2nd Quarter Activities Report

2nd Quarter Activities Report

Hannans Reward | 2nd Quarter Activities Report 2011/2012

Fast Facts ASX Code: HNR

Capital Structure Shares on issue: 131.6m

Options on issue: 5m (ex 20c–$1)

Market cap: $15m (at 11.5c)

Board of Directors Chairman: Richard Scallan

Managing Director: Damian Hicks

Non-Executive Director: William Hicks

Non-Executive Director: Jonathan Murray

Projects Forrestania

Nickel & Gold

Lake Johnston Nickel & Gold

QVR Nickel

East Pilbara Manganese

Dear Shareholders,

I am pleased to report that exploration activities were implemented as planned during the last Quarter despite the uncertainty associated with financial markets.

Hannans Reward

The manganese drilling (reverse circulation and diamond drilling) was successful and completed just prior to the onset of the wet season. The drilling outlined manganese mineralisation over an extensive strike length. Metallurgical testwork is now being completed to determine where to focus future efforts to ensure they are directed towards mineralisation that has potential to produce a saleable manganese product. A substantial amount of additional exploration and test work is required to understand the economic potential of the mineralisation and we are making progress in that direction.

The gold drilling (reverse circulation) at Lake Johnston is continuing but has been hampered by wet weather. Approximately four weeks have been lost due to intermittent heavy rainfall that makes accessing the drill pads and traversing the project very difficult. Some assay results have been received and are summarised in this report however many assay results are pending and approximately 30% of the planned program remains to be drilled. We’ll wait for the program to be completed and fully interpreted before deciding the short term plans for Lake Johnston.

The reconnaissance hematite iron drilling (reverse circulation) at Forrestania will commence this Quarter. Interestingly the Port of Esperance has recently announced plans to increase its future capacity so, along with other potential bulk commodity projects in the Yilgarn, this project has improved infrastructure options. We are continuing systematic exploration activities for nickel and gold at Forrestania with a particular emphasis on the Skeleton Rocks prospect.

Hannans Investment Management

Earlier today Shareholders approved the ‘spin out’ of the manganese project from Hannans Reward. This means that in the next few weeks Shareholders will receive one share in the new manganese company for every share they own in Hannans. Please refer to the Notice of Meeting lodged with the ASX on 23 December 2011 for full details. The manganese strategy is to consolidate many of the sub-economic manganese occurrences in the East Pilbara province and then seek to develop an infrastructure solution. It’s a large undertaking however we believe many other project owners recognise that isolated small deposits have limited value. We are holding ourselves out as a ‘vehicle’ through which the consolidation of manganese projects can occur.

Corporate Board Services

The CBS Team is beginning to make a positive contribution to the cash flow of the business. I strongly endorse the quality of the CBS Team and encourage you to call 08 9322 3383 for an introduction to their cost effective offering for listed resource companies.

Managing Director

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 2

EXPLORATION PROJECTS OVERVIEW By Don Huntly, Exploration Manager

Hannans is of the opinion that the following project portfolio has the potential to deliver an economic mineral deposit:

• FORRESTANIA (east of Hyden, Western Australia); Nickel, Gold and Iron

• QUEEN VICTORIA ROCKS (south-west of Coolgardie, Western Australia); Nickel and Gold

• LAKE JOHNSTON (west of Norseman, Western Australia); Nickel and Gold

• EAST PILBARA (south-east of Newman, Western Australia); Manganese and Base Metals

Figure 1. Southern Yilgarn tenement location diagram

Figure 2. Pilbara manganese project showing tenement locations


SUMMARY AND HIGHLIGHTS Hannans has developed a strategically positioned package of grass-roots exploration projects within corridors which are endowed with nickel sulphides, gold, base metals and bulk commodities.

The company’s objective is to realise value for the shareholders through exploration success within these projects. Our aim is to find an economic resource through the application of rigorous, methodical and multidisciplinary exploration processes.

Hannans will continue to look for opportunities to secure additional land holdings through incremental tenement applications or third party opportunities that can significantly add to the prospectivity of the current portfolio.

Exploration activities for the quarter have included RC Percussion drilling, diamond drilling, auger sampling, gravity surveys, surface TEM surveys and prospect mapping. Listed below is a summary of the exploration activities and highlights:

LAKE JOHNSTON PROJECT

§ A gravity survey has been completed over the Mt Gordon Prospect, the survey has helped to define geological units as well as structural features within the prospect area.

§ 31 RC percussion holes have been completed at the Mt Gordon Prospect, assays have been received for 11 holes to date and best intervals are listed below;

o MGRC013 – 1 metre @ 2.90 g/t Au

o MGRC018 – 1 metre @ 1.12 g/t Au and 1 metre @ 1.21 g/t Au

o MGRC020 – 2 metres @ 2.35 g/t Au

§ Surface TEM was completed at Maggie Hayes South and Mt Gordon; no significant anomalies were generated from the survey

FORRESTANIA PROJECT

§ A nickel anomaly has been defined from auger sampling at the Skeleton Rocks Prospect, a follow up Moving Loop TEM survey (MLEM) has defined a conductive body on the eastern edge of the nickel anomaly.

