AUSTRALIA AFR.AX 0,03 AU$ 10,00%

31 October 2016

QUARTERLY ACTIVITIES REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2016 HIGHLIGHTS

• First Quantum Minerals Ltd (FQM) committed AUD $3 million over the next twelve months on work programs to advance the Sese Integrated Power Project.

• Drilling programs commenced at the Sese Project during September:

  • Four large diameter holes were drilled to provide new data to finalise a power station fuel specification and undertake combustion testing at Eskom's labs in South Africa.

  • Five geotechnical holes were drilled over the planned Sese power station site to evaluate soil and bedrock strength for power station footings.

  • 16 infill core holes completed at Sese West with samples submitted to laboratory in South Africa.

  • A three‐hole core program commenced at Foley North to provide data on extent and nature of the limestone at depth.

• Permitting of Sese Coal Mine and Power Project continued

  • An application to the Botswana Ministry of Finance for a Manufacturing Development Approval Order for the Sese Project was submitted.

• African Energy's 100% owned Mmamabula West and Mmamantswe Projects are being developed for submission into South Africa's 3,750MW cross border IPP procurement program.

• Project development programs continued at the Mmamabula West project:

  • Analyses of large diameter cores to provide the basis for determination of a power station fuel specification for each coal seam continued during the quarter.

  • Amendments to the Environmental and Social Impacts Assessment (ESIA) and Environmental Management Plan to include 600MW of power generation and grid connection continued;

  • Hydrogeological modelling for ESIA baseline studies continued;

  • Preparation of submissions for surface rights and water allocation continued.

• AFR assisted TM Consulting (TMC) with the preparation of a work program for the Mmamantswe Project to ultimately deliver a formal submission into South Africa's cross‐border IPP procurement program.

  • A gap analysis on delivering a bankable feasibility study for the design, construction and commissioning of an applicable open pit coal mine with the associated mine area infrastructure and a coal handling and preparation plant (CHPP) was completed by Sedgman and VBKOM.

• Applications to renew Sese, Sese West and Mmamantswe prospecting licences were submitted to the Department of Mines in Botswana.

• On‐market share buyback remained suspended during the quarter.

• At 30 September 2016, the Company had cash reserves of AU$5.0M.

OUTLOOK FOR NEXT QUARTER

Sese Integrated Power Project (45% AFR, 55% FQM)

• Finalise work programs to advance the Sese Project including;

  • Geotechnical evaluations of the proposed power station site

  • Update the Environmental Approvals to allow up to 450MW of power generation. o Update the mining study to meet the requirements of a 450MW power project. o Preliminary power station design and layout.

  • Execution of the Water Supply Agreement for the project.

  • Hydrogeological studies at the mine site to characterize the aquifers.

• Prepare documentation to apply for a Generation and Export Licence.

• Continue to assess power market opportunities in the southern African region suitable for expansions of the Sese Integrated Power Project.

• FQM are required to commit a further A$9.4M by 12 July 2017 to acquire an additional 20% interest in the project.

  Mmamabula West Project (100% AFR)

• Complete binding documentation for a Joint Development Agreement with a development partner and such other ancillary documents as may be required.

• Ongoing hydrogeological modelling for the ESIA baseline study.

• Completion of the amendment of the ESIA and EMP to include 600MW of power generation plus grid connection, and submission of ESAI/EMP to the Department of Environmental Affairs.

• Commence infill drilling to establish a measured resource in the area of proposed mining for an initial 600MW power station fuel supply.

  Mmamantswe Power Project (100% AFR, operated by TM Consulting)

• Complete Phase 2 of the feasibility study for the proposed coal mine and CHPP.

• Commence detailed power station design studies.

PROJECTS

1. Sese JV, Botswana (AFR 45%, FQM 55%)

2. Sese JV

   • FQM acquired a 51% interest in the Sese Project in January 2015 and can increase their interest in to 75% by investing a further A$10.0M by 12 July 2017.

   • Once FQM has reached a 75% project interest, AFR's ongoing 25% interest in all projects undertaken in the Sese JV will be loan carried through to commercial operation.

   • FQM spent A$668,089 in the quarter and has spent A$2,603,889 to date since their initial investment on January 2015 and currently own 55% interest in the Sese Project.

