Ann: Quarterly Report to 31 December 2016, page-10

Hi Zeb,

Many thanks, great summary of our cash position. Would you estimate an "average" quarterly burn of around say $1m to$1.5m going forward - if you take out most of the extraordinary items? The shares issued in lieu to Directors confuses the heck out of me - are we going to be under pressure to convert them back to direct costs?

Looking on the bright side, if our dealings with KDR progress well and they exercise their option before end of August, we should see cash inflows of $1.5m per quarter. This would be an excellent outcome and move us towards a cash flow positive scenario. No doubt they are in frequent talks and we will have to be patient but I imagine KDR appreciate their own "need for speed". Their drilling results were pretty good with confirmation of spodumene, a form of lithium which still remains comparatively rare at this stage. Early to market is going to be highly desirable - who knows how long the bubble will last.

Ultimately, I think it will still be down to nickel pricing in terms of growing our share price and that is going nowhere right now. That said, I am reasonably hopeful that the negative effects of the Indonesian situation have been mostly played out and the nickel price has plateaued. We still need the warehouse stock to level out again and then we should see a rebound effect (Kip - where are your charts?). Anyway, that is my theory and I am sticking to it!

Hang in there and stay strong POS. We have a few strings to our bow and we are ready to roll. DYOR

Cheers

U