ARCHER MATERIALS LIMITED — Interim / Quarterly Report 2012

Apr 19, 2012

20[th] April 2012

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Quarterly Activities Report For the period ended 31[st] March 2012

HIGHLIGHTS FOR THE QUARTER

EXPLORATION

GRAPHITE

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• A total of 37 RC and RC aircore drill holes for 1,957 metres were drilled at the high grade Campoona Graphite Deposit.

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• Drilling confirmed the presence of an outcropping, sub-vertically dipping, 20-40m thick high grade, low-silica graphitic unit contained within a broad lower grade graphitic proto-gneiss.

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• Drilling at the Sugarloaf Graphite Deposit confirmed the large-scale folded nature of the graphitic unit which enabled a revision of the Exploration Target* up from 24-37Mt grading 10-12%C to 4070Mt grading 10-12%C.

• 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

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• Graphite concentrates grading 82%TGC were produced from a 10%C Sugarloaf sample using conventional flotation techniques and standard reagents.

MAGNESITE

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• Test work continued on samples of Leigh Creek magnesite. Calcining of flotation products produced magnesia grading 95.4% MgO and 2.98% SiO2. Further testing involving straight crushing and attrition of the crushed product delivered magnesite grading 1.7% SiO2. Calcining of this product is underway.

GOLD

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• Gold up to 2g/t reported within large hydrothermal alteration halo at Bartel.

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• Poly metallic mineralisation comprising gold, silver, arsenic, copper, molybdenum ± fluorite and +0.1% Cerium.

COPPER

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• 2m @ 1.4% Cu were intersected at Emu Plain in 2012 drilling, within a wider (32m) low grade (0.2% Cu) halo. Molybdenum reports up to 0.27%.

BUSINESS DEVELOPMENT

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• Negotiations with BHP Billiton Olympic Dam Corporation Pty Ltd in relation to its proposed acquisition of an interest in Archer's five West Roxby tenements are progressing.

FINANCIAL

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• Cash in bank on 31[st] March 2012 of $4.082 million.

• $340,000 spent on exploration during the quarter.

Summary of the March 2012 Quarter Exploration Activities

Graphite Exploration

Campoona Graphite Deposit

Two drill programmes were completed at Archer’s high priority Campoona Graphite Deposit. Six RC aircore drill holes were completed in mid February to test the Campoona graphite deposit north beyond the Campoona South outcrop. That programme was followed by second larger 30 hole drill programme which was in progress at Quarter’s end. The second drill campaign targeted mostly the northern and central Campoona areas where high grade graphite had been intersected in the February 2012 drilling. No results for the second drill campaign were to hand at Quarter’s end.

The drilling was a resounding success demonstrating a thick sub-vertical zone of intense high grade graphite mineralisation carrying visible flake graphite.

Drilling Results

The Campoona graphite intervals received during the March 2012 Quarter are;

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CSRC12_003 24m @ 10.4%C from 49m downhole Including 10m @16.7%C from 48m and 3m @ 13.9%C from 70m CSRC12_006 21m @ 15.0%C from 46m downhole CSRC12_007 25m @ 10.9%C from 64m downhole Including 14m at 15.5%C from 71m

The first drill campaign is considered significant for a number of reasons:

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• The high grade intersections carry visible flake graphite.

• The discrete intense graphite enriched unit is hosted within graphitic proto-gneiss formed under conditions important for the development of crystalline graphite.

• Field observations indicate little to no silicification of the graphite.

• The drilling demonstrated strong continuity in both grade and thickness of the high grade graphite unit.

• The grades reported from the thick high grade hangingwall zone are comparable in grade to the Lac Knife graphite deposit in Canada which is reportedly one of the world’s largest high grade graphite deposits.

• The drilling when combined with the electromagnetic data indicates a strike potential of at least 6km.

• The Campoona graphite deposit outcrops at Campoona South (25%C) and at the historic circa 1915 Campoona Shaft. Elsewhere the deposit lies under thin cover.

