RAREX LIMITED — Interim / Quarterly Report 2011

Jul 25, 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 June 2011

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

Highlights

• Screen fire assay results at Condobolin uplift gold grades at the Phoenix prospect by over 30%. Significant screen fire assay results include:

• 9m @ 4.08g/t Au from 72m; incl

  • 7m @ 5.18g/t Au from 73m

  • 2m @ 14.18g/t Au from 76m

• A follow-up RC hole at the MacGregors prospect at the Parkes JV has extended low-grade gold mineralisation 160m along strike to the south:

• Initial intercept: 21m @ 0.49g/t Au from 73m, Incl. 6m @ 1.0g/t Au from 81m

• Follow-up intercepts 160m to the south:

  • 20m @ 0.43g/t from 46m, Incl. 6m @ 0.94g/t Au

  • 22m @ 0.50g/t Au from 94m, Incl. 4m @ 1.3g/t Au

• Also at MacGregors auger drilling has identified significant bottom of hole mineralisation:  7.5m @ 0.30g/t Au

  • 1.5m @ 0.63g/t Au

• Further RC drilling at the Boxdale prospect at the Moorefield JV has extended gold mineralisation 60m south:

• 15m @ 1.00 g/t Au ; Incl. 6m @ 2.11g/t Au

• Aeromagnetic and radiometric surveys completed at Condobolin , Roseholme , Currumburrama Billabong Creek for a total of 7,097 line km.

• At Trundle a preliminary investigation into the potential of the extensive magnetite skarn horizons at Trundle Park to host economically significant magnetite resources with copper and gold credits is underway

• Regional aircore drilling at the Myall JV has identified features consistent with porphyry-style alteration / mineralisation at several localities, including one with a bottom of hole intercept of: o 3m @ 0.17g/t Au

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

Clancy managed projects

Aeromagnetic and radiometric surveys were completed at Condobolin, Roseholme, Currumburrama and Billabong Creek for a total of 7,097 line km. At Condobolin screen fire assay results were received for RC drilling completed in the previous quarter and a substantial auger soil geochemical survey is underway.

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 within the metasedimentary units of the Ordovician Girilambone Group, associated with pyrite, sphalerite, galena, chalcopyrite, arsenopyrite and free gold.

Following significant gold and base metal drill intercepts at the Phoenix, Mascotte, Bluebell and Potters prospects reported in the March quarter, further samples were collected at 1m intervals from the lode zones and submitted for screen fire assay. Screen fire assays offer a higher degree of confidence when coarse gold is present in the mineral system. The screen fire assay results were released to the market on 24 May 2011 and indicate uplift factors of over 30% for gold intercepts within the lodes, particularly those with coarse base metal-bearing sulphides (Table 1).

Table 1 – Comparison of 2m and 1m gold intercepts for Condobolin RC drilling

Prospect	Hole	2m composites	2m composites	2m composites	1m re-splits	1m re-splits	1m re-splits	Cutoff Au (g/t)	Uplift
		Interval (m)	Au (g/t)	From (m)	Interval (m)	Au (g/t)	From (m)
Phoenix	CORC008	10	3.06	72	9	4.08	72	0.1	33.4%
		8	3.74	72	7	5.18	73	0.5	38.7%
		6	4.73	72	5	6.90	73	1.0	45.9%
		2	10.35	76	2	14.18	76	5.0	37.0%
Mascotte	CORC015	4	1.33	76	4	2.28	76	0.1	71.4%
Bluebell	CORC012	4	0.29	98	4	0.39	98	0.1	34.5%

Intercepts based on Au cutoff shown in the table. Bold text denotes 1m intercepts >1g/t Au. Au was analysed by ALS Orange by screen fire assay/ AAS finish, and for the other elements in Table 1 by ALS Brisbane by four acid digest ICP AES/OES. Standards and duplicates are inserted into the sample stream to monitor laboratory performance.

A 2,106 line km airborne magnetic and radiometric survey covering the Condobolin Mineral Field was completed during the quarter. The magnetic image has highlighted a number of interesting features such as conjugate fault arrays, several high frequency anomalies that may be linked to be high-level skarns and a strong magnetic gradient in the south of the survey area (Figures 1 and 2). The radiometric survey has identified km-scale potassium anomalies that may reflect large scale hydrothermal alteration. Together these features suggest a substantial hydrothermal system, more than likely linked to a concealed intrusive complex, is present within the Condobolin Mineral Field.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

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Figure 1 – Condobolin EL7748 showing mineral occurrences (blue), prospects (labeled) and the high-resolution aeromagnetic and radiometric survey boundary

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Figure 2 – Condobolin high-resolution RTP magnetic image showing mineral occurrences and prospects

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

A soil geochemical survey is currently in progress covering prospective areas within the Condobolin Mineral Field. A total of 868 soil samples have been collected to date. A 3D IP survey covering the Phoenix area is also planned. Results from the geophysical and geochemical surveys will assist with definition of drill targets and follow-up drilling is planned for the September quarter.

