DREADNOUGHT RESOURCES LTD — Interim / Quarterly Report 2012

Jul 30, 2012

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M I N I N G

QUARTERLY REPORT

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NT
Tanami Mill Tan ami
Granites Mill
QLD
WA Eromanga
Basin
North Gawler Craton
SA Marree
Prominent Hill Beverley
Olympic Dam Wert a loona
Gawler
Craton Billa Kalina
NSW
Moralana Padth a way
Lithium Project 500km VIC
IOCG Project
Gold Project
Uranium Project TAS
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Period ending 30 June 2012

HIGHLIGHTS

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• One-for-one non-renounceable Rights Issue successfully raises $1.315 million (before costs).

• Tenement transfers at Billa Kalina, from FMS to MXR, completed allowing exploration permitting with Defence Department to proceed.

• Excellent progress on joint venture negotiations with respect to ERO’s Northern Gawler Craton properties.

REVIEW OF OPERATIONS

ERO Mining Limited ACN 119 031 864

Level 3, 100 Pirie Street Adelaide South Australia 5000

PO Box 3126 Norwood SA 5067

Phone +61 8 7324 3195

Fax +61 8 8312 5576

CORPORATE ACTIVITIES

On 30th April 2012 the Company closed its one-for-one non-renounceable Rights Issue and following placement of 71,900,800 shares from the shortfall has successfully raised $1.315 million from the issue. The Board of ERO Mining is pleased with the support from shareholders for this capital raising, particularly given the difficult market conditions that have prevailed in the Australian, and Global, share markets over the last few months.

Finance

As at 30 June 2012, ERO Mining had available funds of $1.225 million of which the majority is held in term deposits with Australian banks. During the current quarter total net operating expenditure by the company was $0.201 million.

Email info@eromining.com.au

Web www.eromining.com

1

ERO Mining Ltd • Quarterly Report for the period ending 30 June 2012

EXPLORATION ACTIVITIES

BILLA KALINA

ERO Mining earning 50% under the terms of the Billa Kalina JV from Maximus Resources Ltd in ELs 4463, 4584, and 4899 plus ERO 100% in EL 4898

Peeweena Dam

The Billa Kalina Project is located 70km north-north-west of the Olympic Dam copper-gold-uranium (IOCGU) mine, and 45 km east of the more recent discovery and mine development at Prominent Hill, South Australia (Figure 1). The project area is situated within the recently defined Restricted Zone of the larger Woomera Prohibited Area (WPA).

ERO is exploring for IOCGU deposits in the deeper basements rocks under the terms of the Billa Kalina Joint Venture with Maximus Resources Ltd (MXR). MXR hold the rights to all minerals excluding diamonds under an underlying agreement with Flinders Mines Ltd, the registered tenement holder.

MXR has notified ERO that subsequent to the end of the quarter MXR has received formal written notification from the South Australian Department of Manufacturing, Innovation, Trade, Resources and Energy (DMITRE) that the transfer of ownership of the Billa Kalina tenements, from Flinders Mines Ltd to Maximus Resources Ltd, had been completed.

The transfer of the tenements into MXR’s name will facilitate a Deed of Access – Exploration directly between MXR and the Defence Department, allowing ERO Mining the ability to conduct a ground gravity survey on the Peeweena Dam anomaly located within the tenements.

ERO continues to be in regular correspondence with the Defence Department with the objective of allowing exploration to commence at Billa Kalina at the earliest possible opportunity.

NORTH GAWLER CRATON

ERO Mining 100% in ELs 4020 and 4019

The North Gawler project is located along the northern margins of the Gawler Craton in the Marla region of South Australia. The project consists of two primary targets at Welbourn Hill and Nicholson and was explored by the Company in 2008-09 targeting iron-oxide, copper, gold mineralisation of the Olympic Dam type (Figure 2).

As previously reported the Company has been in negotiations with third parties interested in a possible joint venture over the project areas. These negotiations have advanced in a very positive manner during the quarter and have included the completion of a detailed due diligence over the North Gawler properties. The general structure and terms of a Joint Venture have been agreed between the parties and, subject to any further amendments, only requires ratification by the respective Boards. It is anticipated that the North Gawler Joint Venture can be finalised within the next two to three weeks.

