Peak Resources : Quarterly Activities Report and Appendix 5B

8bb67f4c-a6eb-4229-9e7a-44b0c09da3b1.pdf

maRch 2016

Quarterly Activities Report and Appendix 5B

Highlights:

Ngualla Project Update reduces Capex and Opex

f The Company was pleased to provide a detailed Ngualla Project Update during the Quarter that delivered substantial reductions in capital and operating costs.

f Capital costs reduced by 10% to US$330 million, including 25% contingency

f Operating cost reduced by 18% (US$21 million) to US$97 million per annum

f Life of mine 31 years from just the Weathered Bastnaesite Zone

f The revised development plan is focussed on supplying the high value magnet metal rare earths neodymium and praseodymium that are key components of the growing permanent magnet market, with demand driven by the increased electrification of automobiles and green energy applications.

f The Project Update reflects improved process flowsheets, a new Mineral Resource estimate and includes a base case scenario of a refinery located in the European Union.

Higher grade Mineral Resource

f A revised Mineral Resource estimate for the Weathered Bastnaesite Zone contains over 1 million tonnes of rare earth oxide (REO) at a 1% REO cut-off grade including the highest magnet metal (neodymium and praseodymium) grades of any rare earth development project in the world.

Improved recovery flowsheet

f Technical development programs on a new leach recovery flowsheet were successfully concluded during the Quarter and were incorporated in the Project Update. The new process flowsheet is focussed on the recovery of magnet metals neodymium and praseodymium and delivers capital and operating cost reductions through lower reagent use and smaller plant size.

Key Production and Marketing Executives Appointed

f Experienced rare earth production and marketing specialists Mr Rocky Smith, ex-Managing Director of the Molycorp Mountain Pass operation and Mr Michael Prassas, previously of leading global rare earth chemical company Solvay, joined the Peak team during the Quarter.

Project Permitting Progressing

f The permitting process for the Ngualla Rare Earth Project continues to progress with the completion and submission of the Environmental and Social Impact Assessment ("ESIA") Scoping Report to the National Environmental Management Council ("NEMC") in Tanzania.

Company Funded to complete BFS

f Subsequent to the end of the Quarter, Peak announced completion of a A$1 million placement to sophisticated overseas and institutional investors and a proposed rights issue to raise up to A$6 million. The capital raising will see the Ngualla Bankable Feasibility Study ("BFS") fully funded to completion and increase Peak's equity in the Project to 75%. Appian Natural Resources has committed to providing a long term Bridge Loan covering any shortfall in the rights issue

f Regulatory approvals are expected to be granted by June 2016 for the Stage 2 investment of

~A$3.1 million project funding into Peak African Minerals ("PAM") from Appian and IFC. These funding packages will allow for the completion of the BFS and importantly result in Peak retaining 75% of PAM rather than the originally envisaged 62.5 percent.

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developing the Ngualla Project into an

• ethically sustainable

• long term

• high quality

supplier of choice to the global high technology rare earth market

diRectoRs

Non-executive Chairman: Peter Harold

Managing Director: Darren Townsend

Technical Director: Dave Hammond

Non-Executive Directors: Robin Mills

Jonathan Murray John Jetter

Company Secretary: Graeme Scott

coRPoRate detaiLs as at 31 maRch 2016:

Ordinary Shares on issue: 414.4million

52 week range: 5.6c - 9.9c

Market Cap:

$31.1m (at 7.5c) ASX: PEK

Peak ResouRces Limited

Ground Floor, 5 Ord St

West Perth, WA 6005. ACN 112 546 700

Tel: [phone]

[e-mail] www.peakresources.com.au

QUARTERLY ACTIVITIES REPORT MARCH 2016

Project update

The Company, in collaboration with lead engineers AMEC Foster Wheeler, was pleased to provide a Project Update ('the "study", ASX Announcement "Ngualla Study delivers substantial Capex and Opex savings" dated 16 March 2016) to summarise and quantify the impact of a series of successful development studies in terms of operating and capital costs compared to the Preliminary Feasibility Study (PFS) of March 2014.

A key element of the Study involved improvements to the beneficiation process to produce a significantly higher grade concentrate and the development of a new leach recovery flowsheet to focus on the production of Neodymium and Praseodymium. These two rare earths, which occur in high grades at Ngualla, have rapidly become the most important in terms of value (Figure 1) through their role as key elements in the production of high powered permanent magnets.

100%

3%

6%

4%

11%

7%

2% 2% 1% 1%

3% 2%

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4% 3% 3%3%

5% 3%

7% 4% 3%

5% 4%

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6% 5% 8%

7% 10%

Glass Additives Polishing Powders Other

Catalysts Metal Alloys Ceramics

Figure 1: The rapidly growing importance of the permanent magnet sector to the total rare earth market by value. Neodymium and Praseodymium in particular contribute 85% of the value of rare earths used in the magnet sector. Source data - Curtin-IMCOA.

Gadolinium Samarium

6%

15%

Phosphors

Permanent Magnets

Terbium

3%

1%

15%

68%

75%

79%

Dysprosium

11%

Praseo- dymium

2015

magnet

Neo- dymium

47%

54%

22%

sector Value

share

63%

0

2011

2012

2013

2014

2015

High strength permanent magnets are used in high efficiency, lightweight electric motors, demand for which is growing strongly due to growing demand for electric vehicles and renewable energy infrastructure such as wind turbines. The permanent magnet market represents 79% of the global rare earth market by value (Source: IMCOA) with Neodymium and Praseodymium representing approximately 85% of this market by value.

