ARCHER MATERIALS LIMITED — Interim / Quarterly Report 2010

Apr 19, 2010

20 April 2010

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Quarterly Activities Report For the period ended 31st March 2010

HIGHLIGHTS FOR THE QUARTER

FINANCIAL

• Cash in bank on 31st March 2010 of $4.18 million.

• $235,000 spent on exploration during the quarter.

EXPLORATION

At North Burra, Archer Exploration’s (ASX:AXE) shallow RC program of 42 holes and 643m of drilling on the Ketchowla Manganese Prospect intersected manganese (Mn) mineralization including ‐

• 8m @ 15.6%Mn from 6m (K1), 4m @ 29.3% Mn from 5m (K9) and 4m @ 17.5% Mn from 11m (K1).

• At the K1 prospect the manganese mineralization contained up to 0.34% Cu, 0.14% Co, 0.24% Ni and 0.15% Zn

At Carappee Hill aircore drilling (207 holes for 1,711m) through transported sand cover at the Pindari Nickel Prospect outlined a strong soil geochemical anomaly, which was:

• 1km x 300m in extent and greater than 1,000pm nickel (Ni) and chrome (Cr);

• Peak soil sample values of 0.37% Ni and 0.34% Cr;

• Soil anomalism closely associated with the core of the 3km diameter, bullseye Pindari magnetic anomaly.

The initial assessment of the North Cowell Licence on Eyre Peninsula identified potential for:

• Base Metals ‐ results from rock chip sampling undertaken at the historic Morowie and Cowell Mines returned peak values of 11% copper, 72 g/t silver and 19% zinc from old workings.

• Iron and manganese ‐ two unnamed shallow manganese/iron workings located approximately 2.5km apart were sampled with the best result reporting 42.4% iron and 17.7% manganese . This mineralization is part of a 15 km structure, which includes the Cowell Manganese Mine to the north.

Archer Exploration Limited (ABN 64 123 993 233)

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At the Watervale Gold Prospect quartz veined sandstone samples located 50m apart on a NW trending ridge returned gold assays of 6.42g/t Au and 3.84 g/t Au. A second phase of sampling confirmed the gold values.

At West Roxby, Archer has developed an unconformity related, Athabasca style uranium model for the Apollo target, which will be drilled in Q2 subject to governmental approval of the program.

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Figure 1. Archer Exploration Tenement Position March 2010.

CORPORATE

In January 2010, Archer entered into a farmin agreement that entitled the Australian manganese producer OM Holdings Limited (ASX: OMH) to earn 60% of the ferrous minerals (manganese and iron) on Carappee Hill (EL 3711) by spending $600,000 to further explore the Jamieson Tank manganese prospect on South Australia’s Eyre Peninsula. Exploration within the farmin agreement commenced in March with 307 auger holes and 1,201m of drilling completed.

Archer also consolidated its manganese and iron exploration ground on Eyre Peninsula by signing a farm‐in agreement with UraniumSA Limited (ASX:USA) to earn a 100% interest in all minerals (except uranium) on USA’s Wild Horse Plains and Elbow Hill tenements located adjacent to Archer’s North Cowell and Carappee Hill exploration licenses. The

Archer Exploration Limited (ABN 64 123 993 233)

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combined licenses give Archer a land holding of 1,042 km[2] over an area, which contains known manganese and iron occurrences.

Following the success of its Ketchowla Manganese Project, Archer searched for South Australian manganese occurrences near major transport infrastructure. As a result, applications were made for:

• ELA 319/09 Australia Plains, located east of Eudunda, covering 880 sq km and the historic Neales Flat Manganese Claim.

• ELA 030/10 Kanyaka, located 25 km north of Quorn, covering 230 sq km and the former Kanyaka Manganese Mine.

• ELA 031/10 Termination Hill located NW of Leigh Creek, covering 542 sq km and the historic Stone Hut Well Manganese Mine. The application also covers a significant proportion of the SAMAG magnesite resource drilled and Pima Mining NL in the late 1990’s

All of the above licence areas are located within 50km of existing rail corridors.

