STRIKE RESOURCES LIMITED — Capital/Financing Update 2011

Dec 8, 2011

Market Announcement

Apurimac Ferrum Program Funding

Under the AF Settlement Agreement executed in July 2009, Strike made a US$20 million loan facility (Facility) available to its Peruvian joint venture vehicle Apurimac Ferrum SA (AF). On present budgeted expenditure AF is expected to reach the maximum drawdown under the Facility by March 2012.

As previously announced,1 the AF Settlement Agreement provides for a standstill period (Standstill) which ends in September 2012. Under this arrangement key decisions, including financing after the Facility is fully advanced, require unanimous shareholder approval. At the end of the Standstill Strike's partner, the D&C Group, may "top-up" to 50% of AF by contributing an amount equal to Strike's loans (approximately US$27 million) or dilute to an approximate 30% shareholding in AF. Accordingly, the most likely outcomes post Standstill are that either AF will be a 50:50 joint venture with approximately US$27 million in cash to fund future programs or Strike will hold a controlling interest of up to 70%. After the Standstill AF will revert to a more conventional joint venture structure in which each party is required to contribute its proportionate share of budgeted expenditure.

Strike has been in negotiations with its partner, D&C Group, to agree on AF funding from the time the Facility limit is reached until the end of the Standstill, a period of approximately 6 -7 months from March 2012 through to September 2012. Despite the parties negotiating in good faith no agreement has been reached on additional funding for AF at this time.

It has therefore been necessary to substantially reduce AF's work programs until funding terms can be agreed or the end of the Standstill. All key personnel will be retained and AF will maintain its contacts and commitments with the communities with whom it is negotiating exploration access during this period and keep its concessions in good standing. This is calculated to ensure that AF minimises its cash requirements without prejudicing its ability to resume its programs when restrictions on its fundraising ability expire. Strike does not rule out the potential for further funding negotiations during the remainder of the Standstill period.

The AF slowdown coincides with a period of increased social unrest in Peru, including groups staging protests in various parts of the country against mining operations and development projects. There have been a range of reasons provided for the protests by activists and commentators but most have competition for water resources as a common element. The formal mining industry in Peru is committed to sustainable development and operates to high standards, however, there is significant informal (illegal) mining activity in parts of Peru which does not operate to the same high standards and does not pay royalties. The formal mining industry is working with the Government to ensure that this distinction is clear to communities and to enable resource projects to proceed.

The Peruvian Government has repeatedly stated that it is committed to supporting responsible mining as this industry has been the main driver of Peru's remarkable economic growth over the last two decades and the revenue it generates is required to underwrite the President's social programs. As part of this support the Government has proposed building a railway from Andahuaylas (close to AF's key Apurimac concession) to the coast under a

1 See, for example, Strike's 27 July 2009 market announcement: Positive Settlement of Disputes in Peru.

joint government/private sector funding model. If successful and properly structured and funded this would improve the development scenario for the Apurimac iron-ore project.

However, given the number of protests underway and the importance of the issues it is expected that the Government will need several months to decide upon and implement its response to the demands of the various social groups. While the Christmas holiday period and Government responses may see the overall social climate in regional Peru, including Apurimac, return to normal early in the new year it may well be some time before a return to full-scale exploration and development programs is practical. Several communities which have been negotiating with AF for access have requested a hiatus in discussions while the situation is unsettled but have reiterated that they are keen to work with AF to agree community programs and access as soon as practical.

As a result of the above factors it has been determined that AF will wind back exploration programs and all non-essential staff will take leave until mid-January when the situation will be reassessed. During this period AF will maintain its community relations dialogue and programs to ensure it is able to recommence active exploration quickly once circumstances allow and funding is secured for AF.

Managing Director Ken Hellsten said that the project fundamentals remain strong and AF remains well positioned to accelerate its exploration programs and ultimately develop the project. He commented: "While the level of protests in Peru is of concern, AF has made real progress in building a high-calibre team and elevating its standing with both Government and communities. They will use the hiatus in field activity to continue this valuable work and ensure that the company is well positioned to re-activate its exploration programs quickly once circumstances permit. From the Strike Resources perspective the reduced level of activity is frustrating, however, in the medium term Strike will either be free-carried for the next $27 million of AF funding or will move to a majority position of AF."

Cuervo Resources Inc.2 has received approval from the community to commence construction of the access road to its Bob 1 prospect. This is a significant step forward which, together with final community and government approvals for the drilling program which are expected before the end of the year, will enable drilling to commence during the first quarter of 2012. It is anticipated that the drilling program will be completed as planned by the end of June 2012.

Friday, 9 December 2011

For further information:

Malcolm Richmond Chairman Managing Director T | +61 8 9324 7100 T | +61 8 9324 7100

Ken Hellsten

2 Cuervo Resources is a Canadian-listed Peruvian explorer in which Strike holds warrants entitling it to move to a 49.2% shareholding, undiluted, or approximately 46% fully diluted.