PROSPECT RESOURCES LIMITED — Capital/Financing Update 2016

Sep 18, 2016

Very High Grade Assay Results from RC Drilling Extends Arcadia High Grade Lithium Project

Prospect Resources Ltd (ASX: PSC) ("Prospect" and "the Company") is pleased to report assay results from the first 3 RC drill holes at the Company's Arcadia high grade lithium project. This first RC drill programme is completed and the Company await assay results from a further 28 holes over the coming weeks.

Drilling to date has covered approx. 10% of the Company's exploration area. The drilled strike of the 14 stacked pegmatites now extends more than 1km SW-NE and some 350m down dip to NW. The Company's ground position now covers more than 600 hectares of mining licences.

Assay results from the first 3 RC drill holes returned a peak grade of 4.37% Li2O. Significant intersections are summarised as:

• ACR003 – peak grade 2.47% Li2O
  • o 3m @ 3.05% Li2O from 19m
  • o 17m @ 1.46% Li2O from 42m
  • o 2m @ 2.07% Li2O from 64m
• ACR002 – peak grade 4.35% Li2O
  • o 11m @ 2.03% Li2O from 24m
• ACR001 – peak grade 2.51% Li2O
  • o 10m @ 1.5% Li2O from 19m

Two diamond rigs are now back on site drilling metallurgical test holes. RC drill rigs are scheduled to return to site in late September to carry out further resources definition holes.

Development Timetable

• First JORC reportable Mineral Resource is expected to be generated before the end of October
• Mine scoping study planned for completion prior to 31 December
• First ore production planned for pre 30 June 2017
• Off-take discussions underway with > 5 Asian lithium carbonate and lithium hydroxide producers and agreements are expected to be completed prior to 31 December

Please find below: cross sections; a summary of significant intercepts of the first 3 RC drill holes; and a plan map of the existing drill collars.

Cross Section Orientation: South - North Cross Section

Long Section Orientation: South/East – North/West

Long Section Orientation: South/West – North/East

Long Section Orientation: South/West – North/East

Hole	Thickness ofPegmatite	From(m)	To (m)	Li2O Grade	Total Depthof Hole	Assay Results orGeology/ Comments
ACR001	10	19	29	1.5%	51	Received
ACR002	11	24	35	2.03%	52	Received
ACR003	3	19	22	3.05%	76	Received
	5	23	28	1.11%		Received
	17	42	59	1.46%		Received
	2	64	66	2.07%		Received
ACR004	17	2	19	pending	37	Lower Main Pegmatite,spodumene
ACR005	18	5	23	pending	31	Lower Main Pegmatite,spodumene
ACR006	15	19	34	pending	55	Lower Main Pegmatite,spodumene & petalite
ACR007	13	2	15	pending	43	Lower Main Pegmatite,spodumene
ACR008	23	2	25	pending	50	Lower Main Pegmatite,spodumene
ACR009	34	17	51	pending	55	Lower Main Pegmatite,spodumene & petalite
ACR010	30	34	64	pending	70	Lower Main Pegmatite,spodumene & petalite
ACR011	29	41	70	pending	76	Lower Main Pegmatite,spodumene & petalite
ACR012	24	54	78	pending	81	Lower Main Pegmatite,spodumene & petalite
ACR013	30	51	81	pending	81	Lower Main Pegmatite,spodumene & petalite
ACR014	31	1	28	pending	82	Lower Main Pegmatite,spodumene
ACR015	39	0	39	pending	68	Lower Main Pegmatite,spodumene
ACR016	34	36	70	pending	76	Lower Main Pegmatite, petalite
ACR017				pending	53	Hole Abandoned in basalt- waterfissures
ACR018	25	52	77	pending	82	Lower Main Pegmatite,spodumene & petalite
ACR019	37	48	69	pending	77	2 Bands Lower Main Pegmatite,spodumene & petalite

Summary of Significant Intercepts – RC Holes

Prospect Resources Limited | ACN 124 354 329

Suite 6, 245 Churchill Ave. Subiaco WA 6008 | Phone: +61 8 9217 3300 | Fax: +61 8 9388 3006

