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1 25 July 2012 ASX Code SYR QUARTERLY ACTIVITIES REPORT PERIOD ENDED 30 JUNE 2012 Highlights: Balama Graphite Drilling of 15 diamond holes confirms that Balama hosts very thick zones (up to 320m) of graphite mineralisation. The graphite mineralisation has been mapped over a strike distance of 7km. Drill hole assays are pending and preparation for a JORC resource is in progress. Wide zones of vanadium revealed in trench assays. Further metallurgical testwork to begin in Scoping Study consultants team expected to be finalised in August Nachingwea Graphite Mapping, trenching and sampling commenced. Fungoni Mineral Sands Drill rig secured for detailed drill program to begin in September 2012 to follow up past high grade drill results. TonganiTajiri Mineral Sands Additional licence application secured. Application area hosts extensive zones of heavy minerals at surface. Magnetic survey to be flown in August Wembere Uranium Drill rig secured for scout drill program to begin in September Current Corporate Structure Ordinary Shares Issued Shares: 126,704,521 Options Exercisable at 26c: 17,000,000 Major Shareholders Basapa PL 11.27% Copper Strike Ltd 8.79% Gasmere PL 8.70% Kitara Investments PL 8.16% Board of Directors Mr Tom Eadie NonExecutive Chairman Mr Paul Kehoe Managing Director Mr Alistair Campbell NonExecutive Director Mr Mike Chester NonExecutive Director Ms Melanie Leydin Company Secretary Key Projects The June 2012 quarter was a very active and exciting quarter for Syrah Resources (ASX: SYR). Drilling commenced at the Balama Graphite Project in Mozambique. Extensive horizons of graphite mineralisation were observed in each of the 15 holes drilled to date. SYR is confident that a large maiden graphite JORC resource will be delineated at Balama once assays are received. In addition, trench data from Balama revealed encouraging vanadium results with wide zones assaying around 0.25% V. Initial field activities also commenced at the Nachingwea Graphite Project in south Tanzania, where significant graphite outcropping mineralisation is evident. A drill rig has been secured to drill the Fungoni Heavy Mineral Sands Prospect near Dar es Salaam (part of the Mineral Sands tenements in northern Tanzania covering over 400km 2 ) and the Wembere Uranium Project in west Tanzania. Drilling is expected to commence on these projects in September SYR s mineral sands portfolio was enhanced with the acquisition of a further licence area to the north of the Tajiri Balama Graphite Project (Mozambique) and Nachingwea Graphite Project (Tanzania) Have the potential to be high tonnage, high grade, flake graphite projects. Balama is mainly medium to coarse flake and Nachingwea is fine to coarse flake. Balama is also highly anomalous in vanadium with sample grades up to 1.25%. Tanzania Mineral Sands A very prospective portfolio of mineral sands licence areas, some of which have drill results up to 28% heavy minerals. Website Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 1

2 Tongani trend which secures the remaining available area known to be prospective for heavy mineral sands in north Tanzania. BALAMA GRAPHITE PROJECT (100%) SUMMARY Drilling commenced at the Balama Graphite Project in May A total of 15 diamond drill holes have been drilled in the western area of the Project. Every hole intersected graphite mineralisation over the entire drill hole length (up to 320m), other than hole 11 which encountered a 30m thick pegmatite dyke near surface. Assay results are expected to start being received in about two weeks. Once all results are received, preparation of a JORC resource estimate by independent consultants MSA Group will commence. The Minister for Natural Resources, Her Excellency Dr. Esperança Bias visited the Balama project during July. Location and Infrastructure The Balama Graphite Project is a 106 km 2 granted prospecting licence located within the Cabo Delgado province in the District of Namuno of northern Mozambique (Figure 1). The project is approximately 265 km by road (3.5 hours drive) west of the port town of Pemba. Pemba Port is a deepwater container port and is the third largest port in Mozambique. Balama is accessed by an excellent sealed road from Pemba to Montepuez, a regional township, and then via 45 km of unsealed road which is in the process of being upgraded by the Government. The project area is only 7 km east of the small regional township of Balama. Ample labour can be accessed from Balama. The town hosts a primary school and secondary school, provincial government offices, a community medical clinic, police station and numerous local businesses. Electricity is available in Balama town, along with internet and mobile phone services. A large regional dam is located only 14 km northwest of the project site. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 2

