EASTERN RESOURCES LIMITED — Interim / Quarterly Report 2012

Jul 29, 2012

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QUARTERLY REPORT – JUNE 2012
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ASX Code:ASX Code: EFE EFE

Issued Capital: Issued Capital: 68,807,419 (30/6/12)

Share Price at Cash: $0.927M (30/6/12)

Market Capitalisation at Directors

Cash on hand at Glenn Goodacre Greg De Ross Directors Ivo Polovineo Glenn Goodacre - Chairman Wendy Corbett Greg De Ross - Managing Director Ivo Polovineo - Non-Ex Director Greg Jones Wendy Corbett - Non-Ex Director Steve Gemell Greg Jones - Non-Ex Director

Steve Gemell - Non-Ex Director Address

Investor and Media Contact: Level 1, 80 Chandos Street Fergus Ross St Leonards, NSW 2065 Six Degrees Investor Relations

Fergus.ross@sdir.com.au Postal

Address PO Box 956, Crows Nest Level 1, 80 Chandos Street NSW 1585 St Leonards, NSW 2065

HIGHLIGHTS

NOWA NOWA IRON PROJECT

• Experienced project manager, Engenium, appointed to undertake mine Scoping Study

• Diamond drilling program completed

• 71.4m at 46.3% Fe intersected from surface at Seven Mile Deposit

• Beneficiation testwork on drill core samples commenced

CENTRAL QUEENSLAND IRON PROJECT

Eulogie Iron – Vanadium Project

Concept Development Study indicates:

• Capital costs of $605 million

• Mining development producing 3.2Mt magnetite concentrate per year

• Projected operating cost of $75.83/tonne

Postal T: +61 2 9906 7751 PO Box 956, Crows Nest F: +61 2 9906 5233 NSW 1585

Twitter: @EasternIronEFE T: +61 2 9906 7751

F: +61 2 9906 5233

www.easterniron.com.au

Twitter:www.easterniron.com.au @EasternIronEFE

Hawkwood Iron – Vanadium Project

• Maiden Inferred Resource estimation of 100Mt @ 13.8% Fe with significant upside potential

• High quality magnetite concentrate grade of 64.6% Fe, 0.6% V2O5 and 1.6% TiO2

CORPORATE

• $1.27M raised to fund completion of the Nowa Nowa Scoping Study.

Eastern Iron Managing Director, Greg De Ross commented: “The June quarter was a period of heightened activity for EFE across the project portfolio. We are pleased to have commenced the scoping study for our priority Nowa Nowa high grade Iron Project which will be a focus in the current quarter.”

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NOWA NOWA IRON PROJECT

Scoping Study

Eastern Iron continues to focus its activities on the evaluation of a possible mining development at the Nowa Nowa Iron project. During the quarter the Company appointed project delivery specialists, Engenium Pty Ltd to commence a Mine Scoping Study for the project.

The Nowa Nowa project is located 250km east of Melbourne in eastern Victoria (see figure below) and comprises several deposits of massive hematite and magnetite. Eastern Iron has previously announced an Inferred Resource estimate for the Five Mile and Seven Mile deposits totaling 9.5Mt @ 49%Fe at a lower cutoff grade of 40% Fe (10 February 2012).

In carrying out the scoping study, Engenium will evaluate options for the mining, processing and transport of the product for shipment. Various sub-studies will also be undertaken in relation to hydrology, geotechnical, environmental, logistics and metallurgical test work.

Engenium will generate capital and operating cost estimates for the selected study options.

The Study, which is due for completion in the December quarter of this year, will assist the Board in determining whether to proceed with a definitive feasibility study.

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Nowa Nowa Locality Plan

Quarterly Report – June 2012

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Drilling Program

Eastern Iron has recently announced the completion of a diamond drilling program at Nowa Nowa this quarter. The drilling confirmed the strong results of previous drilling carried out by the Victorian Government in the 1950’s as well as providing drill core samples for beneficiation testwork.

Four drill holes were completed consisting of one at the Seven Mile deposit and three at the larger Five Mile deposit. All drill holes were vertical and details of the drilling program are shown in the table below. Assay results have so far been received from the Seven Mile hole which intersected oxidized magnetite/hematite iron ore from surface to 71.4 m depth as follows:

	From (m)	To (m)	Total (m)	Fe%	**SiO2% **	**Al2O3% **	P%	S%
NND120011	0.0	71.4	71.4	46.3	31.3	2.6	0.006	0.03

Further assay results from drilling at Five Mile are awaited.

Drill core from all holes has been split and composited for metallurgical testwork at AMMTEC laboratories in WA. This work is designed to investigate optimum conditions for beneficiating the Nowa Nowa iron ore to a +60% Fe product by crushing, screening and low intensity magnetic separation.

