed to a late Permian – early Triassic age. Three rocks types belonging to a layered mafic complex believed to have an origin from a fractionating magma chamber are: the Hawkwood gabbro, the Delubra quartz gabbro, and the Cadarga Creek granodiorite. The Hawkwood gabbro, believed to be the stratigraphically oldest unit, contains large quantities of semi-massive titaniferous magnetite within some of its layered units.

The predominant rock type is the Delubra quartz gabbro, a medium grained cumulate- textured intrusive rock also with subvertical layering. Minerals consist of clinopyroxene, plagioclase, magnetite, quartz and possibly minor hornblende. The Cardarga Creek Granidiorite mostly occurs in the northeast part of the tenement area containing more plagioclase and quartz than the gabbros.

Narrow dikes of felsic aplite consist of plagioclase, quartz, and alkali feldspar. These truncate the gabbros along NW trending structures. Gold bearing quartz veins appear to have been emplaced along the dike structures at the Great Eastern and Brady prospects.

Flat-lying Jurassic quartz sandstones of the Great Artesian basin outcrop to the east and southeast of the tenement area.

Figure 3 shows a magnetic image of the tenement area. The Hawkwood gabbro, the most magnetic unit, occurs immediately to the west of the tenements and is orientated east-west. A very strong magnetic gradient occurs within the tenements from moderate valuesin the south to very strong magnetic susceptibility in the north. This gradient may reflect a thickening and/or shallowing of the intrusive complex to the north.

15,3

15,296

7150000 mN

7145000 mN

7140000 mN

7135000 mN

Paradigm Metals Ltd

7130000 mNDate:15/7/2007

Author:

Office:

Auburn Gold Project Geological Map

Autogrid Tenement_agd Sg5605

Figure: 2

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Projection: AMG Zone 56 (AGD 66)

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7150000 mN

7145000 mN

15,322

7140000 mN

7135000 mN

Paradigm Metals Ltd

7130000 mNDate:15/7/2007

Author:

Office:

Auburn Gold Project Aeromagnetic image

Figure: 3

Scale: 1:150000 Projection: AMG Zone 56 (AGD 66)

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3.2 Economic GeologyThe Auburn field was known for alluvial workings as well as some small hard rock occurrences. There are extensive alluvial workings extending some 13km within Cadarga and Auburn creeks. The workings have been dug in the high terrace sands and silts on the edge of the creek.

Several hard rock gold occurrences occur on quartz reefs 1-2m wide within the licence area. The largest of the old mines is Brilliant, followed by Great Eastern and Peter Pan. Other very small gold occurrences includ Brady’s and X-Ray. Production was small at all of these occurrences at <1000 oz of gold.

Gold is associated with quartz veins of mesothermal and epithermal origin. At several of the occurrences including Peter Pan and Great Eastern, an early buck quartz ‘mesothermal’ quartz event is then overprinted by low temperature chalcedonic quartz infill. The occurrence of epithermal style vein mineralisation has economic implications given that the Cracow field is only 50km away, and is of similar age although hosted in lower Permian volcanic rocks.

Low levels of PGE (Pt-Pd-Au) mineralisation was found in the Hawkwood Gabbro by earlier explorers. Significant quantities of low-grade titanomagnetite was found within the Hawkwood Gabbro by drilling activities in the 1970s.

4 Previous explorationGold exploration was carried out in the Auburn area by the following parties:Pre-1960’sGold is reported to have been discovered in the Auburn area in the 1880s, and mining continued to 1915, although some mines intermittently operated as late as 1952 (Hayes & Bassingthwaighte, 1986). Initial reports on mines in the Dykehead-Cadarga Creek region included Cadarga Creek Mines (Ball, 1904), Dreams of Avarice (Cameron, 1915), Big Wonder (Saint-Smith, 1915), Main Top (Reid, 1932), Peter Pan (Reid, 1934a) and Auburn Falls (Reid, 1934b).

1960-1971Later exploration also focussed on magnetite within the Hawkwood Gabbro, as described by Graham (1966). Mapping and reports on the gabbroic body were conducted for Tennent Minerals Development Pty Ltd (Bryan, 1965a; 1965b; 1966; 1967), and subsequent drilling of 3 holes totalling 473 m by the Mines Department further delineated the magnetite resource (Brookes, 1968).

In 1971 Golden Plateau NL undertook mapping and stream sediment sampling over Authority to Prospect 893M, which partly overlapped Authority to Prospect 4028M. No new areas were discovered, and Golden Plateau NL did not consider further exploration feasible.

Newmont 1981Newmont Holdings Pty Ltd acquired Authority to Prospect 2731M in 1981, which included a number of old gold mines and the Hawkwood magnetite prospect. The company undertook detailed mapping of the previous workings, obtained rock chip samples and also soil samples at the Great Eastern mine and Brady’s gold mine (Williamson, 1981a; 1981b). Their assay results indicated the gold occurrences were limited, comprising narrow veins in near-vertical lodes of limited strike length, and the country rocks were largely unaltered (Williamson, 1981a). Soil

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sampling results over the partly-obscured lode at Great Eastern indicate that the lode terminates immediately east of the main workings, but extends beyond the westernmost soil line. Additional rock chip sampling assay results were disappointing, and Newmont Holdings Pty Ltd relinquished most blocks within Authority to Prospect 2731M at the end of 1981 (Williamson, 1981b).

