RAREX LIMITED — Interim / Quarterly Report 2011

Oct 27, 2011

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Clancy Exploration Limited Phone: (02) 6361 1285
3 Corporation Place Fax: (02) 6361 1202
Orange NSW 2800 www.clancyexploration.com
Australia info@clancyexploration.com
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QUARTERLY ACTIVITIES REPORT For the period ending 30 September 2011

The Board of Clancy Exploration Limited is pleased to release its Quarterly Activities report for the period ending 30 September 2011.

Highlights

• Diamond drilling is in progress at the Phoenix prospect at Condobolin and will continue into the December quarter, along with aircore and RC drilling across the Mascotte, Meritilga, Bluebell and Potters prospects.

• Also at Condobolin , regional soil sampling has defined a coherent, 2km x 2km arsenic-lead-zinc (+gold) geochemical anomaly over ridges east of Mascotte and west of Potters, defining the new Meritilga Prospect:

• Arsenic-lead-zinc geochemical anomalism is closely associated with gold mineralisation in the Condobolin Mineral Field;

• A detailed airborne geophysical survey has detected an intense potassium anomaly over the entire Meritilga Prospect, which is believed to be mapping a large outcropping alteration zone;

• Similar mineralisation and alteration at multiple prospects, suggests derivation from the same hydrothermal system, with Meritilga situated in the core of the system;

• New drill targets have been defined and will be tested in the December quarter.

• Geological mapping and geochemical and geophysical surveys at the Wellington North JV have identified new porphyry copper-gold prospects including Glenrowan, where magnetic and chargeable IP anomalies have coincident rock chip results up to:

• 5.9g/t Au and 0.19% Cu;

o 1.6g/t Au and 0.72% Cu .

• Field mapping in the Carlisle Reefs area at the Moorefield JV has identified a previously unrecorded set of historical workings. Mullock sampling from the workings has returned significant results:

• Gold values up to 16.15g/t Au, 7.24g/t Au and 5.81g/t Au;

• Arsenic values up to 2.26% As and antimony values up to 358ppm Sb.

• Follow up drilling is planned for the December quarter.

• An assessment of the iron potential at Trundle and Gobondery is underway, with shallow drilling of targets to test for grade and recoverability planned for the December quarter.

• Aircore drilling resumed at the Myall JV with results pending. Aircore drilling will continue in the December quarter.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

Clancy managed projects

The Condobolin project was the focus of field activity for the quarter with the completion of a substantial auger soil geochemical survey and a 3D Induced Polarisation (IP) survey. Diamond drilling is now in progress at the Phoenix prospect. Auger soil geochemical surveys were also completed or are in progress at Orange East, Gobondery and Cundumbul-Bakers Swamp. A total of 2,608 auger soil samples were collected during the quarter. A ground magnetic survey was also completed at Gobondery.

Condobolin EL7748

(NSW, Clancy 100%)

Condobolin is located in the central west of NSW immediately north of the Condobolin township. Condobolin has a substantial mining history, predominantly as a base metals field (lead, zinc and copper), as well as gold. The mineralisation is hosted in epithermal-style quartz veins hosted in the metasedimentary units of the Ordovician Girilambone Group. The veins are associated with pyrite, sphalerite, galena, chalcopyrite, arsenopyrite and gold.

Auger soil sampling continued with an additional 1,327 samples collected on a nominal 100m x 100m grid during the quarter. Results from the soil samples were obtained via a static field portable XRF setup, whereby the instrument is contained in a workstation, and samples are dried and prepared in identical crucibles to ensure quality control. The XRF results were confirmed, and gold results obtained, by analysis carried out by ALS Orange.

A new prospect called Meritilga has been defined in the centre of a large 2km x 2km arsenic-lead-zinc ± gold anomaly between Mascotte and Potters. Arsenic, in particular, maps out the broad extent of a significant hydrothermal system with the historic workings at Mascotte, Phoenix and Potters on the periphery. The arsenic anomaly is coincident with strong potassium anomalism, as shown in Figure 1. The potassium anomaly maps a large outcropping alteration zone. Previous drilling by Clancy at Phoenix, Mascotte, Bluebell and Potters identified similar mineralisation and alteration at all four prospects, suggesting derivation from the same hydrothermal system, and Meritilga is situated in the core of that system within the Condobolin Mineral Field.

