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EMPIRE RESOURCES LIMITED Interim / Quarterly Report 2012

Oct 28, 2012

64875_rns_2012-10-28_0a4fae46-1f13-49b1-b06f-004452ef9288.pdf

Interim / Quarterly Report

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ACN 092 471 513

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QUARTERLY REPORT FOR THE PERIOD ENDING 30 SEPTEMBER 2012

HIGHLIGHTS

YUINMERY, WA : Copper - Gold

  • Just Desserts JORC Resource and A Zone deposits are now understood to be part of the same mineralised horizon

  • New targets discovered on this horizon are located between existing Just Desserts JORC Resource and the A Zone deposits

  • Empire targets mineralisation that may link the two deposits, with potentially significant feasibility and planning consequences

  • Empire moves toward a maiden JORC Resource at A Zone with drilling this quarter

POINT KIDMAN, WA : Gold

  • New gold project acquired in prolific Laverton gold belt

  • Gold nuggets discovered along a 2.5km long zone, which has not been previously explored

  • Comparable geology to the world class Granny Smith mine (4.3 M oz)

PENNY’S FIND, WA : Gold

  • Further high grade intersections brings project closer to production:

  • 8m @ 5.16g/t Au from 155m, including 4m @ 8.03g/t Au

  • 3m @ 17.41g/t Au from 66m, including 2m @ 24.33g/t Au

  • 3m @ 8.89g/t Au from 173m

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Project Location Map Western Australia

REVIEW OF OPERATIONS

SEPTEMBER QUARTER 2012

Yuinmery (WA): Copper - Gold Project

(100% interest and option to earn 91.44% interest on adjoining tenements)

The most advanced prospects at Empire’s Flagship Yuinmery Project, Just Desserts and A Zone, are now thought to occur in the same mineralised horizon which has been disrupted and offset by faulting.

  • This possibility crystallises management’s view that Yuinmery, with a current JORC resource of 1.07 million tonnes @ 1.8% Cu and 0.8g/t, will continue to expand.

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During the quarter a reinterpretation of geology and ground EM surveys has identified two new targets at the YC23 prospect. Importantly, these targets are located between the existing Just Desserts JORC resource and the A Zone deposit, where Empire is targeting the release of a Maiden JORC Resource after additional drilling that will commence this quarter.

These new targets, which represent an extension to the Just Desserts mineralization lie in this same horizon, but have been moved by faulting 350m to the east of Just Desserts. The anomaly closest to Just Desserts is the stronger and larger of the two and will be the priority drill target for the next round of RC drilling this quarter.

The introduction of these additional targets within the same mineralised horizon, adds the appealing prospect that mineralisation may have been contiguous.

Empire continues to drive the expansion of the Yuinmery resource as its central focus, and is excited to be generating additional targets in between known mineral deposits.

The area targeted has had no drilling or sampling carried out previously, so proving mineralisation in these could have significant impact on the size and economics of the Yuinmery project as it targets increasing JORC resources and progresses toward a development decision.

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YC23 – New EM Targets on Magnetics in relation to Just Desserts and A Zone deposits

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YC23 – EM Channel 30 -
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EM anomalies have also been identified at the YC10, YC24 and Maximus prospects which will be tested in the next round of RC drilling.

During the September quarter the Company also completed five Induced Polarization (IP) surveys. These were completed over various prospects to locate areas of disseminated sulphides which could be indicative of copper stockwork dominant mineralization. Three RC holes (540m) were also completed at the YC16 and Constantine prospects.

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The IP surveys were successful in identifying anomalies at the YC16 and YC3A prospects, the one at YC3A being especially strong. No significant anomalies were identified at the YC1, YC9 and YC15 prospects.

A very strong chargeable IP anomaly was identified at the new YC3A prospect which lies 2km north of A Zone and 200m north of the YC4 prospect. RC drilling has previously intersected copper and zinc mineralization at the YC4 prospect – 3m @ 0.5% Cu, 0.3g/t Au, 3.7g/t Ag and 11m @ 0.6% Zn.

YC3A is a target for the next round of RC drilling this quarter.