§ A gold anomaly has been defined from auger sampling at the Skeleton Rocks, peak Au value in auger sampling to date is 1.05 ppm Au.

EAST PILBARA PROJECT

§ RC percussion drilling and diamond drilling has been completed at the Hill 616 Manganese Prospect, all assays have been returned and best intervals include the following;

o JMRC015 – 13m @ 15.07% Mn from surface

o JMRC018 – 12m @ 15.90% Mn from 4 metres




o JMRC168 – 4m @ 25.56% Mn from 6 metres Including 1m @ 31.758% Mn

§ Mapping at the Jig Jig Prospect has identified manganese mineralisation in outcrop and sub-crop over a strike extent of ~2.6 km’s.


FORRESTANIA PROJECT (1,152km2)

Hannans’ Forrestania project, comprising ground in joint venture and wholly owned tenements, is located within the world-class multi-commodity Forrestania nickel, gold and iron greenstone belt. The project adjoins ground owned by major mining companies Western Areas (ASX:WSA) and Kagara

(ASX:KZL). Over the past quarter exploration has been focused within the Skeleton Rocks prospect area in the form of geochemical sampling and a surface TEM survey.

The following table includes a summary of the physical exploration completed within the Forrestania Project.

ACTIVITY

FORRESTANIA SUMMARY

Geochemical Sampling 918 auger samples

Moving Loop TEM 2.5 line km’s

STORMBREAKER AND LUCY ROCKS PROSPECT AREA

No physical exploration was carried out within the Stormbreaker and Lucy Rocks Prospect areas, however government approvals were received for the first round of RC percussion drilling which is designed to test the hematite iron targets in the Stormbreaker Prospect area (Figure 3).

The drilling is expected to commence during the first quarter of 2012 once the drilling is completed at the Lake Johnston Project.

SKELETON ROCKS PROSPECT AREA

Exploration efforts at Skeleton Rocks to the north have continued to be focused on data collation, field reconnaissance and consolidating the geological interpretation.

Geochemical sampling commenced in the area during the quarter with a total of 918 samples collected (Figure 4). Assay results have been received for the first batch of auger samples completed, the assays results show a nickel anomaly on the north-eastern edge of the survey area. The anomaly has a strike extent of 1.2 km’sand is interpreted to be associated with high MgO komatiitic lithologies.

Two lines of surface Moving Loop TEM were completed over the nickel anomaly, for 2.5 line km’s. The survey has generated an anomaly on the eastern edge of the soil anomaly (Figure 5), the anomaly has moderate conductance.

The geochemical sampling also generated a gold anomaly with a peak value of 1.05 ppm Au (Figure 6).

Figure 3. Forrestania Project –

Stormbreaker Prospect planned iron drilling program


FORRESTANIA PROJECT (cont.)

Figure 4. Skeleton Rocks geological summary and exploration targets.



Figure 5. Skeleton Rocks -Nickel in auger sampling and MLEM anomalies over aeromagnetic image.



Figure 6. Skeleton Rocks – Au in auger sampling assays and 1VD aeromagnetic image.


LAKE JOHNSTON PROJECT (375km2)

The tenements are located approximately 25km south-east of Russian mining giant Norilsk’s Maggie Hays and Emily Ann nickel sulphide mines.

High grade gold mineralisation has been identified in rock chip sampling at the Ernest Prospect, in RC percussion drilling at the Ernest, Hardcore and Charles Prospects and in RAB drilling at the Richard Prospect (Figure 7).

Exploration activities for gold has been focused within the eastern corridor and includes a gravity survey and RC percussion drilling at the Mt Gordon prospect area.

The following table includes a summary of the exploration activities completed during the quarter:

ACTIVITY

LAKE JOHNSTON SUMMARY

RC Percussion Drilling 31 holes for 4,514 metres

Gravity 3,901 stations NICKEL SULPHIDE EXPLORATION

Nickel sulphide exploration will continue along the southern extension of the stratigraphy which is host to the Maggie Hayes and Emily Anne deposits, exploration will include surface TEM surveys over areas with poor surface TEM coverage.

MT GORDON PROSPECT (GOLD)

The Mt Gordon prospect area is considered to be a stand out target for gold mineralisation; the prospect includes a number of discrete gold anomalies over a 2 km strike extent

RC percussion drilling commenced during the quarter with 31 holes completed for 4,514 metres. The drilling to date has intersected mafic (basalt) and granodiorite lithologies with minor quartz veining, pyrite mineralisation and silica alteration (Figure 8).