Kirk River – Noble Resources – Costain 1985-1989In 1985 a joint venture between Kirk River Mining Pty Ltd and GL Grealy was granted Authority to Prospect 4028M Eidsvold (Hayes & Bassingthwaighte, 1986). They conducted broad and detailed mapping, magnetometer surveys, non-systematic soil and rock chip sampling, and a RAB percussion drilling program comprising 8 holes (Hayes & Bassingthwaighte, 1986). Assay results from rock chip samples obtained from the lode zone ranged from 0.02-21.1 ppm Au (Derrick, 1989). Hayes & Bassingthwaighte (1986) also reported Au-anomalous rock chip samples and Ag-rich samples from quartz vein material about 800 m WNW of Great Eastern, along strike of the lode. In 1986 the JV relinquished approximately half the blocks within Authority to Prospect 4028M (Hayes, 1987).

In 1988 Noble Resources were contracted by Kirk River Mining Pty Ltd to conduct further exploration on Authority to Prospect 4028M, and compare results with those of previous explorers (Hayes, 1987). Noble Resources sampled the Great Eastern lode in 1987-1988, achieving high grade values in sulphidic quartz (eg 40 ppm: Derrick, 1989). Assays of samples taken along an alteration selvedge adjacent to the main quartz reef zones ranged from 0.2-2.67 g/t Au (Derrick, 1989). Quartz veining was also reported 140m WNW of the workings, with one assayed sample returning 6.6 ppm Au (Derrick, 1989).

Orion Resources carried out a systematic channel and rock chip sampling program, together with orientation soil sampling in 1988. Channel sampling results included 6m @ 2.48 ppm and 4m @1.05 ppm Au (Derrick, 1989). Sampling of massive quartz veins from the dumps yielded assays of 12.9 ppm Au, while pyritic diorite containing quartz-manganese veinlets returned assays of5.85 ppm Au (Derrick, 1989).

A joint venture between Costain Australia and Kirk River Mining Pty Ltd in 1988 performed a nine-hole RC drilling program at the Great Eastern prospect for a total advance of 315m (Derrick, 1989). Best reported intersections were 11m @ 1.13 ppm Au (including 4m at 2.2ppm Au) and 8m @ 1.25 ppm Au (including 3m at 2.6ppm Au).

Compass Resources 1996In 1996 Compass Resources NL acquired EPM 11197, which included both the May Queen and Great Eastern prospects. From November 1996-March 1997 exploration and orientation sampling at both prospects was undertaken by R.M. Tucker & Associates, and processed geophysical imagery was obtained from Exploration and Geo-spectral Services (EGSS). This exploration was performed under instruction from R. Newport, a consultant geologist, on behalf of Compass Resources NL. In detail, 125 soil samples were collected from Great Eastern, as well as six stream sediment BLEG samples (Reston & Garnett, 1997). Following submission of report on these two prospects by P.W. Gregory) the company relinquished the EPM in 1998 (Boots, 1998).

Paradigm Metals (formerly Paradigm Gold Ltd) 2006During the first year of exploration on these permits, Paradigm carried out extensive prospecting and sampling of veins and alteration within the permitted area searching for epithermal style gold mineralisation. Several gold prospects were highlighted. Paradigm collected 118 rock chip

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samples, 5 channel samples and 100 soil samples assayed for gold plus a full range of trace elements. Results of the rock chip sampling for gold are shown in Figure 4.

RC percussion drillingParadigm completed a 24-hole RC percussion drill program at two prospects, Great Eastern and Bottle Tree, for a total advance of 1,568 metres on EPM 15264. The aim of the program was to test the Great Eastern vein system down dip and along strike of the old workings following up from the RC drill hole results by Costain.

The most significant results were found from the drilling at Great Eastern. The drilling tested 200m of strike length of the Great Eastern vein system up to a depth of 90m. The Great Eastern lode has a dip of 65-75 degrees to the southwest and strikes out discontinuously for at least 500m. The lode ranges from 1 to 3 metres true width, but in some holes it divides into numerous quartz veinlets over 10 metres or more with a lower grade. The lower grade Western Lode is some 20m to the west.

A map and long section of the Great Eastern Lode 1 prospect is shown in Figures 5and 6. The best assays results from the drilling are summarised in Table 1 below.

Table 1. Summary of drill intercepts at Great EasternDrillhole From (m) Intercept

(m)Gold (g/t)

GEP001 19 2 5.29.01.5

14.2, followed by 2m no recovery

1.84.11.72.91.00.5 (end of hole)

incl 1GEP002 68 1GEP003 50 1GEP009 41 3

incl 1GEP010 7 2GEP010 103 1GEP011 30 3GEP011 38 13

Air core drillingA 34 hole aircore program was carried out at Brady’s prospect on EPM 15296 for a total advance of 675m. Six of the holes returned gold values of >0.1g/t Au associated with quartz veining and sericite alteration of the host diorite. The highest grade sample was 1m grading 0.26g/t in AUP029. Table 2 is a summary of the best gold results. A map of gold results from the aircore drilling at Brady’s is shown in Figure 7.

