Notice of Annual General Meeting/Proxy Form - Fe Limited

ACN 112 731 638

NOTICE OF ANNUAL GENERAL MEETING

TIME: DATE: PLACE:

9:00am (WST)

3 November 2017

32 Harrogate Street West Leederville, Western Australia 6007

Independent Expert’s Report: Shareholders should carefully consider the Independent Expert’s Report prepared for the purpose of the Shareholder approval required under ASX Listing Rule 10.1 (Refer to Resolution 5). The Independent Expert’s Report comments on the fairness and reasonableness of the Transaction to the non-associated Shareholders. The Independent Expert has determined the Transaction is FAIR AND REASONABLE to the nonassociated Shareholders.

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting. Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 6181 9793.

CO N TEN TS Time and Place of Meeting and How to Vote

2

Proxy Voting

3

Notice of Annual General Meeting (setting out the proposed resolutions)

4

Explanatory Statement (explaining the proposed resolutions)

7

Glossary

29

Schedule 1 – Pro Forma Capital Structure

32

Schedule 2 – Issues of Equity Securities since 29 November 2016

34

Schedule 3 – Valuation of Options

35

Annexure A – Independent Expert’s Report

36

Proxy Form

Enclosed

TIME AND PLACE OF MEETING AND HOW TO VOTE VENUE The Annual General Meeting of the Shareholders to which this Notice of Meeting relates will be held at 9:00am (WST) on 3 November 2017 at: 32 Harrogate Street West Leederville, Western Australia 6007

YOUR VOTE IS IMPORTANT The business of the Annual General Meeting affects your shareholding and your vote is important.

VOTING IN PERSON To vote in person, attend the Annual General Meeting on the date and at the place set out above.

VOTING BY PROXY To vote by proxy please sign the enclosed Proxy Form and return: (a)

by mail to Link Market Services Limited, Locked Bag A14, Sydney South NSW 1235 Australia;

(b)

by facsimile to Link Market Services Limited on facsimile number +61 2 9287 0309;

(c)

by hand to Link Market Services Limited, 1A Homebush Bay Drive, Rhodes NSW 2138; or

(d)

online by visiting www.linkmarketservices.com.au, Select ‘Investor Login’ and enter Fe Limited or the ASX code (FEL) in the Issuer name field, your Securityholder Reference Number (SRN) or Holder Identification Number (HIN) (which is shown on the front of your proxy form), postcode and security code which is shown on the screen and click ‘Login’. Select the ‘Voting’ tab and then follow the prompts. You will be taken to have signed your Proxy Form if you lodge it in accordance with the instructions given on the website,

so that it is received not later than 9:00am (WST) on 1 November 2017. Proxy Forms received later than this time will be invalid.

2

PROXY VOTING Shareholders and their proxies should be aware that pursuant to 250BB and 250BC of the Corporations Act: (a)

if the proxy votes, they must cast all directed proxies as directed; and

(b)

any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes is set out below. Proxy vote if appointment specifies way to vote Section 250BB (1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does: (a)

the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and

(b)

if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and

(c)

if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and

(d)

if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non chair proxy to chair in certain circumstances Section 250BC of the Corporations Act provides that, if: (a)

an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company’s members; and

(b)

the appointed proxy is not the chair of the meeting; and

(c)

at the meeting, a poll is duly demanded on the resolution; and

(d)

either of the following applies: (i)

the proxy is not recorded as attending the meeting; or

(ii)

the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

3

N OT ICE O F A N N UA L G EN ER A L M EETIN G Notice is given that the Annual General Meeting of Shareholders will be held at 9:00am (WST) on 3 November 2017 at 32 Harrogate Street, West Leederville, Western Australia. The Explanatory Statement to this Notice of Meeting provides additional information on matters to be considered at the Annual General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting. The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Annual General Meeting are those who are registered Shareholders of the Company as at 4:00pm (WST) on 1 November 2017. Accordingly, Share transfers registered after that time will be disregarded in determining any entitlement to attend and vote at the Meeting. Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA ORDINARY BUSINESS Financial Statements and Reports To receive and consider the annual financial report of the Company for the financial year ended 30 June 2017 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report.

RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT To consider and, if thought fit, to pass, with or without amendment, the following resolution as a non-binding resolution: “That, for the purpose of Section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the Company’s annual financial report for the year ended 30 June 2017.” Note: The vote on this Resolution is advisory only and does not bind the Directors or the Company. Voting Prohibition Statement: A vote on this Resolution must not be cast (in any capacity) by or on behalf of any of the following persons: (a)

a member of the Key Management Personnel, details of whose remuneration are included in the Remuneration Report; or

(b)

a Closely Related Party of such a member.

However, a person described above may vote on this Resolution if: (c)

the person does so as a proxy appointed by writing that specifies how the proxy is to vote on the Resolution; and

(d)

the vote is not cast on behalf of a person described in sub paragraphs (a) or (b) above.

4

RESOLUTION 2 - RE-ELECTION OF DIRECTOR - MR NICHOLAS SAGE To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution: “That, for the purpose of clause 13.2 of the Constitution, ASX Listing Rule 14.4 and for all other purposes, Mr Nicholas Sage, a Director, retires by rotation, and being eligible, is re-elected as a Director.”

RESOLUTION 3 - RE-APPOINTMENT OF DIRECTOR - MR KENNETH KEOGH To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution: “That, Mr Kenneth Keogh, being a Director, appointed 6 February 2017 retires in accordance with clause 13.4 of the Constitution and, being eligible, is re-elected as a Director.”

RESOLUTION 4 – APPROVAL OF 10% PLACEMENT CAPACITY - SHARES To consider and, if thought fit, to pass, with or without amendment, the following resolution as a special resolution: “That, for the purpose of Listing Rule 7.1A and for all other purposes, approval is given for the issue of Shares totalling up to 10% of the Shares on issue, calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions set out in the Explanatory Statement.” Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may participate in the issue of Equity Securities under this Resolution and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company will not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

RESOLUTION 5 – THE ACQUISITION OF THE KASOMBO PROJECT INTEREST To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

“That, subject to the passing of Resolutions 6 and 7, for the purposes of ASX Listing Rules 10.1 and 10.11 and for all other purposes, approval is given for the Company to issue 25,000,000 Shares to Cape Lambert (or nominee) and acquire the Kasombo Project Interest on the terms and conditions set out in the Explanatory Statement.” Voting Exclusion: The Company will disregard any votes cast on this Resolution by Cape Lambert Resources Ltd (or its nominee) and any of their associates (Excluded Party). However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, provided the Chair is not an Excluded Party, if it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides. Independent Expert’s Report: Shareholders should carefully consider the Independent Expert’s Report prepared by HLB Mann Judd for the purposes of the Shareholder approval required by ASX Listing Rule 10.1 which comments on the fairness and reasonableness of the transaction to the non-associated Shareholders in the Company. The Independent Expert has determined the Transaction is FAIR AND REASONABLE to the nonassociated Shareholders. 5

RESOLUTION 6 – PLACEMENT OF SHARES TO TRANSACTION FACILITATOR To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

“That, subject to the passing of Resolutions 5 and 7, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue up to 10,000,000 Shares to the facilitator of the Transaction on the terms and conditions set out in the Explanatory Statement.” Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

RESOLUTION 7 – APPROVAL TO ISSUE PLACEMENT SHARES To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution: “That, subject to the passing of Resolutions 5 and 6, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue up to that number of Shares, when multiplied by the issue price, will raise up to $2,000,000 on the terms and conditions set out in the Explanatory Statement.” Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may participate in the issue of Shares under this Resolution and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company will not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

DATED: 27 SEPTEMBER 2017 BY ORDER OF THE BOARD

ELOISE VON PUTTKAMMER FE LIMITED COMPANY SECRETARY

6

EXPLANATORY STATEMENT This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the Annual General Meeting to be held at 9:00am (WST) on Friday, 3 November 2017 at 32 Harrogate Street, West Leederville, Western Australia. The purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

1.

FINANCIAL STATEMENTS AND REPORTS In accordance with the Constitution, the business of the Annual General Meeting will include receipt and consideration of the annual financial report of the Company for the financial year ended 30 June 2017 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report. The Company will not provide a hard copy of the Company’s annual financial report to Shareholders unless specifically requested to do so. The Company’s annual financial report is available on the Company’s website at www.felimited.com.au.

2.

RESOLUTION 1 - ADOPTION OF REMUNERATION REPORT The Corporations Act requires that at a listed company’s annual general meeting, a resolution that the remuneration report be adopted must be put to the shareholders. However, such a resolution is advisory only and does not bind the Directors or the Company. The remuneration report sets out the Company’s remuneration arrangements for the Directors and senior management of the Company including service agreements and details of any share based compensation. The remuneration report is part of the Directors’ report contained in the annual financial report of the Company for the financial year ending 30 June 2017. A reasonable opportunity will be provided for discussion of the remuneration report at the Annual General Meeting. Under the Corporations Act, if at least 25% of the votes cast on Resolution 1 are voted against adoption of the Remuneration Report at two consecutive annual general meetings, the Company will be required to put to Shareholders a resolution proposing the calling of a general meeting to consider the appointment of directors of the Company (Spill Resolution) at the second annual general meeting. If more than 50% of Shareholders vote in favour of the Spill Resolution, the Company must convene a general meeting (Spill Meeting) within 90 days of the second annual general meeting. All of the Directors who were in office when the directors’ report (as included in the Company’s annual financial report for the year ended immediately before the second annual general meeting) was approved, other than the managing director of the Company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting. Following the Spill Meeting those persons whose election or re-election as Directors is approved will be the Directors of the Company.

7

At the Company’s previous Annual General Meeting, the votes cast against the remuneration report considered at the Annual General Meeting was less than 25%. Accordingly, the Spill Resolution is not relevant for this Annual General Meeting. Voting Exclusion and Proxy Restrictions Note that a voting exclusion applies to Resolution 1 in the terms set out in the Notice of Meeting. Pursuant to the Corporations Act, if you elect to appoint the Chair, or another member of Key Management Personnel whose remuneration details are included in the Remuneration Report or any Closely Related Party of that member as your proxy to vote on this Resolution 1, you must direct the proxy how they are to vote. Where you do not direct the Chair, or another member of Key Management Personnel whose remuneration details are included in the Remuneration Report or Closely Related Party of that member on how to vote on this Resolution 1, the proxy is prevented by the Corporations Act from exercising your vote and your vote will not be counted in relation to this Resolution 1.

3.

RESOLUTION 2 - RE-ELECTION OF DIRECTOR - MR NICHOLAS SAGE Clause 13.2 of the Constitution and ASX Listing Rule 14.4 requires that at the Company’s annual general meeting in every year, one-third of the Directors for the time being or, if their number is not a multiple of 3, then the number nearest one-third (rounded upwards in the case of doubt), shall retire from office, provided always that no Director (other than a Managing Director) shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself or herself for re-election. The Directors to retire at an annual general meeting are those who have been longest in office since their last election but, as between persons who became Directors on the same day, those to retire shall (unless they otherwise agree among themselves) as determined by drawing lots. A Director who retires by rotation under clause 13.2 of the Constitution is eligible for reelection. Mr Nicholas Sage retires by rotation and seeks re-election. A summary of Mr Nicholas Sage is contained in the 2017 Annual Report.

4.

RESOLUTION 3 - RE-APPOINTMENT OF DIRECTOR - MR KENNETH KEOGH Clause 13.4 of the Constitution allows the Directors to appoint at any time, a person to be a Director as an addition to the existing Directors, but only where the total number of Directors does not at any time exceed the maximum number specified by the Constitution. In accordance with clause 13.4 of the Constitution and ASX Listing Rule 14.4, any Director (other than a Managing Director) so appointed holds office only until the next following annual general meeting and is then eligible for re-election. Mr Kenneth Keogh was elected as a Director on 6 February 2017. Accordingly, Mr Keogh will retire in accordance with clause 13.4 of the Constitution and being eligible seek re-election.

8

Mr Kenneth Keogh is a finance professional with experience in both financing and developing projects in the mining, oil & gas and renewables industries. Mr Keogh is based in Western Australia where he consults to various private companies and holds a key management position at UON Pty Ltd. Mr Keogh also runs his own successful investment firm which holds interests in exploration and mining companies, mining services and hospitality businesses. Mr Keogh holds a Bachelor of Art (Accounting and Finance) from Dublin Business School and holds an MBA from the Australian Institute of Business.

5.

RESOLUTION 4 - APPPROVAL OF 10% PLACEMENT CAPACITY - SHARES

5.1

General ASX Listing Rule 7.1A provides that an Eligible Entity may seek Shareholder approval at its annual general meeting to allow it to issue Equity Securities up to 10% of its issued capital (10% Placement Capacity). The Company is an Eligible Entity. If Shareholders approve Resolution 4, the number of Equity Securities the Eligible Entity may issue under the 10% Placement Capacity will be determined in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 (as set out in section 5.2 below). The effect of Resolution 4 will be to allow the Company to issue Equity Securities up to 10% of the Company’s fully paid ordinary securities on issue under the 10% Placement Capacity during the period up to 12 months after the Meeting, without subsequent Shareholder approval and without using the Company’s 15% annual placement capacity granted under Listing Rule 7.1. Resolution 4 is a special resolution. Accordingly, at least 75% of votes cast by Shareholders present and eligible to vote at the Meeting must be in favour of Resolution 4 for it to be passed.

5.2

ASX Listing Rule 7.1A ASX Listing Rule 7.1A enables an Eligible Entity to seek shareholder approval at its annual general meeting to issue Equity Securities in addition to those under the Eligible Entity’s 15% annual placement capacity. An Eligible Entity is one that, as at the date of the relevant annual general meeting: (a)

is not included in the S&P/ASX 300 Index; and

(b)

has a maximum market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of $300,000,000.

The Company is an Eligible Entity as it is not included in the S&P/ASX 300 Index and has a current market capitalisation of approximately $7.6 million (as at the last day securities were traded on ASX, 13 September 2017). Any Equity Securities issued must be in the same class as an existing class of quoted Equity Securities. The Company currently has one class of Equity Securities on issue, being the Shares (ASX Code: FEL).

9

The exact number of Equity Securities that the Company may issue under an approval under Listing Rule 7.1A will be calculated according to the following formula: (A x D) – E Where: A

is the number of Shares on issue 12 months before the date of issue or agreement: (i)

plus the number of Shares issued in the previous 12 months under an exception in ASX Listing Rule 7.2;

(ii)

plus the number of partly paid shares that became fully paid in the previous 12 months;

(iii)

plus the number of Shares issued in the previous 12 months with approval of holders of Shares under Listing Rules 7.1 and 7.4. This does not include an issue of fully paid ordinary shares under the entity’s 15% placement capacity without shareholder approval; and

(iv)

less the number of Shares cancelled in the previous 12 months.

D

is 10%.

E

is the number of Equity Securities issued or agreed to be issued under ASX Listing Rule 7.1A.2 in the 12 months before the date of issue or agreement to issue that are not issued with the approval of holders of Ordinary Securities under ASX Listing Rule 7.1 or 7.4.

At the date of this Notice the Company has 293,169,629 Shares on issue. If all the Resolutions in this Notice are passed (assuming 25,000,000 Shares are issued to Cape Lambert (or nominee), 10,000,000 Shares are issued to the facilitator of the Transaction and 90,909,091 Shares are issued pursuant to the Placement (refer to Scenario 1 in Schedule 1)), the Company’s issued capital will increase to 419,078,720 and it will be permitted to issue:

5.3

(a)

62,861,808 Equity Securities under ASX Listing Rule 7.1; and

(b)

41,907,872 Equity Securities under ASX Listing Rule 7.1A.

Technical information required by ASX Listing Rule 7.1A Pursuant to and in accordance with ASX Listing Rule 7.3A, the information below is provided in relation to this Resolution 4: (a)

Minimum Price The minimum price at which the Equity Securities may be issued is 75% of the volume weighted average price of Equity Securities in that class, calculated over the 15 ASX trading days on which trades in that class were recorded immediately before: (i)

the date on which the price at which the Equity Securities are to be issued is agreed; or

10

(ii) (b)

if the Equity Securities are not issued within 5 ASX trading days of the date in section 5.3(b), the date on which the Equity Securities are issued.

Date of Issue The Equity Securities may be issued under the 10% Placement Capacity commencing on the date of the Meeting and expiring on the first to occur of the following: (i)

12 months after the date of this Meeting; and

(ii)

the date of approval by Shareholders of any transaction under ASX Listing Rules 11.1.2 (a significant change to the nature or scale of the Company’s activities) or 11.2 (disposal of the Company’s main undertaking) (after which date, an approval under Listing Rule 7.1A ceases to be valid),

(10% Placement Capacity Period). (c)

Risk of voting dilution Any issue of Equity Securities under the 10% Placement Capacity will dilute the interests of Shareholders who do not receive any Shares under the issue. If Resolution 4 is approved by Shareholders and the Company issues the maximum number of Equity Securities available under the 10% Placement Capacity, the economic and voting dilution of existing Shares would be as shown in the table below. The table below shows the dilution of existing Shareholders calculated in accordance with the formula outlined in ASX Listing Rule 7.1A.2, on the basis of the current market price of Shares and the current number of Equity Securities on issue as at the date of this Notice. The table also shows the voting dilution impact where the number of Shares on issue (Variable A in the formula) changes and the economic dilution where there are changes in the issue price of Shares issued under the 10% Placement Capacity. Number of Shares on 1 Issue (Variable ‘A’ in ASX Listing Rule Issue Price 7.1A.2) (per Share)

419,078,720

1

(Current Variable A )

Dilution $0.013

$0.026

$0.052

50% decrease in Issue Price

Issue Price

100% increase in Issue Price

Shares issued - 10% voting dilution

41,907,872 Shares

41,907,872 Shares

41,907,872 Shares

Funds raised

$544,802

$1,089,605

$2,179,209

11

628,618,080


62,861,808 Shares

62,861,808 Shares

62,861,808 Shares

(50% increase in Variable A)

Funds raised

$817,204

$1,634,407

$3,268,814

838,157,440


83,815,744 Shares

83,815,744 Shares

83,815,744 Shares

(100% increase in Variable A)

Funds raised

$1,089,605

$2,179,209

$4,358,419

*The number of Shares on issue (Variable A in the formula) could increase as a result of the issue of Shares that do not require Shareholder approval (such as under a pro-rata rights issue or scrip issued under a takeover offer) or that are issued with Shareholder approval under Listing Rule 7.1. The table above uses the following assumptions: 1.

Resolutions 4 to 7 are passed and the Company has 419,078,720 Shares on issue (assuming 25,000,000 Shares are issued to Cape Lambert (or nominee) pursuant to Resolution 5, 10,000,000 Shares are issued to the facilitator of the Transaction pursuant to Resolution 6 and 90,909,091 Placement Shares are issued pursuant to Resolution 7 (refer to Scenario 1 in Schedule 1)).

2.

The issue price set out above is the closing price of the Shares on the ASX on 13 September 2017 (last day shares were traded).

3.

The Company issues the maximum possible number of Equity Securities under the 10% Placement Capacity.

4.

The Company has not issued any Equity Securities in the 12 months prior to the Meeting that were not issued under an exception in ASX Listing Rule 7.2 or with approval under ASX Listing Rule 7.1.

5.

The issue of Equity Securities under the 10% Placement Capacity consists only of Shares. It is assumed that no Options are exercised into Shares before the date of issue of the Equity Securities.

6.

The calculations above do not show the dilution that any one particular Shareholder will be subject to. All Shareholders should consider the dilution caused to their own shareholding depending on their specific circumstances.

7.

This table does not set out any dilution pursuant to approvals under ASX Listing Rule 7.1.

8.

The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.

9.

The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the 10% Placement Capacity, based on that Shareholder’s holding at the date of the Meeting.

Shareholders should note that there is a risk that

(d)

(i)

the market price for the Company’s Shares may be significantly lower on the issue date than on the date of the Meeting; and

(ii)

the Shares may be issued at a price that is at a discount to the market price for those Shares on the date of issue.

Purpose of Issue under 10% Placement Capacity The Company may issue Equity Securities under the 10% Placement Capacity for the following purposes:

12

(i)

as cash consideration in which case the Company intends to use funds raised for the acquisition of new resources, assets and investments (including expenses associated with such an acquisition), continued exploration expenditure on the Company’s interest in existing projects and general working capital; or

(ii)

as non-cash consideration for the acquisition of new resources, assets and investments, in such circumstances the Company will provide a valuation of the non-cash consideration as required by listing Rule 7.1A.3.

The Company will comply with the disclosure obligations under Listing Rules 7.1A(4) and 3.10.5A upon issue of any Equity Securities. (e)

Allocation policy under the 10% Placement Capacity The Company’s allocation policy for the issue of Equity Securities under the 10% Placement Capacity will be dependent on the prevailing market conditions at the time of the proposed placement(s). The recipients of the Equity Securities to be issued under the 10% Placement Capacity have not yet been determined. However, the recipients of Equity Securities could consist of current Shareholders or new investors (or both), none of whom will be related parties of the Company. The Company will determine the recipients at the time of the issue under the 10% Placement Capacity, having regard to the following factors: (i)

the purpose of the issue;

(ii)

alternative methods for raising funds available to the Company at that time, including, but not limited to, an entitlement issue or other offer where existing Shareholders may participate;

(iii)

the effect of the issue of the Equity Securities on the control of the Company;

(iv)

the circumstances of the Company, including, but not limited to, the financial position and solvency of the Company;

(v)

prevailing market conditions; and

(vi)

advice from corporate, financial and broking advisers (if applicable).

Further, if the Company is successful in acquiring new resources, assets or investments, it is likely that the recipients under the 10% Placement Capacity will be vendors of the new resources, assets or investments. (f)

Previous approval under ASX Listing Rule 7.1A The Company obtained approval under ASX Listing Rule 7.1A at its 2016 Annual General Meeting (Previous Approval). However, the Company did not issue any Equity Securities pursuant to the Previous Approval.

13

During the 12 month period preceding the date of the Meeting, being from 29 November 2016, the Company has issued 2,500,000 Shares and 9,375,000 Options which represents approximately 4.0% of the total diluted number of Equity Securities on issue in the Company on 29 November 2016, which was 294,519,629 (being 290,669,629 Shares and 3,850,000 Options). Further details of the issues of Equity Securities by the Company during the 12 month period preceding the date of the Meeting are set out in Schedule 2. (g)

Compliance with ASX Listing Rules 7.1A.4 and 3.10.5A When the Company issues Equity Securities pursuant to the 10% Placement Capacity, it must give to ASX:

5.4

(i)

a list of the recipients of the Equity Securities and the number of Equity Securities issued to each (not for release to the market), in accordance with Listing Rule 7.1A.4; and

(ii)

the information required by Listing Rule 3.10.5A for release to the market.

Voting Exclusion A voting exclusion statement is included in this Notice. As at the date of this Notice, the Company has not invited any existing Shareholder to participate in an issue of Equity Securities under ASX Listing Rule 7.1A. Therefore, no existing Shareholders will be excluded from voting on Resolution 4.

6.

KASOMBO PROJECT TRANSACTION BACKGROUND

6.1

Summary of the Resolutions 5 to 7 Resolution 5 relates to the acquisition by the Company of 100% of Cape Lambert Resources Limited’s (Cape Lambert) rights and obligations related to the Kasombo Copper-Cobalt Project (Kasombo Project) located in the Democratic Republic of Congo from Cape Lambert. Resolution 5 seeks Shareholder approval for completion of the Transaction and issue of 25,000,000 Shares to Dempsey Resources Pty Ltd, being a wholly owned subsidiary of Cape Lambert and a related party of the Company. Resolution 6 seeks Shareholder approval for the issue of 10,000,000 Shares to the facilitator of the Transaction. In conjunction with the Transaction, the Company is proposing to undertake a placement of Shares to raise up to $2,000,000 (Placement). Resolution 7 seeks Shareholder approval for the issue of Shares under the Placement. Resolutions 5, 6 and 7 are each conditional on the others being passed. Therefore, if one Resolution is not passed then the others will not pass.

14

6.2

Summary of Transaction As announced on 13 July 2016, the Company entered into a conditional binding terms sheet with Cape Lambert (Terms Sheet) pursuant to which Cape Lambert agreed to assign and the Company agreed to assume the Kasombo Project Obligations and Kasombo Project Rights. The parties have subsequently entered into a formal agreement to more fully document the Transaction (Formal Agreement). On completion of the Transaction, Cape Lambert will retain all of its rights and obligations in respect of the Kipushi Project Interest. The Kasombo Copper-Cobalt Project comprises three mineralized areas, Kasombo 5, 6 and 7, of approximately 600 hectares located within two granted mining licenses PE 481 and PE 4886 (Licences) (Kasombo Project). The Licences are held by La Generale Des Carrieres Et Des Mines S.A. (Gecamines). Congolese entity Paragon Mining SARL (Paragon) is a party to a contract with Gecamines for the undertaking of exploration and research work at the Kasombo Project (Gecamines Contract). Cape Lambert’s rights and obligations associated with the Kasombo Project and the Kipushi Cobalt Copper Tailings Project and operate the Kipushi Processing Plant (Kipushi Project) were established in a joint venture agreement (JV Agreement) it entered with Paragon pursuant to which Cape Lambert and Paragon formed an incorporated joint venture with each party holding 50% of the issued capital of that company (JV Company) (refer Cape Lambert ASX announcement dated 17 May 2017). Pursuant to the JV Agreement, Paragon will transfer its interest in the Kipushi Project and the Kasombo Project (subject to conditions) to the JV Company. A summary of the key terms of the Gecamines Contract, JV Agreement and Formal Agreement are set out below. Summary of Kasombo Project The Kasombo Project is located approximately 25km from the DRC’s second largest city, Lubumbashi that is accessed by sealed road. Lubumbashi is the main service centre for the cobalt and copper mining industry in the Haute-Katanga Province. The Project is located near the town of Kipushi, refer to Figures 1 and 2.

Figure 1: Project Location

15

Figure 2: Project Layout

Summary of Gecamines Contract On 24 March 2017, Gecamines and Paragon entered into the Gecamines Contract whereby Gecamines granted Paragon the exclusive right to explore and undertake a feasibility study on the Licences. These obligations were subsequently assumed by Cape Lambert pursuant to the JV Agreement and will be assumed by the Company pursuant to the Formal Agreement on completion of the Transaction. The term of the Gecamines Contract is three years commencing on 24 March 2017. During the term of the contract Paragon is required to sole fund and complete a feasibility study. If, following completion of the feasibility study, a viable operation is discovered, Paragon would need to negotiate an agreement with Gecamines to proceed to development. The contract provides that the options to proceed at that time would be either: (a)

a joint venture arrangement with Gecamines whereby Gecamines would receive a 5160% interest in the joint venture, plus an upfront payment of $35/t of contained copper plus a 2.5% royalty. Under this arrangement, the costs expended by Paragon (which would be FEL costs on completion of the Transaction) up to this time are considered to be a loan to the new joint venture repayable on terms to be agreed; or

(b)

entry into a leasing arrangement with Gecamines where-in Paragon (which would be FEL on completion of the Transaction) bears the costs expended up to this time and pays Gecamines an upfront payment equivalent to an upfront payment equivalent to $35/t of contained copper of the identified copper reserve in the feasibility study plus an ongoing 2.5% royalty of the gross turnover.

