ARCHER MATERIALS LIMITED — Interim / Quarterly Report 2012

Oct 23, 2012

24[th] October 2012

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Quarterly Activities Report For the period ended 30[th] September 2012 HIGHLIGHTS FOR THE QUARTER

EXPLORATION

GRAPHITE

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• Resource modelling of the Campoona Shaft graphite deposit commenced with a JORC Resource* expected in December 2012.

• *It is not possible to confirm at this time whether Mineral Resources or Ore Reserves will be defined in accordance with the JORC Code at the Campoona Graphite Deposit

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• Six diamond drill holes were completed at Campoona Shaft to provide samples for further ore characterisation and to evaluate process design options.

• A sample preparation laboratory was established at Lonsdale for the current round of metallurgical sampling. The site was chosen with a view to house later pilot-scale testing.

• Processing of the airborne EM surveys has highlighted likely extensions to Campoona (both north and south) and identified further targets likely to host graphite.

• Two diamond drill holes were completed at the crest of Sugarloaf Hill to recover graphite material for metallurgical test work.

COPPER

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• With a strong cash position Archer is now able to fund increased exploration on the Company’s nongraphite projects, specifically copper, gold and manganese.

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• A review of the Company’s main copper projects at Robertstown, World’s End, North Cowell and Spring Creek led to the flying of airborne EM across the Robertstown and World’s End (Mimic) copper targets as a precursor to RC drilling.

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• Previous auger drilling at Robertstown identified a 400m x 60m wide copper soil anomaly. Previous rock chip sampling returned assays to 1.75g/t Au and 1.14% Cu in a cuprite-bearing ferruginous gossan.

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• Mimic is a conceptual target but has compelling vectors - structurally identical to the nearby historic Monster Mine at Burra (86,000t recovered Cu) – anti-form with oblique faulting; NMS9 marker bed in Kooringa Member and the presence of prominent iron blows.

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• At North Cowell previous rock chip sampling returned highly anomalous copper with assays to 15.1% Cu over a strike of some 3kms. A drill program is planned for post-2012 harvest. Nearby, airborne EM identified a non-graphitic conductor requiring drill assessment.

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• Spring Creek near Wilmington hosts the historic Spring Creek underground copper mine. Mining extracted ferruginous silicified slate with copper carbonates (malachite and azurite) passing into cuprite, native copper and minor chalcocite in what appears to be a classic supergene profile. No primary sulphides were recorded. Mining drive sampling reported up to 21 feet @ 2.5% - 8.9% Cu.

Historic drilling (1969) at Spring Creek identified a zone of 21m @ 1.8%Cu 60m below the mine workings. Copper mineralisation is contained within a breccia. Drilling indicates the breccia has significant depth extent and may extend to the Brighton Limestone opening the opportunity for skarn mineralisation.

The Department of Environment and Heritage must approve exploration programs at Spring Creek.

GOLD AND MANGANESE

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• As part of the airborne EM targeting copper, flight excursions were included to cover the Napoleon’s Hat gold target near Burra and testing for manganese extending under cover at Ketchowla also in the Burra region.

FINANCIAL

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• Cash in bank on 30[th] September 2012 of $11.87 million.

• $650,042 spent on exploration during the quarter.

• _______________________

Summary of the September 2012 Quarter Exploration Activities

1. Graphite Exploration

Campoona Graphite Deposit

METALLURGICAL DRILLING

Six HQ diamond drill holes were completed at the Campoona Graphite Deposit during the Quarter. Five of the diamond holes intersected the high grade graphitic schist.

The metallurgical drill holes provided samples over the entire profile of the deposit from the weathered surface material through to competent rock. The drill core provided quality samples for further metallurgical test work to investigate the product types and product quality able to be recovered from different levels within the deposit. It is expected that the results will be used in the estimation of JORC Resources*.

• *It is not possible to confirm at this time whether Mineral Resources or Ore Reserves will be defined in accordance with the JORC Code at the Campoona Graphite Deposit

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Significant results included:

Table 1. Campoona Shaft Metallurgical Diamond Drill Results

Hole ID	From (m)	To (m)	Interval (m)	Assay %TGC	Lithology
Diamond Drill Results
CSDD12_001	16	41	37	14.4	Graphitic schist
CSDD12_002	11	88	77	17.2	Graphitic schist
CSDD12_003 incl and	24 24 90	106.4 89 106.4	82.4 65 16.4	15.9 14.7 21.3	Graphitic schist to EOH
CSDD12_004	17	115	98	13.3
CSDD12_005 incl and	28 32 59	74 51 73	46 19 14	12.6 16.1 14.8	Graphitic schist & gneiss

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Figure 1. Drill locations for the Resource Drilling at Campoona Shaft

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Key observations from the Resource drilling are:

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• The high grade intersections carry visible flake graphite.

