PEEL MINING LIMITED — Interim / Quarterly Report 2010

Jan 30, 2011

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DECEMBER 2010 QUARTERLY REPORT

31 January 2011

Peel Exploration Limited

ASX code: PEX ACN: 119 343 734

Unit 1, 34 Kings Park Rd West Perth, WA 6005

Ph: (08) 9382 3955 Fax: (08) 9388 1025 E: info@peelex.com.au Web: www.peelex.com.au

Contact:

Rob Tyson Managing Director rtyson@peelex.com.au

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About Peel Exploration Limited:

• The Company’s four 100%-owned projects cover approximately 500 km[2] of highly prospective tenure in NSW and WA.

• These projects comprise Apollo Hill, May Day, Attunga, and Yerranderie.

• The Apollo Hill gold project is a major, protruding, shear-hosted, gold mineralised system that remains open down dip and along strike.

• Peel’s asset base also includes the Attunga Tungsten Deposit – a high grade tungsten deposit located near excellent infrastructure.

• May Day gold-lead-zinc VMS deposit on granted mining lease near Cobar offers exciting exploration potential.

• 88 million shares on issue.

• $7.5 Market Cap at 31 January 2011.

Highlights for December quarter 2010

• Acquisition of Apollo Hill gold project completed.

• Apollo Hill maiden resource estimate completed:

• 11.1 Mt at 1.0 g/t Au for 341,000 oz gold at 0.5 g/t cutoff.

• Maximum depth of resource estimate is 150m below surface.

• Apollo Hill deposit extends to surface and remains unexploited.

• Mineralisation at Apollo Hill and Ra deposits remains open down dip and along strike south.

• Potential increase in resources with minimal further drilling.

• May Day/Gilgunnia airborne VTEM survey completed with high priority anomaly identified at 4 Mile prospect.

• $2.2 million raised via rights issue and share placement.

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Plans for March quarter 2011

• Apollo Hill work programme planning including infill and extensional drilling.

• Aboriginal Heritage clearance of Apollo Hill ELAs.

• Ground EM survey at Four Mile prospect.

• RAB drilling at May Day/Gilgunnia.

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Peel Exploration Limited – Quarterly Report December 2010

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Exploration

Apollo Hill Project: Gold; Northeastern Goldfields WA (PEX 100%).

During the quarter, Peel announced that it had exercised an option agreement with Hampton Hill Mining NL (ASX:HHM) to acquire the entire issued capital of Apollo Mining Pty Ltd, the 100%-owner of the Apollo Hill gold project in the North Eastern Goldfields of Western Australia. The Apollo Hill gold project, located about 50 kilometres southeast of Leonora, comprises 16 mineral leases covering about 130 square kilometres and is focused on the advanced Apollo Hill gold deposit, an extensively mineralised gold system.

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Figure 1 – Apollo Hill project location

The key terms of the sale agreement saw:

• Peel issue 11 million fully paid ordinary shares to Hampton Hill Mining NL in consideration for the entire issued capital of Apollo Mining Pty Ltd, and;

• Hampton Hill Mining NL granted a 5% gross overriding royalty on Apollo Hill gold production

• exceeding 1 million ounces.

The Apollo Hill gold project exhibits the hallmarks of a major mineralised system, showing extensive and intense hydrothermal alteration and deformation. Two significant gold deposits, Apollo Hill and the RA deposit (formerly known as the Camp zone), have been identified to date and remain open in

several directions. Peel believes that excellent potential exists for the delineation of additional mineralisation.

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Peel Exploration Limited – Quarterly Report December 2010

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Resource Estimation

During the quarter, Peel reported a maiden resource estimate for the Apollo Hill and Ra deposits. The highlights of this work are:

• Maiden resource at Apollo Hill and Ra deposits estimated at 11.1 Mt at 1.0 g/t Au for 341,000 ounces of gold (using 0.5 g/t gold cut off).

• Maximum depth of the resource estimate is 150m below surface.

• At a 0.2 g/t gold cut off for scenario planning the estimated resource is 26.6 Mt at 0.6 g/t Au for 534,000 ounces of gold .

• The Apollo Hill deposit extends to surface and remains unexploited.

• Mineralisation at Apollo Hill and Ra deposits remains open at depth and along strike to the south of both deposits.

• Potential increase in resources with minimal further drilling.

• Exploration planning now underway, infill and extensional drilling planned for March 2011.

The Apollo Hill resource consists of two deposits: the main Apollo Hill deposit and the Ra deposit to the south-east (see Figure 2). A breakdown of the inferred resources present at 0.5 g/t gold cut off for each deposit is shown in Table 1.

