Leaf Resources : Response to ASX Query

17 May 2017

Christopher Dobbs

Adviser, Listing Compliance ASX Compliance Pty Limited 20 Bridge Street

SYDNEY NSW 2000

By email:

Dear Mr. Dobbs,

Response to Appendix 4C Query

I acknowledge receipt of your letter dated 12 May 2017 regarding the Company's Appendix 4C quarterly report for the period ended 31 March 2017. Your questions are individually answered below but the following background information is pertinent to all your questions.

Leaf Resources is currently commercialising its' proprietary GlycellTM process and as reported in our shareholder update on 26 April 2017 has made significant progress in Malaysia as it secures the key milestones required to develop its first commercial project.

As the decision point for this project draws closer, Leaf Resources has made a conscious decision to commit necessary resources to this development and consequently there has been an increase in expenditure by the Company. This increase occurred during the March 2017 quarter and is expected to continue through the June 2017 quarter as reported in the Appendix 4C and noted by yourself.

The commitment of resources reflects the Directors' confidence in the progress of the project in Malaysia.

Should the need arise, the Company could revert to its more normal quarterly expenditure levels of around $750,000 as per previous quarters, however, the Directors are of the belief that potential developments in Malaysia will occur in the near future and that the Company needs to be positioned to maximise the benefits ensuing from those developments.

It should also be noted that Leaf Resources estimates an R&D tax incentive cash refund between $500,000 - $700,000 in respect of the 2017 financial year. Discussions have started on the financing of this refund through the commercial channels that offer this financial service.

Leaf is on the cusp of a commercial breakthrough In Malaysia and the board believes that the current level of expenditure is:

• prudent, given the opportunity;

• positioning the company strongly for raising further equity; and

• being spent in a manner that enhances the potential success of the project.

Our responses to your specific questions follow:

1. Does the Entity expect that it will continue to have negative operating cash flows for the time being and, if not, why not?

   Over recent years the Company has developed its proprietary GlycellTM process and is now seeking to commercialise that process. Whilst the Company is progressing its commercialisation strategy (see Shareholder Update lodged 26 April 2017) and that strategy is progressing towards the deployment of an initial commercial facility, the Company expects that it will continue to have negative operating cash flows in the near future.

2. Has the Entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?

   On 16 May 2017, the Company notified shareholders of an extraordinary general meeting to be held on 16 June 2017. At that meeting, shareholders will be asked to ratify the previous issues of 29,051,726 equity securities issued under ASX Listing Rules 7.1 and 7.1A. This will reinstate the Company's ability to raise capital by issuing further shares in accordance with ASX Listing Rules 7.1 and 7.1A.

   The Company has, over the last 3 years, shown its ability to raise equity capital as required and believes that, based on current discussions with potential Australian and overseas investors and our Australian corporate advisors, it will be able to raise equity as needed. The Company will make such disclosures as are necessary when they are necessary, as required by the Listing Rules.

   In April 2017, the Company received notification from Austrade that its Export Market Development Grant application in respect of the 2016 financial year was successful up to the maximum possible grant amount of $150,000. Leaf has received $40,000 under the first tranche payment and the balance entitlement will be received following Austrade determining the payout factor to be applied to all EMDG recipients.

   Post 30 June 2017, the Company believes, based on previous years' rulings, that in excess of $500,000 will be received from the R & D Tax as a cash refund.

3. Does the Entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?

   The Company expects that it will be able to continue its operations and to meet its business objectives based on its current levels of liquid assets and its ability to promptly raise capital.

4. Can the Entity confirm that it is in compliance with Listing Rule 3.1 and that there is no information that should be given to ASX about its financial condition in accordance with that Rule that has not already been released to the market?

   The Company confirms that it is in compliance with the listing rules and in particular Listing Rule 3.1 and that there is no information about its financial condition that should and has not already been released to the market. A comprehensive Shareholder Update was released to the market on 26 April 2017 and following that on 8 May 2017, it was announced that, subject to certain shareholder approvals, Mr William Baum would be appointed as a non-executive director. A notice of extraordinary general meeting to be held on 16 June 2017 was made on 16 May 2017.

5. Please also provide any other information that the Entity considers may be relevant to ASX forming an opinion on whether the Entity is in compliance with Listing Rule 12.2.

The Company can confirm that it is in compliance with Listing Rule 12.2 and has sufficient assets to cover its liabilities and meet its ongoing commitments.

Yours sincerely,

Ken Richards Managing Director

LEAF RESOURCES LIMITED