Encounter Resources : Quarterly Activities and Cashflow Report June 2016

million options

~A$3.7M

Mr. Paul Chapman

Non-Executive Chairman

Mr. Will Robinson

Managing Director

Mr. Peter Bewick

Exploration Director

Dr. Jon Hronsky

Non-Executive Director

Mr. Kevin Hart / Mr. Dan Travers

Joint Company Secretary

www.enrl.com.au

Level 7, 600 Murray Street West Perth WA 6005

P: 08 9486 9455

F: 08 6210 1578

contact@enrl.com.au

HIGHLIGHTS

The Yeneena Region ("Yeneena") consists of a major ground position between the Nifty copper mine, the Telfer gold-copper mine and the Kintyre uranium deposit where Encounter has made a series of greenfield discoveries that demonstrate the potential of the area for large tonnage, high quality deposits.

• The first diamond drill hole successfully intersected narrow zones of disseminated copper sulphide mineralisation, up to 1% Cu, at the targeted first reductant position. This copper- cobalt mineralisation is located directly above an oxidised "red bed" stratigraphic unit, a stratigraphic position similar to that of many major copper deposits of the Zambian Copperbelt.

• This stratigraphic position is interpreted to extend laterally and, as such, has important implications for the prospectivity of the Lookout Rocks project.

  Millennium Zinc Project (Hampton earning up to 25%)

• A two hole diamond drill program was completed in July 2016. Drilling has confirmed that the area of shale hosted zinc-lead mineralisation extends at least 400m further south- east than previously known and the system remains open. Assay results are expected in August 2016.

• Successful application for WA Government Exploration Incentive Scheme ("EIS") co-funding (up to A$150,000) with drilling expected to commence in September 2016.

  BM1-BM7 Copper Project (100% ENR)

• A three hole diamond drill program was completed testing discrete gravity targets at the BM1-BM7 prospect. The drilling intersected additional low grade copper mineralisation but does not appear to have intersected significant density features as modelled. A review of the drilling and geophysical models is in progress.

  Paterson Gold Projects (100% ENR)

• Successful application for WA Government Exploration Incentive Scheme ("EIS") co-funding (up to A$150,000) for future drilling at the Dora gold project located ~40km SE of the Telfer gold operation.

• A detailed airborne magnetic survey was completed at the Telfer West project (located 25km north-west of Telfer). The last on-ground exploration at Telfer West was completed over two decades ago, where limited shallow drilling intersected gold mineralisation over a 4km long trend.

  CORPORATE

  1

• ~A$3.7 million cash balance as at 30 June 2016.

  EXPLORATION

  PATERSON PROVINCE YENEENA PROJECT

   100% Encounter - E45/2500, E45/2502, E45/2503, E45/2657, E45/2658, E45/2805, E45/2806, E45/3768, E45/4091, E45/4230 and E45/4408

• 90% Encounter / 10% HHM - E45/2501, E45/2561 and the four eastern sub-blocks of E45/2500 with HHM earning up to 25%

   Antofagasta earning into E45/3768, E45/4091, E45/4230 and E45/4408

• Paterson Gold projects: ELA45/4613, E45/4564

Yeneena covers a 1,900km2 of granted exploration licenses in the Paterson Province of WA located between the Nifty copper mine, the Woodie Woodie manganese mine, the Telfer gold-copper mine and the Kintyre uranium deposit (Figure 1).

Figure 1: Yeneena tenements: Projects and Earn-In areas with major regional faults

Millennium Zinc Project - Encounter 90% / HHM 10% in E45/2501, E45/2561 and the four eastern sub- blocks of E45/2500. HHM may earn up to 25% interest.

Background

The Millennium Project is located in the north-east Yeneena (see Figure 1) and is subject to an Earn In Agreement with Hampton Hill Mining ("HHM") (refer ASX announcement 23 April 2015).

The Millennium Project lies on the north eastern margin of Yeneena at the intersection of the NNW trending Tabletop Fault and the NE orientated Tangadee structural lineament. This intersection of two metallogenically important structural corridors is a first order target and typical of the style of setting that is associated with large scale metal deposits.

Previous aircore and RC drilling by Encounter has defined a +3km long zinc regolith anomaly that remains open to the SE. Diamond drilling at Millennium has intersected a thick zinc gossan at the contact between a brecciated carbonate and a thick sequence of carbonaceous shales of the Broadhurst Formation. Previous assay results from the gossan include, (refer ASX announcement 9 July 2015):

38.7m @ 0.9% Zn in EPT2201 from 255.8m; and 91.8m @ 1.6% Zn in EPT2203 from 344.4m

High tenor zinc sulphide mineralisation, in the form of sphalerite, has been intersected below the gossanous unit and returned assays of, (refer ASX announcements 12 January 2015 and 13 December 2013):

0.7m @ 36.7% Zn in EPT1854 from 430m; and 7m @ 4.8% Zn in EPT 2198 from 233m.

Three high priority target zones have been identified for follow up in 2016 (see Figure 3):

Target Zone Central - large untested target area south-east of the strongly mineralised gossan intersection EPT2260

Target Zone South-East - interpreted zone of coherent zinc sulphide mineralisation including EPT 2198 (7m @ 4.8% Zn) that is open to the south-east

Target Zone North West - high-grade zinc sulphide mineralisation intersected in EPT1854 (0.7m @ 36.7% Zn) that remains open downdip and along strike to the north and west.

Exploration activity during the quarter focused primarily on Target Zone South-East:

Target Zone South-East - Previous drilling has intersected a coherent zone of zinc sulphide mineralisation at the contact between carbonaceous black shale and a brecciated carbonate unit. Intersections in the South-East target zone include, (refer ASX announcement 12 January 2015):

14m @ 1.8% Zn in EPT2261 from 223m; and 7m @ 4.8% Zn in EPT 2198 from 233m.

A ground gravity survey was completed in October 2015 and a passive seismic trial was completed in April 2016 to the south east of Millennium to map cover depth and potentially provide additional structural information to assist with drill planning. A two hole diamond drill program was completed at Millennium in July 2016 following up targets defined from the geophysical surveys.

The first hole, EPT2284, was targeting the carbonate-shale contact along strike 100m east of EPT2198. The hole intersected the same alteration assemblage including narrow zones of disseminated zinc sulphide mineralisation. Assay results from this hole are expected in August 2016.

A second hole, EPT 2288, targeted shale hosted zinc-lead mineralisation 400m east of the easternmost drill section (see Figure 2). The 534m hole drilled though a major shear zone from the bottom of the Permian cover at 252m downhole to a depth of ~510m downhole. The hole intersected what is interpreted to be the mineralised shale package in the final ~20m of the hole. The final 20m of the hole contained a series of

carbonate veins containing blebs of sphalerite (zinc sulphide), galena (lead sulphide) and minor chalcopyrite (copper sulphide). The hole terminated at 534m due to bogged rods and a broken rod string. This drill hole successfully confirmed that the shale hosted zinc-lead mineralisation extends further south- east than previously known and the system remains open. Assay results from this hole are also expected in August 2016.

Important geological information was obtained in this phase of drilling including the location of a major structure/shear zone and confirmation that the mineralised shale package extends laterally in this area. This zinc-lead mineralised carbonate veining in the shale is considered an important proximal diagnostic indicator of the clastic dominant or SEDEX deposit model.

During the quarter the Company was successful with its application for WA Government EIS co-funding (up to A$150,000) for a future diamond drill program at Millennium Deeps targeting shale hosted zinc sulphide mineralisation. This EIS co funded program is scheduled to commence in September 2016.

Figure 2: Drill hole collar location - Millennium