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At YC16, the IP anomaly coincided with an old RAB drilling copper anomaly and VTEM anomaly. Two RC holes were drilled to test YC16, one of which intersected 3m @ 0.34% Cu, 3ppm Ag from 147m downhole. This intersection of minor disseminated pyrite and chalcopyrite in felsic volcanics is at the top of the coincident IP and VTEM anomaly. The second drill hole intersected 4m @ 1.29g/t Au from 104m associated with minor quartz veining. Both holes were cased to undertake future downhole EM surveys.

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The Company has already identified an indicated and inferred resource of 1,070,000 tonnes at 1.82% copper and 0.78g/t gold at the Just Desserts prospect.

It is also currently working towards the producing a maiden JORC resource for the A Zone prospect where high grade copper – gold mineralization remains open at depth. After RC precollar drilling, six diamond core holes are planned to extend the A Zone mineralization, commencing this quarter. Increasing JORC resources as Yuinmery progresses toward development is the priority. The RC will move onto test new targets including those between Just Desserts and A Zone.

One RC hole was also completed at the Constantine prospect during the quarter. This intersected minor disseminated pyrite in a pyroxenite unit which returned a best assay of 4m @ 0.51g/t Pt+Pd, 0.16% Ni from 66m down hole.

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Hole ID North East Az Dip Depth From Int Cu Au Pt+Pd Ni Ag
GDA94 z50 (m) (m) (m) % g/t g/t % g/t
YC16 Prospect
YRC12-07 6844470 689000 110 -65 220 147 3 0.34 0.07 - 0.01 3.3
YRC12-08 6844500 689020 290 -65 220 104 4* 0.02 1.29 - - -
Constantine
YRC12-09 6842250 689590 90 -60 100 66 4 0.04 - 0.51 0.16 -

1m riffle split samples assayed for : Gold, Platinum and Palladium by 40gm fire assay, ICP‐MS. Copper, Nickel and Silver by mixed acid digest, ICP‐AES/MS. * 4m composite sample assayed by 40gm aqua regia ICP‐AES/MS

The Yuinmery project continues to reveal additional exciting targets in areas closely located to known mineralisation and established JORC resources.

The Company is targeting multiple closely located mineralised zones under its VMS deposit model for the Yuinmery Project, which is the same deposition model present in nearby currently mined deposits such as Golden Grove, Jaguar and DeGrussa Mines.

Progressing the Yuinmery Project to a development decision as JORC resources are increased is the company’s central focus, and the Board is encouraged by these results, and their potential to contribute to realising this.

Point Kidman (WA): Gold Project – 70% interest

Empire Resources is pleased to announce that it has acquired a 70% interest in a new gold project at Point Kidman, 40km to the east of Laverton in the Eastern Goldfields of WA.

The Point Kidman project, located in the prolific Laverton gold region, comprises six exploration licences covering a total area of 470km[2] .

Recent metal detecting by prospectors has discovered numerous gold nuggets spread along a 2.5km long zone. The area of nuggets overlies extensive quartz vein swarms and stockworks hosted by leached and weathered granite with many veins showing limonite-goethite staining after sulphides.

The association of gold mineralization with granite at Point Kidman shows strong similarities to the Granny Smith gold mine 50km to the southwest and the Golden Cities mine located north of Kalgoorlie. Both these large gold deposits are either partially or wholly located within granite.

In addition, extensive soil sampling undertaken by the tenement holders around the area of the nugget discovery has outlined a number of other gold anomalies in the immediate vicinity.

This new gold discovery is in an area where there are no historical gold workings or previous exploration drilling. This area also is not covered by any Heritage claims.

The Laverton region is one of the best gold endowed areas within the Yilgarn Craton and is host to a number of world class gold deposits such as the Sunrise Dam, Granny Smith and Wallaby mines, all discovered and developed within the past 30 years. The total gold produced to date from the region is in excess of 28 million ounces.

Managing Director, David Sargeant, said of the Point Kidman acquisition:

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“The Point Kidman Project is a rare opportunity in such a famously productive region. The agreement terms are highly attractive to us, especially given the geological pedigree of the tenement area, the absence of any heritage issues and the recent findings in the field by the prospectors. This acquisition will not distract Empire from its goal of fast-tracking Yuinmery to development, but on such attractive terms this was an extraordinary chance to add another high potential project to Empires exploration pipeline, especially as we expect some form of transaction on the Penny’s Find project in 2013.”

