EMPIRE RESOURCES LIMITED — Interim / Quarterly Report 2017

Apr 27, 2017

==> picture [186 x 107] intentionally omitted <==

ACN 092 471 513

QUARTERLY REPORT FOR THE PERIOD ENDING 31 MARCH 2017

PENNY’S FIND GOLD MINE - KALGOORLIE (WA)

During the third quarter of FY17, Empire Resources Ltd (‘Empire’, ‘Company’, ASX code: ERL) achieved several significant corporate developments preparing the way for its first major mining operation at the Penny’s Find Gold Project.

Highlights of the quarter include:

• Establishment and fleet mobilisation commenced by the mining contractor.

• $7.5 million mine operations funding through to gold production

• Office infrastructure established

• Open pit pre-strip mining operations commenced (post quarter)

• Ore haulage contract awarded to Hampton Transport

• No reportable safety incidents occurred during the period.

YUINMERY PROJECT

• New option agreement adds prospective adjacent tenements to this existing copper - gold project.

CORPORATE

• Fully subscribed placement raises $2.01 million (post quarter)

1

REVIEW OF OPERATIONS

Penny’s Find (WA): New gold mine (60% interest)

Empire Resources Ltd (‘Empire’, ‘Company’, ASX code: ERL) holds a 60% interest in and acts as manager for the new Penny’s Find gold mine, located 50km northeast of Kalgoorlie in Western Australia. The remaining 40% interest is held by unlisted Brimstone Resources Ltd.

==> picture [480 x 313] intentionally omitted <==

Location of Penny’s Find Project

Open Pit Mining

During the quarter operations have involved mobilisation of mining equipment to site, establishment of site offices and subsequent to the end of the quarter, the commencement of stripping top soil off the open pit and waste dump areas. The office complex is now operational. Photos of these are shown below.

Subsidiary activities have also included construction of mine haul roads and flood mitigation channels and bunds to protect the site from severe rainfall events. The pit safety bund has been completed.

Using trained locally domiciled staff from Kalgoorlie, work at Penny’s Find is now to commence imminently with full scale production operating continuously 24 hours a day, 7 days a week

2

Funding for Mining

As announced to the ASX on the 21 March 2017, the Company signed a binding Term Sheet with Blue Capital Services Pty Ltd (Blue Cap Mining) to fund mining costs and perform the mining contract needed to bring the Penny’s Find gold mine into full production.

The Term Sheet specifies Blue Cap Mining, will fund mining and related costs to a maximum of A$7.5 million until the mining operations are cash flow positive. These funds will also assist with project on site infrastructure establishment costs.

The Term Sheet agreement with Blue Cap Mining provides for:

• Funding of mining and related costs up to a maximum of A$7.5 million, repayable within seven months of operation commencement.

• The cost of funding, dependent on the amount of draw down, is pro rata up to a maximum of A$2.3 million payable from free cash flow.

The Empire - Blue Cap Mining agreement covers only the mining operations of the open pit with Corporate overheads and infrastructure are being self-funded by the Company with a pro rata reimbursement to the Company by the joint venture partner, Brimstone Resources Ltd.

Haulage Contract

The Company announced to the ASX on the 9 March 2017 it had awarded the haulage contract to Kalgoorlie-based Hampton Transport Services for the cartage of gold ore from Penny’s Find to the Lakewood Mill.

The Lakewood Mill on the southern outskirts of Kalgoorlie-Boulder in WA is located 63km by road from Penny’s Find. Each haulage and treatment campaign is scheduled to process between 15,000 and 20,000 tonnes of gold ore.

Future Drilling

Towards the end of the next quarter the Company plans to undertake a six hole diamond drilling program targeting underground mineralisation with the aim of converting inferred resources to indicated. This drilling will also yield important additional geotechnical data for underground studies.

3

==> picture [485 x 320] intentionally omitted <==

Planned drilling targets

==> picture [485 x 330] intentionally omitted <==

Pre-strip of portion of the open pit area, Penny’s Find Project

4

==> picture [484 x 325] intentionally omitted <==

Loading top soil for removal, Penny’s Find Project

==> picture [486 x 326] intentionally omitted <==

Moving top soil from waste dump area

5

==> picture [485 x 325] intentionally omitted <==

Mine site offices, Penny’s Find Project

==> picture [486 x 326] intentionally omitted <==

Inside the operational mine site office, Penny’s Find Project

6

About Penny’s Find

The high grade gold mineralization at Penny’s Find is hosted by quartz veins at the contact between sediments and basalt.