Having identified gold mineralization on the Watervale Prospect at North Burra EL4266, Archer made application for ELA 015/10 Riverton, located 10 km northwest of Riverton and covering 308 sq km and the historic Watervale Gold mine.

Archer’s tenement status at the end of the quarter is shown in Figure 1. The Australia Plains application is expected to be processed in April, with the other applications due to be processed by the end of the second quarter.

OUTLOOK

Archer will progress its advanced Projects during the second quarter of 2010 by:

• Drilling the Pindari nickel anomaly with up to four reverse circulation holes with diamond tails.

• Drilling the Apollo uranium project with up to two 400m diamond drill holes. This drilling is subject to Ministerial consent.

• Evaluation Cu, Co and Ni bacterial leaching test work of the Ketchowla K1 manganese mineralization.

• Reverse circulation drilling the Jamieson Tank manganese target under the Farmin Agreement with OMH.

During the second quarter Archer will progress its projects by reviewing existing geological information, geological mapping and rock chip sampling of outcrop and old workings at North Cowell and Wild Horse Plains manganese and iron exploration targets.

Archer Exploration Limited (ABN 64 123 993 233)

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License applications are expected to be granted and initial site evaluations of mineralized systems and historic exploration data will be undertaken at:

• Manganese prospects on exploration licence applications at Australia Plains, Kanyaka and Termination Hill.

• Gold mineralization on the Riverton licence application.

• The extensive Mt Hutton magnesite resource.

The Company will maintain a strong cash position.

A detailed summary of the March Quarter exploration activity follows:

1. BURRA REGION (mid North of South Australia)

• 1.1 North Burra (EL4266) Ketchowla Manganese Project

• (Manganese, Cobalt, Nickel, Copper, Zinc ‐ 100% owned by AXE)

In February Archer completed its maiden drill program at the Ketchowla Manganese Project. The 45 reverse circulation (RC) holes (643 m) drilling program intersected > 5% Mn in many holes within a 140 sq km area and the best results are summarised in table 1 and seen in figure 2.

	Target	From To	Width	Mn
Hole ID	Area	m m	m	%
K1RC001 K1RC004 K2RC003 K2RC004 K8RC002 K8RC003 K8RC006 K8RC016 K9RC004 K9RC006 K9RC010	K1 K1 K2 K2 K8 K8 K8 K8 K9 K9 K9	6 14 11 15 3 4 1 2 2 4 2 4 1 5 0 2 2 6 5 9 4 8	8 4 1 1 2 2 4 2 4 4 4	15.6 17.5 33.6 31.7 17.5 12.0 12.5 18.8 16.3 29.3 11.1

Table 1. RC Drilling ‐ Manganese mineralized Zones Ketchowla

Rock chip sampling in the K1 and K2 areas has identified copper (Cu), cobalt (Co), nickel (Ni) and zinc (Zn) mineralisation. These metals appear to be associated with manganese (Mn) in the historic workings at K1 and in small exposures of manganese in rubbly outcrop or in small pits up to 4.7km north of the workings (figure 4).

The K1 workings and the north part of K2 were not drill tested during this program, because of the steep terrain. However, holes K1RC001 and K1RC004 drilled immediately north of K1 workings to test the potential extension of the mineralisation confirmed the

Archer Exploration Limited (ABN 64 123 993 233)

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association between manganese, copper, cobalt, nickel and zinc at depth. Results included:

• K1RC001: 4 ‐ 12m, 8 metres @ 15.6% Mn; 0.21% Cu; 0.14% Co; 0.24% Ni and 0.15% Zn.

• K1RC004: 11 ‐ 15m, 4 metres @ 17.5% Mn; 0.34% Cu; 0.11% Co; 0.24% Ni and 0.15% Zn.

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Figure 2. RC drill hole locations and location of the significant manganese mineralised zones and higher grade drill hole intersections.

Archer Exploration Limited (ABN 64 123 993 233)

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Another encouraging aspect of the results from K1001 and K1004 was the width of manganese mineralization intersected below small rubbly manganese outcrops < 1m wide on a scree covered slope. This highlights the potential of the 4.7 km northern extension of K1.

