ASX/MEDIA RELEASE

31 March 2016

FEASIBILITY STUDY UPDATE

AL HADEETHA COPPER-GOLD PROJECT

Alara Resources Limited (ASX: AUQ) (Alara or Company) is pleased to announce positive preliminary findings of its Feasibility Study which concludes the Al Hadeetha Copper-Gold Project in Oman supports a financially viable project.

1. Key Financials

   
   

   The Study findings conclude financial returns on Base Case as follows:

   
   

   • Revenue of AUD$ 586.5 million1 over 10 years

     
     

   • EBITDA over the same period of AUD$ 191.9 million2

     
     

   • Capital Expenditure (including contingency and working capital) of AUD$66.6 million

     
     

   • Free Cash flow (FCFF) of AUD$ 109.5 million

     
     

   • Project NPV of AUD$ 37.8 million

     
     

   • Project IRR of 21%

     
     

     The Base Case includes following assumptions:

     
     

   • Copper price has been conservatively based on the lower of two reputable price projections until 2019, ranging from US$ 5,190 to US$ 5,593 per tonne. Thereafter, the copper price is fixed at US$ 5,593 per tonne, which is the lowest price point forecasted at any time in the remaining period.

     
     

   • Gold price of US$ 1,200 per ounce. The current price of gold at the time of this report was US$ 1,265 per ounce.

     
     

   • Copper treatment charges of US$ 80 per tonne and refining charges of US 0.08c/lb with 96.5% payable.

     
     

   • Gold refining charges of US$ 5 per ounce with 90% payable.

   
   

   1 Based on exchange rate of AUD$1 to US$0.74

   2 Net of US$22 million in mining royalties

   
   

2. Comparison of Market, Base & Low cases

   
   

   The assumptions used in the financial modelling produced a Base Case, Market Case and Low Case.

   
   

   The variable parameters in each case relate primarily to copper prices. The gold price and treatment charges are fixed entities in each case.

   
   

   A summary of financial returns for Base Case, Market Case and Low Case are summarised below.

   
   

   Table 1 Financial comparison between cases

   
   

   Case Scenario In US$ millions	Total Revenue	Opex (excludes royalty)	EBITDA	NPV	IRR
   Market Case	492	270	198	52	27%
   Base Case	434	270	142	28	21%
   Low Case	406	270	116	13	15%

   
   

   Copper price assumptions for the Market Case are based on the World Bank price projections to 2025 and flat thereafter.

   
   

   Copper price assumptions for the Low Case are a flat price of US$5,190/t, the projected copper price by World Bank for 2017.

   
   

   The Base Case financial model has taken the more conservative approach of using the lower of the World Bank and Economist Intelligence Unit projections until 2019, ranging from US$ 5,190 to US$ 5,593. Thereafter, the copper price is fixed at US$ 5,593, being well below the World Bank's 2025 forecast of US$ 7,000.

   
   

   In all cases, the gold price has been assumed at US$1,200 per ounce for the life of the Project. Likewise, a flat treatment charge has been assumed in all cases.

   
   

   TC / RC prices are not usually forecast. However, current market trends have been sourced from a substantial copper producer.

   
   

   The Base Case NPV is most sensitive to copper prices, followed by copper grade and recovery.

   
   

3. Project Description & Key Parameters

The Project licences are held by Al Hadeetha Resources LLC, a 70/30 Joint Venture (the 'JV') between Alara Oman Operation Pty Ltd (a wholly owned subsidiary of Alara Resources Ltd) and Al Hadeetha Investment Services LLC (a privately owned Omani Company). Al Hadeetha Investment Services are associated with the well-known Al Naba group, owned by Sayyid Khalid Al Busaidi and his family. The JV was formed in 2011 for the purpose of exploring and developing the Washihi, Mullaq and Al Ajal copper and gold concessions and surrounding regions. Figure 1 shows locations of all Alara JV held exploration licenses in Oman.

Figure 1: Al Hadeetha Resources LLC Exploration Licenses in Oman

The Al Hadeetha Copper-Gold Project is currently based around the 'Washihi' copper-gold deposit.

The Washihi exploration licence covers an area of 39 sq km encompassing a 3 sq km mining licence application. A JORC compliant Mineral Resource estimate has been completed for Washihi. The license area and an application of a mining license within area shown in the figure below.

Figure 2: Washihi License Areas

Key Project parameters are summarised in Table 2 and following.

Table 2