Both oxide and fresh mineralization are free milling with 98% and 99% recoveries achieved in testwork respectively. There is also a high gravity recoverable gold component, 53% for oxide and 85% for fresh.

The Penny’s Find Bankable Feasibility Study, announced to the ASX on the 21 June 2016, found that based on a gold price of A$1,500/oz and a probable ore reserve of 146,000 tonnes @ 4.62g/t Au (Table 1)

The Penny’s Find ore reserve is contained within a planned single open pit mined to a depth of 80m with ore to be trucked off site to the Lakewood Mill for conventional gravity recovery and CIL circuit processing.

Table 1- Ore Reserve Summary - based on A$1,500/oz

PENNY'S FIND OPEN PIT ORE RESERVE - FEBRUARY 2016
DESCRIPTION	TONNES	GRADE	GOLD TO
		g/t Au	MILL(ozs)
PROVED	-	-	-
PROBABLE	146,000	4.62	21,700
TOTAL	146,000	4.62	21,700

Underground Potential

Empire is working to eventually take the mine underground as Penny’s Find’s gold mineralisation extends to at least 250m depth where it remains open with a current known deeper resource inventory of 170,000 tonnes @ 5.40g/t Au beneath the open pit (Table 2).

Table 2 : Penny’s Find Resources - September 2015*

Table 2 : Penny’s Find Resources- September 2015*	Table 2 : Penny’s Find Resources- September 2015*	Table 2 : Penny’s Find Resources- September 2015*	Table 2 : Penny’s Find Resources- September 2015*	Table 2 : Penny’s Find Resources- September 2015*	Table 2 : Penny’s Find Resources- September 2015*	Table 2 : Penny’s Find Resources- September 2015*
Reportable In Situ Mineral Resource by location and cut-off
	Open Cut (0.5g/t)		Underground (1.5g/t)		Combined
Class	Tonnes	Au g/t	Tonnes	Au g/t	Tonnes	Au g/t
Measured	-	-	-	-	-	-
Indicated	218,000	4.64	84,000	4.90	302,000	4.71
Inferred	82,000	1.79	86,000	5.89	168,000	3.89
TOTAL	300,000	3.86	170,000	5.40	470,000	4.42

*Announced to the ASX on 2 September 2015

A preliminary underground mine design has been initiated to ensure it is able to mesh smoothly with the open pit mining operation.

7

==> picture [426 x 313] intentionally omitted <==

Penny’s Find Preliminary Underground Mine Design - Long Section

Yuinmery (WA): Copper - Gold Project (100% interest)

The Yuinmery project is a volcanogenic massive sulphide (VMS) copper - gold project located 80km southwest of Sandstone, WA. The Company has already outlined a copper– gold deposit at the Just Desserts prospect as reported in previous quarterly reports.

==> picture [414 x 292] intentionally omitted <==

8

As announced to the ASX on the 16 January 2017, the Company has entered into a two year option agreement to acquire from Evolution Mining (Mungari) Pty Ltd (Evolution Mining), it’s interest in two highly prospective copper - gold exploration licences.

The two granted exploration licences, E57/681 and E57/1027, abut the northern boundary of Empire’s wholly-owned Yuinmery copper-gold project and include the significant A Zone copper-gold prospect which straddles the northern boundary.

Previous exploration on E57/681 has intersected significant copper-gold mineralisation at the A Zone prospect situated just 1.3km along strike from Empire’s Just Desserts coppergold deposit.

Better intersections at A Zone include:

• 5m @ 4.4% Cu, 0.4g/t Au within 19m @ 1.9% Cu, 0.3g/t Au from 160m downhole

• • 4m @ 4.5% Cu, 0.5g/t Au within 7m @ 3.2% Cu, 0.5g/t Au from 192m downhole - 5m @ 2.8% Cu, 1.2g/t Au within 10m @ 1.8% Cu, 0.9g/t Au from 222m downhole - 3m @ 4.0% Cu, 3.3g/t Au within 8m @ 2.4% Cu, 1.3g/t Au from 275m downhole

Details of the above drilling were reported by Empire in announcements to the ASX on the 16 August, 12 September and 22 December 2011 and on the 6 February 2012.

==> picture [482 x 351] intentionally omitted <==

9

The acquisition is via a two year option agreement for Empire to purchase the interest held by Evolution Mining.

The two exploration licences, E57/681 and E57/1027, are the subject of a joint venture between Evolution Mining and Giralia Resources Ltd, a wholly owned subsidiary of Atlas Iron Ltd. Evolution Mining currently holds an interest of approximately 91% in the joint venture.

