ASX RELEASE

07 June 2017 ASX: ARU

AN EMERGING RARE EARTHS PRODUCER FOR USERS WORLDWIDE

COMPLETION OF DETAILED RESOURCE ASSESSMENT
  • Mine Planning for Definitive Feasibility Studies can now commence
  • 66% of Measured and Inferred inventory confirmed as high yielding NdPr material types
  • Compliments results of pilot activities
  • Confirms a consistent NdPr distribution for all resource categories

Arafura Resources Limited (ASX: ARU) ("Arafura" or the "Company") is pleased to announce the completion of a detailed program of geological and geochemical analysis to be utilised for the next phase of mine planning activities for the Definitive Feasibility Study.

The study was commenced to provide greater confidence for the Mine Plan that will incorporate selective mining, and ore loss and dilution studies, to allow the development of optimized pit shells, strategic production schedules and material blending strategies.

Additionally, the review confirmed a substantial inventory of phosphate-rich material types at Arafura's 100%-owned Nolans Bore neodymium-praseodymium ("NdPr") deposit in the Northern Territory.

This work follows the successful completion of the beneficiation pilot plant earlier this year which demonstrated elevated recoveries of all Rare Earths including NdPr from phosphate-rich material types.

Arafura's Managing Director, Gavin Lockyer said, "The results of this work are extremely pleasing and confirm that this is a world class NdPr deposit. Combined with our ongoing successful pilot results, and forecast supply shortages of NdPr for the Electric and Hybrid vehicle market, Arafura continues to prove that it represents a significant and viable source of these scarce and critical materials in the near term."

"This data will now feed into our mine planning schedules to optimise the economic recovery of NdPr and Phosphate ("P2O5") and minimise our operating costs both in mining and downstream processing for the Definitive Feasibility Study", Mr Lockyer said.

This recent analysis, which included the reclassification of material types for all assay intervals and the acquisition of 3,500 new representative whole rock geochemical assays from across the deposit, has identified that more than 66% of the project's higher confidence Measured and Indicated resource inventory comprises phosphate-rich material types.

ARAFURA RESOURCES LIMITED

arafura@arultd.com www.arafuraresources.com.au ABN 22 080 933 455

PERTH: Level 3/263 Adelaide Tce, Perth WA 6000 | PO Box 5773, St Georges Tce, Perth WA 6831 T: +618 6210 7666

DARWIN: 18 Menmuir St, Winnellie NT 0820 | PO Box 37220, Winnellie NT 0821 T: +618 8947 5588 F: +618 8947 5599

Whilst all mineralised material types can be processed using Arafura's flowsheet, NdPr andP2O5 recoveriesare influenced by mineralogy as currently being demonstrated through Arafura's pilot activities. (refer to ASX announcement 6 February 2017).

The distribution of these phosphate-rich material types at Nolans Bore is shown in Figure 2.

The work did not result in any material change to the previously reported Mineral Resources for the project (refer to ASX announcement 30 October 2015). However, it did reveal the consistent nature of the distribution of NdPr across the deposit and the abundanceof P2O5 materialbest suited to Arafura's flowsheet as shown below in Figure 1 and attached JORC Table 1.

Figure 1: Mineral Resources for the Nolans Bore deposit as at 07 June 2017 using a 1% TREO Cut-Off Grade.

RESOURCES

TONNES

million

RARE EARTHS TREO %

PHOSPHATE P2O5 %

NdPr enrichment %

Measured

4.9

3.2

13

26.1

Indicated

30

2.7

12

26.4

Inferred

21

2.3

10

26.5

TOTAL

56

2.6

11

26.4

Numbers may not compute due to rounding. "NdPr enrichment" is the proportion of TREO comprising Nd2O3 and Pr6O11.

Figure 2: Plan view showing the distribution and proportion of phosphate-rich mineralised material types in the Nolans Bore resource. The red represents high-recovery phosphate-rich mineralisation.

The geological block model that supports these Mineral Resources is now populated by a greater array of attributes of economic, metallurgical and environmental interest. These includethe proportion of the reclassified material types and an estimate of iron ("Fe2O3") andaluminium ("Al2O3")contents, the mix of which are important to the current process being piloted.