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 June quarter consisted of a preliminary investigation into the potential of the extensive magnetite skarn horizons at Trundle Park to host economically significant magnetite resources with copper and gold credits. Current mines that exploit this style of deposit include Ernest Henry in Queensland and Cairn Hill in South Australia.

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Figure 3 – Trundle Park ground magnetic image showing the extent of the magnetite skarn horizons (green and yellow hatching) and the location of previous drill holes that intersected significant widths of magnetite (labeled).

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

Previous drill holes TD025, TD026, TPRC001 and TPRC005 intersected substantial widths of magnetite skarn (up to 58m drilled width) in a NW-trending skarn horizon at least 2.8km long. However, the majority of the historical drilling consists of very shallow (<10m), poorly logged RAB holes that were assayed for copper and/or gold only, which is of little use in the assessment of the magnetite potential. Ground magnetic data clearly shows the extent of the NW-trending skarn horizon and also defines a second NE-trending skarn horizon extending through Dunns area (Figure 3). Both skarn horizons, due to the very shallow drilling, remain effectively untested. Assessment of the magnetite potential will continue in the September quarter with magnetite intervals from the Clancy holes drilled in the March quarter to be submitted for Davis Tube magnetite assays. Follow-up drilling of the epithermal vein intercept reported in the March quarter at Trundle Park ( 2m @ 20g/t Au, 6.97% Cu & 81g/t Ag from 64m) will be undertaken after crops are harvested in the December quarter.

Billabong Creek EL6802, Roseholme EL6822 and Currumburrama EL6784

(NSW, Clancy 100%)

An aeromagnetic and radiometric survey was completed at Billabong Creek (1,778 line km) and the data from this survey, along with surveys completed in the previous quarter at Roseholme (1,716 line km) and Currumburrama (1,264 line km), have been processed. Roseholme is located at the northern end of the Northparkes Igneous Complex 29km NNW of Rio Tinto's Northparkes copper-gold mine. Currumburrama is located 40km east of West Wyalong, north of Goldminco's Silverstone and Imola porphyry prospects. Billabong Creek is located 40km east of Wagga Wagga on the Gilmore Fault, a major regional NW-trending composite structure that marks the southern boundary of the Macquarie Arc (Figure 4). Significant anomalies have been defined at all three projects and assessment of the anomalies will continue in the September quarter.

Gold Fields managed JV projects

Aircore drilling continued at the Myall JV but has now been suspended until crops are harvested in the December quarter. RC drilling was undertaken at Parkes, Wellington North and Moorefield JV’s and one diamond hole was extended at Wellington North. A total of 2,762m of drilling was completed on the Gold Fields JV projects in June 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 continued with another 8 holes (996m) completed before the program was suspended for winter crop planting. The regional aircore program will resume after harvest in the December quarter. A total of 111 holes (11,893m) have been completed on a 500m x 500m regional grid with encouraging porphyry-style alteration / mineralisation observed, as well as potential orogenic gold style mineralisation. The best result from drilling in the March quarter was a bottom of hole intercept in hole MYAC298 of 3m @ 0.17g/t Au from 120m.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

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Figure 4 – 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 June 2011

Wellington North EL6178, EL6328, EL6662, EL7200 and EL7440

(Gold Fields 82%, Clancy 18%)

The Wellington North project covers approximately 30km of strike length of the Molong Volcanic Belt immediately north of Wellington. Diamond hole BGDRC001 (396m) that was drilled in the December 2010 quarter at the Boda prospect was re-entered to extend intersections including 7m @ 0.83g/t Au & 0.40% Cu; 8m @ 0.45g/t Au & 0.17% Cu and an open bottom of hole intercept of 85.1m @ 0.08% Cu, 39ppm Mo & 0.06g/t Au in potassic alteration. The hole was extended to 503.2m and the intercept was extended by another 29m to 114m @ 0.08% Cu, 33ppm Mo & 0.05g/t Au. Follow-up work is planned.

Auger geochemistry testing large 3D IP anomalies has defined Cu and key pathfinder anomalism and alteration in the Girraween and Mayhurst areas. One 300m deep RC hole was drilled into an IP anomaly at Mayhurst Central and 3 RC holes (616m) were drilled at the Tomkins porphyry Cu-Au prospect. Assay results for the RC holes are awaited.

