Hannans Reward | 2nd Quarter Activities Report 2011/2012 2nd Quarter Activities Report

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. Well 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. Its 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.

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

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

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 companys 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 o o MGRC013 1 metre @ 2.90 g/t Au MGRC018 1 metre @ 1.12 g/t Au and 1 metre @ 1.21 g/t Au 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 o o o o o 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 @ 31.758% Mn

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 4

FORRESTANIA PROJECT (1,152km )

2

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.

AC TIV I TY Geochemical Sampling Moving Loop TEM

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.

FORR ESTAN IA SUMMARY 918 auger samples 2.5 line kms

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 kms and 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 kms. 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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

FORRESTANIA PROJECT (cont.)

Figure 4. Skeleton Rocks geological summary and exploration targets.

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 6

FORRESTANIA PROJECT (cont.)

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

FORRESTANIA PROJECT (cont.)

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 8

LAKE JOHNSTON PROJECT (375km )

2

The tenements are located approximately 25km south-east of Russian mining giant Norilsks 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:

AC TIV I TY RC Percussion Drilling Gravity

LAKE J OHNSTON SUMMARY 31 holes for 4,514 metres 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 o MGRC013 1 metre @ 2.90 g/t Au MGRC018 1 metre @ 1.12 g/t Au and 1 metre @ 1.21 g/t Au MGRC020 2 metres @ 2.35 g/t Au

Figure 7. Lake Johnston prospect tenement diagram

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

LAKE JOHNSTON PROJECT (cont.)

Table 1. Mt Gordon RC drilling summary table.

HoleID
MGRC009 MGRC010 MGRC011 MGRC012 MGRC013 MGRC014 MGRC015 MGRC016 MGRC017 MGRC018 MGRC019 MGRC020 MGRC021 MGRC021 B MGRC022 MGRC023 MGRC024 MGRC025 MGRC026 MGRC027 MGRC028 MGRC029 MGRC030 MGRC031 MGRC032 MGRC033 MGRC034 MGRC035 MGRC036 MGRC037 MGRC038

MGA_East
289936 289882 290053 290010 289953 289907 289859 289811 289714 289602 289553 289499 289450 289454 289404 289599 289564 289502 289448 289403 289546 289504 289450 289404 289502 289450 289403 289300 290004 289956 289905

MGA_Nort h
6403750 6403750 6402147 6402147 6402152 6402147 6402154 6402151 6403106 6403103 6403102 6403102 6403103 6403106 6403105 6403198 6403199 6403201 6403202 6403202 6403300 6403299 6403298 6403300 6403400 6403401 6403400 643400 6404161 6404149 6404152

Dip
-60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60

Azi
090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090 090

Depth (m)
150 150 150 156 156 156 162 167 150 168 150 156 114 174 195 156 150 174 180 156 78 150 120 126 102 114 162 120 120 150 102

From (m)

To (m)

Int (m)

Au g/t
NSA NSA NSA NSA

122 133

123 134

1 1

2.91 0.699 NSA NSA NSA

116 131 0 26

117 132 2

1 1

0.834 1.21 0.812 2.35

Assays pending 2 2

28

Hole abandoned, not assayed NSA Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending Assays pending

NSA no significant assays received

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 1 0

LAKE JOHNSTON PROJECT (cont.)

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

11

QUEEN VICTORIA ROCKS (QVR) PROJECT (420km )

2

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 1 2

EAST PILBARA PROJECT (1,758km )

2

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.

AC TIV I TY Geochemical Sampling Diamond Drilling

LAKE J OHNSTON SUMMARY 21 rock chip samples 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 kms. 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.

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

13

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 1 4

EAST PILBARA PROJECT (cont.)

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

15

EAST PILBARA PROJECT (cont.)

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 1 6

EAST PILBARA PROJECT (cont.)

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

17

EAST PILBARA PROJECT (cont.)

