ENEGEX LIMITED — Interim / Quarterly Report 2019

Jul 30, 2019

Level 21, 500 Collins Street Melbourne Victoria 3000 Australia Tel: (+61 3) 8610 4700 Fax: (+61 3) 8610 4799 Email: admin@enegex.com.au

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QUARTERLY ACTIVITY REPORT

30 June 2019

Kimberley Basin Exploration Licences

During the quarter the company made application for two exploration licenses in the eastern margin of the Kimberley Basin of Western, a culmination of its expanded its focus over recent years to consider avenues created by advances in energy generation, transmission and storage (refer Figure 1).

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Enegex
Applications
Area
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Figure 1 Enegex Application Areas shown on regional geology

Enegex has identified the area covered by its two applications as offering prospectivity for Vanadium, Cobalt-Nickel, PGE and Fluorite mineralisation.

The geology of the tenements has been mapped as “Hart Dolerite”, a regionally extensive Proterozoic sill complex which has historically not been considered prospective. The tenement areas have accordingly been the subject of only limited exploration, focused on gold and diamonds (refer Figure 2).

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Figure 2: Historical Exploration in and around Enegex Application Areas shown on regional magnetics (reduced to pole first vertical derivative)

Enegex has identified three recent advances in geological understanding that alter the prospectivity of the Hart Dolerite:

• Recent mapping and exploration of the Speewah Dome, immediately to the north of the Enegex tenement areas, has identified that the Hart Dolerite comprises a layered intrusive suite of rocks (Intrusive Suite), and that the prospective part of the Intrusive Suite is the Disseminated Magnetite Gabbro which hosts the Speerwah Dome Vanadium Deposit (adjacent to the Enegex application area). Disseminated gold and copper also identified in the sulphides of the Intrusive Suite indicate potential for reef-type PGE mineralization in the upper, differentiated, magnetite-rich parts of the layered intrusion.

Quarterly Activities Report for the quarter ended 30 June 2019

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• Geological Survey WA (GSWA) regolith sampling has identified high cobalt and coincident high nickel anomalies in Hart Dolerite, indicating prospective fertile host rocks for these minerals within the Suite.

• A later epithermal event has been identified in the Hart Dolerite in the Speewah area with carbonate and epithermal fluorite overprinting the dolerite. Fluoride is currently being investigated as a potential replacement for lithium batteries.

The limited historical exploration in the Enegex application areas has not determined which units of the Intrusive Suite are exposed. Thus, following grant of exploration licenses, Enegex intends to conduct exploration activities to determine the presence or otherwise of prospective units within the tenement area.

Cornea Retention Lease (WA-54-R)

The initial five year term of the WA-54-R Cornea Retention Lease in which Enegex had a 14.75% joint venture interest ended during the quarter, on 5 May 2019, and the Cornea JV lodged an application to renew the Retention Lease for a further five years. For a Retention Lease to be granted and subsequently renewed, the Commonwealth-Western Australia Joint Authority (JA) must be satisfied that the accumulation is “not presently commercial but is likely to be commercially viable within 15 years”.

The Cornea Joint Venture’s renewal application was predicated on the work completed over the initial lease term, especially the last two years of the lease. It was accompanied by detailed oil, gas and water production simulation forecasts generated from an integrated reservoir model prepared by a team of independent specialists comprising a petrophysicist, geologists, geophysicists and reservoir engineers. The development concept and cost estimates were prepared by an independent engineering firm.

The Cornea accumulation has had 18 wells drilled into it and its immediate environs. The renewal application and our studies demonstrated that the field is not presently commercially viable, even adopting an extremely cost efficient development concept of a platform and subsea storage unit. The renewal application demonstrated the oil price, production and cost parameters required for the field to be commercially viable. It identified numerous avenues by which the field’s commercial viability could be improved. The submission proposed a work program focused on strategies for accessing more oil volumes and lowering the development cost.

A renewal of the Retention Lease would have allowed for the possibility that oil demand would result in oil prices recovering sufficiently over the next five years to meet or exceed the necessary threshold oil price needed to justify any further substantial investment in either drilling or development.

During the quarter the National Offshore Petroleum Titles Administrator (NOPTA) provided a “request for further information” in relation to the renewal application, as is typical with all titles administration matters. However, this “request” was unusual in that it did not in fact request any information or seek any clarifications. Rather, it advised that “ insufficient information has been provided to demonstrate that recovery of petroleum from the lease area is likely to become commercially viable within 15 years, and therefore to support a recommendation to renew Petroleum Retention Lease WA-54-R ” with extremely wide and general reasons cited without reference to any of the detailed supporting content provided by the Joint Venture in its renewal application.

Quarterly Activities Report for the quarter ended 30 June 2019

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Having reviewed NOPTA’s “request”, the Joint Venture considered that NOPTA was unlikely to support renewal of WA-54-R and that the JA is therefore unlikely to grant such renewal.

WA-54-R presented an unusual retention lease circumstance, having been granted over an oil accumulation, rather than a gas accumulation. The Cornea JV’s decision to apply for a Retention Lease in 2013 reflected advice from the Joint Authority in early 2013 that it should do so. In September 2013 the Coalition Government’s Policy for Resources and Energy was released with measures aimed at ensuring that Retention Leases are held for “ a legitimate need to secure gas for long-lived production projects ”. The Cornea JV lodged its application for Retention Lease the next month (October 2013) and WA-54-R was granted in May 2014, reflecting the Joint Authority’s earlier advice to the Cornea JV, notwithstanding the September 2013 policy change.

The Cornea JV believes that NOPTA and the JA intended to apply the September 2013 policy and deny a renewal of the Cornea Retention Lease, despite the Cornea JV’s significant investment in Cornea. This investment includes the drilling of Cornea-3. The Cornea JV increased its investment over the course of the Retention Lease, recently completing an integrated reservoir model in accordance with the work program variation approved by the JA.