						3 Bands Lower Main Pegmatite,
ACR020	16	44	60	pending	69	spodumene & petalite
ACR021	26	57	78	pending	85	2 Bands Lower Main Pegmatite,
						spodumene & petalite
ACR022	26	47	73	pending	82.5	3 Bands Lower Main Pegmatite,
						spodumene & petalite
ACR023	22	0	22	pending	89	Lower Main Pegmatite,
						spodumene & petalite
ACR024	22	0	22	pending	55	Lower Main Pegmatite,
						spodumene & petalite
ACR025	3	2	5	pending	55	Main Pegmatite
						Lower Main Pegmatite,
ACR026	5	51	56	pending	60	spodumene
ACR027	0	-	-	pending	74	Lower Main Pegmatite,
						spodumene
ACR028	3	55	58	pending	70	Lower Main Pegmatite,
						spodumene
ACR029	4	33	34	pending	70	No Lower Main Pegmatite
ACR030	1	50	51	pending	53	No Lower Main Pegmatite
ACR031	5	0	5	pending	61	Main Pegmatite
ACR032	0	-	-	pending	24	Main Pegmatite
ACR033	0	-	-	No Assays	24	No intersections

Map of the Completed Diamond drill collars (white) and RC drill holes (green)

For further information, please contact:

Hugh Warner Harry Greaves

Prospect Resources Prospect Resources Executive Chairman Executive Director Ph: +61 413 621 652 Ph: +263 772 144 669

Competent Person's Statement

The information in this announcement that relates to Exploration Targets, Exploration Results, Mineral Resources and Ore Reserves is based on information compiled by Mr Roger Tyler, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy and The South African Institute of Mining and Metallurgy. Mr Tyler is the Company's Senior Geologist. Mr Tyler has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Tyler consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

JORC Code, 2012 Edition – Table 1 report template

Section 1 Sampling Techniques and Data

Criteria	JORC Code explanation	Commentary
Samplingtechniques	Nature and quality of sampling (eg cut channels, random chips, orspecific specialised industry standardmeasurement tools appropriateto the minerals under investigation, such as down hole gammasondes, or handheld XRF instruments, etc). These examples shouldnot be taken as limiting the broad meaning of sampling.Include reference to measures taken to ensure sample representivityand the appropriate calibration of any measurement tools or systemsused.Aspects of the determination of mineralisation that are Material to thePublic Report.In cases where 'industry standard' work has been done this would berelatively simple (eg 'reverse circulation drilling was used to obtain 1m samples from which 3 kg was pulverised to produce a 30 g chargefor fire assay'). In other cases more explanation may be required,such as where there is coarse gold that has inherentsamplingproblems. Unusual commodities or mineralisation types (egsubmarine nodules) may warrant disclosure of detailed information.	•At the ArcadiaProject,the samples were percussion chipsgenerated from a Smith Capitalrig, using a double tube reversecirculation technique.•3kg Samples were collected every metre in triplicate, in addition to asmaller sample retained for reference and logging.Standards, blanks and field duplicates will be inserted into thesample shipment (5% of total sample number)Samples will be shipped to Zimlabs laboratory where they will bepulverized to produce a 30g chargeand thendispatched bycourier to ALS Johannesburg. All samples will beanalysed bymulti-element ICP(ME-MS61). Overlimits on lithium analysed byLiOG63 method,
Drillingtechniques	Drill type (eg core, reverse circulation, open-hole hammer, rotary airblast, auger, Bangka, sonic, etc) and details (eg core diameter, tripleor standard tube, depth of diamond tails, face-sampling bit or othertype, whether core is oriented and if so, by what method, etc).	Double tube, 5" reverse circulation.A trailer mounted SmithCapitaldouble tube RC rig was used with a 25 bar (Inergsoll Rand)2013 compressor. 3m rods were used, and the holeair blasted toallow samplerecovery viaa cyclone every 1m.
Drill samplerecovery	Method of recording and assessing core and chip sample recoveriesand results assessed.Measures taken to maximise sample recovery and ensurerepresentative nature of the samples.Whether a relationship exists between sample recovery and gradeand whether sample bias may have occurred due to preferentialloss/gain of fine/coarse material.	•Chip samples were bagged directly from the cyclone, and immediatelyweighed, then riffle split.Material seems largelyhomogenous, and no relationship has beendetected between grain size and assayed grade.
Logging	Whether core and chip samples have been geologically andgeotechnically logged to a level of detail to support appropriate	•Chip samples have been geologically logged at 1m intervals, with data