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Prominent Hill  

PEEWEENAPEEWEENA  Olympic DamOlympic DamOlympic DamOlympic Dam
DAMDAM   CarapateenaCarapateenaCarapateenaCarapateena
G A W L E R  Punt HillPunt HillPunt HilPunt Hill l
C R A T O N
O'Driscoll lineaments G2 & G9
 Mine
 Prospect
0 100 200 km
G9
G2
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Figure 1 Location of Peeweena Dam Gravity Anomaly in relation to IOCGU mines.

The area covered by the proposed Joint Venture has previously been the subject of Aboriginal Heritage surveys and all permits are in place to allow for an immediate commencement of ground based exploration activities upon ratification of the Joint Venture Agreement. The Company is excited at the prospect of advancing the exploration of these quality IOCGU targets in partnership with a major international copper producer.

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Coongra 1
Nicholson 1
EL4019 EOB 2
EL4020
Nicholson 2
- 27º20'
EL4050
WHD 2
Diamond Drillhole
Historic Drillhole
Fault
0 5 km
Gravity Contour
134º 134º20'
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Figure 2 Gravity contours over magnetic image, North Gawler Craton project.

2 ERO Mining Ltd • Quarterly Report for the period ending 30 June 2012

PADTHAWAY AREA PROJECT

ER0 100% in South East Energy’s ELs 4040, 4041, 4042, 4043, 4044, 4045, 4046, 4054, 4418, 4747 and South East Energy’s ELAs 326/10, 02/11 and 64/11

Exploration for heavy mineral sands (HMS) within the Padthaway Project area is undertaken by Iluka Resources Limited under the terms of a Joint Venture agreement with ERO’s wholly owned subsidiary, South East Energy (Figure 3).

During the quarter Iluka Resources notified the Company that, contrary to earlier indications, it is withdrawing from the Joint Venture over the Padthaway Project area. Iluka has indicated that whilst the exploration undertaken in late 2011 was successfully in intersecting the target marine sands, containing low level heavy mineral assemblages, it believes the area is unlikely to host a deposit that meets Ikuka Resources size requirements. Following the withdrawal of Iluka Resouces the tenement package reverts to 100% ownership by ERO Mining Limited.

The Company is now in receipt of all exploration data generated by Iluka Resources over the duration of the joint venture and is compiling this information for examination by interested third parties.

WERTALOONA PROJECT

ERO Mining 100% in ELs 4601 and 4602

During the quarter no significant ground based exploration activities were undertaken at the Wertaloona Project.

MORALANA PROJECT

ERO Mining 100% in EL4580

During the quarter no significant ground based exploration activities were undertaken at the Moralana Project.

EROMANGA BASIN JOINT VENTURE

ERO Mining earning 70% under the Eromanga Basin JV Agreement with Maximus Resources Limited in the Marree Project

Marree Project

During the quarter ERO Mining notified our Joint Venture partner at Marree, Maximus Resources Limited (MXR) that the Company had no further interest in exploration at the Marree Project. As the single tenement at Marree, EL 4913, is the last remaining tenement within the Eromanga Basin Joint Venture the notification to MXR also formally notified Maximus Resources of ERO’s withdrawal from the joint venture.

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Figure 3 Location of ERO Mining’s Padthaway joint venture area.

3

ERO Mining Ltd • Quarterly Report for the period ending 30 June 2012

TANAMI EXPLORATION INITIATIVE

Objectives

The Tanami Region, located approximately 600 km north west of Alice Springs, in the Northern Territory, has become Australia’s premier Proterozoic Gold Province, with virtually all discoveries made since the mid 1980s. The Tanami Region is one of the last remaining provinces in Australia capable of hosting multi-million ounce gold deposits. The Tanami is currently the host to the Callie Gold Mine, containing 7 Mozs of gold, and several other 0.5 Mozs to 1 Mozs deposits. Despite the operation of major processing facilities and considerable gold production the Tanami remains sparsely explored, and ERO Mining considers the probability for further discoveries to be high. Outcrop in the region is poor, and this has led to a lack of geological knowledge. While the discovery history of the Tanami has been essentially continuous since the mid 1980s, proprietary information on discoveries has been closely guarded. The release, by major gold companies, of large areas of highly prospective land in the Tanami has rapidly resulted in a significant increase in exploration activity across the Tanami and further supports the Company’s exploration strategy in the region (Figure 4).

