Greenland Minerals and Energy : Quarterly activities report

ASX: GGG

December 2016 Quarterly Report

Tuesday 31stJanuary, 2017

Highlights:

• Le Shan Shenghe, 99.999% subsidiary of Shenghe Resources Holding's acquisition of a 12.5% stake in GMEL finalised, following shareholder and Foreign Investment Review Board approvals
• Shenghe has strong proficiency in all parts of the rare earth industrial chain with extensive marketing and financial investment background and substantial balance sheet strength, making it an optimal strategic partner for the development of Kvanefjeld Project
• Ms Wenting Chen appointed to the board of GMEL as a non‐executive director
• GMEL and Shenghe to commence joint technical work programs in early 2017
• Significant progress made on project permitting and reviews of Environmental and Social Impact Assessments (EIA, SIA), and Maritime Safety Study
• Major reviews of EIA sections by Greenland Government expert environmental consultants complete in late 2016, GMEL and Greenland Government assessing recommendations prior to updating the EIA
• Independent report by the Danish Centre for the Environment (DCE) - part of Aarhus University in Denmark - has concluded that it is possible to operate modern uranium mines without major environmental issues; a significant positive indicator for the Kvanefjeld Project
• SIA is advanced with consistent, constructive input and guidance from Greenland's Ministry for Industry, Trade and Labour
• GMEL looking to establish timeline and schedule with the Greenland Government for the public consultation, and follow‐up phases

PERTH: Unit 6, 100 Railway Road, Subiaco Western Australia 6008POSTAL: PO Box 2006, Subiaco WA 6904 Telephone: [phone] Facsimile: [phone]

GREENLAND: PO Box 156, Narsaq, Greenland 3921

WEB:www.ggg.glEMAIL:[e-mail]: 85 118 463 004

Contents

December 2016 Quarter Activities 1

Shenghe's acquisition of 12.5% interest in GMEL finalized 2

About Shenghe Resources Holding 2

Appointment of new Non‐Executive Director 4

Kvanefjeld Project Mining License Application ‐ Processing Update 4

2016 EIA processing progress 5

2016 SIA processing progress 6

Rare Earth Industry Update 7

Uranium Industry Update 7

About the Kvanefjeld Project 9

Tenure, Permitting, and Location 9

Capital Structure 10

Kvanefjeld Project ‐ Statement of Identified Mineral Resources 11

PERTH: Unit 6, 100 Railway Road, Subiaco Western Australia 6008POSTAL: PO Box 2006, Subiaco WA 6904 Telephone: [phone] Facsimile: [phone]

GREENLAND: PO Box 156, Narsaq, Greenland 3921

WEB:www.ggg.glEMAIL:[e-mail]: 85 118 463 004

December 2016 Quarterly Activities

The final quarter of 2016 concluded a transformative year for GMEL that saw a robust foundation established for the Kvanefjeld Project. At the start of 2016, the Company's objectives were to progress the permitting for the Kvanefjeld Project, and to advance the commercial development strategy.

Material progress was made on both fronts, with major reviews of the Environmental and Social Impact Assessments by the Government of Greenland and their expert consultant groups, and the commencement of a strategic relationship with leading rare earth company Shenghe Resources Holding (Shenghe).

In addition, key political developments took place in the first half of 2016 that relate to uranium production and export. The Danish Parliament passed legislation to create the legal framework for uranium exports from Greenland, and the Greenland Parliament adopted laws in relation to non‐ proliferation commitments. This concluded a comprehensive program by the Governments of Greenland and Denmark to establish the regulatory framework required to manage uranium production and export from Greenland.

Market interest in minor metals has surged in recent years, owing to the criticality of numerous minor metals to energy efficient technologies, and clean energy generation (e.g. rare earths, lithium). As the wave of global urbanisation progresses, and the transition continues from carbon‐based energy generation toward greater contributions from renewables and nuclear, projected demand for minor metals is set to surge. Batteries and permanent magnets are two key growth areas that depend on the specific properties of minor metals. Kvanefjeld is well‐placed to play an important role in the new energy era.

Shenghe Resources Holding's 99.999% subsidiary, Le Shan Shenghe's acquisition of a 12.5% stake in GMEL was finalised during the December Quarter, following both shareholder and Foreign Investment Review Board approvals. This sees Shenghe become GMEL's largest shareholder, ahead of North American funds Global X, and Tracor Ltd.

These developments have GMEL well‐placed for 2017, and the progression toward developing Kvanefjeld as a globally significant producer of specialty metals.

Shenghe's Acquisition of a 12.5% Interest in GMEL Finalised

On September 23rd, GMEL announced that it had entered into a Subscription Agreement (SA) with leading rare earth company Shenghe Resources Holding Ltd, and its 99.99% subsidiary Le Shan Shenghe Rare Earth Co., Ltd (Leshan Shenghe). Leshan Shenghe is focussed on rare earth downstream processing.

The SA provided for Shenghe to acquire 125 million shares in GMEL, which represents a 12.5% interest. The fundamental objective of both parties is to develop the Kvanefjeld Project as a cornerstone to new rare earth supply networks. Shenghe's leading technical expertise, processing capacity, and strong international customer base make Shenghe an ideal strategic partner for the Project.

During November, Australia's Foreign Investment Review Board (FIRB) approved the issue of 125 million shares to Shenghe. On November 29th, a General Meeting was held to seek shareholder approval. Shareholders voted overwhelmingly in favour (92.6%) of the SA and the issue of shares to Shenghe.

Following approvals and the receipt of $4.625 million (AUD), 125 million shares were issued to Shenghe, who become the largest shareholder in GMEL.

The rare earth sector, by virtue of the extended industrial chain, necessitates that the mining end requires integration with strong downstream processing proficiency to create a strong business. This emphasizes the importance of aligning the Kvanefjeld Project with a strong global industrial partner. Shenghe's participation provides a means to establish a complete value chain from mine to high‐purity end‐products.

In early 2017, both parties will jointly commence technical work programs to further improve the cost‐ structure of the Kvanefjeld Project, ensure the Project is optimised with respect to downstream rare earth processing, and identify further value add opportunities, including the recovery of additional products.

About Shenghe Resources Holding

Shenghe Resources Holding Co. Ltd (SSE 600392), (Shenghe) is a public company exclusively focused on mining and processing rare earth ores, and producing high purity rare earth oxides, metals and alloys along with a range of rare earth products. Shenghe is listed on Shanghai Stock Exchange (since 2012) and, as at 20 September, 2016 had 941M shares on issue and a market capitalization of approximately RMB14.3 billion or AUD $3 billion.

Shenghe has three major shareholders. The Institute of Multipurpose Utilization of Mineral Resources (IMUMR), a state owned scientific research institute specializing in mineral resources, holds just over 20%, Mr Quangen Wang, former engineer of IMUMR holds ~10% and the Sichuan Giastar Enterprise Group, a private company involved in natural resources holds ~8%.