PROSPECT RESOURCES LIMITED — Capital/Financing Update 2018

Feb 5, 2018

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 tobe issued	Fully paid ordinary shares
		Unlisted options
2	Number of +securities issued ortobeissued(ifknown)or	175,266,669 fully paid ordinary shares
	maximum number which may beissued	20,000,000 unlisted options
3	Principal terms of the +securities(e.g. if options, exercise price andexpirydate;ifpartlypaid+securities,theamount	Placement166,666,667fully paid ordinary shares withan issue price of $0.06 per share
	outstanding and due dates for+convertiblepayment;ifsecurities, the conversion priceand dates for conversion)	Capital raising fees8,600,002 fully paid ordinary shares with adeemed issue price of $0.06 per share
		20,000,000 unlisted options each exercisableat 10 cents per option, which expireson 6February 2019

+ See chapter 19 for defined terms.

4	Do the +securities rank equally inall respects from the +issue datewith an existing +classof quoted+securities?	Shares –yesUnlisted options –yes, upon exercise
	If the additional +securities donot rank equally, please state:•the date from which they do•theextenttowhichtheyparticipateforthenextdividend, (in the case of atrust, distribution) or interestpayment•the extent to which they donot rank equally, other thaninrelationtothenextdividend,distributionorinterest payment
5	Issue price or consideration	PlacementIssuepriceof$0.06pershare(totalconsideration of $10,000,000)Capital raising feesDeemed issue price of $0.06 per share
6	Purpose of the issue(If issued as consideration forthe acquisition of assets, clearlyidentify those assets)	PlacementAs announced by the Company on 31 January2018, shares issued to institutional andsophisticated investors,the proceeds of theplacement will be used to:•accelerate the development of thearcadia mine;•progress exploration at the GoodDays Lithium Project(under option);•investigateandpossiblyacquireadditionallithiumandcobaltprojects; and•supplement general working capital.Capital raising feesAs part of the fees payable to Hunter Capitalfor services provided, and to be provided, theCompany hasagreed to issue shares andunlisted options to Hunter Capital.

+ See chapter 19 for defined terms.

6a Is the entity an +eligible entity 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 resolution under rule 7.1A was passed
• 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

13 November 2017

14,853,840 fully paid ordinary shares 20,000,000 unlisted options

160,412,829 fully paid ordinary shares

N/A

N/A

Yes, agreed to be issued on 30 January 2018, which had a 15 day VWAP of $0.063166. 75% of this VWAP is $0.47375, which is less than the issue price of $0.06. (source: Orient Capital)

N/A

See Annexure 1

+ See chapter 19 for defined terms.

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.

8 Number and +class of all +securities quoted on ASX (including the +securities in section 2 if applicable)

6 February 2018

Number	+Class
1,779,394,965	Fully paid ordinaryshares

+ See chapter 19 for defined terms.

		Number	+Class
9	+classNumberandofall+securities not quoted on ASX+securities(includingtheinsection 2 if applicable)	65,000,000	Unlisted options,each exercisable at$0.05per option,expiring on31/12/2018.
		65,000,000	Unlisted andunvested options,each exercisable at0.5 cents peroption, which vestswhen the 20 dayVWAP of theCompany's shareprice is 1 cent orabove, expires on19/11/2018
		115,000,000	Unlisted andunvested options,each optionexercisable at 1.5cents each, whichvests when the 20day VWAP (or over1 calendar month)of the Company'sshare price is 3cents or above,expires on15/06/2019
		20,000,000	Unlisted options,each optionexercisable at 10cents each, expireson 06/02/2019

10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

N/A

Part 2 - Pro rata issue

+ See chapter 19 for defined terms.

Appendix 3B New issue announcement

11	Issecurityholderapprovalrequired?	N/A
12	Is the issue renounceable or nonrenounceable?	N/A
13	Ratio in which the +securities willbe offered	N/A
14	+Class of +securities to which theoffer relates	N/A
15	+Recorddatetodetermineentitlements	N/A
16	Willholdingsondifferentregisters(orsubregisters)beaggregatedforcalculatingentitlements?	N/A
17	Policy for deciding entitlements inrelation to fractions	N/A
18	Names of countries in which theentity has security holders whowillnotbesentnewofferdocumentsNote: Security holders must be told how theirentitlements are to be dealt with.Cross reference: rule 7.7.	N/A
19	Closingdateforreceiptofacceptances or renunciations	N/A
20	Names of any underwriters	N/A
21	Amount of any underwriting feeor commission	N/A
22	Names of any brokers to the issue	N/A
23	Fee or commission payable to thebroker to the issue	N/A
24	Amountofanyhandlingfeepayable to brokers who lodgeacceptances or renunciations onbehalf of security holders	N/A

+ See chapter 19 for defined terms.

