EASTERN RESOURCES LIMITED — Interim / Quarterly Report 2008

Jan 29, 2009

. . . Quarterly Activities Report

for the period ending 31 December 2008

Highlights from …iron’s new horizon

• Scout drill testing was completed at most licence areas with scout assay results now received for many prospects and priority areas for follow-up identified. The regionally extensive scout phase of work was completed before time and under budget.

• Eastern Iron has now completed 508 scout drillholes at 26 individual palaeochannel prospects for 7,390 metres of drilling.

• Most iron intersections are from surface and represent the primary grade of iron-rich gravel, prior to magnetic separation upgrade. Highlights include:

Cobar Project

11m @ 13.55% Fe (0-11m) incl. 2m @ 31.15 (4-6m) - Belah Tank 16m @ 11.98% Fe (0-16m) incl. 2m @ 20.9% Fe (14-16m) - Techno 1 19m @ 9.6% Fe (0-19m) incl. 1m @ 21.4% Fe (13-14m) Techno 2 19m @ 9.18% Fe (0-19m) incl. 3m @ 26.67% Fe (14-17m) - Bendy 10m @ 16.41% Fe (0-10m) incl. 1m @ 31.2% Fe (2-3m) - Line 1 6m @ 18.69% Fe (0-6m) incl. 3m @ 25.53% Fe (2-5m) - Wendoline 4m @ 26.65% Fe (0-4m) incl. 1m @ 31.7% Fe (3-4m) – Gromit 16m @ 15.19% Fe (0-16m) incl. 3m @ 23.83% Fe (5-8m) - Quartermaine 1 17m @ 12.56% Fe (0-17m) incl. 7m @ 20.41% Fe (10-17m) - Tottington

Main Line Project

9m @ 14.39% Fe (0-9m) incl. 1m @ 20.4% Fe (5-6m) - McGraw 1 6m @ 17.31% Fe (0-6m) - McGraw 2

• A trial resource definition program is progressing at the Belah Tank prospect with initial magnetic separation results indicating that a single pass magnetic separation could produce grades of ~50% Fe. Further metallurgical test work will be completed in the March quarter.

• Single pass magnetic separation test work results indicate that recoveries of magnetic material vary from prospect to prospect. Differential magnetic separation tests have produced product upgrades on ~50% “head grade” material, to as high as 55.2% Fe (reported last quarter). During the quarter, a multi-tonne sample was collected from the Belah Tank prospect and differential separation tests are ongoing. This type of testing will be extended to regional prospects.

• Interest in the potential of Eastern Iron projects remains strong and your Company is pursuing a number of other iron ore related opportunities.

Suite 3, Level 1, 80 Chandos Street St Leonards, NSW 2065 PO Box 956, Crows Nest, NSW 1585 Ph: 02 9906 7551 Fax: 02 9906 5233 www.easterniron.com.au

…iron’s new horizon

…Quarterly Report – December 2008

Eastern Iron Limited

INTRODUCTION

The scout drill program continued into the quarter and although active drilling was completed during November, sample submission and drillhole rehabilitation is ongoing. To date 72 kilometres of channel in 26 individual palaeochannel targets have been scout drill tested at the Cobar and Main Line Projects. The “bulk, in-ground” assay results indicate that broad intersections of iron-rich gravel occur throughout the Cobar Project and at a number of new prospect areas at the Main Line Project. The first X-Ray Florescence (XRF) bulk oxide, iron ore assay results from magnetic separation products have been received from selected prospect areas with more expected to be available in the March Quarter. These results give a firm indication of recovery percentages and the relative quality of iron products. Most exploration targets drilled lie within 50 kilometres by road from major public-access rail infrastructure that connects with the deepwater, bulk-export ports of Newcastle and Port Kembla.

From the potential targets* identified, the Belah Tank prospect remains the current focus. Results received during the quarter reinforce the Company’s view that it is possible to produce a low cost, magnetically separated pisolitic iron product at grades above 50% iron from unconsolidated gravels. Previously reported test work results have proved to be very encouraging with 55% iron achieved from minimal “cracking” and sizing of pisolitic gravel prior to differential magnetic separation test work. This test work has been extended to a large test sample from Belah Tank and will be applied to material from other target areas. The scout phase of work is complete before time and under budget and the Company is now accelerating economic studies, metallurgy and marketing. Eastern Iron is also assessing a number of development and exploration opportunities which have the possibility of adding value to Eastern Iron’s substantial, low phosphorous, low sulphur iron ore assets in NSW through the provision of lower tonnage yet higher grade iron blending products.

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Figure 1. Location of Eastern Iron, Cobar Project licence areas, new exploration licence applications (Camembert and Gorgonzola) and the Hutch JV.

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…Quarterly Report – December 2008

Eastern Iron Limited

EXPLORATION

Cobar Project - Cobar Area Drilling Results

Scout drilling assay results have been received for all prospects located near Cobar NSW. Significantly, at the palaeochannel targets drilled at Gromit, Quartermaine and Tottington, all intersections were wider than at previously drilled prospects. Most iron intersections were encountered from surface with a best result of 16m @ 15.19% Fe (0-16m) incl. 3m @ 23.83% Fe (5-8m) - in hole EIAC0362 at the Quartermaine 1 prospect. Drilling results are currently being interpreted and will be reported in the near future.

Wherever possible, aircore drilling was completed on one cross section and one longitudinal section, testing as much of the length of the exposed iron-rich palaeochannel target as access allowed. The scout drilling has confirmed the continuity of palaeochannels in the Cobar Project, producing a significant body of data for drill section interpretation. The wide intersections, such as those at Gromit, will have a positive effect on the aggregate size potential of all the projects .