The original 2,500m drill program was only partially completed, because of the unavailability of the track mounted rig originally contracted to carry out the program. Access was restricted to relatively flat areas, because the replacement rig was truck mounted. This meant the steeper and most prospective areas of K1 and K2 were not drill tested.

Archer is currently analysing the results of the recent drill program and planning further work, which will include additional drilling and bacterial heap leach testwork of the manganese, copper, cobalt, nickel mineralization at the K1 prospect.

Figure 3 below is an east west cross section through the K9 drilling and it shows the relatively flat dip and strataform nature of the manganese mineralisation, characteristic of the K2, K6, K8 and K9 deposits.

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Open down dip
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Figure 3. K9 cross section with manganese grades in %

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Figure 4. Rock chip grades (red) and drill hole results (blue) K1 and K2 Ketchowla

Archer Exploration Limited (ABN 64 123 993 233)

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1.2 North Burra (EL 4266) Water Vale Gold Project

(Gold 100% owned)

During January 2010, Archer reported assay results from initial reconnaissance of its 100% owned Water Vale Gold Prospect located at North Burra EL 4266, the same tenement that hosts the Company’s Ketchowla Manganese Project. Archer collected eighteen rock chip samples near shallow workings in Watervale Sandstone Member outcrops. Samples of quartz veins, altered siltstones and sandstones were taken to test for gold mineralisation. These samples varied in size from 0.6kg to 1.8kg and were submitted for screening fire assay due to the coarse nature of the gold. After initial preparation, the sample was screened at 75 micron to produce 2 sample sizes, a plus and a minus 75 micron fraction, which were then individually assayed. Screen fire assay is commonly used when coarse gold is expected.

In summary, the January sampling program at Watervale resulted in two quartz veined, sandstone samples located 50m apart on a NW trending ridge returning gold assays of 6.42g/t Au and 3.84 g/t Au (figure 5). To the north, quartz veining returned grades of 0.29 and 0.55 g/t Au, but no sampling was undertaken to the southeast along the interpreted mineralised trend.

Follow up sampling at the Watervale Gold Project was undertaken in late February and assay results are shown in blue in figure 5. The February sampling confirmed the presence of economically significant gold mineralization around the old workings and showed the south east extension to be anomalous for gold. These initial gold results are encouraging given the reconniassance nature of the sampling.

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Figure 5. Watervale Prospect. Rock Chip Sampling

Archer Exploration Limited (ABN 64 123 993 233)

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1.3 World’s End (EL4266)

(Copper, Gold, 100% owned)

No field work was undertaken in the March quarter.

2. EYRE PENINSULA (Central Eyre Peninsula SA)

2.1. Carappee Hill (EL3711) Pindari Nickel Project

(Nickel, Chrome, Cobalt 100% owned)

Pindari is a regional, 3 kilometre diameter, circular magnetic anomaly (Figure 6), which was unsuccessfully tested by Stockdale Prospecting Ltd in 1987 for diamond bearing kimberlite. Stockdale’s petrology investigations reported nickel sulphides, pentlandite and violarite (a supergene nickel sulphide after pentlandite) were present within an ultramafic protolith, which has been metamorphosed and veined. Archer commenced a 207 hole, 1,711m aircore drilling program in January to sample bedrock and soil, through shallow, variable, (1‐10m) transported sand cover, which covers the Pindari magnetic anomaly.

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Figure 6. Total Magnetic Intensity image with nickel soil geochemistry .

Archer Exploration Limited (ABN 64 123 993 233)

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The sampling identified a 1km long arcuate > 1,000 ppm nickel / chrome soil geochemical anomaly, which is open to the west and had peak values of 0.37% nickel and 0.34% chromium. There is a strong correlation between the Ni/Cr soil anomaly and the outline of the core of the magnetic anomaly. Bedrock rare earth (REE) values were elevated over a wide area with peak values generally 10‐20 times REE crustal abundance.

These geochemical results confirm Pindari’s nickel potential and closely link nickel mineralization with the core of the Pindari magnetic anomaly. Future work will involve reverse circulation (RC) and diamond drilling program in the third quarter of 2010 to test the magnetic, electromagnetic and nickel/chrome geochemical Pindari anomaly at depth.