The Cornea JV has considered avenues open to it, including pathways for administrative review in the event of a negative decision and has formed the view that NOPTA’s letter reflects an insurmountable hurdle. To develop Cornea, significant production and oil price hurdles must be overcome. The Cornea JV believes that, for a marginal field such as Cornea to have any chance of development, it must be supported by a constructive and commercial approach from the relevant regulator.

The Cornea JV therefore decided to withdraw its application to renew WA-54R, which withdrawal has been approved following the end of the quarter. As a result, the Cornea JV has been advised that WA-54-R is no longer in force.

Other Mineral Resources Opportunities

Enegex is open to other natural resource opportunities and continues to evaluate opportunities to generate shareholder value including in the areas of

• The exploration for strategic energy, transmission and storage minerals

• New energy storage technologies

• Alternative and renewable energy opportunities

By Order of the Board

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R J Wright

Company Secretary Melbourne, Australia 31 July 2019

Quarterly Activities Report for the quarter ended 30 June 2019

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

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ENEGEX LIMITED
ABN Quarter ended (“current quarter”)
28 160 818 986 30 June 2019
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Consolidated statement of cash flows Current quarter Year to date (12
$A’000 months)
$A’000
1. Cash flows from operating activities
1.1 Receipts from customers
1.2 Payments for
(a) exploration & evaluation (48) (52)
(b) development
(c) production
(d) staff costs
(e) administration and corporate costs (10) (99)
1.3 Dividends received (see note 3)
1.4 Interest received 1 4
1.5 Interest and other costs of finance paid
1.6 Income taxes paid
1.7 Research and development refunds
1.8 Other (provide details if material)
1.9 Net cash used in operating activities (57) (147)
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2. Cash flows from investing activities

• 2.1 Payments to acquire:

• (a) property, plant and equipment

• (b) tenements (see item 10)

• (c) investments

• (d) other non-current assets

• See chapter 19 for defined terms 1 September 2016

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

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Consolidated statement of cash flows Current quarter Year to date (12
$A’000 months)
$A’000
2.2 Proceeds from the disposal of:
(a) property, plant and equipment
(b) tenements (see item 10)
(c) investments
(d) other non-current assets
2.3 Cash flows from loans to other entities
2.4 Dividends received (see note 3)
2.5 Other (provide details if material)
2.6 Net cash used in investing activities
3. Cash flows from financing activities
3.1 Proceeds from issues of shares
3.2 Proceeds from issue of convertible notes
3.3 Proceeds from exercise of share options
3.4 Transaction costs related to issues of
shares, convertible notes or options
3.5 Proceeds from borrowings
3.6 Repayment of borrowings
3.7 Transaction costs related to loans and
borrowings
3.8 Dividends paid
3.9 Other (provide details if material)
3.10 Net cash used in financing activities
4. Net increase / (decrease) in cash and
cash equivalents for the period
4.1 Cash and cash equivalents at beginning of
period 197 287
4.2 Net cash used in operating activities (57) (147)
(item 1.9 above)
4.3 Net cash used in investing activities
(item 2.6 above)
4.4 Net cash used in financing activities
(item 3.10 above)
4.5 Effect of movement in exchange rates on
cash held
4.6 Cash and cash equivalents at end of 140 140
period
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• See chapter 19 for defined terms 1 September 2016

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

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5. Reconciliation of cash and cash Current quarter Previous quarter
equivalents $A’000 $A’000
at the end of the quarter (as shown in the
consolidated statement of cash flows) to the
related items in the accounts
5.1 Bank balances 83 20
5.2 Call deposits 57 177
5.3 Bank overdrafts
5.4 Other (provide details)
5.5 Cash and cash equivalents at end of 140 197
quarter (should equal item 4.6 above)
6. Payments to directors of the entity and their associates Current quarter
$A'000
6.1 Aggregate amount of payments to these parties included in item 1.2
6.2 Aggregate amount of cash flow from loans to these parties included
in item 2.3
6.3 Include below any explanation necessary to understand the transactions included in
items 6.1 and 6.2
7. Payments to related entities of the entity and their Current quarter
associates $A'000
7.1 Aggregate amount of payments to these parties included in item 1.2 6
7.2 Aggregate amount of cash flow from loans to these parties included
in item 2.3
7.3 Include below any explanation necessary to understand the transactions included in
items 7.1 and 7.2
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• See chapter 19 for defined terms 1 September 2016

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

8.	Financing facilities available Add notes as necessary for an understanding of the position Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000
8.1	Loan facilities
8.2	Credit standby arrangements
8.3	Other (please specify)
8.4	Include below a description of each facility above, including the lender, interest rate and
	whether it is secured or unsecured. If any additional facilities have been entered into or are
	proposed to be entered into after quarter end, include details of those facilities as well.

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9. Estimated cash outflows for next quarter $A’000
9.1 Exploration and evaluation 10
9.2 Development
9.3 Production
9.4 Staff costs
9.5 Administration and corporate costs 30
9.6 Other (provide details if material)
9.7 Total estimated cash outflows 40
10. Changes in Tenement Nature of interest Interest at Interest
tenements reference beginning at end of
(items 2.1(b) and and of quarter quarter
2.2(b) above) location
10.1 Interests in mining See Activity Report
tenements and
petroleum tenements
lapsed, relinquished
or reduced
10.2 Interests in mining See Activity Report
tenements and
petroleum tenements
acquired or increased
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• See chapter 19 for defined terms 1 September 2016

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Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

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

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Sign here: ........................................................... Date: 31 July 2019 (Company Secretary)

Print name R.J. WRIGHT

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 that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. See chapter 19 for defined terms 1 September 2016

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