3 Figure 1 Balama Graphite Project Location Map Exploration Activities Syrah has completed 15 diamond drill holes in the western part of the Balama Graphite Project in north Mozambique over an initial strike length of over 1km. This area was selected for initial drilling as the mineralisation was expected to be relatively high grade based on the reconnaissance trenches in this area which ranged from 11% total graphitic carbon (TGC) in Trench 6 to 23.3% TGC in Trench 2 (Figure 2). Also, the geological complexity of this area was likely to be low as surface outcrop showed good continuity and low levels of pegmatite intrusion or evidence of faulting. Each of the 15 holes which ranged from 250 to 320m in length, began and ended in graphite mineralisation. Every hole returned graphite mineralisation down the entire length other than BMDD0011 which encountered a 30m thick pegmatite dyke near surface. Assay results are expected to start being received in approximately two weeks time. Delays were experienced in preparing the samples for assay, but these constraints have been resolved. Once all the drill assay results are in hand a maiden JORC resource will be calculated. MSA Group, an independent South African resource consulting group, has been retained to provide a resource estimate. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 3

4 Figure 2 Completed drilling and trenching map at Balama West Figure 3 Graphite rich drill core from hole 8 Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 4

5 Drilling has now commenced on the eastern part of the Balama Graphite Project, near Mount Coronge, a granite intrusion (Figures 4 & 5). Visual observations suggest that the graphite in this region is very coarse flake with zones of possibly greater than 20% graphite content. Thirteen holes are planned with a depth of between m. Figure 4 Planned drilling and completed trenching map at Balama East An RC rig is due to arrive on site within the next few weeks. The RC rig will be used for scout drilling to identify other areas for a follow up diamond drilling campaign. These may be other high grade areas or zones with graphite that appear different in character to that already drilled. Such graphite may serve end market uses. The RC rig will also be used to delineate the margins of the ore body for future project development planning. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 5

6 The western area drilled to date and the eastern area to be drilled are shown on the map below (Figure 5): Figure 5 Map of Balama showing Balama West and new Balama East drilling area Petrology Samples of fresh graphitic schists from the western area were sent for petrographic analysis by microscope. The samples are dominated by quartz (5570%) with graphite (1419%), mica roscoelite (1525%) and traces (<1%) of rutile and tourmaline. This simple assemblage bodes well for achieving a high graphite concentrate during flotation testwork. Earlier metallurgical testwork on weathered samples resulted in a graphite concentrate of greater than 95%. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 6

7 Figure 6 Oriented flakes of graphite (pale copper brown) within abundant quartz and small flakes of green mica (roscoelite). The whitish mineral is rutile. Plane polarised reflected light. Field of view is 2mm across which suggests most graphite grains are about 500 microns in this slide. Scoping study Discussions are well advanced with prospective consultants for the commencement of a Scoping Study on Balama. The Scoping Study team is expected to be finalised in August NACHINGWEA GRAPHITE PROJECT (Syrah has rights to acquire 100%) At Nachingwea, which is located in southeastern Tanzania, graphite outcrops in a series of hills stretching over at least 2.8 km and rising 200 m above the surrounding plain. Field activities commenced at Nachingwea Graphite project in Tanzania involving mapping, trenching and collection of samples for metallurgical testwork. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 7

8 Early indications suggest that Nachingwea has the potential to be a significant graphite project. These indicators include extensive outcropping graphite exposures over hills extending for 5 km, high graphite grades up to 60% reported by past explorers and historical metallurgical testwork showing that the graphite can be upgraded to a 98% concentrate from a single phase flotation circuit. The project has excellent infrastructure with a deepwater port located only 180km away and with water, electricity and good roads available. At the conclusion of this field work, Syrah expects to be in a position to make a decision on a drilling program for Nachingwea scheduled for the next field season in Wembere A total of 3,000m will initially be drilled at the Wembere Uranium Project in west Tanzania scheduled for September 2012 using a Wallis drill rig. Wembere is a calcrete hosted uranium target. The target was identified by an airborne radiometric survey which revealed a uranium radiometric anomaly with a strike distance of approximately 30km (Figure 7). The anomaly was subsequently verified on the ground by handheld spectrometer. In addition, extensive calcrete was observed just below a surficial cover of up to 1 metre (Figure 8). A test pitting program revealed the following counts per second (CPS) values by handheld spectrometer: Pit From To CPS readings WBPP WBPP WBPP Table 1 Spectrometer readings taken on the walls of three pits Given that the background readings away from the anomaly were only 2030 CPS, these figures are encouraging. Historical data suggests that there is an additional calcrete horizon at approximately 50m deep. The proposed drill program is designed to test both calcrete horizons. If a uranium ore deposit discovery is made, it is likely to be significant in scale given the strike extent of the radiometric anomaly. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 8