25	If the issue is contingent onsecurity holders' approval, thedate of the meeting	N/A
26	Date entitlement and acceptanceform and offer documents will besent to persons entitled	N/A
27	If the entity has issued options,andthetermsentitleoptionholders to participate on exercise,the date on which notices will besent to option holders	N/A
28	Date rights trading will begin (ifapplicable)	N/A
29	Date rights trading will end (ifapplicable)	N/A
30	How do security holders sell theirentitlements in fullthrough abroker?	N/A
31	How do security holders sell partof their entitlements through abrokerandacceptforthebalance?	N/A
32	How do security holders disposeof their entitlements (except bysale through a broker)?	N/A
33	+Issue date	N/A

+ See chapter 19 for defined terms.

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	N/A
39	+Class of +securities for whichquotation is sought	N/A

+ See chapter 19 for defined terms.

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:

N/A

N/A

• 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)

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

Number	+Class
N/A	N/A

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.

6 February 2018 Sign here: ............................................................ Date: .........................

Company secretary

Print name: Andrew Whitten

+ See chapter 19 for defined terms.

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 placementcapacity is calculated
Insert number of fully paid +ordinarysecurities on issue 12 months before the+issue date or date of agreement to issue	1,594,128,296
Add the following:Number of fully paid +ordinary securities•issued in that 12 month period under anexception in rule 7.2Number of fully paid +ordinary securities•issued in that 12 month period withshareholder approvalNumber of partly paid +ordinary•securities that became fully paid in that12 month period	10,000,000 shares (issued 14 December2017)
Note:•Include only ordinary securities here –other classes of equity securities cannotbe added•Include here (if applicable) the securitiesthe subject of the Appendix 3B to whichthis form is annexed•It may be useful to set out issues ofsecurities on different dates as separateline items
Subtract the number of fully paid +ordinarysecurities cancelled during that 12 monthperiod	Nil
"A"	1,604,128,296

+ See chapter 19 for defined terms.

Step 2: Calculate 15% of "A"
"B"	0.15
	[Note: this value cannot be changed]
Multiply "A" by 0.15	240,619,244
Step 3: Calculate "C", the amount of placement capacity under rule7.1 that has already been used
Insert number of +equity securities issuedor agreed to be issued in that 12 monthperiod not counting those issued:	14,853,840 fully paid ordinary shares (issued6 February 2018)
•Under an exception in rule 7.2	20,000,000 unlisted options (issued 6February 2018)
•Under rule 7.1A
•With security holder approval under rule7.1 or rule 7.4
Note:•This applies to equity securities, unlessspecifically excluded – not just ordinarysecurities•Include here (if applicable) the securitiesthe subject of the Appendix 3B to whichthis form is annexed•It may be useful to set out issues ofsecurities on different dates as separateline items
"C"	34,853,840
Step 4: Subtract "C" from ["A" x "B"] to calculate remainingplacement capacity under rule 7.1
"A" x 0.15	240,619,244
Note: number must be same as shown inStep 2
Subtract "C"	34,853,840
Note: number must be same as shown inStep 3
Total ["A" x 0.15] – "C"	205,765,404
	[Note: this is the remaining placementcapacity under rule 7.1]

Part 2

+ See chapter 19 for defined terms.

Rule 7.1A –Additional placement capacity for eligible entitiesStep 1: Calculate "A", the base figurefrom which the placementcapacity is calculated
Note: number must be same as shown inStep 1 of Part 1
Step 2: Calculate 10% of "A"
"D"	0.10
	Note: this value cannot be changed
Multiply "A" by 0.10	160,412,829 (rounded down)
Step 3: Calculate "E", the amount of placement capacity under rule7.1A that has already been used
Insert number of +equity securities issuedor agreed to be issued in that 12 monthperiod under rule 7.1ANotes:•This applies to equity securities – notjust ordinary securities•Include here – if applicable – thesecurities the subject of the Appendix3B to which this form is annexed•Do not include equity securities issuedunder rule 7.1 (they must be dealt within Part 1), or for which specific securityholder approval has been obtained•It may be useful to set out issues ofsecurities on different dates as separate	160,412,829 (issued 6 February 2018)
line items"E"	160,412,829

+ See chapter 19 for defined terms.

Step 4: Subtract "E" from ["A" x "D"] to calculate remainingplacement capacity under rule 7.1A
"A" x 0.10	160,412,829
Note: number must be same as shown inStep 2
Subtract "E"	160,412,829
Note: number must be same as shown inStep 3
Total ["A" x 0.10] – "E"	Nil
	Note: this is the remaining placementcapacity under rule 7.1A

+ See chapter 19 for defined terms.