ENCOUNTER RESOURCES LIMITED — Interim / Quarterly Report 2012

Oct 30, 2012

QUARTERLY REPORT SEPTEMBER 2012

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HIGHLIGHTS

A highly active exploration company advancing a suite of greenfields copper discoveries in the Paterson Province of Western Australia

ASX Code

ENR

Market Cap (30/10/12)

A$23.9m ($0.21/share)

Issued Capital (30/6/12)

114.2 million ordinary shares 8.1 million employee options

Cash (30/9/12)

A$3.2M

YENEENA COPPER PROJECT – Paterson Province, WA (100%)

The Yeneena Copper Project (“Yeneena”) consists of a major ground position between the Nifty copper mine, the Telfer gold/copper mine and the Kintyre uranium deposit where Encounter has made a series of new copper discoveries that demonstrate the potential for large tonnage copper deposits.

BM7

• Further thick copper intersections from the northern part of BM7 reinforce the discovery of a large-scale copper-cobalt mineralised system.

• Copper mineralisation over 1km wide

• Untested portion of geophysical anomaly is 2.5km long

• Geophysical anomaly closely associated with copper mineralisation

• Additional thick zones of copper sulphide mineralisation including the highest grade interval to date from BM7 drilling:

• 279m @ 0.1% Cu from 172m including:

  • 23m @ 0.31% Cu and

  • 6m @ 0.7% Cu

• 73m @ 0.4% Cu from 74m including:  8m @ 1.0% Cu and  0.9m at 4.9% Cu

Board of Directors & Management

Mr. Paul Chapman Non-Executive Chairman

Mr. Will Robinson Managing Director

Mr. Peter Bewick Exploration Director

Dr. Jon Hronsky Non-Executive Director

Mr. Kevin Hart / Mr. Dan Travers Joint Company Secretary

www.enrl.com.au

Level 7, 600 Murray Street West Perth WA 6005 P: 08 9486 9455 F: 08 6210 1578 contact@enrl.com.au

• Heritage survey completed to facilitate drilling over the remaining 2.5km strike length of BM7

• Aircore drilling program (5,000m) over the southern extension of BM7 copper system is in progress

• First assay results from aircore drill program expected November 2012

T4

• 160 hole 5,700m aircore drilling campaign completed over the T4 prospect identified four corridors of copper anomalism

• Geophysical surveys are planned to define targets for follow up RC or diamond drilling at T4

CORPORATE

• Cash balance at the end of the quarter was A$3.2 million

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EXPLORATION

PATERSON PROVINCE

YENEENA COPPER PROJECT (100% Encounter)

Yeneena covers a 1,400km[2] tenement package in the Paterson Province of WA located between the Nifty copper mine, the Woodie Woodie manganese mine, the Telfer gold/copper mine and the Kintyre uranium deposit (Figure 1). Yeneena is highly prospective for different styles of mineralisation including: sediment-hosted copper; silver-lead-zinc; Woodie Woodie style manganese and unconformity related uranium.

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Figure 1: Yeneena project leasing and target areas with major regional faults

Exploration activities in the September 2012 quarter included:

• 1,300m of diamond drilling at BM7

• 5,700m of aircore drilling at T4

• 3,800m of aircore drilling at Sombrero

• Heritage survey at BM7

• Drill site rehabilitation

• Regional target reconnaissance

QUARTERLY REPORT SEPTEMBER 2012

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BM7 Prospect

The BM7 prospect is located 3km south of the BM1 discovery and situated at the intersection of the north-east trending Queen fault and the regionally-extensive McKay fault. Copper oxide mineralisation has been defined by aircore drilling over 3.5km along the Queen fault and remains open both along strike and to the south. Copper oxide mineralisation at BM7 in shallow aircore drilling is best developed at the intersection of the Queen and McKay faults.

The first diamond hole beneath the large scale copper oxide anomaly, EPT 1109, was completed in December 2011. The hole intersected an extensive hydrothermal stockwork system containing broad zones of finely disseminated, locally blebby and stringer copper sulphide mineralisation. Assay results included a zone of 102m @ 0.2% Cu and 243ppm Co from 274m (ASX announcement 17 January 2012). These results indicated the presence of a large-scale, depth-extensive, primary coppermineralisation system at BM7.

A total of 4 diamond holes were completed at BM7 during the quarter, of which three were drilled from surface (EPT1159, EPT1243 and EPT1244), and one was a diamond tail on a previous RC collar (EPT1164) (Tables 1 and 2).