Assays have been received for 11 holes to date, all hole details and significant intervals are included in Table 1, best intervals received to dare include:

o MGRC013 – 1 metre @ 2.90 g/t Au

o MGRC018 – 1 metre @ 1.12 g/t Au and 1 metre @ 1.21 g/t Au

o MGRC020 – 2 metres @ 2.35 g/t Au

Figure 7. Lake Johnston prospect

tenement diagram


LAKE JOHNSTON PROJECT (cont.)

Table 1. Mt Gordon RC drilling summary table.

HoleID MGA_East MGA_Nort

h Dip Azi Depth

(m) From (m)

To (m)

Int (m) Au g/t

MGRC009 289936 6403750 -60 090 150 NSA

MGRC010 289882 6403750 -60 090 150 NSA

MGRC011 290053 6402147 -60 090 150 NSA

MGRC012 290010 6402147 -60 090 156 NSA

MGRC013 289953 6402152 -60 090 156 122 123 1 2.91

MGRC014 289907 6402147 -60 090 156 133 134 1 0.699

MGRC015 289859 6402154 -60 090 162 NSA

MGRC016 289811 6402151 -60 090 167 NSA

MGRC017 289714 6403106 -60 090 150 NSA

MGRC018 289602 6403103 -60 090 168 116 117 1 0.834

131 132 1 1.21

MGRC019 289553 6403102 -60 090 150 Assays pending

MGRC020 289499 6403102 -60 090 156 0 2 2 0.812

26 28 2 2.35

MGRC021 289450 6403103 -60 090 114 Hole abandoned, not assayed

MGRC021B 289454 6403106 -60 090 174

NSA


















NSA – no significant assays received


LAKE JOHNSTON PROJECT (cont.)

Figure 2. Mt Gordon Prospect showing Ai in soil anomalies and planned drill locations.


QUEEN VICTORIA ROCKS (QVR) PROJECT (420km2)

QVR has been owned 100% by Hannans since it listed on the ASX in 2003. The area south-west of Coolgardie has attracted significant interest from major nickel miner Mincor Resources. No physical exploration has been completed within the project during the quarter.

Exploration activity has been focused on data compilation and interpretation of the northern tenements within the Yarmany Prospect area (Figure 9). It has been interpreted that the Yarmany Prospect includes a similar stratigraphic sequence and komatiitic lithologies to those which are host to the nickel sulphide mineralisation at Spargos further south. The data compilation has indicated that there has been very little exploration for nickel sulphides in the Yarmany Prospect area.

Figure 9. Queen Victoria Rocks prospect location diagram


EAST PILBARA PROJECT (1,758km2)

The East Pilbara project boasts the largest tenement holding out of all the projects in the Hannans portfolio (Figure 10), covering a corridor of ground considered highly prospective for Manganese, Base metals and Gold mineralisation.

Hannans holds the base metal, gold and manganese rights within the tenement package. The project has significant potential to include a large manganese resource at the Hill 616 prospect, which has been confirmed through the results of the recent drilling program. As previously announced, Hannans has made the strategic decision to transact the manganese rights at East Pilbara. The primary reason being that manganese is a specialist bulk commodity that is captive largely to infrastructure solutions such as rail and port facilities. Hannans shareholders will have the option to vote on the transaction at the AGM, which is to be held on the 31st of January 2012.

The following table includes a summary of exploration activities completed on the East Pilbara project over the previous quarter.

ACTIVITY

LAKE JOHNSTON SUMMARY

Geochemical Sampling 21 rock chip samples

Diamond Drilling 16 holes for 408.5 metres HILL 616

During the quarter, an extensive drilling program was completed at the Hill 616 prospect which included a combination of RC and Diamond core drilling. Results from this program have been highly encouraging and indicate that a there is a large Manganese mineral occurrence at Hill 616 over a strike extent of ~2 km’s.

The assay results from the RC component of the drilling program (previously reported) show broad zones of Manganese mineralisation (>14%) exist close to surface across the prospect area (Figure 11), with grades in excess of 30% Mn intersected in 4 holes. A summary table of all significant intersections can be found in Table 2, better intercepts included;

JMRC015 – 13m @ 15.07%Mn from surface JMRC018 – 12m @ 15.90%Mn from 4 metres JMRC051 – 12m @ 15.18%Mn from 3 metres JMRC060 – 10m @ 15.76%Mn from 2 metres JMRC066 – 9m @ 16.15%Mn from 5 metres JMRC168 – 4m @ 25.56%Mn from 6 metres Including 1m @ 31.75%Mn

The resulting core from the Diamond drilling component of the program will be used in Metallurgical test work which is expected to begin in January 2012. The test work will play a crucial role in determining potential beneficiation pathways for the manganese mineralisation and hence is key to unlocking the economic potential of the resource at Hill 616.

Hannans has been working to develop the mineralisation model for Hill 616 and the surrounding area. It is believed that significant lateritic enrichment accounts for a majority of the upgrading of manganiferous material within the weathering profile. It was noted that differing high, medium and low grade zones of manganese mineralisation corresponded with specific layers within the regolith.