• The discrete intense graphitic schist is hosted within graphitic proto-gneiss formed under metamorphic conditions (temperature and pressure) important for the development of crystalline graphite.

• There appears to be little to no silicification of the graphite in the Campoona Shaft area.

• The drilling has recorded significant widths of high grade graphite indicating that the unit thickens to a maximum true width exceeding 40m. The hangingwall section is particularly high in grade averaging over 15% graphitic carbon and carrying visible flake.

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• Pinching and swelling of the graphitic schist occurs along strike and down dip. Small rafts ( boudins ) of less deformed graphitic gneiss occur within the highly foliated graphitic schist.

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• The graphite unit outcrops, dips sub-vertically and extends continuously to a vertical depth of at least 100m.

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• The geological profile sees complete oxidation to at least 50 - 60 vertical metres below surface. From 60m the weathering remains strong to at least 80-100m.

• The presence of deep and intense weathering has resulted in a high degree of liberation of the graphite from the gangue minerals.

Results received to date from the drilling program are consistent with the previous exploration programs and reinforce the Company’s confidence in the Campoona Graphite deposit.

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Plate 1. Photo showing diamond drilling in progress for hole CSDD12_003

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Plate 2. HQ drill core of highly graphitic schist in hole CSDD12_003

AIRBORNE EM SURVEY

Archer completed a detailed 2,000 line km airborne RepTEM survey over large portions of EL4693 Wildhorse Plain and EL4893 Cleve West on 6[th] August 2012. The EM survey covered Archer’s Campoona Graphite Deposit and its north-eastern and south-western strike extensions as well as covering the main regional graphite targets (Figure 2).

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Figure 2. Location of EM Survey areas shown on image of regional magnetics

An early aerial survey was conducted over the Campoona Central Area, immediately around the Campoona South outcrop. The data collected from that airborne survey enabled accurate position of drilling in areas where graphite was concealed beneath soil cover.

The survey flown by Geosolutions Pty Ltd was divided into 3 areas:

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• Areas 1 to 3 (Fig. 2) cover the extension of the Campoona Graphite Deposit.

• Areas 4 to 6 cover the widespread Mt Shannon graphite occurrence.

• Area 7 covers the Wilklow to Miltalie occurrences that have previously recorded large flake graphite. Archer has not drilled these two highly prospective areas as yet.

RepTEM is a proprietary time domain EM system that is slung below a helicopter with the system sensor positioned 30 metres above ground surface.

The survey, conducted on flight lines spaced 100m apart, has provided high quality mapping of the highly conductive graphitic horizons.

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Plate 3. RepTem survey (Photo courtesy of Geosolutions Pty Ltd)

Data processing from the western portion of the surveys has shown:

1. The Campoona Shaft graphite deposit extends north of the drilled area.

2. The Campoona shear structure continues to the south for several kilometres.

3. Mt Shannan target offers the compelling mix of well defined structure and high EM response.

4. Other parallel conductive bodies occur to all target areas, which have not been drill tested at this time.

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Figure 3. EM image of area north of Campoona Shaft showing “tram track” extensions to the host shear zone.

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Figure 4. The Campoona structure extends for over 3kms south of the Campoona South outcrop.

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Figure 5. Mt Shannan presents as a pronounced elongate EM structure over several kilometres.

METALLURGY

During the quarter the Company established a sample processing facility at Lonsdale in southern Adelaide. All graphite trench and diamond drill samples from Campoona Shaft and Sugarloaf were transferred to the facility in late September where preparation of composite samples is underway.

The facility provides Archer with a metallurgical workshop and bulk sample storage area. The facility has been set up for weighing, washing, wet-screening, drying, crushing, splitting and blending of specially prepared bulk samples to be sent to commercial laboratories for flotation tests.

Further in-house testing capability is being developed to allow for the bench scale testing of differing extractive processes. Ore microscopy has also been established to provide visual assessments of performance of intermediate processing steps.