2.2. Carappee Hill (EL3711) Jamieson Tank Manganese Project (Manganese and Iron)

Australian manganese producer, OM Holdings Limited (ASX: OMH) signed a $600,000 Farmin Agreement with Archer Exploration Ltd in January 2010 to further explore the Jamieson Tank manganese prospect. The Jamieson Tank manganese project, south of Kimba, is contained within Archer’s wholly‐owned Carappee Hill tenement (EL3711) located in the vicinity of iron ore, manganese and steel operations and projects owned by Centrex, Monax and OneSteel.

Under the farm‐in terms, OM Holdings through its wholly‐owned subsidiary, OM Manganese Limited (OMM) has the right to earn a 60% interest in all ferrous minerals (manganese and iron ore) at Jamieson Tank by funding exploration expenditure to the value of A$600,000 over a four‐year period. Archer retains the right to all non‐ferrous minerals within the tenement. Should OMM withdraw prior to spending $600,000, it will have earned no interest in the ferrous minerals or the tenement.

Upon OMM earning its farmin interest, OMM and Archer will enter into a Joint Venture Agreement (JVA). Archer may either elect to contribute in proportion to its 40% interest, or transfer a further 20% interest to OMM in return for OMM funding a further $600,000 of expenditure.

Should OMM make a decision to mine, Archer may elect to contribute in proportion to its remaining participating interest, or relinquish its interest and withdraw from the JVA in exchange for a net revenue FOB royalty at a rate of 1% for each 10% of participating interest retained at the time of OMM’s decision to mine.

OMM controls 100% of the operating Bootu Creek Manganese Mine located 110 kilometres north of Tennant Creek in the Northern Territory.

A 357 hole and 1,201m auger program was undertaken by OMH in March and results are expected in mid April. A reverse circulation follow up program is planned for May.

Archer Exploration Limited (ABN 64 123 993 233)

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2.3. Wild Horse Plains, (EL3377) Elbow Hill (EL3653)

(Manganese, Iron and base metals)

In March 2010, Archer Exploration Ltd signed a farm‐in agreement with UraniumSA Limited (ASX:USA) to earn an interest in all minerals (except uranium) on USA’s Wild Horse Plains and Elbow Hill tenements located near Archer’s North Cowell and Carappee Hill Projects. The combined projects give Archer access to an area of 1,042 km[2] , which contains known manganese and iron occurrences including Archer’s Jamieson Tank Manganese Project, (figures 7 and 8).

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Figure 7. Eyre Peninsula Tenement Position

The farm‐in agreement provides Archer with access to highly prospective Lower Middleback Jaspilite manganese and iron mineralization and historic base metal prospects, (fig 8). Exploration by CRA in 1977 identified strong iron mineralisation >60% iron at Mt Shannon and Mt Desperate, 10 kms north east of Cleve. Archer’s Jamieson Tank Project, which is the subject of a farmin agreement with OM Holdings (see 2.2) is located 10km to the northwest of Wild Horse Plain and covers similar stratigraphy.

Archer’s initial rock chip sampling at the adjacent North Cowell (see 2.4.) has identified manganese and iron mineralization, which is likely to extend north to the historic Cowell Manganese Mine (figure 8).

Under the terms of the farm‐in agreement, Archer may earn a 100% interest in all minerals (except uranium) by spending a total of A$300,000 exploring the tenements during the next 2 years. Archer must spend a minimum of A$150,000 on exploration during the first year before it can withdraw from

Archer Exploration Limited (ABN 64 123 993 233)

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the farm‐in agreement. After Archer has spent the required A$300,000, it will then enter into a joint venture with USA whereby Archer will be entitled to explore for, and mine, minerals (except for uranium) on the tenements. Archer will retain a 100% interest in all minerals (except for uranium).

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Figure 8. JV tenements and Archer’s North Cowell and Carappee Hill licenses (black) on composite Total Magnetic Intensity image.