The lateritic profile and subsequent Mn mineralisation is illustrated in Figure 12 which shows the zonation within the regolith and distribution of Mn mineralisation.

It should be noted that the higher grade manganese material is located within the upper portion of the regolith profile at shallow depths (0 to 15 metres).

High grade (>20%) Manganese mineralisation was encountered in a number of small zones, both in the central and southern part of the prospect area. It was found that these high grade zones have been delineated from drilling in areas with no significant surface expression of Manganese, therefore potential remains to find further high grade mineralisation to the south of the prospect. The mineralisation occurs as massive, brecciated, dull to bright manganiferous material hosted in completely oxidised clay zones (Photo 1).

Medium grade (>14%) manganese mineralisation was found to exists in numerous broad zones, dominantly in the central and southern parts of the prospect area. It typically exists as thicker seams of dull manganiferous material in highly weathered shales and clays (Photo 2). As seen in figure 2, the medium grade parcel of mineralisation extends over a strike extent of ~2.2km (open to the south) and is up to ~1.2km wide in parts.


EAST PILBARA PROJECT (cont.)

Low grade (>10%) Manganese mineralisation was encountered in most holes drilled at Hill 616 and was found to be laterally extensive. The low grade mineralisation typically exists as thin interbedded seams of matt to dull manganiferous material in highly weathered shales, ranging in thickness from several millimetres to several centimetres (Photo 3).

It is believed that the manganiferous rich horizon in the Balfour shale, that is found outcropping at Hill 616, continues under light cover in both directions along strike, creating a ~30 km long prospective corridor. This has been supported by recent geological mapping that has been conducted in areas surrounding the Hill 616 prospect. This corridor will be the focus of exploration activities in 2012.

Further exploration activities and technical studies will allow Hannans to define both the physical and economic parameters of the resource, with the goal of defining a JORC compliant resource.

Geological mapping has continued within the broader project area at the Jig Jig and Wadda prospects, which are located in the northern section of the project area. It is believed that the Jig Jig prospect has the potential to host significant amounts of Manganese, with mineralisation mapped over a strike extent of ~2.6km and rock chip samples taken over the prospect grading up to 42% Mn. Scout drilling is being planned to test this prospect along with other manganese targets for the 2012 field season. Further geological mapping is required at the Wadda prospect to prioritize areas for drill testing.

ONGOING EXPLORATION ACTIVITIES

§ Metallurgical test work to be completed on diamond core samples.

§ Detailed interpretation of the manganese mineralisation model to be completed.

§ Lodgement of mineralisation report with the Department of Mines and Petroleum for Mining Lease Application over the Hill 616 prospect.

§ Drilling, geophysical surveys, geological mapping and surface sampling planned to recommence in the second quarter 2012.

§ Additional soil sampling required over prospective base metals corridor.

Figure 10. Manganese and Base metals prospects in the East Pilbara project area



Photo 1. High Grade (>20%Mn) Manganese Mineralisation in JDDH01

Photo 2. Medium Grade (>14%Mn) Manganese Mineralisation in JDDH11

Photo 3. Low Grade (>10%Mn) Manganese Mineralisation in JDDH05



Figure 11. Hill 616 drill collar location plan showing distribution of the plus 14% Mn mineralisation.



Figure 12. Diagrammatic representation of the regolith profile and Mn mineralisation at Hill 616.


EAST PILBARA PROJECT (cont.) Table 2. Significant RC drilling results for Hill 616

Hole ID MGA_Eas

t MGA_North Dip Azi. Total Depth

From (m)

To (m)

Interval (m)

Mn (%)

