ARCHER MATERIALS LIMITED — Interim / Quarterly Report 2011

Apr 27, 2011

28[th] April 2011

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Quarterly Activities Report For the period ended 31[st] March 2011

HIGHLIGHTS FOR THE QUARTER

EXPLORATION

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• 19 RC drill holes were completed at Wildhorse Plains EL 3377 to drill test the Salt Creek manganese deposit. Widespread manganese was intersected including:

• 5m at 12.47% Mn from 14 to 19m in SCRC11_002

• 11m at 12.35% Mn from 42 to 53m in SCRC11_003

• 7m at 12.12% Mn from 5 to 12m in SCRC11_005

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• 1 RC drill hole was in progress at Sugarloaf graphite deposit at Carappee Hill at the end of the period. The drill hole had intersected a 20 metre interval of graphitic schist.

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• 2 RC drill holes were completed at the Emu Creek copper prospect at Wildhorse Plains. Traces of disseminated chalcopyrite were intersected within biotite schist. A third drill hole is planned.

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• 3 RC drill holes were completed on Wildhorse Plains EL 3377 to test a ground gravity anomaly at Campoona and Mt Desperate. The drilling intersected BIF and pegmatite at Campoona and amphibolite at Mt Desperate. The amphibolite is the most likely source of the gravity anomalism.

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• ELA 388/10 Eudunda and ELA 11/11 Ediacara were applied for during the quarter covering prospective ground for phosphate, barite, REE and coal.

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• Tenements - 2 tenements were granted during the quarter. Both tenements - Napoleons Hat EL4668 and Mt Shannon EL4673 were granted on the 21[st] February, 2011.

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• Archer accepted the terms and conditions for Witchelina ELA 173/10 covering part of the Leigh Creek magnesite deposit on 11[th] February 2011. Granting of Witchelina is expected during Q4 2011.

METALLURGICAL STUDIES:

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• Leigh Creek Magnesite – A 750kg composite sample of Beds 5 and 9 from the Mt Hutton magnesite deposit was processed by Calix Limited using Calix’s flash calcining process. This first

calcining test was to determine the quality of magnesia that could be produced through the calcining of run-of-mine un-beneficiated magnesite in order to determine if beneficiation was required prior to or subsequent to calcining. A second control sample of Myrtle Springs Bed 9 magnesite was calcined at the Ian Wark Institute to twin the Calix test work. The calcining tests showed that highly reactive magnesia can be produced grading 90% MgO however SiO2 levels at ≥4.5% were too high relative to current marketing specifications for comparable magnesia products. Further testing is being scoped with the aim of reducing the minor amounts of talc (and hence silica) prior to calcining.

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• Test work using density separation and gravity concentration successfully upgraded a sample of Ketchowla K1 manganese drill cuttings from 17.47% Mn to >35% Mn at a 23.21% recovery. The test work also demonstrated upgrading of the Ni (0.258% to 0.412%); Co (0.175% to 0.296%); Cu (0.226% to 0.377%) and Zn (0.164% to 0.277%) in the combined coarse concentrate, fine concentrate and middlings products. Yttrium similarly increased from 113.2ppm to 204ppm.

FINANCIAL

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• Cash in bank on 31[st] March 2011 of $2.919 million.

• $169,000 spent on exploration during the quarter.

A summary of the March Quarter exploration activity follows:

1. Eyre Peninsula Manganese – Salt Creek Manganese Deposit Wildhorse Plains

19 hole RC drill holes were completed over a portion of the Salt Creek manganese deposit located near Cleve on Eyre Peninsula, South Australia.

The drilling targeted an area of discontinuous north-south striking manganese outcrops occurring within cropping paddocks. Previous rock chip samples had returned manganese grades to 27% Mn.

The drilling highlighted that manganese occurs in three different rock units:

1. High iron manganese associated with weathered Lower Middleback banded iron Formation.

2. Fine manganese in weathered pelitic sediments (clays and schists).

3. Up to 5mm fine manganese nodules within transported silica-rich sand.

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Figure 1. Location of Salt Creek Drill holes

The manganese units appear to comprise two limbs of an overturned syncline with a western limb consisting of sporadic outcrops of high-iron manganese and an eastern limb of manganese and silica-rich manganese adjacent to quartzite/leached BIF. The drilling only targeted the western limb.