2.4. North Cowell (EL 4277)

(Manganese, Iron and Copper/Uranium 100% owned)

Archer Exploration Ltd carried out initial reconnaissance sampling and mapping of its North Cowell tenement EL 4277 (figure 8) during the quarter. The tenement hosts the historic Calcookra, Morowie, Cowell and Yalpoodnie copper and uranium mines as well as old manganese/iron workings. Archer’s initial assessment of the tenement involved locating historical base metal and manganese/iron mines and collecting rock chip samples within the workings, host rocks and potential extensions to the mineralization. A total of 51 samples were collected and assayed for a range of elements. The 26 best results are presented in table 3.

Archer Exploration Limited (ABN 64 123 993 233)

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Sample no	Easting	Northing	Fe %	Mn %	Cu %	Zn %	Ag (g/t)
22370	661682	6279379	4.5	0.03	0.64	0.01	0.2
22371	661642	6279385	33.8	1.19	0.11	0.08	0.22
22374	662142	6280162	3.5	0.06	11.00	19.25	72.4
22375	662142	6280152	5.7	0.07	0.48	0.56	5.7
22376	662142	6280142	7.0	0.21	15.10	6.11	9.51
22377	662144	6280171	6.1	0.18	0.75	1.37	4.39
22384	662643	6280322	1.3	0.03	4.70	0.11	1.47
22385	662642	6280306	6.9	0.27	1.03	0.16	1
22386	662639	6280333	3.6	0.02	5.80	0.28	3.92
22387	662724	6280517	4.3	0.06	1.43	0.09	1.75
22388	662724	6280503	3.7	0.04	4.36	0.08	8.46
22389	662720	6280526	1.6	0.02	1.25	0.04	3.95
22394	662960	6281238	2.4	0.01	2.39	0.00	0.29
22395	662960	6281232	3.0	0.01	5.88	0.00	0.46
22396	662958	6281244	4.3	0.01	5.62	0.00	0.87
22399	665848	6281934	37.4	6.78	0.02	0.09	0.46
22400	665844	6281890	42.4	17.65	0.002	0.12	0.3
22401	665844	6281992	40.6	18.90	0.002	0.15	0.24
22402	665839	6282076	38.9	7.84	0.001	1.40	0.41
22407	663774	6279227	47.2	7.14	0.001	0.19	0.2
22408	663774	6279237	26.8	1.45	0.001	0.09	0.13
22415	662181	6278195	35.6	0.49	0.01	0.00	0.39
22416	662171	6278220	41.4	0.25	0.005	0.01	0.3
22418	663268	6280682	5.4	16.15	0.01	0.03	0.81
22419	663304	6280753	5.3	9.20	0.02	0.07	3.06
22420	663351	6280821	3.8	19.70	0.01	0.03	0.79

Table 2. Significant results from rock chip sampling at Nth Cowell.

Copper, Silver and Zinc

The analysis results from rock chip sampling confirmed significant copper (Morowie and Morowie Sth Mines) and copper, zinc and silver (Cowell Mine) associated with the old working. The peak values were 11% copper, 72 g/t silver and 19% zinc from the Cowell Mine.

Mineralisation at the Morowie deposits is predominantly copper, malachite and azurite (copper carbonates) with minor silver, while Cowell was anomalous for copper, zinc and silver deposit. The mineralisation is hosted in a sequence of altered, silicified, siltstone, dolomite and quartzite.

Manganese and Iron

Two shallow unnamed manganese/iron workings located approximately 2.5kms apart were sampled with the best result being 42.4% iron and 17.7% manganese, (figure 9). This manganese and iron mineralization is located approximately 8 kms west of Centrex’s Bungalow Prospect and is associated with the Lower Middleback Jaspilite, which is the primary host to iron mineralisation on the Eastern side of the Eyre Peninsula.

Archer Exploration Limited (ABN 64 123 993 233)

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The next phase in the evaluation of the iron and manganese potential of the jaspilite at North Cowell will be to map and sample the unit over its 6 kms strike length across the tenement.

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Figure 9. Location of significant Mn and Fe samples with underlying geology from PIRSA.

3. WEST ROXBY PROJECTS (Stuart Shelf, Gawler Craton)

IOCG (EL’s 3721, 3722, 3724, 3851, and 3869) 100% owned

Apollo is a greenfields project located in a remote part of South Australia approximately 100 km NW of Port Augusta in the under explored Cariewerloo Basin. The Apollo Project is centred on an untested, precisely coincident gravity low, topographic depression and magnetic low anomalies. (Figures 10 a, b, c).

