ATHENA RESOURCES LIMITED — Capital/Financing Update 2011

Oct 11, 2011

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63 Lindsay Street Perth WA 6000 p 61 8 9428 2900 f 61 8 9428 2910 e ahn@athenaresources.com.au www athenaresources.com.au ABN : 69 113 758 900

12 October 2011

Company Announcements Platform Australian Securities Exchange Level 4, 20 Bridge Street SYDNEY NSW 2000

Athena Byro Iron Ore project moves to next step with results of 5M tpa magnetite plant prefeasibility study

• Study provides for a simple processing circuit comprising crushing, grinding and wet low intensity magnetic separation

• Coarse grind size provides savings in both capital and operating costs

Plant Capital Cost $136M

Operating Cost $8.46 per tonne milled

• Plant to produce concentrate of >67% Fe grade, low in deleterious elements

• 2.5M tpa of magnetite concentrate to be produced

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BYRO – IRON ORE GRESS STUDY October 2011

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Athena Resources Limited (ASX:AHN) advises the completion of the operating cost and capital cost estimate conducted for a 5 million tonnes per annum (tpa) magnetite plant at Athena’s Fe1 iron ore deposit at Byro. The study by GR Engineering Services Limited (GRES) was commissioned by Athena in August 2011 following the excellent metallurgical results in the CRIMM and ALS Ammtec reports on samples taken from Fe1.

The 5M tpa throughput for a resultant 2.5M tpa saleable concentrate product was chosen as the plant is planned to be in operation well before completion of the Oakajee port and rail mid 2015. Athena plans to transport concentrate to Geraldton by road and rail transport with an assumed tonnage limitation of 2.5M tpa.

It is expected that the plant will operate at this capacity until it is upgraded or duplicated when the Oakajee rail and port project is complete.

GR Engineering Services Limited

GRES is a Western Australian based ASX listed (GNG) engineering consulting and contracting company providing high quality process engineering design and construction services to the resources and mineral processing industry.

GRES was selected by Athena based on its expertise in crushing, grinding and beneficiation disciplines and its respected knowledge of iron ore processing in Western Australia. GRES has recent involvement in several iron ore projects including:

• Feasibility Study of Richmond Mining Limited’s Buena Vista Iron Ore Magnetite Project 1.75M tpa Plant and Infrastructure

• Engineering design of Mineral Resources Limited’s FMG Christmas Creek Desands Plant.

In past years, as JR Engineering, GRES key design and project personnel were also involved in the following projects:

• Orebody 25 Crushing Facility Upgrade, SMP construction works for BHP Billiton

• BME Project – Tom Price for Hamersley Iron Pty Ltd

• West Angelas Crushing and Screening facility upgrade for Rio Tinto.

Process

The design capacity of the process plant is 5M tpa (Figure 1). Target feed to crushing is 800 tph while grinding feed rate is 625 tph.

Run of Mine (ROM) ore is initially crushed through a gyratory crusher, prior to being fed to a two stage fine crushing plant. The crushed ore will undergo grinding by two stage ball milling. The primary grinding duty will be performed by a single ball mill operating in closed circuit with a scalping screen with apertures of 6mm. The scalping screen

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BYRO – IRON ORE GRESS STUDY October 2011

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undersize will be classified by stacksizers to produce an intermediate ground product of P80 500 micron which will report to primary (cobbers) stage of wet LIMS separators. At this point approximately 40% of the mass will be rejected as non-magnetic product to final tailings thickener.

The oversize from the primary stacksizers will report to the secondary grinding. The secondary grinding duty will be performed by a single ball mill operating in close circuit with secondary stacksizers with apertures of 250 micron. The magnetic product from the primary (cobbers) wet LIMS will report to the secondary stacksizers. Oversize from the secondary stacksizers will return to secondary ball mill.

The final undersize product from the secondary stacksizes will have a P80 of 125 micron. This undersize product will report, in series, to rougher wet LIMS and cleaner wet LIMS. The cleaner wet LIMS will produce a final magnetic product of 67.5% Fe, which reports to concentrate thickening prior to final concentrate filtration. The relative coarseness of the concentrate should produce a filter cake with less than 7% (w/w) moisture. The nonmagnetics from both rougher and cleaner wet LIMS will report to final tailings thickener, prior to being pumped to Tailing Storage Facility.

