PATERSON RESOURCES LTD — Interim / Quarterly Report 2015

Oct 12, 2015

Quarterly Activities Report Quarter ended 30 th September 2015

Exploration Activities

NSW

EL6463 (100%) EL6874 (100%) EL7975 (100%)

Development

Surface water management. EnviroWest Pty Ltd sampled the two surface water locations for water quality. The sampling parameters were the same as those used for the groundwater bores. This was done to demonstrate relationships between the surface and groundwater.

Ground water management. Ground water quality data was integrated into the ground water hydrological conceptual model. In some of the holes the pH of the water sampled was high. This is unusual in such a high metals environment. It is thought the high pH is a residual from the construction of the water bores. Cement was used in the construction and with low water flows the water in the holes has been contaminated with cement since the construction of the bores. This adds weight to the numerical model that water is not flowing at great rates in those holes. During the coming month the bores will be purged and when the water infiltrates the bores again, they will be re-sampled.

Both the hydrological concept model and the numerical model (following 3rd download of water level monitoring) were sent to the hydrologists in NSW Office of Water (NOW) for review prior to a meeting held on 24th September. The groundwater monitoring and modelling carried out to date and presented at the meeting indicates that existing groundwater levels are quite stable and do not respond significantly to rainfall events. GDEs and registered bores are unlikely to be impacted by the development.

On this basis, Elysium (through its consultants Coffey Geotechnics) advised NOW that it considers 12 months of groundwater level monitoring to be a sufficient basis for groundwater modelling of the mine operation and to provide baseline data for subsequent assessment of impacts.

TSF Engineering and Geotechnical. The initial design of the Stage 1 TSF has been completed. It has a crest level at RL 840 and this provides a storage capacity of 375,000m3. This will be enough storage capacity for the first 18months of startup and operations. The purpose of Stage 1 is to build a TSF to get the project into operation for the lowest capital cost. The additional costs of future stages will be funded from sustaining capital. Building the Stage 1 to the RL 840 level significantly reduces the costs of clay lining the TSF in the early stages of development as a natural clay lining exists in the footprint below this RL. Above this RL the clay will have to be imported to construct the clay layer on the eastern embankment.

To progress the permitting of the TSF to ANCOLD standards, the final design will have to be completed. To complete this design the Stage 2 impoundment area will have to be surveyed to obtain an accurate surface area and volume. This survey will be complete in the coming months as weather and forest harvesting allows.

An extensive metallurgical test work program was completed on samples of diamond core drilled specifically for the collection of metallurgical samples. The samples consisted of one fresh bulk sample and 10 smaller variability samples representing variances in location, grade and oxidation state. Copper exists as chalcopyrite within the fresh ore alongside pyrite, galena, sphalerite, at times arsenopyrite, and minor levels of silver, gold and indium.

The comminution results showed that the ore will be easily crushed and ground to the desired size range in a conventional crushing and ball mill circuit. A Bond mill work index of 11.1 kwh/t was obtained for the bulk sample and ranged from 10.3 to 13.2 kwh/t for the fresh variability samples, which is lower than the average for copper ores.

Flotation response of all the fresh ore samples was excellent with high copper recovery and low reagent consumption at an optimised grind of P80=125mm. A six stage locked cycle test on the bulk sample resulted in +95% recovery while maintaining a copper concentrate grade of 25%. Depression of pyrite using SMBS during rougher flotation was required to reduce pyrite contamination in the concentrate. Although not present in the bulk sample flotation concentrate, varying levels of zinc and lead contamination occurred in the fresh variability sample concentrates.

The transition ore samples tested gave low recoveries across a range of head grades when using Controlled Potential Sulphidisation (CPS) for the recovery of oxide copper minerals. While the near surface transition material accounts for only around 10% of the in-situ resource being considered for mining, further test-work will be considered to allow this material to be processed alongside the in-situ primary material, tailings and slag dumps.

Precious metals were upgraded to the concentrate.

Material handling with regard to thickening, filtration and pumping holds no concern.

This now completes the metallurgical test-work as planned for the in-situ primary mineralisation, with the tailings and slag metallurgical test-work completed in previous years. Studies will now commence on a plant design to determine the suitability of blending the different potential ore sources economically. Along with potential further test-work on the transition material, options will be considered to blend the transition mineralisation with the other potential ore sources where test-work results have shown the metallurgical response to be acceptable (slag) to excellent (in-situ primary mineralisation). Once complete the pit optimisation and design work can be finalised.