Empire has entered into an agreement to acquire its interest in the Point Kidman project subsequent to the end of the quarter (on 26 October, 2012) from two private companies through reimbursement of past expenditure (totalling approximately $125.000) and the issuing of up to 3 million ordinary shares in Empire over the next two year period. The first tranche of 1 million of these shares will be issued in the next week at a nominal value of 5 cents per share under the current 15% limit, will not require shareholder approval, and will rank equally with existing shares. Subsequent issue of 1 million shares each may occur after 12 and 24 months at the then current market price.

The forward plan is to complete a detailed aeromagnetic survey and structural study prior to drilling in the New Year.

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Gold nuggets found at Point Kidman

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Penny’s Find (WA): Gold Project – 60% interest

Drilling during the quarter by Brimstone Resources Limited (Manager) reported further high grade gold intersections at the Penny’s Find gold project, 50km northeast of Kalgoorlie in Western Australia.

Empire entered into a staged sale agreement [∆] with Brimstone for the latter to bring Penny’s Find into production. Brimstone can either acquire 100% of the project by payment to Empire of $2.5 million by June 2013 or earn up to a 75% interest by continuing exploration and development.

Penny’s Find already contains a JORC compliant near surface resource of 314,000 tonnes @ 5.2g/t Au for 52,500ozs . Its location on a granted mining lease in close proximity to Kalgoorlie, the current sustained high gold price (>US$1,700/oz) and potential for mining a substantial portion of the deposit by open pit before progressing to underground mining, are all strong positives for the future development of the project.

A conceptual open pit design completed on Penny’s Find in 2009 is shown below. This was based on a gold price of A$1,500/oz and operating costs at that time.

The latest drill results are from the first eight holes of a new reverse circulation and diamond drilling campaign designed to deliver an enhanced resource estimate by years end, to aid in mine planning and to obtain samples for metallurgical testwork.

Better intersections include :

  • PFRC12-27 : 3m @ 8.89g/t Au from 173m

  • PFRC12-32 : 3m @ 17.41g/t Au from 66m

  • PFRC12-33 : 8m @ 5.16g/t Au from 155m including 4m @ 8.03g/t Au from 158m

True widths are approximately 90% of drill widths.

The latest 20 hole, 3,000m program to drill out the deposit on a 20m by 20m pattern is being undertaken by Brimstone Resources Ltd, a subsidiary of LionGold Corporation Ltd, a Singapore Stock Exchange listed resource development company. As of 30 September 2012, Brimstone has earned 40% equity with the right to go to a 51% interest in the project through its exploration expenditure.

Penny’s Find’s high grade, coarse gold mineralization is hosted by quartz veins at the contact between shale and basalt. Metallurgical testwork has shown both oxide and fresh mineralization to be free milling with a high gravity recoverable gold component of >60% and a total gold recovery of >96%.

The current resource is defined to a vertical depth of 150m. Below this, faulting has moved the shale-basalt contact hosting the deposit 150m to the east. Locating the continuation of the Penny’s Find deposit on the other side of the fault will be a priority.

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Penny’s Find Location Plan

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Penny’s Find Long Section

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Penny’s Find Cross Section

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Penny’s Find Conceptual Pit Design[#] – looking NW Model Blocks shown >0.7g/t Au Red 2.0 - 3.00g/t Au, Purple >3.0g/t Au

Penny’s Find Drill Results

Hole ID Northing Easting Grid Dip Depth From To Int Au
Local Grid(m) Az (m) (m) (m) (m) g/t
PFRC12-14 9470 9305 253 -55 144 135 137 2 3.07
PFRC12-15 9470 9305 251 -62 168 152 154 2 4.41
PFRC12-18 9458 9375 264 -60 230 222 224 2 8.75
incls 222 223 1 16.10
PFRC12-27 9510 9370 270 -60 210 173 176 3 8.89
PFRC12-28D 9510 9370 270 -65 204 187.10 188.30 1.20 17.19
PFRC12-32 9540 9270 270 -60 90 66 69 3 17.41
incls 66 68 2 24.33
78 84 6 1.32
PFRC12-33 9550 9335 270 -60 186 138 139 1 5.50
155 163 8 5.16
incls 158 162 4 8.03
incls 160 161 1 21.25
PFRC12-36D 9550 9380 270 -65 210 200.05 206.10 6.05 2.83
incls 200.05 200.60 0.55 8.95

Intersections are an arithmetic average calculated using a 1.0g/t Au lower cut-off. No high cut has been applied. Maximum internal dilution 2m @ < 1.0g/t Au.