It is proposed that on completion of the Transaction and if after exploration a feasibility study shows a mining operation is viable then the JV Company will negotiate with Gecamines a development option (referred to above) that will maximise the returns to the JV Company and hence FEL.

16

Summary of JV Agreement The JV Agreement governs the affairs of the JV Company and its assets which includes the rights and obligations associated with the Kasombo Project. Under the terms of the JV Agreement, inter alia, Cape Lambert assumed all of Paragon’s obligations under the Gecamines Contract. The JV Agreement remains subject to the satisfaction or waiver of a number of outstanding conditions precedent including the following: (a)

the amending of an existing loan agreement Paragon has with its lender that releases the associated security over Paragon’s assets (including the Kasombo Project rights);

(b)

Paragon executes contracts with the JV Company that transfers ownership of the projects, including the Kasombo Project to the JV Company;

(c)

a bank account with a reputable banking institution being opened in the name of the JV Company;

(d)

each of the Shareholders holds 50% of the ordinary shares issued by the JV Company,

(together, the JV Conditions). The JV Conditions must be satisfied or waived on or before 29 September 2017, or as extended by agreement between Cape Lambert and Paragon. Under the JV Agreement, in relation to the Kasombo Project, Cape Lambert is required to: (a)

provide all necessary technical resources to enable exploration and mining activities at the Kasombo Project to be conducted to acceptable industry standards and in accordance with an agreed budget;

(b)

provide 100% of the funding to the JV Company on the basis set out in (c) below to undertake exploration activities at the Kasombo Project, complete a feasibility study and any other expenses the JV Company board my deem necessary;

(c)

sole fund the costs of exploration and the completion of a feasibility study on the Kasombo Project in accordance with the requirements of the Gecamines Contract up to a cost of US$7.5 Million (Sole Funding Commitment);

(d)

provide any required funds in excess of US$7.5 Million by way of a loan to the JV Company, which is repayable from future profits of the JV Company; and

(e)

if it is determined that a mining operation is viable at the Kasombo Project, secure, on behalf of the JV Company, 100% of the funds for development of the Kasombo Project and to upgrade the Kipushi Processing Plant to process ore from the project, and to also conclude any obligations with Gecamines,

(together, the Kasombo Project JV Commitments). On completion of the Transaction, Cape Lambert will retain all of its rights and obligations in respect of the Kipushi Project Interest. The feasibility study must focus on the establishment of a mining and processing operation targeting a production of a minimum of 10,000 tonnes per annum of LME grade copper cathode and associated production of cobalt in concentrate.

17

The JV Company will, subject to approval by Gecamines, consider accelerating mining activities at the Kasombo Project. In the event that mining activities at the Kasombo Project commence simultaneously or before the Kipushi Tailings Project, then Cape Lambert will accelerate its funding obligations as contemplated under (e) above. Kipushi Processing Plant The Kipushi Processing Plant facility was constructed by Paragon during 2015/2016 for the reprocessing of tailings from its nearby Kipushi Tailings Project (PER 12347). It comprises a conventional flotation plant with a 1Mtpa design throughput to produce a copper-cobalt concentrate.

As noted above, it is contemplated that ore from the Kasombo Project will be processed through the Kipushi Process Plant, which will necessitate significant upgrades to be completed to achieve the target production contemplated by the JV Agreement. Summary of Formal Agreement On 18 September 2017, Cape Lambert and FEL entered into the Formal Agreement which provides that, on settlement of the Transaction: (a)

Cape Lambert will assign to FEL the Kasombo Project Rights related to the period from settlement; and

(b)

FEL will assume the Kasombo Project Obligations related to the period from settlement,

with the objectives being to: (a)

undertake exploration activities at the Kasombo Project;

(b)

complete a Feasibility Study on the Kasombo Project; and

(c)

commence mining activities at the Kasombo Project within 24 months.

18

On completion of the Transaction the Company will be responsible for the Kasombo Project JV Commitments detailed above. Completion of the Transaction is conditional on satisfaction of the following: (a)

FEL successfully raising a minimum of $2,000,000 pursuant to the Placement (the subject of Resolution 7);

(b)

FEL obtaining all necessary Shareholder approvals in relation to the Transaction (the subject of Resolution 5) and the issue of the Facilitator Shares (the subject of Resolution 6);

(c)

Cape Lambert obtaining all necessary shareholder approvals required in relation to the Transaction;

(d)

the conditions precedent listed in the JV Agreement are satisfied or waived by Paragon and/or Cape Lambert as appropriate (with any waiver subject to the prior written approval of FEL);

(e)

Cape Lambert confirming that the warranties provided by Paragon in the JV Agreement remain true and accurate as at the settlement date;

(f)

receipt of all necessary consents in respect of the Transaction; and

(g)

Cape Lambert obtaining necessary consent in writing from Paragon consenting to the assignment,

(together, the Conditions). The Conditions must be satisfied or waived by 30 September 2017 unless otherwise waived or extended by the Company and Cape Lambert. Consideration payable to Cape Lambert (or nominee) for the Transaction is the issue of 25,000,000 Shares at a deemed issue price equal to the volume weighted average closing price of Shares as quoted on ASX over the last five (5) trading days immediately preceding the settlement date (Consideration Shares). The Consideration Shares will be issued on the settlement date and escrowed for a period of 12 months from the date of issue. Until settlement of the Transaction, Cape Lambert will continue with its obligations under the JV Agreement for conducting the exploration works at the Kasombo Project. The Company will reimburse Cape Lambert for expenditure incurred during by Cape Lambert since its acquisition of the Kasombo Interest (Pre-Settlement Expenditure) up to a maximum of $125,000 in total (subject to ASX’s confirmation that it is reimbursement of expenditure incurred in the development of the asset). On the date of execution of the Terms Sheet, the Company paid Cape Lambert $50,000 in advance as a contribution towards the Pre-Settlement Expenditure. The final amount of PreSettlement Expenditure payable by, or refundable to, FEL shall be paid or refunded three (3) months after Settlement. The maximum additional amount of Pre-Settlement Expenditure payable by the Company is a further $75,000.

19

After settlement Cape Lambert will use its best endeavours to get Paragon to agree to FEL and Paragon forming a new joint venture company (New JV Company) to exclusively govern the Kasombo Project and to enter into a new shareholders agreement to administer the New JV Company (New Kasombo Project Agreement). FEL and Paragon would have a 50-50 interest in the New JV Company. The New Kasombo Project Agreement would have similar terms and conditions as in the JV Agreement including provisions for the funding of all Kasombo Project costs by FEL and Paragon in proportion to their shareholding in the New JV Company (subject to FEL satisfying the Sole Funding Commitment). Until the New Kasombo Project Agreement is executed FEL shall be bound by the provisions of the JV Agreement in so far as it relates to the Kasombo Project. In the event that Paragon do not agree to the formation of a New JV Company, then prior to any development proceeding to exploit the Kasombo Project, the Cape Lambert and FEL will negotiate and execute a further agreement that will set out the terms of a suitable operating structure, or some other arrangement, acceptable to FEL that would provide security against its investment in developing and exploiting the Kasombo Project. From settlement and until such time as Paragon and FEL enter into the New Kasombo Project Agreement: (a)

Cape Lambert will hold the Kasombo Project Rights and the Kasombo Project Obligations on trust for FEL and will at all times act on the instructions of FEL in respect of the Kasombo Project Rights and the Kasombo Project Obligations;

(b)

the Cape Lambert appointed directors of the JV Company shall act as representatives of FEL in relation to all JV Company matters associated with the Kasombo Project (FEL/CFE JV Nominees); and

(c)

Cape Lambert and the FEL/CFE JV Nominee must at all times act under the instruction of, and in the best interests of, FEL in relation to all JV Company matters associated with the Kasombo Project.

Until FEL and Paragon enter into a New Kasombo Project Agreement Cape Lambert must keep FEL fully informed of all matters pertaining to the Kasombo Project. Cape Lambert must indemnify FEL in respect of any claim, loss, action, damage or liability suffered by FEL arising from any breach by Cape Lambert of the Kasombo Project Obligations relating to the period up to settlement and its obligations under the JV Agreement (other than a breach of the Kasombo Project Obligations after settlement). FEL must indemnify Cape Lambert in respect of any claim, loss, action, damage or liability suffered by Cape Lambert arising from any breach of the Kasombo Project Obligations relating to the period from settlement. Under the JV Agreement, the Kipushi Process Plant remains the property of Paragon until Cape Lambert satisfies its funding obligations in relation to the projects. In the event that the Kasombo Project advances such that upgrading of the Kipushi Processing Plant will form part of the development work for processing Kasombo Project ore, then Paragon, Cape Lambert and FEL must first work together to determine a suitable ownership structure, or some other arrangement, acceptable to FEL that would provide security against its investment in upgrading the Kipushi Processing Plant.

20

Pelesa & Associates Law Firm (Pelesa) introduced Paragon’s Kasombo Project, Kipushi Tailings Project and Kipushi Processing Plant to Cape Lambert and later facilitated and assisted in negotiating the JV Agreement. Cape Lambert is obligated to pay Pelesa certain advisory fees, part of which are attributable to the Kasombo Project. Under the Formal Agreement, FEL has assumed responsibility for the following advisory fees: (a)

in the event that production is achieved at the Kasombo Project: (i)

(ii)

(b)

prior to production at Cape Lambert’s Kipushi Tailings Project, then FEL will: (A)

issue Pelesa 25,000,000 Shares within 5 Business Days of achieving production at the Kasombo Project (or within 5 Business Days of receiving FEL Shareholder approval if required; and

(B)

pay Pelesa US$75,000 within 5 Business Days of achieving production at the Kasombo Project; or

after to production at Cape Lambert’s Kipushi Tailings Project, then FEL will issue Cape Lambert 25,000,000 Shares within 5 Business Days of achieving production at the Kasombo Project (or within 5 Business Days of receiving FEL Shareholder approval if required); and

the grant by FEL to Pelesa of a 1% royalty on all of FEL’s attributable production from the Kasombo Project.

If the issue of the Shares to Pelesa or Cape Lambert referred to above is subject to Shareholder approval and the approval is not obtained despite the best endeavours of FEL, FEL must in lieu thereof pay Pelesa or Cape Lambert (as the case may be) within 15 Business Days of demand a sum equal to 25,000,000 multiplied by the volume weighted average price (excluding special crossings) of Shares in the 10 trading days immediately after the date of demand. FEL may elect to withdraw and terminate the Formal Agreement by giving 30 days’ notice in writing to Cape Lambert and Paragon.

6.3

Pro forma balance sheet An unaudited pro-forma balance sheet of the Company following completion of the Transaction and the Placement and issue of all Shares contemplated by this Notice is set out in section 9 of the Independent Expert’s Report.

6.4

Pro forma capital structure The capital structure of the Company following completion of the Transaction, issue of the Facilitator Shares and assuming various scenarios in respect of the Placement is set out in Schedule 1.

6.5

Additional risk factors Completion of the Transaction will increase the Company’s risk exposure through widening its investment portfolio to include Africa. However, the Board considers that Africa is a favourable investment destination and intends to mitigate its risk by employing staff that are experienced in working in the DRC and good management of its projects.

21

While the Company has undertaken a due diligence process in relation to the Kasombo Project, it should be noted that the usual risks associated with mineral resource companies with a small market capitalisation are expected to remain despite completion of due diligence. The term of the Gecamines Contract is three (3) years expiring on 24 March 2020 with no provision for an extension of this period. The agreement requires the completion and lodgement of a feasibility study 6 months before expiry of the contract. There is a risk that FEL will not complete the feasibility study within the required time frame and Gecamines will not grant an extension to the term of the Gecamines Contract, which would result in FEL losing all rights to the Kasombo Project. In the event a viable operation is discovered at the Kasombo Project following completion of a feasibility study, the JV Company on behalf of FEL will need to negotiate with Gecamines to proceed to development via either a joint venture or lease arrangement as detailed in section 1.1. There is no guarantee that FEL will obtain a desired outcome from those negotiations. The Company will rely on Cape Lambert acting on behalf of FEL in regards to the Kasombo Project and in the best interests of the Company at all times. In addition, the Company is not a party to the JV Agreement and the JV Company has interest and obligations in projects other than the Kasombo Project. FEL is subject to the risk that changes in the status of the JV Company or the parties to the JV Agreement (including changes caused by financial failure or default by a participant in the joint venture) may adversely affect FEL’s interest in the Kasombo Project. In order for the Company to be able to achieve its objectives FEL is reliant on the respective parties to the Gecamines Contract and the JV Agreement to comply with their contractual obligations under those agreements. The Kasombo Project JV Commitments are onerous in comparison to the Company’s current cash position. And while completion of the Transaction is conditional upon FEL raising $2,000,000 pursuant to a Placement further funds will need to be raised and there is no guarantee that this will be possible. In addition Cape Lambert’s funding commitments under the JV Agreement in respect of the Kipushi Project are also onerous compared to their current cash position. If FEL or Cape Lambert do not have sufficient funds to comply with their respective funding obligations in respect of the Kasombo Project and the Kipushi Project (as the case may be) then their interests in those projects could be at risk. Gecamines is the registered holder of the Licenses and if it fails to comply with conditions of the Licenses which results in loss of title to the Licenses the Company would lose its interest in the rights being acquired pursuant to the Formal Agreement. It may then be necessary for the Company to approach a court to seek a legal remedy. Legal action can be costly and there can be no guarantee that a legal remedy will be ultimately granted on the appropriate terms. In addition, the Gecamines Contract and the JV Agreement are governed by the laws of the Democratic Republic of Congo and the Company would need to seek any remedy from these courts. Until such time as the Company enters into the New Kasombo Project Agreement with Paragon it will have no direct legal title to the Kasombo Project Interest and Cape Lambert will hold this interest on trust for FEL.

22

There is a risk that the Kipushi Processing Plant cannot be suitably upgraded for the processing of ore from the Kasombo Project. In which case a new processing plant may need to be sourced or alternatively built by the New JV Company. Both of these outcomes could be adverse for the Company.

6.6

Advantages of the Transaction The Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on Resolution 5:

6.7

(a)

the acquisition of the Kasombo Project Interest will provide the Company an opportunity to build a portfolio of cobalt assets in the established cobalt producing region of DRC and nearby to the Kipushi Processing Plant;

(b)

the acquisition increases the size of the Company’s existing assets and interests and may enhance the prospects of the Company

(c)

the Kasombo Project is at a more advanced stage of exploration than the Company’s existing assets; and

(d)

the potential increase in market capitalisation of the Company following completion of the Transaction may lead to increased coverage from investment analysts, access to improved equity capital market opportunities and increased liquidity which are not currently present.

Disadvantages of the Transaction The Directors are of the view that the following non-exhaustive list of disadvantages may be relevant to a Shareholder’s decision on how to vote on Resolution 5:

6.8

(a)

current Shareholders will have their voting power in the Company diluted;

(b)

future outlays of funds from the Company will be required for the exploration and development of the Kasombo Project; and

(c)

current Shareholders will be exposed to the additional risks associated with the Kasombo Project as set out in Section 6.5.

Intentions if Transaction is not approved If Resolution 5 is not passed and the Transaction is not completed, the Company will maintain its retained interests and seek alternative investment opportunities.

6.9

Independent Expert’s Report ASX Listing Rule 10.10.2 requires a notice of meeting containing a resolution under ASX Listing Rule 10.1 to include a report on the transaction from an independent expert. The Independent Expert's Report annexed to this Notice sets out a detailed independent examination of the Transaction to enable non-associated Shareholders to assess the merits and decide whether to approve Resolution 5. The Independent Expert has concluded that the Transaction is FAIR AND REASONABLE to the non-associated Shareholders.

23

Shareholders are urged to carefully read the Independent Expert’s Report to understand its scope, the methodology of the valuation and the sources of information and assumptions made. The Independent Expert’s Report is also available on the Company’s website (www.felimited.com.au). If requested by a Shareholder, the Company will send to the Shareholder a hard copy of the Independent Expert’s Report at no cost.

6.10

Directors’ Recommendation The Directors unanimously recommend that Shareholders vote in favour of Resolution 5 as they consider the proposed Transaction and associated issue of the Consideration Shares to be in the best interests of Shareholders as after assessment of the advantages and disadvantages referred to in Sections 6.6 and 6.7 the Directors are of the view that the advantages outweigh the disadvantages.

7.

RESOLUTION 5 – THE ACQUISITION OF THE KASOMBO PROJECT INTEREST

7.1

General A summary of the Transaction is set out in Section 6.2. Resolution 5 seeks Shareholder approval for the acquisition of the Kasombo Project Interest including the issue of the Consideration Shares to a related party of the Company. Cape Lambert has nominated its wholly owned subsidiary Dempsey as the recipient of the Consideration Shares. The passing of Resolution 5 is subject to Shareholders also approving Resolutions 6 and 7. For the reasons set out below, the acquisition of the Kasombo Project Interest is considered the acquisition of a substantial asset from a related party for the purposes of Listing Rule 10.1 and, as Dempsey is considered a related party of the Company, the issue of securities to Dempsey also requires Shareholder approval under Listing Rule 10.11.

7.2

ASX Listing Rule 10.1 ASX Listing Rule 10.1 provides that an entity must ensure that neither it, nor any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to, amongst other persons, a person whose relationship to the entity is such that, in ASX’s opinion, the transaction should be approved by security holders, without the prior approval of holders of the entity’s ordinary shareholders. Acquisition Completion of the Transaction will result in an acquisition by the Company. Substantial asset For the purposes of ASX Listing Rule 10.1, an asset is substantial if its value, or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the entity as set out in the latest accounts given to ASX under the ASX Listing Rules.

24

The equity interests of the Company as defined by the ASX Listing Rules and as set out in the latest accounts given to ASX under the ASX Listing Rules (being for the half year ended 31 December 2016) were $24,324 (deficit). 5% of this amount is $1,216. As set out in the Independent Expert’s Report, the value of the Consideration Shares for the Transaction is more than 5% of the equity interests of the Company as set out in the latest accounts given to ASX under the ASX Listing Rules. Therefore, the Transaction constitutes the acquisition of a substantial asset by the Company for the purposes of the ASX Listing Rules. Related Party For the purposes of ASX Listing Rule 10.1, a related party of an entity includes, amongst other persons, an entity that controls a public company. As at the date of this Notice, Cape Lambert (via its wholly owned subsidiary Dempsey) holds 41.47% of the issued share capital of the Company and is therefore likely to be considered to control the Company. Requirement for shareholder approval As a result of the above conclusions, the completion of the Transaction will result in the acquisition of a substantial asset from persons covered by ASX Listing Rule 10.1 and the Company is therefore required to seek Shareholder approval under ASX Listing Rule 10.1.

7.3

Chapter 2E of the Corporations Act For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must: (a)

obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and

(b)

give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act. The issue of the Consideration Shares to Dempsey will constitute giving a financial benefit and Dempsey is a related party of the Company by virtue of holding 41.47% of the Company’s Shares and is therefore likely to be considered to control the Company. The Directors consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required as they consider that the terms of the Transaction were negotiated on arm’s length terms by the non-associated Directors of the Company and Cape Lambert.

7.4

ASX Listing Rule 10.11 ASX Listing Rule 10.11 requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

25

As the issue of the Consideration Shares involves the issue of securities to a related party of the Company, Shareholder approval pursuant to ASX Listing Rule 10.11 is required unless an exception applies. It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances.

7.5

Specific information required by ASX Listing Rule 10.13 Pursuant to and in accordance with ASX Listing Rule 10.13, the following information is provided in relation to the approval of the issue of the Consideration Shares to Dempsey: (a)

the name of the person to whom the securities are to be issued is Dempsey Resources Pty Ltd;

(b)

the maximum number of securities to be issued to Dempsey is 25,000,000 Shares;

(c)

the Shares will be issued no later than one month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules);

(d)

the relationship between Dempsey and the Company that gives rise to Dempsey being a related party is that Dempsey currently holds 41.47% of the Company’s Shares and is therefore likely to be considered to control the Company;

(h)

the Shares will be issued for nil consideration as they are being issued in consideration for the acquisition of the Kasombo Project Interest;

(i)

the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and

(j)

no funds will be raised from the issue of the Consideration Shares as they are being issued in consideration for the acquisition of the Kasombo Project Interest pursuant to the Transaction.

Approval pursuant to ASX Listing Rule 7.1 is not required for the issue of the Consideration Shares as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Consideration Shares will not be included in the use of the Company’s 15% annual placement capacity pursuant to ASX Listing Rule 7.1.

8.

RESOLUTION 6 - APPPROVAL FOR ISSUE OF SHARES TO TRANSACTION FACILITATOR

8.1

General Subject to receipt of Shareholder approval for Resolutions 5 to 7 and completion of the Transaction, the Company has agreed to issue 10,000,000 Shares to the facilitator of the Transaction. ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period.

26

The effect of Resolution 6 will be to allow the Company to issue the Facilitator Shares during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity. Resolution 6 is subject to the passing of Resolutions 5 and 7.

8.2

Technical information required by ASX Listing Rule 7.3 Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the issue of the Facilitator Shares under Resolution 6: (a)

the maximum number of securities to be issued is 10,000,000 Shares;

(b)

the Shares will be issued no later than three (3) months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules);

(c)

the Shares will be issued for nil consideration as they are being issued in consideration for services provided in facilitating the Transaction;

(d)

the Shares will be issued to the facilitator of the Transaction, who is not a related party of the Company;

(e)


(f)

no funds will be raised from the issue of the Facilitator Shares as they are being issued in consideration for facilitation services provided in relation to the Transaction.

9.

RESOLUTION 7 – PLACEMENT OF SHARES

9.1

General Subject to receipt of Shareholder approval for Resolutions 5 and 6 and completion of the Transaction, Resolution 7 seeks Shareholder approval for the issue of up to that number of Shares, when multiplied by the issue price, will raise up to $2,000,000 (Placement). A summary of ASX Listing Rule 7.1 is set out in section 8.1 above. The effect of Resolution 7 will be to allow the Company to issue the Shares pursuant to the Placement during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

9.2

Technical information required by ASX Listing Rule 7.1 Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Placement: (g)

the maximum number of securities to be issued is up to that number of Shares which, when multiplied by the issue price, equals $2,000,000;

27

10.

(h)

the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that issue of the Shares will occur on the same date;

(i)

the issue price will be not less than 80% of the average market price for Shares calculated over the 5 days on which sales in the Shares are recorded before the day on which the issue is made or, if there is a prospectus, over the last 5 days on which sales in the securities were recorded before the date the prospectus is signed;

(j)

the Directors will determine to whom the Shares will be issued but these persons will not be related parties of the Company;

(k)


(l)

the Company intends to use the funds raised from the Placement for payment of the Pre-Settlement Expenditure reimbursement to Cape Lambert (if required), on exploration activities on the proposed Kosombo Project asset and general working capital purposes.

ENQUIRIES Shareholders are required to contact the Company Secretary on (+ 61 8) 6181 9793 if they have any queries in respect of the matters set out in these documents.

28

G LO S SA RY $ means Australian dollars. Annual Report means the Company’s annual report including the reports of the Directors and the auditor and the financial statements of the Company of the year ended 30 June 2017 which can be downloaded from the Company’s website at www.felimited.com.au. Annual General Meeting or Meeting means the meeting convened by the Notice of Meeting. ASIC means the Australian Securities and Investments Commission. ASX means ASX Limited. ASX Listing Rules means the Listing Rules of ASX. Board means the current board of directors of the Company. Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day. Cape Lambert means Cape Lambert Resources Limited (ABN 71 095 047 920). Chair has the meaning set out in the Corporations Act. Change of Control Event means the occurrence of: (a)

the offeror under a takeover offer in respect of all the shares in the FEL announces that it has achieved acceptances in respect of 50.1% or more of FEL Shares and that takeover bid has become unconditional; or

(b)

the announcement by FEL that shareholders of FEL have at a court convened meeting of FEL shareholders voted in favour, by the necessary majority, of a proposed scheme of arrangement under which all FEL Shares are to be either: (i)

cancelled; or

(ii)

transferred to a third party; and

(iii)

the court, by order, approves the proposed scheme of arrangement.

Closely Related Party of a member of the Key Management Personnel, a spouse or child of the member; a child of the member’s spouse; a dependent of the member or the member’s spouse; anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity; a company the member controls; or a person prescribed by the Corporations Regulations 2001 (Cth). Company or FEL means Fe Limited (ACN 112 731 638). Consideration Shares as the meaning set out in Section 1.1. Constitution means the Company’s current constitution. Corporations Act means the Corporations Act 2001 (Cth).

29

Dempsey means Dempsey Resources Pty Ltd (ABN 50 100 305 486). Director means a current director of the Company. DRC means the Democratic Republic of Congo. Equity Securities includes a Share, a right to a Share or Option, an Option, a convertible security and any security that ASX decides to classify as an Equity Security. Explanatory Statement means the explanatory statement accompanying the Notice of Meeting. Facilitator Shares means 10,000,000 Shares to be issued to the facilitator of the Transaction (being the subject of Resolution 6). Independent Expert means HLB Mann Judd. Independent Expert’s Report means the report prepared by the Independent Expert and annexed to this Notice at Annexure A. JV Agreement has the meaning in Section 1.1. Kasombo Project Interest means the interest in the Kasombo Project to be acquired by the Company pursuant to the Transaction. Kasombo Project Obligations means all obligations, covenants, conditions and liabilities of Cape Lambert under the JV Agreement in so far as they relate to the Kasombo Project arising after settlement of the Transaction. Kasombo Project Rights means all right, title, interest and benefit, including causes of action, of Cape Lambert under the JV Agreement in so far as they relate to the Kasombo Project arising after settlement of the Transaction. Key Management Personnel has the same meaning as in the accounting standards and broadly includes those persons having authority and responsibility for planning, directing and controlling activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the Company. Kipushi Project Interest means the interest in the Kipushi Project acquired by Cape Lambert pursuant to the JV Agreement. Notice or Notice of Meeting or Notice of Annual General Meeting means this notice of annual general meeting including the Explanatory Statement. Placement has the meaning set out in Section 3.1. Placement Shares means Shares to be issued pursuant to the Placement. Proxy Form means the proxy form accompanying the Notice. Related Party has the meaning set out in section 228 of the Corporations Act. Remuneration Report means the remuneration report set out in the Director’s Report section of the Company’s annual financial report for the year ended 30 June 2017.

30

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires. Share means a fully paid ordinary share in the capital of the Company. Shareholder means a registered holder of a Share. Transaction means: (a)

the assignment of all of the Kasombo Project Rights under the JV Agreement to the Company; and

(b)

the assumption by the Company of all of the Kasombo Project Obligations under the JV Agreement.

US$ means the currency of the United States of America. WST means Western Standard Time as observed in Perth, Western Australia.

