Australian Mines : Diamond drilling update - Simmons prospect

Highlights:

 Completed two diamond core drill holes for a total of 1,230 metres

 Intersected ultramafic rocks similar to those hosting Kambalda nickel deposits

 Two distinct sulphide zones observed

 Cutting and sampling of core in progress

 Commencing down hole electromagnetic surveys of drill holes

Australian Mines Limited ("Australian Mines" or "the Company") is pleased to provide an update on the initial drilling program at the Simmons nickel prospect in Western Australia. The Simmons prospect is located within the broader Marymia project area, which is situated 55 kilometres northeast of Sandfire Resources' DeGrussa copper-gold mine.

The Simmons drilling program commenced in early September (see announcement 8 September) and was designed to test a bedrock conductor identified during an electromagnetic (EM) survey over a coincident nickel and copper soil anomaly. Modelling of the EM data indicated that a buried massive sulphide body was potentially the source of the resulting geophysical anomaly.

Australian Mines has now completed a two-hole diamond core drill program at Simmons (totalling 1,230 metres) and the Company's exploration team is highly encouraged by the initial indications received from this drilling.

Two distinct sulphide zones (>10% sulphides) were observed in these drill holes. Both zones appear to comprise iron sulphides (pyrrhotite and, to a lesser extent pyrite) with trace amounts of other sulphides including chalcopyrite (copper) in hole number SMDD001 (see Appendix 1). No graphitic sulphide shales were encountered.

Figure 1: A section (515.6 to 516.8 metres) of the four-metre wide sulphide zone intersected by drill hole SMDD002 at the Simmons prospect. This drill hole was designed to test the source of the bedrock conductor identified beneath a historic nickel-in-soil anomaly. Further information on this hole will be provided once the Company receives the final assay results and down hole electromagnetic survey data.

Whilst the Company's initial drilling program did intersect multiple sulphide zones at Simmons, neither drill hole adequately explains the strong nickel and copper soil anomalies previously reported over the prospect area1.

The Company is presently cutting the drill core and anticipates submitting samples to the assay laboratory for analysis in the coming week.

The presence of sulphides at Simmons is considered significant as the mineralogy of Kambalda-style nickel deposits is dominated by pyrrhotite, pentlandite (nickel sulphide) and pyrite2.

1 Australian Mines Limited, Strong EM conductor identified at Marymia, released 1 August 2014

2 Cowden, A. & Roberts D.E., 1990. Komatiite hosted nickel sulphide deposits, in Geology of the Mineral Deposits of

Australia and Papua New Guinea, pp 567-581

Similarly, the sulphides present within Sandfire Resources' DeGrussa copper deposit is primarily

pyrrhotite, chalcopyrite (copper sulphide) and pyrite3.

Australian Mines has therefore commenced a down hole EM survey of these drill holes to ascertain whether additional conductive zones (which may represent a massive nickel sulphide zone) are present either below or adjacent to the recently drilled diamond holes.

Australian Mines will also seek to extend the coverage of its ground-based EM surveys to test the entire

20-kilometre strike length of the favourable ultramafic (komatiite) unit at Simmons.

results we have received from our first phase of drilling at Simmons.

The Simmons prospect is located within a highly prospective region of Western Australia, having the potential to host Kambalda-style nickel as well as DeGrussa-style copper-gold mineralisation.

With our maiden drill program intersecting a komatiite (ultramafic) sequence similar to that which hosts the Kambalda, Perseverance and Cosmos nickel deposits, we believe the Simmons prospect represents a positive exploration target for nickel and these first two holes have further strengthened this view."