Parkes EL7676 and EL7677

(Gold Fields 80%, Clancy 20%)

The Parkes project covers 474km[2] of the highly prospective Northparkes Igneous Complex. Rio Tinto’s Northparkes copper-gold mine is located approximately 15km to the north of the Parkes project. One RC hole (MGD002, 186m) was completed at the MacGregors prospect, 160m along strike to the south from previously reported diamond hole MGD001 which intersected:

• 21m @ 0.49g/t Au from 73m, Incl. 6m @ 1.0g/t Au from 81m

MGD002 hit a broad zone (110m) of quartz-pyrite-arsenopyrite veining in phyllic altered greenstone rocks. Results include:

• 20m @ 0.43g/t Au & 0.29% As from 46m, Incl. 6m @ 0.94g/t Au & 0.70% As

• 22m @ 0.50g/t Au & 0.15% As from 94m, Incl. 4m @ 1.3g/t Au & 0.26% As and 4m @ 0.91g/t Au & 0.34% As

Two RC holes were drilled at the Bogan Gate prospect and one RC hole was completed at each of the Swansbra and E44 South prospects. No significant results were returned from the RC holes.

Auger drilling continued at the MacGregors prospect and identified shallow intervals of significant Au and As bottom of hole mineralisation including:

• 7.5m @ 0.30g/t Au & 0.14% As from 0m, Incl. 1.5m @ 0.55g/t Au

• 1.5m @ 0.63g/t Au & 0.02% As from 4.5m

Moorefield EL7675

(Gold Fields 80%, Clancy 20%)

Moorefield covers 285km[2] between Fifield and Condobolin in the central west of New South Wales. RC hole BDRC001 drilled by Gold Fields in 2010 at Boxdale returned the following significant intercept:

• 19m @ 1.28g/t Au & 6796ppm As, incl. 4m @ 4.30g/t Au , 8.35g/t Ag and 2.22% As

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

Four RC holes were completed at Boxdale in the June quarter, following up the BDRC001 results. Significant results were returned from BDRC003 confirming that the mineralisation identified in BDRC001 extends for at least 60m to the south along a NNW strike:

• 4m @ 0.70g/t Au, 7.6g/t Ag from 32m

• 11m @ 0.4 g/t Au, from 56m; Incl. 3m @ 1.06g/t Au and 5.08g/t Ag

• 15m @ 1.00 g/t Au , 0.79% As from 85m; Incl. 6m @ 2.11g/t Au and 9.57g/t Ag

• 6m @ 0.13g/t Au from 124m

An IP survey will be carried out in the September quarter to map out the sub-surface sulphide distribution and further drilling is planned.

Corporate

Rights Issue

A fully underwritten non-renounceable rights issue that raised $4.38 million (before issue costs) was completed during the quarter. The rights issue was offered on the basis of one new share and one free attaching option for every two shares held, at an issue application price of 8 cents per share. The free attaching options have an exercise price of 15 cents each and will expire on 31 July 2013 and are listed under the existing ASX code of “CLYO”. The Board expresses its appreciation to the joint underwriters, Patersons Securities Limited and Soaring Securities Pty Limited for the faith their support demonstrates in the company, its management and its prospects.

Preferred Drilling Contractor

A binding Memorandum of Understanding was signed with Australian Mineral and Waterwell Drilling Pty Ltd (AMWD) whereby AMWD will become CLY’s preferred drilling contractor for a $5 million drilling contract or a three year period, whichever occurs first. Under the terms of the agreement, AMWD will invoice CLY monthly for a cash amount equivalent to 75% of all agreed costs associated with drilling and CLY will issue fully paid ordinary shares in CLY to AMWD for the balancing amount of 25%. Shares issued to AMWD will be priced at 95% of the three day Volume Weighted Average Price at the date of invoice. CLY shares issued to AMWD will be escrowed for 12 months. CLY will also make a one off issue of 2,000,000 listed options (CLYO) to AMWD upon signing of a drilling earn-in agreement to be completed in the September quarter.

Please direct enquiries to:

Gordon Barnes Managing Director Phone: +61 2 6361 1285 Email: info@clancyexploration.com Web: www.clancyexploration.com

Shane Murphy FD Phone: +61 8 9386 1233 Mobile: +61 (0)420 945 291

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.

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Clancy Exploration Limited (ASX: CLY)

Quarterly Activities Report for period ending 30 June 2011

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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