Alara Resources : Quarterly Activities and Cashflow Reports

ASX Code: AUQ

DIRECTORS

James Phipps

Non‐Executive Chairman

Justin Richard

Summary

CEO

Atmavireshwar Sthapak

Executive Director

Vikas Jain

Non‐Executive Director

Ian Gregory

Alternate Director

COMPANY SECRETARY

Ian Gregory

CAPITAL STRUCTURE (AS AT 31 MARCH 2016)

Shares: 592,506,073

Options: 233,804,321

Share Price: $0.19 (as at 31 Mar) Market Cap: $11m

CONTACT DETAILS

Level 11, 216 St Georges Tce West Perth WA 6000 Australia

PO Box 1227

West Perth WA 6872

Telephone +61 8 9322 3383

Facsimile | +968 2449 2491

www.alararesources.com ABN: 27 122 892 719

• Offtake Agreement signed for Al Hadeetha Copper Gold Project

• MOU signed for Al Hadeetha Copper Gold Project

• Oman Mining Licence application updates

• Project updates

• Alara presents at the Oman Minerals and Mining Conference and Exhibition

For further information, please contact:

Justin Richard T | +61 8 9322 3383

Managing Director E | jrichard@alararesources.com

Ian Gregory T | +61 8 9322 3383

Company Secretary E | cosec@alararesources.com

Al Hadeetha Copper‐Gold Project (Oman)

Alara Oman Operations Pty Ltd (a wholly owned subsidiary of Alara Resources Ltd) signed an off-take agreement for the supply of copper concentrate from the Al Hadeetha Project, Washihi Reserve.

After considering offtake proposals from several competing companies, the Company entered an agreement with Statdrome PTE Ltd. Statdrome has over 15 years' experience in non-ferrous concentrates trading, including copper sales in and out of Oman.

Under the agreement, copper concentrate will be shipped at regular intervals from the Sohar port. There also exists the possibility of supplying the material to the Omani smelter in the case that it restarts.

The agreement forms part of the project financing suite and was concluded in discussion with bank representatives.

Previous Company announcements and other public reports1 referred to the establishment of Mining Development Oman ('MDO') and its objectives, including the development of copper mining in Oman2. During the period, Alara and MDO finalised a Memorandum of Understanding in connection with these objectives (the 'MOU").

Alara's discussions with other interested parties (including potential project equity partners) continue subject to the terms of the MOU.

The Company held several meeting with the Public Authority of Mining and other Government authorities during the period. Overall, strong support was shown for advancing the project despite the application progressing slowly.

1 For example: Times of Oman, 20 September 2016 "Mining Development Oman…", Reuters, 5 January 2016 "Oman sovereign fund, others plan $260m mining venture" and http://www.tanmia.om/view-news.php?id=MQ

2 See http://www.omanminingexpo.com/industry-news.php for further details on MDO's objectives.

Following the Company's submission of a landscape enhancement plan for a park near the project site, the Public Authority for Mining advised that a no objection letter had been received from the Ministry of Tourism and that it would continue to follow through with the Ministry of Environment on any other outstanding issues.

The project timeline previously released was based on the mining licence being issued during the period. Given this has not occurred, the commencement of mine construction is expected to shift accordingly.

During the period, the LME cash price for copper rose from ~$5,600/t to over $5,800/t, including a high of more $6,000/t. The Project's financial models consider copper price forecasts from leading institutions. The models shows good financial returns3 even when a flat price of $5,593 is used over the life mine i.e. a price that is below all the forecasts that were considered4.

Last quarter Alara appointed Progesys as Project Management Consultants for the Project. Progesys are in the process of finalising the EPC contract documents, including the scope of work prior to EPC contract award.

Progesys are Canadian based industrial consultants with Middle East experience. Their project resumé includes project management, construction and commissioning services for some of the largest mining companies in the world.

Other Activities

Previous scoping studies considered the option of toll treating ore from Block 7 at another treatment plant, in addition to heap leaching and other options. The positive findings of the Al Hadeetha Feasibility Study also provide support for the Block 7 Mining Applications which can now be considered with the additional option of having high grade Daris ore treated at the Washihi Plant.

3 Revenues of US$452m, Project NPV of US$39m and IRR of 26%, refer Alara's ASX Announcement dated 24 January 2017 for further details. The models include NPV varying from US$ 39 million to US$ 73 million, hence the Project may do much better than predicated if referenced copper price forecasts and the underlying supply deficits are realised.

4 There is a growing consensus among analysts that copper prices will rise over coming years, as a major supply deficit begins to emerge in 2018/19.

During the quarter, Mr Justin Richard delivered the Company's presentation on Alara's investment into Oman at the Oman Minerals & Mining Conference in Muscat. The conference was held in partnership with Oman's Public Authority for Mining and was directed toward leveraging the increasing demand for minerals, addressing issues relevant to the expansion of the industry, and attracting investment.

The "Project Opportunities" session of the conference was chaired by a representative of Mining Development Oman and included a vibrant question and answer session directed largely toward copper projects in Oman.

Alara board members Atmavireshwar Sthapak and Vikas Jain also attended the conference and met with H.E. Eng. Hilal Al Busaidi (CEO of the Public Authority for Mining) who was a guest of honour at an Indian Embassy function in Oman the same week.

The Sultanate's has a long history of copper mining and recent developments in the sector aim to re-establish mining as a pillar of the Omani economy.

LEGAL PROCEEDINGS5

During the period, there were two hearings before the Board of Grievances in Saudi Arabia, one in January and one in March. The other party to proceedings ('Manajem') did not appear at the January hearing, but representatives from both parties were in attendance at the hearing in March when the judge requested further information and scheduled another hearing for Sunday April 30, 2017.

The Company maintains that Manajem's allegations are baseless, but will leave others to draw their own inference from the fact that Manajem has repeatedly failed to appear at hearings and further delayed proceedings by continuing to seek extensions of time and challenging the appointment of Alara's lawyer rather than addressing the substantive issues of the case.

Overhead burden is being reduced through tight administrative management and cost sharing arrangements with joint venture partners.

5 Refer Alara's ASX Announcement dated 3 May 2016 for an overview of the Project, including an outline of the rise and fall of the earlier joint venture with United Arabian Mining Company.