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Figure 10 a. Gravity b. Total Magnetic Intensity c. Topography

One of the geological models proposed to explain the coincident anomalies is an Athabasca style unconformity related uranium mineralized system. PIRSA has identified the potential for unconformity related uranium mineralization in the Cariewerloo Basin, where Mesoproterozoic red bed lithologies

Archer Exploration Limited (ABN 64 123 993 233)

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(Pandurra Formation) unconformably overlie faulted, reduced, crystalline basement, which has been intruded by uranium rich A type granites (figure 11).

Athabasca uranium deposits like Millennium (47 Million pounds U3O8) and Rabbit Lake (21.3 Million pounds U3O8) in Canada are known to be associated with magnetic and gravity lows. These features result from intense alteration during the uranium mineralizing event that converts the host rocks to clay resulting in surface depressions. Rabbit Lake is associated with a topographic depression.

At Apollo the unconformity between the Pandurra Formation and basement is estimated to be approximately 250‐350m from surface. The target is ready for drill testing and the planar nature of the target and the extensive alteration and pathfinder element halo around unconformity style mineralized systems means a limited amount of drilling will be required to evaluate the Apollo target concept.

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Figure 11. Model for Apollo anomaly

During the second quarter, subject to government approval, at least one diamond drill will test the gravity feature to evaluate the geology associated with the anomaly and any mineralization, alteration or pathfinder minerals. Analysis results are expected to be reported in July.

4. WILMINGTON (East of Pt. Augusta – SA)

EL’s 4201, 4249 and 4202 (Copper, Iron and Diamonds 100% owned)

No field work was undertaken in the March quarter.

Archer Exploration Limited (ABN 64 123 993 233)

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CORPORATE

Growing asset base:

Archer Exploration expanded its exploration tenement holding for manganese and gold in South Australia by:

• Entering into a Farmin Agreement with Uranium SA to explore the 895 sq km Wild Horse Plains (EL 3377) and Elbow Hill (EL 3653) licenses. These licences are close to Archer’s North Cowell (EL4277) where reconnaissance exploration has encountered manganese and iron mineralization and Carappee Hill (EL 3711) where Archer’s Jamieson Tank manganese project is subject to a farmin agreement OM Holdings Limited (ASX: OMH).

• Making application for three exploration licences (Australia Plains ELA319/09, Kanyaka ELA 030/10 and Termination Hill ELA 031/10) in areas with historic manganese occurrences that are located close to transport infrastructure (figure 1). In addition to the manganese, these licences have potential for other mineral occurrences, the most apparent the historic magnesium resources at Termination Hill and Plug Hill near Leigh Creek (ELA 031/10).

• Making application for the Riverton ELA015/10, which covers the historic Watervale Mine, which has a similar geological setting as Archer’s Watervale Prospect at North Burra. Watervale Mine records from 1896 include reports of 14 g/t gold from a 20m shaft and surface samples from 3 to 22 g/t gold.

Cash balance:

The Company’s cash balance at the end of the quarter was $4.18 million.

Subsequent Activities:

On 12 April Archer received a notice from Raffles Equities Limited requesting that the Company hold an Extraordinary General Meeting for the purpose of appointing Mr John Dawkins as a director of Archer Exploration Limited. The Company has been in discussions with Raffles and Mr Dawkins regarding the request and expects to make a further announcement in the coming week.

For further information please contact: Mr Greg English Mr Mike Hatcher Chairman CEO Archer Exploration Limited Archer Exploration Limited Tel: (08) 8332 5033 Tel: (08) 8332 5033

The exploration results reported herein, insofar as they relate to mineralisation, are based on information compiled by Mr. Wade Bollenhagen, Exploration Manager of Archer Exploration Limited. Mr. Bollenhagen is a Member of the Australasian Institute of Mining and Metallurgy who has more than fifteen years experience in the field of activity being reported. Mr. Bollenhagen consents to the inclusion in the report of matters based on his information in the form and context in which it appears.

Archer Exploration Limited (ABN 64 123 993 233)