Table 2. Significant RC drilling results for Hill 616

Hole ID
JMRC015 JMRC015 JMRC018 JMRC019 JMRC020 JMRC021 JMRC022 JMRC022 JMRC023 JMRC024 JMRC025 JMRC026 JMRC029 JMRC030 JMRC030 JMRC031 JMRC032 JMRC036 JMRC037 JMRC038 JMRC040 JMRC041 JMRC041 JMRC042 JMRC042 JMRC043 JMRC045 JMRC046 JMRC047 JMRC048 JMRC048 JMRC049 JMRC050 JMRC051 JMRC052 JMRC053 JMRC053 JMRC054 JMRC056 JMRC057 JMRC058 JMRC059 JMRC060 JMRC061 JMRC062

MGA_Eas t
247726 247726 247999 248101 248198 248295 248400 248400 247294 247398 247501 247597 247900 247997 247997 248098 248194 248599 247694 247804 247996 248101 248101 248196 248196 248298 248498 247504 247596 247699 247699 247798 247899 248001 248103 248196 248196 248299 247404 247500 247598 247704 247800 247898 247996

MGA_North
7373611 7373611 7373599 7373597 7373600 7373600 7373601 7373601 7373994 7373997 7374003 7374003 7373997 7373999 7373999 7374000 7373994 7373602 7373801 7373806 7373800 7373801 7373801 7373801 7373801 7373804 7373803 7374192 7374201 7374193 7374193 7374196 7374206 7374204 7374197 7374204 7374204 7374203 7374402 7374398 7374402 7374402 7374402 7374401 7374402

Dip
-90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90

Azi.
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Depth
30 30 36 36 36 36 36 36 54 36 48 30 36 30 30 36 36 30 36 30 30 30 30 30 30 36 36 36 30 48 48 30 30 36 30 36 36 36 30 30 30 30 36 30 30

From (m)
0 14 4 11 4 7 9 20 6 6 7 8 12 6 11 2 11 9 0 0 12 5 11 4 10 4 23 7 5 0 4 13 5 3 12 7 10 8 7 1 1 3 2 6 4

To (m)
13 17 16 16 7 9 13 23 10 14 13 10 14 8 14 11 14 12 4 2 15 9 13 8 12 11 25 9 12 3 9 17 7 15 15 9 12 11 9 5 5 7 12 8 10

Interval (m)
13 3 12 5 3 2 4 3 4 8 6 2 2 2 3 9 3 3 4 2 3 4 2 4 2 7 2 2 7 3 5 4 2 12 3 2 2 3 2 4 4 4 10 2 6

Mn (%)
15.073 15.569 15.907 14.375 14.459 15.744 15.066 15.595 18.706 15.091 17.783 15.763 14.969 16.577 14.407 14.092 14.046 15.414 16.751 14.400 14.885 15.986 15.705 14.572 14.040 14.133 15.086 14.330 15.016 15.285 14.599 16.247 14.640 15.182 14.020 17.138 14.330 15.556 16.266 15.502 17.971 17.757 15.767 14.718 14.007

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 1 8

EAST PILBARA PROJECT (cont.)

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

Hole ID
JMRC064 JMRC065 JMRC066 JMRC066 JMRC067 JMRC070

MGA_Eas t
248196 248296 248394 248394 248489 247802

MGA_North
7374400 7374402 7374401 7374401 7374402 7374602

Dip
-90 -90 -90 -90 -90 -90

Azi.
0 0 0 0 0 0

Total Depth
30 36 36 36 36 30

From (m)

To (m)

Interval (m)

Mn (%)

14 18 4 15.664 12 19 7 14.944 5 14 9 16.152 20 22 2 14.195 24 28 4 14.882 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 Including 1m @ 30.132% 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 Including 1m @ 33.23% 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 Including 1m @ 31.758% 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.

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

19

SUMMARY OF EXPLORATION ACTIVITIES

including ongoing exploration activities and schedule
FORRESTANIA PROJECT (1,107 sq kms granted, 709 sq kms 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. Process and interpret auger sampling programs. Field reconnaissance at Stormbreaker North. RC percussion drilling to test hematite rich iron mineralisation during the coming quarter. Process and interpret auger sampling programs. Field reconnaissance at Stormbreaker North. RC percussion drilling to test hematite rich iron mineralisation during the coming quarter.

LUCY ROCKS PROSPECT(Ni)

Nil. Nil. Nil. Nil. Nil.

QUEEN VICTORIA ROCKS PROJECT (302 sq kms granted, 253sq kms application)
Schedule from Previous 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.

Work Completed Current Qtr

Summary and Positive Results

Outstanding Activities from Previous Qtr

Schedule Coming Qtr

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)

Nil. Nil. Nil. Nil. Nil.

