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1 ASX ANNOUNCEMENT 13 February 2013 AGREEMENT TO ACQUIRE MINERAL EXPLORATION TENEMENTS IN MOROCCO PROSPECTIVE FOR MANGANESE PLACEMENT TO RAISE $800,000 HIGHLIGHTS - Acquisition of 80% interest in 6 mining convention areas and 100% interest in 13 other exploration concessions - Excellent manganese grades, early stage exploration with potential upside - Skilled Moroccan based team will create opportunity for more acquisitions in French speaking Africa Callabonna Resources Limited ( Callabonna ) has entered into a binding, conditional Memorandum of Understanding ("MOU") with Mr Gregor Theiser in which it has agreed, subject to satisfaction of certain conditions, to enter into a sale agreement to acquire 100% of Element Morocco Limited, a Hong Kong incorporated company with an interest in 19 mineral exploration tenements in Morocco of which 12 are prospective for manganese ("Tenements"), held through its Moroccan subsidiary Element Commodities Morocco SA. In respect of the Tenements, 6 of the concessions are valid until December 2016 as Mining Convention ; 7 are research permits valid until May 2013 and 6 are research permits in the process of being renewed. Element Commodities Morocco SA holds a 100% interest in the research permits and an 80% interest in the mining conventions, with the other 20% being owned by ONHYM, the Moroccan National Organisation for Hydrocarbon and Mining, pursuant to a joint venture agreement. Registered Office Level 17, 530 Collins Street Melbourne VIC 3000 T: F: E: info@callabonna.com.au Callabonna Resources Limited - ABN ASX announcement Element

2 Overview The 19 Concessions total 306 km2 (each being 16km2) and are located in two regions, one near Marrakech in the south and the other near Oujda in the north (Figure 1). The main work to date has been on the southern areas where the 6 mining concessions are located near the old Tasdremt manganese mine. The Tasdremt concessions are well located with good road access 150km from the Port of Agadir and potential for extracting manganese oxide by open pit mining. The known deposits at Tasdremt are stratiform and occur close to the unconformity below the mid Cretaceous rocks. As at the IMINI manganese mine 80km to the north east, they occur in three sedimentary layers but have lower manganese grades and have a higher lead (and silver) content. Exploration in the mid 1970 s reported manganese grades typically in the range of 30-40% Mn. Trench samples from 2012 have confirmed these grades and have also reported lead values in the range of 3-6% along with silver contents of around 20g/t. Exploration potential exists in two areas on the Tasdremt concessions; 1) ore at or near surface over a large flat area near where Element Commodities Morocco SA (ECMSA) conducted limited trenching in 2012 and, 2) the middle horizon at depth of around 20 meters over an area of 500x300m defined by previous drilling and adits in Morocco is emerging as a significant manganese producer exceeding 60,000 tonnes per annum of exports to established markets including China, USA, India and Spain (based on the Vendor s internal sources). The Vendor (and the affiliated Element Commodities group) is exporting Mn ore from Morocco on a regular basis. The IMINI mine is one of the most important producers. It is located in central Morocco (45km from the city of Ouarzazate) and produces three products: 1) metallurgical grade for the steel industry in the, 0-100mm size range; 2) a size range of micron that can be sold either as metallurgical grade 30-42%MnO2 or chemical grade 53-70%MnO2; 3) chemical grade MnO2, size from 0-75micron. High quality and high value ore in the range from 70-92%MnO2 is sold into the chemical industry for use in batteries and paint. This grade is IMIN s main product by value and as it is quite rare and as such commands a high price. Because of the price advantage of back load shipping, containerized freight rates to China are very low so the CIF price to China is extremely competitive. In some modern smelters high Pb (and silver) content can be an added benefit. The exploration potential of all 19 concessions is discussed below. Exploration Potential Tasdremt is the most advanced because it has had historical drilling and trench sampling by ECMSA in 2012, however in Callabonna s opinion all 19 concession areas are at an early stage of exploration. This is based on the information from the Office National Hydrocarbon and Minerals (ONHYM) and consulting reports to the Vendor. The summary table in Figure 2 lists all 19 concessions along with commodities and the exploration priorities based on the available data. 2

3 There are 7 manganese concessions in Zone 1 (Figure1) south of Marrakech. Tasdremt includes 6 concessions ( , , , , , plus referred to as Aqufour - Figure 3). High grade manganese oxide has been observed over large areas in 5 of the concessions. ECMSA sampled and assayed 3 of these in 9 pits during 2012 ( , , ) Results in other pits meant sampling was not justified. Callabonna believes that previously experienced sampling problems would be overcome with Reverse Circulation hammer drilling to define open-pittable resources for manganese ores containing significant lead and silver as a bi-product. The 7 th concession in Zone 1 is Ait Iggelt, some 25 km SE of Tasdremt. Here road access is poor but there also seems to be good potential to define open-pittable manganese along with other minerals such as barite. There are 5 manganese concessions are in Zone 2 (Figure1) near Oujda in northern Morocco. Callabonna has reviewed data on 5 concessions with known manganese potential located in Zone 2 near the Algerian border. At Bourdine ( ) good road access is reported along with potentially open-pittable manganese. Reported lower grades and poor road access to the other four areas would appear to limit their potential. There are 7 other concessions with potential for minerals other than manganese. The 7 concessions with mineralisation listed as Molydenum or Wolframite (Figure 2) have not been reviewed at the time of signing the MOU. These will require first pass exploration before future commitments to an exploration program. Manganese Quality At Tasdremt the trench sampling conducted in 2012 has confirmed the presence manganese oxide of excellent grade exceeding 40% MnO along with acceptable values of SiO2, MgO, Al2O3, P2O5. Other elements are generally comparable to IMINI, with the exception of much higher lead, barium and silver contents at Tasdremt. The Team in Morocco The team associated with the Vendor in Morocco include manganese commodity traders, consultant geologists, a mining engineer, financial and legal representatives all of whom have developed considerable local knowledge and established good working relationships with local government departments. Callabonna anticipates it will have access to this team and regards this as an asset for operating in Morocco, and in nearby countries. Potential to expand in French Speaking Africa Callabonna anticipates that the working relationship forged with the Vendor will facilitate access to other assets in French Speaking Africa. The company looks forward to welcoming a representative of the Vendor to the Callabonna board. Terms of the Agreement Pursuant to the MOU, entry into the formal sale agreement is conditional upon the terms of the sale agreement being agreed, satisfactory due diligence being completed by each of Callabonna and Mr Theiser, and Callabonna board approval. 3