Assay results received during the quarter from the diamond drilling program have provided more evidence of a large scale copper-cobalt system at BM7. Broad zones of disseminated sulphide mineralisation in excess of 250m thick and narrow zones of high grade copper mineralisation have been intersected.

Results from the latest batch of assays from diamond drilling include:

• 279m @ 0.1% Cu and 100ppm Co from 172m including 23m @ 0.31% Cu and 170ppm Co and 6m @ 0.7% Cu and 435ppm Co in EPT1244

• 73m @ 0.4% Cu and 100ppm Co from 74m including 8m @ 1.0% Cu and 120ppm Co and 0.9m at 4.9% Cu and 350ppm Co in EPT1159

The copper mineralisation in drill hole EPT1159, which included an intersection up to 0.9m @ 4.9% Cu, has demonstrated the potential for high grade copper sulphide within the large mineral system at BM7. The scale potential of the prospect has already been established with broad thicknesses of lower grade copper mineralisation intersected over a large area (Figure 2).

The copper mineralisation at BM7 is coincident with a 3km long geophysical anomaly (conductivity low) that is interpreted to represent a broad zone of silicification and dolomitisation (Figure 3). This silicification and dolomitisation is observed to be an important alteration halo surrounding major sediment-hosted copper deposits such as Nifty and Mt Isa. The close spatial relationship between the area of copper mineralisation at BM7 and the geophysical anomaly is compelling.

The BM7 mineralisation remains open to the south of E45/2658. The southernmost section drilled to date has defined a corridor of copper mineralisation in excess of 1km wide along the tenement’s southern boundary (Figure 3).

The tenement directly to the south of the recent BM7 drilling, E45/2805, was previously held as an application which prevented further drilling to the south. Tenement, E45/2805, was granted in August 2012 and a heritage survey was completed in September 2012 to facilitate a program of aircore and RC drilling.

QUARTERLY REPORT SEPTEMBER 2012

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Figure 2: BM7 prospect drill status plan

BM7 South drill program (E45/2805)

Results from the southernmost section at BM7 drilled to date have been highly encouraging (including 14m @ 0.8% Cu, 7m @ 0.7% Cu, 2m @ 2.9% Cu, 2m @ 2.2% Cu and 19m @ 0.5% Cu). It is expected that further copper mineralisation will be intersected as we progress south.

Aircore drilling has commenced over the remaining 2.5km of strike at the BM7 prospect on the recently granted tenement E45/2805. Initial 400m spaced aircore traverses are planned, with further infill to be undertaken based on results returned from handheld XRF (Niton) analyser. This drilling campaign will further explore the interpreted dolomite/silica alteration zone south of the existing BM7 RC and diamond drilling and test the extent of near surface copper-cobalt anomalies at BM7.

The 5,000m aircore drill program will also provide targets for follow up deeper RC drilling. An RC drill program will be conducted before the end of the 2012 field program. The location of RC holes and the scale of the program will be determined following the compilation of results from the aircore drilling program.

QUARTERLY REPORT SEPTEMBER 2012

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Figure 3: BM1 - BM7 prospects maximum copper in hole (>0.3%) over VTEM Channel 45

BM2 Prospect

The BM2 prospect is located on the regionally-extensive Tabletop Fault. This structure is known to be metallogenically important and is closely associated with the position of the Nifty Copper deposit, 50km along strike to the north-west (Figure 1). Previous aircore drilling defined a broad zone of copper anomalism (+0.25% Cu) over a strike extent of 800m (Figure 4). The identification of this significant base metal anomaly was made in an area of no outcrop, with up to 20m of transported overburden.

QUARTERLY REPORT SEPTEMBER 2012

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2012 RC and diamond collars in blue, 2011 diamond collars in black
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Figure 4: BM2 maximum copper in aircore drilling and drill status plan

RC drilling in the June 2012 quarter confirmed a heavily leached oxide profile with many holes showing a strengthening of zinc mineralisation at depth. RC holes EPT1136A through to EPT1141 all ended in anomalous zinc and lead and have mapped out an extensive area of base metal sulphide mineralisation that extends over 1km in strike.

Drill hole EPT1140, collared in the core of the regolith copper anomaly, returned the first sulphide copper intersection at BM2:

26m @ 0.60% copper from 100m incl. 10m @ 0.92% copper from 100m

This intersection sits below the depth of the original aircore drilling and remains open to the west and at depth.