SPARGOS NORTH & SOUTH (Ni)

Nil. Nil. Nil. Nil. Nil.

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.

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 2 0

SUMMARY OF EXPLORATION ACTIVITIES(cont.)

including ongoing exploration activities and schedule
LAKE JOHNSTON PROJECT(372 sq kms granted,82sq kms application)
Schedule from Previous Qtr ERNEST PROSPECT(Au)
Rehabilitation of RC drilling collars and pads. Nil. Nil. Rehabilitation of RC drilling collars and pads. Rehabilitation of RC drilling collars and pads.

Work Completed Current Qtr

Summary and Positive Results

Outstanding Activities from Previous Qtr

Schedule Coming Qtr

HARDCORE PROSPECT(Au)
Rehabilitation of RC drilling collars and pads. Nil. Nil. Rehabilitation of RC drilling collars and pads. 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 kms granted,1,215sq kms application)

Schedule from Previous 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.

Work Completed Current Qtr

Summary and Positive Results

Outstanding Activities from Previous Qtr

Schedule Coming Qtr

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.

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

21

CASH EXPENDITURE & SHARE PRICE

(all quarters since ASX Listing)
Expenses/(Income) A$'000 2,000 HNR Share Price A$

Administration & Other Exploration and Evaluation HNR Share Price

1,500

0.95 0.85 0.75 0.65 0.55 0.45

1,364 1,347 661 721 546 541 272 245 386 305 281 135 Jun 2006 69 Jun 2007 219 292 145 69 45 228 142 196 388 475 1,121 908 980 1,398 0.35

1,640

1,000

500
339 390 330 158 261 144 99 158 77 193 143 97 106 131 667

403 418

0.25 0.15 0.05 -0.05

(494)

246 265 268

92

109 118 104 Dec 2004

240 283 276 207 235 194 149 172 139 158 Dec 2009 Jun 2010 Dec 2010 Jun 2011

Dec 2003

Jun 2004

Jun 2005

24 Dec 2005

Dec 2006

30 13 Dec 2007 Jun 2008 Dec 2008

Jun 2009

Dec 2011

-0.15 (500) -0.25

EXPLORATION EXPENDITURE 2011/2012

1st Quarter A$ Geological activities Geochemical activities Geophysical activities Drilling Field Supplies Field camp and travel Environmental Rehabilitation Feasibility Studies Annual tenement rent Annual tenement rates Tenement administration Tenementapplication fees Penalty &exemption fees Total 193,212 109,855 53,104 436,859 68,524 77,593 21,189 25,875 128,600 30,795 (770) 1,144,837 % 16.88% 9.60% 4.64% 38.16% 5.99% 6.78% 1.85% % % 2.26% 11.23% 2.69% (0.07)% % 100% A$ 258,915 272,604 32,854 925,183 215,843 146,457 5,538 1,620 45,047 3,291 9,322 30,158 1,946,833 2nd Quarter % 13.30% 14.00% 1.69% 47.52% 11.09% 7.52% 0.28% % 0.08% 2.31% 0.17% 0.48% 1.55% % 100%

COMPETENT PERSON STATEMENT

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.

Cash Basis (Appendix 5B) Timing Difference

980,000 164,837

1,398,000 548,833

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 2 2

HIM
HANNANS INVESTMENT MANAGEMENT VALUATION OF EQUITIES as of 31December 2011
COMPANY
AGO SCR Other SCR SCR Total Equities

TYPE
FPO FPO FPO Options (ex. 20c) Options (ex. 40c)

NUMBER
4,300,000 19,585,235 165,000 1,250,001 500,000

PRICE ($)
2.70 0.20 0.08 - 0.15 0.07 0.04

VALUE ($)
11,610,000 3,917,047 23,150 87,500 20,000 15,657,697

NOTES
1

2 3

LOAN as of 31 December 2011

TO
Kiruna Iron AB Scandinavian Resources Ltd Kiruna Iron AB Total Total Loan Interest-to-date TOTAL RECEIVABLE

FACILITY ($)
2,500,000 1,250,000 750,000 4,500,000 99,767 3,744,767

DRAWN DOWN ($)

2,500,000 395,000 750,000 3,645,000

NOTES
4 4 4

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

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

23

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 ASX Compliance Management Annual Report Half-year Report Shareholder Communications Management Company Secretarial & Administrative Support

Board remuneration, salaries and wages Management reporting Quarterly Report ASX & ASIC Documentations

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 companys obligations. This enables clients to focus on the core business activities of their company rather than day-to-day management, providing better utilisation of managements time. For further information, contact our office at 08 9322 3383.