31

S C H E D U L E 1 – P R O F O R M A C A P I TA L ST R U C T U R E The capital structure of the Company following completion of the Transaction and the Placement and issues of all Shares contemplated by this Notice is assuming various scenarios in relation to the Placement is set out below: Scenario 1 – Assuming Consideration Shares and Facilitator Shares are issued and 90,909,091 Shares are issued pursuant to the Placement (being equal to an issue price of $0.022 each to raise $2,000,000) Shareholder

Holding before issue of Consideration Shares, Facilitator Shares and Placement Shares No. of Shares

Dempsey 1 Facilitator Placement Subscribers 2 Current Shareholders TOTAL

Consideration Shares, Facilitator Shares and Placement Shares 2 No. of Shares

Holding after issue of Consideration Shares, Facilitator Shares and Placement Shares 2 No. of Shares Percentage (%) 146,573,636 34.98 10,000,000 2.39 90,909,091 21.69

121,573,635 - -

Percentage (%) 41.47 - -

171,595,994

58.53

-

171,595,994

40.95

293,169,629

100

125,909,091

419,078,720

100

25,000,000 10,000,000 90,909,091

Notes 1. Dempsey is a wholly owned subsidiary of Cape Lambert Resources Limited. 2. Assumes no current Shareholders participate in the Placement and 90,909,091 Shares are issued pursuant to the Placement (being equal to an issue price of $0.022 to raise $2,000,000.

Scenario 2 – Assuming Consideration Shares and Facilitator Shares are issued and 72,727,273 Shares are issued pursuant to the Placement (being equal to an issue price of $0.028 each to raise $2,000,000) Shareholder

Holding before issue of Consideration Shares, Facilitator Shares and Placement Shares No. of Shares

Dempsey 1 Facilitator Placement Subscribers 2 Current Shareholders TOTAL


Holding after issue of Consideration Shares, Facilitator Shares and Placement Shares 2 No. of Percentage Shares (%) 146,573,635 36.56 10,000,000 2.49 72,727,273 18.14

121,573,635 - -


171,595,994

58.53

-

171,595,994

42.80

293,169,629

100

107,727,273

400,896,902

100

25,000,000 10,000,000 72,727,273


32

Scenario 3 – Assuming Consideration Shares and Facilitator Shares are issued and 121,212,121 Shares are issued pursuant to the Placement (being equal to an issue price of $0.017 each to raise $2,000,000) Shareholder

Holding before issue of Consideration Shares, Facilitator Shares and Placement Shares

No. of Shares Dempsey 1 Facilitator Placement Subscribers 2 Current Shareholders TOTAL


Holding after issue of Consideration Shares, Facilitator Shares and Placement Shares 2

121,573,635 - -


No. of Shares

Percentage (%)

25,000,000 10,000,000 121,212,121

146,573,635 10,000,000 121,212,121

32.62 2.23 26.97

171,595,994

58.53

-

171,595,994

38.18

293,169,629

100

156,212,121

449,381,750

100


33

S C H E D U L E 2 – I S S U E S O F EQ U I T Y S EC U R I T I E S S I N C E 2 9 N OV E M B E R 2 0 1 6 Date

Quantity

Class

1 December 2016

2,500,000

Shares

Dempsey Resources Pty Ltd as approved at shareholder meeting on 29 November 2016

23 December 2016

9,375,000

Unlisted 4 Options

Various investors pursuant to placement agreements as approved at shareholder meeting on 29 November 2016

Notes: 1.

Recipients

2

Issue price and discount to Market Price (if 1 applicable) $0.02 per Share Discount to Market Price = 44.4%

Form of consideration

Cash consideration Amount raised = $50,000 Amount spent = $50,000 Use of funds = General working capital purposes Nil – the options Non-cash were issued as free consideration attaching options Amount raised = Nil 3 on the basis of one Current Value = $Nil option for every four shares subscribed for under the placement.

Market Price means the closing price on ASX (excluding special crossings, overnight sales and exchange traded option exercises). For the purposes of this table the discount is calculated on the Market Price on the last trading day on which a sale was recorded prior to the date of issue of the relevant Equity Securities.

2.

Fully paid ordinary shares in the capital of the Company, ASX Code: FEL (terms are set out in the Constitution).

3.

The value of Options is measured using the Black & Scholes option pricing model. Measurement inputs include the Share Price on the measurement date, the exercise price, the term of the Option, the expected volatility of the underlying Share (based on weighted average historic volatility adjusted for changes expected due to publicly available information), the expected dividend yield and the risk free interest rate for the term of the Option. The valuation of the Options is set out in schedule 3.

4.

Unlisted Options, exercisable at $0.03 each, on or before 30 November 2018. The full terms and conditions were disclosed in the notice of meeting for the shareholder meeting held on 29 November 2016.

34

S C H E D U L E 3 – VA LUAT I O N O F O P T I O N S The Options issued investors pursuant to placement agreements as approved at shareholder meeting on 29 November 2016 have been valued. Using the Black & Scholes options model and based on the assumptions set out below, the Options were ascribed the following value: Assumptions: Valuation date Market price of shares Exercise price Expiry date (length of time from issue) Risk free interest rate Expected volatility Indicative value per Options (undiscounted) Total value of Options (undiscounted) Discount Indicative value per Option (discounted) Total value of Options (discounted)

23 December 2016 $0.036 $0.030 30 November 2018 1.85% 20.73% $0.008 $77,400 100% Nil Nil

Note: the valuation noted above is not necessarily the market price that the Options could be traded at and is not automatically the market price for taxation purposes.

35

ANNEXURE A – INDEPENDENT EXPERT’S REPORT

36

Independent Expert’s Report

Fe Limited

Opinion: Fair and Reasonable

HLB Mann Judd Corporate (WA) Pty Ltd AFSL 250903 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: [email protected]. Website: http://www.hlb.com.au HLB Mann Judd Corporate (WA) Pty Ltd is a member of

International, a worldwide organisation of accounting firms and business advisers.

FINANCIAL SERVICES GUIDE Dated 21 September 2017 1.

HLB Mann Judd Corporate (WA) Pty Ltd HLB Mann Judd Corporate (WA) Pty Ltd ABN 69 008 878 555 (“HLB Mann Judd Corporate” or “we” or "us” or “ours” as appropriate) has been engaged to issue general financial product advice in the form of a report to be provided to you.

2.

Financial Services Guide In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (“FSG”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as a financial services licensee. This FSG includes information about:     

3.

who we are and how we can be contacted; the services we are authorised to provide under our Australian Financial Services Licence, Licence No. 250903; remuneration that we and/or our staff and any associates receive in connection with the general financial product advice; any relevant associations or relationships we have; and our complaints handling procedures and how you may access them.

Financial services we are licensed to provide We hold an Australian Financial Services Licence which authorises us to provide financial product advice in relation to:    

securities; interests in managed investment schemes excluding investor directed portfolio services; superannuation; and debentures, stocks or bonds issued or proposed to be issued by a government.

We provide financial product advice by virtue of an engagement to issue a report in connection with a financial product of another person. Our report will include a description of the circumstances of our engagement and identify the person who has engaged us. You will not have engaged us directly but will be provided with a copy of the report as a retail client because of your connection to the matters in respect of which we have been engaged to report. Any report we provide is provided on our own behalf as a financial services licensee authorised to provide the financial product advice contained in the report.



Financial Services Guide

2 4.

General financial product advice In our report we provide general financial product advice, not personal financial product advice, because it has been prepared without taking into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. Where the advice relates to the acquisition or possible acquisition of a financial product and there is no statutory exemption relating to the matter, you should also obtain a product disclosure statement relating to the product and consider that statement before making any decision about whether to acquire the product.

5.

Benefits that we may receive We charge fees for providing reports. These fees will be agreed with, and paid by, the person who engages us to provide the report. Fees will be agreed on either a fixed fee or time cost basis. Except for the fees referred to above, neither HLB Mann Judd Corporate, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

6.

Remuneration or other benefits received by us HLB Mann Judd Corporate has no employees. All personnel who complete reports for HLB Mann Judd Corporate are partners of HLB Mann Judd (WA Partnership). None of those partners are eligible for bonuses directly in connection with any engagement for the provision of a report.

7.

Referrals We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

8.

Associations and relationships HLB Mann Judd Corporate is wholly owned by HLB Mann Judd (WA Partnership). Also, our directors are partners in HLB Mann Judd (WA Partnership). Ultimately the partners of HLB Mann Judd (WA Partnership) own and control HLB Mann Judd Corporate. From time to time HLB Mann Judd Corporate or HLB Mann Judd (WA Partnership) may provide professional services, including audit, tax and financial advisory services, to financial product issuers in the ordinary course of its business.

9.

Complaints resolution 9.1.

Internal complaints resolution process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. Complaints must be in writing, addressed to The Complaints Officer, HLB Mann Judd Corporate (WA) Pty Ltd, Level 4, 130 Stirling Street, Perth WA 6000. When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 7 days and investigate the issues raised. As soon as practical, and not more than one month after receiving the written complaint, we will advise the complainant in writing of the determination.

Financial Services Guide

3 9.2

Referral to external disputes resolution scheme A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service Limited (“FOS”). FOS independently and impartially resolves disputes between consumers, including some small business, and participating financial services providers. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below. Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399

10. Contact details You may contact us using the details at the foot of page 1 of this FSG.

21 September 2017 The Directors Fe Limited 32 Harrogate Street WEST LEEDERVILLE WA 6007 Dear Sirs INDEPENDENT EXPERT’S REPORT INTRODUCTION On 13 July 2017 (“Announcement Date”), Fe Limited (“FEL” or the “Company”) announced that it had entered into a conditional binding terms sheet (“Terms Sheet”) with Cape Lambert Resources Limited (“Cape Lambert”) pursuant to which Cape Lambert agreed to assign to FEL its rights and obligations in the Kasombo Copper-Cobalt Project (“Kasombo Project”) located in the Democratic Republic of Congo (“Acquisition”). Cape Lambert’s rights and obligations associated with the Kasombo Project were established in a joint venture agreement (“JV Agreement”) it entered into with Congolese entity Paragon Mining SARL (“Paragon”) pursuant to which Cape Lambert and Paragon will form an incorporated joint venture with each party holding 50% of the issued capital of that company. Pursuant to Cape Lambert’s obligations under the JV Agreement, FEL’s objectives will be to: (a) Undertake the exploration activities at the Kasombo Project; (b) Complete a feasibility study on the Kasombo Project; and (c) Commence mining activities at the Kasombo Project within 24 months. Consideration for Cape Lambert assigning its rights in the Kasombo Project to FEL comprises the following: (a) The issue of 25 million fully paid shares in FEL to Cape Lambert (“Consideration Shares”); (b) A $50,000 advance payment on execution of the Terms Sheet, for reimbursement of up to $125,000 of pre-settlement exploration expenditure; (c) Up to a $75,000 payment on the date which is three months after the settlement date, as final reimbursement of pre-settlement exploration expenditure; and (d) The issue of 10 million fully paid shares in FEL to the facilitator of the Acquisition (“Facilitator Shares”).



Fe Limited Independent Expert’s Report – September 2017

2 (e) At the date of this Report, Cape Lambert holds 41.5% of the issued share capital of FEL (via its wholly owned subsidiary, Dempsey Resources Pty Ltd). The potential issue of 25 million fully paid shares in FEL to Cape Lambert as part consideration noted above (“Proposed Transaction”) is the subject of Resolution 5 of the Notice of Annual General Meeting of shareholders of the Company (“Notice”). At that meeting, shareholders will also be asked to consider a resolution for the issue of up to 10 million fully paid shares in FEL to the facilitator of the transaction (Resolution 6) and a resolution for the issue of up to that number of shares, when multiplied by the issue price, will raise up to $2,000,000 (Resolution 7). Resolutions 5, 6 and 7 are interdependent, ie each of these resolutions are subject to the passing of each of the other resolutions. The Proposed Transaction requires shareholder approval for the following reasons: 

The Acquisition is considered a change in the scale of the Company’s activities (Listing Rule 11.1.2);



The Acquisition is considered an acquisition of a substantial asset from a related party (Listing Rule 10.1);



Cape Lambert is considered a related party of FEL (Listing Rule 10.11); and



Pursuant to Section 611 Item 7 of the Corporations Act 2001 (“the Act”), the issue of Consideration Shares to Cape Lambert will increase Cape Lambert’s shareholding in FEL, Cape Lambert already owning greater than 20% of the issued share capital of the Company.

STRUCTURE OF REPORT This Report has been divided into the following sections: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Summary and opinion Purpose of the Report Key components of the Terms Sheet, Formal Agreement and Associated Agreements Economic analysis Industry/country analysis – Kasombo Project Adopted basis of evaluation Profile of FEL Valuation of FEL prior to the Proposed Transaction Valuation of FEL subsequent to the Proposed Transaction Assessment of whether the Proposed Transaction is fair Assessment of whether the Proposed Transaction is reasonable Sources of information Qualifications, Declarations and Consents

Appendix 1 – Glossary of Terms Appendix 2 – Independent Valuation of FEL’s mineral assets and Cape Lambert’s Kasombo Project prepared by Al Maynard & Associates Pty Ltd.


3 SUMMARY AND OPINION 1.1

Fairness

Set out in the table below is a comparison of our assessment of the fair market value of an FEL share prior to the Proposed Transaction on a control basis with the value of a FEL share subsequent to the Proposed Transaction on a minority basis. Report Reference Value of an FEL share pre-transaction Value of an FEL share post-transaction

8.3 9

Low cents 1.0 2.8

Preferred cents 1.1 3.2

High cents 1.2 3.6

As the preferred value of a FEL share on a pre-transaction basis is less than the preferred value post transaction on a minority basis, it is our opinion that the Proposed Transaction is fair to the non-associated shareholders of FEL. 1.2

Reasonableness

We have considered the analysis in Section 11 of this Report, in terms of both the advantages and disadvantages of the Proposed Transaction and the position of the nonassociated shareholders of FEL if the Proposed Transaction was to proceed. In our opinion the position of the non-associated shareholders of FEL if the Proposed Transaction was to proceed is more advantageous than if the Proposed Transaction was not approved by the shareholders. 1.3 Opinion We are of the opinion that the Proposed Transaction is fair and reasonable to the nonassociated shareholders of FEL.

1. PURPOSE OF THE REPORT 2.1

General

The Directors of FEL have requested that HLB Mann Judd Corporate (WA) Pty Ltd (“HLB”) provide an independent expert’s report (“Report”) advising whether, in our opinion, the Proposed Transaction is fair and reasonable to holders of the Company’s ordinary shares whose votes are not to be regarded (“non-associated shareholders”). This Report has been prepared to assist shareholders in their decision whether to vote for or against the resolution giving effect to the Proposed Transaction. FEL is seeking the approval of its shareholders under various requirements of the Listing Rules of the Australian Securities Exchange Limited (“ASX”) and the Act as set out in the Introduction section of this Report. This Report is required under Listing Rule 10.1 as the Acquisition is considered an acquisition of a substantial asset from a related party. Furthermore, Section 606 of the Act expressly prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) increasing its interest from


4 below 20% to more than 20% of the issued shares of a listed company, or from a starting point that is above 20% and below 90%. Cape Lambert holds 41.5% of the issued share capital of FEL (via its wholly owned subsidiary, Dempsey Resources Pty Ltd) at the date of this Report. Following the Proposed Transaction, Cape Lambert will increase its shareholding in FEL to 46.1%, however when the Facilitator Shares are taken into account, Cape Lambert’s shareholding increases to only 44.7%. Furthermore, if shares are issued pursuant to Resolution 7 and if Cape Lambert takes no part in this placement, Cape Lambert’s shareholding could reduce to approximately 35.9% (on the basis that the $2,000,000 placement is done at 2.5 cents, resulting in 80 million shares being issued). Section 611 of the Act permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting. ASIC Regulatory Guide 74 “Acquisitions Approved by Members” (RG 74”) states that the obligations to supply shareholders with all information that is material can be satisfied by the non-associated directors of the Company, by either: 

Undertaking a detailed examination of the Proposed Transaction themselves, if they consider that they have sufficient expertise; or



By commissioning an Independent Expert’s Report.

As the Company is required to include an Independent Expert’s Report in the Notice of Meeting pursuant to the requirement in Listing Rule 10.1, this will also satisfy the directors’ obligations under RG 74. 2.2

Regulatory Guidance

This Report is to be included in the Notice to consider the resolution giving effect to the Proposed Transaction, for the purpose of assisting shareholders in their consideration of that resolution. This Report should not be used for any other purpose. We have prepared this Report having regard to the relevant Australian Securities and Investments Commission (“ASIC”) releases. The RG 74 requirement to supply shareholders relevant information has been discussed above. In determining the fairness and reasonableness of the Proposed Transaction, we have had regard to ASIC Regulatory Guide 111 “Content of expert reports” (“RG 111”), which states that an opinion as to whether an offer is fair and/or reasonable shall entail a comparison between the offer price (in this case, the proposed price at which the convertible notes will be converted into fully paid shares in FEL) and the value that may be attributed to the securities under offer (in this case, the value of the FEL shares) (fairness) and an examination to determine whether there are sufficient reasons for security holders to accept the offer despite an offer not being fair (reasonableness). The concept of fairness is taken to be the value of the offer price, or the consideration, being equal to or greater than the value of the securities in this offer (in this case, the value of the FEL shares). Furthermore, this comparison should be made assuming 100%


5 ownership of the “target” (in this case, 100% of FEL) and irrespective of whether the consideration is scrip or cash. RG 111 states that an offer is reasonable if it is fair. An offer may also be reasonable, if despite it not being fair, there are significant factors which in the expert’s opinion shareholders should consider in accepting the offer. RG 111 also suggests that where the Proposed Transaction is a control transaction the expert should focus on the substance of the control transaction, rather than the legal mechanism used to effect it. RG 111 suggests that where a transaction is a control transaction it should be analysed on a basis that is consistent with a takeover bid. In our opinion, the Proposed Transaction is a control transaction as defined by RG 111 and we have therefore assessed the Proposed Transaction to consider whether, in our opinion, it is fair and reasonable to the non-associated shareholders of FEL. We have also had regard to ASIC Regulatory Guide 112 “Independence of experts”. 2.3

Compliance with APES 225 Valuation Services

This Report has been prepared in accordance with the requirements of the professional standard APES 225 Valuation Services (“APES 225”) as issued by the Accounting Professional & Ethical Standards Board. In accordance with the requirements of APES 225, we advise that this assignment is a Valuation Engagement as defined by that standard as follows: “an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Member is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Member at that time.”

2. KEY COMPONENTS OF THE TERMS SHEET, FORMAL AGREEMENT AND ASSOCIATED AGREEMENTS On the Announcement Date, FEL announced that it had entered into a Terms Sheet with Cape Lambert under which Cape Lambert will assign to FEL 100% of its rights and obligations in the Kasombo Project located in the Democratic Republic of Congo (“Acquisition”). The terms contained in the Terms Sheet were formalised in a deed of assignment and assumption dated 18 September 2017 between FEL and Cape Lambert (“Formal Agreement”). Cape Lambert’s rights to the Kasombo Project were established in a joint venture agreement (“JV Agreement”) it entered into with Congolese entity Paragon Mining SARL (“Paragon”), pursuant to which Cape Lambert and Paragon will form an incorporated joint venture with each party holding 50% of the issued capital of that company. Pursuant to Cape Lambert’s obligations under the JV Agreement, FEL’s objectives will be to: (a) Undertake the exploration activities at the Kasombo Project; (b) Complete a feasibility study on the Kasombo Project; and (c) Commence mining activities at the Kasombo Project within 24 months.


6 Consideration for Cape Lambert assigning its rights in the Kasombo Project to FEL comprises the following: (a) The issue of 25 million fully paid shares in FEL to Cape Lambert (“Consideration Shares”); (b) A $50,000 advance payment on execution of the Terms Sheet, for reimbursement of up to $125,000 of pre-settlement exploration expenditure; (c) Up to a $75,000 payment on the date which is three months after the settlement date, as final reimbursement of pre-settlement exploration expenditure; and (d) The issue of 10 million fully paid shares in FEL to the facilitator of the transaction (“Facilitator Shares”). Kasombo Copper-Cobalt Project The Kasombo Copper-Cobalt Project (“Kasombo Project”) comprises three mineralised areas, Kasombo 5, 6 and 7, of approximately 600 hectares located within two granted mining licenses PE 481 and PE 4886 (Licences) (Kasombo Project). The Licences are held by La Generale Des Carrieres Et Des Mines S.A. (Gecamines). Paragon is a party to a contract with Gecamines for the undertaking of exploration and research work at the Kasombo Project (Gecamines Contract). The Kasombo Project is located approximately 25 kms from the DRC’s second largest city, Lubumbashi that is accessed by sealed road. Lubumashi is the main service centre for the cobalt and copper mining industry in the Haute-Katanga Province. The Project is located near the town of Kipushi. Cape Lambert’s rights and obligations associated with the Kasombo Project and the Kipushi Cobalt Copper Tailings Project and operate the Kipushi Processing Plant (together the “Kipushi Project”) were established in a joint venture agreement (JV Agreement) it entered with Paragon pursuant to which Cape Lambert and Paragon will form an incorporated joint venture with each party holding 50% of the issued capital of that company (JV Company). A summary of the key terms of the Gecamines Contract, JV Agreement and Formal Agreement are set out below. Summary of Gecamines Contract On 24 March 2017, Gecamines and Paragon entered into the Gecamines Contract whereby Gecamines granted Paragon the exclusive right to explore and undertake a feasibility study on the Licences. These obligations were subsequently assumed by Cape Lambert pursuant to the JV Agreement and will be assumed by the Company pursuant to the Formal Agreement on completion of the Acquisition. The term of the Gecamines Contract is three years commencing on 24 March 2017. During the term of the contract Paragon is required to sole fund and complete a feasibility study.


7 If, following completion of the feasibility study, a viable operation is discovered, Paragon would need to negotiate an agreement with Gecamines to proceed to development. The contract provides that the options to proceed at that time would be either: 

a joint venture arrangement with Gecamines whereby Gecamines would receive a 5160% interest in the joint venture, plus an upfront payment of $35/t of contained copper plus a 2.5% royalty. Under this arrangement, the costs expended by Paragon (which would be FEL costs on completion of the Transaction) up to this time are considered to be a loan to the new joint venture repayable on terms to be agreed; or



entry into a leasing arrangement with Gecamines wherein Paragon (which would be FEL on completion of the Acquisition) bears the costs expended up to this time and pays Gecamines an upfront payment equivalent to $35/t of contained copper of the identified copper reserve in the feasibility study plus an ongoing 2.5% royalty of the gross turnover.

It is proposed that on completion of the Acquisition and if after exploration a feasibility study shows a mining operation is viable then the JV Company will negotiate with Gecamines a development option (referred to above) that will maximise the returns to the JV Company and hence FEL. Summary of JV Agreement The JV Agreement governs the affairs of the JV Company and its assets which includes the rights and obligations associated with the Kasombo Project. Under the terms of the JV Agreement, inter alia, Cape Lambert assumed all of Paragon’s obligations under the Gecamines Contract. The JV Agreement remains subject to the satisfaction or waiver of a number of outstanding conditions precedent including the following: (a) the amending of an existing loan agreement Paragon has with its lender that releases the associated security over Paragon’s assets (including the Kasombo Project rights); (b) Paragon executes contracts with the JV Company that transfers ownership of the projects, including the Kasombo Project to the JV Company; (c) a bank account with a reputable banking institution being opened in the name of the JV Company; (d) each of the Shareholders holds 50% of the ordinary shares issued by the JV Company, (together, the “JV Conditions”). The JV Conditions must be satisfied or waived on or before 29 September 2017, or as extended by agreement between Cape Lambert and Paragon. Under the JV Agreement, in relation to the Kasombo Project, Cape Lambert is required to: 

provide all necessary technical resources to enable exploration and mining activities at the Kasombo Project to be conducted to acceptable industry standards and in accordance with an agreed budget;


8 

provide 100% of the funding to the JV Company on the basis set out below to undertake exploration activities at the Kasombo Project, complete a feasibility study and any other expenses the JV Company board may deem necessary;



sole fund the costs of exploration and the completion of a feasibility study on the Kasombo Project in accordance with the requirements of the Gecamines Contract up to a cost of $US7.5 million (“Sole Funding Commitment”);



provide any required funds in excess of $US7.5 million by way of a loan to the JV Company, which is repayable from future profits of the JV Company; and



if it is determined that a mining operation is viable at the Kasombo Project, secure, on behalf of the JV Company, 100% of the funds for development of the Kasombo Project and to upgrade the Kipushi Processing Plant to process ore from the project, and to also conclude any obligations with Gecamines,

(together, the “Kasombo Project JV Commitments”). On completion of the Acquisition, Cape Lambert will retain all of its rights and obligations in respect of the Kipushi Project Interest. The feasibility study must focus on the establishment of a mining and processing operation targeting a production of a minimum of 10,000 tonnes per annum of LME grade copper cathode and associated production of cobalt in concentrate. The JV Company will, subject to approval by Gecamines, consider accelerating mining activities at the Kasombo Project. In the event that mining activities at the Kasombo Project commence simultaneously or before the Kipushi Tailings Project, then Cape Lambert will accelerate its funding obligations as contemplated above. Kipushi Processing Plant The Kipushi Processing Plant facility was constructed by Paragon during 2015/2016 for the reprocessing of tailings from its nearby Kipushi Tailings Project (PER 12347). It comprises a conventional flotation plant with a 1Mtpa design throughput to produce a copper-cobalt concentrate. As noted above, it is contemplated that ore from the Kasombo Project will be processed through the Kipushi Processing Plant, which will necessitate significant upgrades to be completed to achieve the target production contemplated by the JV Agreement. Summary of Formal Agreement On 18 September 2017, Cape Lambert and FEL entered into the Formal Agreement which provides that, on settlement of the Transaction: 

Cape Lambert will assign to FEL the Kasombo Project Rights related to the period from settlement; and



FEL will assume the Kasombo Project Obligations related to the period from settlement,

with the objectives being to:


9 

undertake exploration activities at the Kasombo Project;



complete a Feasibility Study on the Kasombo Project; and



commence mining activities at the Kasombo Project within 24 months.

On completion of the Transaction the Company will be responsible for the Kasombo Project JV Commitments detailed above. Completion of the Transaction is conditional on satisfaction of the following: 

FEL successfully raising a minimum of $2,000,000 pursuant to the Placement (the subject of Resolution 7);



FEL obtaining all necessary Shareholder approvals in relation to the Acquisition (the subject of Resolution 5) and the issue of the Facilitator Shares (the subject of Resolution 6);



Cape Lambert obtaining all necessary shareholder approvals required in relation to the Acquisition;



the conditions precedent listed in the JV Agreement are satisfied or waived by Paragon and/or Cape Lambert as appropriate (with any waiver subject to the prior written approval of FEL);



Cape Lambert confirming that the warranties provided by Paragon in the JV Agreement remain true and accurate as at the settlement date;



receipt of all necessary consents in respect of the Acquisition; and



Cape Lambert obtaining necessary consent in writing from Paragon consenting to the assignment,

(together, the “Conditions”). The Conditions (other than (a) above) must be satisfied or waived by 29 September 2017 unless otherwise waived or extended by the Company and Cape Lambert. Consideration payable to Cape Lambert (or nominee) for the Acquisition is the issue of 25,000,000 fully paid shares in FEL at a deemed issue price equal to the volume weighted average closing price of Shares as quoted on ASX over the last five (5) trading days immediately preceding the settlement date (“Consideration Shares”). The Consideration Shares will be issued on the settlement date and escrowed for a period of 12 months from the date of issue. Until settlement of the Acquisition, Cape Lambert will continue with its obligations under the JV Agreement for conducting the exploration works at the Kasombo Project. The Company will reimburse Cape Lambert for expenditure incurred by Cape Lambert since its acquisition of the Kasombo Interest (“Pre-Settlement Expenditure”) up to a maximum of $125,000 in total.