The final concentrate filter cake will report to one of three storage bins prior to loading into road trucks for transportation.

The PFS produces 2.5M tpa of high grade magnetite concentrate, low in content of deleterious elements. Concentrate specifications are as follows:-

TYPICAL CONCENTRATE SPECIFICATIONS

Fe	67.5%
SiO2	4.0%
Al2O3	0.3%
S	0.02%
P	0.01%
AverageP80 Size	125micron
Filtercakemoisture content	<7%

Capital Costs

The GRES prefeasibility study (PFS) was conducted to an overall accuracy of +/- 30%, and is presented in Australian dollars (A$) and is based upon pricing obtained during the second quarter of 2011.

The capital cost of the process plant is $136 million, while the capital cost of a 300 person construction and permanent camp is $24 million.

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----- Start of picture text -----

A B C D E F G H J K L M
ROM ORE
800 t/h PRODUCT
1 1
SCREENS x2
685 t/h
SCALPING
PRIMARY 800 t/h SCREEN
CRUSHER
115 t/h
800 t/h
2 BINS x 2 2
FINE ORE
685 t/h 525 t/h BINS x 2
625 t/h
318 t/h
3 3
FI LT RATE
RECLAIM FEEDERS x 2
SECONDARY TERTIARY
CLEANER CRUSHER CRUSHERS x2
LIMS x 3
CONCENTRATE
MILL FEED CONVEYOR
FILTERS x 2
x 2
1210 t/h
SCALPING 625 t/h
SCREEN &6mm
4 CONCENTRATE 4
THICKENER
268 t/h
+6mm
337 t/h PRIMARY
FINAL STACKSIZERS x 3
&250 microns
CONCENTRATE
893 t/h
318 t/h
447 t/h
&1mm
PRIMARY
SECONDARY
19 t/h BALL MILL
5 STACKSIZERS x 6 5
447 t/h 179 t/h
&6+1mm
648 t/h
+250 microns
MAGS
201 t/h COBBER
268 t/h
LIMS x 4
6 TAILINGS NON&MAGS 6
THICKENER
179 t/h
ROUGHER SECONDARY
LIMS x 4 BALL MILL
PROCESS WATER DAM
TAILS
289 t/h
110 t/h
7 7
307 t/h
TAILINGS STORAGE FACILITY (TSF)
DRAWN MK 1/08/2011
WHEN IN DOUBT � ASK ATHENA RESOURCES LIMITED
8 DO NOT SCALE CHECKED 8
BYRO MAGNETITE PLANT
D 15/09/2011 ISSUED WITH STUDY REPORT MK DGP
This drawing is confidential proprietary information and DESIGNED
C 01/09/2011 ISSUED FOR FINAL REVIEW MK DGP SIMPLIFIED FLOWSHEET
furnished for the sole use of the recipient. Acceptance
ENGINEERING CONSULTANTS AND CONTRACTORS TECH APP
B 12/08/2011 ISSUED FOR REVIEW MK DGP of the same constitutes an agreement that it will not 179 Great Eastern Highway, Belmont ACN 121 542 738 PROCESS FLOW DIAGRAM
A 01/08/2011 ISSUED FOR INTERNAL REVIEW MK DGP be copied or reproduced in any form, or given to anyother party without written permission from Western Australia. 6104Phone: (08) 6272 6000 PROJ APP SCALE JOB No DWG No REV
REFERENCE DRAWING DRAWING NUMBER REV DATE REVISION DRN CHK TECH PROJ GR ENGINEERING SERVICES. Fax: (08) 6272 6001 CLIENT APP A1 N.T.S. 11825 BMP 11825&F&001 D
A B C D E F G H J K L M
PRELIMINARY / NOT
FOR CONSTRUCTION
M:\1&PROJECT STUDIES\11825 & Byro Magnetite Plant\11825F001.dft & 15/09/2011 & 09:31AM & Margaret.Keenan
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BYRO – IRON ORE GRESS STUDY October 2011

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The capital cost for the process plant includes the following:-

• Site administration facility

• Process plant, from ROM feed to crusher, grinding and classification, three stages of wet LIMS, through to concentrate handling and loading into road trucks

• Construction of Tailings Storage Facility (TSF) capable of holding 1[st] year’s tailing discharge, including pumps and pipeline to discharge tailings to TSF and pumps and pipeline to return tailings water to process dam

• Borefield pumping to supplement process water.