JMRC015 247726 7373611 -90 0 30 0 13 13 15.073

JMRC015 247726 7373611 -90 0 30 14 17 3 15.569

JMRC018 247999 7373599 -90 0 36 4 16 12 15.907

JMRC019 248101 7373597 -90 0 36 11 16 5 14.375

JMRC020 248198 7373600 -90 0 36 4 7 3 14.459

JMRC021 248295 7373600 -90 0 36 7 9 2 15.744

JMRC022 248400 7373601 -90 0 36 9 13 4 15.066

JMRC022 248400 7373601 -90 0 36 20 23 3 15.595

JMRC023 247294 7373994 -90 0 54 6 10 4 18.706

JMRC024 247398 7373997 -90 0 36 6 14 8 15.091

JMRC025 247501 7374003 -90 0 48 7 13 6 17.783

JMRC026 247597 7374003 -90 0 30 8 10 2 15.763

JMRC029 247900 7373997 -90 0 36 12 14 2 14.969

JMRC030 247997 7373999 -90 0 30 6 8 2 16.577

JMRC030 247997 7373999 -90 0 30 11 14 3 14.407

JMRC031 248098 7374000 -90 0 36 2 11 9 14.092

JMRC032 248194 7373994 -90 0 36 11 14 3 14.046

JMRC036 248599 7373602 -90 0 30 9 12 3 15.414

JMRC037 247694 7373801 -90 0 36 0 4 4 16.751

JMRC038 247804 7373806 -90 0 30 0 2 2 14.400

JMRC040 247996 7373800 -90 0 30 12 15 3 14.885

JMRC041 248101 7373801 -90 0 30 5 9 4 15.986

JMRC041 248101 7373801 -90 0 30 11 13 2 15.705

JMRC042 248196 7373801 -90 0 30 4 8 4 14.572

JMRC042 248196 7373801 -90 0 30 10 12 2 14.040

JMRC043 248298 7373804 -90 0 36 4 11 7 14.133

JMRC045 248498 7373803 -90 0 36 23 25 2 15.086

JMRC046 247504 7374192 -90 0 36 7 9 2 14.330

JMRC047 247596 7374201 -90 0 30 5 12 7 15.016

JMRC048 247699 7374193 -90 0 48 0 3 3 15.285

JMRC048 247699 7374193 -90 0 48 4 9 5 14.599

JMRC049 247798 7374196 -90 0 30 13 17 4 16.247

JMRC050 247899 7374206 -90 0 30 5 7 2 14.640

JMRC051 248001 7374204 -90 0 36 3 15 12 15.182

JMRC052 248103 7374197 -90 0 30 12 15 3 14.020

JMRC053 248196 7374204 -90 0 36 7 9 2 17.138

JMRC053 248196 7374204 -90 0 36 10 12 2 14.330

JMRC054 248299 7374203 -90 0 36 8 11 3 15.556

JMRC056 247404 7374402 -90 0 30 7 9 2 16.266

JMRC057 247500 7374398 -90 0 30 1 5 4 15.502

JMRC058 247598 7374402 -90 0 30 1 5 4 17.971

JMRC059 247704 7374402 -90 0 30 3 7 4 17.757

JMRC060 247800 7374402 -90 0 36 2 12 10 15.767

JMRC061 247898 7374401 -90 0 30 6 8 2 14.718

JMRC062 247996 7374402 -90 0 30 4 10 6 14.007


EAST PILBARA PROJECT (cont.) Table 2. Significant RC drilling results for Hill 616 (cont.)

Hole ID MGA_Eas

t MGA_North Dip Azi. Total Depth

From (m)

To (m)

Interval (m)

Mn (%)

JMRC064 248196 7374400 -90 0 30 14 18 4 15.664

JMRC065 248296 7374402 -90 0 36 12 19 7 14.944

JMRC066 248394 7374401 -90 0 36 5 14 9 16.152

JMRC066 248394 7374401 -90 0 36 20 22 2 14.195

JMRC067 248489 7374402 -90 0 36 24 28 4 14.882

JMRC070 247802 7374602 -90 0 30 1 5 4 14.853

Including 1m @ 32.223%

JMRC074 248202 7374601 -90 0 36 8 13 5 14.152

JMRC074 248202 7374601 -90 0 36 26 30 4 15.114

JMRC076 248396 7374602 -90 0 36 11 15 4 16.121

JMRC078 248600 7374588 -90 0 36 12 14 2 14.272

JMRC083 247799 7374801 -90 0 36 2 9 7 15.190


JMRC084 247898 7374802 -90 0 36 5 9 4 15.279

JMRC084 247898 7374802 -90 0 36 10 13 3 14.162

JMRC085 247997 7374801 -90 0 36 6 9 3 14.808

JMRC085 247997 7374801 -90 0 36 12 14 2 15.841

JMRC086 248099 7374803 -90 0 36 11 14 3 15.324

JMRC087 248197 7374802 -90 0 36 10 12 2 14.272


JMRC087 248197 7374802 -90 0 36 14 19 5 17.351

JMRC088 248296 7374810 -90 0 30 6 8 2 15.182

JMRC089 248398 7374800 -90 0 30 22 27 5 14.718

JMRC090 248496 7374800 -90 0 30 20 23 3 14.885

JMRC096 248008 7375002 -90 0 36 14 19 5 14.438

JMRC097 248103 7374998 -90 0 30 13 15 2 14.466

JMRC098 248199 7375002 -90 0 36 6 8 2 15.705

JMRC111 248104 7375203 -90 0 30 3 6 3 14.782

JMRC146 247696 7373409 -90 0 30 4 10 6 15.137

JMRC148 247896 7373406 -90 0 24 11 13 2 14.098

JMRC149 247999 7373399 -90 0 30 9 13 4 14.688

JMRC150 248104 7373404 -90 0 36 9 21 12 14.669

JMRC151 248203 7373403 -90 0 36 8 13 5 14.451

JMRC161 247893 7373206 -90 0 24 18 20 2 14.543

JMRC162 248009 7373200 -90 0 30 18 21 3 14.136

JMRC163 248100 7373193 -90 0 42 11 14 3 14.188

JMRC164 248206 7373203 -90 0 30 9 12 3 15.337

JMRC165 248310 7373205 -90 0 36 4 14 10 14.946

JMRC166 248406 7373203 -90 0 30 0 6 6 14.705

JMRC167 248503 7373203 -90 0 24 4 7 3 14.575

JMRC168 248600 7373206 -90 0 24 6 10 4 25.562


JMRC169 248696 7373202 -90 0 18 9 11 2 15.725 *Reported intercepts were determined by using a minimum cut-off of 2 metres grading at an average of 14%Mn or greater, with no more than 2 metres of consecutive internal dilution.