10 On the date of execution of the Terms Sheet, the Company paid Cape Lambert $50,000 in advance as a contribution towards the Pre-Settlement Expenditure. The final amount of Pre-Settlement Expenditure payable by, or refundable to, FEL shall be paid or refunded three (3) months after Settlement. The maximum additional amount of Pre-Settlement Expenditure payable by the Company is a further $75,000. After settlement Cape Lambert will use its best endeavours to get Paragon to agree to FEL and Paragon forming a new joint venture company (“New JV Company”) to exclusively govern the Kasombo Project and enter into a new shareholders agreement to administer the New JV Company (“New Kasombo Project Agreement”). FEL and Paragon would have a 50/50 interest in the New JV Company. The New Kasombo Project Agreement would have similar terms and conditions as in the JV Agreement including provisions for the funding of all Kasombo Project costs by FEL and Paragon in proportion to their shareholding in the New JV Company (subject to FEL satisfying the Sole Funding Commitment). Until the New Kasombo Project Agreement is executed FEL shall be bound by the provisions of the JV Agreement in so far as it relates to the Kasombo Project. In the event that Paragon does not agree to the formation of a New JV Company, then prior to any development proceeding to exploit the Kasombo Project, Cape Lambert and FEL will negotiate and execute a further agreement that will set out the terms of a suitable operating structure, or some other arrangement, acceptable to FEL that would provide security against its investment in developing and exploiting the Kasombo Project. From settlement and until such time as Paragon and FEL enter into the New Kasombo Project Agreement: 

Cape Lambert will hold the Kasombo Project Rights and the Kasombo Project Obligations on trust for FEL and will at all times act on the instructions of FEL in respect of the Kasombo Project Rights and the Kasombo Project Obligations;



the Cape Lambert appointed directors of the JV Company shall act as representatives of FEL in relation to all JV Company matters associated with the Kasombo Project (“FEL/CFE JV Nominees”); and



Cape Lambert and the FEL/CFE JV Nominee must at all times act under the instruction of, and in the best interests of, FEL in relation to all JV Company matters associated with the Kasombo Project.

Until FEL and Paragon enter into a New Kasombo Project Agreement Cape Lambert must keep FEL fully informed of all matters pertaining to the Kasombo Project. Cape Lambert must indemnify FEL in respect of any claim, loss, action, damage or liability suffered by FEL arising from any breach by Cape Lambert of the Kasombo Project Obligations relating to the period up to settlement and its obligations under the JV Agreement (other than a breach of the Kasombo Project Obligations after settlement). FEL must indemnify Cape Lambert in respect of any claim, loss, action, damage or liability suffered by Cape Lambert arising from any breach of the Kasombo Project Obligations relating to the period from settlement.


11 Under the JV Agreement, the Kipushi Process Plant remains the property of Paragon until Cape Lambert satisfies its funding obligations in relation to the projects. In the event that the Kasombo Project advances such that upgrading of the Kipushi Processing Plant will form part of the development work for processing Kasombo Project ore, then Paragon, Cape Lambert and FEL must first work together to determine a suitable ownership structure, or some other arrangement, acceptable to FEL that would provide security against its investment in upgrading the Kipushi Processing Plant. Pelesa & Associates Law Firm (“Pelesa”) introduced Paragon’s Kasombo Project, Kipushi Tailings Project and Kipushi Processing Plant to Cape Lambert and later facilitated and assisted in negotiating the JV Agreement. Cape Lambert is obligated to pay Pelesa certain advisory fees, part of which are attributable to the Kasombo Project. Under the Formal Agreement, FEL has assumed responsibility for the following advisory fees: (a) in the event that production is achieved at the Kasombo Project: (i)

prior to production at Cape Lambert’s Kipushi Tailings Project, then FEL will: 

issue Pelesa 25,000,000 Shares within 5 Business Days of achieving production at the Kasombo Project (or within 5 Business Days of receiving FEL Shareholder approval if required); and



pay Pelesa $US75,000 within 5 Business Days of achieving production at the Kasombo Project; or

(ii) subsequent to production at Cape Lambert’s Kipushi Tailings Project, then FEL

will issue Cape Lambert 25,000,000 Shares within 5 Business Days of achieving production at the Kasombo Project (or within 5 Business Days of receiving FEL Shareholder approval if required); and

(b) the grant by FEL to Pelesa of a 1% royalty on all of FEL’s attributable production from the Kasombo Project. If the issue of the shares to Pelesa or Cape Lambert referred to above is subject to Shareholder approval and the approval is not obtained despite the best endeavours of FEL, FEL must in lieu thereof pay Pelesa or Cape Lambert (as the case may be) within 15 Business Days of demand a sum equal to 25,000,000 multiplied by the volume weighted average price (excluding special crossings) of shares in the 10 trading days immediately after the date of demand. FEL may elect to withdraw and terminate the Formal Agreement by giving 30 days’ notice in writing to Cape Lambert and Paragon. 3. ECONOMIC ANALYSIS At its meeting on 5 September 2017, the Reserve Bank of Australia Board (“Board”) decided to leave the cash rate unchanged at 1.5 per cent. In support of this decision, the Board provided the following commentary: Conditions in the global economy are continuing to improve. Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a


12 medium-term risk. Commodity prices have risen recently, although Australia's terms of trade are still expected to decline over coming years. Wage growth remains low in most countries, as does core inflation. Headline inflation rates have declined recently, largely reflecting the earlier decline in oil prices. In the United States, the Federal Reserve expects to increase interest rates further and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively and volatility remains low. The recent data have been consistent with the Bank's expectation that growth in the Australian economy will gradually pick up over the coming year. The decline in mining investment will soon run its course. The outlook for non-mining investment has improved recently and reported business conditions are at a high level. Residential construction activity remains at a high level, but little further growth is expected. Retail sales have picked up recently, although slow growth in real wages and high levels of household debt are likely to constrain future growth in spending. Employment growth has been stronger over recent months and has increased in all states. The various forward-looking indicators point to solid growth in employment over the period ahead. The unemployment rate is expected to decline a little over the next couple of years. Wage growth remains low. This is likely to continue for a while yet, although stronger conditions in the labour market should see some lift in wages growth over time. Inflation also remains low and is expected to pick up gradually as the economy strengthens. The Australian dollar has appreciated over recent months, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to the subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast. Conditions in the housing market continue to vary considerably around the country. Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney. In some other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities. Investors in residential property are facing higher interest rates. There has also been some tightening of credit conditions following supervisory measures to address the risks associated with high and rising levels of household indebtedness. Growth in housing debt has been outpacing the slow growth in household incomes. The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time. Source: www.rba.gov.au Statement by Philip Lowe, Governor: Monetary Policy Decision 5 September 2017

4. INDUSTRY/COUNTRY ANALYSIS – KASOMBO PROJECT The following analysis is provided in respect of the copper-cobalt exploration industry in the Democratic Republic of Congo, as the Kasombo Project is based in that country. Democratic Republic of Congo BMI Research, a unit of Fitch Group, reports that the Democratic Republic of Congo will benefit from low labour costs, high ore grades and vast untapped resources that will attract foreign investment into some of its largest gold and copper deposits, particularly from China.


13 Furthermore, the spectacular rise in global cobalt demand will further fuel potential for growth in the Democratic Republic of Congo's mining sector due to the country's vast reserves of the battery-making commodity. The Democratic Republic of Congo will be the fastest growing major mining market in the world over the coming years, as high ore grades and large untapped reserves encourage exploration and production. Furthermore, the country's relatively competitive labour costs in comparison with other major mining countries in the region such as South Africa will attract significant foreign direct investment. BMI Research forecasts the country to experience an average mining industry value growth rate of 9% over the 2017 to 2021 period on the back of rising copper, gold and cobalt output, all of which are due to be supported by improving prices. Big projects supported by foreign investment The Democratic Republic of Congo's mining sector growth will be in large part fueled by ongoing foreign investment into some of its largest mining projects. An important boost will come from growing Chinese investment, as the country looks to bridge a systemic refined copper deficit of 2.3 Mt as of 2017. The recently announced sale in late 2016 of the country's largest copper mine Tenke Fungurume, by Freeport-McMoran and Lunding Mining to China Molybdenum is the latest evidence of growing Chinses interest in the Democratic Republic of Congo's copper assets. The mine has probable and proven reserves of 144 Mt at 2.6% ore grade, significantly above the global average of 0.8%. In addition, Randgold Resources has made the expansion of activities in its Kibali mine a central part of its operational strategy for the coming years. The company is planning to commission an underground expansion at the site for Q3, 2017 which will deliver around 610 000 oz of gold in 2017 and 750 000 oz in 2018, while it is also investing in a second hydropower station at the site. Rising global cobalt demand to spur further growth Containing over 50% of the world's cobalt reserves, the Democratic Republic of Congo will be a beneficiary of the booming cobalt industry in the coming years. Primarily used in rechargeable batteries (49% of demand for cobalt consumption is destined to this end) BMI Research projects that solid future growth in global battery demand will support cobalt consumption and prices for decades to come. This positive growth projection will in turn fuel investment into cobalt mining operations in the Democratic Republic of Congo, such as Glencore's recent acquisition of Mutanda and Katanga mining companies as well as the aforementioned Fenke Tungurume mine, where cobalt is sourced as a by-product of copper. BMI Research forecasts the Democratic Republic of Congo's cobalt production to increase from 70.1 kilo tons in 2017 to 82 kilo tons by 2021.


14 Regulatory uncertainty and political turmoil to pose downside risks Despite strong growth projections, recent moves aimed at reforming the mining code to increase royalties and taxes have the potential to disrupt BMI Research forecasts, while uncertainty regarding the upcoming elections may lead to social unrest. The original 2002 mining code is considered competitive by investors, guaranteeing the holder of a mine to unlimited access to explore and develop properties under an efficient permitting process. However, in early 2017 the Kibali administration announced plans to potentially revise the code, which may include hiking profit taxes to 35% from 30%, raising the state's share of new mining projects and increasing royalties on copper and cobalt revenues. Downside risks to BMI Research forecasts will also be driven by the uncertainty surrounding the upcoming elections, due to be held in late 2017. Despite incumbent President Kabila having agreed to hold elections this year, BMI Research's country risk team believes it is likely that these will be postponed to 2018, which could lead to a cut in foreign aid and discontent among the population. The country's Katanga province, where most the important mining assets are found, will be most at risk of witnessing turmoil due to its history of conflict with the central Democratic Republic of Congo government and its long -held secessionist ambitions. Any scenario whereby the government loses control of Katanga would pose significant risks to most of the mining operations located there, thus affecting Mining Review of Africa’s growth forecasts for the country as a whole. Source: Mining Review of Africa 4 May 2017 – www.miningreview.com

Copper Current Performance The main demand for copper comes from the construction industry, as it is used extensively in new buildings, with secondary demand coming from machinery and electronics manufacturing. Due to this strong tie to construction, the low price of copper (under $US1,800 per metric ton from 2001 through 2003) helped drive the housing boom in the first half of this decade. To keep up with the demand from the US housing market and the rapid urbanisation of China and India, the copper mining industry greatly expanded. However, these efforts could not keep copper stocks from depleting and the price from skyrocketing to new historic highs in 2006 (about $6,700 per metric ton) through early 2008 (almost $US9,000 per metric ton). The annual production and stock averages did not vary much between 2007 and 2008, but monthly averages showed great volatility in reaction to the boom and bust of the market over the course of 2008. World copper production caught up to demand during 2008, driving prices down as the housing market collapsed and world financial markets went into crisis. Demand for copper dropped along with the economy and stockpiles of the metal grew. This sudden abundance of supply pushed the price down to $US3,100 per metric ton for December 2008, causing many copper mines to reduce production and plans for expansion. Following the steep decline, the price rebounded throughout 2009 and early 2010. Supply cutbacks primarily drove the price rebound as copper mines scaled back production quickly in the wake of the price plunge to allow the excess stockpiles to be sold. On the demand side, while new home construction in the United States remained anemic, construction and manufacturing demand in China and India increased rapidly, driving


15 demand towards prerecession peaks and depleting the existing stockpiles. Consequently, the price rose 45.9% to an average of $US7,538 per metric ton over 2010. As construction spending growth accelerated in China and India over 2011, the price of copper grew another 17.0%. However, due to the stagnant growth of the construction sectors of the world’s fully developed countries, especially in the United States, the price fell over the second half of the year. As these construction sectors continue their struggle to grow, copper prices have fallen. Furthermore, slowing growth in China has also contributed to the recent decline in prices. In 2014, the price of copper is fell 6.4%, building on the 7.9% that occurred in 2013. Prices fell another 19.7% over 2015 with demand low from emerging markets. Dampened demand and rising supply pushed prices down another 11.7% in 2016. The market is expected to stabilize in 2017, however, leading prices to rise an estimated 19.9% over the year, though prices will remain significantly lower than most years since the Great Recession. Outlook Like many commodities, the price of copper is highly volatile and difficult to forecast. The price of copper will remain constrained due to economic stagnation and debt issues that will continue to prevent the construction sectors in Japan, the United States and the European Union from fully recovering. Once they do recover to healthy levels, the price of copper is anticipated to grow at a fast rate. In the long run, the continued urbanisation of China and India, combined with accelerating construction growth in the United States, will sustain demand for copper. As a result, the world price of copper is expected to increase at an annualised rate of 0.9% over the five years to 2022.

The world prices of copper presented above are annual figures derived from the average monthly prices of high-grade copper on the London Metals Exchange. The data is sourced from the International Monetary Fund. Source: IBISWorld Business Environment Profiles June 2017 – www.ibisworld.com.au


16 Cobalt Market outlook This year the price of cobalt has lifted to levels not seen since 2008 largely as a result of rising demand for batteries accompanied by the issue of unreliable sources of supply (see Figure1 below). Cobalt pricing often has little impact on the viability of production as it is produced as a by-product. Copper and zinc demand are key drivers of cobalt supply. Supply The Democratic Republic of Congo is the world's largest supplier hosting 48% of world reserves and accounting for an estimated 54% of production in 2016 (USGS). Supply from the Congo has some associated concerns regarding the reliability of the many small scale operations and the political instability within the area. Cobalt from the Congo is generally imported and refined by China who then sells it to electronics businesses and vehicle manufacturers. Companies are looking to take the pressure off the Congo by producing in other regions, especially with the current incentive of higher prices. Demand Demand trends are closely linked to the growth of the battery industry (49% of cobalt usage in 2015). The growing usage of cobalt in smartphones, lithium-ion batteries and Tesla vehicles are key drivers behind these growth trends. Cobalt's efficiency as an electrode allows for power to be stored for longer periods with lower carbon emissions. According to Cobalt Development Institute (CDI) in 2015, cobalt demand is growing at a steady rate sustaining a CAGR of greater than 5%, with this trend expected to continue into the near-term future. Cobalt is being increasingly used in emerging technologies in the biotech industry, energy storage and catalytic processes. China is currently the largest consumer of cobalt, with around 80% of Chinese usage being concentrated in the battery industry.

Source: UBS Global Research – www.ubs.com/investmentresearch

5. ADOPTED BASIS OF EVALUATION 6.1

Fairness

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities the subject of the offer. The comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a


17 knowledgeable and willing, but not anxious, seller acting at arm’s length. When considering the value of the securities the subject of the offer in a control transaction, the expert should consider the value inclusive of a control premium. We have assessed whether the Proposed Transaction is fair by comparing our assessment of the fair market value of a FEL share on a control basis prior to incorporating the effects of the Proposed Transaction with our assessment of the fair market value of a FEL share on a minority basis subsequent to incorporating the effects of the Proposed Transaction. 6.2

Reasonableness

RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable it despite it being “not fair’, the expert believes that there are sufficient reasons for shareholders to accept the offer in the absence of a higher bid. We have assessed the reasonableness of the Proposed Transaction by considering other advantages and disadvantages of the Proposed Transaction to the non-associated shareholders of FEL. 6.3

Individual circumstances

We have evaluated the Proposed Transaction for FEL shareholders as a whole. We have not considered the effect of the Proposed Transaction on the particular circumstances of individual shareholders. Due to their particular circumstances, individual shareholders may place a different emphasis on various aspects of the Proposed Transaction from those adopted in this Report. Accordingly, individual shareholders may reach different conclusions to ours on whether the Proposed Transaction is fair and reasonable. If in doubt, shareholders should consult an independent adviser. 6.4

Limitations and Reliance on Information

HLB’s opinion is based on economic, share market, business trading and other conditions and expectations prevailing at the date of this Report. These conditions can change significantly over relatively short periods of time. If these conditions did change materially the valuations and opinions contained in this Report could be different in these changed circumstances. This Report is also based upon financial information and other information provided by FEL. HLB has considered and relied upon this information. HLB has no reason to believe that any material facts have been withheld. The information provided to HLB has been evaluated through analysis, enquiry and review for the purposes of forming an opinion as to whether the Proposed Transaction is fair and reasonable to the non-associated shareholders of FEL. However, in preparing reports such as this, time is limited and HLB does not warrant that its enquiries have identified or verified all of the matters that an audit, extensive examination or “due diligence” investigation might disclose. In any event, an opinion as to fairness and reasonableness is more in the nature of an overall review rather than a detailed audit or investigation. An important part of the information used in forming an opinion of the kind expressed in this Report is comprised of the opinions and judgment of management. This type of information was also evaluated through analysis, enquiry and review to the extent practical. However, such information is often not capable of external verification or valuation. Preparation of this Report does not imply that HLB has audited in any way the records of FEL for the purposes of this Report. It is understood that the accounting information that


18 was provided was prepared in accordance with generally accepted accounting principles and in a manner consistent with the method of accounting in previous years except as otherwise noted. The information provided to HLB included historical financial information for FEL. FEL is responsible for this information. HLB has used and relied on this information for the purpose of analysis. 6. PROFILE OF FEL 7.1 Company History FEL is an Australian company which is listed on the Australian ASX on 13 October 2005. The Company was previously named Buka Gold Ltd and focused on the exploration and development of goldfields in Australia. FEL currently has interests in several highly prospective projects in the Bryah Basin region of Western Australia with joint venture partners Auris Minerals Ltd (formerly RNI NL), Alchemy Resources Ltd, Independence Group NL, Westgold Resources Limited and Billabong Gold Pty Ltd, which are freecarried with no contributing responsibilities, until Decision to Mine, as follows: Bryah Basin Joint Venture Projects (Bryah Basin) (20% rights, free carried to Decision to Mine) FEL, via its wholly owned subsidiary, Jackson Minerals Pty Ltd (“Jackson”), has a 20% free carried interest to Decision to Mine in twelve tenements covering an area of 802km² in the highly prospective Bryah Basin, including tenements proximal to Sandfire Resources NL’s Doolgunna Project and DeGrussa copper gold mine and several gold and copper prospects. The Bryah Basin Project tenements are subject to joint ventures and farm ins with Westgold Resources Limited, Independence Group NL, Billabong Gold Pty Ltd, Alchemy Resources (Three Rivers) Ltd and Auris Minerals Ltd (formerly RNI NL). Auris Projects - Auris Minerals Ltd (AUR) 80% in all minerals (except gold for E52/1659 and E52/1671) and FEL 20% in all minerals free carried to Decision to Mine FEL, via its subsidiary, Jackson, holds a 20% free carried interest to Decision to Mine in five exploration licences and three prospecting licences (E52/1659 and E52/1671 and P52/1484-1486 within AUR’s “Forrest Project” and E51/1033, E52/1613, E52/1672 at AUR’s “Morcks Well Project”) covering a total of 607km². The AUR 80% interests were previously registered in the name of Grosvenor Gold Pty Ltd (“Grosvenor”). Grosvenor, via RNI NL, changed its name to Auris Minerals Ltd, effective 17 March 2017. Metals X Ltd (“MLX”) acquired AUR’s interest in the gold assets with regard to E52/1659 and E52/1671 (within the AUR Forrest Project) from AUR in July 2015. MLX transferred its 80% gold rights interest in these tenements to Westgold Resources Limited (“WGX”) via a demerger by MLX. FEL’s 20% interest in E52/1659 and E52/1671 is now free carried until Decision to Mine by WGX (pursuant to a Deed of Novation completed in December 2016).


19 Forrest Project: Forrest (E52/1671), Wodger (E52/1659), Big Billy Prospects (E52/1659) The “Forrest”, “Wodger” and “Big Billy” Prospects are located along a 12km mineralized Cu+-Au trend which hosts multiple targets for volcanic-hosted massive sulfide (“VHMS”) style mineralisation. The Wodger prospect is confirmed as the priority prospect in AUR’s Bryah Basin exploration portfolio. Morck’s Well Project: (E51/1033, E52/1613, E52/1672) The Morck’s Well Prospect is located in the eastern part of the Bryah Basin and contains approximately 40km of strike length of the highly prospective Narracoota Volcanic Formation. The northern boundary of Morck’s Well is adjacent to Sandfire Resources NL’s DeGrussa-Doolgunna exploration tenements. On 10 July 2017 AUR announced via their June 2017 Quarterly Report that the company had commenced a 13,500 metre air core drill program over five prospects identified in the Cashman and Morck’s Well Project areas (refer to ASX: AUR 6 June 2017 and 10 July 2017). Alchemy Projects - ALY 80% in all minerals (see below for details of other companies farming-into this interest) and FEL 20% (in all minerals) free carried to Decision to Mine FEL, via its wholly owned subsidiary, Jackson Minerals, holds a 20% interest in all minerals free carried to Decision to Mine in four exploration licenses (E52/1668 (“Reefer” and “Flamel” prospects), E52/1678 (“Troy” prospect), E52/1722 (“Neptune” prospect), E52/1730 (“Henry” prospect) jointly known as the “Jackson Tenements”. Additionally, Jackson Minerals has a 20% beneficial interest in all minerals in part of E52/1852 previously held under P52/1167 and P52/1168, held in trust for Jackson Minerals by ALY/Billabong The project covers approximately 45km strike of the prospective Narracoota Volcanic Formation sequence in the Bryah Basin and is proximal to Sandfire’s Doolgunna Project and the recently discovered Monty Prospect. Base Metals Rights – ALY/IGO/JAK E52/1668, E52/1678, E52/1722 and E52/1730 Alchemy has entered into a farm-in and joint venture with Independence Group NL, which is earning up to a 70% interest in base metals rights, excluding iron ore rights, in relation to whole area of E52/1722 and parts of E52/1668, E52/1678 and E52/1730 (in regard to the Jackson Minerals Tenements). All Mineral Rights - ALY/Billabong/JAK E52/1668, E52/1678, and E52/1730 Leading Australian gold producer Northern Star Resources Ltd (ASX: NST) entered into a Farm-In and Joint Venture agreement with ALY, in regard to parts of E52/1668, E52/1678 and E52/1730 (excluding those parts being farmed into by IGO) and also to earn an 80% interest in the whole of E52/1852 (within which ALY holds a 20% interest in the area previously held under P52/1167-68 for Jackson Minerals). NST assigned its interest in these tenements and the Farm-in and Joint Venture to Billabong Gold Pty Ltd (“Billabong”) via a Deed of Consent, Assignment and Assumption dated 11 October 2016, pursuant to a “Sale and Purchase Agreement Plutonic Gold Operations” between NST


20 and Billabong dated 12 August 2016. FEL retains its 20% free carried interests in all minerals all of the aforementioned tenements, via wholly owned subsidiary Jackson Minerals. Mt Ida Gold - FEL, Mt Ida Iron Ore Project Mt Ida is approximately 80km northwest of the operational railway at Menzies, which offers access to existing port facilities at Esperance. The Mt Ida Iron Ore Project (“Mt Ida Iron Project”) provides FEL the rights to explore and mine for iron ore on two exploration licenses (E29/640 and E29/641) and 3 mining leases (M29/2, M29/165 and M29/422), held by Mt Ida Gold Pty Ltd, covering approximately 120km2 in the emerging Yilgarn Iron Province. The rights give provision for FEL to retain revenue from any iron ore product it mines from the tenure. FEL has no registered interest in these tenements. The Mt Ida Project area covers part of the Mt Ida - Mt Bevan banded iron formation, which is currently being explored and evaluated by Jupiter Mines Limited and Legacy Iron Ore Limited. Mt Elvire Project – FEL 100% FEL’s 100% interest in two exploration licences, E77/1842 and E77/1843 at its Mt Elvire Project, covering 5.9km2 expired on 24 May 2017, when the soil results reported to the ASX 29 March 2017 were deemed insufficient for the Department of Mines to extend the term of the licences. Evanston Iron Ore Royalty (Cliffs Asia Pacific Iron Ore Pty Ltd, a subsidiary of Cliffs Natural Resources Inc) (Cliffs) FEL holds a 1.5% Dry Metric Tonne, FOB Royalty over two tenements (E77/1322 and M37/1259) within the Evanston Project, registered to Black Oak Minerals Limited (“BOK”). Cliffs previously held these tenements but sold them to BOK, assigning the obligation to pay the associated to FEL royalty from Cliffs to BOK. The tenements are approximately 20kms north of the Windarling mine. The Evanston Iron Ore Project is located in the Southern Yilgarn Iron Province of Western Australia and covers an area of 167km², of which E77/1322 and M77/1259 cover a combined area of 76.92km². Source: Fe Limited website, annual reports

7.2 Financial Position and Financial Performance The Company’s assets comprise predominantly of mineral exploration properties as noted in Section 7.1 above. Extracts of the Company’s audited financial reports for the years ended 30 June 2016 and 30 June 2017 are shown at Sections 7.7 and 7.8 of this Report.


21 7.3

Legal Structure

FEL is a public company incorporated and domiciled in Australia. FEL has the following subsidiaries: Country of incorporation

Name of subsidiary

Jackson Minerals Pty Ltd Mooloogool Pty Ltd Bulk Ventures Ltd

7.4

% interest held by FEL

Australia Australia Australia

100 100 100

Management and Personnel

The Company’s current directors are: Mr Antony Sage Mr Nicholas Sage Mr Kenneth Keogh

Non-Executive Chairman Non-Executive Director Non-Executive Director

The Company’s current company secretary is: Ms Eloise von Puttkammer 7.5 Capital Structure and Shareholders At the date of this Report, FEL had the following securities on issue:

Shares: Number Fully paid ordinary shares

293,169,629

Options: Number Exercisable at 3 cents cents on or before 30 November 2018 Escrow provisions At the date of this Report, no shares are held in escrow.