Power supply and site assay laboratory are to be provided under contract by third parties and are included in the operating costs.

Operating Costs

The operating cost of the process plant is $8.46 per tonne milled. The summary of operating costs is detailed in the following:-

Byro Magnetite Project	Total Cost	Total Cost	% Fixed	Fixed	Fixed	Variable	Variable
**5.0 Mtpa **	**A$/yr **	A$/t		**A$/yr **	A$/t	**A$/yr **	A$/t
Operating Consumables Maintenance Materials Labour Power General&Administration	9,437,175 4,235,585 9,816,900 14,855,599 3,975,624	1.89 0.85 1.96 2.97 0.80	0% 31% 100% 25% 100%	- 1,296,633 9,816,900 3,657,051 3,975,624	- 0.26 1.96 0.73 0.80	9,437,175 2,938,952 - 11,198,548 -	1.89 0.59 - 2.24 -
TOTAL	42,320,883	$8.46		18,746,208	$3.75	$23,574,675	$4.71

The coarse nature of the magnetite at Fe1 allows for a high degree of liberation of the magnetite at a relative coarse grind size P80 of 125 micron. This contributes to a significant reduction in power required for grinding and results in substantial operating cost savings.

The calculated annual production of concentrate is 2.5M tpa (dry tonnes). The total process operating cost is $16.92 per tonne of concentrate produced.

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BYRO – IRON ORE GRESS STUDY

October 2011

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Water

Total make-up water is calculated at 4,425 m[3] per day. This will be sourced from both mine de-watering and extracted from a bore field located in the paleochannels found on site. These costs are included in the plant operating costs.

Power

Power is provided by contract from a 14MW power station owned and operated independently by a third party. For the PFS an energy cost of $0.24 per kWh has been used. Average power requirement is 10.5MW.

Conclusions on the Processing Plant Prefeasibility

The processing plant prefeasibility demonstrates that due to the nature of the magnetite ore at Byro a processing plant can be built for a modest capital cost to produce a high value concentrate at a very competitive cost per tonne.

On completion of the JORC resource on Fe1 currently underway by AMC, a mine plan will be produced to supply ROM ore to the plant for an initial 5 year period.

Investigations are also underway to identify the most cost effective transport route to the port of Geraldton.

Byro Iron Ore Project Location

The Byro Iron Ore Project (Athena 100% through its wholly owned subsidiaries) is strategically located some 330km north east of Geraldton and about 250km north of the Mt Gibson Tallering Peak Project. It is 100km west of the proposed Midwest Iron Ore Railway to link existing and future iron ore projects in the mid west region to the proposed Oakajee deep water bulk shipping port north of Geraldton.

The Iron Ore at Byro was identified in late 2010 by aeromagnetic surveys carried out by the WA Government and later by Athena. The full extent of the iron ore targets identified from the aeromagnetic surveys flown over Athena’s tenements covers an area of 40x30km (1,200km[2] ). The high priority magnetic targets provide Athena with more than 20km strike length of prospective magnetite iron ore horizon.

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BYRO – IRON ORE GRESS STUDY October 2011

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Figure 2 Location

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E W Edwards Managing Director

Competent Persons Statement

The technical information relating to Athena’s exploration projects was compiled by Mr Liam Kelly, an employee of Athena Resources Limited. Mr Kelly is a Member of the Australasian Institute of Mining and Metallurgy, and has sufficient relevant experience in the styles of mineralisation and deposit styles under consideration to qualify as a Competent Person as defined in “The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2004 edition)”. Mr Kelly consents to this inclusion of the information in this report in the context and format in which it appears.

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