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ALARA RESOURCES LIMITED Interim / Quarterly Report 2014

Jul 28, 2014

64461_rns_2014-07-28_25928fb0-b18e-41e2-8123-120c4d9a9afc.pdf

Interim / Quarterly Report

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June
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ua r terl Ac t iviti e s R r t Q y epo June 2 014

TUESDAY, 29 JULY 2014

ASX Code: AUQ

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DIRECTORS

Ian Williams Non-Executive Chairman Philip Hopkins Managing Director John Hopkins Non-Executive Director HRH Prince Abdullah bin Mosaad bin Abdulaziz Al Saud Non-Executive Director James Phipps Alternate Director

MANAGEMENT TEAM

Victor Ho Company Secretary Elle Macdonald Corporate Affairs Manager Justin Richard Country Manager, Saudi & Oman John Watkins Chief Financial Officer

CAPITAL STRUCTURE

As at 28 July 2014 Shares: 242,007,500 Options: 36,050,000 Share Price: $0.055 Market Cap: $13.31m Cash as at 30 June 2014 - $3.1m

RESOURCES – KHNAIGUIYAH * Measured & Indicated: Zinc-Copper Resource 25.32 Mt @ 4.03% Zn and 0.17% Cu Measured & Indicated: Copper Resource 8.53Mt @ 0.64%Cu

H ighli g hts

  • In June, the previo u sly announced HoA ( m oving Ala r a from its c urrent 50% eq u ity position to a 60 % equity p osition in the Khnai g uiyah Project) r eached an impasse. T he Comp a ny continu e s to work t o ward resolution of this m a tter with v a rious optio n s being progressed.

  • Previou s ly initiate d technical and fin a ncial Khn a iguiyah P roject enhancement studi e s progres s ed on sch e dule with positive res u lts.

  • Khnaigu i yah Projec t enhance m ent studie s include:

  • Evalu a tion for H e avy Media Separatio n (HMS) pr o cessing o f ore - exhibiting positiv e initial results;

  • Khnai g uiyah water supply opportuni t ies – se v eral alternatives identified;

  • Comminution Cir c uit Optimisation – stu d y initiated;

  • Plant o re feed g r ind size o p timisation – study to commenc e after HMS e valuation; a nd

  • Bulk p roduct tr a nsportatio n /shipping v ersus a container based appro a ch – initial investigati o ns comme n ced.

  • Continui n g improv e ment in t h e Zinc pri c e is a key upside f o r the Khnaigu i yah Proje c t. The Pr o ject econ o mics wer e establis h ed at $1.05/lb. At the tim e of writing, Zinc had r e ached a p r ice of $1.0 9 /lb.

**RESERVE – KHNAIGUIYAH ***

Proved: Zinc-Copper Reserve 17.7 Mt @ 3.4% Zn and 0.29% Cu Probable: Zinc-Copper Reserve 8.35 Mt @ 3.1% Zn and 0.13% Cu

  • Daris/W a shihi Proj e ct (Oman) Options S tudy was c ompleted in the Quarter and led to the “re-sc o ping” of t h e upgraded Scoping Study which is nearing co m pletion.

CONTACT DETAILS

Level 3, 35 Havelock Street West Perth WA 6005 Australia

PO Box 1890 West Perth WA 6872 Telephone: +61 8 6323 5900 Facsimile: +61 8 6323 5999

www.alararesources.com

ABN: 27 122 892 719 * Re f er JORC State m ents at page 1 0

A LARA RESO U RCES LIMITE D

Intr o duc t ion

The fourth Quarter of t he 2014 Fi n ancial Yea r included b oth positive breakthrou g hs and a d isappointin g delay with t h e Khnaigui y ah Project.

Project st u dies progr e ssed well for the Kh n aiguiyah Z inc-Copper Project in Saudi Ara b ia and th e Daris/Was h ihi Project i n Oman, but the Compa n y was una b le to move forward on t h e previousl y announce d Heads of A greement (HoA) to ac q uire an ad d itional 10 % of the Kh n aiguiyah Zi n c-Copper P roject Join t Venture (J V ).

The contin u ing improvement in t h e price of Zinc is a s ignificant p o sitive for t h e Khnaiguiyah Projec t economics.

Sau d i Arabia

KHNAIGUIYAH ZINC-COPPER PROJECT

As previou s ly announc e d[1][& 2] Ala r a and its J V partner, United Arabi a n Mining C o mpany LL C (Manajem ) entered int o a Heads of Agreemen t (HoA) for t h e Khnaigui y ah Project whereby Al a ra would m ove from it s current 50 % equity position to 60% e quity in the JV Compa n y, Khnaigui y ah Mining C ompany (K M C). In turn , this agree m ent resolve d all outstan d ing historic a l matters b e tween the p a rties and w o uld thus allow the JV t o move forw a rd.

The Comp a ny subseq u ently announced[3] that t he implem e ntation of the HoA, whi c h includes a Road Ma p outlining th e steps the p arties have agreed to u n dertake to g ive effect t o a New JV A greement, h ad reache d an impasse resulting fr o m JV partn e r Manajem’ s failure to c o mply with t h e steps in t h e Road Ma p .