SUMMARY OF EXPLORATION ACTIVITIES including ongoing exploration activities and schedule

FORRESTANIA PROJECT (1,107 sq km’s granted, 709 sq km’s application)

Schedule from Previous Qtr

Work Completed Current Qtr

Summary and Positive Results

Outstanding Activities from Previous Qtr

Schedule Coming Qtr

SKELETON ROCKS PROSPECT (Ni + Au)

§ Field check Au and Ni anomalies.

§ Complete auger sampling during the coming quarter.

§ 918 auger samples completed.

§ Minor reconnaissance work completed.

§ Data compilation and review.

§ Nickel anomaly defined from sampling to date.

§ MLEM anomaly defined on eastern edge of nickel anomaly.

§ Gold anomaly defined from sampling to date, peak value is 1.05 ppm Au.

§ Extensive weathered BIF subcrop and outcrop noted in the area.

§ Azurite (Cu hydroxyl-carbonate) noted in historical RAB samples from Skeleton Rocks NW, samples were not assayed for base metals.

§ Field check Ni and Au anomalies at Skeleton Rocks North.

§ Complete current auger sampling program.

§ Implement additional auger sampling at Skeleton Rocks North.

§ Field check Azurite occurrence at Skeleton Rocks NW.

STORMBREAKER PROSPECT (Ni)

§ Process and interpret auger sampling programs.

§ Field reconnaissance at Stormbreaker North.

§ RC percussion drilling to test hematite rich iron mineralisation during the coming quarter.

§ Preliminary interpretation undertaken on auger sampling from Stormbreaker North.

§ Minor Ni and Cu anomalies defined from sampling program.







LUCY ROCKS PROSPECT(Ni)

Nil. Nil. Nil. Nil. Nil.

QUEEN VICTORIA ROCKS PROJECT (302 sq km’s granted, 253sq km’s application)





Schedule Coming Qtr

YARMANY PROSPECT (Ni)

Nil. § Data compilation and interpretation.

§ Magnetic high feature are interpreted to be komatiitic features similar to Spargos host unit.

§ No historical exploration for Ni sulphides has been completed in the area.

Nil. § Field reconnaissance.

§ Plan geochemical sampling programs.

BENARI PROSPECT(Ni)

§ Geological interpretation at Benari and further north.

§ Historical data reviews on northern tenements.

§ Historical data review underway. § Very limited exploration for Ni has been completed on the northern tenements.

§ Geological interpretation. § Rehabilitation of RC drilling collars and pads.

§ Validate geology and magnetic high features.

HORSESHOE PROSPECT (Ni)


SPARGOS NORTH & SOUTH (Ni)


SPARGOS PROSPECT (Ni)

§ Re-logging of historical diamond drill core.

§ Plan diamond drilling program.

Nil. Nil. § Re-logging of historical diamond drill core.

§ Plan diamond drilling program.

§ Re-logging of historical diamond drill core.


SUMMARY OF EXPLORATION ACTIVITIES(cont.) including ongoing exploration activities and schedule

LAKE JOHNSTON PROJECT(372 sq km’s granted,82sq km’s application)





Schedule Coming Qtr

ERNEST PROSPECT(Au)

§ Rehabilitation of RC drilling collars and pads.

Nil. Nil. § Rehabilitation of RC drilling collars and pads.


HARDCORE PROSPECT(Au)


Nil. Nil. § Rehabilitation of RC drilling collars and pads.


MT GORDON PROSPECT(Au)

§ RC drilling to commence during October 2011.

§ 31 holes completed, assays received for 11 holes.

§ High grade (> 1 ppm Au) intervals intersected in drilling to date.

Nil. § Complete RC drilling program.

MAGGIE HAYES SOUTHPROSPECT (Ni + Au)

§ Surface TEM traverses. Nil. Nil. § Surface TEM traverses. § Surface TEM traverses.

EAST PILBARA PROJECT (1,758 sq km’s granted,1,215sq km’s application)





Schedule Coming Qtr

HILL 616 PROSPECT (Mn)

§ Diamond drilling program to complete.

§ Metallurgical samples to collect.

§ 16 diamond holes completed and logged in detail.

§ Mapping of hill 616.

§ Diamond core has greatly enhanced the understanding and interpretation of the regolith processes and subsequent Mn enrichment.

§ Submit metallurgical samples. § Submit metallurgical samples.

§ Compile and finalise mineralisation report.

MANGANESE TARGETING

§ Field season will end in November so there will not be any more field work carried out during the coming two quarters.

§ Report completed for September field work.