9,375,000


22 Top 20 shareholders The top 20 shareholders of FEL as at 13 September 2017 are set out below. Shareholder

DEMPSEY RESOURCES PTY LTD CAULDRON ENERGY LIMITED WHITEY TIGER PTY LTD MRS SARAH LOUISE SMART HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED PERSHING AUSTRALIA NOMINEES PTY LTD MOMENTUM NORTH PTY LTD ANTONY WILLIAM PAUL SAGE & LUCY FERNANDES SAGE SUBURBAN HOLDINGS PTY LIMITED MR ANTHONY ROBERT RAMAGE GEMGILD PTY LTD FRED PARRISH INVESTMENTS PTY LTD AUSTRALIAN TRADE ACCESS PTY LTD AFRICA COAL PTY LTD MRS LILIANA TEOFILOVA MRS CAROL MAREE BERZINS PEARL BLISS PTY LTD MOLTONI SUPER PTY LTD AUSTRALIAN TRADE ACCESS PTY LTD GOLDFIRE ENTERPRISES PTY LTD BNP PARIBAS NOMINEES PTY LTD MR DEREK MORRAN TOTAL

Number of Shares

% of total shares on issue

121,573,635 25,828,112 14,404,469 12,500,000 11,758,268 10,173,590

41.5 8.8 4.9 4.3 4.0 3.5

5,000,000 4,624,065

1.7 1.6

3,923,010

1.3

3,220,000 3,000,000 3,000,000

1.1 1.0 1.0

2,845,449 2,500,000 2,500,000 2,327,890 2,083,333 2,000,000 2,000,000

1.0 0.9 0.9 0.8 0.7 0.7 0.7

1,966,667 1,933,989

0.7 0.7

1,633,334 1,600,000 241,750,013

0.6 0.5 82.9


23 Optionholders The optionholders of FEL as at 13 September 2017 are set out below. Number of Options

Optionholder

TERRA CAPITAL NATURAL RESOURCES FUND PTY LTD PERSHING AUSTRALIA NOMINEES PTY LTD SUBURBAN HOLDINGS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CHIFLEY PORTFOLIOS PTY LTD DEMPSEY RESOURCES PTY LTD CAULDRON ENERGY LIMITED AFRICA COAL PTY LTD LTL CAPITAL PTY LTD AUSTRALIAN SHARE NOMINEES PTY LTD HORATIO STREET PTY LTD < HORATIO STREET FAMILY A/C> TOTAL

7.6

% of total options on issue

2,500,000

26.7

1,250,000

13.3

1,000,000

10.7

937,500

10.0

812,500

8.6

625,000 625,000 625,000 437,500

6.7 6.7 6.7 4.6

375,000

4.0

187,500 9,375,000

2.0 100.0

Share Price Performance

FEL’s share price movements in the 12 months to the date of the announcement of the Acquisition, together with volumes traded are presented in the graph below:

0.035 0.03

Price

0.025 0.02 0.015 0.01 0.005 0

Fe Limited

9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0

Volume

0.04


24 The FEL closing share price has fluctuated from a price of 3.5 cents at the beginning of the above period, to a low of 2.0 cents in June 2017, a high of 3.8 cents in March 2017 and to a closing price pre announcement of 2.8 cents. The following key announcements were made by the Company to the market during the above period: Date

Announcement

04-Aug-17 31-Jul-17 13-Jul-17 29-Mar-17 09-Mar-17 18-Jan-17 16-Jan-17 22-Dec-16 20-Dec-16

Exploration to commence at Kasombo AUR: New High-Grade Copper Intersection at Wodger Prospect FEL Acquires rights to Kasombo Copper-Cobalt project in DRC Company Update RNI: Wodger Firms as Priority Bryah Basin Copper target Quarterly Activities and Cashflow Report RNI: Significant VMS Mineralisation Intersected at Wodger RNI: VMS Horizon confirmed at Wodger App 3B – Shares Proposed to be issued under Prospectus

Closing share Closing share price price after three days after announcement $ announcement $ (movement) (movement) 0.032 0.026 0.024 0.038 0.029 0.027 0.035 0.025 0.025

(0%) (3.7%) (14.3%) (8.6%) (0%) (22.8%) (0%) (0%) (7.4%)

0.032 0.027 0.024 0.038 0.029 0.027 0.027 0.025 0.025

(0%) (14.8%) (14.3%) (8.6%) (0%) (22.8%) (22.8%) (0%) (7.4%)

Source: ASX company announcements

7.7

Financial Performance

Extracts of the Company’s audited financial results for the years ended 30 June 2016 and 30 June 2017 are set out below:

Interest income Recovery of costs associated with terminated transaction Gain on sale of assets Other income

Employee benefits expense and directors’ remuneration Legal costs Pre-acquisition transaction costs Brokerage fees on converting loans Share-based payment expense Impairment of exploration assets Loss on disposal of plant and equipment Accounting and audit fees Consultants costs Compliance costs Travel costs Other expenses Loss before income tax Income tax expense Loss for the period

Audited Year to 30 June 2016 $ 3,774 50,000 53,774

Audited Year to 30 June 2017 $ 4,597 100,000 750 4,130 109,477

(248,915) (216,206) (28,888) (4,761) (47,703) (28,700) (32,000) (38,208) (3,354) (60,299) (655,260) (655,260)

(99,738) (51,073) (1,998) (40,360) (3,458) (41,575) (35,000) (47,929) (21,158) (63,159) (295,971) (295,971)

7.8 Financial Position Extracts of the Company’s audited financial position as at 30 June 2016 and 30 June 2017 are set out below:


25

Current Assets Cash and cash equivalents Restricted cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Exploration and evaluation expenditure Plant and equipment Available for sale financial assets Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Application funds Total Current Liabilities Total Liabilities Net Assets/(Liabilities)

Audited 30 June 2016 $


90,137 968,131 55,702 2,625 1,116,595

422,649 5,067 3,864 431,580

4,274 2,500 6,774 1,123,369

248 248 431,828

179,562 968,131 1,147,693 1,147,693 (24,324)

39,375 39,375 39,375 392,453

7.9 Tax Losses At 30 June 2017, the Company had a net unrecognised deferred tax asset attributable to tax losses of $2,193,967 and an unrecognised deferred tax asset attributable to capital losses of $392,439. This asset is not included in the statement of financial position in Section 7.8 of this Report. 8. VALUATION OF FEL PRIOR TO THE PROPOSED TRANSACTION 8.1

Valuation Summary

HLB has assessed the fair market value of FEL to be 1.1 cents per share. This is based on our assessment of the fair market value on a control basis prior to incorporating the effects of the Proposed Transaction. For the purpose of our opinion, fair market value is defined as the amount at which the shares would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have considered the aspect of a premium for control in forming our opinion. In determining this amount, we assessed the fair market value of FEL after considering the various valuation methods, which are discussed in further detail at Section 8.2 of this Report. 8.2 Valuation Methodology Methodologies commonly used for valuing assets and businesses are as follows: 8.2.1 Capitalisation of future maintainable earnings (“FME”) This method places a value on a business by estimating the likely future maintainable earnings, capitalised at an appropriate rate which reflects business outlook, business risk,


26 investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data. The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives. The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (“EBIT”) or earnings before interest, tax, depreciation and amortisation (“EBITDA”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used for FME. This method is not appropriate for use in mining exploration companies. 8.2.2 Discounted future cash flows (“DCF”) The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present values at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks. A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate. DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start-up phase, or experience irregular cash flows. The DCF methodology is not considered appropriate to use in the valuation of FEL as the Company is in the exploration phase and does not have reliable cash flow forecast information based on JORC reserves. 8.2.3 Net asset value Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:   

Orderly realisation of assets method Liquidation of assets method Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner. The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Where wind up or liquidation of the entity is not being contemplated, these methods in their strictest form are generally not appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs. The net assets on a going concern method is usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities


27 of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation. Often the FME and DCF methodologies are used in valuing assets forming part of the overall net assets on a going concern basis. These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when entities are not profitable, a significant proportion of the entity’s assets are liquid or for asset holding companies. 8.2.4 Quoted Market Price Basis Another valuation approach that can be used in conjunction with (or as a replacement for) any of the above methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a “deep” market in that security. 8.2.5 Methodology Adopted We consider that the most appropriate methods for the valuation of FEL shares are the net assets on a going concern method and the quoted market price basis. 8.3 Valuation 8.3.1 Net assets on a going concern method of valuation of FEL (prior to incorporating the effects of the Proposed Transaction) Our valuation of FEL on a going concern method of valuation is set out in our valuation calculations below. We have considered the valuation of FEL prior to incorporating the effects of the Proposed Transaction.

Statement of Financial Position Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Exploration and evaluation expenditure Plant and equipment Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets

Note

1


Valuation Low $

Valuation Preferred $

Valuation High $

422,649 5,067 3,864 431,580

422,649 5,067 3,864 431,580

422,649 5,067 3,864 431,580

422,649 5,067 3,864 431,580

248 248 431,828

2,500,000 248 2,500,248 2,931,828

2,900,000 248 2,900,248 3,331,828

3,200,000 248 3,200,248 3,631,828

39,375 39,375 39,375 392,453

39,375 39,375 39,375 2,892,453

39,375 39,375 39,375 3,292,453

39,375 39,375 39,375 3,592,453


28

Number Shares on issue

Number

Number

Number

293,169,629

293,169,629

293,169,629

293,169,629

0.13

1.0

1.1

1.2

Value per share (cents)

We have made the following adjustments to the net assets of FEL as at 30 June 2017 in determining our valuation. These adjustments relate to matters which have effect prior to the effects of the Proposed Transaction. 1. We instructed Al Maynard & Associates Pty Ltd to provide an independent market valuation of the mineral assets currently held by FEL. Al Maynard & Associates Pty Ltd considered a number of different valuation methods when valuing these mineral assets. A copy of the report prepared by Al Maynard & Associates Pty Ltd is attached to this Report as Appendix 2. The range of values for FEL’s exploration assets as assessed by Al Maynard & Associates Pty Ltd is set out below. We have incorporated these valuation amounts in the above table as the “Valuation Low”, “Valuation High” and “Valuation Preferred” amounts. Low Value $’000 Company mineral assets (as valued by Al Maynard & Associates Pty Ltd): Valuation of FEL’s mineral assets Total

Preferred Value $’000

High Value $’000

2 2,500,000 2,500,000

2,900,000 2,900,000

3,200,000 3,200,000

8.3.2 Quoted Market Price Basis - Shares To provide a comparison to our assessed valuation of FEL in Section 8.3.1, we have also assessed the value of FEL on the quoted market price basis. The quoted market value of a company’s shares is reflective of its value on a minority interest basis. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company. RG 111.25 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of section 611 of the Corporations Act 2001, the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain control of another company. These advantages include the following:    

control over policy, decision making and strategic direction; access to cash flows; control over dividend policies; and potentially, access to tax losses.

Whilst Cape Lambert will not be obtaining 100% of FEL, RG 111 states that the expert should calculate the value of a “target’s” (i.e. FEL) shares as if 100% control was being obtained. RG 111.3 states that the expert can then consider an acquirer’s practical level of


29 control when considering reasonableness. We have considered reasonableness in Section 11 of this Report. Our valuation calculation has been prepared in two parts. First, we have calculated the quoted market price on a minority interest basis. Secondly, we have added a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control. Minority interest value A chart of the share price movement of FEL over the 12 month period prior to the date of announcement of the Acquisition is included in Section 7.6 of this Report. The FEL closing share price has fluctuated from a price of 3.5 cents at the beginning of the above period, to a low of 2.0 cents in May and June 2017, a high of 3.8 cents on 30 March 2017 and to a closing price pre announcement of 2.8 cents (13 July 2017). To provide further analysis of the market prices for a FEL share, we have also calculated the volume weighted average market price for 10, 30, 60 and 90 day periods of recent trading, immediately prior to the announcement of the Acquisition is as follows: 13 July 2017 cents Closing price Volume weighted average

2.8

10 Days cents 2.7

30 Days cents 2.6

60 Days cents 2.6

90 Days cents 2.5

For the quoted market price basis to be reliable there needs to be an adequately liquid and active market for the securities. A deep market is a market with a high trading volume where a relatively large trade cannot impact the price of a security. We consider the following characteristics to be representative of a liquid and active or “deep” market:    

Regular trading in a company’s securities; At least 50% of a company’s securities are traded on an annual basis; The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and There are no significant and unexplained movements in the company’s share price.

A company’s shares should meet all of the above criteria to be considered as trading in a “deep” market, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares determined on this basis cannot be considered relevant. An analysis of the volume of trading in FEL shares for the 12 months prior to the date of announcement of the Acquisition (13 July 2017) is set out below:


30 Low cents Quoted market price value Control premium Quoted market price value inclusive of a control premium Low cents 10 days 30 days 60 days 90 days 180 days 365 days

High cents 2.6 2.4 2.1 2.0 2.0 2.0

Preferred cents

2.0 15%

2.9 20%

3.8 25%

2.3

3.5

4.8

Cumulative Volume Traded 3.1 3.1 3.1 3.1 3.8 3.8

High cents

No 22,639,876 34,311,264 36,485,551 43,279,524 53,243,163 61,388,338

As a % of issued capital as at 30 June 2017 7.7% 11.7% 12.5% 14.8% 18.2% 20.1%

This table indicates that the Company’s shares display a low level of liquidity, with only 20.1% of the Company’s issued capital at 30 June 2017 being traded in the 12 month period to 13 July 2017 and only 14.8% over the last 90 days. We do not consider this level of trading in the Company’s shares to be sufficiently adequate and to otherwise meet the criteria in order for the trading in the Company’s shares to be considered as “deep”. Notwithstanding our opinion that the quoted market price basis is not a reliable valuation basis for our assessment, for the purpose of comparison, in our opinion a range of values for FEL shares based on market pricing, after disregarding post-announcement pricing, is between 2.0 cents and 3.8 cents per share, with a preferred pricing of 2.9 cents per share. Control Premium Share prices from share market trading do not reflect the market value for control of a company as they are in respect of minority interest holdings. Traditionally, the premiums required to obtain control of companies range between 15% and 25% of the minority interest values. Quoted market price including control premium Applying these control premiums to FEL’s quoted market share price results in the following quoted market price values including a premium for control: Therefore, our valuation of a FEL share based on the quoted market price method and including a premium for control is between 2.3 cents and 4.8 cents with a preferred value of 3.5 cents. 8.4

Assessment on the Fair Market Value of a FEL Share

The results of the net asset and quoted market price valuations performed are summarised in the table below:


31 Low cents Net assets (Section 8.3.1) Quoted market price (Section 8.3.2)

Preferred cents

1.0 2.3

High cents

1.1 3.5

1.2 4.8

As it is our opinion that the trading in FEL shares is illiquid, we believe the most appropriate method of valuation of FEL shares in accordance with RG 111 is the net assets method. Based on the results above we consider the preferred value of an FEL share to be 1.1 cents. 9. VALUATION OF FEL SUBSEQUENT TO THE PROPOSED TRANSACTION Following is our assessment of the fair market value of an FEL share on a minority basis subsequent to incorporating the effects of the Proposed Transaction. In assessing the effects of the Proposed Transaction, we have also taken into account other transactions that will occur if the resolution giving effect to the Proposed Transaction is passed, as well as other related matters as noted below. Report Reference Value of FEL - pre-transaction Non-refundable deposit paid on execution of the Terms Sheet (Note 1) Payment due 3 months after settlement date (Note 1) Value of the Kasombo Project (Note 2) Placement – Resolution 7 (Note 4) Net assets ($) Shares on issue – pre-transaction Issue of Consideration Shares to Cape Lambert Issue of Facilitator Shares (Note 3) Placement – Resolution 7 (Note 4) Potential issue of shares to Cape Lambert or Pelesa (Note 5) Total shares on issue (Number)

8.3.1

Valuation Low

Valuation Preferred

Valuation High

2,892,453

3,292,453

3,592,453

(50,000)

(50,000)

(50,000)

(75,000) 10,300,000 2,000,000 15,067,453

(75,000) 11,400,000 2,000,000 16,567,453

(75,000) 12,600,000 2,000,000 18,067,453

293,169,629

293,169,629

293,169,629

25,000,000 10,000,000 80,000,000

25,000,000 10,000,000 80,000,000

25,000,000 10,000,000 80,000,000

25,000,000 433,169,629

25,000,000 433,169,629

25,000,000 433,169,629

3.5 20% 2.8

3.8 17% 3.2

4.2 13% 3.6

Net assets per share (cents) Minority interest discount (Note 6) Value post transaction (cents)

Note 1 – Payments made in accordance with the Term Sheet As set out in Section 3 of this Report, the consideration for Cape Lambert assigning its rights in the Kasombo Project to FEL included the payment by FEL of a $50,000 nonrefundable deposit and the payment of an amount of $75,000 on the date which is three months after the settlement date. Both these amounts are in respect of contributions towards pre-settlement expenditure. These payments have been factored into our valuation of FEL subsequent to the Proposed Transaction.


32 Note 2 – Inclusion of the value of the Kasombo Project Part of the consideration for Cape Lambert assigning its rights in the Kasombo Project to FEL is the issue of 25 million fully paid shares in FEL to Cape Lambert (“Consideration Shares”). The potential issue of these shares has been factored into our valuation of FEL subsequent to the Proposed Transaction. We have also factored into this valuation the value of the Kasombo Project to be acquired by FEL. We instructed Al Maynard & Associates Pty Ltd to provide an independent market valuation of the Kasombo Project owned by Cape Lambert. Al Maynard & Associates Pty Ltd considered a number of different valuation methods when valuing the project. A copy of the report prepared by Al Maynard & Associates Pty Ltd is attached to this Report as Appendix 2. The range of values for the Kasombo Project as assessed by Al Maynard & Associates Pty Ltd is set out below. We have incorporated these valuation amounts in the above table as the “Valuation Low”, “Valuation High” and “Valuation Preferred” amounts.

Low Value $’000 Company mineral assets (as valued by Al Maynard & Associates Pty Ltd): Kasombo Project Total

10,300,000 10,300,000

Preferred Value $’000

High Value $’000

11,400,000 11,400,000

12,600,000 12,600,000

Note 3 – Issue of Facilitator Shares If Resolution 5 of the Notice is passed (being the issue of 25 million fully paid shares to Cape Lambert as part consideration for Cape Lambert assigning its rights in the Kasombo Project to FEL), Resolution 6 will be put to the shareholders at the same meeting. Resolution 6 relates to the issue of 10 million Facilitator Shares to the facilitator of the transaction. Note 4 – Placement – Resolution 7 If Resolutions 5 and 6 of the Notice are passed, Resolution 7 will be put to the shareholders at the same meeting. Resolution 7 relates to the placement of shares to the value of $2 million. For the purposes of our valuation, we have assumed that these shares will be issued at a price of $0.025 per share resulting in the issue of 80 million fully paid shares. Note 5 – Potential issue of shares to CFE or Pelesa As set out in Section 3 of this Report, if production is achieved at the Kasombo Project, FEL will be required to issue to either Cape Lambert or Pelesa (depending on whether this occurs before or after production at Cape Lambert’s Kipushi Project), 25 million FEL shares, as well as FEL granting to Pelesa a 1% royalty on all of FEL’s attributable production from the Kasombo Project. We consider that if production is achieved at the Kasombo Project, the valuation of the Kasombo Project would be well in excess of the current valuation as determine by Al Maynard & Associates Pty Ltd, however we do not believe that it is possible to determine such a value at this stage. For the purposes of our valuation, to be conservative, we have


33 factored in only the issue of shares without any corresponding increase in the valuation of the Kasombo Project. At the same time, we have not factored in the effect of the 1% royalty to be granted to Pelesa as we also do not believe that it is possible to determine this royalty at this stage. We have also not factored in the $US75,000 payable to Pelesa in the event that production is achieved at the Kasombo Project prior to production at Cape Lambert’s Kipushi Tailings Project, as this will not have a material impact on our valuation. Note 6 – Minority interest discount The above “Net assets per share (cents)”of an FEL share have been determined on a controlling interest basis. If the Proposed Transaction is approved via the passing of Resolution 1, together with the passing of Resolution 2, non-associated shareholders would become minority shareholders in the Company. We have therefore adjusted our valuation of an FEL share to reflect a minority interest holding. As noted in Section 8.3.2 of this Report, we assessed an appropriate premium for control to range from 15% to 25%. We have therefore assessed a range for an appropriate minority interest discount (which is the inverse of a premium for control) of 13% to 20%. We have adjusted our valuation of an FEL share to reflect a minority interest holding. As noted in Section 8.3.2 of this Report, we assessed an appropriate premium for control to range from 15% to 25%. We have therefore assessed a range for an appropriate minority interest discount (which is the inverse of a premium for control) of 13% to 20%. Sole Funding Commitment Under the JV Agreement, FEL will be taking over the commitment to sole fund the costs of exploration and the completion of a feasibility study on the Kasombo Project up to a cost of $US7.5m. For the purposes of this valuation, we have assumed that this expenditure will directly increase the value of the Kasombo Project. We have also assumed that the Company will most likely need to raise capital to fund this commitment, however we are not in a position to ascertain the timing of this capital raising, nor the price at which the capital will be raised. Whilst we believe that a likely capital raising will reduce the value of an FEL share post-transaction, we do not believe that the value will reduce to a level that would change our opinion as to whether the Proposed Transaction was fair. 10. ASSESSMENT OF WHETHER THE PROPOSED TRANSACTION IS FAIR RG 111 defines an offer as being fair if the value of the offer price is equal to or greater than the value of the securities being the subject of the offer. Set out in the table below is a comparison of our assessment of the fair market value of a FEL share prior to the Proposed Transaction on a control basis with the value of a FEL share subsequent to the Proposed Transaction on a minority basis. Report Reference Value of a FEL share pre-transaction Value of a FEL share post-transaction:

8.3 9

Low cents 1.0 2.8

Preferred cents 1.1 3.2

High cents 1.2 3.6


34 As the preferred value of a FEL share on a pre-transaction basis is lower than the preferred value post transaction on a minority basis, it is our opinion that the Proposed Transaction is fair. 11. ASSESSMENT OF WHETHER THE PROPOSED TRANSACTION IS REASONABLE In accordance with RG 111, an offer can be reasonable even though it is not fair. In determining whether the Proposed Transaction is reasonable, we have also considered the advantages and disadvantages of the Proposed Transaction, as follows: Advantages 

the acquisition of the Kasombo Project interest will provide the Company an opportunity to build a portfolio of cobalt assets in the established cobalt producing region of DRC and nearby to the Kipushi Processing Plant;



the acquisition increases the size of the Company’s existing assets and interests and may enhance the prospects of the Company;



the Kasombo Project is at a more advanced stage of exploration than the Company’s existing assets; and



the potential increase in market capitalisation of the Company following completion of the Proposed Transaction may lead to increased coverage from investment analysts, access to improved equity capital market opportunities and increased liquidity which are not currently present.

Disadvantages 

current shareholders will have their voting power in the Company diluted;



future outlays of funds from the Company will be required for the exploration and development of the Kasombo Project, including the commitment of the Company to be required to sole fund the costs of exploration and the completion of a feasibility study on the Kasombo Project up to a cost of $US7.5 million; and



current Shareholders will be exposed to the additional risks associated with the Kasombo Project as set out in Section 6.5 of the Explanatory Statement forming part of the Notice.

We have considered the above factors. We consider that, on balance, the advantages of the Proposed Transaction outweigh the disadvantages. We are therefore of the view that the position of non-associated shareholders if the resolution giving rise to the Proposed Transaction is passed, would be more advantageous than if the resolution was not passed. Accordingly, we are of the opinion that the Proposed Transaction is reasonable to the nonassociated shareholders. 12. SOURCES OF INFORMATION In preparing this report we have had access to the following principal sources of information:   

Draft Notice concerning the Proposed Transaction; FEL’s annual audited financial reports for the years ended 30 June 2016 and 30 June 2017; Discussions with officers of FEL;


35    

Publicly available information; Share registry information; ASX Announcements concerning the Proposed Transaction; and Valuation report of FEL’s current mineral assets and Cape Lambert’s Kasombo Project prepared by Al Maynard & Associates Pty Ltd.

13. QUALIFICATIONS, DECLARATIONS AND CONSENTS HLB, which is a wholly owned entity of HLB Mann Judd Chartered Accountants, is a Licensed Investment Adviser and holder of an Australian Financial Services Licence under the Act and its authorised representatives are qualified to provide this Report. The authorised representative of HLB responsible for this Report has not provided financial advice to FEL. The author of this Report is Lucio Di Giallonardo. He is a Fellow of Chartered Accountants Australia and New Zealand, holds a Bachelor of Business, and has considerable experience in the preparation of independent expert reports and valuations of business entities in a wide range of industry sectors. Prior to accepting this engagement, HLB considered its independence with respect to FEL with reference to ASIC Regulatory Guide 112 and APES 225. In HLB’s opinion, it is independent of FEL. This Report has been prepared specifically for the shareholders of FEL. It is not intended that this Report be used for any other purpose other than to accompany the Notice to be sent to the FEL shareholders. In particular, it is not intended that this Report should be used for any purpose other than as an expression of the opinion as to whether or not the Proposed Transaction is fair and reasonable to the non-associated shareholders of FEL. HLB disclaims any assumption of responsibility for any reliance on this Report to any person other than those for whom it was intended, or for any purpose other than that for which it was prepared. The statements and opinions given in this Report are given in good faith and in the belief that such statements and opinions are not false or misleading. In the preparation of this Report, HLB has relied on and considered information believed, after due inquiry, to be reliable and accurate. HLB has no reason to believe that any information supplied to it was false or that any material information has been withheld. HLB has evaluated the information provided to it by FEL and other parties, through inquiry, analysis and review, and nothing has come to its attention to indicate the information provided was materially misstated or would not provide a reasonable basis for this Report. HLB has not, nor does it imply that it has, audited or in any way verified any of the information provided to it for the purposes of the preparation of this Report. In accordance with the Act, HLB provides the following information and disclosures: 

HLB will be paid its usual professional fee based on time involvement at normal professional rates, for the preparation of this Report. This fee, estimated to be in the range of $18,000 to $22,000 excluding GST, is not contingent on the conclusion, content or future use of the Report.


36 

Apart from the aforementioned fee, neither HLB, nor any of its associates will receive any other benefits, either directly or indirectly, for or in connection with the preparation of this Report.



HLB and its directors and associates do not have any interest in FEL.



HLB and its directors and associates do not have any relationship with FEL or any associate of FEL.

Yours faithfully HLB MANN JUDD CORPORATE (WA) PTY LTD Licensed Investment Advisor (AFSL Licence number 250903)

L DI GIALLONARDO Authorised Representative


37 APPENDIX 1 Appendix 1 – Glossary of Terms TERM

DEFINITION

Acquisition

Cape Lambert assigning to FEL its rights and obligations in the Kasombo Copper-Cobalt Project (“Kasombo Project”) located in the Democratic Republic of Congo

Announcement Date

Date the event giving rise to the Proposed Transaction was announced to ASX, being 13 July 2017

ASIC

Australian Securities and Investments Commission

ASX

Australian Securities Exchange Limited

Cape Lambert

Cape Lambert Resources Limited

DCF

Discounted cash flows

Directors

Directors of FEL

EBIT EBITDA

Earnings before Interest and Tax Earnings before Interest, Tax, Amortisation

Facilitator Shares

The issue of 10 million fully paid shares in FEL to the facilitator of the Acquisition

FEL or the Company

Fe Limited

FME

Future maintainable earnings

Formal Agreement

Deed of Assignment and Assumption dated 18 September 2017 between FEL and Cape Lambert

HLB

HLB Mann Judd Corporate (WA) Pty Ltd

JORC Code

Code of the Joint Ore Reserves Committee of the AIMM, AIG and MCA

JV Agreement

Agreement between Cape Lambert and Paragon, which established Cape Lambert’s rights and obligations associated with the Kasombo Project

Notice

The Notice of Annual General Meeting for 2017 and Explanatory Statement

Paragon

Paragon Mining SARL

Proposed Transaction

The potential issue of 25 million fully paid shares in FEL to Cape Lambert as part consideration for the Acquisition

Report

Independent expert’s report prepared by HLB

Non-associated shareholders

Existing shareholders in FEL who are not associated with Cape Lambert or its associates

Depreciation

and


38 APPENDIX 2 Appendix 2 – Independent valuation of FEL’s mineral assets and Cape Lambert’s Kasombo Project prepared by Al Maynard & Associates Pty Ltd.