Diamond drill hole EPT1174 (Figure 5) was collared from surface and drilled to the north at -60[0] . The hole was designed to test for copper sulphide mineralisation at depth below EPT1140.

The hole intersected a broad zone of carbonate alteration and veining in the shale unit that contained visible zinc and lead sulphides. Assay results include:

201m @ 0.6% zinc from 233m to end of hole including:

• 13m @ 1.3% zinc from 295m; and

• 8m @ 1.5% zinc from 349m; and

• 29m @ 1.0% zinc from 400m.

An orientation survey of IP (“Induced Polarisation”) is under consideration to provide a vector towards stronger accumulations of sulphides at BM2.

QUARTERLY REPORT SEPTEMBER 2012

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Figure 5: BM2 Cross Section 389150mE

T4 Prospect

Previous stratigraphic diamond drilling at the T4 prospect, an area totally covered by sand dunes, has confirmed the presence of copper sulphides within Rudall Complex metamorphic rocks. A magnetic anomaly with a strike-length of approximately 4km is present at T4. It is interpreted that this large anomaly represents magnetite alteration associated with copper mineralisation.

Assays have been received from the two diamond drill holes drilled at T4 designed to target the magnetic anomaly. The analysis confirms that zones of elevated copper anomalism (300-1000ppm copper) are associated with more intense magnetite and pyrrhotite alteration.

A total of 125 shallow aircore drillholes were completed over the T4 prospect this quarter. Widespread low-level copper anomalism (+100ppm) was observed in a highly variable regolith profile (0 to 30m thick), forming four main zones outlined in Figure 6.

Significantly, copper anomalism commonly occurs at end-of-hole, with EPT1391 ending in 270ppm Cu and 246ppm Mo (two orders of magnitude above background values for Molybdenum), and EPT1270 ending in 441ppm Cu. Approximately 27 drillholes were ineffective at testing the regolith due to difficulties penetrating the cover sequence.

It is considered that the copper anomalism observed in the aircore drilling forms a secondary regolith blanket that overlies primary copper mineralisation. It is often the thickness of the regolith that controls the extent of lateral dispersion of copper, and in the case of T4, the regolith is poorly developed and is often “stripped” by erosion. This results in tight regolith footprints over primary mineralisation, with poor lateral dispersion of copper. Considering the limited regolith profile, any results above 100ppm Cu are considered significant and warrant follow-up drilling.

QUARTERLY REPORT SEPTEMBER 2012

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A second phase of aircore drilling is planned to further define and delineate the four +100ppm Cu anomalies and follow up on the highly anomalous molybdenum intercept (246ppm Mo) in EPT1391.

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Figure 6: Electro-Magnetics ch35 overlain by maximum in-hole Cu (circles), +100ppm Cu outlines (yellow dashes) and magnetic anomalies (red shaded areas)

Sombrero Prospect

During a recently completed reconnaissance program, an ironstone outcrop was discovered 10kms east of BM1 in an area surrounded by windblown sands. A series of rock chips were taken over the outcrop that returned elevated copper, barium, cobalt, thallium and arsenic. It was interpreted that this ironstone may be a base metal gossan and might represent the surface expression of a copper sulphide body.

A total of 49 aircore holes were completed at Sombrero this quarter to test for a regolith copper anomaly beneath the outcropping gossan. Assays from 17 holes have been received, and 32 holes remain pending. Weak copper anomalism was observed in the

QUARTERLY REPORT SEPTEMBER 2012

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regolith (100-400ppm) with all holes ending in deeply weathered foliated shales. The levels of copper anomalism observed in the regolith do not explain the higher copper assays (+1000ppm) returned from the outcropping gossan.

CORPORATE

Cash balance at the end of the quarter was A$3.2 million.