As a resul t of this i m passe, Alara has post p oned prep a rations for a General Meeting to seek Alar a shareholde r approval f o r the issue o f the share s required t o affect the e quity transf e r to Manaj e m under th e New JV Agreement. T h e Compan y will recom m ence this process once the Mining License tra n sfer to KM C is underwa y .

Alara continues to w o rk toward a solution t o the curre n t JV HoA impasse in order to p rogress th e Khnaiguiya h Project in the current rising Zinc price mark e t. Various options and opportuniti e s are bein g progressed in order to m ove the Pr o ject forward as soon as practical.

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Alara B oard Chai rm an Ian W illiams, AO makes a formal p re sentation on behalf of Alara t o Mr Sulaim a n Al Jebree n (Chairman of the Al Q u wayiyah Chamber of Comm e rce) at a civic rece p tion at Al Quway i yah on the occasion o f the Alara Board v isit to Saudi A rabia in May 2014.

1 Refer A lara’s ASX mark e t announcement dated 14 March 2 014 and entitled Alara Moving to 6 0% Interest in thee Khnaiguiyah Pr o ject”

2 Refer A lara’s ASX mark e t announcement dated 4 April 201 4 entitled “Compl e tion of Agreeme n t for Updated Khnnaiguiyah Project Joint Venture”.

3 Refer A lara’s ASX mark e t announcement dated 4 June 2014 entitled “Khnai g uiyah Project Joi n t Venture Agreemment Has Reach e d Impasse”.

2

QUARTERLY A CTIVITIES REPO R T – JUNE 201 4

ALARA RESOURCES LIMITED

PROJECT ENHANCEMENTS IDENTIFIED FOR FURTHER STUDY

Based on internal technical analyses and confirmed by the independent Definitive Feasibility Study (DFS) Peer Review in the previous quarter, additional technical studies were either progressed, or have been defined and are ready to commence as soon as practical. These studies are designed to materially enhance the value and/or reduce the key risks associated with the Khnaiguiyah Project.

The bulk of these additional Project enhancement studies have or are currently being completed while further work has been put on temporary hold until the Company is able to progress the Project JV. Alara does not intend to expend significant additional funds on Project optimisation until a clear way forward for the JV has been identified and progressed.

The current status of the Project Enhancement Studies is as follows:

HEAVY MEDIA SEPARATION (HMS) EVALUATION FOR THE ORE

  • Test work (at lab or ‘bench’ scale) has been completed and a draft report has been issued. Initial indications show positive amenability of Khnaiguiyah ore to the HMS process. Test work to bring this flow sheet change up to DFS level is pending the resolution of the current Project delay.

  • As reported in the March 2014 Quarterly Report[4] , a HMS plant would allow a relatively coarsely crushed ore feed (4-7 mm diameter) to be processed up front and as a result of this pretreatment, the lighter (non-metallic) silica material included in the ore could potentially be inexpensively separated from the Zinc-Copper bearing rock. The outcome of this process flow sheet enhancement is a 70-90% upgrade in the effective ore grade being fed to the processing plant.

  • Should the test work currently underway prove to be technically viable and economically justifiable for the Khnaiguiyah ore, then there will be an option for the Khnaiguiyah Project to advance on one of two paths:

  • i) Maintain the 2Mtpa ore feed as per the DFS, but change the circuits to have ore pass through the HMS first. This would allow the remainder of the processing plant to be downsized to 1.0-1.5Mtpa thus reducing the complexity and capital cost of the plant; or alternatively

  • ii) Increase the front end feed through the HMS to 3.5- 4.0Mtpa and retain the back end of the process plant throughput at 2Mtpa but due to the upgrade in ore grade, produce up to 1.5-1.8 times more concentrate per annum.

WATER SUPPLY OPPORTUNITIES

  • A water supply study has identified several alternative process water supply sources which are being investigated and discussions are ongoing with the relevant government departments and private entities.

COMMINUTION CIRCUIT OPTIMISATION

  • Data was provided to external consultants to perform an initial analysis and modelling on the potential to replace the SAG mill with 1-2 crushing units (dependent on crushing unit size and performance of the HMS process – see above) as well as general optimisation of the comminution circuit.

PLANT ORE FEED GRIND SIZE OPTIMISATION

  • The grind size employed in the DFS is very fine and there is an opportunity to increase the grind size thus reducing the plant size, power consumption and operating costs associated with wear and tear on materials and parts. A grind size review and potential optimisation study will commence only after the result of the HMS evaluation is finalised.

4 Refer Alara’s ASX market announcement dated 29 April 2014 and entitled “Quarterly Activities Report - March 2014”

3

QUARTERLY ACTIVITIES REPORT – JUNE 2014

A LARA RESO U RCES LIMITE D

BULK PRODUCT TRANSPORTATION/SHIPPING VERSUS A CONTAINER BASED APPROACH

Initial disc u ssions wer e undertake n with shipping/logistics experts on c urrent indi c ative freigh t rates from the several possible p orts, and port facilities are being investigated in order t o evaluate t h e potential to bulk ship concentr a tes from si t e as an al t ernative to transportin g concentrat e s in cont a iners. This study will also incorporate input from the p roviders o f concentrat e offtake ag r eements.

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The Alara Board visite d Dammam’ s King Abd u l Aziz Sea P o rt, the large s t port on the Persian Gul f , as part of it s site visit to S audi Arabia in May 2014 . The Board m et with the p ort authority and reviewe d the port’s available ca p acity while viewing th e port’s worl d class and e xpanding bulk/ contain e r shipping facilities.