Meritilga hosts several historic gold, silver and/or lead mines dating from the early 1900’s. Field inspection has identified abundant quartz blows and breccia float, which also show evidence of weathered sulphides and epithermal vein textures similar to those seen at Phoenix, Mascotte and Potters. The Meritilga prospect is defined in soil by +100ppm arsenic (spot highs up to 500ppm), +30ppm lead (spot highs up to 150ppm), +50ppm zinc (spot highs up to 210ppm), and up to 0.1 g/t gold. The gold, copper, lead, silver and zinc mineralisation in the Condobolin Mineral Field appears to be a manifestation of a zoned hydrothermal system, with near surface, low-sulphidation epithermal mineralisation potentially linked at depth to a deeper intrusive source (Figure 2).

A 3D Induced Polarization (IP) survey was recently completed and preliminary modelling of the data is showing significant chargeable anomalies near the Phoenix and Mascotte prospects, close to the location of RC drill holes completed in February 2011. Processing of the IP data is in progress. Diamond drilling commenced at Phoenix on October 24 2011 and will continue, along with aircore and RC drilling across the Mascotte, Meritilga, Bluebell and Potters prospects, in the December quarter.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

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Figure 1 - Potassium channel of the detailed airborne geophysical survey, overlain by arsenic concentrations in soil contours (ppm). Major prospects and known historic workings (blue triangles) also shown. Coordinates in GDA94 Zone 55.

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MERITILGA
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Figure 2 - Schematic model for mineralisation in the Condobolin Mineral Field.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

Trundle EL4512 and EL7187

(NSW, Clancy 100%)

Trundle consists of two exploration licences EL4512 and EL7187 and is located 25km west of the Northparkes copper-gold mine (Rio Tinto) and has many similarities to Northparkes. Most of the project area is currently under winter crops so drilling will not be possible until after crop harvest in the December quarter. Work in the September quarter consisted of a site visit with a consultant to assess the potential of the extensive magnetite skarn horizons at Trundle Park and Mordialloc to host significant iron mineralisation. Outcrop of the skarn is restricted to small exposures around historic workings at Trundle Park, Mordialloc and Botfield, where it is relatively thin and has high sulphide content (mostly pyrite). However, magnetic data suggests that the skarn is quite extensive, particularly at Trundle Park (Figure 3), where it extends under shallow cover into areas that have never been drill tested. Further work is planned in the December quarter to assess the iron potential in these areas. Follow-up of epithermal and porphyry copper-gold targets will also resume after crops are harvested.

Gobondery EL6534

(NSW, Clancy 100%)

Gobondery (EL6534) is located approximately 50km NW of Northparkes, just south of Tullamore. Gobondery sits within an inlier of Ordovician arc that is interpreted to have been rifted west off the Northparkes Igneous Complex. The main Ordovician arc unit is the Raggatt Volcanics, which consists of shoshonitic andesitic lavas and volcaniclastic rocks. Exposure of Ordovician rocks is generally poor, comprising scattered outcrop and subcrop in the central part of the tenement. Quaternary, Devonian and Silurian sediments cover the Ordovician units to the north and south. The Ordovician belt at Gobondery is narrow (1-2km wide) and is flanked to the west by the Devonian Gobondery Granite, and to the east by Silurian volcanics and the Devonian rift basin sediments of the Tullamore Syncline.

Medium grained magnetite-dominant skarn occurs in the central part of the tenement, which was worked in 1920 to produce 8128t of iron ore. The skarn crops out over an area of 250m by 80m along the contact of the Raggatt Volcanics and the Gobondery Granite. The thickness of the skarn lenses is unknown, as they have not been drill tested. Aerial magnetic imagery shows an intense coherent magnetic anomaly extending for approximately 4.5km along the granite contact, referred to as the Forest View anomaly. This anomaly, shown in Figures 3 and 4, encompasses the outcropping skarn and large areas buried under less than ten metres of unconsolidated cover. A 50m line-spaced ground magnetic survey was completed during the quarter (187 line km’s) to further define the Forest View magnetic anomaly. The survey data shows several features such as areas of greater magnetic intensity that are thought to relate to the greatest concentrations of magnetite minerals. Importantly, the data suggests that the outcropping skarn has been uplifted from an adjacent elongate body approximately 1.3km long which is covered by recent sediments.

