December 2015 Quarterly Report 31 December 2015

29 January 2016

QUARTERLY REPORT - 31 December 2015

Please find attached the Quarterly Activities Report and Appendix 5B for the period ended 31 December 2015.

Yours faithfully

Cape Lambert Resources Limited

Tony Sage

Executive Chairman

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Cape Lambert Resources Limited (ASX: CFE) is a fully funded mineral development company with exposure to iron ore, copper, gold, uranium, manganese, lithium and lead-silver- zinc assets in Australia, Europe, Africa and South America.

Australian Securities Exchange

Code: CFE

Ordinary shares 626,686,586

Unlisted Options

7,675,000 ($0.088 exp 18 Dec 2016)

Board of Directors Tony Sage Executive Chairman

Tim Turner

Non-executive Director

Jason Brewer

Non-executive Director

Melissa Chapman Company Secretary

Key Projects and Interests

Marampa Iron Ore Project Pinnacle Group Assets

Cape Lambert Contact

Tony Sage Executive Chairman

Eloise von Puttkammer Investor Relations

Phone: +61 8 9380 9555

Email: [email protected]

Australian Enquiries

Professional Public Relations David Tasker

Phone: +61 8 9388 0944

Mobile: +61 433 112 936

Email: [email protected]

UK Enquiries

Tavistock Communications Emily Fenton / Jos Simson Phone: +44 (0)207 920 3150

Mobile: +44 (0)7899 870 450

www.capelam.com.au

Cape Lambert Resources Limited December 2015 Quarterly Report

September

HIGHLIGHTS

• As at 31 Dec 2015, the Company had approximately A$4.69 million in cash at bank.

• Further cost reduction completed in Sierra Leone.

• Cape Lambert signs Farm-In JV Agreement with Argosy on Wee McGregor Project.

• Update on African Minerals Limited sale of shares in the Company.

• Annual General Meeting held.

• Retirement of Mr Ross Levin as Non-Executive Director.

• Post quarter end, Cape Lambert announced $4m fully underwritten placement

  
  

  CORPORATE

  
  

  Strategy and Business Model

  
  

  Cape Lambert Resources Limited (ASX: CFE) (Cape Lambert or the Company) is an Australian domiciled, fully funded, mineral development company. Cape Lambert has interests in several exploration and mining companies, providing exposure to iron ore, copper, gold, uranium, manganese, lithium and lead-silver-zinc assets in Australia, Asia, Europe, Africa and South America (refer Figure 1).

  
  

  Cape Lambert's strategy is to acquire and invest in undervalued and/or distressed mineral assets and companies (Projects) and:

  • improve the value of these Projects, through a hands on approach to management, exploration, evaluation and development; and

  • retain long-term exposure to these Projects through a production royalty and/or equity interest.

Cape Lambert aims to deliver Shareholder value by adding value to these undeveloped Projects. If Projects are converted into cash, the Company intends to follow a policy of distributing surplus cash to Shareholders.

Corporate Structure

Board Restructure

On 26 November 2015, the Company announced the retirement of Mr Ross Levin as Non- Executive Director of the Company with immediate effect.

Capital Management

African Minerals Limited Shareholding

As previously announced, the Company advised Shareholders that administrators had been appointed to manage the affairs, business and property of African Minerals Limited (AML). There has been no change in the quarter and AML continues to be a substantial shareholder of the Company with a holding of 105,808,628 shares.

September

Investments

Timis Mining Corporation Royalty

The Company wishes to update Shareholders regarding the royalty agreement with Timis Mining Corporation SL Limited and Timis Mining Corporation Limited (collectively Timis Mining).

As previously announced, Cape Lambert will receive a royalty of US$2 per tonne of iron concentrate (Royalty) exported from the Timis Marampa Iron Ore Mine (Mine), which is payable on a quarterly basis. The Royalty of US$2 per tonne is payable on production of 24mt from the Mine.

The Mine remains on care and maintenance due to the currently low iron ore price. The payment from Timis Mining to Cape Lambert of US$2,566,420 for the March 2015 quarter royalty also remains unpaid.