   • FQM has committed AUD $3 million over the next twelve months on work programs to advance the Sese Integrated Power Project:

     • Additional large diameter drilling to collect approximately 1,000kg of coal for combustion testing and physical handling test work. This will lead to the development of the fuel specification for the proposed power station, and finalization of the coal handling and processing flowsheet.

     • Preliminary geotechnical evaluations of the proposed power station site to assess sub‐ surface conditions with respect to footings for the power station (boilers, turbines, generators) and ancillary infrastructure.

     • Update the mining study to meet the requirements of fuel delivery for a 450MW integrated power project.

     • Preliminary power station design and layout.

     • Negotiations for power off take agreements with interested parties.

     • Execution of the Water Supply Agreement for the project.

     • Hydrogeological studies at the mine site to characterize aquifers to allow mine design and aquifer management plans to be advanced.

     • Commencement of early site works to include an upgraded access road and preliminary siting of camp facilities.

     • Diamond drilling to test the continuity and quality of the Seswe limestone deposit for use as a sorbent to reduce airborne sulphur emissions from the proposed power station.

   • The following field based activities were undertaken during the quarter:

     • Completion of four large diameter drill holes to collect 122mm coal core for combustion testing and test work leading to the development of a detailed fuel specification. A total of 50.01m of 122mm coal core has been collected in this program (approximately 1,000kg of coal). The core is stored in sealed, nitrogen filled tubes to preserve the coal in pristine condition prior to the test work commencing. Testing will commence in the next quarter.

     • Thirteen core holes were drilled into the measured resource in the area where initial mining is currently planned to provide fuel for the first power station. This will provide additional information on coal qualities and seam geometry to allow detailed mine planning and mine scheduling to be undertaken.

     • Five shallow core holes collecting HQ3 diameter core were drilled to test the soil and bedrock geotechnical quality/strength at sites where power station foundations may be located. Additional drilling will carry over into the next quarter to complete preliminary geotechnical evaluations of the site.

     • Sixteen vertical cored holes were drilled on a 500m x 500m grid at Sese West to provide information for the development of a measured resource estimate for part of the Sese West deposit. A total of 1,468.3m was drilled, of which 633.7m was drilled as RC‐percussion pre‐ collars, and 834.6m was HQ3 diameter core. Core samples of coal have been sent to South Africa for proximate and ultimate analysis and for washing test work.

     • A program of three diamond core holes to collect sample of marble/limestone from the Seswe carbonate occurrence (Foley North industrial minerals prospecting licence) commenced in the quarter. This program will be completed in the next quarter. Carbonate samples collected from this drilling will be analysed for their sulphur‐dioxide sorbency properties and evaluate its suitability for power station emissions management.

3. Permitting

   • A mining license application covering enough coal for the initial Sese Power Project and potential future expansions is currently being assessed by the Department of Mines in Botswana.

   • Applications for further two‐year extensions to the two coal prospecting licences (Sese PL96/2005 and Sese West PL197/2007) were submitted to the Department of Mines in late September.

   • A Land Lease agreement providing guaranteed surface rights over the Sese project area for 50 years was signed during 2016 and remains in the process of being registered as a Deed in Botswana.

   • A formal Water Supply Agreement is being finalized for execution.

   • The Environmental and Social Impact Assessment for the Sese Integrated Power Project has been approved by the Department of Environmental Affairs (DEA).

     • This covers an initial 300MW power station, associated coal mine and related infrastructure, including an access corridor to the main A1 highway and regional transmission grid.

     • An update to the ESIA is being prepared to seek environmental approvals sufficient for up to 450MW of power generation (staged development of 2 x 225MW units) and the associated coal mining and processing.

   • An application for a Manufacturing Development Approval Order for the Sese integrated power project was submitted to the Ministry of Finance during the quarter.

4. Mmamabula West Project, Botswana (AFR 100%)

5. Integrated Power Project

   • In April, South Africa gazetted an updated notice amending it coal‐fired, baseload, cross‐border IPP procurement program to 3,750MW. Procurement is to be managed via the IPP Office on behalf of the Department of Energy, and can be via direct negotiation for grid connection as soon as possible.

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