NEXT QUARTER HIGHLIGHTS

Activities planned for the December 2012 quarter include:

1. Aircore / RC drilling at BM7

2. Final assays from BM7 diamond drilling

3. IP orientation surveys at BM7, BM2

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Will Robinson Managing Director

The information in this report that relates to Exploration Results and Mineral Resources at Lake Way South is based on information compiled by Mr Peter Bewick who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Bewick is a full time employee of Encounter Resources Ltd and has sufficient experience which is relevant to the style of mineralisation under consideration to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Bewick consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

QUARTERLY REPORT SEPTEMBER 2012

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Hole ID	Depth from (m)	Depth to (m)	Interval (m)	Copper (%)	Cobalt (ppm)
EPT 1181	239.6	257.5	17.9	0.20	162
and	302	304.7	2.7	0.10	66
EPT 1159	74.4	147	72.6	0.36	99
incl.	74.4	101	26.6	0.64	112
incl.	79.6	87.7	8.1	1.05	116
incl.	82.1	83	0.9	4.88	350
and	121.3	147	25.7	0.29	143
EPT 1244	172	451	279	0.10	102
incl.	172	184.5	12.5	0.31	191
and	189.6	333.5	143.9	0.14	133
incl.	195	198.4	3.4	0.39	238
incl.	199.5	202.3	2.8	0.44	438
incl.	211.8	215.5	3.7	0.17	317
incl.	246.5	269.9	23.4	0.31	173
incl.	293	333.5	40.5	0.16	162
and	401.7	405.3	3.6	0.11	36
and	438.7	445	6.3	0.67	435

Table 1: BM7 Drill Hole Assay Summary Intervals listed are composited from individual assays using a nominal cut off of 0.1% copper. Zones of below 0.1% copper have been included in some composite calculations.

Hole ID Northing (m) Easting (m) RL (m) EOH (m) Dip Azi	Hole ID Northing (m) Easting (m) RL (m) EOH (m) Dip Azi
EPT1181 EPT1159 EPT1164 EPT1244	7541496 7541298 7540900 7541100 367171 367226 366853 367550 320 320 320 320 346.2 301 502.9 472.4 60 60 60 60 090 090 090 090

Table 2: BM7 Diamond Drill hole information

Drill hole coordinates GDA94 zone 51 datum and determined via handheld GPS (+/-5m), EOH = End of hole depth; m=metre; azi=azimuth.

QUARTERLY REPORT SEPTEMBER 2012

Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10, 17/12/10

Name of entity

	Encounter Resources Limited
	ABN 47 109 815 796 Consolidated statement of cash flows
			30 September 2012
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration and 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 - R&D tax concession refund - Other NetOperating Cash Flows			Current quarter $A’000	Year to date (3 months) $A’000
			- (2,099) - - (241) - 120 - - 209 31	- (2,099) - - (241) - 120 - - 209 31
			(1,980)	(1,980)
Cash flows related to investing activities 1.8 Payment for purchases: (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)			- - (11) 20 - - - - -	- - (11) 20 - - - - -
			9	9
			(1,971)	(1,971)

• See chapter 19 for defined terms.

Appendix 5B Page 11

30/9/2001

Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(1,971)	(1,971)
Cash flows related to financing activities 1.14 Proceeds/(refunds) 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 – capital raising costs Net financing cash flows	- - - - - -	- - - - - -
	-	-
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 of quarter	(1,971) 5,185 -	(1,971) 5,185 -
	3,214	3,214

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
		183
		-
1.25	Explanation necessaryfor an understandingof the transactions
	Item 1.23 - Remuneration of Directors.

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 reportingentityhas an interest
	-

• See chapter 19 for defined terms.

Appendix 5B Page 12

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Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

	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
	900
	-
	-
	200
Total	1,100

Reconciliation of cash

Total Reconciliation of cash		1,100
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	714	1,185
	2,500	4,000
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	3,214	5,185

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
	E37/1062 E38/2622	Sold Sold	100% 100%	0% 0%
	E45/2805 E45/2806	Granted Granted	0% 0%	100% 100%

• See chapter 19 for defined terms.

Appendix 5B Page 13

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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 note 3) (cents)	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)	Amount paid up per security (see note 3) (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 (c) Released from Escow	114,194,360	114,194,360
	- - -	- - -
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	500,000 400,000 400,000 200,000 5,425,000 550,000 550,000	- - - - - -		Exercise price $0.535 $0.55 $0.70 $0.30 $1.35 $0.80 $0.40		Expiry date 30/11/2012 30/11/2012 30/11/2012 30/6/2013 22/11/2014 30/9/2015 31/5/2016
	-	-
	-	-
	50,000	-		$0.50		9/8/2012

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

7.11 Debentures (totals only)	-	-
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 4).

• 2 This statement does give a true and fair view of the matters disclosed.

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Sign here:

Date: 31 October 2012 (Company secretary)

Print name: Kevin Hart

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: Cash Flow Statements apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International Accounting 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.

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Appendix 5B Page 15

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