The presence of fine (<5mm) nodular manganese within unconsolidated silica-rich sand suggests that the manganese was locally re-precipitated. The silica-rich sand units are thought to represent an old scarp (cliff face) possibly formed as a result of faulting. The implication is that manganese mineralisation may continue to the west of the drilling, as well as to the east in the buried syncline.

Much of the manganese appears to have been affected by weathering, which also contributes to the increased iron values seen in the results.

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Figure 2. Geology of southern drill line with manganese intervals reported.

All 19 drill holes encountered anomalous manganese mineralisation as shown in table 1, below.

Hole Id	From To Interval (m) Mn % Fe %	From To Interval (m) Mn % Fe %	From To Interval (m) Mn % Fe %	From To Interval (m) Mn % Fe %	From To Interval (m) Mn % Fe %
SCRC11_001	0	43	43	2.66	30.7
SCRC11_002	0	66	66	4.15	24.44
SCRC11_003	0	57	57	6.44	16.77
SCRC11_004	16	37	21	5.04	5.9
SCRC11_005	0	31	31	4.86	23.24
SCRC11_006	12	26	14	4.3	25.18
SCRC11_007	44	59	15	2.41	24.31
SCRC11_008	8	19	11	2.54	17.05
SCRC11_009	0	24	24	5.45	26.94
SCRC11_010	0	27	27	3.48	22.45
SCRC11_011	8	50	42	4.61	21.28
SCRC11_012	30	38	8	2.35	22.92
SCRC11_013	0	36	36	3.09	23.02
SCRC11_014	10	46	36	3.48	24.09
SCRC11_015	23	46	23	2.65	29.57
SCRC11_016	32	43	11	2.89	33.24
SCRC11_017	4	12	8	3.4	1.08
SCRC11_018	1	3	2	5.99	13.69
SCRC11_019	0	25	25	2.98	9.34

Table 1. Manganese intervals for all Salt Creek drill holes

The Salt Creek manganese deposit has a strike length of up to 10 kms as evidenced by Archer rock chip sampling and the recent drilling program and as indicated by historical mapping and sampling (CRA-1978, Shell1986 and Aberfoyle-1991), figure 3 below.

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Figure 3 The potential strike extensions to the Salt Creek manganese deposit

Representative samples of the three styles of manganese mineralisation will be collected for dense media and gravity concentration tests.

2. Eyre Peninsula Graphite – Sugarloaf Graphite Deposit Carappee Hill

Graphite was historically mined from two shafts at Sugarloaf, which is located on EL 3711 on Eyre Peninsula, South Australia. Government reports state mining ceased before 1915.

In 2008, Archer intersected a number of highly graphitic intervals during drilling, a number of these intervals were assayed to identify economic intervals of graphite. Values of up to 20% total carbon were identified (figure 4).

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Figure 4 Section 4700N, with assayed intervals showing average total carbon grades

An evaluation of drilling conducted by Helix and Goldstream identified that 23 of the 41 drill holes drilled to identify shallow gold intersected significant widths of graphitic schist (figure 5). None of holes were assayed for total carbon, although the presence of carbon interfered with the gold reporting.

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Figure 5 Historic drilling at Sugarloaf highlighting drill holes that intersected graphitic schist in magenta

Samples of graphite were sent to Pontifex and Associates in Adelaide for detailed petrological work to determine the potential flake size of graphite from thin section.

This initial work identified the carbon present in the samples to be graphite with an average grain size of 100µ, with flakes ranging from 20µ to 200µ in length. Most flakes were independently arranged in the matrix. Some graphite flakes were arranged in ‘booklets’ up to 50µ in width (figure 6 below).

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100µ
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Figure 6 Photomicrograph of thin section of graphite rock under ordinary transmitted light showing typical mode of occurrence and flake size of schistose black-opaque graphite within (muscovite) quartz-rich metasiltstone.

Archer has determined an exploration target of between 9 – 20 million tonnes* of highly graphitic schist. The lower bound results from extrapolation between drilled cross sections (1,150m strike; 30m width; and 100m depth extent) and the upper bound assuming the same dimensions over a 2.5 km strike coincident with the EM anomaly.

