KORAB RESOURCES LIMITED — Capital/Financing Update 2016

Jun 22, 2016

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

Thursday, 23 June 2016

WINCHESTER MAGNESIUM CARBONATE MINE AND STRATEGIC INVESTOR UPDATE

We refer to the ASX report dated 23 March 2016 which advised that Korab Resources Ltd (“ Korab ”, or “ Company ”) ( ASX: KOR ), its wholly owned subsidiary AusMag Pty Ltd (“ AusMag ”) have entered into a binding agreement with Mr. Hong Wang, who represents interests associated with Chinese steel industry, banking and finance, construction and building materials to invest $6 million into new shares of AusMag (Tranche 1 Funding) regarding the funding and the development of Winchester magnesium carbonate mine located near Darwin in the Northern Territory. As part of this arrangement, Mr. Wang agreed to become a strategic investor in Korab by subscribing for 10,000,0000 new Korab shares at a price of 5c per share for a total of $500,000.

Korab is pleased to advise that Mr. Wang has commenced transfers of subscription funds in relation to this strategic investment. The subscription funds are being transferred in tranches.

INFORMATION ABOUT WINCHESTER MAGNESIUM CARBONATE DEPOSIT AND MAGNESIUM CARBONATE MARKET

Winchester mine is being developed to initially produce high grade DSO magnesium carbonate to supply producers of magnesium oxide, refractories and other users (to be funded by Tranche 1 Funding). There are also plans to produce at the second stage of operations which could be funded from Tranche 2 Funding high grade magnesium oxide in the form of calcined magnesia, dead burned magnesia and fused magnesia in addition to raw magnesium carbonate.

Location, grade, logistics and other characteristics of this deposit offer unparalleled advantages compared to other magnesium carbonate sources (see Figure 1, Figure 2, Figure 3, Figure 4, and Figure 6). The Winchester magnesium carbonate mine has very attractive economics with $395 mln in aggregate earnings before tax over mine life and long-run annual earnings of $32 mln/year (at 800kt/year of magnesium carbonate rock sales). The capital and start-up costs of magnesium carbonate production are estimated at around $4 mln (including mine costs of approximately $1.2 mln and a contingency of just under $1mln).

Market for magnesium carbonate (magnesium carbonate) has been growing at a strong historical trend rate over several decades with the trend pointing to yet higher consumption over coming years. The main uses for magnesium carbonate is in production of various types of magnesium oxides. Magnesium carbonate is also used to produce magnesium metal which is the lightest of all metals, being about two-thirds lighter than aluminium but stronger then steel. Magnesium is non-toxic, nonmagnetic, has high-impact strength and is resistant to denting.

The main sectors where magnesium oxide is used include refractory bricks which are used to line steel and iron furnaces; production of flame retardants; production of fire resistant and moisture resistant building materials like mag wall, MgO board and mag cement; production of magnesium alloys used extensively in cars, airplanes, tanks, APC-s and other defence uses; hydrometallurgy, primarily for nickel and cobalt production; water purification and soil treatment and feedstock.

Experts expect that the market for magnesium carbonate will continue to expand due to the growth in all these sectors, however the potential game changer is the recent development of magnesium-ion batteries which have 8 to 12 times greater capacity than lithium-ion batteries and can be charged in as little as 36 minutes. Magnesium-ion battery's charge/discharge efficiency is 5 times higher than a lithium-ion battery. Another advantage of magnesium-ion batteries is their ability to perform at

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

temperatures as low as -30°C and as high as +55°C whereas lithium-ion batteries cease to function at around -15°C. Additional benefit of magnesium-ion batteries is that they do not use graphite and consequently are not dependant on supply of this relatively expensive material.

The variety of uses and the relative size of the magnesium carbonate, magnesium oxide and magnesium alloys markets are of obvious benefit to magnesium carbonate producers. By way of comparison, the magnesium oxide market is approximately 40 times bigger than the lithium carbonate market and approximately 22 times bigger than the graphite market (see Figure 8).

The key determinant of the success of a magnesium carbonate project is the quality of its magnesium carbonate rock and its proximity to transport infrastructure. Winchester magnesium carbonate project has the advantage of being one of the highest grade magnesium carbonate deposits and also being located in close proximity to rail, roads, and a major deep sea port.

The deposit is a shallow, flat lying ore body which can be mined using open cut method, essentially as a quarry (see Figure 5 and Figure 6). On 10 March 2015, Korab released the results of the expanded study into Winchester magnesium carbonate quarry and its potential earnings, costs, free cashflow, and net present value. The Company confirms that all material assumptions underpinning the production target in that announcement continue to apply and have not materially changed. This expanded study included the estimates of revenues and various additional material costs such as haulage, port charges, interest, debt repayment, royalties, overheads, etc. and evaluated the economics of Winchester quarry assuming its development as a direct shipping ore (DSO) operation.

