Carpentaria Exploration : Drilling Update

We find it. We prove it. We make it possible.

ABN: 63095117981 ASX: CAP

16 January 2017

More superb results from Hawsons resource drilling

C A R P E N T A R I A E X P L O R A T I O N L I M I T E D

Highlights

• Outstanding results returned from latest 4 drill holes of the Hawsons Iron Project resource definition drilling
• Mineralised intersections between 102m and 200m thick returned from 14 of the first 16 holes
• Best new intersection of 174m at 15.4% magnetite mass recovery at the excellent 70.1% Fe concentrate grade in RC16BRP073
• Second intersection of new mineralised zone in the north-east of 45m at 16.4% magnetite mass recovery at 70.0% Fe concentrate grade in RC16BRP074, providing potential to increase the resource base Product marketing and pricing update
  • Iron ore market strengthens for Hawsons Supergrade: Direct reduction (DR) pellet premium1 for January up around 18% to US$54.50/t over Platts 65% Fe price2, translating to US$66.45/t premium over the 62% Fe fines3, and at 12 January 2017 an index based price of US$147.60/t for DR pellets
  • Strong interest in offtake expressed from DR pellet buyers during recent product marketing activities in the Middle East, including from potential new customers

Level 6, 345 Ann Street

Brisbane Qld 4000

PO Box 10919, Adelaide St Brisbane Qld 4000

e-mail: [e-mail]

For further information contact: Quentin Hill

Managing Director Phone: [phone]

www. carpentariae x . net. au

Confidence in the quality of the Hawsons resource continues to grow, after emerging iron producer Carpentaria Exploration Limited (ASX:CAP) announced today more positive results from the latest drilling at its flagship project near Broken Hill.

Completed in December 2016, the programme has been designed to support a resource upgrade expected shortly after final results are received, in addition to a planned new prefeasibility study for the project located just 60km from the Silver City.

Drilling comprising 5,963m of 20 reverse circulation (RC) holes was completed prior to Christmas 2016, with preliminary results for 12 holes reported on 20 December 2016 (refer ASX announcement) and another four holes returned last week (Figure 1, Table 2).

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Commenting on the latest results, Carpentaria's Managing Director, Quentin Hill said they are another step toward a resource upgrade in a project capable of producing the highest grade product in the seaborne market.

"These results provide further evidence that the existing Hawsons Inferred Resource is very robust and, where infill drilling is undertaken, the Company is hopeful of high conversion rates to Indicated Resources. Carpentaria is on track to deliver a new resource estimate that could support a revised mine plan for use in a planned prefeasibility study for Hawsons, due in quarter two of this calendar year, potentially providing a major boost to the project's development," Mr Hill said.

The drilling results continue to deliver outstanding "Supergrade" concentrate grades, with the best recent results from standard Davis Tube test work at 70.9% Fe and 1.52% silica. Earlier pilot processing test work that included an elutriation upgrade of the final product has demonstrated how Hawsons can achieve the rare DR specification.

Meanwhile, product marketing activities for Hawsons Supergrade have continued with a recent trip to Dubai, strengthening Carpentaria's existing relationships with DR buyers and attracting interest from potential new customers. Carpentaria has already secured non-binding letters of intent to acquire nearly 80% of initial planned production at Hawsons, from blue-chip buyers across Asia and the Middle East.

The value of the DR specification has been highlighted this month with an 18% surge in the Platts monthly DR pellet premium1 from US$46.00 to US$54.50 above the 65% Fe fines2 price. This translates to a US$66.45 premium over the quoted Platts 62% Fe fines index3 and an index based price for DR pellets of US$147.60 as at 12 January 2017, highlighting the potential premium prices available for Hawsons Supergrade. Further, in percentage terms, high grade premiums have never been higher, and likewise low grade discounts have never been greater, with the discount for Platts 58% Fe fines4 now 33% below the Platts 62%Fe fines price.

Targeted resource upgrade area

UNIT1

UNIT2

UNIT3

Figure 1 - Drill hole location plan

Drilling programme

The work programme carried out, together with results to date, has improved the potential for a resource upgrade as results are broadly in line with expectation, drill spacing has been tightened, Davis Tube analysis has been done on every interval and geophysics collected on 80% of the drilling, consistent with earlier drilling programmes.

Additionally, new analytical data for another mineralised unit, Unit 1 were received (Figure 1). This has added a second intersection to that reported in December 2016, increasing the potential for the inclusion of additional mineralisation in a revised resource estimate and mine plan.

The deposit is characterised by very thick mineralised units, with 14 from 16 holes returning intersections between 102m and 200m in thickness. The two exceptions included a hole abandoned before the target was reached and a QAQC hole that targeted a shorter intersection.

Final results are expected in approximately two weeks.

