LOTUS RESOURCES LIMITED — Interim / Quarterly Report 2016

Apr 28, 2016

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ASX Announcement ASX Code: DLE Release Date: 29 April 2016

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For Further Information

Mr Gang Xu Managing Director Tel: +61 8 9322 6009

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Directors

Mr Jie Chen Chairman

Mr Gang Xu Managing Director

Mr Keong Chan Non-Executive Director

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Share Registry

Computershare Investor Services www.computershare.com.au

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Contact Details

Dragon Energy Ltd Suite 8, 1297 Hay Street West Perth, WA 6005 PO Box 1968, WA 6872

Tel: +61 8 9322 6009 Fax: +61 8 9322 6128

Quarterly Report

For the period ended 31 March 2016

Introduction

Dragon Energy Ltd (“Dragon Energy”) is an exploration company controlling a portfolio of tenements in Western Australia.

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www.dragonenergyltd.com

ABN: 38 119 992 175

Dragon Energy Ltd

Quarterly Report to 31 March 2016

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Petroleum Project (DLE: 100%)

In September 2014 Dragon was selected by the DMP as preferred applicant for Petroleum Exploration Permit STP-EPA-0123. The permit is 1,277km[2] in area and lies onshore in the northern Perth Basin 50km east of Geraldton, and is 350km north of Perth, Australia. The Dampier-Bunbury Natural Gas Pipeline bisects the permit, the Parmelia Gas Pipeline lies 20km to the south, the Northam-Geraldton Railway transects the northern region of the permit, and the NW Coastal Highway is 11 to 69km to the west.

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Perth Basin exploration for hydrocarbons began in the late 1940s resulting in 309 onshore and 52 offshore wells, of which 26 petroleum accumulations were discovered and 13 of those proved to be commercial. Dongara oil and gas field has been the most significant discovery with 14.3Gm3 (508Bcf) of original in-place gas and 16.6GL (104MMbbl) of original in-place oil. Origin Energy, AWE Limited and Empire Oil & Gas NL currently dominate the ground holding in the Perth Basin.

A number of exploration wells have been drilled in the vicinity of the permit with the Mt Horner oilfield located 5km to the south, which was in production from 1984 to 2011. The permit straddles the Bookara Shelf, a relatively shallow basement containing up to 3,600m of Permian to Jurassic strata, and to a lesser extent the Wicherina, Irwin and Allanooka Terraces. Only ten stratigraphic and exploration wells have been drilled in the permit area, two of which have recorded oil shows (Jay-1 and Rosslyn-1) and a gas show (Mungarra-1).

The permit is in a region with a thick Lower Triassic source and seal interval, as well as likely source intervals in the Lower Jurassic. It is broadly within the oil window. Possible plays include fault-controlled, small folds and drape over basement highs.

Dragon Energy’s proposed exploration programme will initially focus on performing geotechnical studies, reprocessing existing 2D seismic data and the acquisition and analysis of 3D seismic data. Previous exploration work will be assessed and reviewed to develop a geological model for the area. Following the generation of a suite of isopachs going south to the Mt. Horner Oilfield, a structural/depositional history will be unravelled which will provide the framework for 2D seismic interpretations. Subject to financing, these activities will be initiated once native title negotiations have been completed and the permit is formally granted.

Dragon Energy has commenced native title negotiations.

Dragon Energy Ltd

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Quarterly Report to 31 March 2016

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Pilbara Iron Project- Rocklea Deposits (DLE: 100%)

The Pilbara Iron Project is Dragon’s most advanced project, comprising the Rocklea Channel Iron Deposit (CID) in the central Pilbara Iron Ore Province of Western Australia.

The Rocklea Deposit is located 33km SW of the mining town of Tom Price. It is situated on the eastern margin of the Rocklea Dome where Archaean age Fortescue Group Formations dip to the east and are overlain by Tertiary age CID and other Cainozoic deposits of sand and gravels. The CID comprises goethitic and hematitic detrital deposits of the Tertiary Robe Pisolites. Dragon acquired the Rocklea Project in 2010, and its southern extension in 2012.

A number of studies have been completed and negotiations in process with regards to development of the Pilbara Iron Project. A Mining Proposal for a Rocklea Early Tonnes mining operation, incorporating a mine planning study, an environmental management plan and a mine closure plan was submitted to the DMP in 2014. This proposal has been reviewed and Dragon followed up a number of DMP queries for further information.

Following a review, the mining lease 47/1471 was reduced in size, and an application for a retention licence was submitted to the DMP. The conversion to retention licence R47/8 was granted on 6 November 2015.

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Dragon Energy Ltd

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Quarterly Report to 31 March 2016

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Ashburton Project (DLE: 50%) is located in the Ashburton Basin, and is 10 to 40km from rail and other infrastructure associated with the Paraburdoo iron ore operations of Rio Tinto Limited.