Dammam P ort is the pri n cipal port o f Saudi Arabi a and is located approxi m ately mid- w ay along th e Eastern Co a st. It acts as the main ga t eway throug h which carg o es leave a n d enter the Eastern an d Central Pro v inces of the Kingdom to a ll parts of th e globe and is strategic a lly placed t o service th e continuous d evelopment of Riyadh, t h e capital, an d the major provincial c i ties in the Eastern an d Central Pro v inces.

KHNAIGUIYAH PROJECT INDICATIVE TIMELINE

The Khnaiguiyah Project indicative development timeline is as follows:

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4

QUARTERLY A CTIVITIES REPO R T – JUNE 201 4

ALARA RESOURCES LIMITED

Oman

DARIS/WASHIHI COPPER-GOLD PROJECT

An upgraded Scoping Study for the Daris/Washihi Project in Oman commenced and is nearing completion. External interest in the Project has continued with various parties undertaking due diligence activities.

OPTIONS ANALYSIS/SCOPING STUDIES

As advised in the previous Quarterly Report[4] , the updated Scoping Study was placed on hold pending a full Options Analysis Study[5] .

This Options Analysis Study evaluated the following six project options:

  1. Conventional flotation circuit;

  2. HMS circuit followed by a smaller capacity conventional flotation circuit;

  3. HMS circuit followed by a larger capacity (x2) conventional flotation circuit;

  4. Toll treatment of the Daris Sulphide ores;

  5. On-site conventional heap leach of Daris oxides; and

  6. Continuous Vat Leach of Daris oxides.

Test work on the benefits of including a HMS circuit to the ore treatment process flow sheet proved successful[6] and two variations on the application of a HMS circuit were evaluated (Options 2 & 3 - see above). The application of the HMS circuit to the Daris/Washihi Project provides a material uplift or ‘breakthrough’ as it effectively increases the grade of the material to be processed from 0.8-0.9% Cu to 1.61.8% Cu.

Based on the technical and economic results of the Options Analysis Study, Options 2 & 3 were then selected for inclusion in an upgraded Scoping Study. The Scoping Study is designed to confirm the economic potential of the project and identify the key technical issues required to progress the project to its next phase. The work on the Scoping Study recommenced in the June 2014 Quarter and is nearing completion.

Additional preparatory activity has been undertaken in parallel to prepare a phased Pre-Feasibility Study work program that addresses the issues identified in the Scoping Study. This work program is currently under internal consideration as part of overall Project development planning.

PROJECT PARTICIPATION AND DEVELOPMENT ALTERNATIVES

The Daris/Washihi Project is underpinned by the largest copper resource (JORC qualified)[7][& ][8] in Oman. This fact, coupled with the Daris/Washihi Project’s location, logistics, JV partners and other project parameters, has made this Project attractive to outside groups. Several of these external parties are reviewing the assets and the Daris/Washihi Project to determine if they wish to become involved. This activity continued during the Quarter, together with the evaluation of additional and associated commercial opportunities.

5 Refer to Alara’s ASX Announcement dated 12 June 2014 entitled “Oman Project - Positive Options Analysis Study Outcomes” 6

Refer to Alara’s ASX Announcement dated 18 February 2014 entitled “Oman Project HMS Breakthrough”

7 Refer Alara’s ASX market announcement dated 16 July 2013 entitled “Upgrade to JORC Resources at Washihi Copper-Gold Project in Oman” 8 Refer JORC Statements at page 10

5

QUARTERLY ACTIVITIES REPORT – JUNE 2014

ALARA RESOURCES LIMITED

Commercial

ZINC MARKET

The price of Zinc metal continued to move upwards during the Quarter and into July when the zinc price reached US$1.09/lb. Commentators on the Zinc market believe that the market has moved into up-cycle driven by organic growth in demand and near term supply constraints as several large mines are about to close.

This is aligning well with the project timeline for the Khnaiguiyah Project which is planned to commence production in 2017 when forecasters are predicting a zinc price range of US$1.40-$2.00/lb (Glencore-CRU). Should these prices be achieved they would provide significant upside to the Project economics which is based on a zinc price of US$1.05/lb.

Corporate & Finance

GENERAL

John Watkins commenced as Alara’s Chief Financial Officer[9] on 1 May 2014. This key appointment completed the assembly of Alara’s core Management Team to take the Company through the next stage of its development.

As previously announced[10] , the Managing Director and representatives from Petra Capital conducted an investor roadshow (17-20 June) to Sydney and Melbourne, meeting with existing and prospective investors.

FINANCE & METAL OFFTAKE DISCUSSIONS

Advice was received regarding the application process for Saudi Investment & Development Fund (“SIDF”) finance. The SIDF is mandated to support the industrialisation objectives of the Kingdom of Saudi Arabia by providing technical, administrative, financial and marketing advice and financial assistance in the form of medium and long term loans to investors in industry. For approved projects in more remote areas of the country, the SIDF can fund up to 75% of construction capital cost and 5-10% of pre-construction cost. As part of funding conditions the SIDF would require a significant portion of concentrate output to be covered by metal offtake agreements.