*The potential quantities and grades presented are conceptual in nature, there has been insufficient exploration to define an overall Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource

The physical characteristics of the graphite, including flake size, are essential to determine the prospectivity of the deposit.

Pontifex’s interpretation was that the sample represented a low to medium grade metamorphosed pelitic quartz-rich siltstone, which was inherently carbonaceous, now converted to fine graphite forming a schistosity within laminated fine quartzose rock i.e. a fine graphite-quartz-schist. Graphite formed approximately 15% of the whole rock. A visual estimate of the average size of the independent graphite flakes was 10 m thick x 100 m long.

A four hole drill program (figure 7) was planned with two main aims:

1. Drill adjacent to former unassayed drill holes to determine the accuracy of previous geological logging which had recorded wide intervals of graphitic schist, and

2. Drill deep RC holes (150m down-hole) along a selected area of strike to provide strike and depth coverage samples for graphite determination.

During the quarter a grab sample of weathered graphitic schist from the collar of one of the shafts was forwarded to a laboratory in the USA to test for carbon and graphite. The laboratory reported that the sample contained graphite but was mostly non graphite carbon due to its amorphous nature and high resistivity. The laboratory qualified its observations by saying that because the sample was taken from the surface they could not then conclude that a sample taken at depth would have same test results.

By period’s end one drill hole was in progress already intersecting an interval of 20m of highly graphitic schist.

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Figure 7 Proposed drill program highlighted in green for Sugarloaf

Once the holes have been assayed for total carbon, a number of samples will be selected for detailed graphite characterisation as well as sufficient sample to undertake bench-scale screening and flotation tests.

3. Eyre Peninsula Copper – Emu Plains Copper Prospect Wildhorse Plains

During the quarter 2 RC holes were drilled at the historical copper workings at Emu Plains, the first hole was drilled to 37m and the second to 67 m. Both holes intersected muscovite altered rocks. Trace amounts of sulphide including chalcopyrite were observed throughout the more intensely altered zones of the rock. Results are expected in the next quarter.

4. Eyre Peninsula Iron – Campoona and Mt Desperate Gravity Anomalies Wildhorse Plains

Three holes were drilled at separate locations over the gravity anomalies at Campoona central, Campoona West and Mt Desperate. The first hole drilled at Campoona Central was completed at 115m in a hematite altered pegmatite, the source of the anomalism was not determined. The other two holes at Campoona Central and Mt Desperate were terminated at 60m and 16m respectively in a highly altered schist unit dominated by amphiboles (amphibolite). Additional density work on samples collected from these holes will assist in the re-modelling of the gravity data to determine if the material drilled is the source of the gravity anomalies.

5. Leigh Creek Magnesite

During 2010, Archer applied for two tenements covering the Leigh Creek magnesite deposits that were formerly owned by Magnesium International Limited. Termination Hill EL 4567 was granted on 20[th] September 2010 giving Archer ownership over high grade magnesite deposits at Mt Hutton, Mt Playfair, Pug Hill and Termination Hill. Archer has accepted the terms and conditions attached to ELA173/10 Witchelina and is awaiting confirmation of grant.

Termination Hill EL 4567 JORC Measured, Indicated and Inferred Resources are shown in Table 2 below.

	Termination Hill EL 4567 JORC Magnesite Resources*	Termination Hill EL 4567 JORC Magnesite Resources*	Termination Hill EL 4567 JORC Magnesite Resources*
Area	Measured(Mt)	Indicated(Mt)	Inferred(Mt)	MgO (%)
PugHill		10	10	42.7%
Termination Hill	4	5	20	42.8%
Mt Hutton	18.3	42	53	42.9%
Mt Playfair		11	23	42.5%

Table 2 JORC Magnesite Resources within Termination Hill EL4567

Source: SAMAG Project Report 1999 # Magnesite (MgCO3) has a maximum possible MgO grade of 47.8%

Witchelina ELA 173/10 hosts the substantial Witchelina magnesite deposit.