• The high grade graphite unit is sub-vertical and extends to a depth of at least 70 metres. The unit shows no sign of diminishing in grade or thickness with depth.

Figure 1 below shows the location of the holes drilled in the area with the targeted EM structure.

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Figure 1. Location of all holes drilled in the Campoona / Grid2 area 2012 holes in blue.

Sugarloaf Graphite Deposit

Three RC holes were drilled (SLRC12_001, 002 and 003) on the eastern side of the Sugarloaf Hill to confirm the presence of an eastern graphite limb to the Sugarloaf anticline as indicated by historic holes drilled for gold and EM data (refer to Figure 2 below) and two historic shafts.

Archer’s previous drilling had only concentrated on the western graphite limb. The drilling confirmed that the Sugarloaf graphite deposit occurs in a broad open anticline. All three holes intersected graphite schist.

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Figure 2. Location of all Archer holes drilled at Sugarloaf.

Drilling Results

The best graphite intervals reported from the recently completed drilling were;

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20m @ 7.8%C from 54m 7m @ 10.6%C from 76m

• SLRC12_001

SLRC12_002 34m @ 6.3%C from 55m 23m @ 10.6%C from 96m Including 7m @ 16.0%C

Including

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• SLRC12_003

25m @ 6.4%C from 42m 22m @ 5.2%C from 82m

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Figure 3. Stacked EM sections showing graphite horizon at Sugarloaf

Figure 4 below is a cross section of hole SLRC12_002 showing the electromagnetic response without vertical exaggeration. The drilling closely mirrors the EM signature and highlights the substantial width of the graphitic ore.

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Figure 4. Drill section through SLRC012_002 superimposed on EM signature

BARTEL EPITHERMAL GOLD PROSPECT

As an adjunct to the Campoona drilling Archer completed three (3) RC drill holes on the Bartel epithermal prospect which is located on EL4693 Wildhorse Plain, 15km north of the township of Cleve on Eyre Peninsula, South Australia.

Historic Exploration

The immediate Bartel area was seen by early explorers as a likely uranium target. Kerr McGee completed diamond drilling on what they designated as the A405 target but did not report the presence of uranium. Archer re-sampled the available drill core and in October 2010 reported anomalous gold. The most significant results from the sampling of 6 Kerr McGee diamond holes were:

A405/2 32.3m to 48.8m 16.5m @ 0.32 g/t Au; 7.43 g/t Ag; 146ppm Mo A405/3A 31.4m to 37.2m 5.8m @ 0.48 g/t Au; 2.93 g/t Ag

The re-assaying was the first time that anomalous gold had been identified in the Cleve district. Intense alteration is dominated by silica, fluorite, clay, iron and minor sulphide. Colloform banded quartz veining has also been observed.

February 2012 Drill Campaign

Three RC drill holes (EPIRC12_001 to 003) were drilled for 304 metres in what is now termed the Bartel prospect to further test the previous gold anomalism. The three holes were drilled to intersect the EW trending mineralisation which has resulted from the strong alteration of a dolomite host unit.

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• EPIRC12_001 intersected a dolomitic unit that has undergone stylolitic quartz and manganese veining with minor brecciation. The significant gold intervals occur within a chlorite rich shear zone.

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• EPIRC12_002 intersected silica and manganese altered dolomite, with minor fluorite. This hole appears to have intersected host rock alteration only.

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• EPIRC12_003 intersected a highly weathered quartz kaolin unit which showed similar alteration to hole 001. No significant gold assays were received for this hole but the alteration is noteworthy due to elevated REE’s, (ie Ce up to 3900ppm; Nd 1800ppm).

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Plate 1. Fluorite in outcrop near EPIRC12_002

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Plate 2. Alteration of host rocks near to hole EPIRC12_003

Table 1 Gold intercepts at Bartel

Hole ID	From	To	Interval	**Aug/t **	**Ag g/t **	**Coppm **	**Moppm **	**Asppm **
EPIRC12_001	79	107	29	0.57	4	560	95	1200
Incl.	84	85	1	2.15	6	1090	160	2760

Significance of Anomalous Gold

The widespread alteration geochemistry suggests the Bartel prospect to be a low sulphidation hydrothermal (epithermal) alteration system. The area of known alteration is very large being at least 1.5km x 1.2km in dimensions and is seen to extend under cover.