Details of Nowa Nowa Drill program:

Drill hole	Location	North (GDA)	East (GDA)	Dip °	Total Depth (m)
NDD011	7 Mile	599462	5832270	-90	124.1
NDD012	5 Mile	598407	5830862	-90	101.97
NDD013	5 Mile	598399	5830825	-90	119.4
NDD014	5 Mile	598378	5830801	-90	132.15

EULOGIE IRON - VANADIUM PROJECT

Concept Study

Eastern Iron has completed a concept study for a potential development of the estimated resource at the Eulogie project. The two areas that constitute Eastern Iron’s Queensland Iron Project, namely Eulogie and Hawkwood, are similar in resource potential and magnetite content, however, the location of the Eulogie deposit within close trucking distance of an available export port at Gladstone gave the project the potential for a quicker and lower cost development and hence became the focus for this study.

The study is based on open pit mining of the drill defined global Indicated and Inferred resource of 465Mt at 14.6%Fe (for details of the resource estimate see announcement dated 19 October 2011). The mining operation has been scoped to mine around 20 million tonne of ROM ore per year. Capital costs are estimated at close to $600 million for a project producing 3.2 million tonne per year of magnetite concentrate to be exported via Gladstone Port.

Quarterly Report – June 2012

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A summary of the key outcomes from the concept study are as follows:

Item	Units	Amount
Resource	Mt	465
Mill Feed	Mtpa	20
ROM Fe content	%	14.6
Concentrate Production	Mtpa	3.18
Capital Expenditure	A$M	605
Cash cost (FOB) per tonne conc	A$/t conc	76
NPV @ 8% DCF - (after tax inc MRRT)	A$M	513
Internal Rate of Return (IRR)	%	19.5

Geology and Resources

At Eulogie, magnetite, which is an iron mineral, is concentrated within multiple shallow dipping (30-40 degrees) layers (ferrigabbro) within a layered igneous complex.

In 2011 Eastern Iron completed a resource drilling program at Eulogie which included 34 drillholes totalling 3,484m. Drill hole and magnetic composites samples were analysed for Fe and associated elements with drill hole composites were analysed by Davis tube (DTR). The drill hole and assay data from this program was used to compile an Indicated and Inferred Resource of 465Mt @ 14.2% Fe. This resource was estimated to 200m depth over 35% of the total mapped area of the ferrigabbro consistent with earlier estimates of an exploration target tonnage of 500-1,000Mt[1] .

1 Potential exploration target tonnages and grades in this report are conceptual in nature as there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. Tonnages and grades are not to be quoted outside this context.

Mining

The mining study assumed conventional open pit mining, with the primary crusher located at the plant site. The current resource model was used to undertake pit optimisations using Whittle Four-X software to generate pit shells from which estimates of waste and ore mined were derived.

Quarterly Report – June 2012

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Metallurgy and Mineral Processing

Preliminary metallurgical testwork was carried out by consultant metallurgists, METS Pty Ltd of WA. The study was carried out in June 2011 using composite drillcore samples recovered from the earlier Thiess drilling. Davis tube analysis was carried out on fresh (unoxidised) core at grind sizes of 100% passing 150, 75 and 45 micron.

Further optimisation of the final product grade and grind size is anticipated. The Fe grade of the concentrate is higher at finer grind sizes. However, the coarser 150 micron magnetic fraction DTR concentrate as shown in the following table is of acceptable quality but may be subject to some discounting due to the moderate titanium levels.

						Assay (%)	Assay (%)	Assay (%)
Mass (%)	Fe	SiO2	Al2O3	TiO2	FeO	CaO	S	P	MnO	**K2O **	**K2O **	**K2O **	V
71.6	61.4	1.44	3.29	6.81	31.50	0.29	0.63	0.00	0.29	0.002	1.37	0.034	0.571

Concentrate Transport

A transport options study identified several options for transporting product to a multi-user wharf at Gladstone Port which include either road or rail or a combination of both. The concept study assumes that concentrate will be transported via a dedicated haul road for some 50km east of the mine to the Pacific Highway and then an additional 30km via existing sealed roads to Gladstone. Preliminary discussions with the Gladstone Port Corporation have indicated the availability of dry bulk cargo capacity at multi-user wharves in time for a development at Eulogie.

Capital and Operating Cost Estimates

Initial capital costs have been estimated at $605 million. The table below summarises the operating cost estimates including mining, processing, transport and loading of the iron product on a vessel at Gladstone Port.

Operating Cost summary

Cost Centre	Unit	Amount
Waste Mining	A$/t mined	2.50
Ore Mining	A$/t mined	3.50
Processing	A$/t milled	5.18
Product transport	A$/t conc	14.00
Port Loading	A$/t conc	2.50
Admin	A$M/yr	5.00
Total	A$/tonne conc.	75.83

Financial Model and Analysis

The base case financial analysis assumes product revenue of US$120/tonne magnetite concentrate FOB Gladstone, a long term exchange rate of $A0.90 : 1US$ and a WACOC of 8%. The model is ungeared, assuming 100% equity funding and does not include any price or cost escalation.

Quarterly Report – June 2012

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A sensitivity analysis shows that the project NPV is most sensitive to changes in concentrate price and then in decreasing order of sensitivity, exchange rate and total operating costs and least sensitive to initial capital cost.