	Mt	**Aug/t **	Ounces
Apollo Hill(total)	9.9	1.0	318,000
fresh	7.5	1.0	241,000
oxide	2.4	0.8	62,000
Ra(total)	1.2	1.0	39,000
fresh	0.8	1.0	26,000
oxide	0.4	1.0	13,000
Combined Total	11.1	1.0	341,000

Table 1. Summary of Apollo Hill inferred resource estimate at 0.5 g/t cut-off. Note: The significant figures in Table 1 reflect the precision of estimates and include rounding errors.

Resource Estimate Details

The resource estimate, completed by independent consultants Hellman & Schofield Pty Ltd, is based on 22,887 metres of historic drilling made up of 35 diamond, 214 reverse circulation and 136 aircore drill holes completed by a number of explorers since 1986. The resource estimate has been classified as Inferred under the JORC code (2004 edition). Work completed by Peel Exploration has included resampling and examination of diamond core, field visits, and compilation and validation of data. The current estimates assume densities of 2.3 and 1.8 t/bcm for oxidised Apollo Hill and Ra (previously known as Camp) mineralisation respectively, with a density of 2.6 t/bcm for fresh rock at both deposits.

Documentation of historic sampling details is variable, however approximately 35% of the sample data (metres drilled) used in the resource estimation has documentation covering details of the methodologies used.

Assaying was carried out at a number of laboratories in Perth and Kalgoorlie. About 75% of the samples used in the estimation were analysed by fire assay with AAS finish method with the

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Peel Exploration Limited – Quarterly Report December 2010

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remainder analysed using either aqua regia or LeachWell digests with AAS finish or unknown finish methodology. More than 15% of assay results have had repeat analysis carried out and further check analysis has also been carried out on a number of batches.

Cut off **Aug/t **	Weath.	Ra Mt Aug/t koz	Apollo Hill Mt Aug/t koz	Combined Mt Aug/t koz
0.2	Oxide Fresh Total	1.6 0.5 26 2.3 0.6 44 3.9 0.5 63	7.3 0.5 117 15.4 0.7 347 22.7 0.6 438	8.9 0.5 143 17.7 0.7 391 26.6 0.6 534
0.4	Oxide Fresh Total	0.6 0.8 15 1.2 0.8 31 1.7 0.8 44	3.4 0.7 77 9.5 0.9 275 12.9 0.9 373	4.0 0.7 92 10.7 0.9 306 14.7 0.8 398
0.5	Oxide Fresh Total	0.4 1.0 13 0.8 1.0 26 1.2 1.0 39	2.4 0.8 62 7.5 1.0 241 9.9 1.0 318	2.8 0.8 75 8.3 1.0 267 11.1 1.0 341
0.6	Oxide Fresh Total	0.3 1.1 11 0.6 1.2 23 0.9 1.1 32	1.7 0.9 49 6.0 1.2 231 7.7 1.1 272	2.0 0.9 60 6.6 1.2 255 8.6 1.1 314
0.8	Oxide Fresh Total	0.2 1.3 8 0.4 1.5 19 0.5 1.4 23	0.9 1.2 35 3.9 1.4 176 4.8 1.4 216	1.1 1.2 43 4.3 1.4 195 5.4 1.4 238
1.0	Oxide Fresh Total	0.1 1.6 5 0.2 1.7 11 0.4 1.7 22	0.5 1.4 23 2.6 1.7 142 3.1 1.7 169	0.6 1.4 28 2.8 1.7 153 3.4 1.7 181

Table 2: Apollo Hill resource estimates to 150 metres depth Note: The significant figures in Table 2 reflect the precision of estimates and include rounding errors.

In addition, Peel Exploration submitted 100 quarter core samples from three drill holes to ALS Laboratory Group in Perth, WA for triple analysis by fire assay (50g) and AAS finish. Standard reference material was also submitted by Peel Exploration. ALS conducted duplicate sample checks, lab standard checks and blank sample checks. Pulps of these samples were the submitted to Standard Reference Laboratories in Perth, WA for analysis by fire assay as a further check. The results largely confirmed previous sampling and assaying results.

Location of drill hole collars was sourced from historic reports with variable survey methodologies completed. Down hole surveys were predominately conducted with a down hole camera. Structural studies in 2004 indicate that the predominant drilling direction previously used has the highest probability of intersecting the greatest number of mineralised features.

The topographic surface used was generated from all drill hole collar coordinate data, and 200 by 200 metre spaced spot heights from a ground gravity survey completed by Fugro Ground Geophysics in March 2004.

Hellman & Schofield estimated resources for the Apollo Hill gold project by using Multiple Indicator Kriging with block support correction methodology, to reflect open pit mining selectivity. The model estimates recoverable resources into panels sized 10 metres across strike by 30 metres along strike by 5 metres vertical. Although the model estimates extend to around 290 metres depth, the reported resources only include estimates to approximately 150 metres below surface to reflect realistic extraction depths.