Timis Mining Corporation Bridging Finance

The Company would like to provide an update to Shareholder regarding the bridging finance with Timis Mining (refer ASX Announcement 22 October 2014).

Bridging finance of US$8 million is repayable to the Company in October 2015 and incurs interest of 3 month US LIBOR (London interbank offered rate) + 6%. The principal and interest was due to be repaid to Cape Lambert in one payment on 21 October 2015 and could be extended by the parties on mutually agreed terms.

Repayment of the bridging finance is yet to be received by the Company. Cape Lambert is in communication with Timis Mining to understand when it is anticipated that the Mine will re- commence production and be in a position to repay the bridging finance.

Fully Underwritten Placement

Subsequent to the quarter end, the Company announced the that it had entered into an underwriting agreement with Gulf Energy International Limited (Gulf) for the placement of approximately 94 million shares at 4.25c per share to raise $4m (before expenses) (refer ASX Announcement 11 and 12 January 2016) (Underwriting Agreement).

The placement will be with sophisticated investors in the United Kingdom or Europe and has a proposed closing date of 11 February 2016, being 30 days from execution of the Underwriting Agreement, and a settlement date of 26 February 2016. In accordance with the Underwriting Agreement, and subject to shareholder approval, Gulf will be issued one option for every four shares subscribed to under the placement to be issued with an exercise price of 5c exercisable on or before 31 December 2018.

The Underwriting Agreement contains a number of indemnities, representations and warranties that are considered standard for an agreement of this type. It also contains termination provisions whereby Gulf has the right to terminate the Underwriting Agreement if the S&P 200 falls more than 10% at any time from execution of the Underwriting Agreement up to the date of closing as well as a number of other termination events common to agreements of this type.

September

Cauldron Energy Limited

The Company owns a 15.84% interest in Cauldron Energy Limited (ASX: CXU) (Cauldron). During the quarter, Cauldron announced that current drilling has significantly extended the strike length of mineralization as well as announcing a mineral resource upgrade at it's Benett Well project.

FE Limited

Cape Lambert owns a 57.74% interest in FE Limited (ASX: FEL) (FEL). On 30 September 2015, FEL announced that it had signed a binding conditional terms sheet to acquire 100% of Cardinal House Group Pty Ltd who is a provider of online social gaming products and real money gambling platforms. The transaction is progressing and expected to complete in March 2016.

PROJECTS

Marampa (100% interest)

Marampa is an iron ore project at the development stage, and is located 90 km northeast of Freetown, Sierra Leone, West Africa (Marampa or Marampa Project) (refer Figure 2). Marampa comprises one granted mining licence (ML05/2014) comprising 79.40km2 and two granted exploration licences (EL46A/2011 - 159.78 km2 and EL46B/2011 - 66.00km2 (formerly EL46/2011 - 305.18km2)) held by Marampa Iron Ore (SL) Limited, which is indirectly, a wholly owned subsidiary of Cape Lambert.

No exploration activities occurred during the quarter. The Company completed further cost reduction measures at Marampa during the quarter.

Dempsey Resources (100% interest)

Dempsey Resources holds the Kukuna Iron Ore Project located in Sierra Leone (Kukuna or

Kukuna Project).

The Project is located 120 km northeast of Freetown in the northwest of Sierra Leone and consists of one exploration licence (EL22/2012) covering 68km2 (refer Figure 2). The licence is located 70km due north of the Marampa Project and the Pepel Infrastructure and comprises rocks that correlate with the Marampa Group stratigraphy known to host specular hematite mineralisation.

The Kukuna Project is currently under care and maintenance.

Metal Exploration Limited (100% interest)

Metal Exploration (Mauritius) Limited, a wholly owned subsidiary of Cape Lambert, holds 15 granted exploration licences and one application in Sierra Leone covering approximately 1,688km2. This land package covers the region 70km to the north and south of Marampa and is referred to as the Rokel Iron Ore Project (Rokel or Rokel Project). Rocks from the Marampa Group exist throughout the licence areas, much the same as the Marampa Project, and are known to host specularite schist bearing units.

The Rokel Project is prospective for discovery of hematite schist deposits geologically similar to those at Marampa and is located proximal to the existing Pepel infrastructure (refer