Field reconnaissance demonstrated a paucity of outcrop over E08/2211 & E08/2209. These tenements host the greatest thicknesses and areal extent of Cainozoic sediments, which potentially fill palaeochannels presently incised by Turee Creek as it flows south into Ashburton River. The braided drainages of Turee Creek and Seven Mile Creek drain the ranges of the Brockman Iron Formation near Paraburdoo, as such these palaeochannels may host detrital and/or CID mineralisation.

Elevated alluvial gravel beds are evident with the ground surface dominated in parts by iron (hematite) gravels. Small outcrops were rarely observed, the most interesting a foliated, ferruginised sediment and ironstonespossibly shear or gossan in the basement sediment. This outcrop returned up to 51% Fe, 555ppm Zn and 292ppm Ni (2007-2010 sampling) and may be associated with mantle tapping structures, namely the Barings Down Fault which transects E08/2211 (identified by a 2011 regional seismic survey).

Following a heritage survey in 2013 a planned reconnaissance drilling programme on E08/2211 & E47/2417 was delayed awaiting access via Rio Tinto’s service road. Further exploration strategies have subsequently been developed to investigate potential base metal and gold targets, greatly enhanced by recent DMP releases of seismic data in 2012 and a regional EM survey over the project area in 2014.

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Dragon Energy Ltd

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Quarterly Report to 31 March 2016

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In April 2013 Dragon Energy Ltd (Dragon Energy) entered into a Farm-in/Farm-out Agreement for its Ashburton Project (JV) with Shandong Energy Australia Pty Ltd (Shandong Energy) and Shandong Lunan GeoEngineering Exploration Institute (Lunan) (JV Partners).

The JV Partners are required to spend $300,000 on exploration on the Ashburton Project to acquire 30% participating interest in the tenements (Stage One Expenditure) and have the option to acquire an additional 20% participating interest in the JV by spending an additional amount of $700,000 on exploration on the Ashburton Project (Stage Two Expenditure). The JV Partners have fulfilled the Stage One and Stage Two Expenditure commitments to earn a 50% participating interest in the JV.

Further, the JV Partners have the option to spend an additional $1,000,000 on exploration on the Ashburton Project to acquire an additional 15% participating interest in the JV (Stage Three Expenditure).

A supplementary agreement was signed with the JV Partners (Supplementary Agreement) on 28 October 2015. Under the Supplementary Agreement:

1. Shandong Energy and Lunan will fund an additional $187,598 expenditure on the Ashburton Project to earn an additional 2.8% participating interest.

2. Stage Three Expenditure is removed.

Lee Steere Project (DLE: 100%) is located some 200km NE of Wiluna, in the Earaheedy Basin of the Midwest.

A farm-out agreement with Iron West Resources Pty Ltd (subsidiary of Golden West Resources Limited, GWR) was established December 2012. Exploration activities have included an aeromagnetic survey, photogeological mapping and rock chip sampling.

Dragon Energy has received notification from GWR its intention to cease all exploration activities and withdrawal from the Lee Steere Project. Considering the current cash position of the Company, Dragon Energy has submitted applications to surrender E69/2126-I and E69/2377-I.

Corporate

Dragon Energy continues to review new project opportunities.

The Company had a cash balance of $0.277m as at 31 March 2016.

Authorised by:

Gang Xu Managing Director

For further information or corporate opportunities please refer to our website www.dragonenergyltd.com or contact:

Gang Xu Keong Chan Managing Director Company Secretary Telephone: +61 8 9322 6009 Telephone: +61 8 9322 6009

Dragon Energy Ltd

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Quarterly Report to 31 March 2016

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About Dragon Energy

Dragon Energy Limited (“Dragon”) listed on the Australian Securities Exchange (ASX) in February 2009 ( ASX: DLE ). Dragon’s most advanced project is the Pilbara Rocklea Iron Project. Dragon Energy’s portfolio of tenements includes numerous multi-commodity targets, including Fe, Mn, Au and base metals in Western Australia. It was recently selected preferred applicant for an onshore Petroleum Permit in the northern Perth Basin.

	Tenement Schedule
TenementReference	Status	Interest atbeginning ofquarter	Acquired/(Disposed)during the quarter	Interest at endof quarter
E08/2211-I	Granted	50%		50%
E08/2210-I	Granted	50%		50%
E08/2209-I	Granted	50%		50%
E47/2417-I	Granted	50%		50%
R47/8-I	Granted	100%		100%
E47/952-I	Granted	100%		100%
P47/1429-I	Granted	100%		100%
E69/2126-I	Surrendered	100%	100%	0%
E69/2377-I	Surrendered	100%	100%	0%
STP-EPA-0123(ReleaseL13-3)	Application (1stPreference)	100%		100%

Dragon Energy Ltd

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