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Peel Exploration Limited – Quarterly Report December 2010

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Peel Exploration believes that the shallow and extensive nature of mineralisation at the Apollo Hill gold project suggests that the project has reasonable prospects for eventual economic extraction.

Apollo Hill Deposit Details

At Apollo Hill, two zones of mineralisation have been identified: West (or Main) Zone and the East Zone (see Figure 2). The current resource extends for 600m in strike length and Peel Exploration expects to increase this to the south-east with further drilling. The gold mineralisation dips to the north-east at 45-60 degrees and is accompanied by quartz veins and carbonate-pyrite alteration associated with a structurally deformed mafic-felsic lithological contact. Mineralisation is present at surface.

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Figure 2 – Apollo Hill and Ra Zone deposits

The Apollo Hill mineralisation has been tested by generally 30 metre spaced, 45 degrees trending traverses of drill holes generally inclined towards the south-west. Across strike spacing is variable. For most traverses, the upper approximately 50 metres has been tested by holes spaced at around 20 metres. Below this depth the coverage is highly variable, ranging from around 20 metre spacing on some sections to commonly greater than 60 metres.

The western mineralised domain strikes 315 degrees and has an average width of approximately 95 metres. The eastern domain strikes 330 degrees and has an average width of approximately 115 metres.

Recent metallurgical testwork by Peel Exploration has been favourable showing gold

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Peel Exploration Limited – Quarterly Report December 2010

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extraction levels of over 80% by gravity separation alone and greater than 98% of gold extractable via gravity and cyanidation.

Ra Deposit Details

The Ra gold deposit is covered by a layer of transported material, with mineralisation hosted by dolerite rock and dipping 30-60 degrees to the east (see Figure 5). The current resource at Ra has a strike length of approximately 300m (see Figure 2), with mineralisation open along strike and at depth.

Ra deposit mineralisation has been tested by generally 20 metre spaced, 45 degrees trending traverses of drill holes inclined towards the south-west. Across strike spacing is generally around 15 metres to a depth of approximately 60 metres below surface. Below this depth, sampling is limited to rare, broadly and irregularly spaced drill holes.

Further Work

Planning of additional exploration at Apollo Hill is well advanced, with infill and extensional drilling designed to increase resources and provide sufficient material for comprehensive metallurgical testwork is planned for later in the March quarter subject to regulatory approvals. A preliminary scoping study is planned for mid year. An IP geophysical survey commenced in January 2011, however high salinity levels in nearby covered terrain interfered with data quality and the survey was subsequently cancelled.

Attunga Project: Gold, Tungsten, Molybdenum, Copper; Northeastern NSW (PEX 100%).

Tenements: EL6883 (Mt Patterson), EL6884 (Attunga).

Targets: Intrusive-Related Gold System and/or Orogenic style gold mineralisation; skarn style tungsten-molybdenum mineralisation and skarn-style precious/base metals mineralisation.

Kensington/Kensington NW

During the quarter, Peel announced that shallow RAB drilling at Kensington had yielded encouraging gold mineralisation. As previously reported, better results from drilling at Kensington included the following intercepts:

• 24.5m at 0.74 g/t Au from 1.5m including 13m at 1.02 g/t Au from 13m* in KRAB006;

• 12m at 0.61 g/t Au from 13m in KRAB014; and

• 14m at 1.78 g/t Au from 17m* including 4m at 2.94 g/t Au from 21m in KRAB019.

Follow-up RAB drilling results from Kensington continue to yield encouraging results including:

• 11m at 0.84 g/t Au from 13m in KRAB022;

• 13.5m at 1.67 g/t Au from 18m* in KRAB023 (twin of KRAB019);

• 6.5m at 0.70 g/t Au from 25m* in KRAB024;

• 4m at 0.50 g/t Au from 5m and 8m at 0.24 g/t Au from 25m in KRAB025;

• 16m at 0.23 g/t Au from 5m and 5m at 0.18 g/t Au from 29m* in KRAB026.

Also during the quarter, drilling was undertaken at Kensington NW (1.5km NW of Kensington) with anomalous results returned from several holes including:

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Peel Exploration Limited – Quarterly Report December 2010

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• 24m at 0.25 g/t Au from 5m in KNWRAB002;

• 9m at 0.18 g/t Au from 0m in KNWRAB003;

• 14m at 0.17 g/t Au from 5m in KNWRAB004 .

Peel designed the shallow RAB drilling programme at Kensington to target tungsten and gold mineralisation. Historic data had indicated the presence of a large, shallow, low grade tungsten occurrence however drilling completed to date has discounted this possibility.

