Alara Resources Limited

A.B.N. 27 122 892 719

Level 11, 216 St Georges Tce Perth WA 6000, Australia

GPO Box 2517

Perth WA 6831

Telephone | +61 8 9481 0389

Facsimile | +61 8 9463 6103

Web | www.alararesources.com Email | [email protected]

8 July 2016

Dear Option holder,

Renounceable Rights Issue

Alara Resources Limited (ACN 122 892 719) (Company) is proposing a renounceable pro rata entitlement offer of 1 new share for every 7 existing shares held as at 5:00pm (AEST) on 14 July 2016 (Record Date), at an issue price of $0.02 per share to raise up to approximately $1.45 million before issue costs (Offer).

The Offer is made under a prospectus which will be lodged with ASIC on 8 July 2016. The prospectus will be available on both the ASX's and the Company's websites. The prospectus and personalised entitlement and acceptance form will be dispatched to eligible shareholders shortly after the Record Date.

The purpose of this letter is to give you notice that if you wish to participate in the Offer with respect to your options, you must exercise your options before the Record Date by delivering an option exercise notice together with the correct monies to the Company by no later than the Record Date. Any notice of exercise of option received after this date cannot be assured of allotment before the Record Date.

If you do not wish to participate in the Offer (in respect of your options) you do not need to take any action. The exercise price of your options will be adjusted in accordance with Listing Rule 6.22.2.

Before deciding whether to exercise all or any of your options, you should consult with your professional advisor.

Eligible shareholders need to read the prospectus carefully and will need to complete the personalised entitlement and acceptance form that will accompany the prospectus to acquire new securities under the Offer.

Yours faithfully

Elizabeth Hunt Company Secretary

ASX Code | AUQ