Quarterly Report for Period Ended 31 December 2015

29 January 2016

QUARTERLY REPORT - 31 DECEMBER 2015

Please find attached the Quarterly Activities Report and Appendix 5B for the period ended 31 December 2015.

Yours faithfully,

Tony Sage Executive Chairman

Cauldron Energy Limited

Cauldron Energy Ltd ABN 22 102 912 783

ASX Code CXU 271,053,444 shares

24,000,000 unlisted options

Board of Directors

Tony Sage Executive Chairman

Qiu Derong

Non-Executive Director

Judy Li

Non-Executive Director

Mark Gwynne

Non-Executive Director

Management

Simon Youds Operations Manager

Catherine Grant Company Secretary

32 Harrogate Street, West Leederville WA 6007 | PO Box 1385 West Leederville WA 6901 | PHONE +61 8 9380 9555 | FAX +61 8 9380 9666

www.cauldronenergy.com.au

HIGHLIGHTS

CORPORATE

• Legal proceedings

  
  

• Annual General Meeting

  
  

• A$1.6 million Research and Development refund received

  
  

• Funding through the Exploration Incentive Scheme

  
  

• Placement Funding

  
  

• Shares issued

  
  

• Movements in unlisted options

  
  

  EXPLORATION & PROJECTS

  
  

• Yanrey Uranium Project

  • A Mineral Resource (JORC 2012) upgrade in tonnes and grade at Bennet Well in excess of the Company's 30 Mlb U3O8 target was achieved during the period (refer ASX Announcement 17 December 2015) which underlines the Company's belief of Yanrey as a globally significant uranium project

  • The Exploration Target for the Bennet Well area and its immediate surrounds (BW Extended) exclusive of Resource, is 19 to 54 million tonnes of mineralisation at a grade of 300 to 420 parts per million uranium oxide (U3O8), for a contained 18 to 53 million pounds of U3O8 (8,000 to 24,000 tonnes of contained U3O8), using a cut-off of 150 ppm

  • The successful rotary mud drilling program has proven the mineralisation model developed by Cauldron's geology team completed during the period A total of 69 mud rotary holes drilled for a total of 6,156 metres

  • The success of the geological model has added shareholder value through the extension of the Bennet Well Channel to over 11 km into adjacent tenement and accompanying Exploration Licence Application E08/2774 (refer ASX Announcement 13 October 2015)

  • The recent drilling identified a Channel adjacent to Paladin's Manyingee Deposit (refer ASX Announcement 2 November 2015) called Manyingee South and appears to have may similarities to Paladin's mineralisation

  • Mud Rotary drill hole BW0098 intersected 3 mineralised zones in the Bennet Well channel that was predicted in the mineralisation model and discovered by Cauldron's geology team

     BW0098: 1.25 m @ 293 ppm eU3O8, from 82.5 m

     BW0098: 1.80 m @ 2900 ppm eU3O8, from 86.0 m

     Inc 1.10 @ 4520 ppm eU3O8, from 86.35 m

     BW0098: 0.90 m @ 268 ppm eU3O8, from 88.6 m

    • Argentina

      • Cauldron moved to 51% ownership of the Rio Colorado Project during the period

      • Cauldron is awaiting judicial approval to allow the commencement of drilling at Rio Colorado

      • Recent National, State and Local election results in Argentina signal a change in attitude to mining which is viewed as positive by the Company

        
        

        
        

        Cauldron Energy Ltd (Cauldron or the Company) is pleased to present its Quarterly Activities Report for the period ended 31 December 2015.

        
        

        CORPORATE ACTIVITIES

        
        

        Legal Proceedings

        As previously announced, the Company took legal action to enforce its rights under the placement agreements to receive unpaid funds. On 28 January 2016, His Honour Justice Mitchell of the Supreme Court of Western Australia found in favour of Cauldron in respect of its claim that Beijing Joseph Investment Co. Ltd, Joseph Investment International Limited, and Guangzhou City Guangrong Investment Management Co. Ltd have breached their respective placements agreements in 2014 and entered judgment in favour of the Company in the following amounts:

    • $3 million plus interest;

    • damages of $55,000 plus interest; and

    • 85% of the Company's legal costs.

    As previously announced, the proceedings began on 12 October 2014, when Beijing Joseph Investment Co. Ltd, Joseph Investment International Limited, and Guangzhou City Guangrong Investment Management Co. Ltd (the Plaintiffs) obtained ex parte injunctive relief against the Company in the Supreme Court of New South Wales without notice to the Company. The injunctive orders were discharged by consent on 15 October 2014. On 11 December 2014, Justice Robb of the New South Wales Supreme Court made orders transferring the proceedings to the Supreme Court of Western Australia.

    Cauldron counterclaimed seeking to enforce the placement agreements.

    The Company will now take steps to enforce the judgment and recover its legal costs as ordered by the Supreme Court.

    
    

    Annual General Meeting

    The Company's Annual General Meeting (AGM) was held 9 November 2015 at 9:00am where all resolutions put to shareholders were passed on a show of hands. For more information, refer to the Notice of Annual General Meeting and Results available via the Company's website www.cauldronenergy.com.au.

    
    

    Research and Development refund

    During December 2015, Cauldron received $1.6 million from the Australian Taxation Office under the Research and Development Tax Incentive Programme relating to the 2015 financial year.

    Funding through the Exploration Incentive Scheme

    In January 2016, Cauldron received $120,000 from the Department of Mines & Petroleum (DMP) under the Exploration Incentive Scheme 2015-16 for drilling at the Yanrey project. This amount is 80% of the total that may be claimed by the Company.

    
    

    Placement funding

    As previously announced, the Company has entered into a series of placement agreements (Placement Agreement/s) with a range of Chinese investors. Cauldron's Non-executive Director Mr Derong Qiu was a party to a Placement Agreement for placement funds of A$2 million (Placement Funds) at an issue price of $0.118 per share (16,949,178 shares).

    During the June 2015 quarter, Cauldron confirmed it had received A$1.71 million in cash from Mr Qiu (Subscription Sum), with the balance of A$0.29 million planned to settle director fee payments owing to Mr Qiu in respect of his services (together, A$2 million). In accordance with the Placement Agreement, the shares to be issued to Mr Qiu were subject to shareholder approval, and as such the cash component of the Subscription Sum was initially held in trust by the Company. In November 2015, Shareholder approval to issue the shares was obtained at the Company's AGM, the shares were issued, and the cash (previously held in trust) became available to the Company.

    Mr Qiu's investment underlines the continued interest and confidence in the uranium industry from China and the growing interest in existing uranium resources.

    
    

    Cash at 31 December 2015

    Cash available to the Company at the end of the December 2015 quarter was A$2.2 million.

    
    

    Shares issued

    During the quarter the Company issued the following shares:

• 16,949,178 fully paid shares issued pursuant to Placement Agreement at $0.118 each for total $2,000,000 (as detailed above); and

• 3,000,000 fully paid shares issued upon exercise of unlisted options at $0.138 each for total $414,000.

Exercised Options

During the quarter 3,000,000 unlisted options were exercised at $0.138 each for a total of

$414,000 consideration.

Options issued

During the quarter the Company issued the following unlisted options:

• 16,000,000 unlisted options to Mr Derong Qiu (Placement Options) pursuant to a Placement Agreement. The key terms of the Placement Options are as follows:

1. Half of the Placement Options will vest immediately upon issue with an:

2. exercise price of $0.118 each; and

3. expiry date of 31 December 2015 (the Upfront Options); and