Clashing with a reinforced company from the Việt Cộng 3rd Battalion, 274th Regiment, a classic encounter battle ensued between two forces of roughly equal size.

This prompted the commander of the 1st Australian Task Force (1 ATF)—Brigadier Stuart Graham—to speculate that the Việt Cộng may have fled to the border, perhaps leaving the province altogether.

[1] Graham reasoned that a succession of operations in the south-east of the province and the completion of the barrier minefield at Đất Đỏ meant that no single, sizable threat remained to the populated areas of Phước Tuy.

However, the Australians were convinced that deliberate patrolling techniques were more effective in separating communist forces from the population in the villages while working towards slowly extending government control, and such urgings went largely unheeded.

[6] Meanwhile, after Westmoreland had again pressed Vincent on what he saw as the limited results achieved by Australian tactics, a large joint US-Australian operation was mounted against the Mây Tào mountains in Phước Tuy, moving against the communist bases in the area.

[7] Mounted on a large scale under American command and involving nearly 15,000 troops, Paddington failed to result in significant contact, in spite of the employment of well co-ordinated search techniques and blocking forces.

A large number of Việt Cộng camps, bunkers and storage areas were however uncovered and destroyed, resulting in significant disruption to the communist logistic system.

[1] Regardless, D445 Battalion had suffered heavy casualties and posed a diminished threat, while the headquarters of the Việt Cộng 5th Division was located near the northern border, west of the Mây Tào mountains, with its fighting formations widely dispersed.

[17] The twelve-day battalion search and destroy operation subsequently commenced on 4 August 1967, within AO Lion, 9 kilometres (5.6 mi) north-west of Núi Đất.

In an attempt to achieve surprise the rifle companies moved into their respective areas of operation by foot, rather than by helicopter, carrying five days rations and supplies to reduce the need for resupply and the likelihood of detection by the Việt Cộng.

[20] Meanwhile, elements of 1st Field Squadron, Royal Australian Engineers had been tasked with clearing Route 2 of vegetation and rubber north of Núi Đất and D Company, 2 RAR was attached for the operation, providing security for the engineers and additional protection to the fire support base in conjunction with a troop of M113 armoured personnel carriers from A Squadron, 3rd Cavalry Regiment which would support the infantry during the day.

Utilising an insertion technique perfected by the Special Air Service Regiment they were subsequently re-supplied early on the evening of 5 August, with the supplies successfully unloaded and the helicopters departing within three minutes.

At 10:40, moving north-west with 2 Platoon leading, the Australians crossed a creek, the Suối Châu Pha, and shortly afterwards located a fresh track which had only recently been used.

[22] Minutes later two Việt Cộng sentries walked into the ambush with their weapons slung, and they were killed instantly by a short burst from an M60 machine-gun, likely surprised by the silent insertion of the Australians.

Considering it unlikely that the dead men had been alone, O'Donnell assessed that the remainder of a Việt Cộng squad was located somewhere further along the track and he subsequently requested artillery fire to block any escape, while 2 Platoon was ordered to sweep forward.

[20][25] Amid the chaos, a wasp nest in a nearby tree was disturbed, and a number of Australians were so badly stung that they were incapacitated and also needed to be evacuated.

[28] Meanwhile, the Việt Cộng attempted to use "hugging tactics" to remain in close contact under the artillery barrage, while utilising rockets, grenades, machine-guns and small arms to inflict casualties on the Australians.

[24] Withdrawing through the barrage and a number of airstrikes called in to pursue them, the Việt Cộng proceeded to drag their dead from the battlefield, having suffered crippling casualties.

Losing an eye and suffering heavy blood loss from multiple shrapnel wounds after a Việt Cộng rocket exploded within a metre of him, he was evacuated to 8 Field Ambulance in Vung Tau with no pulse.

Making a miraculous recovery however, he was personally recommended for the US Medal of Honor by Westmoreland for his resolute spirit, although this was later reduced to a lesser Australian award.

[18] A sweep of the area by the Australians subsequently resulted in the recovery of a further five dead Việt Cộng, however drag marks and extensive blood trails indicated that they had suffered heavily, with perhaps another 33 killed or wounded in the contact.

[13][39][Note 9] Graham believed that the large public turnout in Phước Tuy had been due to the long-term effects of Australian operations in the province which had increased the population's sense of security.

[39] However, with the war approaching a stalemate strategically, the Australians were substantially reinforced following the trend of further American troop increases, with a third infantry battalion arriving in December, while a squadron of Centurion tanks and additional Iroquois helicopters were added in early 1968.

[41] Total Australian strength in Vietnam grew to over 8,000 men, its highest level during the war, effectively doubling the combat power available to the task force commander.

[43] In spite of this build up North Vietnamese strength in South Vietnam also increased growing to 278,000 men, and although communist strategy remained fundamentally one of protracted war, preparations for a strategic offensive had reached an advanced stage.

[45] 1 ATF would be heavily involved in the fighting during Tet, deploying astride communist lines of communication in support of American and South Vietnamese forces defending the Long Bình-Biên Hòa complex north-east of Saigon during Operation Coburg, while also repelling repeated Việt Cộng attacks against Bà Rịa and Long Điền in Phước Tuy province.