AL MAYNARD & ASSOCIATES Pty Ltd Consulting Geologists www.geological.com.au 9/280 Hay Street, SUBIACO, WA, 6008 Australia

Tel: (+618) 9388 1000 Fax: (+618) 9388 1768

ABN 75 120 492 435 Mob: 04 0304 9449 [email protected]

Australian & International Exploration & Evaluation of Mineral Properties

INDEPENDENT TECHNICAL VALUATION OF THE

FE LIMITED MINING PROJECTS IN

WESTERN AUSTRALIA AND THE CAPE LAMBERT RESOURCES LIMITED KASOMBO PROJECT IN

THE DEMOCRATIC REPUBLIC OF CONGO

PREPARED FOR

HLB MANN JUDD CORPORATE (WA) PTY LTD

Author: Peer Review: Company; Date:

Brian J. Varndell, BSc(Spec.Hons.), FAusIMM. Allen J Maynard BAppSc(Geol), MAIG, MAusIMM Al Maynard & Associates Pty Ltd 21st August, 2017

Valuation of the FEL Mineral Assets

EXECUTIVE SUMMARY This Independent Technical Valuation Report (“ITV”) of the Fe Limited (“FEL”) mining projects in Western Australia (“WA”) and the Cape Lambert Resources Limited Kasombo project in the Democratic Republic of Congo (“DRC”), has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr L. Di Giallonardo, (Director) of HLB Mann Judd Corporate (WA) Pty Ltd (“HLB”) for inclusion in their Independent Expert’s Report (“IER”). The WA tenements concerned cover 809.87 km2 within the Murchison District of WA and the Kasombo project covers 6 km 2 in the DRC (Figure 1 & 2). This report provides an independent technical valuation of the two projects as at 21st August, 2017. The AM&A report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports (the “Valmin Code”) (2015) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”). FEL is a company on the Official List of Australian Securities Exchange Limited (“ASX”). Its principal business is involved in mineral exploration. FEL owns 20% of the concessions situated northwest of Meekatharra in WA that are prospective for gold, iron deposits and base metal mineralisation. The annual rents and rates for the Australian leases is $161,815pa and the total commitment is $1,011,840pa. The key project area in WA comprises two zones in the Murchison district north of Meekatharra. A western zone is centred over the Fortnum Mine area which has predominantly historical gold production. The eastern area is centred over a portion of the Bryah Basin where the contact zones of the Naracoota Fm rocks constitute base metal mineralisation targets with perhaps the Horseshoe Lights base metal with precious metal credits deposit providing a model for mineralisation. Historically most exploration efforts failed to encounter anomalous mineralisation beneath the extensive soil-colluvium-laterite cover, however collective interpretation has recently led to identification of new target zones and exploration drilling has met success at the Wodger and Neptune deposits. At the Kasombo project there is currently no geological map available of the area so no resource estimates can yet be attempted. The artisanal workings and two non-operating nearby open pits confirm the presence of copper/cobalt mineralisation at the project, however extensive successful exploration is required before JORC Code (2012) resources estimates can be undertaken. Given the relevance of the key Joint Venture (“JV”) assumptions and factors underlying the prospectivity and conceptual future for resources at the projects AM&A has concluded that it is reasonable to rely on this data for the purposes of this report and the derivation of a current valuation accordingly based on that information. AM&A has relied on the technical data supplied by FEL and additional data available on the WAMEX website and accepted that data in reaching our conclusions, unless AM&A expressly states otherwise. The summary of the valuation conclusions is presented in Table 5. This current valuation has used a form of the MEE Method applied to expenditures that are relevant to the present day tenement holding and the JV method applied to tenement packages. The average of the WA MEE and the JV methods was selected as the most appropriate method for valuation estimate purposes. The rounded 20% FEL share of the Western Australian Projects is ascribed a value on the 21st August, 2017 at $2.9 M from within the range $2.5 M to $3.2 M. The rounded proposed FEL JV commitment to the Kasombo Project in the DRC is ascribed a value on the 21st April, 2017 at $11.4 M from within the range $10.3 M to $12.6 M.


Figure 1: FEL WA Projects Location Plan. Exploration Licence data based on the WA Tengraph website, sourced on 21stAugust, 2017.

Figure 2: Kasombo Project DRC Location Plan.


CONTENTS 1.0 Introduction 1.1 1.2

3

General Valuation Methods.................................................................................................................................3 Discounted Cash Flow/Net Present Value ........................................................................................................4 Joint Venture Terms.............................................................................................................................................4 Similar or Comparable Transactions.................................................................................................................4 Multiple of Exploration Expenditure ..................................................................................................................4 Ratings System of Prospectivity (Kilburn)........................................................................................................4 Empirical Methods (Yardstick – Real Estate)....................................................................................................5 General Comments ..............................................................................................................................................5 Environmental implications ................................................................................................................................5 Indigenous Title Claims.......................................................................................................................................5 Commodities-Metal prices ..................................................................................................................................5 Resource/Reserve Summary ..............................................................................................................................5 Previous Valuations.............................................................................................................................................5 Encumbrances/Royalty .......................................................................................................................................6

3.0 Background Information 3.1 3.2 3.3

1

Scope and Limitations.........................................................................................................................................2 Statement of Competence...................................................................................................................................3

2.0 Valuation of the Mineral Assets – Methods and Guides 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14

PAGE

6

Introduction...........................................................................................................................................................6 Specific Valuation Methods ................................................................................................................................6 Tenement Holding................................................................................................................................................6

4.0 FEL Projects, Western Australia

7

4.1 Introduction...........................................................................................................................................................7 4.2 Location and Access ...........................................................................................................................................7 4.3 Regional Geological Setting. ..............................................................................................................................8 4.3.1 Western Fortnum Area 8 4.3.2 Eastern Bryah Basin Area 14 4.4 Previous and Recent Exploration ....................................................................................................................16 4.4.1 Fortnum Area 16 4.4.2 Bryah Zone 19 4.7 Exploration Potential .........................................................................................................................................20

5.0 Democratic Republic of Congo

20

5.1 Introduction........................................................................................................................................................20 5.2 Regional Geology..................................................................................................................................................23 5.4 Resource Potential.............................................................................................................................................26

6.0 Valuation of the Project 6.1 6.2

26

Selection of Valuation Methods........................................................................................................................27 Valuation Conclusions ......................................................................................................................................27

7.0 References 8.0 Glossary of Technical Terms and Abbreviations Appendix 1: Details of Valuation Estimates.

FEL WA & DRC - ITV Report – AM&A

29 30 32

Contents i


List of Figures Figure 1: FEL WA Projects Location Plan. ............................................................................................2 Figure 2: FEL DRC Kasombo Project Location Plan.............................................................................2 Figure 3: Regional Geological setting for Western Fortnum – Peak Hill Mine Area..............................9 Figure 4: Generalised Stratigraphy of the Fortnum Wedge.................................................................10 Figure 5: Fortnum Area Key Deposit Locations...................................................................................12 Figure 6: Toms Simplified Geological Plan..........................................................................................13 Figure 7: Toms Cross Section 10940N. ..............................................................................................13 Figure 8: Alchemy Bryah Basin Joint Venture area including Neptune Deposit Location. ..................15 Figure 9: Forrest Gimp RAB Drill Hole Locations and Intercepts with cross section – July 2006. ......17 Figure 10: Wodger Drilling Defined Stratigraphic Offset to Cuintercepts at Forrest Prospect with new anomalous VMS intercepts. ................................................................................................................18 Figure 11: Wodger Long Section Showing Residual Oxidised Au cap................................................19 Figure 12: Kipushi Tailings and Kasombo Cu/Co Projects Location in Google Image........................21 Figure 13: Kasombo Deposit Area Tenement over Google Image. ....................................................22 Figure 14: Artisinal diggings with Saprolite hosted Cobalt Mineralisation Zones. ...............................23 Figure 15: Kasombo Area Regional Geology from Google Maps. ......................................................24

List of Tables Table 1: Typical PEM Factors. ..............................................................................................................4 Table 2: FEL WA Tenement Holdings...................................................................................................7 Table 3: Anticipated Stratigraphy in the Kasombo District. .................................................................24 Table 4: Nchanga Zambian Copperbelt Area Stratigraphy. ................................................................25 Table 5: Summary Range of FEL Current Values...............................................................................28 Table 6: FEL WA Valuation Worksheet...............................................................................................33 Table 7: FEL DRC Kasombo Project JV Commitment........................................................................33


Contents ii


The Directors,

21st August 2017

HLB Mann Judd Corporate (WA)Pty Ltd Level 4, 130 Stirling Street, Perth, WA 6000, Australia Dear Sirs,

VALUATION OF THE FE LIMITED MINING PROJECTS IN WESTERN AUSTRALIA AND THE CAPE LAMBERT RESOURCES LIMITED KASOMBO PROJECT IN THE DRC

1.0

Introduction

This Independent Technical Valuation Report (“ITV”) of the Fe Limited (“FEL”) mining projects in Western Australia (“WA”) and the Cape Lambert Resources Limited (“CFE”) Kasombo project in the Democratic Republic of Congo (“DRC”), has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr L. Di Giallonardo, (Director) of HLB Mann Judd Corporate (WA) Pty Ltd (“HLB”) for inclusion in their Independent Expert’s Report (“IER”). The FEL tenements concerned cover 809.87 km2 within the Murchison District of WA and will cover 6 km 2 in the DRC (Figure 1 & 2). This report provides an independent technical valuation of the two projects as at 21st August, 2017. The AM&A report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports (the “Valmin Code”) (2015) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”). The directors of FEL engaged HLB to prepare an IER on whether it is fair and reasonable to the FEL Shareholders for FEL to issue Shares to Cape Lambert Resources Limited (“CFE”) as referred to in a Notice of Meeting of Shareholders (“Notice”) and an Explanatory Statement (“ES”) attached to the Notice to be forwarded to shareholders in September 2017 for a shareholders meeting planned for October 2017. The IER contains a full description of the various JV arrangements that are applicable to both of the full tenement packages. FEL is a company listed on the Official List of Australian Securities Exchange Limited (“ASX”) (ASX:FEL). Its principal business is involved in mineral exploration. FEL, through its 100% owned subsidiary Jackson Minerals Pty Ltd (“Jackson”), owns 20% of the concessions situated in the Murchison District of Western Australia which are in JV with several other parties. FEL will also have, through an acquisition of the JV rights from CFE, access to three mineralised areas on two licences (“Kasombo Project”) within the Katantaga region located in the extreme southwest of the DRC. Both areas are considered prospective for precious metals and base metal mineralisation based upon previous exploration and mining results. Jackson held the original WA tenement package and vended it into the initial successful Gleneagle Gold Ltd (“Gleneagle”) Initial Public Offering (“IPO”) in 2003 for $100,000 cash and 3 M 20cent shares worth $600,000 plus a retained 20% free carried interest in all minerals to any decision to mine. Gleneagle has had a JV with Eagle Gold Mines Pty Ltd (“Eagle’) that after several name changes has become Auris Minerals Ltd (“AUR”). AUR negotiated another JV through Alchemy Resources Limited (“ALY”) which in turn negotiated two further JVs: the first with Independence Group NL (“Independence”) whereby Independence can earn an 70% interest in any base metal discoveries (within part of E52/1668, E52/1678 and E52/1730 and all of E52/1722) by the combined expenditure of $11.5 M; and the second with Northern Star Resources Ltd now assigned to Billabong Gold Pty Ltd (“Billabong”) whereby Billabong can earn a 70% interest in the gold prospective tenements (part of E52/1668, E52/1678 and E52/1730) by the combined expenditure of $1.2 M. FEL WA & DRC - ITV Report – AM&A


For the DRC project, CFE has a 50/50 JV with Congolese entity Paragon Mining SARL (“Paragon”) that includes the Kasombo Project, which comprises the exploration and drilling of potential copper/cobalt deposits to a pre-feasibility study level and a decision to mine. The terms for the assignment of rights includes a total payment of US$ 200,000 cash and 60 M shares and a 1% royalty on any of its share of production. This report provides an independent technical valuation of the two projects as at 21st August 2017. The report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports (the “Valmin Code”) (2015) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”) and specifically :  ASIC Regulatory Guideline 111 – Content of expert’s Reports (“RG 111”)  ASIC Regulatory Guideline 112 – Independence of Experts (“RG 112”); and  AusIMM’s Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (“the ValMin Code”). The assets valued in this report are the tenements in WA and the DRC. 1.1 Scope and Limitations This Report is valid as of 21st August 2017 which is the date of the latest review of the data and technical information and there have been no material changes to this data or valuation since that date. The valuation can be expected to change over time having regard to political, economic, market and legal factors. The valuation can also vary due to the success or otherwise of any mineral exploration that is conducted either on the mineral assets concerned or by other explorers on prospects in the near environs. The valuation could also possibly be affected by the consideration of other exploration data from adjacent licences with production history affecting the mineral assets which have not been made available to the writers. In order to form an opinion as to the value of any mineral asset, it is necessary to make assumptions as to the potential of ongoing exploration based upon the current geological setting and results. The writers have taken all reasonable care in formulating these assumptions to ensure that they are appropriate to the case. These assumptions are based on the writers’ technical training and over 40 years’ experience in the exploration and mining industry. Whilst the opinions expressed represent the writers’ professional opinion at the time of this Report, these opinions are not however, forecasts as it is never possible to predict accurately the many variable factors that need to be considered in forming an opinion as to the value of any mineral asset. The information presented in this Report is based on technical reports provided by FEL supplemented by our own inquiries as to the reasonableness of the supplied data. At the request of AM&A, copies of relevant technical reports and agreements were readily made available. There is also information available in the public domain and relevant references are listed in Section 7.0 – References. No site visits were undertaken since the writers are familiar with the terrane from visits to other similar environs and sufficient technical information is provided to enable an informed opinion to be derived. FEL will be invoiced and expected to pay a fee, estimated to be $8,000 for the preparation of this Report. This fee comprises a normal, commercial daily rate plus expenses. Payment is not contingent on the results of this report. Except for these fees, neither the writer nor any family members nor Associates have any interest, nor the rights to any interest in FEL nor any interest in the mineral assets reported upon. FEL has confirmed in writing that all technical data known to it was made available to the writer. The working papers and models for this valuation are being kept in our files and would be available for further references. We would be available to support our valuation if required. The title of this report shall not pass to the Company until all professional fees have been paid in full. FEL WA & DRC - ITV Report – AM&A


The valuation presented in this Report is restricted to a statement of the fair value of the mineral asset package. The Valmin Code defines fair value as “The estimated amount of money, or the cash equivalent of some other consideration, for which, in the opinion of the Expert reached in accordance with the provisions of the Valmin Code, the mineral asset or security shall change hands on the Valuation date between a willing buyer and a willing seller in an arms’ length transaction, wherein each party had acted knowledgeably, prudently and without compulsion”. It should be noted that in all cases, the fair valuation of the mineral assets presented is analogous with the concept of “valuation in use” commonly applied to other commercial valuations. This concept holds that the assets have a particular value only in the context of the usual business of the company as a going concern which is mineral exploration and development in this case. This value will invariably be significantly higher than the disposal value, where there is not a willing seller. Disposal values for mineral assets may be a small fraction of going concern values. In accordance with the Valmin Code, we have prepared the “Range of Values” as shown in Table 5, Section 6.2. Regarding the Project, it is considered that sufficient geotechnical data has been provided from the reports covering the previous exploration of the relevant area to enable an understanding of the geology. This provides adequate information to enable an informed opinion as to the current value of the mineral assets. A site visit was not undertaken since the authors are familiar with the terrane type from visits to other similar nearby environs over previous years for other clients and reliance has been placed on the drill hole data provided in WA. 1.2 Statement of Competence This Report has been prepared by Allen J. Maynard and Brian J. Varndell. Maynard is the Principal of AM&A, a qualified geologist, a Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) (No 104986) and a Member of the Australian Institute of Geoscientists (“AIG” #2062). He has had over 35 years of continuous experience in mineral exploration and evaluation and more than 30 years’ experience in mineral asset valuation. Brian J. Varndell BSc (SpecHonsGeol), FAusIMM (No111022), is a geologist with over 40 years in the industry and 35 years in mineral asset valuation. The writers each hold the appropriate qualifications, experience and independence to qualify as an independent “Expert” or “Specialist” and “Competent Person” under the definitions of the Valmin and JORC Codes.

2.0

Valuation of the Mineral Assets – Methods and Guides

With due regard to the guidelines for assessment and valuation of mineral assets and mineral securities as adopted by the AusIMM Mineral Valuation Committee on 17th February, 1995 – the Valmin Code (updated 1999 & 2015), AM&A has derived the estimates listed below using the average of the JV and MEE methods for the current technical value of the mineral assets. The ASIC publications “Regulatory Guides 111 & 112” have also been referred to and duly considered in relation to the valuation procedure. The subjective nature of the valuation task is kept as objective as possible by the application of the guideline criteria of a “fair value”. This is a value that an informed, willing, but not anxious, arms’ length purchaser will pay for a mineral (or other similar) asset in a transaction devoid of “forced sale” circumstances. 2.1 General Valuation Methods The Valmin Code identifies various methods of valuing mineral assets, including: Discounted cash flow,  Joint Venture and farm-in terms for arms’ length transactions,  Precedents from similar comparable asset sales/valuations,  Multiple of exploration expenditure,  Ratings systems related to perceived prospectivity,  Real estate value and rule of thumb or yardstick approach.



2.2 Discounted Cash Flow/Net Present Value This method provides an indication of the value of a mineral asset with identified reserves. It utilises an economic model based upon known resources, capital and operating costs, commodity prices and a discount for risk estimated to be inherent in the project. Net present value (‘NPV’) is determined from discounted cash flow (‘DCF’) analysis where reasonable mining and processing parameters can be applied to an identified ore reserve. It is a process that allows perceived capital costs, operating costs, royalties, taxes and project financing requirements to be analysed in conjunction with a discount rate to reflect the perceived technical and financial risks and the depleting value of the mineral asset over time. The NPV method relies on reasonable estimates of capital requirements, mining and processing costs. 2.3 Joint Venture Terms The terms of a proposed joint venture agreement may be used to provide a market value based upon the amount an incoming partner is prepared to spend to earn an interest in part or all of the mineral asset. This pre-supposes some form of subjectivity on the part of the incoming party when grass roots mineral assets are involved. 2.4 Similar or Comparable Transactions When commercial transactions concerning mineral assets in similar circumstances have recently occurred, the market value precedent may be applied in part or in full to the mineral asset under consideration provided sufficient details and dimensions regarding the nature of the mineral asset are disclosed. 2.5 Multiple of Exploration Expenditure The multiple of exploration expenditure method (‘MEE’) is used whereby a subjective factor (also called the prospectivity enhancement multiplier or ‘PEM’) is based on previous expenditure on a mineral asset with or without future committed exploration expenditure and is used to establish a base value from which the effectiveness of exploration can be assessed. Where exploration has produced documented positive results a MEE multiplier can be selected that take into account the valuer's judgment of the prospectivity of the mineral asset and the value of the database. PEMs can typically range between ‘zero’ to 3.0 and occasionally up to 5.0 where very favourable exploration results have been achieved, applied to previous exploration expenditure to derive a dollar value. Typical PEM Factors are shown in Table 1. PEM Range 0.1 – 0.5 0.5 – 1.0 1.0 – 1.3 1.3 – 1.5 1.5 – 2.0 2.0 – 2.5 2.5 – 3.0 3.0 – 4.0 4.0 – 5.0

Criteria Exploration (past and present) has downgraded the tenement prospectivity, no mineralisation identified Exploration potential has been maintained (rather than enhanced) by past and present activity from regional mapping Exploration has maintained, or slightly enhanced (but not downgraded) the prospectivity Exploration has considerably increased the prospectivity (geological mapping, geochemical or geophysical) Scout Drilling has identified interesting intersections of mineralisation Detailed Drilling has defined targets with potential economic interest. A resource has been defined at Inferred Resource Status, no feasibility study has been completed Indicated Resources have been identified that are likely to form the basis of a prefeasibility study Indicated and Measured Resources

Table 1: Typical PEM Factors. 2.6 Ratings System of Prospectivity (Kilburn) The most readily accepted method of this type is the modified Kilburn Geological Engineering/Geoscience Method and is a rating method based on the basic acquisition cost (‘BAC’) of the mineral asset that applies incremental, fractional or integer ratings to a BAC cost with respect to various prospectivity factors to derive a value. Under the Kilburn method the valuer is required to FEL WA & DRC - ITV Report – AM&A


systematically assess four key technical factors which enhance, downgrade or have no impact on the value of the mineral asset. The factors are then applied serially to the BAC of each mineral asset in order to derive a value for the mineral asset. The factors used are; off-property attributes onproperty attributes, anomalies and geology. A fifth factor that may be applied is the current state of the market. 2.7 Empirical Methods (Yardstick – Real Estate) The market value determinations may be made according to the independent expert’s knowledge of the particular mineral asset. This can include a discount applied to values arrived at by considering conceptual target models for the area. The market value may also be rated in terms of a dollar value per unit area or dollar value per unit of resource in the ground. This includes the range of values that can be estimated for an exploration mineral asset based on current market prices for equivalent assets, existing or previous joint venture and sale agreements, the geological potential of the mineral assets, regarding possible potential resources, and the probability of present value being derived from individual recognised areas of mineralisation. This method is termed a “Yardstick” or a “Real Estate” approach. Both methods are inherently subjective according to technical considerations and the informed opinion of the valuer. When comparable transactions can be related by mineral asset quantity (oz for precious metals and tonnes for base metals) an in-ground unit value at a particular commodity at a specific price/date can be determined and used for comparison. 2.8 General Comments The aims of the various methods are to provide an independent opinion of a “fair value” for the mineral asset under consideration and to provide as much detail as possible of the manner in which the value is reached. It is necessarily subjective according to the degree of risk perceived by the mineral asset valuer in addition to all other commercial considerations. Efforts to construct a transparent valuation using sophisticated financial models are still hindered by the nature of the original assumptions where no known resource exists and are not applicable to mineral assets without an identified resource or reserve. The values derived for this Report have been concluded after taking into account the general geological environment for the mineral assets under consideration with respect to the exploration potential of each tenement. 2.9

Environmental implications

Information to date is that there are no identified existing material environmental liabilities on the mineral assets. Accordingly, no adjustment was made during this Report for environmental implications. 2.10 Indigenous Title Claims Native Title style claims over the project area have not been indicated to AM&A. 2.11 Commodities-Metal prices Where appropriate, current metal prices are used sourced from the usual metal market publications or commodity price reviews (e.g.” Kitco.com” or “Alibaba”). 2.12 Resource/Reserve Summary There are no JORC Code (2012) compliant resource estimates declared for the Projects. 2.13 Previous Valuations No previous valuations of the tenement package are known to the authors. FEL WA & DRC - ITV Report – AM&A


2.14 Encumbrances/Royalty The Projects may be subject to government royalties as stipulated by the Government where currently applicable. No royalty payments are considered in this valuation as no mining is yet occurring.

3.0

Background Information

3.1 Introduction This valuation has been provided by way of a detailed study of existing information and field data provided by FEL regarding operations completed at the projects to date. No JORC Code (2012) compliant Resource estimates have been undertaken for any mineral deposits yet for either of the projects in WA or the DRC. Equally, Exploration target potential has also not been considered at either project. AM&A has been supplied with available historical expenditures which forms the partially second basis for this valuation in WA while the main over-riding method is the Joint Venture arrangements. The company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements. The company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcements. 3.2 Specific Valuation Methods There are various methods acceptable for the valuation of a mineral prospect ranging from the most favoured DCF analysis of identified Proved & Probable Reserves to the more subjective rule-ofthumb assessment when no Reserves have yet been calculated but Resources may exist. These are discussed above in Section 2.0. For the FEL projects the Joint Venture method averaged with MEE Method for the WA holdings has been applied to the available historic expenditures to determine a value range as at 21st August, 2017 and a preferred or most likely value ascribed within that range. 3.3 Tenement Holding FEL in its own right holds rights to all minerals on 10 Exploration Licences (“EL”) and three Prospecting Leases (“PL”) in WA and will hold the rights to three mineralised areas on two granted tenements within the DRC (Table 2). The Company provided the full tenement details to AM&A, along with all Joint Venture information, who verified this WA tenement holding on the Department of Mines Tengraph website. The total surface area of the tenements in WA is 809.87 km2, with annual rents and rates at $161,815pa and the total commitment is $1,011,840pa. The general configuration of the tenements held by FEL are presented in Figures 1, 2 and 14. The status of the tenements in WA pursuant to paragraphs 67 and 68 of the VALMIN Code has been verified by AM&A and the tenements are believed to be in good standing at the date of this valuation as represented by FEL. The other DRC licences are believed to be in good standing at the date of this valuation as represented by FEL. A “Previous Tenement ID” column is included to assist in diagram recognition. Tenement ID E51/1033-I E52/1613-I

Project Heines Find Heines Find

E52/1659

Milgun

E52/1668

Peak Hill

Holder AURJAK AURJAK AURJAK JAKALY

Date Granted

Expiry Date

Blocks

Area (ha)

22/09/2005

21/09/2017

53

16180

29/03/2006

28/03/2018

30

27/01/2004

26/01/2018

23/02/2004

22/02/2018


Rent/Rates ($)

Commitment ($)

Iron- All

30641

159000

9277

Iron- All

17349

90000

12

3409

All

7484

70000

41

12690

All

22190

123000

Minerals

Previous ID

Valuation of the FEL Mineral Assets Tenement ID

Project

Holder AURJAK AURJAK JAKALY

Date Granted

Expiry Date

Blocks

Area (ha)

Rent/Rates ($)

Commitment ($)

23/11/2004

22/11/2017

61

18530

All

36142

183000

E52/1656

22/09/2005

21/09/2017

35

10800

Iron- All

20250

105000

E52/1664

23/02/2004

22/02/2018

12

3117

All

6461

70000

P52/1040

Minerals

Previous ID

E52/1671

Milgun

E52/1672-I

Heines Find

E52/1678

Peak Hill

E52/1722

Heines Find Peak Hill

JAKALY

28/02/2005

27/02/2018

8

2425

All

8740

70000

E52/1730

Peak Hill

JAKALY

1/12/2004

30/11/2017

13

2992

All

6710

70000

E52/1852

Peak Hill

ALY

14/06/2005

13/06/2018

4

1023

All

2405

50000

P52/1494

Milgun

6/03/2015

5/03/2019

179.3

All

1285

7200

P52/1050

P52/1495

Milgun

6/03/2015

5/03/2019

181.1

All

844

7280

P52/1049

P52/1496

Milgun

6/03/2015

5/03/2019

183.7

All

1314

7360

P52/1048

161815

1011840

AURJAK AURJAK AURJAK

Totals

80987.11

Auris Exploration Pty Ltd =AUR

Jackson Minerals Pty Ltd=JAK

P52/1056, P52/1057, P52/1055 E52/1638, E52/1639, P52/1041, P52/1042, P52/1043, P52/1044, P52/1045, P52/1052, P52/1053, P52/1054, P52/1167, P52/1168 P52/1041, P52/1042, P52/1167, P52/1168

Alchemy Resources (Three Rivers) Pty Ltd=ALY

Table 2: FEL WA Tenement Holdings. The Kasombo blocks 5, 6 and 7 located on PE 481 and 4886 are valid until 3rdApril, 2024 and 13thDecember, 2024 respectively.