Analyses were done on 1m rotary split samples or half diamond core using a 30gm Fire Assay, AAS finish.

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Figure 5 : Damperwah Location Plan

Damperwah (WA): Copper Project – Farm-in earning 70% interest

The Company has identified an area with potential for volcanogenic massive sulphide (VMS) copper mineralization in the Warriedar Fold Belt situated approximately 320km northeast of Perth and 60km southwest of the Golden Grove copper-zinc mine.

RC drilling in the June 2012 quarter discovered copper sulphides at the Sears prospect enhancing the overall prospectivity of the area. Thin section examination of these drill chips indicates the rock sequence at Damperwah may be part of the same stratigraphy as hosts the Golden Grove mine, 60km to the northeast.

No field work was undertaken during the quarter.

Wynne (WA): Copper Project - 100% interest

The Wynne project consists of two granted exploration licences covering an area of 113km[2] in the northern Gascoyne region of Western Australia located 260 kilometres northeast of Carnarvon. Copper and lead mineralization has been identified associated with ironstones within metasedimentary rocks of the Proterozoic Morrissey Metamorphic Suite.

Surface sampling identified base metal gossans outcropping in three horizons, over at least a 7km strike length. Assays in various samples showed up to 0.25% Cu, 0.39% Pb, 0.14% Zn, 0.5g/t Au, 4.6% As, 347ppm Bi, 114ppm Mo and 128ppm W.

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The best intersection came from hole WRC12-01 where abundant visible secondary copper minerals were intersected at a shallow depth between 5–6 metres. This interval assayed 1m @ 3.9% Cu. Another significant intersection came from hole WRC12-08 which assayed 8m @ 0.56% Pb, 3g/t Ag from 84 metres depth. The drilling revealed a succession of calc-silicates and highly altered and sheared mafic rocks containing small amounts of copper, lead and zinc sulphides.

Examination by thin section of selected rocks from the recent drilling revealed rocks and sulphides similar to those of the Eastern Creek succession at Mt Isa.

The host rocks at Mount Isa are silicified, carbonaceous dolomitic shales, but at a higher metamorphic grade these would convert to actinolite-calcite rich calc-silicates as found in the recent drilling.

No field work was undertaken during the quarter.

Troy Creek (WA): Copper - Gold - PGM Project - 45% interest

The Troy Creek copper-gold-platinum group metal (PGM) project is situated 900 km northeast of Perth on the northern margin of the Palaeoproterozoic Earaheedy Basin where the Company holds tenements covering an area of 270 sq km.

No field work was undertaken during the quarter.

Yarlarweelor (WA): Uranium Project (28% indirect interest)

The Yarlarweelor uranium project is located 125km north of Meekatharra in Western Australia. Empire Resources Ltd holds an indirect 28% interest in the project through its shareholding in ASX listed FYI Resources Ltd.

No field work was undertaken during the quarter.

DAVID SARGEANT MANAGING DIRECTOR

October 2012

For further information on the Company, visit www.resourcesempire.com.au

David Sargeant – Managing Director Phone: +61 8 9361 3100 Adrian Jessup – Executive Director Phone: +61 8 9361 3100

The information in this report that relates to Exploration Results has been compiled by Mr David Ross B.Sc(Hons), M.Sc, who is an employee of the Company. He is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. He has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity to 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”. David Ross consents to the inclusion in the public release of the matters based on his information in the form and context in which it appears.

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Mineral Resource Estimates

The information is this report concerning the Mineral Resources for the Penny’s Find Deposit and the Just Desserts Deposit at Yuinmery have been estimated by Mr Peter Ball B.Sc who is a director of DataGeo Geological Consultants and is a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Ball has sufficient experience which is relevant to the styles of mineralization and types of deposit under consideration and qualifies 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 Ball consents to the inclusion in the public release of the matters based on his information in the form and context in which it appears.

Notes on the Penny’s Find Resource

An updated resource estimate for the Penny’s Find gold mineralization was completed and announced to the market on 8 August 2007 and 12 October 2007. There has been no change to the resource since that time.