The Khnaiguiyah Project is believed to meet the SIDF ‘remote location’ criteria. This is supported by written advice received from external financial advisors (KPMG) in Saudi Arabia. The availability of a large portion of project finance from within Saudi Arabia and the need for metal offtake arrangements both reduce project risk in the areas of funding and revenue.

During the Quarter, Alara commenced discussions with metal traders and financiers. These discussions were positive and are being assessed and expanded. Further discussions are planned as we refine the DFS optimisation studies and project finance timeline.

COST CONTROL

A review was undertaken of working capital/operating costs (G&A) with additional and continuing tight control of expenditure. Project costs are also being scrutinized pending resolution of the Khnaiguiyah HoA impasse. The cash operating expenditure was $1,404k in the June 2014 Quarter, and is forecast to reduce to $1,100k in the September 2014 Quarter.

9 Refer to Alara’s ASX Announcement dated 2 May 2014 entitled “Alara Appoints Highly Experienced CFO” 10

Refer to Alara’s ASX Announcement dated 16 June 2014 entitled “Investor Roadshow Presentation - JUN 2014”

6

QUARTERLY ACTIVITIES REPORT – JUNE 2014

A LARA RESO U RCES LIMITE D

CASH POSITION

Alara’s cas h position a s at 30 June 2014 was $ 3.1 million ( 31 March 2 0 14: $4.9 m i llion). In ad d ition a ban k cheque for the first payment under the Khnai g uiyah HoA of USD 601,000 ($63 7 ,000) is held in escro w pending co m pletion of t h e transacti o n.

Conclusion

Progress o n the techni c al front wa s pleasing f o r Alara’s pr o jects in bot h Saudi Ara b ia and Om a n. Howeve r we have b e en very frustrated by th e delay in pr o gressing th e terms of t h e HoA whic h would increase Alara’ s stake in the Khnaigui y ah Project from 50% to 60% and allow us t o move for w ard with fi n ancing an d developme n t to the benefit of all pa r ties.

Alara is co n tinuing to c e ntre its pri m ary focus o n achieving a resolution t o the curre n t Project im p asse and i n turn move t h e Khnaigui y ah Project forward as s o on as practical.

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C o re from th e Khnaiguiyah Project s h owing inter s ection cont a ining Sphal e rite ((Zn, F e ) S) mineralisation. (Sphalerite is a zinc/iro n sulphide a n d the primary ore of zin c metal.)

Nex t Qu a rte r Pla n ned Activitie s

  • Res o lution of the impasse for the Khnaig u iyah Projec t JV

  • Prog r ess the Kh n aiguiyah Pr o ject DFS o p timisation s t udies  Prog r ess the Kh n aiguiyah Pr o ject financi n g plans  Com p lete the Da r is/Washihi P roject upda t ed Scoping Study

7

QUARTERLY A CTIVITIES REPO R T – JUNE 201 4

ALARA RESOURCES LIMITED

INTERESTS IN MINING AND EXPLORATION LICENCES

KHNAIGUIYAH ZINC-COPPER PROJECT (SAUDI ARABIA)

The Khnaiguiyah Zinc-Copper Project (Khnaiguiyah Project) is located approximately 170km south-west of the capital city Riyadh and 35km north-west of Al-Quwayiyah, which is a regional centre located around the Riyadh to Jeddah Expressway.

The Khnaiguiyah Project comprises one mining licence (issued in December 2010 with an exclusive 30 year term and no mineral royalties), 2 exploration licences and 5 exploration licence applications, totalling approximately 380km[2] currently held by Manajem pending completion of transfer to the JV company, Khnaiguiyah Mining Company LLC (KMC) (Saudi Arabia, incorporated on 10 January 2011).

Alara’s wholly owned subsidiary, Alara Saudi Operations Pty Limited has a 50% interest in KMC, with an agreement to move to 60% equity[1] .

Two exploration licences, Umm Al Hijja and Mutiyah, have expired and are pending renewal and are considered by Alara to be non-core to the Khnaiguiyah Project vis a vis the five exploration licences (applications pending grant) surrounding the existing Mining Licence

The current status of all licences/applications for this project is presented in the table below.

Project Licence
Owner
Status Tenement Expiry Date Location/ Alara’s
Interest
Grant/Application
Area Property Country
Date
Name
Khnaiguiyah
Zinc-Copper
Project
United
Arabian
Mining
Company
LLC
Granted Mining
Lease No
2. Qaaf
30 years 50%**
~170km
Dec 2010 dated Saudi
5.462km
2
west of
6/1/1432H Arabia
Riyadh
Khnaiguiyah
Zinc-Copper
Project
United
Arabian
Mining
Company
LLC
Two (2)
Granted/
pending
renewal
Exploration
Licence
“Qaf”/101
Expired
(pending
renewal/reissue)
50%**
~170km
Oct 2007 dated 84 +
Saudi
west of
17/10/1428H 66km
2
Arabia
Riyadh
Khnaiguiyah
Zinc-Copper
Project
United
Arabian
Mining
Company
LLC
Five (5)
Applications
Exploration
Licence
"Qaf"/99
N/A 24.99 + 50%**
66.71 + ~170km
Oct 2007 dated Saudi
65.52 + west of
17/10/1428H Arabia
34.65 +
Riyadh
30.08km
2

** The transfer of licences for exploration or exploitation of the same is covered by a Shareholders Agreement between Alara and Manajem and a Mining Rights Agreement between Alara, KMC and Manajem. The latter, among other things, contemplates KMC’s rights to exploit the ML and its extensions or the Environmental Approval as if these were held by KMC[12] .