	ELA 173/10 Witchelina JORC Magnesite Resources*	ELA 173/10 Witchelina JORC Magnesite Resources*	ELA 173/10 Witchelina JORC Magnesite Resources*
Area	Measured(Mt)	Indicated(Mt)	Inferred(Mt)	MgO (%)
Witchelina	23.7	94	99	40.0%
Table	3 JORC Magnesite	Resources within Witchelina ELA 173/10

*Source: Reproduced from MDL Report “Economic Evaluation of the Pug Hill Magnesite Deposit, North Flinders Ranges, South Australia. 2001. Note full BFS completed and JORC resources for 5 deposits and JORC reserve for Mt Hutton calculated. The independent resource estimates were completed by Mr. Colin Arthur (BSc, MSc, FGS, MAusIMM, CGeol, CEng) Manager, Micromine Resource Centre, August 1999. The estimates were based on 69 fully cored DDHs and all other attendant studies required to support resource and reserve estimation.

During the December 2010 quarter a 750kg (approx) composite sample from magnesite Beds 5 and 9 at Mt Hutton was collected and dispatched for initial flash calcining tests to Calix Limited in Victoria. A second control sample of Myrtle Springs Bed 9 magnesite was calcined at the Ian Wark Institute to twin the Calix test work.

This calcining test work was designed to determine the quality of magnesia that could be produced through the calcining of run-of-mine un-beneficiated magnesite.

The full results were not available by period’s end however initial calcining tests indicated that calcining of runof-mine un-beneficiated magnesite produced highly reactive magnesia grading 90% MgO. SiO2 levels at ≥4.5% were too high relative to current marketing specifications for comparable magnesia products.

Calix is performing screening of the calcined magnesia in order to determine if screening post calcining can reduce the silica levels.

Further tests are being scoped that will test beneficiation of the magnesite prior to calcination.

Magnesia (MgO) has a wide range of applications including agricultural (fertilizers and food supplements, pharmaceutical, industrial, construction and high tech applications such as long-life batteries, a multitude of alloys with aluminium, manganese, zinc, as the mainstay importance to the die casting industry, aviation, defence and space industry, many automotive parts and components, uranium reduction, refractory use in iron and steel production and much more.

6. Ketchowla Manganese, Base Metals and REE

A composite RC drill hole sample from the Ketchowla manganese deposit was sent to Nagrom in Kelmscott, Perth for dense media separation and analysis. Test work using density separation and gravity concentration successfully upgraded the 17.47% Mn sample to >35% Mn (23.21% recovery) as shown in the table below.

Product Summary	Yield (%)	Mn % dist	Mn % dist	%	Fe dist	SiO2 % dist	SiO2 % dist
Coarse Concentrate	11.99%	36.49	25.04%	1.77	5.12%	17.42	5.21%
Fines Concentrate	2.58%	38.95	5.74%	5.42	3.37%	8.75	0.56%
Middlings	8.64%	33.67	16.65%	3.65	7.61%	18.68	4.02%
Waste	76.79%	11.96	52.56%	4.53	83.91%	47.11	90.21%
Calculated Head	100.00%	17.47	100.00%	4.15	100.00%	40.11	100.00%

Table 4 Ketchowla K1 manganese beneficiation results

The test work also demonstrated upgrading of the Ni (0.258% to 0.412%); Co (0.175% to 0.296%); Cu (0.226% to 0.377%) and Zn (0.164% to 0.277%) in the combined coarse and fine concentrate and the middlings products. Yttrium similarly increased from 113.2ppm to 204ppm.

It was signalled in the December quarterly that additional work including ground gravity and reverse circulation drilling would be completed in the March quarter. This work has been postponed until the evaluation of the Salt Creek manganese deposit can be completed.

7. OMM Joint Venture – Jamieson Tank (EL3711)

During the quarter, a total of 824m in 14 drill holes were drilled at Archer’s Jamieson Tank manganese project by Monax Mining Limited as part of the joint venture with OMM Holdings Limited. A total of 182 samples were submitted for laboratory analyses. Results will be reported in the next quarter.

Cash balance:

The Company’s cash balance at the end of the quarter was $2.919 million.

For further information please contact:

Mr Greg English Chairman Archer Exploration Limited Tel: (08) 8272 3288

Mr Gerard Anderson Managing Director Archer Exploration Limited Tel: (08) 8272 3288

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 sixteen 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.

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Figure 8. Archer Exploration Tenement Position March 2010.