Greenland Minerals and Energy : September 2016 Quarterly Report

ASX: GGG

September 2016 Quarterly Report

Monday 31stOctober, 2016

Highlights:

• Greenland Minerals and Energy Ltd (GMEL) set to commence strategic working relationship with leading rare earth company Shenghe Resources Holding
• Shenghe to acquire a 12.5% interest in GMEL, subject to shareholder and Foreign Investment Review Board approval
• Shenghe has strong proficiency in all parts of the rare earth industrial chain including mining, beneficiation, metallurgy, downstream processing, and marketing with extensive financial investment background and solid capital strength, thereby making it an optimal strategic partner for the development of Kvanefjeld Project
• Greenland formalises status as signatory to international nuclear conventions at the 60thIAEA General Conference, held in Vienna in September 2016
• Progress continues on Greenland's processing of the Kvanefjeld Mining License Application: main focus during Q3 on key components of the Environmental Impact Assessment with technical reviews by independent expert consultancies
• Rare earth industry developments: China's Ministry of Industry and Information Technology (MIIT), announces 13thFive Year Plan (2016‐2020)

  • Annual rare earth output reduced to a limit of 140,000 tonnes by 2020.

  • Significant progress on eradicating illegal, unregulated production during previous 5 year plan

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

September 2016 Quarter Activities 1

Shenghe Resources Holding to Acquire 12.5% interest in Greenland Minerals 2

About Shenghe Resources Holding 3

Greenland Formalises Status as Signatory to International Nuclear Conventions 4

Kvanefjeld Project Mining License Application Processing ‐ Update 4

Environmental Impact Assessment Processing 5

Rare Earth Industry Update 7

About the Kvanefjeld Project 8

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

September 2016 Quarterly Activities

The September Quarter continued a transformative year for GMEL, with the announcement of a subscription agreement and the commencement of a strategic relationship with leading rare earth company Shenghe Resources Holding (Shenghe).

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 has strong competencies across all aspects of the rare earth industrial chain, and has an international customer base with a strong international growth strategy. Subject to shareholder approval, Shenghe, through its subsidiary Le Shan Shenghe Rare Earth Co., Ltd, will become a 12.5% shareholder in GMEL.

Together, GMEL and Shenghe aim to further lower the cost structure of GMEL's 100% owned Kvanefjeld Project, ensure the project is optimally integrated with downstream processing, and ultimately develop the Project as a cornerstone to future international rare earth supply.

Execution of the agreement follows on from a period of extensive due diligence by both GMEL and Shenghe in Greenland, Denmark, Australia and China.

Also during the September Quarter, Greenland formalised its status as a signatory to international nuclear conventions at 60th IAEA General Conference in Vienna. Greenland, filed documents that formalise its status as a signatory in its own right to several important international nuclear conventions essential for Greenland's participation in the global civil uranium industry.

This followed on from the passing of key legislation in both the Greenland and Danish parliaments in the June Quarter to manage the production and export of uranium from Greenland. Uranium will be a by‐ product from Kvanefjeld, but any production necessitates that all regulatory aspects can be addressed in accordance with international best‐practice.

Steady progress continues on the major technical reviews of the Kvanefjled mining license application. A key area of focus has been the review of key components of the Environmental Impact Assessment (EIA) by expert consultants, on behalf of the Greenland Government.

Shenghe Resources Holding Enters Agreement to Acquire 12.5% Interest in GMEL and Commence Strategic Working Relationship

On September 23rd, GMEL announced that it has 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 two parties commenced a dialogue in late‐2015, and recognised a strong alignment of strategy, and complementary strengths at different ends of the rare earth industrial chain. Shenghe's experience and skills will maximise the core strengths of the Kvanefjeld Project ('Project'), which include scale, processing advantage, and direct shipping access.

Nowhere else in the world does such a confluence of attributes occur.

The fundamental objective of both parties is to develop the Project as a cornerstone to new supply networks. With the permitting process underway, the partnership with Shenghe will help to ensure that the Project is optimised to integrate with downstream processing, and that customer networks are established. Shenghe's leading technical expertise, processing capacity, and strong international customer base make Shenghe an ideal strategic partner for the Project.

The SA provides for the investment by Leshan Shenghe of $4.625 million (AUD) for 125 million ordinary shares in GMEL at 3.7 cents/share, subject to shareholder and FIRB approvals, which are to be sought prior to November 30th, 2016. The price of 3.7 cents per share represents a 5% discount to the 60‐day volume weighted average price (VWAP) as of September 19th, 2016.

Shenghe unconditionally and irrevocably guarantees the obligations of Leshan Shenghe under the SA.

Shenghe will have the right to nominate a non‐executive director to the board of GMEL, and will have top up rights to maintain a 12.5% position in GMEL.

Once the SA becomes unconditional, 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. This will be conducted in parallel to GMEL working through the permitting steps for Kvanefjeld that are currently underway in Greenland.

GMEL views the SA and the establishment of a strategic working relationship as a major landmark for both the Company, and future rare earth supply. Given that Shenghe have been assessing rare earth projects globally for a number of years, their participation is a very strong endorsement of the Kvanefjeld project and the company's strategy.