The project area is well located to infrastructure such as power, road and rail. The Troffs rail station on the Tottenham Branch rail line lies less than 10 km away by existing roads.

The outcropping skarn and several intense magnetic anomalies will be shallow drill tested in the December quarter, testing for iron content and recoverability.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

The Devonian Mount Leadley epithermal gold prospect (YTC Resources) is adjacent to the northeast section of EL6534. Auger soil sampling on gold-copper targets west of Mount Leadley was completed in the September quarter (474 samples) and processing of the results will continue into the December quarter.

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Figure 3 - Location of the Forest View and Trundle Park magnetic anomalies showing nearby infrastructure such as roads and rail.

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Figure 4- RTP ground magnetic image of the Forest View anomaly over regional RTP showing the contact of the Gobondery Granite and the Raggatt Volcanics. The most intense anomalies are outlined in black, faults are in red. Outcropping skarn is shown in the north of the image (arrow).

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

Orange East EL6181

(NSW, Clancy 100%)

Orange East (EL6181) is located east of the city of Orange and contains several target styles including Ordovician porphyry copper-gold and post-Ordovician copper-gold targets. Auger soil sampling to extend the soil sample coverage to the Favell Zone, a parallel alteration zone west of Carangera, was completed. A total of 640 samples were collected during the September quarter and processing of results will continue into the December quarter.

Cundumbul EL6661 and EL7399

(NSW, Clancy 100%)

The Cundumbul project covers 204.9km[2] of prospective arc units in the Molong Volcanic Belt between Molong and Wellington. There are numerous intrusive complexes at Cundumbul that have anomalous copper and/or gold associated with them. Auger soil sampling is in progress at Bakers Swamp with 167 samples collected to date. Soil sampling will continue into the December quarter.

Gold Fields managed JV projects

Aircore drilling resumed at the Myall JV and auger drilling and ground geophysical surveys were undertaken at the Wellington North and Moorefield JV’s. A total of 2,293m of aircore drilling was completed on the Gold Fields JV projects in the September 2011 quarter.

Myall EL6913

(NSW, Gold Fields 51%, Clancy 49%, Gold Fields earning 80%)

Myall (EL6913) is located 25km southwest of Narromine at the northern end of the Junee-Narromine Volcanic Belt of the Macquarie Arc. The regional aircore drilling program resumed with a further 25 holes (2,293m) completed in areas without winter crops. Results are pending. Aircore drilling will resume in the December 2011 quarter after crops have been harvested. A total of 136 holes (14,186m) have been completed on a 500m x 500m regional grid to date.

Wellington North EL6178, EL6328, EL6662, EL7200 and EL7440

(NSW, Gold Fields 82%, Clancy 18%)

The Wellington North project covers approximately 30km of strike length of the Molong Volcanic Belt immediately north of Wellington. Geological mapping, rock-chip sampling (53 samples), auger drilling (517 holes for 2,248m), ground magnetic surveys and petrology studies continued at several prospects. Highlights for the quarter include:

Glenrowan : significant Au-Cu rock chip results were returned with values up to 5.9g/t Au & 0.19% Cu in skarn altered limestone (sample GWR0062) and 1.6g/t Au & 0.72% Cu in quartz-limonite altered rock (sample GWR0063). The anomalous Au-Cu rock-chip samples of skarn and quartzlimonite altered rocks are associated with an untested magnetic high anomaly which is coincident with a larger IP chargeability anomaly.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

Mayhurst North : intense albite-hematite (‘reddened’) altered andesitic rocks were confirmed with anomalous Cu (~800ppm) in rock-chip samples and coincident IP chargeability and magnetic high anomalies. This may represent the inner propylitic zone within a porphyry Cu-Au system.

Mayhurst Central : propylitic and phyllic type alteration with pyrite>>chalcopyrite was intersected at in andesitic volcaniclastic rocks and porphyries. The style of mineralisation is consistent with the outer or upper parts of a porphyry Cu-Au system.