4.0 FEL Projects, Western Australia 4.1 Introduction FEL has rights to precious and base metals on all tenements centred approximately 780 km NNE of Perth in the Eastern Gascoyne region of Western Australia, 180km NE of Meekatharra and some 240 km south of Newman, in the East Pilbara Region of Western Australia. The Company maintains an ongoing program of review and monitoring of JV partner activity but recently little field exploration was undertaken on much of the tenements. The project areas are located on a plateau, approximately 500 amsl. It is topographically subdued with generally undulating physiography covered with low mulga woodland interspersed with spinifexcovered sand plain. Eucalypt trees are scattered along creeks and some flats. 4.2

Location and Access

General access is 75 km north along the Great Northern Highway from Meekatharra to the graded Ashburton road towards Milgun Station past the Peak Hill Mine access road and onwards to Fortnum Mine, a distance in total of some 95 km. Vehicle access within the project is via 4wd exploration tracks leading from these two roads. The climate is classed as semi-arid with a historic annual rainfall of ~236 mm per year. Average monthly rainfall data recorded at stations in the region indicate moderate seasonality, with higher average monthly rainfall totals during the summer months (peak period January to March), early winter rains and a dry spring (August to October). Average maximum temperature in January is 40 0C and for July is 250C. Average minimum temperature in January is 230C and for July is 500C. FEL WA & DRC - ITV Report – AM&A


4.3 Regional Geological Setting. 4.3.1 Western Fortnum Area The Fortnum gold deposits occur within the Fortnum Wedge which is located within the Bryah and Padbury Groups, which comprise the now-superseded Glengarry Basin of Gee and Grey (1993). The Bryah and Padbury Groups comprise Palaeoproterozoic rocks that are bound to the north by the Bangemall Basin, to the west by the Archaean Narryer Terrane, and the Archaean Marymia Terrane to the east. A complex assemblage of Archaean rocks of the Yilgarn Craton and Proterozoic rocks lie to the south. Deposition of the Bryah and Padbury Groups is interpreted as occurring between 2.0 and 1.65 Ga (Gee, 1990; Meyers et al., 1996). Rocks of the Bryah Group are interpreted as a rift succession with mafic-ultramafic volcanic rocks (Figure 3). The Padbury Group unconformably overlies the Bryah Group but most contacts are faulted. Metamorphic grade increases from east to west. The Bryah-Padbury Basin forms part of the Capricorn Oregon, a collision zone between the Archaean Yilgarn and Pilbara Cratons, and was subject to regional compression, under two progressive deformation regimes between 2.0 and 1.6 Ga (Pirajno et al., 2000; Davis, 2005). The earliest, D1-D2 event involved NNE-SSW to N-S compression, resulting in a broad, approximately east-west structural arch through the core of the basin. The D3-D4 event involved ESE-WNW to E-W compression, resulting in N-S trending folds and thrust belts. Metamorphic grade throughout the Bryah Basin comprises prograde assemblages up to greenschist facies, post-dated by retrograde overprints within high-strain zones. Mineralisation within the Bryah Basin mainly comprises orogenic lode-gold and volcanogenic massive sulphide Cu-Au deposits. To date, the majority of exploited gold mineralisation is structurally controlled, mesothermal, epigenetic lode systems, formed during the D3-D4 stages of regional deformation. These deposits are spatially associated with high strain zones in metasedimentary and/or metavolcanic rocks, and are characterised by narrow zones of hydrothermal alteration.



Figure 3: Regional Geological setting for Western Fortnum – Peak Hill Mine Area. The Fortnum Wedge area comprises a series of deformed volcanic, volcaniclastic and sedimentary rocks of the Narracoota Formation. The wedge forms a deformed and relatively uplifted sequence of Narracoota Formation within Ravelstone Formation rocks of the lower Bryah Basin. Lithological layering is generally moderately to steeply west dipping although there are exceptions. Most of the rocks have a variably developed cleavage (tectonic foliation) although some lithologies are rarely foliated - basalt is a notable example. A stratigraphic column has been compiled which is based on several composite sections through the Fortnum Mine pits with stratigraphy not exposed in the pits inferred from the lithological interpretation (Figure 4). The wedge area comprises the Narracoota Formation of volcanics and sediments, which forms the lower part of the Bryah Group (Pirajno et al., 2000). The wedge is conformably overlain by Ravelstone Formation sediments in the west as observed in Dougies pit. To the east the Narracoota Formation is interpreted to be thrust over the Ravelstone Formation.



Figure 4: Generalised Stratigraphy of the Fortnum Wedge. The best exposure of stratigraphy is in the Trev’s / Starlight area where a section can be traced from the Starlight basalt up through the interbedded tuffs, volcaniclastics and sediments into the felsic tuff then ultimately into the overlying Ravelstone Formation. Immediately below the Ravelstone Formation in the Dougies pit is a thick series of volcaniclastics comprising tuffs and interbedded sediments. A particularly clear marker unit, a coarse-grained, quartz-rich, of interpreted felsic crystal tuff is exposed at Dougies pit. This unit is also exposed on the western wall of the Callies pit and has been identified in only a few places from the chip logging. Below this unit and separated by interbedded volcaniclastics is another coarse-grained marker unit also thought to be a tuff, but with little or no quartz is interpreted to be of intermediate composition. These distinctive tuffs form marker units within the upper volcaniclastic section of the stratigraphy. Additional intermediate tuffs occur below the marker intermediate tuff so in limited exposure this unit is not as diagnostic as the quartz-rich felsic tuff marker. The Starlight basalt forms the base of this upper volcaniclastic unit. The basalt is massive and medium- to coarse grained and is usually not foliated where observed in the pits. Interpreted lower sections of the stratigraphy are exposed in the Tom and Eldorado pits. Here the lower part of the Starlight basalt overlies tuffs, volcaniclastics and sediments. Below the volcaniclastic part of the stratigraphy a lower basalt unit is exposed on the eastern wall of the Tom’s south pit. The lower volcaniclastic unit is only poorly exposed in Tom’s pit where fine-grained, well-bedded sediments and coarse grained volcaniclastics, probably tuffs, are present. In the Eldorado pit early stages of excavation exposed a similar volcaniclastic part of the



stratigraphy where the section is dominated by a massive medium-grained volcaniclastic with wellbedded sediments (or fine-grained tuffs) above and below. In the eastern part of the wedge a series of lithologies have been intersected in drilling that are similar to those observed in the western part of the wedge. However, their arrangement suggests a different stratigraphy that cannot be easily correlated with that in the west. Until more data suggests otherwise, the eastern stratigraphy has been treated separately. The generalised stratigraphy for the Fortnum Wedge is shown in Figure 7. The Horseshoe deposits, located 25km south east of the treatment plant are hosted within a sequence of ultramafic and high MgO. The interpreted structure of the wedge area is dominated by large-scale faults, mostly thrusts, and folds. It is envisaged that folding and thrusting occurred during a progressive contractional deformation event and that some cross faulting may have formed as accommodation structures during thrusting. The shear zone exposed in Tom’s pit has been interpreted as a thrust and, together with Trev’s thrust, forms a series of west dipping thrusts and inverted extensional faults that contribute significantly to the structure of the area. Macroscale folding can be demonstrated at Callies pit using cleavage bedding relationships although the overall structure here is not a simple anticline. In a similar way, bedding cleavage relationships observed in the eastern wall of the Yarlarweelor pit have been used to infer the presence of a major, south plunging anticline east of the pit. This anticline is further interpreted to trend northwards and account for an interpreted fold south of Tom’s area. The association of mineralisation with both thrust faults and particular stratigraphic intervals is well documented for the Trev’s/Starlight area and can be interpreted in terms of mineralising fluid flow interaction with; a) suitable mechanical host rocks, b) chemical host rocks, and/or c) fluid mixing traps. This implies that the thrusts provide the main fluid conduits, as evidenced by common alteration and veining and while these are sometimes mineralised, it is common to find better mineralisation in nearby locations that presumably provide better hosts due to mechanical/chemical properties or access to other fluids. The interpretation that much of the thrusting may result from inverted extensional faults would give thrusts access to deep crustal levels and fluids during their formation.



Figure 5: Fortnum Area Key Deposit Locations. A mineralisation model for the Toms deposits located less than 1 km from the Fortnum treatment plant that were mined by Perilya from 1999 to 2001 for a total of 13,905 oz Au. Gleneagle recommenced mining at the Tom deposit in July 2006. Toms is similar to the southern Yarlarweelor deposit in that it is hosted within jasperoid units in proximity to basaltic contacts (Figures 6 and 7). The jasperoid-hosted deposit consists of several west dipping ore shoots, bounded by epidotised basalt in the footwall, and mafic volcaniclastics in the hanging wall. The upper ore position is defined by a west-dipping reverse fault, now termed the “Toms Shear”, within sandy jasperoids. The lower ore shoots are hosted within variably sheared coarse grained epidotised basalts. Vein and foliation asymmetries in the Toms North pit indicate that the Tom’s shear has a reverse west over east sense of movement which is consistent with the observations made in all of the other Fortnum pits. Jasperoid is in most cases highly altered to a sandy jasperoid in the currently designed cut back. Sandy Jasperoid is a weathering alteration product, with the haematite in the jasperoid being dissolved to leave a highly porous and in some cases vuggy, friable sandy rock. Although the rocks are quite friable, the average SG is relatively high at 2.57. Fresh jasperoid is generally a massive dark purple extremely hard siliceous rock that is sporadic within the confines of the currently designed pit. Jasperoid was produced by the advanced stages of haematitic silica alteration after epidote-chlorite alteration and predates the last movement on the Toms Shear. Jasperoid outcrops at Toms Hill between the Toms South and Toms North pits FEL WA & DRC - ITV Report – AM&A


Figure 6: Toms Simplified Geological Plan.

Figure 7: Toms Cross Section 10940N. The hanging wall basalts and volcaniclastic units are weathered to upper saprolitic yellow brown clays. The footwall basalts are altered to granular epidote-chlorite and are generally massive. FEL WA & DRC - ITV Report – AM&A


Gold mineralization is late and was most likely introduced between the time of jasperoid alteration and the last episode of shearing. Mineralisation is associated within quartz vein stockworks, sheared quartz veins and interpreted pyrite-bearing faults or shears within basalts. Quartz veins are both moderately west dipping, and steep north east dipping. In areas of intense brecciation, quartz veins have numerous orientations within a broadly west dipping stockwork. Intensity of mineralisation increases in zones of strong silicification and pyritisation. Disseminated coarse euhedral pyrite cubes within the vein selvedges and zones of increased silicification are generally indicators of zones of higher grade gold mineralisation. Magnetite alteration is present as a more peripheral alteration halo to mineralisation. Mineralisation is west dipping and south plunging in the Toms North deposit but has an apparent north plunge in the southern parts of the Toms south pit. This apparent plunge is evident from 3D analysis of the drill hole data. Further structural analysis is required to confirm this. The Horseshoe mining project comprised three separate open pits, which were mined by Dominion Mining Ltd between 1991 and 1992 with 955,000 t grading at ~2.5-2.9 g/t Au, for 79,900 oz. The Horseshoe-Cassidy deposit is hosted within a sequence of high-magnesium basalts and ultramafic volcanics of the Narracoota Ultramafics in contact with fine-grained pelitic metasediments of the Thaduna Greywacke. 4.3.2 Eastern Bryah Basin Area The Bryah Basin is one of several Paleoproterozoic basins that formed during the Capricorn Orogeny resulting from the collision between the Pilbara and Yilgarn Cratons culminating around 1800 Ma. The basin comprises the Karalundi, Narracoota, Ravelstone and Horseshoe Formations (Pirajno and Occhipinti. 2000). The Narracoota Fm. conformably overlies and inter-fingers with the Karalundi Fm. and is in a dis-conformable contact with the overlying Ravelstone Fm. Rocks of the Narracoota Fm. comprise peridotitic and high-Mg basalts, basaltic hyaloclastite, mafic to ultramafic schist, pyroclastic rocks and lesser shale, lithic wacke and pods of jasperoidal chert. The formation is interpreted to have been emplaced into a sub-aqueous, back-arc basin environment (coeval with the underlying Karalundi Fm.). This geological setting is considered highly-prospective for development of VMS mineralisation. The discoveries of the Horseshoe Lights and DeGrussa deposits and the recently discovered Monty deposit confirm the base metal potential of the Narracoota & Karalundi Fms.; however, no other economic VMS discoveries have been made in this regionally extensive package. The gross stratigraphy of the basin has been defined through GSWA mapping and reconnaissance drilling, although, there is a very poor understanding of the detailed stratigraphy and prospective VMS target horizon(s) within the basin. The Neptune Prospect area has previously been mapped at the 1:250,000 and 1:100,000 scale by the GSWA however, the majority of the surface geology at the prospect is transported colluvium and sheet-wash between 1-20 m in thickness (Figure 8).



Figure 8: Alchemy Bryah Basin Joint Venture area including Neptune Deposit Location. To the Ne of the Bryah zone in the Plutonic/Marymia Mine zone the NW edge of the Belt consists of amphibolite-facies metamorphosed and foliated assemblages of ultramafic rocks, tholeiitic basalt, banded iron-formation (“BIF”), chert, felsic tuff, arkose and pelite. The central and southern part of the belt consists of metamorphosed boulder conglomerate with sub-rounded clasts of monzogranite, BIF and mafic schist in a foliated mafic matrix. The conglomerate is interlayered with arkose and rhyodacitic volcanic rocks, quartzite, pelite and amphibolite. Proterozoic dolerite dykes intrude the greenstones and the surrounding granites. Most rocks now present as pale grey, phyllitic quartz-white mica chlorite schists, locally with 'chert' horizons. The occurrence of amphiboles in the Archaean greenstones suggests that the peak metamorphic grade of the rocks was probably lower amphibolite facies. These were retrogressed to greenschist facies rocks in structurally confined strips. Interpretation of aeromagnetics indicates that the BIFs and associated rocks are overlain to the north and west by the Bangemall Group. In the north these rocks are the Wonyulgunna Sandstone and a black shale/siltstone sequence below it intersected in drillholes. To the west the overlying rocks are assigned to formations overlying the Wonyulgunna Sandstone, but relationships to both the BIFassociated rocks and the Bangemall Group are indefinite, and may involve faulting. The BIF associated rocks are almost certainly equivalents of the Lower Proterozoic Glengarry SubBasin sequences to the west of Peak Hill. The minor copper mineralisation observed in chlorite schists at Copper Hills suggests an affinity with the Narracoota Volcanics at Horseshoe Lights. The BIF to the south of the Marymia Road resembles Horseshoe Formation although a quartzitic unit close to its base is unrepresented elsewhere. An exposure of jasperoid stratigraphically below this BIF unit suggests the presence of a thin sequence of Thaduna Greywacke equivalent. All mapping in this area requires revision.



The overturned nature of the folds in the Proterozoic and the NW trends of reverse faulting in the Archaean suggest that these two structural groupings are related. It seems likely that the reverse faulting in the greenstones is probably Proterozoic in age. Mineralisation in this region is dominated by gold mines and base metal occurrences. Gold has been, or is being, produced from a NE trending corridor parallel to the Jenkin Fault. The Marymia gold mines produced approximately 350,000 oz Au from 1992-98 and current production from the Plutonic group of deposits exceeds 5 Moz Au. The main style of gold mineralisation in the district, the Plutonic brown-lode, typically occurs as thin ~1-3 m wide lodes that consist predominately of quartz-biotite-amphibole-titanite-epidote-carbonatetourmaline-arsenopyrite-pyrrhotite ± chalcopyrite ± scheelite ± gold. Visible gold is considered to have occurred at a late-stage during the evolution of the deposit as it is largely undeformed and overprints most, if not all, of the minerals and fabrics. It is typically associated with thin, discontinuous quartz-calc-silicate veins within the brown-lodes. Where these gold-bearing zones are well developed, they tend to be near-parallel to the stratigraphy as marked by the rare metasedimentary horizons and to the dominant foliation, which is also typically parallel to metasediment horizons. Geochemistry suggests that these lodes developed on the boundary between mafic units or are focussed along or adjacent to minor metasedimentary units within the Mine Mafic unit. Lodes may be rich in arsenopyrite or pyrrhotite, and while arsenopyrite is an indicator of mineralisation, it is not present in all mineralisation. Significant gold mineralisation is hosted by quartz vein systems within or at the margins of the granite separating the western greenstone belt from the central greenstone belt. The quartz vein systems are orientated sub-parallel to the granite-greenstone contact with some of the quartz veins forming thin sheets separating the greenstone from the granite. Visible gold has been panned from some of the latter quartz veins. Surficial enrichment of the primary gold mineralisation has occurred within the thick clay-rich saprolite zone that overlies the granite-greenstone basement while other areas of surficial supergene mineralisation are often characterised by the presence of abundant ironstone fragments or brown ferruginous staining. It is likely that this iron is derived from iron sulphides present in the vein systems. In the Neptune deposit area drilling has indicated Narracoota Volcanics fertile for sulphide mineralisation but no economic intersections have yet been achieved. 4.4 Previous and Recent Exploration 4.4.1 Fortnum Area Homestake Australia Limited (“Homestake”) acquired the area in 1983 after it discovered anomalous gold values in outcrop as part of a regional evaluation of the Glengarry Basin. Their initial exploration until withdrawal in 1993 concentrated around the outcrop discovery at Toms Hill, but in 1986 a bedrock RAB geochemical program was extended to the west and SW of Toms Hill in order to determine the limits of the Fortnum gold system along its projected trend. The program delineated two high order bedrock geochemical anomalies named Yarlarweelor and Callies. Exploration located further significant bedrock gold values at Trevs, 2.5 km to the north of Callies. By the end of 1988 Homestake had defined total resources of 4 Mt at 3.2 g/t Au. This included non JORC CODE Compliant proven and probable reserves of 832,000 t at 3.2 g/t Au. Homestake commenced mining in 1989 and processed 1.37 Mt of ore, from Trevs, Yarlarweelor and the smaller Twilight deposits. Following a period of low head grades coincident with a low gold price, Homestake took the decision to place the mine on care and maintenance in April 1992.



In 1993 Perilya Mines NL (“Perilya”) took up an option to purchase the Fortnum Project from Homestake and continued exploration added additional reserves at the Yarlarweelor and Trevs mines such that by May 1995, the company had reported a total combined reserve and resources of 6.35 Mt at 2.3 g/t Au. An intensive regional exploration program commenced during 1995, including mapping, soil geochemical sampling and drilling. By 20013 most resources and reserves were depleted by the 5.96 Mt production at 3.0 g/t Au for 541,000oz. Perilya divested its holdings in the area by 2003. Gleneagle and Jackson entered the district in 2003. Early exploration at Forrest Gimp from Gleneagle drilling intersected variably deformed and altered, fine-grained sedimentary rocks of the Ravelstone Formation, and highly altered ultramafic schists from the Narracoota Formation both deeply weathered to depths of over 80 m. A veneer of lateritic ferricrete, up to 3 m thick conceals bedrock throughout most of the area (Figure 9). Encouraging zones of gold mineralisation were intercepted in two holes on line 7185700mN. Mineralisation is west-dipping and associated with quartz veining in intensely sheared, sulphidic, altered ultramafic rocks. An intense manganese overprint occurs throughout parts of the mineralised zone that appears to be broadly analogous to that at the Horseshoe-Cassidy deposit.

Figure 9: Forrest Gimp RAB Drill Hole Locations and Intercepts with cross section – July 2006. During 2017 at the Wodger deposit some 12 km south of the Fortnum mill drilling has identified a 1 km long VMS mineralised horizon (Figures 5, 10 and 11). The results enhance the VMS affinities and returned an extensive halo of highly anomalous Cu, Au, Ag, Bi, Te and Mo values between the Ravelstone Fm sediments and the hydrothermally altered Narracoota Formation mafic volcanics. This mineralisation is similar in style to the Forrest Prospect and is the primary VMS horizon. In addition, the geochemistry from the assays also delineates certain rock types and suggests that the mineralisation at Wodger sits within a regional fold. This geological feature reflects the mineralisation at the Horseshoe Lights deposit that is also situated within a fold structure. The oxide mineralisation at Wodger, defines over 1km of strike that is open along strike and at depth and includes significant copper intercepts: FEL WA & DRC - ITV Report – AM&A


• 9 m at 1.30% Cu (within a broader halo of 99 m at 0.27% Cu) • 4 m at 2.02% Cu (within a broader halo of 28 m at 0.53% Cu) • 16 m at 0.85% Cu (within a broader halo of 88 m at 0.29% Cu)

Figure 10: Wodger Drilling Defined Stratigraphic Offset to Cu intercepts at Forrest Prospect with new anomalous VMS intercepts.



Figure 11: Wodger Long Section Showing Residual Oxidised Au cap. FEL ASX announcement 21Aug2017

4.4.2 Bryah Zone Past exploration commenced with broad-spaced vacuum and RAB drilling completed by Newcrest Mining Limited (“Newcrest”) and Homestake as part of the Glengarry Project Joint Venture in the mid 1990s. Follow-up RAB drilling completed by Perilya at the Neptune prospect intersected sporadic, low-order, mineralisation within 123 RAB drillholes. No further exploration was completed until 2012 when Alchemy Resources (ALY) acquired E52/1722 from Grosvenor Gold as part of a larger tenement package. Multi-element resampling of historic RAB drilling spoils coupled with soil sampling led to the identification of a discrete multielement anomaly at Neptune. A subsequent 28 hole AC drilling program established the extents of a large, high-order, multielement geochemical anomaly, hosted at the contact between the Narracoota Fm. and the underlying Karalundi Fm. In 2014 IGO entered into a letter agreement with ALY to explore the project area and subsequent drilling programs further refined the size and geological setting for the Neptune Prospect. No economic massive sulphide mineralisation has been intersected at Neptune, however, heavy disseminated, blebby and stringer style, pyrite-dominant sulphide mineralisation is hosted at three major stratigraphic horizons within the Karalundi Fm:   

Mineralised Horizon 1 is a massive to well-bedded, intercalated Graphitic Shale and Siltstone unit with minor silica flooding and 10-20% veined and disseminated pyrite. Mineralised Horizon 2 is an intercalated Siltstone, medium-grained Sandstone and Graphitic Shale unit with 5-20% pyrite ± pyrrhotite throughout. Mineralised Horizon 3 is a massive to laminated Graphitic Shale with horizons of shale clasts within and 5-20% pyrite ± pyrrhotite throughout.

Several weakly mineralised zones are also intersected within the Narracoota Fm where one of the more promising intersections is a 0.9m zone at 611 ppm Cu from 227.1m with associated anomalous FEL WA & DRC - ITV Report – AM&A


Ag, Au, As, Ba, Bi, PGEs, Sb and Se. Other encouraging anomalies with a multi-element VMS pathfinder type signature include 5.25m with 463 ppb Au, 81 ppm Cu, and 0.2 ppm Ag with pathfinder elements from 331.85m in 15BRDD002. This mineralisation is associated with highly anomalous As, Mn and Cr along with anomalies in Pt, Pd, Sb, Cd and Se hosted within a fine-grained metasedimentary rock with chloritic alteration. Sulphide textures are varied throughout and several assemblages are identified that are interpreted to represent diagenetic mineralisation, including euhedral, cubic, framboidal, and blebby morphologies and also hydrothermal mineralisation, including veined, banded and semimassive/bedded morphologies. A large alteration selvedge, comprising veined pyrrhotite+/-pyrite mineralisation with strong to intense silica-sericite+/-haematite alteration also occurs proximal to the primary Narracoota-Karalundi contact. . An additional, late/brittle vein hosted within a large sandstone package containing pyritehemimorphite infill is also intersected within 15BRDD002. Assay results from this interval are 0.65m at 763 ppm Zn and 0.9 ppm Cd from 364.35m. Although small the occurrence of hemimorphite is strongly suggestive of polymetallic hydrothermal mineralisation. Minor gold assay results also suggest a possible relationship to Peak Hill style gold mineralisation which mainly occurs in pelitic schist, in close proximity to bodies of mafic schist or Metadolerite, and commonly shows an intimate relationship with graphitic schist. 4.7 Exploration Potential There has been extensive exploration over the extensively soil/colluvium/laterite covered project area where techniques wrestled to obtain positive exploration signals. The cumulative collection of data and geological interpretation has finally reached a stage of fruition with fertile mineralisation targets identified and reportable drillhole intersections achieved. These results collectively indicate that the Narracoota Fm contact zones are fertile for mineralisation and warrants additional exploration throughout the tenement package.

5.0

Democratic Republic of Congo

5.1 Introduction The Kasombo Project comprises three separate blocks (5, 6 and 7) within two granted mining licenses, PE 4886 and a portion of PE481 (Figure 12). All deposits are within 3-5 km of the Kipushi Processing Plant which will undergo upgrading. The proposed deal with CFE will involve CFE assigning its rights to the Kasombo Project, which is located in the Katanga Copper Belt of the DRC and the location of some of the world’s largest and highest grade copper and cobalt deposits.



Figure 12: Kipushi Tailings and Kasombo Cu/Co Projects Location in Google Image The project area is approximately 24 km from the second largest DRC city, Lubumbashi, that is accessed by a well maintained sealed road (Figure 2). The project benefits from excellent, established infrastructure since Lubumbashi is the main service centre for the cobalt and copper mining industry in the Haut-Katanga Province. The nearby Kipushi tailings are located on granted mining license PER 12347 and the Kipushi Processing Plant is located some 8 km north by road from the tailings area. The ground covered by the Kasombo Project (blocks 5, 6 and 7) is shown in Figure 12 and Figure 13. There are two historic open cut mines now both filled with water that fall within the permit. The southern-most pit forms part of a river system that continually flows into and through the pit. The remainder of the area is relatively undisturbed by organised mining although artisanal mining occurs at various locations within the permit area predominantly for cobalt and copper mineralisation. Main target commodities include cobalt, copper and zinc that occur in abundance within the permit area. No technical data has been provided as yet on the area to help with a basic understanding of rock types, structures, previously identified areas of mineralisation, general geology, structure etc so a new fundamental work proposal is based essentially on a green fields approach to be conducted in a systematic fashion.



