PROSPECT RESOURCES LIMITED — Capital/Financing Update 2016

Jul 21, 2016

Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Prospect Resources Limited

ABN

30 124 354 329

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of +securities issued or to Fully paid ordinary shares be issued Unlisted options 2 Number of[+] securities issued or Placement to be issued (if known) or 280,000,000 fully paid ordinary shares maximum number which may be issued Remuneration options 115,000,000 unlisted options Capital raising fees 27,000,000 unlisted options

• See chapter 19 for defined terms.

Appendix 3B Page 1

04/03/2013

Appendix 3B New issue announcement

3 Principal terms of the Placement +securities (e.g. if options, Fully paid ordinary shares exercise price and expiry date; if partly paid +securities, the Remuneration options amount outstanding and due dates for payment; if Unlisted and unvested options, each option +convertible securities, the exercisable at 1.5 cents each, which vests conversion price and dates for when the 20 day VWAP (or over 1 calendar conversion) month) of the Company’s share price is 3 cents or above, expires on 15/06/2019 Capital raising fees Unlisted options, each option exercisable at 1.5 cents each, expires on 22/07/2019

• See chapter 19 for defined terms.

Appendix 3B Page 2

04/03/2013

Appendix 3B New issue announcement

4 Do the[+] securities rank equally Shares – yes in all respects from the[+] issue date with an existing[+] class of Options – yes, upon exercise quoted[+] securities? If the additional[+] securities do not rank equally, please state:

• the date from which they do

• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

• 5 Issue price or consideration

Placement Issue price of 5 cents per share Remuneration options Issued for nil cash consideration Capital raising fees Issued for nil cash consideration

• See chapter 19 for defined terms.

Appendix 3B Page 3

04/03/2013

Appendix 3B New issue announcement

• 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets)

Placement

• As announced by the Company on 20 July 2016, funds raised from the placement ($14m) will be used to:  fast track drilling at the Arcadia Lithium deposit, approx. 35kms north east of Harare;

• accelerate mine design, plant design and feasibility studies for the Arcadia Lithium deposit;

• enable the Company to order long lead time items of plant for the Arcadia Lithium deposit;

• fast track exploration at the God’s Gift Lithium deposit;

• accelerate gold production at the Gwanda East gold camp, south east of Bulawayo;

• provide the Company with capacity to make additional strategic acquisitions, particularly within the lithium, graphite and cobalt sectors; and

• supplement general working capital.

• Remuneration options As announced by the Company on 22 July 2016, shareholders approved the issue of options to the Company’s directors and a number of its employees. Capital raising fees As part of the capital raising, in lieu of cash payments, the Company agreed to remunerate service providers in relation to the capital raising with unlisted options.

6a Is the entity an[+] eligible entity Yes that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the[+] securities the subject of this Appendix 3B , and comply with section 6i 6b The date the security holder 20 November 2015 resolution under rule 7.1A was passed

• See chapter 19 for defined terms.

Appendix 3B Page 4

04/03/2013

Appendix 3B New issue announcement

6c Number of+securities issued without security holder approval under rule 7.1 6d Number of+securities issued with security holder approval under rule 7.1A 6e Number of+securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of+securities issued under an exception in rule 7.2 6g If+securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If+securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B.	30,000,000 fully paid ordinary shares 27,000,000 unlisted options
	N/A
	250,000,000 fully paid ordinary shares (resolution 2, extraordinary general meeting held on 22 July 2016) 115,000,000 unlisted options (resolutions 3- 6, extraordinary general meeting held on 22 July2016)
	N/A
	N/A
	N/A
	Listing Rule 7.1: 128,569,244 Listing Rule 7.1A: 123,712,829
	22 July 2016

• See chapter 19 for defined terms.

Appendix 3B Page 5

04/03/2013

Appendix 3B New issue announcement

8 Number and +class of all +securities quoted on ASX (_including_the +securities in section 2 if applicable) 9 Number and +class of all +securities not quoted on ASX (_including_the +securities in section 2 if applicable) 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)	Number	+Class
	1,517,128,296	Fully paid ordinary shares
	Number	+Class
	65,000,000 115,000,000 27,000,000	Unlisted and unvested options, each exercisable at 0.5 cents per option, which vests when the 20 day VWAP of the Company’s share price is 1 cent or above, expires on 14/12/2018 Unlisted and unvested options, each option exercisable at 1.5 cents each, which vests when the 20 day VWAP (or over 1 calendar month) of the Company’s share price is 3 cents or above, expires on 15/06/2019 Unlisted options, each option exercisable at 1.5 cents each, expires on 22/07/2019
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 6

04/03/2013

Appendix 3B New issue announcement

Part 2 - Pro rata issue

11	Is security holder approval
	required?
12	Is the issue renounceable or
	non-renounceable?
13	Ratio in which the+securities
	will be offered
14	+Class of+securities to which the
	offer relates
15	+Record date to determine
	entitlements
16	Will holdings on different
	registers (or subregisters) be
	aggregated for calculating
	entitlements?
17	Policy for deciding entitlements
	in relation to fractions
18	Names of countries in which the
	entity has security holders who
	will not be sent new offer
	documents
	Note: Security holders must be told how their
	entitlements are to be dealt with.
	Cross reference: rule 7.7.
19	Closing date for receipt of
	acceptances or renunciations
20	Names of any underwriters
21	Amount of any underwriting fee
	or commission
22	Names of any brokers to the
	issue
23	Fee or commission payable to
	the broker to the issue

• See chapter 19 for defined terms.