Criteria	JORC Code explanation	Commentary
	Mineral Resource estimation, miningstudies and metallurgicalstudies.Whether logging is qualitative or quantitative in nature. Core (orcostean, channel, etc) photography.The total length and percentage of the relevant intersections logged.	recorded in spreadsheet format using standardized codes. Sampleweight, moisture content, lithologies, texture, structure, induration,alteration, oxidationand minerlisation were recorded.The work is undertaken according to Prospect Resources' standardprocedures and practices, overseen by the CP.Prospect Resourcesbelieves that the level of detail and quality of the work is appropriate tosupport the current and any future exploration.
Sub-samplingtechniquesand samplepreparation	If core, whether cut or sawn and whether quarter, half or all coretaken.If non-core, whether riffled, tube sampled, rotary split, etc andwhether sampled wet or dry.For all sample types, the nature, quality and appropriateness of thesample preparation technique.Quality control procedures adopted for all sub-sampling stages tomaximise representivity of samples.Measures taken to ensure that the sampling is representative of the insitu material collected, including for instance results for fieldduplicate/second-half sampling.Whether sample sizes are appropriate to the grain size of the materialbeing sampled.	•Samples were bagged straight from the cyclone.Typically 12 –18 kgof sample were produced per metre.•The dry samples were split using a 3-stage riffle splitter. With three, 3kgsamples being collected per 1m interval.Excess material was dumpedin a landfill,•Field duplicates were produced every 20th sample.•The 3kg samples were crushed and milled (90%, pass-75u) at theFarvic Laboratory. Labduplicates,blanks and standard material(produced and AMIS) were inserted in identical packets to thesamples, one per 20 normal samples. This was done under thesupervision of a qualified geologist.
Quality ofassay dataandlaboratorytests	The nature, quality and appropriateness of the assaying andlaboratory procedures used and whether the technique is consideredpartial or total.For geophysical tools, spectrometers, handheld XRF instruments, etc,the parameters used in determining the analysis including instrumentmake and model, reading times, calibrations factors applied and theirderivation, etc.Nature of quality control procedures adopted (eg standards, blanks,duplicates, external laboratory checks) and whether acceptable levelsof accuracy (ie lack of bias) and precision have been established.	All samples will be analysed by multi-element ICP (ME-MS61).Overlimits on lithium analysed by LiOG63 method, after four aciddisolution, at ALS
Verification ofsampling and	The verification of significant intersections by either independent oralternative company personnel.	•Prospect Resources' Chief geologist has almost 30 years experienceand was on site during most of the drilling and sample pre-

Criteria	JORC Code explanation	Commentary
assaying	The use of twinned holes.Documentation of primary data, data entry procedures, dataverification, data storage (physical and electronic) protocols.Discuss any adjustment to assay data.	preparation. Thesignificantintersectionswere also shownGeological Survey staff.•All hard copies of data are retained at the Prospect ResourceExploration offices, attached to the Farvic Mine. All electronic dataresides in Excel format on the office desktop, with back-ups retainedon hard-drives in a safe.No holes have been twinned to date.Though twinning istaking placeon historically drilled holes (from 1970s)Logging and assay data captured electronically on excel spreadsheet,and subsequently Access database.
Location ofdata pointsData spacinganddistribution	Accuracy and quality of surveys used to locate drill holes (collar anddown-hole surveys), trenches, mine workings and other locationsused in Mineral Resource estimation.Specification of the grid system used.Quality and adequacy of topographic control.Data spacing for reporting of Exploration Results.Whether the data spacing and distribution is sufficient to establish thedegree of geological and grade continuity appropriate for the MineralResource and Ore Reserve estimation procedure(s) andclassifications applied.Whether sample compositing has been applied.	No Mineral Resource estimate has been carried out.The first drill holewascompleted withdown-hole surveyed using aAzimuth Point System (APS) Single Shot survey method down-holeinstrument at a minimum of every 50m and measured relative tomagnetic North. These measurements have been converted frommagnetic to UTM Zone 35 South values. No significant hole deviationis evident in plan or sectionDrill holes are planned to be drilled at an average of 50m intervalsalong strike. This issufficient to establish geological and gradecontinuity, Further infill drilling is planned to take place as a secondcampaign to infill this to 25m
Orientation ofdata inrelation togeologicalstructureSample	Whether the orientation of sampling achieves unbiased sampling ofpossible structures and the extent to which this is known, consideringthe deposit type.If the relationship between the drilling orientation and the orientationof key mineralised structures is considered to have introduced asampling bias, this should be assessed and reported if material.The measures taken to ensure sample security.	Mineralised structures are flat lying pegmatites and drilling wasplanned in a straightforward manner to intersect thesestructureswithout bias.Samples will beplaced in sealed bags to prevent movement and
security		mixing. Minimal preparation was done on site.

Criteria	JORC Code explanation	Commentary
Audits or		
reviews	The results of any audits or reviews of sampling techniques and data.	To be advised.

Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

Criteria	JORC Code explanation		Commentary
Mineral	Type, reference name/number, location and ownership including		Arcadia V claim, held by JV partner Paul Chimbodza.
tenement andland tenure	agreements or material issues with third parties such as jointventures, partnerships, overriding royalties, native title interests,	No environmental or land title issues.
status	historical sites, wilderness or national park and environmentalsettings.		Rural farmland -fallow
	The security of the tenure held at the time of reporting along with anyknown impediments to obtaining a licence to operate in the area.
Explorationdone by otherparties	Acknowledgment and appraisal of exploration by other parties.	Two rounds of historical drilling were done. Three EXT holes weredrilled in 1969 at site of current pit. These logs are available, and thelithologies observed are consistent with that seen by ProspectResources' drilling. The sites of at least 10 NQ sized boreholes havealso been identified in the field. The detailed records of thisprogramme have been lost. But the work done in the 1970's wasrecorded by the Geological Survey in their 1989 bulletin, wherehistorical estimatesof 18mt at upto 5% Li were recorded.
Geology	Deposit type, geological setting and style of mineralisation.			Na-Li pegmatite, with spodumene, eucryptite, petaliteamblygonite. In addition to disseminated tantalite and beryl.			and
Drill holeInformation	A summary of all information material to the understanding of theexploration results including a tabulation of the following information	Bhs	Eastings	Northings	RL	Azimuth	Dip	Depth
	for all Material drill holes:	ACR001	331,538	8,034,130	1,367	130	-79	51
	oeasting and northing of the drill hole collar
	oelevation or RL (Reduced Level –elevation above sea level in	ACR002	331,505	8,034,181	1,366	151	-81	52
	metres) of the drill hole collar	ACR003	331,454	8,034,257	1,375	144	-80	76
	odip and azimuth of the hole
	odown hole length and interception depth
	ohole length.

Criteria	JORC Code explanation	Commentary
	If the exclusion of this information is justified on the basis that theinformation is not Material and this exclusion does not detract fromthe understanding of the report, the Competent Person should clearlyexplain why this is the case.
Dataaggregationmethods	In reporting Exploration Results, weighting averaging techniques,maximum and/or minimum etruncations (eg cutting of high grades)and cut-off grades are usually Material and should be stated.	Borehole intersections were reported using downhole weightedaveragingmethods. No maximum or minimum grade truncations wereused. The mineralisation is well constrained in pegmatites and quartz
	Where aggregate intercepts incorporate short lengths of high graderesults and longer lengths of low grade results, the procedure usedfor such aggregation should be stated and some typical examples ofsuch aggregations should be shown in detail.	veins.
	The assumptions used for any reporting of metal equivalent valuesshould be clearly stated.
Relationshipbetweenmineralisationwidths andinterceptlengths	These relationships are particularly important in the reporting ofExploration Results.	The firstdrilled to intersect the shallow dipping pegmatiteveins. Alldrill holes were drilled with an azimuth of 135°. The dip of all the holes
	If the geometry of the mineralisation with respect to the drill holeangle is known, its nature should be reported.	is-80°.The first hole intersected the main pegmatite as planned.
	If it is not known and only the down hole lengths are reported, thereshould be a clear statement to this effect (eg 'down hole length, truewidth not known').
Diagrams	Appropriate maps and sections (with scales) and tabulations ofintercepts should be included for any significant discovery beingreported These should include, but not be limited to a plan view ofdrill hole collar locations and appropriate sectional views.	Mapsare attached and cross sections are being created
Balancedreporting	Where comprehensive reporting of all Exploration Results is notpracticable, representative reporting of both low and high gradesand/or widths should be practiced to avoid misleading reporting ofExploration Results.	The Company believes that all resultshave been reported andcomplywith balanced reporting.
Othersubstantiveexplorationdata	Other exploration data, if meaningful and material, should be reportedincluding (but not limited to): geological observations; geophysicalsurvey results; geochemical survey results; bulk samples –size andmethod of treatment; metallurgical test results; bulk density,groundwater, geotechnical and rock characteristics; potential	Channel sampling also carried out at the adjacent dormant pit, thatwas mined in the '70s. Geological mapping and grab sampling wasundertaken on a surveyed grid, down-dip and along strike of the pit.

Criteria	JORC Code explanation	Commentary
	deleterious or contaminating substances.
Further work	The nature and scale of planned further work (eg tests for lateralextensions or depth extensions or large-scale step-out drilling).	Infill and extension drilling is being planned for Q3 2016
	Diagrams clearly highlighting the areas of possible extensions,including the main geological interpretations and future drilling areas,provided this information is not commercially sensitive.