§ Additional targets identified further north.

§ Potential exists to the south of Hill 616 and under cover towards the Zebra Bore Prospect.

§ Field check the northern Mn targets.

§ Plan additional exploration programs for the coming field season.

MUNDAROO (Zn) AND PROJECT BASE METALS

§ Design and plan zinc exploration program.

§ Geochemical sampling programs designed for Zinc and other base metal exploration.

Nil. § Implement geochemical sampling programs.

§ Implement geochemical sampling programs.

§ Plan surface geophysics trials over the Mundaroo Prospect.


CASH EXPENDITURE & SHARE PRICE (all quarters since ASX Listing)

EXPLORATION EXPENDITURE 2011/2012

COMPETENT PERSON STATEMENT

1st Quarter 2nd Quarter The information in this document that relates to exploration results is based on information compiled by Mr Donald Huntly, Exploration Manager who is a Full Member of the Australian Institute of Geoscientists and a Registered Professional Geoscientist. Mr Huntly is a full-time employee with Hannans Reward Ltd. Mr Huntly has sufficient experience, which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which has been undertaken to qualify as a Competent Person as defined by the 2004 edition of the “Australian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Huntly consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

A$ % A$ %

Geological activities 193,212 16.88% 258,915 13.30%

Geochemical activities 109,855 9.60% 272,604 14.00%

Geophysical activities 53,104 4.64% 32,854 1.69%

Drilling 436,859 38.16% 925,183 47.52%

Field Supplies 68,524 5.99% 215,843 11.09%

Field camp and travel 77,593 6.78% 146,457 7.52%

Environmental 21,189 1.85% 5,538 0.28%

Rehabilitation – –% – –%

Feasibility Studies – –% 1,620 0.08%

Annual tenement rent 25,875 2.26% 45,047 2.31%

Annual tenement rates 128,600 11.23% 3,291 0.17%

Tenement administration 30,795 2.69% 9,322 0.48%

Tenementapplication fees (770) (0.07)% 30,158 1.55%

Penalty &exemption fees – –% – –%

Total 1,144,837 100% 1,946,833 100%

Cash Basis (Appendix 5B) 980,000 1,398,000

Timing Difference 164,837 548,833

The amounts shown above are prepared on an Accruals Basis and are unaudited.

92 144 99 109 118 104 97 10624

265 268135

69

305 281219

292

30145

13

228142

207 235 194 149 172 139 158240 283 276

(494)

330158 261

158

390

77193 143

246

339

131

245

667

403 418

272

661

386

541

1,347

69

45

196

721

546

388475

1,121

1,364

1,640

908980

1,398

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0.35

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0.65

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0

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1,500

2,000

Dec 2003 Jun 2004 Dec 2004 Jun 2005 Dec 2005 Jun 2006 Dec 2006 Jun 2007 Dec 2007 Jun 2008 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011

Administration & Other

Exploration and Evaluation

HNR Share Price

Expenses/(Income)A$'000

HNR Share PriceA$


HIM HANNANS INVESTMENT MANAGEMENT

VALUATION OF EQUITIES as of 31December 2011

COMPANY TYPE NUMBER PRICE ($) VALUE ($) NOTES

AGO FPO 4,300,000 2.70 11,610,000 1

SCR FPO 19,585,235 0.20 3,917,047

Other FPO 165,000 0.08 - 0.15 23,150

SCR Options (ex. 20c) 1,250,001 0.07 87,500 2

SCR Options (ex. 40c) 500,000 0.04 20,000 3

Total Equities 15,657,697

LOAN as of 31 December 2011

TO FACILITY ($) DRAWN DOWN ($) NOTES

Kiruna Iron AB 2,500,000 2,500,000 4

Scandinavian Resources Ltd 1,250,000 395,000 4

Kiruna Iron AB 750,000 750,000 4

Total 4,500,000 3,645,000

Total Loan Interest-to-date 99,767

TOTAL RECEIVABLE 3,744,767 4,5

Notes 1 – Approximately 300,000 AGO shares were sold during January 2012 2 – Theoretical value calculated using BSOPM with 3.16% risk free rate, 100% volatility & 305 days to maturity as of 31 December 2011 3 – Theoretical value calculated using BSOPM with 3.16% risk free rate, 100% volatility &350 days to maturity as of 31 December 2011 4 – Assumes no conversion into SCR at 33c and 66c respectively (ie convertible loans) 5 – Refer Financial Report for the Annual Year Ended 30 June 2011


TRANSACTION SERVICES & CORPORATE MANAGEMENT Corporate Board Services is designed to assist the Boards and Management of ASX listed companies and those looking to list by assuming responsibility for the day-to-day compliance management of a Company and assisting companies through the IPO process. This value added service will enable the Board to focus on important strategic decisions.