Figure 13: Kasombo Deposit Area Tenement over Google Image. Artisinal workings towards centre of Kasombo 7

The Kasombo project forms part of the Kasombo Complex, a series of copper-cobalt rich deposits that have been extensively explored by State owned La Generale des Carrieres et des Mines ("Gecamines") and developed and mined by various international companies in JV with Gecamines. An area known as Kasombo 1 was the first operation to be developed in 1995 with mining and process under a JV between Forrest International Group and Gecamines and publicly reported to have mined copper and cobalt grades of 2.7-3.7% Cu and 0.7-1.5% Co. Kasombo 7 is located on PE 4886, which is where the Kipushi Processing Plant is located. Kasombo 5 and Kasombo 6 are located on PE 481, which is contiguous to and south of PE4886. Under the terms of the Paragon/CFE JV, CFE will allocate its technical and financial resources to complete further exploration and feasibility study work on Kasombo in order to meet the JV objectives of completing a feasibility study by September 2019. Pursuant to the deal between CFE and FEL, FEL will assume the CFE rights and obligations to the Kasombo Project. CFE staff have inspected a number of the contiguous deposits including Kasombo 5 and Kasombo 13, where Gecamines have completed trenching, sampling and drilling, and artisanal miners exploit cobalt and copper mineralisation by both shallow open pit methods and underground exploitation to ~30 m (Figure 14). Production is ongoing via the sale of concentrates to local traders and processing groups. Several waste rock and low grade stockpiles within the license area were inspected by CFE. Handheld XRF sampling at artisanal open pit workings of exposed cobalt mineralisation within saprolitic rocks at the Kasombo deposits at surface and material from depths of 30 m all returned significant Cu and Co readings.



Figure 14: Artisinal diggings with Saprolite hosted Cobalt Mineralisation Zones. 5.2 Regional Geology



Figure 15: Kasombo Area Regional Geology from Google Maps. The general geology of the area is dominated by the Katanga Supergroup which is comprised of a sequence of three metasedimentary subgroups known as the Kundelungu Group, Nguba Group and the Roan Group. Large scale geological mapping has the permit area located predominantly within the Roan Group so anticipated lithologies are carbonaceous (dolomitic) shales and siltstones and argillaceous conglomerates, sandstones and shales.

Table 3: Anticipated Stratigraphy in the Kasombo District. The recent site visit to some artisanal workings near the central northern boundary of the permit observed a short stratigraphic profile in the side wall of an excavation. The stratigraphy appeared to be striking in a roughly northerly direction and dipping between 40-60° towards the east. Artisinal miners were hand digging sub vertical shafts down the stratigraphic layers in areas of less competent rock (presumably siltstone and shales) looking to intercept obvious oxide copper mineralisation to a depth of ~60 m. Based on this information and known mineralisation styles common to the province, the mineralisation target model is assumed to be stratiform copper/cobalt. At the nearby Zambian Nchanga open pit (65 km NW of Kitwe and 100 km SE of Kabombo – Figure 2) micaceous ores are found in very large quantities in banded sandstones and the dolomitic schist formations above and below an upper sulphide orebody. These resources occur as a capping or inter-fingering within the normal orebodies. There are huge stockpiles of this material with additional resources still yet to be mined. FEL WA & DRC - ITV Report – AM&A


At Nchanga the basement complex has undergone a higher degree of metamorphism than the overlying Katanga sediments. The most common metamorphic minerals in the Roan Supergroup are biotite, chlorite, sericite and albite indicating Greenschist Facies metamorphism. Group

Formation Upper Roan Dolomite (URD)

Upper Roan Shale with Grit (SWG)

Thickness ~140m ~120m

Lower Roan Chingola Dolomite (CDOL) Dolomitic Schist (DOLSCH) Upper Banded Shale (UBS)

~10-50m ~10-160m ~15–40m

The Feldspathic Quartzite (TFQ)

~8 – 40m

Banded Sandstone Upper (BSSU)

~600m

Pink Quartzite

Orebody Type

UOB REF

~6m

IOB

~2m

IOB

Banded Sandstone Lower (BSSL)

~0-50m

REF

Lower Banded Shale

~0- 40m

LOB

~0 -300m

LOB

Shale Marker

Arkose

(PQ)

UOB/REF

(SM)

(LBS) (ARK)

Boulder Conglomerate (BC)

~50m

Banded Sandstone Upper (BSSU)

~600m

REF

Basement Complex - Granite, Schists, Gneiss Table 4: Nchanga Zambian Copperbelt Area Stratigraphy. The units exposed range from the Basement Complex to the Upper Roan Formation of the Katanga Supergroup where the sediments of the Katanga System lie unconformably on an eroded basement surface. The Lower Roan Group has been divided into a 60-90 m lower arkosic formation and an upper argillaceous formation, the 48 m Gritty Argillite. Similarly, the Upper Roan Group has been split into a 55 m Dolomitic Argillite Formation and an overlying 72 m Dolomite Formation. These Katanga Fm rocks are folded into westerly plunging synclines that are often overturned with axial plane that dip steeply to the north. Only minor faulting has been recorded with minor displacements. The Basement Complex chiefly comprises porphyry, biotite gneiss, boulder conglomerate, sericite schist and possibly the quartzites to arkoses and quartz mica schist. The porphyry grades imperceptibly into granitised boulder conglomerate in places, but the two rocks are normally distinguishable. The texture of the rocks is well preserved in depth; feldspar porphyroblasts, sporadically zoned and up to 5 cm across, have weathered to a cream to light pink or yellow clay. The opal quartz grains in the unweathered rock, normally about 0.5 cm across, are generally shattered during weathering into a number of angular fragments. Small patches of dark red clay, containing minor secondary mica after biotite, occur between the quartz feldspar grains. The porphyry is often foliated roughly parallel to the axis of the folding. The Biotite Gneiss is fine to medium grained, green to purple, igneous textured material composed of brown to green secondary micas with opal quartz grains, some chlorite and a few limonite spots. FEL WA & DRC - ITV Report – AM&A


It appears to be a localised occurrence of the biotite gneiss of the type found elsewhere in the Copperbelt. It is possible that the quartzite outcrops could belong to the Muva Supergroup or possibly be part of the Lower Roan sediments. In the Precambrian Katanga Supergroup, Lower Roan Group the 200-1,000 m boulder conglomerate comprises cobbles and boulders of basement rocks set in a medium grained matrix of quartzite; schistose rocks that form the base of the Lower Roan Group. A 58-75 m Basal Arkose is light to pink, poorly sorted medium to coarse grained arkose that overlies the boulder conglomerate. The arkose is gritty in places and also has clear opalescent sporadic small pebbles and grits, quartz grains, kaolinised feldspar and scattered speculate fragments. Towards the top, the unit shows thin argillite bands. A 20 m shaley Arkose is a thin unit of fine grained alternating beds of arkose and grey laminated argillic shale. The arkose overlies the basal arkose and basal unit. The 50-200 m gritty Argillite is a massive to finely bedded gritty argillite with locally developed silty interbeds. The unit is characterised by well rounded “frosted” quartz pebbles and numerous bands and lenses of coarser arkosic material. The gritty argillite overlies the basal arkose. A 50-100 m semi-massive to banded speckled Dolomitic Argillite has gritty limonitic bands with manganese rich quartzitic material that forms the rock mass. This rock shows much pitting suggestive of dolomite leaching. The unit marks the top of the Lower Roan Group sequence. The shaley arkose is a thin and poorly developed equivalent unit of the copperbelt ore shale type, is sometimes carbonaceous and may be the basal part of the gritty argillite unit. In the deeper parts of the basin a well-developed thicker ore shale unit may exist with possible ore grade mineralisation. In the Upper Roan Group a 100-200 m Dolomite Formation forms the topmost unit of the stratigraphic portion in the Nchanga area. It is a fine-grained white-pink dolomite mostly confined to the axial plane of synclines showing very deep levels of weathering and is decomposed to dolomitic silt. The tentative correlation of the local stratigraphy is listed in Table 4 above. Locally the soil layer that blankets the geological formations can be as much as 20 m or thick. Generally, the soil profile is of the B-type with isolated laterite and dambo soils that are moist and peaty in places. 5.4

Resource Potential

There is currently no geological map available of the Kasombo project area so no resource estimates can yet be attempted (at the time of writing this report CFE was undertaking a mapping program at Kasombo 5, 6 and 7). The artisanal workings and two non-operating nearby open pits confirm the presence of copper/cobalt mineralisation at the project, however extensive successful exploration is required before JORC Code (2012) resources estimates can be undertaken. It is emphasized that Exploration Target tonnage and grade estimates are entirely conceptual in nature. There has been insufficient or no drilling in the immediate areas of this project and it is uncertain if exploration will result in the estimation of a Mineral Resource in the future.

6.0

Valuation of the Project

When valuing any mineral asset/project it is important to consider as many factors as possible that may either assist or impinge upon the current cash value estimates of the mineral asset under consideration. In this Report AM&A considers that the primary features to be taken into account are the Tenement Security; Available Infrastructure; Relevant Expenditure on development, Resource Estimations and the general Geological Setting. Basically, many of these “Components are Ticked” as described above with regards to tenement FEL WA & DRC - ITV Report – AM&A


security, infrastructure, previous exploration concepts and a favourable geological environment. 6.1 Selection of Valuation Methods The following valuation methods, as described above in section 2, are not considered applicable for the respective reasons provided:   

  

The Discounted Cash Flow method cannot be used for the Projects as the lack of mineral reserve estimates precludes a DCF; The Yardstick ‘prospectivity’ method - as the “Exploration Target” component is large and since not allowed by the Valmin Code 2015 would leave a distorted residual figure. Comparable transactions – with the recent general demise of the exploration industry, through lack of ‘high-risk funds’, this has curtailed much activity thus no similar recent relevant transactions could be located for similar projects where the mineral asset was suitably described. Real estate value which is usually based on a value ascribed to varying areas of tenement holdings which may consequently become unrealistic due to the varying areas of projects. The Empirical method was deemed unreliable since there are no JORC Code (2012) compliant resource estimates within a much larger mineralised footprint that has not yet been adequately drill investigated in total. For the Kasombo project the dearth of geological information precludes the use of any other method where the JV acquisition obligations take precedence.

Accordingly, the average of the MEE and the JV method, with appropriate MEE PEM factors, or modifying factors that arise from the geological setting, results or deemed prospectivity at each deposit have been adapted as the overriding basis for the estimation of the value for the WA tenements. The MEE method was applied to the sourced historical expenditures for the WA projects inflated by the Reserve Bank of Australia Inflation Calculator in order to arrive at a present day value. PEM Factors, with regard to the geological setting, results or deemed prospectivity at each deposit, between1.5-5.0 were applied to the total inflated expenditures to arrive at present day expenditure that was then varied by ±10% in order to produce a range of values. For the WA tenements the JV method and the MEE method results were averaged to provide a final value within low and high ranges. For the Kasombo Project the JV method addressed the agreed investment terms and conditions for the three tenement blocks and has overriding precedence. Details of these workings are summarised in Appendix 1. 6.2 Valuation Conclusions The summary result for the two methods is presented in Table 5. As stated above the average of the MEE and the JV methods was selected as the most appropriate for valuation estimate purposes for the WA projects while the JV acquisition of rights for the Kasombo Project takes precedence.



Method WA MEE WA JV Total WA MEE+JV Mean WA MEE+JV Rounded FEL 20% FEL 20% Rounded

Low 13.78 11.22 25.00 12.50 12.5 2.50 2.5

A$M High Preferred 18.33 16.06 13.71 12.47 32.04 28.52 16.02 14.26 16.0 14.3 3.20 3.2

FEL - DRC JV 10.29 12.57 FEL - DRC JV Rounded 10.3 12.6

2.85 2.9

11.43 11.4

Table 5: Summary Range of FEL Current Values.

The rounded 20% FEL share of the Western Australian Projects is ascribed a value on the 21st August, 2017 at $2.9 M from within the range $2.5 M to $3.2 M. The rounded FEL JV commitment to the Kasombo Project in the DRC is ascribed a value on the 21st August, 2017 at $11.4 M from within the range $10.3 M to $12.6 M. Yours faithfully,

Allen J. Maynard BAppSc(Geol), MAIG, MAusIMM.

Brian J. Varndell BSc(Spec Hons) FAusIMM.

Competent Persons Statement The information in this report which relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Allen Maynard, who is a Member of the Australian Institute of Geosciences (“AIG”), a Corporate Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) and independent consultant to the Company. Mr Maynard is the Director and principal geologist of Al Maynard & Associates Pty Ltd and has over 35 years of exploration and mining experience in a variety of mineral deposit styles. Mr Maynard 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 2012 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code 2012). Mr Maynard consents to inclusion in the report of the matters based on this information in the form and context in which it appears.



Competent Persons Statement The information in this report which relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Brian Varndell, who is a Fellow of the Australasian Institute of Mining and Metallurgy and independent consultant to the Company. Mr Varndell is an associate of Al Maynard & Associate Pty Ltd and has over 40 years of exploration and mining experience in a variety of mineral deposit styles including iron ore mineralisation. Mr Varndell 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 2012 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code 2012). Mr Varndell consents to inclusion in the report of the matters based on this information in the form and context in which it appears.

7.0 References Valuation AusIMM - JORC Code, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserve, prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia (JORC), 2012 Edition.

AusIMM. (2015): "Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the VALMIN Code)" 2015 Edition. ClM, (2003): - "Standards and Guidelines for Valuation of Mineral Properties. Final Version, February 2003". Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties (CIMVAL). Oxford Dictionary of Current English; for any terms not covered in the Glossary: Oxford University Press. Rudenno, V. 2009: "The Mining Valuation Handbook" 3rd Edition. Reserve Bank Inflation Calculator, Australia 2017:http://www.rba.gov.au/calculator/annualDecimal.html Reports

Davis, B.K., 2005. Structural Review of Mineralisation in the Fortnum Wedge area, Bryah and Padbury Basins, Western Australia (RSG) (Unpublished report by RSG) FEL ASX announcement 21 August 2017; High Grade Copper identified in Wodger assays. Gee, R.D., 1990. Nabberu Basin. In: Geology and mineral resources of Western Australia. Western Australia Geological Survey Memoir, 3, 202-210. Gee, R.D. and Grey, K., 1993. Proterozoic rocks on the Glengarry 1:250,000 sheet stratigraphy, structure, and stromatolite biostratigraphy. Western Australia Geological Survey, Report, 41. Murphy, J. 2006, Annual Report for Fortnum Project for the period 01/01/2005 – 31/12/2005. Project Number C591/1994 (formerly M3638/1). Unpublished report by Gleneagle Gold Ltd. Myers, J.S., Shaw, R.D., and Tyler, I.M., 1996. Tectonic evolution of Proterozoic Australia. Tectonics, 15, 1431 – 1446. Pirajno, F. Occhipinti, S.A., Swager, C.P., 2000. Geology and Mineralisation of the PalaeoProterozoic Bryah and Padbury Basins



RNI ASX announcement 16 January 2017; - Significant VMS Mineralisation intersected at Wodger 8.0 Glossary of Technical Terms and Abbreviations Anomaly Value higher or lower than the expected or norm. Base metal Generally a metal inferior in value to the precious metals, e.g. copper, lead, zinc, nickel. Complex An assemblage of rocks or minerals intricately mixed or folded together. Diamond drill Rotary drilling using diamond impregnated bits, to produce a solid continuous core sample of the rock. Dip The angle at which a rock layer, fault of any other planar structure is inclined from the horizontal. Fault A fracture in rocks on which there has been movement on one of the sides relative to the other, parallel to the fracture. Intercept The length of rock or mineralisation traversed by a drillhole. JORC Joint Ore Reserves Committee- Australasian Code for Reporting of Identified Resources and Ore Reserves. Mineralisation In economic geology, the introduction of valuable elements into a rock body. Ore A mixture of minerals, host rock and waste material which is expected to be mineable at a profit. Outcrop The surface expression of a rock layer (verb: to crop out). Primary Mineralisation which has not been affected by near surface mineralisation oxidising process. Quartz A very common mineral composed of silicon dioxide-SiO2. RAB Rotary Air Blast (as related to drilling)—A drilling technique in which the sample is returned to the surface outside the rod string by compressed air. RC Reverse Circulation (as relating to drilling)—A drilling technique in which the cuttings are recovered through the drill rods thus minimising sample losses and contamination. Reconnaissance A general examination or survey of a region with reference to its main features, usually as a preliminary to a more detailed survey. Remote Sensing Geophysical data obtained by satellites processed and presented Imagery as photographic images in real or false colour combinations. Reserve In-situ mineral occurrence which has had mining parameters applied to it, from which valuable or useful minerals may be recovered. Resource In-situ mineral occurrence from which valuable or useful minerals may be recovered, but from which only a broad knowledge of the geological character of the deposit is based on relatively few samples or measurements. Shear (zone) A zone in which shearing has occurred on a large scale so that the rock is crushed and brecciated. Stratigraphy The succession of superimposition of rock strata. Composition, sequence and correlation of stratified rock in the earth’s crust. Strike The direction or bearing of the outcrop of an inclined bed or structure on a level surface.



Abbreviations B Billion C Carbon g kg km km2 m m2

gram kilogram kilometre square kilometre metre square metre


TGC m3 mm M oz t µm

Total graphitic carbon cubic metre millimetre million troy ounce tonne micron

.

Dead

Dead

Dead

Dead

Dead

P52/1049

P52/1048

E52/851

P52/1167

Live

Live

Live

Live

Live

Live

Live

Live

Live

Live

Live

Live

Live

P52/1050

P52/1496

P52/1495

P52/1494

E52/1852

E52/1730

E52/1722

E52/1678

E52/1672-I

E52/1671

E52/1668

E52/1659

E52/1613-I

E51/1033-I

8,931

12,336

Inf

3,886

3,945

3,977

6,261

5,643

64,299

23,522

13,770

2005

5,107

5,185

5,227

8,229

7,416

84,505

30,914

18,097

Inf

5,147

14,834

13,141

4,526

8,473

6,419

6,349

35,385

163,616

17,774

6,230

55,078

2006

6,532

18,826

16,678

5,744

10,753

8,147

8,058

44,908

207,650

22,558

7,907

69,901

Inf

2007

Inf

2008

Inf

2009

Inf

2010

Inf

2011

Inf

2012

Inf

2013

Inf

2014

Inf

2015

Inf

2016

2017

Inflated Total

Pref.

3,598

5,689

7,638

9,892

93,496

20,125

22,375

5,630

21,045

75,607

4,462

7,056

9,473

12,269

115,960

24,960

27,751

6,983

26,101

93,772

1773

4,718

8,341

5,637

9,051

173,740

32,659

28,916

4,158

20,277

86,524

2107

5,608

9,914

6,700

10,758

206,500

38,817

34,368

4,942

24,100

102,839

958

4,937

7,090

7,445

8,162

58,609

13,877

30,719

13,232

67,857

70,023

1119

5,766

8,280

8,695

9,532

68,448

16,207

35,876

15,453

79,248

81,778

1394

25,739

50,659

7,916

13,234

53,548

146,268

37,109

13,574

45,257

79,539

1582

29,207

57,486

8,983

15,017

60,764

165,978

42,110

15,403

51,356

90,257

6438

15,559

92,540

27,998

24,145

264,363

268,085

56,739

50,564

47,679

230,763

7072

17,091

101,652

30,755

26,522

290,393

294,482

62,326

55,543

52,374

253,485

13309

48,355

113,818

119,139

134,396

344,615

183,086

224,674

103,386

72,564

392,374

14366

52,196

122,859

128,603

145,072

371,990

197,630

242,521

111,599

78,328

423,543

6753

56,374

70,312

182,535

52,467

524,913

231,033

141,392

87,687

81,968

192,040

7115

59,397

74,082

192,323

55,280

553,061

243,422

148,974

92,389

86,363

202,338

8133

50,809

72,335

72,089

78,190

185,327

1,578,351

154,559

132,646

113,627

212,391

8361

52,234

74,364

74,111

80,383

190,525

1,622,618

158,894

136,366

116,814

218,348

5721

13,924

100,044

213,485

77,851

137,258

187,590

127,631

192,821

102,019

163,804

5794

14,102

101,322

216,211

78,845

139,011

189,986

129,261

195,283

103,322

165,896

7360

7280

7200

29,970

77,916

909,251

37,699

145,886

461,334

81,285

131,952

145,656

330,237

7360

7280

7200

70063

20530

38464

711344

119813

47516

12336

11639

24011

21904

14720

14560

14400

275777

653912

1663314

507382

2187444

3547588

1055300

1503261

883475

2032393

1.10

0.90

0.90

1.00

0.90

0.90

1.00

0.90

1.10

0.90

1.10

0.90

0.90

1.10

1.10

2.00

0.90

0.90

0.90

0.80

0.80

0.80

0.80

0.80

0.80

0.80

0.90

0.80

0.90

0.80

0.80

0.90

0.90

1.80

0.80

0.80

1.30

1.00

1.00

1.20

1.00

1.00

1.20

1.00

1.30

1.00

1.30

1.00

1.00

1.30

1.30

2.20

1.00

1.00

High

PEM Factor

2003

Low

Status

Tenement

NOTE: Inf' is RBA inflated number for CPI applied to the specific year

21 August 2017

MEE Method

Western Australia

FEL Valuation Worksheet

Appendix 1: Details of Valuation Estimates.


0.05

0.01

0.01

0.02

0.02

0.01

0.01

0.01

0.30

0.59

1.83

0.46

1.97

3.90

1.16

3.01

0.80

1.83

Pref.

VALUE

0.04

0.01

0.01

0.02

0.02

0.01

0.01

0.01

0.25

0.52

1.50

0.41

1.75

3.19

0.95

2.71

0.71

1.63

Low

0.06

0.01

0.01

0.03

0.02

0.01

0.02

0.01

0.36

0.65

2.16

0.51

2.19

4.61

1.37

3.31

0.88

2.03

High

LODGE YOUR VOTE 

ONLINE www.linkmarketservices.com.au

 BY MAIL

Fe Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

ACN 112 731 638



BY FAX +61 2 9287 0309



BY HAND Link Market Services Limited 1A Homebush Bay Drive, Rhodes NSW 2138



ALL ENQUIRIES TO Telephone: + 61 1300 554 474

*X99999999999*

E

X99999999999

PROXY FORM

I/We being a member(s) of Fe Limited and entitled to attend and vote hereby appoint:

APPOINT A PROXY

STEP 1

P

L

OR if you are NOT appointing the Chairman of the Meeting as your proxy, please write the name of the person or body corporate you are appointing as your proxy or failing the person or body corporate named, or if no person or body corporate is named, the Chairman of the Meeting, as my/our proxy to act on my/our behalf (including to vote in accordance with the following directions or, if no directions have been given and to the extent permitted by the law, as the proxy sees fit) at the Annual General Meeting of the Company to be held at 9:00am (WST) on Friday, 3 November 2017 at 32 Harrogate Street, West Leederville, Western Australia 6007 (the Meeting) and at any postponement or adjournment of the Meeting. Important for Resolution 1: If the Chairman of the Meeting is your proxy, either by appointment or by default, and you have not indicated your voting intention below, you expressly authorise the Chairman of the Meeting to exercise the proxy in respect of Resolution 1, even though the Resolution is connected directly or indirectly with the remuneration of a member of the Company’s Key Management Personnel (KMP). The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business. the Chairman of the Meeting (mark box)

VOTING DIRECTIONS

S

A

M

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the Meeting. Please read the voting instructions overleaf before marking any boxes with an T

STEP 2

Resolutions

For Against Abstain*

1 Adoption of Remuneration Report

5 The Acquisition of the Kasombo Project Interest

2 Re-election of Director – Mr Nicholas Sage

6 Placement of Shares to Transaction Facilitator

3 Re-appointment of Director – Mr Kenneth Keogh

For Against Abstain*

7 Approval to Issue Placement Shares



* If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

STEP 3

SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED Shareholder 1 (Individual)

Joint Shareholder 2 (Individual)

Joint Shareholder 3 (Individual)

Sole Director and Sole Company Secretary

Director/Company Secretary (Delete one)

Director

This form should be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth).

FEL PRX1701C

*FEL PRX1701C*

4 Approval of 10% Placement Capacity - Shares

HOW TO COMPLETE THIS SHAREHOLDER PROXY FORM YOUR NAME AND ADDRESS This is your name and address as it appears on the Company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

APPOINTMENT OF PROXY If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If you wish to appoint someone other than the Chairman of the Meeting as your proxy, please write the name of that individual or body corporate in Step 1. A proxy need not be a shareholder of the Company.

LODGEMENT OF A PROXY FORM This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 9:00am (WST) on Wednesday, 1 November 2017, being not later than 48 hours before the commencement of the Meeting. Any Proxy Form received after that time will not be valid for the scheduled Meeting. Proxy Forms may be lodged using the reply paid envelope or:



DEFAULT TO CHAIRMAN OF THE MEETING Any directed proxies that are not voted on a poll at the Meeting will default to the Chairman of the Meeting, who is required to vote those proxies as directed. Any undirected proxies that default to the Chairman of the Meeting will be voted according to the instructions set out in this Proxy Form, including where the Resolution is connected directly or indirectly with the remuneration of KMP.

 BY MAIL

Fe Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

VOTES ON ITEMS OF BUSINESS – PROXY APPOINTMENT You may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

 

APPOINTMENT OF A SECOND PROXY You are entitled to appoint up to two persons as proxies to attend the Meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the Company’s share registry or you may copy this form and return them both together.

M

To appoint a second proxy you must: (a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded; and (b) return both forms together.

SIGNING INSTRUCTIONS

S

A

You must sign this form as follows in the spaces provided: Individual: where the holding is in one name, the holder must sign. Joint Holding: where the holding is in more than one name, either shareholder may sign. Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it. Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

ONLINE www.linkmarketservices.com.au Login to the Link website using the holding details as shown on the Proxy Form. Select ‘Voting’ and follow the prompts to lodge your vote. To use the online lodgement facility, shareholders will need their “Holder Identifier” (Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on the front of the Proxy Form).

L

BY FAX +61 2 9287 0309

P

E

BY HAND delivering it to Link Market Services Limited* 1A Homebush Bay Drive Rhodes NSW 2138 * During business hours (Monday to Friday, 9:00am–5:00pm)

COMMUNICATION PREFERENCE We encourage you to receive all your shareholder communication via email. This communication method allows us to keep you informed without delay, is environmentally friendly and reduces print and mail costs.



ONLINE www.linkmarketservices.com.au Login to the Link website using the holding details as shown on the Proxy Form. Select ‘Communications’ and click the first button to receive all communications electronically and enter your email address. To use the online facility, securityholders will need their “Holder Identifier” (Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on the front of the Proxy Form).

CORPORATE REPRESENTATIVES If a representative of the corporation is to attend the Meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission in accordance with the Notice of Meeting. A form of the certificate may be obtained from the Company’s share registry or online at www.linkmarketservices.com.au.

IF YOU WOULD LIKE TO ATTEND AND VOTE AT THE ANNUAL GENERAL MEETING, PLEASE BRING THIS FORM WITH YOU. THIS WILL ASSIST IN REGISTERING YOUR ATTENDANCE.