9 Figure 8 Calcrete rich pit at Wembere 20km Figure 7 Wembere radiometric anomaly Mineral Sands Portfolio, Tanzania Syrah now controls a 100% interest in eight Prospecting Licences and one Prospecting Licence Application focused on mineral sands exploration in the northern and central coastal areas of Tanzania. This significant portfolio of licences covers an area of over 1,000km 2 and strike extent of greater than 100km. Most of the Tanzanian coast known to be prospective for heavy mineral sands is now secured either by a Syrah application or granted licence. All projects have significant mineral sands anomalies identified by past explorers with minimal exploration follow up. Fungoni Mineral Sands Prospect An initial 3,000m drilling program utilising a Wallis drill rig is planned for September 2012 and will focus on the high grade Fungoni Prospect where historical auger drilling revealed the following intercepts: 4m containing 27.8% heavy minerals 4m containing 24.9% heavy minerals 4m containing 23.1% heavy minerals Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 9

10 The previous drilling stopped at 4m because the auger was not able to penetrate below the water table. These high heavy mineral grades are particularly interesting because the composition of the heavy minerals is 25% zircon, 5% rutile and 44% ilmenite. Syrah has contracted a drill rig which will be able to penetrate beneath the water table. Historical data records that the depth to the basement in this area is around 30 metres. Syrah believes the heavy minerals are likely to extend to a much greater depth than the 4m previously recorded. These intersections all occur within a 300 m by 150 m high grade zone at the Fungoni prospect itself which is located in Figure 8. This prospect has not been closed off in any direction, particularly at depth because of the drilling method noted above. It lies within a larger underexplored anomalous area which comprises two 20 km long, arcuate belts of >1% heavy minerals. Figure 9 Fungoni project licences showing known the known high grade area at Fungoni and the surrounding underexplored anomalous areas (>1% HM) Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 10

11 ADDITIONAL TANZANIAN MINERAL SANDS LICENCE AREA APPLICATION ACQUIRED Syrah has acquired an additional mineral sand application in northern Tanzania (Tongani North). Consideration for the acquisition is $200,000 (which has been paid) plus 18,500 shares in Syrah. The licence area is at the far north of the TonganiTajiri trend and only 5 km south of the port town of Tanga (Figure 10). Figure 10 TonganiTajiri mineral sands project areas Historical sampling data indicates that the acquired licence area contains a 7km strike zone comprising 3% heavy minerals within a much wider zone comprising 13% heavy minerals. Although the area is mainly dominated by ilmenite, a field reconnaissance trip to the area by Syrah showed areas of up to 20% rutile and 10% zircon. Syrah now controls virtually all the northern Tanzanian coastline that is known to be prospective for heavy minerals. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 11

12 Figure 11 Mineral rich sands at Tongani area Given the strike distance of the northern licence area and the high ilmenite content, Syrah has decided to fly a magnetic survey to better define target areas for follow up drilling. The survey will be flown in August CASH AT BANK As at 30 June 2012, Syrah had approximately $3.9 million cash on deposit. Syrah anticipates receiving $800,000 from the sale of its Saudi Arabian interests in the next few months. The Company has sufficient cash to fund its activities for the foreseeable future. Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 12

13 It is likely that the mineral sands portfolio will be spun out in 2013 to a dedicated mineral sands vehicle in order for Syrah to concentrate on its potentially world class graphite projects. In the meantime the limited exploration programs on the mineral sands portfolio are expected to add considerable value to Syrah at minimal cost. EMPLOYEE OPTIONS A total of 500,000 options exercisable at $2.21 per share by 16 July 2016 have been issued to Syrah personnel working in Mozambique and Tanzania. This is to recognise the excellent job and substantial contribution in advancing our projects above and beyond job requirements. The information in this report as it relates to geology, geochemical, geophysical and exploration results was compiled by Mr. Tom Eadie, FAusIMM, who is a Competent Person and Chairman of Syrah Resources Limited. Mr. Eadie has more than 20 years experience in the activities being reported on and has sufficient expertise which is relevant to the style of mineralisation and type of deposit under consideration. He consents to the inclusion of this information in the form and context in which it appears in this report. Paul Kehoe Managing Director Syrah Resources Ltd Mobile contact p.kehoe@syrahresources.com.au Syrah Resources Ltd (ABN ). Level Collins Street, Melbourne Victoria 3000 Australia 13