The base case has included the payment of the Mineral Resource Rent Tax (MRRT) which on current analysis becomes payable from the commencement of operations. If the MRRT is repealed so that it is not payable the project NPV increases to A$682.7M.

Development Time Frame

It is expected that under the standard permitting regime in Queensland it will take approximately 2 years from submission of an application to the grant of a mining lease. Eastern Iron is proceeding with certain activities such as environmental baseline studies which would allow this process to commence as soon as funding for the feasibility study is in place. On this basis it is projected that the project could be development ready by early 2015.

Next Steps

Eastern Iron is currently in discussions with the Gladstone Port Corporation with a view to securing an MOU covering the potential to ship concentrate from the port area.

The Company is also in discussion with parties interested in joining Eastern Iron in further evaluation of the project including funding to completion of the mine feasibility study.

HAWKWOOD IRON PROJECT

Resource Estimate

During the quarter the Company received the results of the initial resource estimate at its Hawkwood Project located 200 kilometres southwest of Gladstone in Central Queensland. These estimates are reported in accordance with the 2004 JORC Code.

The resource estimate was carried out by H&S Consultants Pty Ltd (H&SC) and was based on data from the recently completed drilling program and geophysical surveys which outlined the surface trace of the magnetite-bearing ferrigabbro units at Hawkwood.

Drilling used in the current estimate covers only around 10-20% of the area of magnetic anomaly associated with sub-cropping ferrigabbro at Hawkwood which is consistent with earlier estimates of an exploration target tonnage of 500Mt-1000Mt.[1 ]

1 Potential exploration target tonnages and grades in this report are conceptual in nature as there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. Tonnages and grades are not to be quoted outside this context.

In summary (at a lower cutoff of 10% DTR) the Hawkwood resource is as follows -

	Tonnes (Mt)	DTR	Fe%	TiO2%	V%
Inferred	103.7	12.2	13.8	1.83	0.05

Note: decimals do not imply precision.

Quarterly Report – June 2012

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Hawkwood – drillhole locality plan

The Hawkwood iron (magnetite) concentrate is notably lower in titanium (TiO2) and higher in iron than comparable titaniferous magnetite deposits as reflected in the high quality concentrate (DTR) analysis for the resource as follows:

	Fe%	TiO2%	V2o5%	SiO2%	Al2O3%	S%
DTR Conc	64.6	1.63	0.6	3.26	1.96	0.65

NSW IRON ORE PROJECT

Joint venture partners 3E Steel Pty Ltd have completed drilling of additional palaeochannel areas within the joint venture tenements near Cobar in central western NSW. The objective of this drilling will be to substantially increase the current total resource. 3E have also approved a program of beneficiation testwork at a major Chinese University to be completed over the next six months.

CORPORATE

During the quarter Eastern Iron undertook a capital raising by way of a pro-rata non-renounceable Entitlement Offer of New Shares whereby shareholders were offered 2 shares for every 3 fully paid ordinary share held in the Company on 30 May 2012 at an issue price of $0.055 per New Share.

A total of 23,028,507 Shares were subscribed representing approximately 50.2% of available entitlements.

The primary purpose of the Entitlement Offer was to raise funds for the ongoing work program and scoping study of the Nowa Nowa Project. The total amount raised under the Entitlement Offer was $1,266,568 before costs. The New Shares were quoted with ASX on a deferred settlement basis on 28 June 2012 and Holding Statements were despatched on 5 July 2012.

Quarterly Report – June 2012

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FORWARD PROGRAM

Nowa Nowa

Progress the scoping study including:

• Release of assay results from the recently completed drilling at Five Mile

• Upgrade the current resource estimates at Five and Seven Mile

• Progress beneficiation testwork

• Commence environmental baseline studies

• Mining study

• Site investigations at the Eden Port facility

Queensland Iron Project

Progress discussions with potential joint venture partners for the Queensland Iron Project.

FINANCIAL POSITION

Total exploration expenditure for the quarter was $147,000. Expenditure by joint venture partners on exploration tenements in which Eastern Iron has an interest amounted to $311,400. The cash balance at the end of the quarter was $927,000 with a further $1,266,000 (before costs) which became available on 5 July from the Entitlement Offer.

INVESTOR INFORMATION

Eastern Iron is investigating the potential for development of a high grade magnetite resource at Nowa Nowa in Eastern Victoria as well as a magnetite processing operation based on magnetite deposits it holds under permit in Central Queensland. The Company is also in joint venture with 3E Steel to investigate the potential for developing large low cost low grade iron deposits in central western NSW.

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

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Mr Greg De Ross Managing Director Mob: 0417 711 274

The information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on information compiled by Greg De Ross, BSc, who is a Fellow of the Australasian Institute of Mining and Metallurgy. Greg De Ross is Managing Director and a full-time employee of Eastern Iron Limited and 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”. Mr De Ross consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

ASX: EFE

For enquiries on your shareholding or change of address please contact:

Boardroom Limited GPO Box 3993, Sydney NSW 2001 Phone: (02) 9290 9600

Quarterly Report – June 2012