24 October 2014

CHAIRMAN'S LETTER TO SHAREHOLDERS

Silvergate's latest claims are false, misleading and should be rejected

Dear Shareholder,
I am writing on behalf of the Board to address the issues raised by Silvergate Capital ('Silvergate') in its
15th October 2014 letter to you, signed by Edward McCormack of Pure Metals, concerning the General Meeting of shareholders ('Meeting') which will be held immediately following the Annual General Meeting of Carpentaria shareholders on 10th November 2014. This letter may be read in conjunction with my letter to you of 7th October 2014 and is intended to remind shareholders of the main issues at stake and alert you to certain misrepresentations of the facts by Silvergate which are extremely misleading.
It remains the Board's position that, by seeking to appoint the majority of a new Board, Silvergate is acting in its own interests and that those interests are not aligned with Carpentaria shareholders'. Parties associated with Silvergate have invested circa $24m in the Hawsons joint venture against $8m invested by Silvergate in buying its 18% stake in the Company. Silvergate's interest lies in optimising its position. This could mean, for example, influencing Carpentaria's actions to meet Silvergate's needs, such as the spend rate on the project or it could mean gaining access to the value in its joint venture
stake in preference to other Carpentaria shareholders.
Despite this obvious distraction your Company is maintaining focus on protecting and growing the value of the project and the Company. We are executing targeted programs to address key areas of project risk that have been identified by potential investors, such as the recent pilot plant test work and port study. These programs will bring project elements into alignment and this platform will give the best chance to attract key investors that have the capacity to increase shareholder value and project value.
I urge shareholders to protect their interests and vote against Silvergate's proposals. I summarise below why the claims in Silvergate's latest letter are misleading.

CONNECT WITH US:

Level 6, 345 Ann St Brisbane Queensland 4000

PO Box 10919, Adelaide Street, Brisbane Queensland 4000

Phone: + 61 7 3220 2022 Fax: + 61 7 3220 1291

[email protected] www.capex.net.au

We find it, We prove it, We make it possible

1.0 Misalignment of Interests and Appropriate Board Representation

Silvergate argues that its interests would be more aligned with all Carpentaria shareholders than those of the current Board members.

Silvergate's actions to date in fact belie this statement and it is only through the continuing independence of the Board, now under threat, that all shareholders' interests can be fully protected.

Silvergate suggests that in August 2014 the Board rejected its proposal to create a four person Board and left Silvergate little choice but to take this action

This entirely misrepresents the events as they occurred. Mr McCormack never proposed an additional new independent director to add to his three person proposal. It was, in fact, suggested for consideration by our Managing Director, Mr Hill.
Mr Hill can verify that at the 6th August meeting Mr McCormack said he would take the idea to his associates. The idea was subsequently rejected by Mr McCormack and rejected again by Ms Lau at a meeting with Mr Hill on 27th September 2014.

2.0 Prudent Management of Shareholders' Funds

Silvergate claims that your Board has mismanaged the Company and continues to waste shareholders'

funds.

This is demonstrably untrue. As a Carpentaria shareholder, you will be aware that the Company was formed as an exploration company, with a strong belief that exploration for minerals is a business that can generate great shareholder wealth. It is of course a high risk industry, but as in all investment, risks and potential rewards are commensurate.
The Hawsons discovery, which was made by Carpentaria, is an illustration of the use of professional exploration programs and techniques to make significant minerals discoveries.
In June this year Carpentaria announced it will focus on Hawsons exclusively and cease to be a general exploration company. This recognises the importance of Hawsons to the Company's future and coincided with the Company resuming management of Hawsons, following a 12 month period of project management by Pure Metals
Unlike many in its peer group, Carpentaria has a sound balance sheet with $4m cash in the bank and a
strong focus on avoiding dilutionary capital raisings. This position, deep into a cyclical downturn, demonstrates prudent management.

3.0 Identifying Development Partners

It is claimed that the Board has failed to introduce a development partner into the Hawsons Project.