Alara’s interest is in these licences is currently 50% with a right to move to 60% as agreed in a HoA announced on 14 March 2014[1]

8

QUARTERLY ACTIVITIES REPORT – JUNE 2014

ALARA RESOURCES LIMITED

INTERESTS IN MINING AND EXPLORATION LICENCES (CONTINUED)

DARIS/WASHIHI COPPER-GOLD PROJECT (OMAN)

- Daris Copper Gold Project

The Daris Copper-Gold Project is located approximately 150km west of Muscat, the capital of Oman, and comprises a mineral excavation licence of ~587km[2] . The JV company, Daris Resources LLC, has made applications for two mining licence applications covering 3.2km[2] and 1.3km[2] which have been filed over the Daris East and Daris 3A-5 prospects.

Alara’s wholly owned subsidiary, Alara Oman Operations Pty Limited has a 50% interest (with a right to increase to 70%+) in the JV company, Daris Resources LLC (Oman, incorporated on 1 December 2010), which holds the exclusive right to manage, operate and commercially exploit the exploration licence.

The current status of all licences/applications for this project is presented in the table below.

Block
Name
Alara
JV
Area Exploration Licence
Date of
Date of
Application
Exploration Licence
Date of
Date of
Application
Exploration Licence
Date of
Date of
Application
Status Mining Licences within EL
Area
Date of
Status
Mining Licences within EL
Area
Date of
Status
Mining Licences within EL
Area
Date of
Status
Licence
Owner
Block
7
Al Tamman Interest Grant Expiry for Renewal
Deemed

Daris East
Application
Dec 2012

Accepted in
April 2013; in
progress
Trading and 50-70% 587km
2
Nov
2009
Nov
2012
Oct 2012 renewed
as per
law
3.2km
2
Est. LLC, Daris 3A-5
1.3km
2
Oman
  • Also refer to Alara ASX announcements dated 30 August 2010 and entitled “Project Acquisition Daris Copper Project in Oman” for further background information.

Washihi-Mullaq-Al Ajal Copper-Gold Project

The Washihi-Mullaq-Al Ajal Copper-Gold Project is located approximately 80-160kms east of Alara’s Daris Project.

Alara’s wholly owned subsidiary, Alara Oman Operations Pty Limited holds 70% of the shares in the JV company, Al Hadeetha Resources LLC (Al Hadeetha). Al Hadeetha holds exploration licences over the Washihi area of 39km[2] , the Mullaq area of 41km[2] , and the Al Ajal area of 25km[2] .

Two of the exploration licences, Washihi and Mullaq, are located approximately 100km south-southeast of the Daris Project (Block 7 licence). One exploration licence, Al Ajal, is located approximately 40km east of the Daris Project (Block 7 licence).

The JV entity has made applications for mining licences over the Washihi area of 3km[2] , Mullaq area of 1km[2 ] and Al Ajal area of 1.5km[2] .

The current status of all licences/applications for this project is presented in the table below.

Licence
Name
Licence
Owner
Exploration Licence Exploration Licence Exploration Licence Mining Licence within EL Mining Licence within EL Mining Licence within EL
Alara JV
Interest Area Date of
Date of
Application
for Renewal
Status Area Date of
Status
Grant Expiry Application
Washihi Al Hadeetha
Resources
LLC Oman
Dec 2013 Accepted
in April
2013; in
progress
Deemed
Jan Jan
70% 39km
2
granted as 3km
2
Dec 2012
2008 2013
per law
Mullaq Al Hadeetha
Resources
LLC Oman
Sep 2012 In
progress
Oct Oct In
70% 41km
2
1km
2
Jan 2013
2009 2012 progress
Al Ajal Al Hadeetha
Resources
LLC Oman
Dec 2013 In
progress
Jan Jan In
70% 25km
2
1.5km
2
Jan 2013
2008 20013 progress

Also refer to Alara’s market announcement dated 8 December 2011 and entitled “Project Acquisition - Al Ajal-Washihi-Mullaq Copper-Gold Project in Oman” for further background information.

9

QUARTERLY ACTIVITIES REPORT – JUNE 2014

ALARA RESOURCES LIMITED

JORC STATEMENTS

KHNAIGUIYAH ZINC-COPPER PROJECT (SAUDI ARABIA)

Table 3 - Khnaiguiyah JORC Ore Reserves[11]

Mineralised Zone Proved Probable Proved + Probable Proved + Probable Proved + Probable
Mt Zn% Cu% Mt Zn% Cu% Mt Zn% Cu%
1 0.78 4.2 0.23 1.07 4.3 0.25 1.85 4.3 0.24
2 8.75 2.6 0.32 1.2 3.8 0.44 9.95 2.7 0.34
3 8.21 4.1 0.27 6.08 2.7 0.05 14.28 3.5 0.17
Total
(All Pits)
17.73 3.4 0.29 8.35 3.1 0.13 26.08 3.3 0.24

Table 4 - Khnaiguiyah JORC Measured and Indicated Resource - Zinc (Domain 1) and Zinc-Copper (Domain 2)[12]