Low sulphidation epithermal alteration systems often record strong vertical mineral zonation and can host high grade gold veins. In such systems gold is often concentrated through a combination of ground preparation (permeability) and rheological contrast.

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Plate 3. Drilling of EPIRC12_001

Follow up work will include mapping and sampling the system across the neighbouring properties, as well as the implementation of a geophysical survey to assist in the delineation of the system. Further drilling will be planned to determine if vertical mineral zonation is present and to test for gold mineralisation peripheral to the existing intercepts and at depth.

This follow up work will happen systematically behind the graphite focus of the Company.

- West Roxby Farm In by BHPBilliton Olympic Dam Corporation Pty Ltd

A Heads of Agreement between Archer Exploration Limited (“Archer”) and BHPBilliton Olympic Dam Corporation Pty Ltd (“ODC”) covering the sale of an 80% legal and beneficial interest in Archer’s five West Roxby tenements was signed on 23[rd] December 2011.

The Tenements host a number of undrilled exploration targets including potential IOCG targets at Island Lagoon and Evelyn Dam, a potential Athabasca unconformity uranium target at Apollo and several skarn targets (Figure 5).

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Figure 5. Magnetic image showing Archer’s West Roxby Tenements in relation to major IOCG deposits.

The main terms of the Heads of Agreement signed between Archer Exploration Limited and BHP Billiton Olympic Dam Corporation Pty Ltd (“ODC”) covering Archer’s five West Roxby tenements are:

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• ODC to acquire an 80% legal and beneficial interest in the five Tenements for a cash consideration of $3 million.

• ODC to spend $3 million on Exploration over a period of 3 years.

• ODC will sole fund the Project up to a maximum of $50 million to a Decision to Mine is made,

whichever is the first to occur.

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• Archer and ODC agree to establish a Joint Venture to carry on exploration of the Project with ODC as Manager.

• Archer has the right to sell its participating interest at any stage before and on the Decision to Mine.

• Pre-emptive rights apply.

• Exclusivity has been agreed until 30[th ] April 2012.

These Heads of Agreement contemplated the finalisation of a Sale and Purchase Agreement and a Joint Venture Agreement prior to 30[th] April 2012. The Sale and Purchase Agreement will be subject to Ministerial consent and final approval by the board of ODC. The Sale and Purchase and Joint Venture Agreements are conditional on ODC conducting further non-geological Due Diligence and the results of that work being to the satisfaction of the ODC board .

Metallurgy

Magnesite

Test work continued on samples of Leigh Creek magnesite. Calcining of flotation concentrate has produced magnesia grading 95.4% MgO and 2.98% SiO2. Testing will continue to determine if further reductions in SiO2 can be achieved through cyclosizing of the calcined products.

In ongoing test work, the primary magnesite feed will undergoing staged rolls crushing at decreasing gap size from 10mm to 4mm, 2mm, 1mm and near closed to determine whether removal of talc can be achieved effectively without flotation.

Graphite

An amorphous graphite product of 82%Total Graphitic Carbon has been achieved from a composite sample from RC drill hole SLRC 11_004 using conventional flotation techniques and standard reagents. The Total Graphitic Carbon content rose to 85% using an acid digest. The sample head grade was 10%C.

Samples from the February Campoona drilling programme have been submitted for comminution and flotation testwork.

Tenement Granted

EL 4840 (Eudunda) was granted on the 15[th] February 2012 for a period of 2 years.

Cash balance:

The Company’s cash balance at the end of the quarter was $4.082 million.

Activities next Quarter

Resource drilling at Campoona will be conducted in stages with the initial drilling scheduled for completion in April 2012. A second stage is scheduled to commence in May 2012 with the aim of completing sufficient drilling to support a JORC standard resource for at least the area around the Campoona Shaft.

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 6. Archer Exploration Tenement Position December 2011.