DREADNOUGHT RESOURCES LTD — Interim / Quarterly Report 2012

Apr 29, 2012

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M I N I N G

QUARTERLY REPORT

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Period ending 31 March 2012
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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HIGHLIGHTS

• ERO announces one-for-one non-renounceable Rights Issue to raise approximately $1.8 million (before costs).

• Stage 1 exploration results, targeting heavy mineral sands, at the Padthaway Project SA Joint Venture with Iluka Resources support follow-up drilling program during Q3 of 2012.

• Exploration access to the Peeweena Dam Prospect (IOCGU), within the Woomera Prohibited Area, anticipated by end of May 2012.

• Joint Venture discussions advancing with respect to ERO’s Northern Gawler Craton and Tanami project areas.

REVIEW OF OPERATIONS

CORPORATE ACTIVITIES

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 Email info@eromining.com.au

Web www.eromining.com

On 15 March 2012, the Company announced a pro rata one-for-one non-renounceable Rights Issue. The Rights Issue seeks to raise approximately $1.8 million (before costs) through the issue of approximately 360 million new fully paid ordinary shares in ERO. At 27 April 2012, the Company had received acceptances of $764,510.53 under the Rights Issue.

The net proceeds from the Rights Issue will be used for working capital purposes and to fund exploration and development including:

• Geophysical surveys and subsequent drill programs at the Peeweena Dam prospect Billa Kalina SA (ERO in joint venture with Maximus Resources Ltd (ASX:MXR)) which is located 70 km north–northwest of the Olympic Dam copper-gold-uranium mine and 45 km east of the mine development at Prominent Hill. Finalisation of the Deed of Access – Exploration with the Defence Department will allow the completion of a detailed gravity survey and drill testing of the Peeweena Dam gravity

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ERO Mining Ltd • Quarterly Report for the period ending 31 March 2012

anomaly, targeting iron oxide, copper, gold, uranium mineralisation similar to the nearby Olympic Dam and Prominent Hill mines.

• Advancing the Company’s portfolio of gold/uranium exploration licences and licence applications in the Tanami region of the Northern Territory (ERO 100%), which has become Australia’s premier Proterozoic Gold Province capable of hosting multi-million ounce gold deposits. Encouraging results from geochemical surveys conducted in the 2011 field season, including the discovery of significant arsenic anomalies indicating potential for associated gold mineralisation, require follow-up in conjunction with further ground based exploration of both the Suplejack and Talbot North Project areas.

The Rights Issue will close on 30 April 2012. ASX will be notified of any under-subscriptions under the Rights Issue on 3 May 2012 and the date for allocation of new shares is 8 May 2012.

Finance

As at 31 March 2012, ERO Mining had available funds of $0.116 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 $0.117 million.

EXPLORATION ACTIVITIES

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.

The main points of the agreement are:

• Iluka shall farm-in by conducting exploration for HMS on eight ERO exploration licenses near Padthaway in southeastern South Australia.

• Agreement allows for ERO to retain rights to uranium and other minerals.

• Iluka to spend $300,000 over two years to earn 80% interest in the mineral sands.

• Additional payments and royalties to ERO in the event of successful mining lease application.

The agreement allows ERO to retain the rights to uranium and other minerals in the tenements in line with ERO’s stated policy of focusing its future exploration on key copper/gold, gold, uranium and lithium projects in South Australia and the Northern Territory.

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Figure 1 Location of ERO Mining’s Padthaway joint venture area.

2 ERO Mining Ltd • Quarterly Report for the period ending 31 March 2012

During the last quarter of calendar 2011 Iluka Resources completed drilling of two traverses along roads within ELs 4041 and 4043 located between the towns of Keith and Bordertown South Australia (Figure 1).

Iluka Resources have provided the results of the initial phase of exploration. They report that encouraging stratigraphy was intercepted by most drillholes on the two traverses completed, with marine sands intercepted belonging to the Bridgewater Formation. A total of 161 holes were drilled for 4,242 m and 274 samples submitted for assay. Low grade HMS (<0.3%) over several metres vertical thickness were noted in many drillholes. Further drilling is planned for Q3 2012 to follow up on better intercepts returned from the 2011 exploration program.

BILLA KALINA

ERO Mining earning 50% under the terms of the Billa Kalina JV from Maximus Resources Ltd in ELs 3526, 3525, 3170, 3337 and 3338

Peeweena Dam

The Billa Kalina Project is located 70 km north–northwest 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 2). 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.

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Prominent Hill  

PEEWEENAPEEWEENA  Olympic DamOlympic DamOlympic DamOlympic Dam
DAMDAM  CarapateenaCarapateenaCarapateenaCarapateena
G A W L E R   Punt HillPunt HilPunt HillPunt Hill
C R A T O N
O'Driscoll lineaments G2 & G9
 Mine
 Prospect
0 100 200 km
G9
G2
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Negotiations between Flinders Mines Limited (FMS) and MXR, to transfer ownership of the Billa Kalina tenements to MXR, were finalised during the quarter. FMS will retain the rights to any diamond mineralisation, with MXR retaining the rights to all other minerals. Documentation was submitted to DMITRE on 10th February to register the tenement transfers, with confirmation pending.

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 has been in regular correspondence with the Defence Department and anticipates approval to conduct the ground gravity survey over the Peeweena Dam anomaly within the first half of 2012 (H1).

During the quarter no significant ground based exploration activities were undertaken on the Billa Kalina tenements.

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.

The Company has been approached by third parties interested in a possible joint venture over the project areas. A detailed data review has now been completed and the Company is in negotiations with an international copper producer over their potential involvement in future exploration programs.

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 no significant ground based exploration activities were undertaken at the Marree Project. The Company continues to review these projects areas and has reduced the overall tenement acreage where the holding costs are considered excessive.

Figure 2 Location of Peeweena Dam Gravity Anomaly in relation to IOCGU mines.

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ERO Mining Ltd • Quarterly Report for the period ending 31 March 2012

TANAMI EXPLORATION INITIATIVE

ERO 100% in ELs 26625, 27806 and ELAs 27511, 27921, 27995, 27997 and 28493

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 lead 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 3).

No ground based exploration was possible during the quarter under review due to the Northern Australian Wet Season. 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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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 3 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

Mr Kevin Lines

Chief Executive Officer

30 April 2012

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 Managing Director of the Company.

4 ERO Mining Ltd • Quarterly Report for the period ending 31 March 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	ERO MINING LIMTED
	ABN 40 119 031 864 Consolidated statement of cash flows
			31 MARCH 2012
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 9 months) $A’000
		(25) (94) 2		(282) (342) 6
		(117)		(618)
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)				(1) 299
				298
		(117)		(320)

• 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)	(117)	(320)
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	320 (3)
	1	317
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	(116) 232	(3) 119 -
	116	116

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
		-
		-
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		116
5.2 Deposits at call		-
5.3 Bank overdraft		-
5.4 Other (provide details)		-
Total: cash at end of quarter(item 1.22)		116

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
	N/A
	N/A

• 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	366,127,677	366,127,677
	6,000,000 10,800	6,000,000 10,800	Nil 6 cents	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	86,813,229 50,000 313,000 441,666	86,813,229	Exercise price $0.060 $0.220 $0.165 $0.280	Expiry date 28/9/2012 19/11/2012 05/03/2013 03/02/2014
	10,800	10,800	6 cents	6 cents
	228,000		$0.220	20/03/2012
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:

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Date: 30 April 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.

17/12/2010 Appendix 5B Page 5