JORC Resource Domain Mineralised Zone Tonnes (Mt) Copper % Zn Cut-off
(%)
Zinc %
Measured 1 d 2 1,2 9.65 3.37 0.16 1.5
3 6.37 5.28 0.25 1.5
Indicated an 1,2 3.12 4.45 0.3 1.5
3 6.18 3.55 0.05 1.5
Measured and
Indicated
1, 2 and 3 25.32 0.17 1.5
4.03

Table 5 - Khnaiguiyah JORC Measured and Indicated Resource - Copper (Domain 3)[12]

JORC Resource Domain Mineralised Zone Tonnes(Mt) Copper % Cu Cut-off(%)
Measured 3 1,2 4.7 0.72 0
3 1.07 0.63 0
Indicated 1,2 1.59 0.54 0
3 1.16 0.43 0
Measured and
Indicated
1, 2 and 3 8.53 0.64 0

Table 6 - Khnaiguiyah JORC Inferred Resource - Zinc (Domain 1) and Zinc-Copper (Domain 2)

JORC Resource Domain Mineralised Zone Tonnes (Mt) Copper % Zn Cut-off
(%)
Zinc %
Inferred 1 and 2 4 4.32 0.03 1.5
2.9

The information in these JORC Reserve and Resource tables was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

11 Refer to Alara’s ASX Announcement of 18 April 2013 entitled “Maiden JORC Ore Reserves – Khnaiguiyah Zinc-Copper Project”

12 Refer to Alara’s ASX Announcements of 21 February 2012 entitled “Maiden JORC Resource – Khnaiguiyah Zinc-Copper Project”, 12 October 2012 entitled “JORC Resource Upgrade for Khnaiguiyah Zinc-Copper Project,” and 30 October 2012 entitled “JORC Resource Upgrade and Update for Khnaiguiyah Zinc-Copper Project”

10

QUARTERLY ACTIVITIES REPORT – JUNE 2014

ALARA RESOURCES LIMITED

JORC STATEMENTS (CONTINUED)

WASHIHI-MULLAQ-AL AJAL COPPER-GOLD PROJECT (OMAN)

Table 1 - Washihi JORC Mineral Resources[13]

Cu %
Cut off
Indicated Resource Indicated Resource Indicated Resource Inferred Resource Inferred Resource Inferred Resource
Tonnes
(Million)
Copper (Cu) Gold (Au)
g/t
Tonnes
(Million)
Copper (Cu)
%
Gold (Au)
g/t
%
0 7.16 0.87 0.17 7.77 0.67 0.2
0.25 6.84 0.9 0.17 7.27 0.71 0.2
0.5 5.66 1.01 0.18 5 0..85 0.21
0.75 4.04 1.17 0.18 2.57 1.07 0.23
1 2.39 1.37 0.2 1.24 1.31 0.27

DARIS COPPER-GOLD PROJECT (OMAN)

Table 2 - Daris-East JORC Mineral Resources

Cut-off
grade
Cu%
Measured Measured Indicated Indicated Measured and
Indicated
Measured and
Indicated
Inferred Inferred
Ore type Tonnes Cu%
Gold
(Au)
g/t
Tonnes Cu% Gold
(Au)
g/t
Tonnes Cu% Gold
(Au)
g/t
Tonnes Cu% Gold
(Au)
g/t
Sulphides 0.5 129,155 2.48 0.23 110,870 2.24 0.51 240,024 2.37 0.43 30,566 2.25 0.55
Oxides 0.5 96,526 0.77 0.03 86,839 0.66 0.14 183,365 0.72 0.08 1,712 0.61 0.97

The information in these JORC Resource tables was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

13 - Refer to 16 July 2013 ASX Announcement: Upgrade to JORC Resource at Washihi Copper Gold Project in Oman Providing Strategic Options for the Asset

11

QUARTERLY ACTIVITIES REPORT – JUNE 2014

ALARA RESOURCES LIMITED

JORC COMPETENT PERSONS STATEMENTS

  1. The information in this report that relates to Ore Reserves in relation to the Khnaiguiyah Zinc-Copper Project (Saudi Arabia) was compiled by Mr Geoff Davidson, who is a Fellow of the Australian Institute of Mining and Metallurgy and a consultant to Khnaiguiyah Mining Company LLC (KMC). Mr Davidson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (JORC Code, 2004 edition). In assessing the appropriateness of the Ore Reserve estimate, Mr Davidson has relied on various reports, from both internal and external sources, in either draft or final version, which form part of or contribute to the Khnaiguiyah Project Detailed Feasibility Study. These reports are understood to be compiled by persons considered by KMC to be competent in the field on which they have reported. Mr Davidson has given his consent to the inclusion in the report of the matters based on his information in the form and context in which it appears. Refer also to Table 5 (Estimation and Reporting of Khnaiguiyah JORC Ore Reserve Statement) of the JORC Code Competent Person Statements in Alara Resources Limited’s ASX market announcement dated 18 April 2013: Maiden JORC Ore Reserves – Khnaiguiyah Zinc-Copper Project for further information in relation to the Ore Reserve estimate for the Khnaiguiyah Project.