The Study was based on extensive metallurgical flow sheet development work and pilot plant programs completed since delivery of the PFS, and included sophisticated engineering simulation and mass balance modelling conducted in conjunction with lead engineers, Amec Foster Wheeler. Peak has made substantial improvements to each of the three stages of processing (Figure 2) which when combined lead to reduced operating and capital costs and a simplified, reduced risk operation.

Run of mine

ore

Piloted Pilot underway Piloted Beneficiation Leach Recovery separation

Rare earth oxide and carbonate Products

Figure 2: Three stage process developed by Peak for Ngualla's rare earth mineralisation and pilot plant status.

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QUARTERLY ACTIVITIES REPORT MARCH 2016

The Study base-case scenario envisages production of approximately:

f 2,300 tonnes per annum of Neodymium and Praseodymium rare earth oxide

f 250 tonnes per annum of mixed Samarium, Europium and Gadolinium rare earth carbonate (equivalent to 180tpa of contained REO) and

f 5,900 tonnes per annum of Cerium/Lanthanum carbonate (equivalent to 4,240tpa of contained REO).

The strong alignment of Ngualla's projected revenue to the high value, high growth magnet metals Neodymium and Praseodymium is illustrated in Figure 3.

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Catalytic converters

/glass polishing

+

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Lighting / flat 8% 85%

Production forecasts are based on the weathered Bastnaesite Zone Mineral Resource estimate at a 1% REO lower grade cut (Measured and Indicated portions only, see Appendix for category breakdown), together with the mining and processing assumptions reported in the

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6%

S

Pr6O11 24%

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%

n

Portable electronics

C

a

r

/ magnets for wind turbines & hybrid electric cars

ASX Announcement "Ngualla Study delivers substantial Capex and Opex savings" dated 16 March 2016.

The revised Mineral Resource estimate incorporating drilling completed in 2015 is summarised in ASX Announcement "Higher grade Ngualla Mineral Resource contains nearly

1 million tonnes rare earth oxide" dated 22 February 2016).

Ngualla

Production: Relative Value

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Nd2O3 61%

Figure 3: Ngualla's future production value is strongly focused on neodymium and praseodymium. * Relative value of contained REO equivalent product mix based on February 2016 Metal Pages relative prices for individual rare earth oxides.

key outcomes:

Note all costs are in US dollars unless otherwise denoted. Cost reductions from the Project Update are in comparison to the PFS of 2015 (ASX Announcement "Peak Resources delivers robust PFS for Ngualla" of 19 March 2015).

Low Capital Cost

The outcomes of the Study confirm that Ngualla is expected to have substantially lower capital cost than any comparative rare earth project and positions Ngualla at the forefront of potential new rare earth projects.

• Capital cost (including 25% contingency) has reduced by 10%, or US$37 million) to US$330 million from the PFS A number of capital cost items currently included in the revised Capital Cost estimate including:

  Low caPitaL cost
  • Reduced by us$37 million (or 10% compared to PFs)

• Now us$330 million including 25% contingency

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QUARTERLY ACTIVITIES REPORT MARCH 2016

The Study has identified a number of additional opportunities for further reductions in capital costs and these will be examined as part of the current BFS process.

The capital costs include a base-case assumption of a European Union ('EU') based refinery to produce high purity separated products. Substantive site investigation and preliminary engineering work has been completed for a number of potential EU sites for the refinery.

Low Operating Costs

The Study has updated operating costs to US$97 million per annum, an 18% reduction (US$21 million per annum) compared with the PFS. The operating cost reductions have been achieved through optimisation of the flow sheet, which has confirmed that Peak's selective Alkali Roast process allows for the early rejection of the majority of low value cerium and deleterious iron, leading to significant reduction in reagent costs.

Low oPeRatiNg cost

• Reduced by us$21 million pa (or 18% compared to PFs)

• Now us$97 million pa

• Higher value product focussed on magnet metal market

Long Project Life

Project mine life has been optimised to 31 years, with this mine life based on the high grade weathered Bastnaesite Zone which comprises only 22% of the total Mineral Resource in terms of contained rare earths.

Low Development Risk

Peak is confident that the technical development risk of the Ngualla Project remains low. This is primarily due to the following:

• High confidence Mineral Resource (89% of the Bastnaesite Zone +1% REO Mineral Resource is classified in the highest JORC 2012 Measured category)

• Low cost low strip ratio open pit mining

• Conventional multistage processing plant on site at Ngualla to produce high grade rare earth concentrate

  BeNeFits oF a higheR gRade coNceNtRate ReductioNs iN:

  3 Concentrate transport costs

  3 Leach recovery plant size

  3 Leach plant capital costs

  3 Acid consumption

  3 Leach plant operating costs

• Location of refinery in European Union (Figure 4)

• Peak team have extensive experience in commissioning and operating rare earth projects

• Low capex/opex requirement

• Very low uranium and thorium mineralisation (15ppm U and 53 ppm Th)

• Proven and demonstrated extraction process

• Advanced development studies

The relatively simple nature of the operation and use of conventional, proven technology demonstrates that Ngualla should avoid the lengthy start-up periods and costs experienced by some new rare earth projects leading Peak to remain confident it can deliver the Project for substantially lower capital cost than any other comparative rare earth project and become one of the lowest operating cost rare earth developers.

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