Annual report for MC 22798 and MC 22799, year ended 17 November 2009

Abstract

There has been no on-ground exploration activity carried out over MCC 22798 and 22799 during the year ended 17 November 2009. Expenditure against the licence during this period totalled $4,027 and was largely administration costs. This follows expenditure by Arafura exceeding $850,000 in 2004-2008 in the Kurinelli area (AC 74 and MCCs 950, 951, 952, 953, 22798 and 22799). Most of this expenditure was in the area occupied by AC74 which encompasses MCCs 22798 and 22799. As you are aware, Arafura Resources is an organisation whose focus is on building a long-term rare earths (REE) production and marketing business, centred on our Nolans Project and associated strategic land position in the Reynolds Range. Consequently over the past year, Arafura has been attempting to either divest its non-core exploration properties, or seek suitable partners to help develop them through joint ventures. The recent global upheaval in credit markets makes it even more compelling for Arafura to sharpen its focus on its core business, as financial conditions deteriorate and Arafura's ability to fund its (non-REE) exploration portfolio to an appropriate level becomes increasingly difficult to execute and, indeed, justify. Arafura's gold interests, represented by the Mt Porter (ML 23839 and ERL 116) and Kurinelli (AC 74 and MCCs 950, 951, 952, 953, 22798 and 22799) projects, were assessed by several parties during 2008 but to this point no firm commercial proposals have been presented. In addition, Arafura has registered its interest with the GBS Gold Australia administrators to explore strategies which may assist in our determination to extract value from our gold projects. In light of our position, Arafura proposes that no on-ground activity (and therefore no expenditure, excepting administration costs) be undertaken during the next year on MCCs 22798 and 22799.