Cape Lambert Resources : Quarterly Activities Report and Appendix 5B

Q3

Quarterly Report

30 September 2019

31 October 2019

QUARTERLY ACTIVITIES AND CASH FLOW REPORT

FOR THE QUARTER ENDED 30 SEPTEMBER 2019

CORPORATE

Strategy and Business Model

Cape Lambert Resources Limited (ASX: CFE) (Cape Lambert or the Company) is an Australian domiciled mineral development company. Cape Lambert has interests in several exploration and mining companies, providing exposure to iron ore, copper, gold, uranium, cobalt, lithium and lead-silver-zinc assets in Australia, Europe, Africa and South America (refer Figure 1).

Cape Lambert's strategy is to acquire and invest in undervalued and/or distressed mineral assets and companies (Projects) and:

• improve the value of these Projects, through a hands-on approach to management, exploration, evaluation and development; and
• retain long-term exposure to these Projects through a production royalty and/or equity interest.

Cape Lambert aims to deliver Shareholder value by adding value to these undeveloped Projects. If Projects are converted into cash, the Company intends to follow a policy of distributing surplus cash to Shareholders

Cash Balance

As at 30 September 2019, the Company had approximately A$278,000.

Magna Financing Facility

As previously announced, the Company established a A$7.5m finance facility with MEF I, L.P. (Magna) of which A$750k (548,310 convertible notes) was drawn down on 19 December 2018.

During the quarter, Magna converted 125,831 notes which resulted in the issue of 32,546,119 fully paid ordinary shares in the Company. As at 30 September 2019, Magna had 207,986 convertible notes remaining.

Winance Finance Facility

On 31 July 2019, the Company announced that it had secured an A$15m finance facility with Winance Investment LLC (Winance) for mining exploration and general working capital purposes.

Cape Lambert Resources Limited ABN 71 095 047 920

32 Harrogate Street, West Leederville WA 6007
Phone: [phone] Email: [e-mail]
www.capelam.com.au	ASX: CFE

Quarterly Report - 30 September 2019

31 October 2019

The initial tranche of A$1.2m (1,200 convertible notes) was drawn down on 8 August 2019 with the conversion of initial tranche A notes ($480k or 480 convertible notes) unconditional and the conversion of initial tranche B notes ($720k or 720 convertible notes) subject to prior approval by Cape Lambert shareholders. Further tranches of A$13.8m is available in tranches of A$500k each upon full conversion of the notes from the previous drawdown, subject to a cooling off period.

Full terms and conditions of the convertible securities are included in the announcement released on 31 July 2019.

During the quarter, Winance converted 130 notes which resulted in the issue of 26,000,000 fully paid ordinary shares in the Company. As at 30 September 2019, Winance had 1,070 convertible notes remaining.

Figure 1: Group Structure 30 September 2019

Exploration Projects

Kukuna Iron Ore Project

CFE

Sierra Leone

Wee MacGregor Copper Project

CFE - 100%

Australia

Investments

(in listed entities)

Fe limited (ASX: FEL)

29.84% interest

Iron Ore, Gold, Lithium, Base Metals

(Yilgarn WA, Australia)

International Goldfields Limited

(Unlisted)

18.82% interest

Gold (Australia / Cote d'Ivoire / Brazil)

Cauldron Energy Limited

(ASX: CXU)

15.93% interest

Uranium (Australia / Argentina)

European Lithium Limited

(ASX: EUR)

10.75% interest Lithium (Austria)

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Quarterly Report - 30 September 2019

31 October 2019

PROJECTS

Marampa

Marampa is an iron ore project at the development stage, and is located 90 km northeast of Freetown, Sierra Leone, West Africa (Marampa or Marampa Project). The Marampa Project comprised one mining licence (ML05/2014) comprising 97.40km2 and one exploration licence (EL46A/2011) comprising 145.86km2. The status of these tenements is as follows:

ML05/2014

In 2014, Marampa Iron Ore (SL) Limited (Marampa SL), a wholly owned subsidiary of Cape Lambert was granted the mining and environmental licences for ML05/2014 (together the Mining Licence). The Company has spent circa US$62.7m on exploration and development to date on the Marampa Project.

