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1 23 September 2013 Exploration Target for Sambas Project set at 58,500 to 87,750 Tonnes of Tin 1 Following a review of available geological and government data, Stratos Resources Ltd (ASX: SAT) is pleased to provide an update on the Sambas offshore tin project ( Sambas ). Stratos currently has an option over Sambas. Key Points Significant Exploration Target: Following a review of available sample and seismic data Sambas has an exploration target of: 75,000 tonnes to 112,500 tonnes of cassiterite (SnO 2) at a target grade of 0.25kg/ m3 (@78% Sn) which equates to 58,500 tonnes to 87,750 tonnes of contained tin metal 1 Grab Sample Grades: Previous sampling work includes 45 grab samples taken in and around Sambas. The 26 samples taken in the exploration target area had an average grade of 0.54 kg/m 3 SnO 2. Economic alluvial and offshore dredging operations in Indonesia typically grade between 0.2 kg/m 3 and 0.4 kg/ m 3 SnO 2. Alluvial Tin Economics: Stratos alluvial mining consultants anticipate that an offshore dredging and gravity processing operation with an assumed grade in line with the Sambas target grade of 0.25kg/m 3 could have a cash processing cost of approximately US$11,500/ tonne of tin. This compares to the current tin price of US$23,340/tonne (20 September 2013). Strong Partner and Attractive Option Structure: Sambas is currently under a 3 month option (expiring late October 2013) to acquire 70% of the project with the right to extend the option for an additional 3 months for a minimal payment as detailed below. Local capability has been established for the due diligence process (including experienced legal and alluvial mining consultants) and the local partner has extensive experience in West Kalimantan mining projects. 1. The tonnage and quality expressed above is conceptual in nature and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. The exploration target was calculated by considering a sediment layer with a volume of 300 million m 3 to 450million m 3 at an average cassiterite grade of 0.25 kg/ m3 (@78% Sn). Page 1

2 Strong Tin Market Fundamentals: Stratos believes that the tin market and tin price has strong fundamentals in the near and medium term. Analysts expect continued demand for solder by the consumer electronics industry (the key industrial usage for tin) and constrained supply (including the forecast end of life of the San Rafael mine in Peru in 2016/17 which currently accounts for 10% of global tin production and limited new mines in development) will provide strong support for the tin price. Key tin commentators, including the recognized tin market authority, the International Tin Research Institute ( ITRI ) has forecast the potential for the tin price to increase from recent levels of US$20,000-23,000/ tonne to US$30,000-35,000/ tonne in the period to Next Steps: Stratos has mobilised a team to site this week to undertake additional sampling and assaying work. The initial focus is on twinning previous samples and undertaking further work in and around some of the higher grade samples. Based on the results of this work a decision will be made on whether or not to acquire the project. Sambas Project Historical Work The Sambas project is a 49,270 Ha offshore exploration lease (Indonesian exploration IUP) in the northern Sambas province of West Kalimantan, Indonesia (refer ASX announcement dated 29 July 2013). In 2009, the Centre of Research for Geology and Ocean Geophysics (a division of the Indonesian Department of Energy and Mineral Resources) undertook a field program in and around the Sambas project. The program included beach auger sampling, shallow seismic survey, sea depth and tide level surveys, followed by laboratory analyses using heavy media and XRF techniques to determine the percentages of a range of heavy metals contained in the sediment samples collected (see figure 1 below for locations of the 45 samples which were taken at approximately 3km intervals). Of the 45 samples, 40 samples were laboratory tested and 35 of these contained significant values of tin, as cassiterite. Page 2

3 Figure 1 - Portion of Lease (Red outline) showing Sample Locations There were 26 samples reported in the target area. The average grade of these 26 samples is 0.36 kg/tonne (0.54kg/m 3 ). Grab samples were taken at a spacing of 3,000m and the figures reported are a simple arithmetic average. No geo-statistical analysis has been applied. The depth of the sediment is estimated to be approx. 1.5m (typically 1 to 2m), based on a review of seismic data. There is potential that the sediment may be as thick as 10m if the presence of paleochannels (ancient river systems which may contain concentrated levels of tin) can be established, and if this is found to be the case there is significant potential to substantially increase the size of the exploration target. The exploration target is based on a block 30km long x 10km wide, which eliminates the near shore shallows and areas beyond 20m water depth, encompassing 300,000,000 m3 of sea bed. Page 3

4 The depth of water in the lease area is generally between 5 and 20 metres which is considered ideal for offshore tin dredge mining operations (see figure 2 below). Previous sampling was focussed on the north east area of the lease and no sampling or other exploration work was undertaken in the south-western region of the lease Figure 2 - Offshore Lease Location and Ocean Depths PT Tunas Alaska Alluvial Tin Mining Economics Indonesia has a major offshore tin dredging industry and is the world s leading exporter of tin (accounting for over 30% of global production). It is estimated that up to 80% of Indonesia s tin is currently extracted from offshore alluvial deposits such as the Sambas project utilising dredging and gravity processing methods. According to ITRI, the cost of mining and processing at a 0.2kg/m 3 alluvial tin mine is estimated to be approximately 30% lower than for an underground hard rock tin mine grading 1.0%. The major cost (approximately 60%) of alluvial mining is fuel whereas open pit and underground mines are more sensitive to labour costs. See figure 3 below which shows the assumed cash costs of production for various grades of Underground, Open Pit and Alluvial mining operations. Page 4

5 UG UNDERGROUND OP - OPEN PIT Al - ALLUVIAL Figure 3: ITRI, Investing in Tin, November 2012 Based on a US$2/m 3 mining cost (which assumes a current fuel cost near 2013 levels), Stratos alluvial mining consultants anticipate that an offshore tin resource at the target grade of 0.25kg/m 3 (which equates to contained tin value of approx. US$4/m 3 ) utilising dredging and gravity processing could have a cash cost of mining and processing of approximately $11,500/ tonne of tin. Terms of the Sambas Option Agreement The effective purchase consideration if the option for 70% of the Sambas project is exercised is $137,500 of Stratos equity. There is no cash purchase consideration or minimum expenditure commitment. Further terms of the option are as follows: 3 month exclusive option expiring in late October 2013, with the ability to extend for a further 3 months for a fee of US$15,000 No upfront option fee Reimbursement of land tax payments to the vendor of approximately US$25,000 If exercised, Stratos would purchase a 70% interest in the project for $137,500 in Stratos equity. The vendors 30% interest will be free carried to commercial production. Exercising the option is subject to legal and commercial due diligence, ASX and shareholder approval (if required). Page 5

6 Stratos intends to complete its planned further sampling program at Sambas ahead of making a decision on whether or not to exercise the option. Stratos Resources Ltd Level 1, 981 Wellington St West Perth WA Ph: +61 (0) Competent Person Statement The information in this announcement that is related to exploration results is based on information obtained from the vendor and a review of government data. This information has been reviewed by Mr Peter Cranfield of Cranfield Associates (alluvial mining consultants). Mr Cranfield is a mining engineer with over forty years experience in the mining industry throughout S.E Asia and Australia, specializing in alluvial mining. He is a Chartered Engineer (UK), Associate of the Royal School of Mines (ARSM) and Member of the Institute of Materials, Minerals and Mining (MIMMM) which is a Recognised Overseas Professional Organisation and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the a ctivity which he is undertaking to qualify as a competent person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Cranfield consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Page 6