  2. The information in this report that relates to Zinc and Copper Mineral Resources within Mineralised Zone 3 in relation to the Khnaiguiyah Zinc-Copper Project (Saudi Arabia) is based on information compiled by Mr Daniel Guibal, an employee of SRK Consulting (Australasia) Pty Ltd, who is a Fellow of The Australasian Institute of Mining and Metallurgy. Mr Guibal has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code, 2004 edition. Mr Guibal consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

  3. The information in this report that relates to Zinc and Copper Mineral Resources within Mineralised Zones 1, 2 and 4 in relation to the Khnaiguiyah Zinc-Copper Project (Saudi Arabia), Mineral Resources in relation to the Daris/Washihi Copper-Gold Project (Oman) and other Exploration Results is based on information compiled by Mr Ravindra Sharma, who is a Chartered Professional Member of The Australasian Institute of Mining and Metallurgy and Registered Member of The Society for Mining, Metallurgy and Exploration. Mr Sharma was a principal consultant to Alara Resources Limited. Mr Sharma has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code, 2004 edition. Mr Sharma consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

FORWARD LOOKING STATEMENTS:

This announcement contains “forward-looking statements” and “forward-looking information”, including statements and forecasts which include without limitation, expectations regarding future performance, costs, production levels or rates, mineral reserves and resources, the financial position of Alara, industry growth and other trend projections. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “is expecting”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes”, or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might”, or “will” be taken, occur or be achieved. Such information is based on assumptions and judgements of management regarding future events and results. The purpose of forward-looking information is to provide the audience with information about management’s expectations and plans. Readers are cautioned that forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Alara and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, among others, changes in market conditions, future prices of gold and silver, the actual results of current production, development and/or exploration activities, changes in project parameters as plans continue to be refined, variations in grade or recovery rates, plant and/or equipment failure and the possibility of cost overruns.

Forward-looking information and statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date such statements are made, but which may prove to be incorrect. Alara believes that the assumptions and expectations reflected in such forward-looking statements and information are reasonable. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Alara does not undertake to update any forward-looking information or statements, except in accordance with applicable securities laws.

For further information, please contact:

Philip Hopkins T | +61 8 6323 5900 Managing Director E | [email protected] Elle Macdonald T | +61 8 6323 5900 Corporate Affairs Manager E | [email protected]

About Alara Resources

Alara Resources Limited (ASX: AUQ) is an Australian-based minerals exploration and mine development company with a portfolio of projects in Saudi Arabia and Oman. Alara has recently completed a Definitive Feasibility Study on its flagship Khnaiguiyah Zinc-Copper Project in Saudi Arabia and a Scoping Study on its Daris/Washihi Copper-Gold Project in Oman. Alara is now transitioning toward establishing itself as an emerging base and precious metals mine development and production company.

For more information, please visit: www.alararesources.com

12

QUARTERLY ACTIVITIES REPORT – JUNE 2014

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/2013

Name of entity

Name of entity
Alara Resources Limited
ABN
27 122 892 719
Quarter ended (“current quarter”)
27 122 892 719 30 June 2014

Consolidated statement of cash flows

Cash flows related to operating activities
1.1
Receipts from product sales and related
debtors
1.2
Payments for (a) exploration & evaluation
(b) development
(c) production
(d) administration
1.3
Dividends received
1.4
Interest and other items of a similar nature
received
1.5
Interest and other costs of finance paid
1.6
Income taxes paid
1.7
Other (R&D Tax Refund)
Net Operating Cash Flows
Current quarter
(June 2014)
$A’000
Year to date
(12 months)
$A’000
-
(636)
-
-
(768)
-
18
-
-
-
-
(1,190)
-
-
(4,661)
-
121
-
-
4,754
(1,386) (976)
Cash flows related to investing activities
1.8
Payment for purchases of:
(a) prospects
(b) equity investments
(c) other fixed assets
1.9
Proceeds from sale of:
(a) prospects
(b) equity investments
(c) other fixed assets
1.10
Loans to other entities
1.11
Loans repaid by other entities
1.12
Other (provide details if material)
Net investing cash flows*
1.13
Total operating and investing cash flows
(carried forward)
(637)
-
-
-
-
-
-
-
-
(637)
-
-
-
-
-
-
-
-
- -
(2,023) (1,613)
  • See chapter 19 for defined terms.

01/05/2010 Appendix 5B Page 1

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

1.13
Total operating and investing cash flows
(brought forward)
(2,023) (1,613)
Cash flows related to financing activities
1.14
Proceeds from issues of shares, options, etc.
1.15
Proceeds from sale of forfeited shares
1.16
Proceeds from borrowings
1.17
Repayment of borrowings
1.18
Dividends paid
1.19
Other (provide details if material)
Net financing cash flows
-
-
-
-
-
-
-
-
-
-
-
-
- -
Net increase (decrease) in cash held
1.20
Cash at beginning of quarter/year to date
1.21
Exchange rate adjustments to item 1.20
1.22
Cash at end ofquarter *excludesprepayment
(2,023)
4,938
195
(1,613)
4,459
264
3,110 3,110
Prepayment bank cheque of USD601k (AUD637k) for the Khnaiguiyah Project settlement is held in escrow.
Payments to directors of the entity, associates of the directors,
related entities of the entity and associates of the related entities*
1.23
1.24
Aggregate amount of payments to the parties included in item 1.2
Aggregate amount of loans to the parties included in item 1.10
Current quarter
$A'000
(150)
-
1.25 Explanation necessaryfor an understandingof the transactions
Directors fees, salaries and superannuation for the quarter.