In September 2018, Marampa SL received a letter from the Sierra Leone Ministry of Mines (SLMOM) cancelling the Mining Licence. In 2018, Marampa SL commenced legal action in Sierra Leone to challenge SLMOM's decision to cancel the Mining Licence ML05/2014, however, the Board has agreed to place legal action against the SLMOM on hold.

The Company reconfirms that it does not currently have tenure over ML05/2014. Whilst no formal application has been made to date, the Company has, and will continue to be, engaged in dialogue with the relevant Sierra Leonean authorities in an attempt to have the Mining Licence reinstated or reissued by mutual agreement.

Whilst there can be no guarantee that the SLMOM will agree to reinstate or reissue a Mining Licence, if Marampa SL were to successfully recover the Mining Licence, the Board is committed to working with the relevant parties to secure access to the necessary plant and equipment and infrastructure to enable the ramp up of the Marampa Project upon the reissuance of the Mining Licence for the benefit of our shareholders as well as, importantly, the Government and People of Sierra Leone.

In parallel, Cape Lambert management are in preliminary discussions with third parties to secure financing to fund the development of the Marampa Project.

EL46A/2011

In 2014, Marampa SL was granted exploration license EL46A/2011. In June 2014 the SLMOM extended EL46A/2011 for a further 2-year term from 31 July 2015 until 31 July 2017. Marampa SL has not paid renewal fees to the SLMOM in respect of EL46A/2011 since 31 July 2017. However, Marampa SL has not received any termination documentation or request for information from the SLMOM, therefore is of the view that EL46A/2011 remains a valid license. Marampa SL has contacted the SLMOM asking them to confirm the status of EL46A/2011 however no response has been received to date therefore tenure over EL46A/2011 remains uncertain. Marampa SL will continue to follow up with the SLMOM to determine the status of EL46A/2011.

The Board confirms that given the inherent uncertainties relating to the future of the Marampa Project, the carrying value of the Marampa Project in Cape Lambert's audited accounts was fully impaired as at 30 June 2016 and remains fully impaired.

The Company is currently committing minimum expenditure on the Marampa Project and no exploration activities are currently underway at the Marampa Project.

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Kukuna

Dempsey Resources Bermuda Limited holds the Kukuna Iron Ore Project located in Sierra Leone (Kukuna or Kukuna Project).

The Kukuna Project is located 120 km northeast of Freetown in the northwest of Sierra Leone and consists of one exploration licence (EL22/2012) covering 68km2. The licence comprises rocks known to host specular hematite mineralisation.

The Kukuna Project remains under care and maintenance.

Kipushi Copper-Cobalt Projects (JV with Paragon Mining SARL)

The Kipushi Cobalt Copper Tailings Project located in the Democratic Republic of Congo consisted of a tailings dam located on PE 12347 and the Kipushi Processing Plant located adjacent mining licence PE481 (Kipushi Project).

During the quarter the Company announced that the joint venture agreement with its partner Paragon Mining SARL had been terminated (refer ASX announcement dated 14 August 2019) and hence the Company is no longer involved with the Kipushi Project.

Mining International Pty Ltd

Mining International Pty Ltd (Mining International), is a wholly owned subsidiary of Cape Lambert. The Company holds tenure to 4 mining leases at the Wee MacGregor Project located 40 km southeast of Mt Isa in Queensland (refer Figure 2).

The tenements are located within in the Eastern Fold Belt of the Mt Isa inlier. The tenements are located in the Mary Kathleen Zone/Wonga Subprovince. This area is prospective for a variety of deposit types, most notably structurally controlled epigenetic copper and gold deposits.

Cohiba Minerals Limited (Cohiba) has a Farm-in agreement with the Company for mining licences ML 2504, ML 2773 and ML 90098, while the Firebird Minerals Pty Ltd (Firebird) Farm-in agreement for mining licence ML 2771 has lapsed.

No activities were reported for the quarter.

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Figure 2 - Wee McGregor Project Location

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