Main Line Project - Drilling Results

All iron assay results have been received for the nine prospects drilled at the Main Line Project. Encouragingly, wide intersections of iron-bearing gravels were intersected from surface at two separate prospects within the McGraw Licence area. Better results included:

9m @ 14.39% Fe (0-9m) incl. 1m @ 20.4% Fe (5-6m) - McGraw 1 6m @ 17.31% Fe (0-6m) - McGraw 2.

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The intersections at McGraw 1 are less than 10 kilometres from the main transcontinental rail line (Figure 2).

At other Main Line Project licence areas, scout drilling has revealed that iron-bearing target zones have been covered by non-magnetic sediment that is devoid of iron. This barren cover is between 5 and 20 metres thick. The presence of overburden at bulk tonnage targets downgrades the iron prospectively of portions of the Main Line Project, however, sections of the iron-bearing palaeochannels are being selected for bulk leach extraction assay and further metallurgical test work to determine potential for alluvial tin and gold.

At the Bimbella licence area, a magnetic palaeochannel target with potential for both ironrich gravel and alluvial gold has been identified. Branches of the palaeochannel extend into an area previously explored by North Limited (Rio Tinto), where wide gold intersections were reported in RC drilling.

Figure 2. McGraw licence area showing location of McGraw 1 and McGraw 2 prospects in relation to the main transcontinental rail line and other palaeochannels that remain to be evaluated.

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…Quarterly Report – December 2008

Eastern Iron Limited

Belah Tank Trial Resource Drilling

The Belah Tank prospect was chosen as a test area for resource drilling methodologies, refining product beneficiation pathways and as a ready source of product for marketing and bulk handling tests. A total of 111 holes for 1,384m of drilling have been completed on 13 drill sections at Belah Tank. Despite this large amount of drilling, only approximately 20% of the total area of potential at Belah Tank has been tested (Figure 3). All assays for the in-situ iron contents have now been received and magnetic separation tests to determine iron product recoveries and grades are underway. Early results indicate that on average 12% of the gravel is recoverable with grades of ~50% Fe.

A bulk sample of approximately 5 tonnes has been collected and is currently being processed. This material will be used in ongoing beneficiation studies and in trials to determine the bulk handling characteristics of iron ore products.

Continuing Work

Three palaeochannels are scheduled for drill test within the Hutch JV area and additional targets will be defined by geophysical modelling upon successful grant of the Gorgonzola and Camembert ELA areas.

The Hutch JV drilling will complete the scout phase of work and the Company is now moving to metallurgy, marketing and logistical studies. The resource calculation for Belah Tank will also be accelerated.

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Figure 3. Belah Tank prospect area, showing outline of material grading <20% Fe between 6-7m downhole.

The differential magnetic separation process is being refined using a larger (approximately 2 tonne) sample of representative drill cuttings from the Belah Tank prospect. Although the ~50% product is very inexpensive and easy to produce a higher grade product, such as the initial result of 55.17%, is important to pursue using low cost methods such as differential magnetic separation. Test work underway at the Belah Tank test area will be expanded and also extended to regional prospects in the March quarter.

Further fine grinding and pyro-metallurgical test work programs are being considered and joint funding of these activities will be pursued with potential customers. However, a higher grade, direct shipping product, produced by differential magnetic separation may provide a route towards early cash flow, whilst downstream processing and value adding is developed for the lower grade product fractions. Opportunities for joint marketing arrangements with other iron ore explorers and developers are being sought and considered.

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…Quarterly Report – December 2008

Eastern Iron Limited

IMPLICATIONS

Results of the completed scout drilling phase indicate that at least 12 large tonnage exploration targets* exist in NSW. Eastern Iron believes the aggregate size has sufficient potential to justify the expansion of the metallurgical test work program.

The exploration targets defined so far are a small subset of the total ~1,100 kilometres of palaeochannel that exist within the Eastern Iron licence areas, which are all adjacent to significant transport and workforce infrastructure. Any potential development of this new deposit type would be most similar to existing, operating iron-sand mines. Significantly, in-ground iron grades of magnetic gravel at the Company’s prospects are equivalent to, or higher than, the in-ground grades commonly found at iron-sand mines and iron-sand developments worldwide. Test work at the Belah Tank prospect indicates that a low phosphorus, low sulphur, iron concentrate grading 50% iron or better can be produced using simple, inexpensive, on-site magnetic separation. Encouragingly a low magnetic flux (weak magnetism) beneficiation test has produced a product grading 55.2 % Fe, indicating that both DSO and blending feed products may be possible, together with a low cost, bulk tonnage product grading 50%.

Cash Position

The Company had over $3.603 million in cash at 31 December 2008 and no borrowings. Eastern Iron has already achieved many of the high cost elements of its exploration projects and intends to be selective about how it spends its funds. Eastern Iron realises that compelling corporate opportunities may arise over the next year or more for companies that hold cash. In the meantime our cash reserves are deposited with major Australian banks.

Further information, previous Eastern Iron announcements and exploration updates are available at the information tab on the Company’s website - www.easterniron.com.au

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Peter M Buckley, BSc (Hons), who is a member of the Australian Institute of Geoscientists. Peter M Buckley is Managing Director of Eastern Iron Limited and a full-time employee of PlatSearch NL. Peter M Buckley has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which 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”. Peter M Buckley consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Investor Information

Mr Glenn Goodacre, Chairman, 0419 877 734 Mr Peter Buckley, Managing Director, 0405 513 993 Website: www.easterniron.com.au

ASX:EFE

*Note:

These exploration targets are reported according to Clause 18 of the JORC Code. This means that the potential quantity and grade is conceptual in nature and that considerable further exploration, particularly drilling, is necessary before any identified mineral resource can be reported. It is uncertain if further exploration will lead to larger, smaller or any mineral resource.

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…the eastern dragon

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