STRATEGY CBS revenue reduces Hannans’ fixed cost

CBS offers Hannans shareholders opportunities to access new offerings (e.g. Scandinavian Resources Ltd, Naraccota Resources Ltd, Lithex Resources Ltd)

CBS utilises expertise of Hannans corporate team to provide transaction services and corporate management services to listed and unlisted private and public companies

Authorised Representative of AFSL holder – in progress

SERVICES OFFERED FOR THE QUARTER Management of Initial Public Offering (IPO)

Financial Management § Budgeting and forecasting § Bookkeeping

§ Board remuneration, salaries and wages § Management reporting

ASX Compliance Management § Annual Report § Half-year Report

§ Quarterly Report § ASX & ASIC Documentations

Shareholder Communications Management

Company Secretarial & Administrative Support CLIENTELE

Our clients include Scandinavian Resources Ltd (ASX: SCR), Equity & Royalty Resources Ltd, Naracoota Resources Ltd (ASX: NRR) and Swedish incorporated entities Scandinavian Resources AB and Kiruna Iron AB as well as the Hannans Reward Group of companies.

The range of services provided this year include assisting with the IPO and listing on the ASX of Narracoota Resources Ltd, preparation of Annual, Half Year and Quarterly Reports, preparation of loan documents, preparation of detailed board packs for board meetings, arranging shareholder meetings, preparation of Notices of Meeting and providing full accounting and financial management support to our Australian and Swedish based clients.

Our clients’ benefits by engaging with experienced and professional services customised to their individual needs which provides ease of mind that unnecessary missed dates or delays in the company’s obligations. This enables clients to focus on the core business activities of their company rather than day-to-day management, providing better utilisation of management’s time.

For further information, contact our office at 08 9322 3383.


HANNANS Capital

HANNANS REWARD LTD CAPITAL STRUCTURE as of 31 December 2011

TYPE NUMBER EXPIRY FPO 131,648,715 Options (ex. 80c) 1,000,000 30-Jun-12 Options (ex. 40c) 100,000 30-Jun-12 Options (ex. 80c) 1,000,000 30-Jun-13 Options (ex. 20c) 2,000,000 30-Jun-13 Options (ex. 20c) 300,000 20-Jul 13 Options (ex. 75c) 300,000 20-Jul 13 Options (ex. 100c) 300,000 20-Jul 13 Fully diluted FPO 133,948,715

TOP 20 HOLDERS as of 31 December 2011

Rank Name Units % of Units

1. JP Morgan Nominees Australia Limited <Cash Income A/C> 11,168,023 8.48

2. Marfield Pty Limited 8,724,543 6.63

3. Aust Global Resources Pty Ltd 3,636,363 2.76

4. Acacia Investments Pty Ltd 3,554,697 2.70

5. Eric Preston Pty Ltd 2,825,000 2.15

6. Mossisberg Pty Ltd 2,296,296 1.74

7. Dixon International Pty Ltd 2,075,720 1.58

8. HSBC Custody Nominees (Australia) Limited 1,778,200 1.35

9. Ms Mara Jane Rudd 1,700,000 1.29

10. Navigator Australia Ltd <Navigator Pers Plan Sett A/C> 1,608,989 1.22

11. Kanaslex Pty Limited 1,548,296 1.18

12. Ms Susan Eileen Dechow 1,500,001 1.14

13. Bonord Pty Ltd <C W Hulls & Co Super Fund> 1,500,000 1.14

14. Mr Terrence Ronald Grammer 1,500,000 1.14

15. Susern Holdings Pty Ltd 1,500,000 1.14

16. Mandies Meats Pty Ltd <Number 2 Account> 1,497,000 1.14

17. Mr Terrence Ronald Grammer 1,390,000 1.06

18. Jigalong Community Inc/c 1,306,500 0.99

19. Mr David MiloradNovac + Ms Cathy Lee Sheehan <Shevac Super Fund A/C> 1,206,346 0.92

20. Nijinsky Corporation Pty Ltd <Nijinsky Retire Fund A/C> 1,200,600 0.91

Totals: Top 20 holders of ORDINARY SHARES (GROUPED) 53,516,574 40.65

Total Remaining Holders Balance 78,132,141 59.35


CONTACTS For further information please contact: HANNANS REWARD Mr Damian Hicks Managing Director Tel: +61 8 9324 3388

MEDIA Mr James Harris Professional Public Relations Tel: +61 400 296 547

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UBS Australia Equities Ltd

Macquarie Equities Ltd

EL & C Baillieu Stockbroking Ltd

Bell Potter Securities Ltd

Penson Financial Services Australia Pty Ltd

Citigroup Wealth Advisors Pty Ltd

Credit Suisse Equities (Australia) Ltd

ETRADE Australia Securities Ltd

Australian Investment Exchange Ltd

Commonwealth Securities Ltd

Sell ($k)

Buy ($k)

HNR Performance Relative to ASX 300 Metals & Mining Index (XMM)

HNR Liquidity HNR Broker Trading

HNR Share Price Performance

2nd Quarter Activities Report

Documents

Transcript of 2nd Quarter Activities Report