Benjamin Bell Managing Director Ph: +61 8 9481 5811

E: bbell@australianmines.com.au

Information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Benjamin Bell who is a member of the Australian Institute of Geoscientists. Mr Bell is a full-time employee and Managing Director of Australian Mines Limited. Mr Bell has sufficient experience that is relevant to the style of mineralisat ion 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, Mineral Resources and Ore Reserves." Mr
Bell consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

3 Sandfire Resources Ltd, AMEC Congress Presentation, released 1 June 2010

Australian Mines has entered into a Heads of Agreement with Riedel Resources covering the Marymia nickel-copper-gold project, located 55 kilometres northeast and along strike of Sandfire Resources' world class DeGrussa copper -gold mine. Under the terms of this Agreement announced on 30 April 2014, Australian Mines may acquire a 51% interest in the Marymia project by making a cash payment to Riedel Resources of $250,000 by 30 October 2014 and spending $1 million on exploration within an initial two-year period. Following the acquisition of the initial 51%, Australian Mines may elect to acquire an additional 29% interest (taking the total to 80%) in the project by spending a further $2 million on exploration within a further 36-month period.

All co-ordinates are recorded in MGA Zone 50.
Drill hole collar co-ordinates were obtained using handheld GPS and are accurate to within +/- 5 metres. Reduced Level (RL) is reported in metres above sea level.
Data entry and electronic storage of Australian Mines' assay data adheres to the industry's accepted protocols and is managed by rOREdata in Perth, Australia.

 Nature and quality of sampling (e.g. cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc.). These examples should not be taken as limiting the broad meaning of sampling.

 Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used

 Aspects of the determination of mineralisation that are Material to the Public Report.

 In cases where 'industry standard' work has

been done this would be relatively simple (e.g.
'reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay'). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules)
may warrant disclosure of detailed information.

 No Australian Mines assay results or significant intersections are included in the accompanying report.

The HQ diamond core is presently being half-cut and will be sampled collected at one metre intervals.
Sampling is guided by Australian Mines' protocols and QAQC procedures which were designed in consultation with SRK Consulting, Perth.
All samples will be submitted to the UltraTrace assay laboratory in Perth for Fire Assay and Four Acid ICP-OES analysis.
Australian Mines analyse for the following elements: Au, Ag, Al, As, Ba, Bi, Ca, Cd, Ce, Co, Cr, Cu, Fe, K, La, Li, Mg, Mn, Mo, Na, Ni, P, Pb, S, Sb, Sc, Sn, Sr, Te, Ti, Tl, V, W, Zn.

 Drill type (e.g. core, reverse circulation, open- hole hammer, rotary air blast, auger, Bangka, sonic, etc.) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face- sampling bit or other type, whether core is oriented and if so, by what method, etc.)

 The Simmons drill program referred to in the accompanying report involved two diamond core drill holes.

Drill hole SMDD001 had an RC-precollar to 96 metres down hole, with an HQ diamond tail to end of hole (being 600.7 metres).
Drill hole SMDD002 had a rock roller precollar to
36 metres down hole, with an HQ diamond tail to end of hole (being 630.8 metres).
The core was oriented and marked by the drill contractor (DDH1 drilling) using ACT Mk II electric core orientation.

 Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.

 The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.

 The Marymia project (and Simmons prospect) is located within the Western Australian exploration licences of E52/2394 and E52/2395.

On 30 April 2014, Australian Mines announced it had signed a Heads of Agreement with Riedel Resources Limited (ASX code: RIE) in relation to the Marymia project.
Exploration licences E52/2394 and E52/2395 are within the Marymia and Ned's Creek Pastoral Leases and contained within the Native Title Claim boundaries of the Gingirana (WAD6002/03) and Yugunga-Nya (WAD6132/98) Traditional Owners.
Exploration activities on E52/2394 and E52/2395 are permitted under agreements dated;
7 October 2010 between Audax Resources Ltd (a subsidiary of Riedel Resources) and the Yamatji Marlpa Aboriginal Corporation as agent for the Yugunga-Nya people; and
23 October 2010 between Audax Resources and Gingirana Pty Ltd. Australian Mines is permitted to operate under these agreements as the company is joint venturing with Riedel Resources on this project.
Exploration licences E52/2394 and E52/2395 are in good standing with no impediments to exploration known to exist at the time of writing.

 Acknowledgment and appraisal of exploration by other parties.

 Limited exploration and drilling programs have previously been undertaken across the Marymia project area by other companies.

A summary of the historic anomalous gold and nickel intersections are outlined in the Prospectus released by Riedel Resources Limited on 23 November 2010.

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