No ground based exploration was possible during the quarter under review. The Company has received interest from third parties in the possibility of joint venturing some, or all, of the Company’s gold/uranium exploration portfolio in the Tanami. A Confidentiality Agreement has been signed and data reviews are ongoing. Any potential involvement of third parties in exploration of the Company’s assets in the Tanami will only be considered when the current capital raising has been completed.

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Mr Kevin Lines Chief Executive Officer 31 July 2012

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S U P L E J A C K
EL27806
S T A T I O N
Talbot North 0 40 km
Groundrush Mine
ELA28493 G
ELA27921
Groundrush Ext
Groundrush South
-20°  Tanami
Mine EL26625 ELA27997
Suplejack Mt Solitaire
 Rabbit Flat Roadhouse
Callie Gold Mine E  The Granites
ELA27995
Officer Hill South
-21°
ELA27511
Highland Rocks
Granted Exploration Licence EEEE Mine
Exploration Licence Application GGGG Mine (disused)
Pastoral Lease  Processing plant
Tanami Road
Rd
Lajamanu
130° 131°
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Figure 4 Location of Tanami Exploration Initiative licence areas.

For further information please contact:

ERO Mining on 08 7324 3195, or Investor relations:

Mr Duncan Gordon,

Executive Director, Adelaide Equity Partners on 0404 006 444

Further information relating to ERO Mining Limited and its various exploration projects can be found on its website: www.eromining.com

Disclaimer

This report contains forward looking statements that are subject to risk factors associated with the exploration and mining industry.

It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a variety of variables which could cause actual results or trends to differ materially. The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Kevin Lines who is a Member of the Australasian Institute of Mining and Metallurgy, and who has sufficient experience relevant to the style of mineralisation, the type of deposit under consideration, and the activity 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 (the JORC Code). This report is issued in the form and context in which it appears with the written consent of the Competent Person, who is Chief Executive Officer of the Company.

4 ERO Mining Ltd • Quarterly Report for the period ending 30 June 2012

Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10

Name of entity

ERO MINING LIMTED

Quarter ended (“current quarter”)

ABN 40 119 031 864 30 JUNE 2012

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows	Current quarter $A’000	Year to date (12 months) $A’000
	- (24) (187) - 7 - - -	(306) (529) 13
	(204)	(822)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	(2)	(1) (2) 299
	(2)	296
	(206)	(526)

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 1

Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(206)	(526)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows	1,315	1,635 (3)
	1,315	316
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	1,109 116 -	1,106 119 -
	1,225	1,225

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		17
		-
1.25	Explanation necessaryfor an understandingof the transactions

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.

• See chapter 19 for defined terms.

Appendix 5B Page 2

17/12/2010

Appendix 5B Mining exploration entity quarterly report

3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	-	-
	-	-

Estimated cash outflows for next quarter

4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	300
	-
	-
	100
Total	400

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as	Current quarter	Previous quarter
shown in the consolidated statement of cash flows)	$A’000	$A’000
to the related items in the accounts is as follows.
5.1 Cash on hand and at bank	278	232
5.2 Deposits at call	947	-
5.3 Bank overdraft	-	-
5.4 Other (provide details)	-	-
Total: cash at end of quarter(item 1.22)	1,225	232

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
	EL 4913	Right to earn 70%	Right to earn 70%	Nil

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 3

Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note3) (cents)	Amount paid up per security (see note3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs	629,227,041	629,227,041
	263,089,280 12,084	263,089,280 12,084	$0.005 per share $0.060 per share	Fully paid Fully paid
7.5 +Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	86,801,145 50,000 313,000 441,666	86,801,145	Exercise price $0.060 $0.220 $0.165 $0.280	Expiry date 28/9/2012 19/11/2012 05/03/2012 03/02/2014
	12,084	12,084	$0.060	28/9/2012
7.11 Debentures (totals only)

• See chapter 19 for defined terms.

Appendix 5B Page 4

17/12/2010

Appendix 5B Mining exploration entity quarterly report

7.12 Unsecured notes (totals only)

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here: Date: 31 July 2012

Company secretary

Print name: Peter Kupniewski

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

• See chapter 19 for defined terms.

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17/12/2010 Appendix 5B Page 5