The results from this RAB drilling provide encouragement to the possibility of substantial, near surface, gold mineralisation at Kensington. Gold mineralisation at Kensington occurs within a package of structurally deformed sediments and remains open to the northwest and southeast, and down dip.

Hole No.	Easting	Northing	Dip	Final Depth (m)	From (m)	To (m)	Interval (m)	Au (g/t)	Comment
KRAB022	300853	6582552	-90	24.0	13	24	11	0.84	Bulk intersection.
KRAB023	300850	6582579	-90	31.5	18	31.5*	13.5	1.67	Twin of KRAB019. 1m samples.
KRAB024	300847	6582600	-90	31.5	25	31.5*	6.5	0.70	Bulk intersection.
KRAB025	300846	6582621	-90	34.5	5	9	4	0.50	4m composite sample.
and					25	33	8	0.24	Bulk intersection.
KRAB026	300816	6582574	-90	34.0	5	21	16	0.23	Bulk intersection.
and					29	34*	5	0.18	5m composite sample.
KRAB027	300934	6582517	-90	27.0	-	-	-	-	N.S.A.
KNWRAB001	299858	6584106	-90	17.0	-	-	-	-	N.S.A.
KNWRAB002	299951	6584109	-90	29.0	5	29*	24	0.25	Bulk intersection.
KNWRAB003	299971	6584116	-90	20.0	0	9	9	0.18	Bulk intersection.
KNWRAB004	299956	6584324	-90	19.0	5	19*	14	0.17	Bulk intersection.
KNWRAB005	299600	6584151	-90	25.0	-	-	-	-	N.S.A.
KNWRAB006	299668	6584083	-90	25.0	-	-	-	-	N.S.A.
KNWRAB007	299731	6584035	-90	19.0	-	-	-	-	N.S.A.
KNWRAB008	299820	6584083	-90	19.0	-	-	-	-	N.S.A.

Notes:

• denotes mineralisation present at end of hole.

• Drillholes were drilled using open hole RAB technique.

• Collar locations were determined using a Garmin GPS 72 (GDA Zone 56).

• Samples were speared from commonly 4m composite samples, except KRAB023 which was sampled on an 1m basis.

• Samples were analysed by ALS Chemex (Orange) utilising method Au-AA25 (30g fire assay) for gold.

• Bulk intersections had a 0.1 g/t Au lower cutoff grade applied.

• No estimate of true width has been made.

Attunga Copper Mine

No fieldwork was undertaken during the quarter.

Attunga Tungsten Deposit

No fieldwork was undertaken during the quarter, however a comprehensive review of the garnet market was undertaken to assist in determining potential economic implications of the garnet contained within the Attunga Tungsten Deposit.

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Peel Exploration Limited – Quarterly Report December 2010

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May Day Project: Gold, Lead, Zinc, Silver, Copper; Western NSW (PEX 100%).

Tenements: ML1361 (May Day), EL7461 (Gilgunnia) Targets: Volcanogenic Massive Sulphide mineralisation.

Airborne VTEM Survey

A 120 line kilometre airborne VTEM survey was flown over the May Day and G5 magnetic anomaly areas during December. Subsequent to the quarter’s end, interpretation of the data has resulted in the recognition of a coincident late time chargeable anomaly and magnetic high. The anomaly is adjacent to the historic Four Mile goldfield prospect, a series of surface and underground gold workings located about 10 km east of the May Day deposit.

Peel plans to further refine and test the anomaly by completing a ground-based fixed-loop TEM survey along with shallow RAB drilling. The timing of this work is subject to gaining surface access to the prospect. Peel is also planning on completing additional RAB drilling adjacent to the May Day deposit, targeting historic underground workings and anomalous geochemistry.

Yerranderie: Silver, Lead, Gold; Central NSW (PEX 100%).

Tenement: EL7356.

Targets: Silver-lead-gold mineralisation in surface waste and tailings dumps.

No fieldwork was undertaken during the quarter.

Relinquishments

During the quarter, Peel lodged a relinquishment notice for the Mt Tennyson (EL7272) project area.

Corporate

During the quarter, Peel announced that its recent rights issue to raise approximately $1.5 million had closed fully subscribed. However, to satisfy strong demand from investors wishing to take up the shortfall from the rights issue, the Directors made a placement under ASX Listing Rule 7.1 of an additional 10.7 million shares at 7 cents, the same price as the rights issue, to raise a further $752,000. The placement was made to a group of sophisticated investors.

For further information, please contact Managing Director Rob Tyson on mobile 0420 234 020.

The information in this report that relates to Exploration Results is based on information compiled by Mr Robert Tyson who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Tyson has sufficient experience which is relevant to the styles of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ Mr Tyson, consents to the inclusion in this report of the matters based on their information in the form and context in which it appears.

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Peel Exploration Limited – Quarterly Report December 2010