Empire must meet all expenditure commitments while retaining an option to purchase Evolution Mining’s interest for either a cash or share consideration of A$500,000. A 2% net smelter royalty capped at A$500,000 will be payable by Empire on any minerals produced from the two tenements.

Further drilling at A Zone is planned for the coming quarter.

==> picture [282 x 398] intentionally omitted <==

Laverton (WA): Gold Project (Nil interest)

The Laverton gold project consists of one exploration licence (E38/3075) located 25km northeast of the town of Laverton in Western Australia.

Following a data review, the decision was taken to sell this tenement to allow the Company to concentrate efforts on its core projects.

10

An agreement has been signed with Victory Mines Ltd to sell the tenement for $2,000 and a 2% gross product royalty on any minerals produced.

CORPORATE

Share Placement - post quarter

The successful completion of a fully subscribed placement to sophisticated investors was announced to the ASX on the 12 April 2017.

The Company has made a share placement of 96 million shares at a price of 2.1 cents after the end of the quarter. The shares were allotted on 19 April 2017.

Proserpine Capital and Fiscus Capital Pty Ltd were Advisors to the Placement , which was completed within the Company's placement capacity pursuant to ASX Listing Rules 7.1 (58,080,221ordinary shares) and 7.1A (37,919,779 ordinary shares), leaving a placement capacity of 800,369 ordinary shares .

The Placement funds will be applied towards:

• Mining infrastructure items at Penny's Find;

• Further investigating underground development at Penny's Find;

• Drilling at the recently optioned extension at Yuinmery;

• General working capital; and

• Repayment of a working capital facility.

FYI Resources Limited (Empire 13.54% interest)

ASX-listed FYI Resources Ltd (ASX Code “FYI”) is focused on potash exploration in South East Asia where potential exists for the discovery of first tier potash deposits.

FYI Resources is currently in joint venture negotiations with a Chinese group regarding resource development and potential production in Laos.

FYI Resources also has applications pending for potash tenements covering two separate project areas in Thailand. Drill programmes have been finalised and are awaiting grant of tenements.

Legal Proceedings

As referred to in the previous quarterly report and the 31 December 2016 half year accounts, Empire Resources Ltd has been named as a defendant in a writ issued in the District Court of Western Australia by Johannes Stig Norregaard. The matter has now been moved to the Supreme Court of Western Australia.

DAVID SARGEANT MANAGING DIRECTOR April 2017

For further information on the Company, David Sargeant – Managing Director Phone: +61 8 9361 3100 Visit: www.resourcesempire.com.au

11

Competent Persons Statements

The scientific and technical information in this report that relates to Ore Reserve estimates for the Penny’s Find Deposit is based on information compiled by Mr Roselt Croeser, an independent consultant to Empire Resources Limited. Mr Croeser is a Member of the Australasian Institute of Mining and Metallurgy. Mr Croeser has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Croeser consents to the inclusion in the report of the matters related to the Ore Reserve estimate in the form and context in which it appears.

The information is this release concerning the Mineral Resources for the Penny’s Find and Just Desserts deposits 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 style of mineralization and type of deposit under consideration and qualifies as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Ball consents to the inclusion in this public release of the matters based on his information in the form and context in which it appears.

Tenement Holdings at 31 March 2017
PROJECT	TENEMENT NUMBER	PERCENTAGE INTEREST HELD	PERCENTAGE INTEREST HELD	COMMENTS/ CHANGES SINCE LAST QUARTER
		31 December 2016	31 March 2017
PENNY'S	E27/410	60	60
FIND	E27/420	60	60
	E27/553	60	60
	E27/591	0	60	APPLICATION
	E27/592	0	60	APPLICATION
	E27/593	0	60	APPLICATION
	G27/1	60	60
	L27/90	60	60
	L27/91	60	60
	L27/92	60	60
	L27/93	60	60
	M27/156	60	60
	P27/2007	60	60
	P27/2008	60	60
	P27/2262	60	60	APPLICATION
YUINMERY	M57/265	100	100
	M57/636	100	100	APPLICATION covers P57/1214 - 1217
	P57/1214	100	100
	P57/1215	100	100
	P57/1216	100	100
	P57/1217	100	100
	E57/1037	100	100
EVOLUTION	E57/681	0	0	OPTION TO ACQUIRE 91% INTEREST
OPTION	E57/1027	0	0
LAVERTON	E38/3075	100	0	SALE

12