The results of the geological model also confirm data presented in the Nolans Environmental Impact Statement and validates management plans for tailings and waste rock inventory during operations.

- ENDS -

For further information, contact: Investor enquiries: Media enquiries:

Gavin Lockyer Luke Forrestal

Managing Director Media and Capital Partners

T: +61 8 6210 7666 M: +61 411 479 144

Competent Persons Statement

The information in this report that relates to Exploration Results and Mineral Resources is based on information compiled by Mr Kelvin Hussey, a Competent Person who is a Member of the Australian Institute of Geoscientists. Mr Hussey is a full-time employee of Arafura Resources Limited. Mr Hussey has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Hussey consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

ARAFURA RESOURCES LTD - NOLANS PROJECT JORC TABLE 1 ASSESSMENT CRITERIA

JORC TABLE 1 ASSESSMENT CRITERIA FOR NOLANS BORE MINERAL RESOURCE STATEMENT AS AT 7 JUNE 2017

Section 1: Sampling Techniques and Data

Criteria

Commentary

Sampling techniques

Senior Geologists, including Competent Person (Kelvin Hussey), have ensured sampling is to industry standard across all exploration and resource definition campaigns at Nolans Bore. Quality of sampling and all relevant sampling details were continuously monitored and recorded by the responsible Geologist. Results of the sampling programs detailed below are included in the geological model and Mineral Resource estimate as outlined. Assay results of samples collected from surface mapping, shallow pits and the wide diameter core/auger holes were not included in the Mineral Resource estimate but were considered in the development of the geological model.

Sampling has involved both Reverse Circulation (RC) and diamond core drilling methods. Most drill holes were systematically drilled towards the southeast (145 degrees true) at an initial inclination of -60 degrees. Drilling has been completed across most of the area at nominal 40m x 40m spacing on a local grid pattern with infill to 20m x 20m in the central parts of the North Zone (CNZ). Wider spaced exploration RC drilling occurs on the periphery of the main resource. 10 vertical RC holes have been drilled at Nolans Bore and are used to abstract or monitor groundwater. 25 inclined diamond core holes have been drilled nominally east or west (true) on 100 metre-spaced sections to resolve complexities in the geological model in the Central Zone. 19 inclined diamond core holes have been drilled in various other directions. The quantum of drilling and drill core at Nolans Bore is sufficiently high and widespread to ensure adequate sampling and a geological understanding of the deposit.

RC drilling was undertaken in 2001, 2004, 2005, 2007-08, 2010, 2011 and 2013. All RC drilling campaigns have employed a 140mm diameter face sampling hammer with sufficient air pressure/volume to ensure adequate representative sample was collected. A total of 63,053 metres in 589 RC drill holes have been completed at Nolans Bore and its immediate surrounds. A total of 532 of these RC holes (60,021 metres) have been drilled in the main area considered in the current resource assessment.

RC drill chips were collected at one-metre sample intervals. Assay samples were automatically split via a 12.5/87.5 riffle splitter at the drill rig. One 2011 RC drill rig was adequately setup to enable automated splitting of wet samples. An assessment of wet and dry splitting at this rig and a comparison with the other rigs at that time showed no material biases with acceptable sample sizes. The entire 2007-08 RC program and all other wet samples were manually split to size using Arafura's 50/50 riffle splitter after the residues were air dried in the sun. The drill rig cyclone and splitter were thoroughly washed and air dried after each rod in the clay-rich parts of the deposit, to limit cross-contamination of samples and smearing of grade. Automatically split assay sample sizes were typically considered acceptable. However in some instances, the residue was manually re-split again to achieve an acceptable assay sample size. RC samples were sub-sampled using both rig-mounted and stand-alone riffle splitters into one-metre samples of 3-6 kg in size, averaging about 4 kg. Most samples were collected dry with a small proportion collected moist due to ground conditions or excessive dust suppression. As instructed, RC assay samples were composited on an equal weight basis at the laboratory, typically as 2 metre assay samples although both 1m and 3m RC assay samples occur. Field duplicates are targeted one-metre assay samples that have been specifically selected as representing geological boundaries or corresponding to an anticipated high, medium or low grade based on radiometric and geological logging.

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