PIE (Plant and Infrastructure Engineering Pty Ltd) was engaged to assist the Company with the process design. The process design is the critical first step in refining the capital cost requirements for the Burraga Copper Project. The services to be provided by PIE will include:

• Review of relevant metallurgical test-work results and their interpretation into present process design criteria. Identify test-work results and deficiencies that enable low risk equipment selections.
• Engage a copper flotation specialist, to review flotation test-work to identify potential flaws and opportunities when upscaling to detailed design. Review economic modelling process plant performance assumptions and assist with development of high confidence performance data.
• Development of process design deliverables such as Process Design Criteria, Mass Balances, Process Flow Diagrams, Process Control Philosophy and Piping and Instrumentation Diagrams.
• Carryout major equipment sizing and assist with equipment selections.
• Assist with development of equipment datasheets and equipment specifications.
• Review vendor data to ensure specifications are adhered to and proposed equipment is suitable.
• Assist with development of process plant layout.
• Review suitability of operating cost estimate.
• Incorporate third party contractor data into the process design as well as assist in providing process data to third party contractors.
• Develop an upgrade strategy for future implementation into the process plant design.
• Assist with HAZOP investigation of the process design.
• Assist the E and I contractor during development of instrument datasheets as well as review of instrument vendor proposals.

Exploration

During the winter months exploration activities were limited to database validation and general housing keeping.

Elevated levels of Indium were detected in the metallurgy test-work. The Company is currently investigating the occurrence of Indium is coincident with the copper. If sufficient levels exist within the Lloyds mineralisation and coherent models can be created, the possibility exists that it will positively impact the potential revenue stream. Some 300 samples from recent drilling have been submitted for Indium assaying.

Indonesia – Malang Project

IUP (Industrial) number: 180/005/IUPE/421.302/2013 (earn to 67.5%)

No work was conducted during the quarter.

WA

Horseshoe South Project EL52/2569 (100%)

Horseshoe Metals Ltd (ASX:HOR) is managing this tenement under an option agreement.

HOR have advised that drilling is intended no later than November this year.

Neb Zurkic Director 13 October 2015

Permit	Permit Number	Location	Held Via	Beneficial %	Agreement
Type					Type
EL	6463	Australia,	BC ExplorationPty	100.0%
		NSW	Ltd
EL	6874	Australia,	BC Exploration Pty	100.0%
		NSW	Ltd
EL	7975	Australia,	BC Exploration Pty	100.0%
		NSW	Ltd
E	52/2569	Australia,	Elysium Resources	100.0%	Under
		WA	Limited		option
IUPE	421.302/2013	Indonesia,	Malang Resources	67.5%	Farm-in
		JAVA	Pty Ltd

EYM tenements held as at 30 th September 2015.

JORC Compliance Statement

The information in this announcement that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore reserves is based on information reviewed or compiled by Neb Zurkic BAppSc(Geol), MSc(Min & Energy Economics), a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy and a Registered Professional Geoscientist with the Australian Institute of Geoscientists. Mr. Zurkic is employed by Zurkic Mining Consultants Pty Ltd. Mr. Zurkic has sufficient experience that is relevant to the styles of mineralisation and types 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 Mineral Resources and Ore Reserves". Mr. Zurkic consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears. Zurkic Mining Consultants Pty Ltd, which is owned and controlled by Mr. Zurkic, owns shares in Elysium Resources Limited and provides consulting services as required to both companies.

Exploration Targets

References to Exploration Targets or Targets in this document are in accordance with guidelines of the JORC Code (2012). As such it is important to note that the reported Targets are based on existing data, historical production and geology models. Any references to grade and quantity are conceptual in nature. Exploration carried out to date is insufficient to be able to estimate and report mineral resources in accordance with the JORC Code (2012). It is uncertain if further exploration will result in the determination of a Mineral Resource.

Reserves and Project Development

The information in this announcement that relates to Ore Reserves or Project Development is based on information reviewed or compiled by Dean Pontin BAppSc (Surv), Grad Dip (Mining), a Competent Person, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr. Pontin is employed by Lesmau Pty Ltd. Mr. Pontin has sufficient experience that is relevant to the styles of mineralisation and types 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 Mineral Resources and Ore Reserves". Mr. Pontin consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears. Lesmau Pty Ltd, which is owned and controlled by Mr. Pontin, owns shares in Elysium Resources.