Boda : calc-potassic and skarn (garnet) alteration in andesitic wall-rocks was confirmed at the prospect. The causative intrusion(s) is yet to be intersected in drilling.

Rose Hill : calc-sodic and propylitic alteration assemblages were confirmed. The non-mineralised calc-sodic event is associated with the equigranular diorite-monzodiorite rocks which are overprinted by a later mineralised (chalcopyrite-pyrite) propylitic event which is unrelated to the host-rocks. Future work will aim to locate the causative intrusion and mineralised centre.

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Figure 5 – Wellington North JV project showing prospects mentioned in the text.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

Assay results were received for three RC holes completed at the Tomkins prospect and one RC hole completed at the Mayhurst Central prospect in the previous quarter. No significant Cu or Au results were returned, however a significant zone of anomalous S-Te-As geochemistry (280m @ 1.2% S, 0.68ppm Te & 45ppm As from 20m to EOH) was returned from hole WTRC004 at Mayhurst Central consistent with the pyrite shell to a porphyry system. Further drilling and ground magnetic surveys are planned for the December quarter.

Moorefield EL7675

(Gold Fields 80%, Clancy 20%)

Moorefield covers 285km[2] between Fifield and Condobolin in the central west of New South Wales. A 3D IP survey was completed at the Boxdale Prospect and a significant chargeability anomaly was defined coincident with the gold-arsenopyrite-pyrite lode intersected in previous drilling, which confirms the NW strike orientation.

Field mapping in the Carlisle Reefs area identified a previously unrecorded set of historical workings where gold results from mullock sampling returned 16.15g/t Au, 7.24g/t Au and 5.81g/t Au . The gold results have supporting arsenic (up to 2.26%) and antimony (up to 358ppm) anomalism. The results have an identical geochemical signature to the Boxdale target. These workings are approximately 200m west of the recorded workings, and neither has been drill tested. Follow up drilling is planned for the December quarter.

Corporate

Chairman

Dr Mike Etheridge accepted the Board’s invitation to take on the role of Clancy’s Non-Executive Chairman, effective from July 22, 2011. Mike has been a non-executive director and chairman of several successful listed and non-listed companies. Former Chairman, Dr James Macdonald, will remain on the Board as a NonExecutive Director.

Preferred Drilling Contractor

An Earn-In Agreement was signed with Australian Mineral and Waterwell Drilling Pty Ltd (AMWD) to complete the preferred drilling contractor agreement announced in the previous quarter. A one off issue of 2,000,000 listed options (CLYO) was made to AMWD upon signing of a drilling earn-in agreement.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

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Figure 6 – Map showing the Clancy projects in the Macquarie Arc of Lachlan Fold Belt. Inset – the location within NSW.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 September 2011

Please direct enquiries to:

Gordon Barnes Shane Murphy Managing Director FD Phone: +61 2 6361 1285 Phone: +61 8 9386 1233 Email: info@clancyexploration.com Mobile: +61 (0)420 945 291 Web: www.clancyexploration.com

The information in this document that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Gordon Barnes who is a Member of the Australian Institute of Geoscientists. Mr Barnes is a full-time employee of Clancy Exploration Limited and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Gordon Barnes consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

About Clancy Exploration

Clancy Exploration (ASX: CLY) is an Australian-focused copper, gold, base metals and tin explorer. The Company’s portfolio consists of copper-gold projects in the Lachlan Fold Belt of NSW, base metal and tin projects in the Mount Read Volcanic Belt of Tasmania, Nadbuck near Broken Hill in NSW and Yalgoo, adjacent to the Golden Grove mine in Western Australia.

In NSW, Clancy has 12 wholly owned and managed projects and 7 joint venture projects which are managed by Gold Fields Australasia Pty Ltd. In Tasmania, Clancy has 2 base metal joint venture projects with Bass Metals and 2 tin joint venture projects with TNT Mines Pty Ltd (a wholly owned subsidiary of Minemakers Ltd). The Tasmanian projects are managed by Clancy’s joint venture partners. This mix of Clancy and joint venture project funding allows a high level of exploration activity to be maintained, whilst prudently managing Clancy’s financial resources. Details of Clancy’s projects can be found at the Company's website: www.clancyexploration.com

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