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on
consolidated assets and liabilities but did not involve cash flows
None.
  • 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

None.

  • See chapter 19 for defined terms.

Appendix 5B Page 2

01/05/2013

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities
3.2 Credit standby arrangements
Amount available
$A’000
Amount used
$A’000
- -
- -

Estimated cash outflows for next quarter

4.1
Exploration and evaluation
4.2
Development
4.3
Production
4.4
Administration
$A’000
500
-
-
600
Total 1,100

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as
shown in the consolidated statement of cash flows)
to the related items in the accounts is as follows.
Current quarter
$A’000
Previous quarter
$A’000
5.1
Cash on hand and at bank
5.2
Deposits at call
5.3
Bank overdraft
5.4
Other (provide details)
660 1,688
2,450 3,250
- -
- -
Total: cash at end of quarter(item 1.22) 3,110 **4,938 **
  • See chapter 19 for defined terms.

01/05/2010 Appendix 5B Page 3

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Changes in interests in mining tenements and petroleum tenements

Tenement
reference
and
location
Nature of interest
(note (2))
Interest at
beginning
of quarter
Interest at
end of
quarter
6.1
Interests in mining
tenements and
petroleum tenements
relinquished, reduced
or lapsed
Refer to quarterly
activities report
6.2
Interests in mining
tenements and
petroleum tenements
acquired or increased
Refer to quarterly
activities report
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Tenement
reference
and
location
Nature of interest
(note (2))
Interest at
beginning
of quarter
Interest at
end of
quarter
6.1
Interests in mining
tenements and
petroleum tenements
relinquished, reduced
or lapsed
Refer to quarterly
activities report
6.2
Interests in mining
tenements and
petroleum tenements
acquired or increased
Refer to quarterly
activities report
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Tenement
reference
and
location
Nature of interest
(note (2))
Interest at
beginning
of quarter
Interest at
end of
quarter
6.1
Interests in mining
tenements and
petroleum tenements
relinquished, reduced
or lapsed
Refer to quarterly
activities report
6.2
Interests in mining
tenements and
petroleum tenements
acquired or increased
Refer to quarterly
activities report
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Tenement
reference
and
location
Nature of interest
(note (2))
Interest at
beginning
of quarter
Interest at
end of
quarter
6.1
Interests in mining
tenements and
petroleum tenements
relinquished, reduced
or lapsed
Refer to quarterly
activities report
6.2
Interests in mining
tenements and
petroleum tenements
acquired or increased
Refer to quarterly
activities report
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Tenement
reference
and
location
Nature of interest
(note (2))
Interest at
beginning
of quarter
Interest at
end of
quarter
6.1
Interests in mining
tenements and
petroleum tenements
relinquished, reduced
or lapsed
Refer to quarterly
activities report
6.2
Interests in mining
tenements and
petroleum tenements
acquired or increased
Refer to quarterly
activities report
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number Number quoted Issue price per
security (see
note3) (cents)
Amount paid up
per security (see
note3) (cents)
7.1
Preference
+securities
(description)
7.2
Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns
of capital, buy-
backs,
redemptions
-
-
-
-
-
-
-
-
7.3
+Ordinary
securities
7.4
Changes during
quarter
(a) Increases
through issues
(b) Decreases
through returns
of capital, buy-
backs
242,007,500 242,007,500 - -
-
-
-
-
-
-
-
-
7.5
+Convertible
debt
securities
(description)
  • See chapter 19 for defined terms.

Appendix 5B Page 4

01/05/2013

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

7.6
Changes during
quarter
(a) Increases
through issues
(b) Decreases
through
securities
matured,
converted
-
-
-
-
-
-
-
-
7.7
Options
(Unlisted
Options)
7.8
Issued during
quarter
(Unlisted
Options)
7.9
Exercised
during quarter
7.10
Expired during
quarter
3,650,000
2,000,000
400,000
6,666,667
3,333,333
10,000,000
10,000,000
-
-
-
-
-
-
-
Exercise price
35 cents
60 cents
35 cents
15 cents
20 cents
10 cents
15cents
Expiry date
25 October 2014
25 October 2014
22 August 2015
21 November 2016
21 November 2016
15 January 2016
15 January 2016
- - - -
- - - -
200,000
250,000
125,000
125,000
-
-
-
-
50 cents
60 cents
60 cents
70 cents
25 May 2014
25 May 2014
25 May 2014
25 May 2014
7.11
Debentures
(totals only)
- -
7.12
Unsecured
notes(totals
only)
- -

Compliance statement

  • 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

  • 2 This statement does give a true and fair view of the matters disclosed.

==> picture [92 x 30] intentionally omitted <==

Sign here: ............................................................ (Chief Financial Officer)

Date: 29 July 2014

Print name: John David Watkins

  • See chapter 19 for defined terms.

01/05/2010 Appendix 5B Page 5

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Notes

  • 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

  • 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements and petroleum tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement or petroleum tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

  • 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

  • 4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

  • 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

  • See chapter 19 for defined terms.

Appendix 5B Page 6

01/05/2013