4 A refundable deposit of $300,000 is payable by Callabonna to Mr Theiser within 2 business days of signing the MOU. The deposit will be refunded if the sale agreement is not entered into before 28 February 2013, or if the conditions to the sale agreement are not satisfied by a specified date (unless the parties agree to extend either of these dates). The MOU provides that subject to the satisfaction of the conditions, the parties will enter into a sale agreement on the following key commercial terms: 1. The purchase price will be $1m consisting of $500,000 cash and $500,000 in value of Callabonna shares, being 12,500,000 shares at 4 cents per share; 2. Completion under the sale agreement will be conditional on, amongst other things, shareholder approval of the transaction at an EGM to be held in the near future and any other consents and approvals required; and 3. A Vendor representative to be appointed to the Board of Callabonna on completion. Placement to Raise $800,000 Callabonna intends to undertake a placement of up to 20,000,000 fully paid ordinary shares in the Company to sophisticated investors at an issue price of $0.04 per share to raise up to $800,000. The placement will be made pursuant to the company s 25% placement capacity and is likely to occur in the next few days. Shareholder Approval for the Issue of the 12,500,000 Consideration Shares ASX in principle advice for the transaction has been sought. Shareholder approval for the transaction pursuant to listing rule will be sought at an EGM. Details of the meeting will be released to the market in due course. Of the $800,000 raised, $500,000 will be utilised for the acquisition consideration and $300,000 for first pass exploration expenditure and costs of the transaction. CUU will continue with the exploration of its existing assets (utilising existing funds) as outlined in the quarterly reports. Outlined below is the capital structure of the Company assuming completion of the Acquisition and Planned Capital Raising: Ordinary shares Current shares on issue 83,047,108 Acquisition consideration 12,500,000 Planned Capital Raising 20,000,000 New Expanded Capital 115,547,108 4

5 Effect of the Transaction CUU s pro-forma balance sheet as at 30 December 2012 (set out below), reflects the Acquisition and Planned Capital Raising: Unaudited For the 6 months Proforma Post ended 31 Dec 12 Transaction $A $A CURRENT ASSETS Cash and cash equivalents 184, ,248 Trade and other receivables 103, ,877 Other 26,494 26,494 TOTAL CURRENT ASSETS 314, ,618 NON-CURRENT ASSETS Property, plant and equipment 39,632 39,632 Exploration and evaluation expenditure 194,090 1,194,090 Other 30,000 30,000 TOTAL NON-CURRENT ASSETS 263,723 1,263,722 TOTAL ASSETS 578,341 1,878,340 CURRENT LIABILITIES Trade and other payables 52,674 52,674 Borrowings 3,041 3,041 TOTAL CURRENT LIABILITIES 55,715 55,715 TOTAL LIABILITIES 55,715 55,715 NET ASSETS 522,626 1,822,625 SHAREHOLDERS' EQUITY Share capital 42,851,482 44,151,482 Reserves 127, ,203 Accumulated losses (42,456,059) (42,456,059) TOTAL SHAREHOLDERS' EQUITY 522,626 1,822,626 As the assets being acquired are exploration tenements, there are no likely changes to the company s revenue, profit and extraordinary items. For further information, contact: Michael Raetz Ian Hobson Competent Persons Statement The information in this report that relates to Exploration Results is based on information compiled by Michael Raetz, a Director of the Company. Mr Raetz has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking. This qualifies Mr Raetz 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 Raetz consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 5

6 Attached Figures relating to Element Commodities Morocco SA Properties Figure 1 Concession location in Morocco in two zones. Figure 2 Concession list summary. Figure 3 Tasdremt Concessions (Zone 1) 6

7 COMPANY BACKGROUND AND LONG TERM STRATEGY Callabonna Resources (formerly Callabonna Uranium) has broadened its exploration focus from uranium to a wide range of mineral consistent with the name change from Callabonna Uranium to Callabonna Resources, announced in the September 2012 Quarter. The move contemplated by the Transaction announced herein will provide an opportunity for the Company to acquire an operational team in Morocco from which it may better evaluate other acquisitions in French Speaking Africa. With respect to the Australian operations, these are ongoing. As reported in the last Quarterly report, the Company has completed divestment of all underperforming exploration assets, so it may focus adequate resources on the Frome Embayment East project in NSW. The Caldera Project in QLD is a high quality green-fields project and the Company is involved in due diligence and discussion with a potential joint venture partner to fund the necessary exploration work. 7