Product marketing

An 18% surge in the Platts monthly DR pellet premium1 from US$46 to US$54.50/t above the 65% Fe fines2 price occurred in January 2017. This translates to a US$66.45/t premium over the quoted Platts 62% Fe index3 and an index based price of US$147.60/t for DR pellets as at 12 January, 2017, demonstrating the potential value of the Hawsons Supergrade.

Hawsons is one of approximately 10 such projects worldwide capable of producing DR quality without excessive iron losses and processing costs. Some 90% of raw material for this market is currently supplied by just four companies, namely LKAB, Anglo American, Vale and Samarco, making it in buyers' interests to support additional supply sources.

Carpentaria's Product Marketing Director and former steel maker and iron ore marketer with BHP, Lou Jelenich, recently visited the Middle East to strengthen existing relationships with potential customers as well as promoting the project to potential new customers. These discussions are progressing, highlighting the potential to build on the existing list of blue chip offtake customers that have signed letters of intent in this high value market. These currently comprise Bahrain Steel, Emirates Steel, Taiwan's Formosa Plastics, Mitsubishi Corporation RtM Japan and trading house Gunvor Group.

Providing further pricing encouragement, recent data from Platts, shows that, in percentage terms, the premiums for high grade products, the 65%Fe fines2 index are close to historical highs over the 62%Fe index3, and the discounts of the Platts 58%Fe fines4 are also at historical levels below the 62%Fe price. On January 12, it was ~33% below the 62%Fe price (Figure 2). This data shows the current value of higher grade material to steel makers seeking improved productivity and reduced pollution.

12 Jan17

Figure 2 Iron ore price charts (Platts SBB analyser 12 January 2017

Commenting on his marketing trip, Mr Jelenich said: "Hawsons Supergrade is the highest grade product in the seaborne market and as such continues to attract great interest from the blast furnace market as well as the DR market. I'm confident that the project's quality product, its infrastructure advantages and favourable location in an historic mining city will see it generate growing support from international buyers."

Mr Hill added: "Carpentaria is positioning Hawsons to be first in the queue for development among the next wave of iron projects, and the latest drilling results and positive iron ore market momentum have only added to our confidence in the project.

"With its superior grade, superior location and potential for access to superior pricing and competitive costs, Hawsons is well placed to meet is development target of concentrate production in 2020 and to generate increased value for our shareholders and new jobs and wealth for Broken Hill and Australia."

About Hawsons Iron Project

The Hawsons Iron Project joint venture (Carpentaria 64%, Pure Metals P/L 36%) is currently undertaking development studies based on the low cost, long term supply of a high grade, ultra- low impurity iron concentrate to a growing premium iron market, including the direct reduction market.

The project has a clear technical and permitting pathway. It is located 60km southwest of Broken Hill, an ideal position for mining operations with existing power, rail and port infrastructure available for a conceptual 10 Mtpa start-up operation. A mining lease application has been lodged.

The project's soft rock is different from traditional hard rock magnetite and allows a very different approach to the typical magnetite mining and processing challenges (both technical and cost-related). The soft rock enables simple liberation of a Supergrade magnetite product without complex and expensive processing methods.

The Company is targeting the growing premium high grade product market, both pellets and pellet feed, which is separate to the bulk fines market, and believes its targeted cost

Figure 3 Location of Hawsons Iron Project and Port Pirie

structure is very competitive and profitable at consensus long-term price forecasts for this sector. It has secured offtake intent from blue chip companies Bahrain Steel, Emirates Steel, Formosa Plastics, Mitsubishi RtM and Gunvor.

The project is underpinned by Inferred and Indicated Resources totalling 1.8 billion tonnes at 15% mass recovery for 263 million tonnes of concentrate grading at 69.7% Fe. The Company confirms that it is not aware of any new data that materially affects this resource statement since the first public announcement and that all material assumptions and technical parameters underpinning the resource estimates continue to apply and have not materially changed since first reported (refer ASX announcement 26 March 2014 and Table 2).

Category	Billion Tonnes (cut off 12% mass recovery)	Magnetite mass recovery (%)	concentrate grades					Contained Concentrate million tonnes
			Fe%	SiO2%	Al2O3%	P%	LOI%
Inferred	1.55	14.7	69.6	2.9	0.20	0.004	-3.0	228
Indicated	0.22	16.2	69.8	2.8	0.20	0.005	-3.0	35
Total	1.77	14.9	69.7	2.9	0.20	0.004	-3.0	263

Table1 JORC compliant resources- Hawsons Iron Project

1 Platts IODRP00 Iron Ore Direct reduction Pellet Premium ($US/dry mt) (monthly)

"A monthly assessment reflecting the value of "premium" used in formulating a provisional contract settlement price for iron ore direct reduction pellets typically sold in term contracts, to steel mills primarily in Middle East and North Africa, and also in the Americas. This value reflects an additional charge for a high quality 67.5%Fe DR grade pellet, net of any further quality adjustments and including the 2.5% Fe over a 65%Fe fines