31 July 2015

QUARTERLY ACTIVITIES REPORT FOR THE PERIOD ENDED 30 JUNE 2015

HIGHLIGHTS

 African Energy ("AFR") executed a binding term sheet with an experience d South African project

developer ("Dev
$20M.
loper") for the conditional sale of the Mmama
tswe coal a nd power project for US

o The Developer will

form a bid consortium which will sole fun d the preparation and
submission of a bid into South Africa's coal‐fired base load IPP p rocurement programme using the Mmamantswe project.

o If the

mamantswe bid is shortlisted by South Africa's Departm ent of Energy, AFR will
transfer it's interest in the Mmamantswe prospecting licence to the Developer for US $10M.

o AFR will receive an additional US $10M should the shortlisted projec t reach Financial Close.

 AFR retained a 49% interest in Sese Joint Venture at the end of the quarter. First Quantum Minerals

Ltd ("FQM") will invest a further A $12M in the Sese JV over the next 1 2 months t additional 24% interest from AFR.
acquire an

o Initial fi e months under FQM

scope originally developed by A
anagement has focused on a detail ed review of the project
R.

o Key appointments to Sese JV project team were made during the qu arter.

o AFR continued to provide assistance with the technical and adminis trative integration of the

Sese JV and migration to full FQM management.

 Review of AFR director's remuneration and reduction of company overh eads will result in total annual savings of ~A $1m

OUTLOOK FOR NEXT QUARTER

Sese Integrated Po

er JV (49% AFR, 51% FQM)

 Ongoing provision of technical assistan

e to FQM to finalise a development programme and budget
for the assessment of a fully integrated power business at Sese to construct , generate and sell the output from a potential power station.

 Continue to assess power market opportunities in the southern African regi on suitable for expansions of the Sese Integrated Power JV.

Mmamantswe Integrated Power Project (100% AFR)

 Completion of due diligence by the Developer.

 Execution of a Share Sale Agreement which will include delivery of a bank guarantee in favour of

African Energy or the creation of an escrow account for the initial US $10m payment.

 Commence documentation for a formal submission in response to South Africa's Request for

Proposals (RFP) for a coal‐fired, cross‐border independent power project.

Mmamabula West Project (100% AFR)

 Continue discussions with potential project development partners for mine‐mouth power generation opportunities, coal exports to South Africa or coal exports into seaborne global markets.

PROJECTS

1 Sese JV, Botswana (AFR 49%, FQM 51%)

1.1 Sese Joint Venture (Sese JV)

 The Sese JV comprises five entities that control the Sese, Sese West and Foley North prospecting licenses.

 FQM acquired a 51% interest in the Sese JV on 9 January 2015.

 FQM can increase their interest in Sese JV to 75% by investing a further A $11.5M by 15 July 2016.

This investment will be used to fund the evaluation and development of the proposed Sese
Integrated Power Project.

 FQM spent US$342,980 in the quarter and has spent $498,134 to date.

 Once FQM has reached a 75% project interest, AFR's ongoing 25% interest in all projects

undertaken in the Sese JV will be loan carried through to commercial operation, with the loan to be priced on the same terms as FQM's weighted average cost of long‐term debt, and repaid from
AFR's share of operating surplus cash flow.

1.2 Integrated Power Project

 Initial five months under FQM management have focused on a detailed review of the project scope that was developed by AFR.

 Appointments of key consultants to Sese JV project team were made during the quarter, bringing expertise in coal‐fired power plant design and operation, coal fuel, transmission, geotechnical, and environmental aspects.

 Norwegian engineering and design consultants, Norconsult, were engaged by Sese JV to evaluate transmission integration solutions for Sese, including various options for wheeling power to neighbouring countries along a combination of existing and new‐build transmission infrastructure in southern Africa.

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 German engineering consultants, STEAG, were appointed to undertake a desktop review of the power station feasibility work completed to date and assist with key technology selection decisions and preliminary power plant design considerations.

1.3 Permitting

 A formal Lease Agreement for the approved Surface Rights area at Sese is being prepared for execution.

 The Environmental and Social Impact Assessment for the Sese Integrated Power Project has been approved by the Department of Environmental Affairs (DEA). This covers an initial 300MW power station, associated coal mine and related infrastructure, including an access corridor to the main A1 highway and regional transmisison grid.

 The Botswana Department of Mines has granted extensions for both of Sese (PL96/2005) and Sese

West (PL197/2007) prospecting licenses, which are now valid until 31 December 2016.

2 Mmamantswe Integrated Power Project, Botswana (AFR 100%)

2.1 Binding Term Sheet

 A binding Term Sheet was signed in early July with an experienced South African project developer

(the "Developer") for the sale of the 100% owned Mmamantswe coal and power project.