Results of the expanded study have shown that the project has very attractive economics with an aggregate EBITDA of $395 mln over quarry life and attractive long-run annual EBITDA of $32 mln/year (at 800kt/year of rock sales). The capital and start-up costs were estimated at around $4 mln (including quarry costs of approximately $1.2 mln and a contingency of just under $1mln). Full text of the report can be accessed through the link below:

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01606646

This study assessed estimated potential of Winchester project supplying a direct shipping ore. No additional processing of magnesium carbonate rock is planned. The output from the quarry would consist of crushed magnesium carbonate rock with a waste stream consisting of waste rock and fines which would be stored on site. The estimated ratio of coarse saleable magnesium carbonate rock to fines was 80%. This study showed that there may be a market for magnesium carbonate fines in agriculture and feedstock production; however any potential revenue from sale of fines has not been included in this study.

Deposit is located approximately 85km south of the port of Darwin in the Northern Territory. It is less than a hundred meters from sealed road, and less than 5km from railway line. The deposit is a shallow, flat laying body covered by up to 5 meters of soil overburden (see Figure 2, Figure 5, and Figure 6). It can be quarried at a low cost by open cut method.

This pre-feasibility study was based on the indicated mineral resource only. Current estimated mineral resources at Winchester, including both indicated and inferred categories, are shown in the following table:

Table 1 Mineral resources estimates

At 40% MgO Cut-Off	MgCO Mass ‘000 Tonnes	MgO grade %
Indicated Resources	12,200	43.1
Inferred Resources	4,400	43.6
Total	16,600	43.2

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

There has been no change to the Winchester mineral resource estimate since it was last reported in the Annual Report 2015. This information was prepared and first disclosed under the JORC Code 2004 on 17 July 2007. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The author of this report is not aware of any new information or data that materially affects the information included in the report released on 17 July 2007 and, in the case of mineral resources that all the material assumptions and technical parameters underpinning the estimates in the report released on 17 July 2007 continue to apply and have not materially changed. The form and context in which the findings of the report released on 17 July 2007 are presented have not been materially modified.

CONTACT:

Andrej K Karpinski, Executive Chairman - Australia: (08) 9474 6166, International: +61 8 9474 6166

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

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Figure 1 Strategic location of Darwin port. Winchester is located 30 minute drive from Darwin suburbs.

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED

KORAB HOUSE

www.korab.com.au

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Darwin Port
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Figure 2 Location of Winchester proposed quarry relative to East Arm Wharf at Darwin Port

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Port
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Figure 3 Location of Geolsec and Winchester relative to local infrastructure, roads and rail

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

Figure 4 Site locality plan

Figure 5 Conceptual layout at end of year 3 – bench-by-bench development variant

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

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Topography surface
Stockpile of striped soil
Soil overburden
Top of magnesite
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Figure 6 Drill-blasting of exposed magnesium carbonate rock in the test pit during the wet season – notice very thin soil overburden

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Figure 7 Magnesium oxide price in US$ (weighted average of CCM, DBM, EFM)

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

Fitted trend

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FPO SHARES Issued: 202 mln Market Cap: $6 mln ASX: KOR Last Price: AU¢ 3.0 BERLIN: C6S.BE Last Price: € 0.01

KORAB RESOURCES LIMITED KORAB HOUSE

www.korab.com.au

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Figure 8 Magnesium carbonate market vs lithium carbonate and graphite on logarithmic scale (each line represents 10-fold increase)

ABOUT KORAB RESOURCES

Korab Resources Ltd is an international mining and exploration company with operations in Australia and Europe. Korab’s projects include gold and silver deposit at Bobrikovo in eastern Ukraine, Geolsec phosphate rock deposit and Winchester magnesium carbonate deposit near Darwin in the Northern Territory of Australia. The Company also explores for gold and copper at Ashburton Downs in Western Australia and for polymetallic deposits at Batchelor in the Northern Territory. More information about Korab’s projects can be sourced from Korab’s website at www.korab.com.au. Korab’s shares are traded on Australian Securities Exchange (ASX) and on the Berlin Stock Exchange (Berliner Börse) through Equiduct electronic trading platform.

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20 PROWSE STREET, WEST PERTH, WA, 6005, AUSTRALIA PO BOX 1958, WEST PERTH, WA, 6872, AUSTRALIA TEL (08) 9474 6166 FAX (08) 9322 6333 ACN 082 140 252

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