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Plate 4. Trench samples and diamond drill core arriving at Lonsdale.

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Plate 5. Facility in early stage of establishment

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Plate 6. Sample screening

Results from the metallurgical test work are expected throughout the December quarter.

ENVIRONMENTAL BASELINE STUDIES

The contract to undertake baseline flora and fauna studies for the Campoona Graphite Project was awarded to Golder Associates Pty Ltd.

Baseline flora and fauna studies are an important element for any future Program for Environmental Protection and Rehabilitation (PEPR) as required by the Department of Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) prior to the grant of a Mining Lease.

Desktop studies commenced in September 2012 with field surveys planned for November 2012. The timing of the studies ensured data is collected during the Spring period.

SUGARLOAF

Two metallurgical diamond drill holes were completed, Figure 6. The holes successfully intersected graphite horizons proximal to the historic shafts. Following receipt of the assay results samples will be collected for processing test work.

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Figure 6. Location of 2012 diamond drill holes (SLDD12_001 and SLDD12_002) with other AXE drilling

2.0 Copper Exploration

With the completion of the sale of Archer’s West Roxby tenements to BHP Billiton for $8 million the Company now has a strong cash position to fund increased exploration on the Company’s non-graphite projects, specifically copper, gold and manganese.

Archer has four very promising copper exploration targets at Robertstown, World’s End, Spring Creek and North Cowell.

The success of the Wildhorse Plain EM led to the Company flying airborne EM across the Robertstown and World’s End (Mimic) copper targets as a precursor to RC drilling. Data was still being processed at quarter’s end.

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Previous auger drilling at Robertstown has defined a 400m x 60m wide copper soil anomaly. The soil anomaly is supported by rock chip sampling which returned peak assays to 1.75g/t Au and 1.14%Cu in a co-incident cuprite-bearing ferruginous gossans.

Mimic is a conceptual target with compelling vectors - structurally identical to the Monster Mine at Burra (86Kt recovered Cu) and is located in a repeat antiform with attendant oblique faulting. Importantly the targets correspond with the NMS9 marker bed in Kooringa Member (host to the Monster Mine copper mineralization). Worlds End is marked with several prominent iron blows.

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Mimic
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Figure 7. Mimic and Robertstown copper targets

At North Cowell previous rock chip sampling returned highly anomalous copper with assays to 15.1% Cu over a strike of some 3kms (Figure 8). A drill program is planned for post-2012 harvest.

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Figure 8. Copper (%) from rock chip sampling

Spring Creek near Wilmington hosts the historic Spring Creek underground copper mine. Mining extracted ferruginous silicified slate with copper carbonates (malachite and azurite) passing into cuprite, native copper and minor chalcocite in what appears to be a classic supergene profile. No primary sulphides were recorded. Mining drive sampling reported up to 21 feet @ 2.5% - 8.9% Cu.

Historic drilling (1969) at Spring Creek identified a zone of 21m @ 1.8%Cu 60m below the mine workings. Copper mineralisation is contained within a breccia. Drilling indicates the breccia has significant depth extent and may extend to the Brighton Limestone opening the opportunity for skarn mineralisation.

The Department of Environment and Heritage will need to authorize exploration programs at Spring Creek.

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Plate 7. Malachite in outcrop 300m from mine adit

Plate 8. Historic adit showing copper carbonate lode

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3.0 Gold and Manganese Exploration

As part of the airborne EM targeting copper, flight excursions were included to cover the Napoleon’s Hat gold target near Burra and testing for manganese extending under cover at Ketchowla also in the Burra region.

Processing of data was in progress at quarter’s end.

4. CASH BALANCE

The Company’s cash balance at the end of the quarter was $11.87 million.

5. ACTIVITIES FOR DECEMBER QUARTER

Resource estimation for Campoona Shaft is expected to be completed in December 2012.

Metallurgical test work on the Campoona Shaft diamond drill samples will be completed.

Preparation is underway for the drilling of Central Campoona scheduled for January – March 2013.

Preparation is underway preparing for drilling of the Company’s copper, gold and manganese targets scheduled for the 2013 summer period.

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 eighteen years experience in the field of activity being reported. Mr Bollenhagen has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” relating to the reporting of Exploration Results. 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 5. Archer Exploration Tenement Position 30 September 2012

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