The mineral resource by category is 314,000 tonnes averaging 5.2 g/t gold down to a vertical depth of 150m below surface. The mineral resource above 0.5 g/t gold is summarised in the following table.

Penny’s Find - Classified mineral resources – August 2007

Category Tonnes Grade* Ounces
Measured 79,000 4.40 11,177
Indicated 132,000 3.98 16,893
Inferred 103,000 7.33 24,276
TOTAL 314,000 5.18 52,316

*grades are based on a minimum cut-off of 0.5g/tAu and high assays cut to 25g/tAu

Resource modelling consultants Datageo calculated a JORC compliant in situ resource estimate, utilising all drill hole information available on mining lease M27/156 up to the end of June 2007.

The resource grade was estimated using ordinary kriging based on the drill hole data composited downhole to 1m intervals within constraining shapes representing the mineralization. Assumed specific gravity values used were:- oxide 2.0t/m[3] ; transitional 2.2t/m[3] ; fresh 2.5t/ m[3] .

# Penny’s Find Open Pit Scoping Study

During the March 2009 quarter, the Company employed an independent consultant to review pit design, mine scheduling, and potential cash flow based on a gold price of AUD$1,500/oz. The results of this study were positive and were utilised in discussions with various parties for the sale or joint development of the resource. No official reserve figures have been announced as a result of this study.

The parameters used in the study were: Gold price AUD$1,500/oz, Mining costs $3.50/t ore, $3.41/t waste, Mining 0 dilution 15%, Mining recovery 95%, Strip ratio 21:1, Pit slope average 50 , Treatment recovery 96%, Treatment costs $24.65/t.

The open pit outline shown in the Penny’s Find long section figure is based on the above scoping study conducted in the first quarter of 2009. It does not mean that mineralization above the outline is currently economic. To determine if any mineralization is currently economic a feasibility study will have to be undertaken using up to date costs and parameters.

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∆ Penny’s Find Agreement with Brimstone Resources Limited

At the election of Brimstone Resources Limited, the sale consideration for the Penny’s Find project consists of either :

  • A total cash payment of $3 million by June 2013 for a 100% interest together with a royalty on any gold produced in excess of 52,500oz. This includes a non-refundable payment of $500,000 already made to Empire for a 40% interest in the project.

  • A partial sale of either a 51% or 75% interest by the expenditure of $750,000 by 30 September 2012 or further expenditure of an additional $750,000 by June 2013. In either case ERL’s costs would be carried and repayable from production.

A 2% gross royalty payable to Empire on gold produced in excess of the current JORC resource of 52,500oz applies when the gold price is above A$700/oz up to a maximum of A$50/oz.

Notes on the Yuinmery Resource

A resource estimate for the Just Desserts prospect at Yuinmery was completed and announced to the market on 9 April 2009. There has been no change in the resource since that time.

The mineral resource by category to a depth of 250m below surface is reported below. The resource comprises no oxide mineralization, only transitional and fresh.

Just Desserts Classified Mineral Desserts Classified Mineral Resources – March 2009 – March 2009
Category Tonnes Grade* Grade* Grade*
Cu% Aug/t Ag g/t
0.5%Cu cutoff Indicated 184,000 1.11 0.54 0.8
Inferred 2,159,000 1.24 0.54 1.7
TOTAL 2,343,000 1.23 0.54 1.6
1%Cu cutoff Indicated 104,000 1.65 0.86 1.3
Inferred 966,000 1.84 0.77 2.1
TOTAL 1,070,000 1.82 0.78 2.1
1.5%Cu cutoff Indicated 46,000 2.11 1.14 1.6
Inferred 536,000 2.34 0.92 2.7
TOTAL 582,000 2.33 0.93 2.6

*High assays have been cut to 9%Cu, 20g/tAu and 10g/tAg.

Resource modelling consultants Datageo calculated a JORC compliant in situ resource estimate, utilising all drill hole information available on Prospecting Licence P57/1215 up to the end of June 2008.

The resource grade was estimated using ordinary kriging based on the drill hole data composited down hole to 1m intervals within constraining shapes representing the mineralization. Assumed specific gravity values used were:transitional 2.7t/m[3] ; fresh 3.2t/m[3] .

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