2

Carpentaria is very focused on the need for a development partner, but it must be on reasonable terms to increase shareholder value. Carpentaria's Board and management have devoted significant resources to identifying an appropriate partner over the past 4 years and, over time, we are confident that by following our strategy one will emerge, potentially from those we have built relationships with. However, as Mr McCormack points out, at this stage of the commodities cycle it is difficult for projects at an early development stage to attract major balance sheet investors. All over the world there are high quality projects that are considered by major mining companies, commodities trading houses and steel producers to be not sufficiently advanced to warrant investment. Silvergate says the Carpentaria Board is at fault and yet Silvergate:
• has been unable to secure a cornerstone project investor on terms that could be considered reasonable; and
• continues to create uncertainty for investors by requisitioning or threatening to requisition shareholder meetings to change the Board composition.
The "unforgivable" "significant error of judgement" attributed by Silvergate to your Board was to reject a proposal that provided certainty only for Silvergate's interest to meet its immediate commercial imperatives but provided NO binding benefits to all Carpentaria shareholders. As previously stated, the proposal was made under a threat of a General Meeting and was rejected on the basis of value and risk. This was, quite simply, a proposal that could not be in the interests of Carpentaria shareholders and followed an earlier proposal from Silvergate that included your Company taking on a debt, with no way of servicing that debt. This is why we continue to stress that Silvergate's/Pure Metals' interests are not aligned with those of other Carpentaria shareholders.

4.0 Cost Control and Accounting for Exploration Expenses

Silvergate claims that costs must be reduced to a bare minimum and administration costs are too high.

As previously stated Carpentaria has reduced its annual cost base by 30% in 2014 and total board base remuneration for FY15 has been reduced by over one third. Carpentaria will continue to review its costs. However, the assertion that administration costs are too high is a superficial and misleading description as under accounting standards adopted by the ASX in its listing rules, business development costs and other items designed to grow the business are captured under 'administration'. The ASX listing rules do not permit such costs to be classified as 'exploration and evaluation'.
The Carpentaria Board has struck a balance between reducing costs and the need to protect and promote the Hawsons Iron Ore Project. There is a fine balance between ensuring the Company remains in a position to retain the asset and is also ready to move when the iron ore market recovers, which it inevitably will.
By contrast Silvergate has not provided any future plans for the Company.
Your Company is not top heavy with management and the non-executive Directors receive modest fees. Payments to directors in the 2014 financial year were abnormally high due to the retirement of long

3

serving Company founder Mr Sheard. Further, Directors' payments include the Managing Director's salary, skewing the data.
In conclusion, I urge you to vote against each of the proposed Silvergate resolutions and support the continued independence of the current Board, which remains committed to acting in the best interests of all shareholders.
If you have any queries regarding the Meeting, the recommendations or need assistance with the proxy form, please call the Shareholder Information Line on 1300 560 339.

Dr Neil Williams

The Directors unanimously oppose Silvergate's resolutions and recommend you Vote IN FAVOUR OF all resolutions for the Annual General Meeting and Vote AGAINST all resolutions for the Extraordinary General Meeting requisitioned by Silvergate

Why Carpentaria Needs Your Vote:

• If Silvergate succeeds in putting its nominees on the Board it will have gained effective control of your Company without having to offer all shareholders an appropriate price for that control.

• If Silvergate succeeds in putting its nominees on the Board, the Company will not comply with the governance standards recommended by ASX and ASIC. Consistent with these standards, three out of five directors on the Carpentaria Board and all members of the Carpentaria Audit Committee are independent. Silvergate is proposing a smaller Board of three directors, a majority of whom will not be considered independent.

• Your current Board has extensive experience in the resources industry including the successful delivery of major development projects and completion of commercial transactions in Australasia and the Americas. Its directors also provide significant leadership, commercial, legal and geoscientific experience to the Board. Silvergate's two nominees have between them only one year's experience as Directors of an ASX Listed Company and they have not offered any credible reasons why their skills and experience are superior to those of the existing Board.

• Your current Board has a track record of sound capital management and demonstrably acting at all times in the interests of all shareholders.

The Carpentaria Board of Directors strongly opposes Silvergate's resolutions and recommends you vote against each of their resolutions in order to protect your investment

4