14 Appendix 5B Mining exploration entity quarterly report Appendix 5B Rule 5.3 Mining exploration entity quarterly report Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001. Name of entity SYRAH RESOURCES LIMITED ABN Quarter ended ( current quarter ) JUNE 2012 Consolidated statement of cash flows Cash flows related to operating activities Current quarter $A Year to date (12 months) $A 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration and evaluation (b) development (c) production (d) administration * (1,023,627) (719,040) (1,612,579) (1,588,656) 1.3 Dividends received 1.4 Interest and other items of a similar nature 21,375 53,525 received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other 72,475 Net Operating Cash Flows (1,721,292) (3,075,235) Cash flows related to investing activities 1.8 Payment for purchases of: (a)prospects/farmins (b)equity investments (c) other fixed assets (200,733) (484,848) (1,428,386) (608,184) 1.9 Proceeds from sale of: (a)prospects (b)equity investments (c)other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows (685,581) (2,036,570) 1.13 Total operating and investing cash flows (carried forward) (2,406,873) (5,111,805) * The major administration costs during the quarter included once off legal fees, company secretarial and accounting fees, and an increase in general administrative costs at the Balama Graphite Project in Mozambique. + See chapter 19 for defined terms. 30/06/2012 Appendix 5B Page 1

15 Appendix 5B Mining exploration entity quarterly report 1.13 Total operating and investing cash flows (brought forward) (2,406,873) (5,111,805) Cash flows related to financing activities 1.14 Proceeds from issues of shares 6,177,709 8,365, Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other Capital raising costs (357,222) (490,212) Net financing cash flows 5,820,487 7,875,497 Net increase (decrease) in cash held 3,413,614 2,763, Cash at beginning of quarter/year to date 474,429 1,079, Consolidation of Jacana Resources Limited cash as a result of the acquisition of Jacana Resources Limited 43, Exchange rate adjustments to item 1.20 (13,322) (11,601) 1.23 Cash at end of quarter 3,874,721 3,874,721 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 $A 1.23 Aggregate amount of payments to the parties included in item 1.2 $228, Aggregate amount of loans to the parties included in item Explanation necessary for an understanding of the transactions The above related party payments include Salaries, Superannuation, Rent, and Consultancy fees paid to director related entities during the June 2012 quarter. It also includes payments to OptiRes Pty Ltd of $9,710 for consultancy and administration services, and Axiom Advisory Pty Ltd for $8,800. OptiRes Pty Ltd is controlled by a director, Mr Alistair Campbell, and Axiom Pty Ltd is controlled by a director, Mr Michael Chester. Payments were also made to Copper Strike Limited for part rental of the principal place of business for $8,800. A further $70,000 was paid to Mr Paul Kehoe for part repayment of the loan owing to him acquired as part of the Jacana Acquisition in December Noncash 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 + See chapter 19 for defined terms. Appendix 5B Page 2 30/06/2012

16 Appendix 5B Mining exploration entity quarterly report 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 Add notes as necessary for an understanding of the position. 3.1 Loan facilities 3.2 Credit standby arrangements Amount available $A 000 Amount used $A 000 Estimated cash outflows for next quarter 4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration $A 000 1, Total 2,100 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. Current quarter $A 000 Previous quarter $A Cash on hand and at bank 3, Deposits at call 5.3 Bank overdraft 5.4 Other Bank Term Deposits Total: cash at end of quarter (item 1.22) 3, See chapter 19 for defined terms. 30/06/2012 Appendix 5B Page 3

17 Appendix 5B Mining exploration entity quarterly report 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 Tenement reference Nature of interest (note (2)) Interest at beginning of quarter Interest at end of quarter Sena 3456L 100% Nil 7666/ / / / / / /2010 Nil Nil Nil Nil Nil Nil Nil 100% 100% 100% 100% 100% 100% 100% + See chapter 19 for defined terms. Appendix 5B Page 4 30/06/2012

18 Appendix 5B Mining exploration entity quarterly report Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates. 7.1 Preference + securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buybacks Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues Total number Number quoted Issue price per security (see note 3) (cents) Amount paid up per security (see note 3) (cents) 125,204, ,204,521 FP FP 10,296,182 10,296,182 $0.60 (60 cents) $0.60 (60 cents) (b) Decreases through securities matured, converted 7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter 7.11 Debentures (totals only) 7.12 Unsecured notes (totals only) 1,500,000 17,000,000 Exercise price $0.25 $0.26 Expiry date 31 July December See chapter 19 for defined terms. 30/06/2012 Appendix 5B Page 5

19 Appendix 5B Mining exploration entity quarterly report 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. Sign here: Company Secretary Date: 25 July 2012 Print name: MELANIE LEYDIN 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 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. == == == == == + See chapter 19 for defined terms. Appendix 5B Page 6 30/06/2012