 Subject to certain conditions precedent, African Energy agreed to sell the Mmamantswe project on the following terms:

o The Developer will form a bid consortium which will sole fund the preparation and submission of a bid into South Africa's coal‐fired base load IPP procurement programme using the Mmamantswe project.

o African Energy will be paid an initial sum of US $10m if the project bid is shortlisted by

South Africa's Department of Energy.

o On receipt of the initial US $10m, African Energy will transfer ownership of its shares in the

Mmamantswe project company to the Developer.

o African Energy will receive a second payment of US $10m if the project reaches Financial

Close.

 The conditions precedent include completion of due diligence by the buyer within 30‐days, delivery of a bank guarantee or the creation of an escrow account for the initial US $10m payment within 60 days, and completion of a Share Sale Agreement within 60 days.

2.2 Integrated Power Project

 South Africa's Department of Energy has issued a Request for Proposals ("RFP") to developers of projects for the first bid window of a 2,500MW coal baseload IPP procurement programme. This first bid window is for 1,600MW, of which up to 600MW can come from cross border projects (i.e. those physically located outside South Africa's border).

 It is expected that specific qualifying criteria for the cross‐border projects will be released under an

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amended RFP in Q4 2015.

 The Mmamantswe project is only 20km from the border with South Africa and has been previously evaluated by Eskom for integration into the South African grid.

 The Developer will prepare and submit a Mmamantswe RFP bid for a 600MW coal‐fired cross‐

border power project.

 Mmamantswe prospecting licence (PL069/2007) has been granted an extension until 31st

December 2016.

3 Mmamabula West Project, Botswana (AFR 100%)

 The Mmamabula West project contains two ~5m thick coal seams which provide a variety of developments options as either a stand‐alone integrated power project, and stand‐alone export coal mine (for export of coal to South Africa or into the seaborne global market), or a combination of the two.

 The Environmental and Social Impact Assessment (ESIA) for the project has now been subjected to stakeholder review, with meetings held on‐site and at the Dept. of Environmental Affairs in Gaborone.

 Feedback from the stakeholder meetings will be incorporated into the final version of the ESIA, which will be re‐submitted when ready.

 The revised ESIA will also incorporate all necessary amendments to add a 300MW power station to the project description.

 Mmamabula West (PL56/2005) has been granted a two‐year extension to 31 March 2017.

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4 Global Resources for African Energy's Coal Projects in Botswana

TOTAL 2,517 Mt

TOTAL 2,501 Mt

TOTAL 2,433 Mt

TOTAL 1,243 Mt

* In‐Situ tonnes have been derived by removing volumes for modelled intrusions, burnt coal and weathered coal and then applying geological loss factors to the remaining Gross In‐Situ Tonnes

The Coal Resources quoted for the Sese, Mmamabula West and Mmamantswe Projects in the table above have been defined in accordance with the practices recommended by the Joint Ore Reserves Committee (2004 edition of the JORC Code). Sese West is reported as per the 2012 edition. There have been no material changes to any of the resources since they were first announced.

Dr. Frazer Tabeart

Managing Director

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5 Mining tenements held at the end of the quarter and their location

*Renewal of Sinazongwe East prospecting licence is under application

Full details for all projects including location maps, tenement schedules and technical descriptions may be found on the African Energy Resources website at: www.africanenergyresources.com

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the 'JORC Code') sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The information contained in this announcement was prepared under the JORC Code 2012. References to "Measured, Indicated and Inferred Resources" are to those terms as defined in the JORC Code (2012 edition).

Information in this report relating to Exploration results, Mineral Resources or Ore Reserves is based on information compiled by Dr Frazer Tabeart (an employee and the Managing Director of African Energy Resources Limited) who is a member of The Australian Institute of Geoscientists. Dr Tabeart has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person under the 2012 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Tabeart consents to the inclusion of the data in the form and context in which it appears.

For any queries please contact the Company Secretary, Mr Daniel Davis on +61 8 6465 5500

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Appendix 5B

Mining exploration entity quarterly report

Name of entity

African Energy Resources Limited

ARBN Quarter ended ("Current Quarter")

123 316 781 30 June 2015

Consolidated statement of cash flows

Cash flows related to operating activities

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1.13 Total operating and investing cash flows (carried forward)

Payments to directors of the entity and associates of the directors

Payments to related entities of the entity and associates of the related entities.

Current quarter

$US'000

1.23 Aggregate amount of payments to the parties included in item 1.2 201

1.24 Aggregate amount of loans to the parties included in item 1.10 ‐

1.25 Explanation necessary for an understanding of the transactions

US$151,522 - director remuneration payments

US$49,696 - payments for administrative staff, technical staff and provision of a fully serviced office

Non‐cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

Nil

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Nil

Financing facilities available

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Estimated cash outflows for next quarter

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed

6.2 Interests in mining tenements acquired or increased

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Issued and quoted securities at end of current quarter

7.12 Unsecured notes (totals only)

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Compliance statement

1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

2 This statement does give a true and fair view of the matters disclosed.

Mr Daniel Davis Company Secretary Date: 31 July 2015

Notes

1 The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.

4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026:

Statement of Cash Flows apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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