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011 2 4

HANNANS Capital
HANNANS REWARD LTD CAPITAL STRUCTURE as of 31 December 2011
TYPE
FPO Options (ex. 80c) Options (ex. 40c) Options (ex. 80c) Options (ex. 20c) Options (ex. 20c) Options (ex. 75c) Options (ex. 100c) Fully diluted FPO

NUMBER
131,648,715 1,000,000 100,000 1,000,000 2,000,000 300,000 300,000 300,000 133,948,715

EXPIRY
30-Jun-12 30-Jun-12 30-Jun-13 30-Jun-13 20-Jul 13 20-Jul 13 20-Jul 13

TOP 20 HOLDERS as of 31 December 2011

Rank
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Name
JP Morgan Nominees Australia Limited <Cash Income A/C> Marfield Pty Limited Aust Global Resources Pty Ltd Acacia Investments Pty Ltd Eric Preston Pty Ltd Mossisberg Pty Ltd Dixon International Pty Ltd HSBC Custody Nominees (Australia) Limited Ms Mara Jane Rudd Navigator Australia Ltd <Navigator Pers Plan Sett A/C> Kanaslex Pty Limited Ms Susan Eileen Dechow Bonord Pty Ltd <C W Hulls & Co Super Fund> Mr Terrence Ronald Grammer Susern Holdings Pty Ltd Mandies Meats Pty Ltd <Number 2 Account> Mr Terrence Ronald Grammer Jigalong Community Inc/c Mr David MiloradNovac + Ms Cathy Lee Sheehan <Shevac Super Fund A/C> Nijinsky Corporation Pty Ltd <Nijinsky Retire Fund A/C>

Units
11,168,023 8,724,543 3,636,363 3,554,697 2,825,000 2,296,296 2,075,720 1,778,200 1,700,000 1,608,989 1,548,296 1,500,001 1,500,000 1,500,000 1,500,000 1,497,000 1,390,000 1,306,500 1,206,346 1,200,600 53,516,574 78,132,141

% of Units
8.48 6.63 2.76 2.70 2.15 1.74 1.58 1.35 1.29 1.22 1.18 1.14 1.14 1.14 1.14 1.14 1.06 0.99 0.92 0.91 40.65 59.35

Totals: Top 20 holders of ORDINARY SHARES (GROUPED) Total Remaining Holders Balance

HANNANS 2ND QUARTER ACTIVITIES REPORT: DECEMBER 2011

25

HNR Share Price Performance

400.0 Volume Share Price 350.0 0.14 130.% 0.16 140.%

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

300.0

0.12 Share Price (AUD/Share) 120.%

250.0 Volume (k)

0.10

110.%

200.0

0.08

100.%

150.0

0.06

90.% 100.0 0.04 80.%

50.0

0.02

0.0

0.00

70.%
03 Oct 11 12 Oct 11 21 Oct 11 01 Nov 11 10 Nov 11 21 Nov 11 30 Nov 11 09 Dec 11 20 Dec 11 30 Dec 11

03 Oct 11 12 Oct 11 21 Oct 11 01 Nov 11 10 Nov 11 21 Nov 11 30 Nov 11 09 Dec 11 20 Dec 11 29 Dec 11

HNR Liquidity
400 Volume Average 350

HNR Broker Trading

Commonwealth Securities Ltd Australian Investment Exchange Ltd ETRADE Australia Securities Ltd Credit Suisse Equities (Australia) Ltd

300

250 Volume (k) Citigroup Wealth Advisors Pty Ltd 200 Penson Financial Services Australia Pty Ltd 150 Bell Potter Securities Ltd EL & C Baillieu Stockbroking Ltd Macquarie Equities Ltd UBS Australia Equities Ltd
-100.0 -50.0 0.0 50.0 100.0 150.0

100

50 Sell ($k) Buy ($k)

0
03 Oct 11 12 Oct 11 21 Oct 11 01 Nov 11 10 Nov 11 21 Nov 11 30 Nov 11 09 Dec 11 20 Dec 11 29 Dec 11

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