Appendix 3B Page 7

04/03/2013

Appendix 3B New issue announcement

24	Amount of any handling fee
	payable to brokers who lodge
	acceptances or renunciations on
	behalf of security holders
25	If the issue is contingent on
	security holders’ approval, the
	date of the meeting
26	Date entitlement and
	acceptance form and offer
	documents will be sent to
	persons entitled
27	If the entity has issued options,
	and the terms entitle option
	holders to participate on
	exercise, the date on which
	notices will be sent to option
	holders
28	Date rights trading will begin (if
	applicable)
29	Date rights trading will end (if
	applicable)
30	How do security holders sell
	their entitlements_in full_through
	a broker?
31	How do security holders sell_part_
	of their entitlements through a
	broker and accept for the
	balance?
32	How do security holders dispose
	of their entitlements (except by
	sale through a broker)?
33	+Issue date

• See chapter 19 for defined terms.

Appendix 3B Page 8

04/03/2013

Appendix 3B New issue announcement

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of[+] securities ( tick one )

• (a) +Securities described in Part 1

• (b)[All other ][+][securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional +securities held by those holders

36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

Entities that have ticked box 34(b)

• 38 Number of[+] securities for which +quotation is sought

• 39 +Class of +securities for which quotation is sought

• See chapter 19 for defined terms.

Appendix 3B Page 9

04/03/2013

Appendix 3B New issue announcement

40 Do the[+] securities rank equally in all respects from the[+] issue date with an existing[+] class of quoted +securities?

If the additional[+] securities do not rank equally, please state:  the date from which they do

• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period

(if issued upon conversion of another[+] security, clearly identify that other[+] security)

Number +Class

• 42 Number and +class of all +securities quoted on ASX ( including the[+] securities in clause 38)

• See chapter 19 for defined terms.

Appendix 3B Page 10

04/03/2013

Appendix 3B New issue announcement

Quotation agreement

1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted +quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the[+] securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

22 July 2016 Sign here: ............................................................ Date: ......................... Company secretary Andrew Whitten Print name: .........................................................

• See chapter 19 for defined terms.

Appendix 3B Page 11

04/03/2013

Appendix 3B New issue announcement

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

Part 1	Part 1
Rule 7.1 – Issues exceeding 15% of capital
Step 1: Calculate “A”, the base figure from which the placement capacity is calculated
Insertnumber of fully paid+ordinary securities on issue 12 months before the +issue date or date of agreement to issue	687,424,820
Addthe following: • Number of fully paid+ordinary securities issued in that 12 month period under an exception in rule 7.2 • Number of fully paid+ordinary securities issued in that 12 month period with shareholder approval • Number of partly paid+ordinary securities that became fully paid in that 12 month period Note: • Include only ordinary securities here – other classes of equity securities cannot be added • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items	163,365,062 (issued 21 September 2015) 35,755,000 (issued 14 December 2015) 1,875,000 (issued 12 January 2016, ratified on 22 July 2016) 40,000,000 (issued 21 March 2016, ratified on 22 July 2016) 103,157,765 (issued 4 May 2016) 14,537,898 (issued 4 May 2016, ratified on 22 July 2016) 191,012,751 (issued 6 June 2016, ratified 22 July 2016)
Subtractthe number of fully paid+ordinary securities cancelled during that 12 month period	Nil
“A”	1,237,128,296

• See chapter 19 for defined terms.

Appendix 3B Page 12

04/03/2013

Appendix 3B New issue announcement

Step 2: Calculate 15% of “A”

Step 2: Calculate 15% of “A”	Step 2: Calculate 15% of “A”
“B”	0.15 [Note: this value cannot be changed]
Multiply“A” by 0.15	185,569,244
Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used
Insertnumber of+equity securities issued or agreed to be issued in that 12 month period_not counting_those issued: • Under an exception in rule 7.2 • Under rule 7.1A • With security holder approval under rule 7.1 or rule 7.4 Note: • This applies to equity securities, unless specifically excluded – not just ordinary securities • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items	57,000,000 (issued 22 July 2016)
“C”	57,000,000
Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1
“A” x 0.15 Note: number must be same as shown in Step 2	185,569,244
Subtract“C” Note: number must be same as shown in Step 3	57,000,000
Total[“A” x 0.15] – “C”	128,569,244 [Note: this is the remaining placement capacity under rule 7.1]

• See chapter 19 for defined terms.

Appendix 3B Page 13

01/08/2012

Appendix 3B New issue announcement

Part 2

Rule 7.1A – Additional placement capacity for eligible entities

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A” 1,237,128,296 Note: number must be same as shown in Step 1 of Part 1 Step 2: Calculate 10% of “A” “D” 0.10 Note: this value cannot be changed Multiply “A” by 0.10 123,712,829

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

Insert number of[+] equity securities issued or agreed to be issued in that 12 month period under rule 7.1A

Notes:

• This applies to equity securities – not just ordinary securities

• Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

• Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

• It may be useful to set out issues of securities on different dates as separate line items

“E” Nil

• See chapter 19 for defined terms.

Appendix 3B Page 14

01/08/2012

Appendix 3B New issue announcement

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A
“A” x 0.10 Note: number must be same as shown in Step 2	123,712,829
Subtract“E” Note: number must be same as shown in Step 3	Nil
Total[“A” x 0.10] – “E”	123,712,829 Note: this is the remaining placement capacity under rule 7.1A

• See chapter 19 for defined terms.

Appendix 3B Page 15

01/08/2012