Table 2. Summary of aircore drill intercepts at Brady’s prospectDrillhole From (m) Intercept (m) Au (g/t)

AUP015 30 3 0.13AUP022 30 5 0.20AUP027 3 7 0.15AUP028 10 5 0.13AUP029 19 6 0.2AUP030 17 2 0.17

A further 18 holes of aircore drilling was completed on EPM 15264 at the Extended prospect, for a total advance of 338m. No significant gold results were found during this drilling.

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Figure 4. Rock chip samples of old mine dumps and quartz vein outcrops, Auburn gold project.

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Figure 5. Map of the Great Eastern Lode 1 prospect showing drill targets (hatched) down-plunge of the outcropping veins (red)

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Figure 6. Long section of the Great Eastern Lode 1 prospect: Northwest (left) to Southeast (right)

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Figure 7. Map of gold assays from aircore drilling at Brady’s prospect, EPM 15296.

5 Work carried out during the current yearDuring the year Paradigm has carried out a review of the exploration results at Auburn. No new field work was carried out. Paradigm has had a change of focus during the year, and has decided to farm-out or sell its pure gold projects in southern Queensland and NSW.

The Company believes that there is excellent gold potential at Auburn. Only two of nine prospects have been drilled to date, with encouraging initial drill results received at the Great Eastern.

Discussions are continuing with at least one interested party interested in advancing the exploration at Auburn. The Company hopes to conclude these discussions very soon. It is envisaged that further work will include ground geophysics followed by drilling.

6 ReferencesBall, L.C., 1904, Cadarga Creek Mines, Gayndah District. Qld. Govt. Min. J., April

1904.Boots, M.K., 1998. Compass Resources NL EPM 11197 Cadarga, Mundubbera area,

Queensland, Final Report. Qld. Dept. Mines, Company Report 30369.Brooks, J.H., 1968. Departmental diamond drilling programme magnetite deposits,

Hawkwood area. Qld. Gov. Min. J. 69 537-545.

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Bryan, W.B., 1965a. Geology of a magnetite-anorthosite complex near Hawkwood station, Queensland. Report to Tennent Minerals Development Pty. Ltd. (Unpub).

Bryan, W.B., 1965b. Further investigation of Magnetic Anomalies near Hawkwood using Fluxgate magnetometer. Report to Tennent Minerals Development Pty. Ltd. (Unpub).

Bryan, W.B., 1966. Proposed drilling programme, Hawkwood area. Report to Tennent Minerals Development Pty. Ltd. (Unpub).

Bryan, W.B., 1967. Supplementary report on magnetite deposits, Hawkwood area, Queensland. Report to Tennent Minerals Development Pty. Ltd. (Unpub).

Carman, G. and Worden, K, 2007. First Annual Report for Auburn project, EPMs 15264, 15296, 15322 (confidential report to the Department of Mines)

Cameron, W.E., 1915. Dreams of Avarice Mine, Cadarga Creek. Qld. Govt. Min. J. 16 56.

Derrick, G.M., 1989. Report on a Percussion Drilling Program, Great Eastern Prospect, For the Period Ending 31.12.88, Report to Costain Australia. Qld. Dept. Mines, Company Report 19825.

Golden Plateau N.L., 1971. Cracow Joint Venture, Authority to Prospect 893M, Cadarga Creek, Qld. Progress Report No. 1. Qld. Dept. Mines, Company Report 3937.

Graham, M.J., 1966. The Hawkwood Gabbro. The geology of a layered magnetite- anorthosite complex and associated rocks (Unpub. thesis).

Gregory, P.W., 1998. EPM 11197 Mundubbera Project, Report on Inspection of Great Eastern and May Queen Prospects. In: Boots, M.K., 1998. Compass Resources NL EPM 11197 Cadarga, Mundubbera area, Queensland, Final Report. Qld. Dept. Mines, Company Report 30369.

Hayes S.W., 1987. Kirk River Mining Pty. Ltd, Authority to Prospect 4028M, Eidsvold, Relinquish Report to the Queensland Department of Mines for 12 Month Period Ended 30.6.86. Qld. Dept. Mines, Company Report 16200.

Hayes S.W., and Bassingthwaighte, H.C., 1986. Kirk River Mining Pty. Ltd, Authority to Prospect 4028M, Eidsvold, First Six-Monthly Report for the Period Ended 31.12.85. Qld. Dept. Mines, Company Report 15864.

Reid, J.H., 1932. Main Top Claim, Hawkwood. Qld. Govt. Min. J. 33 6.Reid, J.H., 1934a. Peter Pan, Delubra, Auburn Falls district. Qld. Govt. Min. J. 35 6.