September 2017 Quarterly report

35/2017 - 31 października 2017

Debiensko Mine (Premium Hard Coking Coal)

Geo-technical Drill Program Underway

•In preparation for the upcoming next phase of project studies, a shallow geo-technical drill program was completed at Debiensko during the quarter.

•Results will be used for detailed design and engineering of surface structures associated with the shafts, coal handling and preparation plant and other surface facilities during the upcoming feasibility study.

Mine Site Redevelopment Program Update

•Focus during the quarter has been on planning the mine site’s redevelopment program, including:

preparation for an in-fill drill program to increase JORC Measured and Indicated resources to support future feasibility studies;

initial demolition works; and

pre-qualification of study contractors.

Offtake Discussions Advance

•Prairie continued discussions with regional steel makers and coke producers for future coking coal sales and offtake.

•Highly favourable market fundamentals remain prominent as Europe’s steel industry continues to consume 47 Mt of hard coking coal annually, 85% of which is imported.

Jan Karski Mine (Semi-Soft Coking Coal)

Transformational Coking Coal Quality Results

•Coal quality results from latest drilling have transformed Jan Karski into a high-value ultra-low ash semi-soft coking coal project.

•Updated marketing and coal sales strategies have begun in the quarter following Prairie’s latest successful drilling results with Jan Karski’s semi-soft coking coal product expected to attract a 10% premium to international benchmark prices. Marketing and coal sales are strategies to be used in preliminary offtake discussions between Prairie and steel makers.

China Coal Studies Near Completion

•China Coal’s studies for the development of the Jan Karski Mine have significantly advanced and will incorporate the coal quality results from the latest drilling at Jan Karski. Studies are due to be finalised in the coming months.

•Under the Strategic Co-operation Agreement between Prairie and China Coal, the studies will support China Coal’s EPC contract to construct the Jan Karski Mine and will underpin a Chinese bank financing package.

Jan Karski Most Advanced Coking Coal Project in Northern Hemisphere

•Spatial development plan approved at Jan Karski meaning the rezoning of 56 hectares of agricultural land for industrial use is complete allowing for construction of a mine site, shafts and associated surface infrastructure.

•Prairie remains on track to submit a Mining Concession application for Jan Karski in the coming months following submission of the Environmental and Social Impact Assessment during October 2017.

Robust Coking Coal Fundamentals

Strong Price Environment Continues

•Coking coal price environment has remained strong throughout the quarter attributed to strong cash margins of Chinese steel mills, production cuts by some Chinese miners, and production disruptions in Australia.

Coking Coal Reconfirmed as a Critical Raw Material for Europe

•In Europe, coking coal remains on the European Commission’s 2017 revised list of Critical Raw Materials as European steel makers – including the newly-formed ThyssenKrupp Tata Steel Joint Venture – look to supply a changing automobile industry and numerous infrastructure programs.

oIncreasing demand for ultra-low emission vehicles is expected to drive growth in steel supply to the European automobile industry – almost 0.5 tonnes of coking coal are required to produce the structural, electrical and plated steel for each electric car.

oUK infrastructure projects including the High Speed 2 Rail Line and the construction of the Hinkley Point C Nuclear Power Station are expected to use over 3 million tonnes of steel – equivalent to 375 London Olympic Stadiums.

oAccording to BHP Billiton, China’s Belt and Road Initiative to advance globalisation and trading – and which includes several European countries including Poland – could result in up to 150 million tonnes of incremental steel demand.

•Prairie’s two large-scale Tier One assets are ideally positioned to supply coking coal to meet Europe’s steel demand in the future.

Corporate

•Prairie and CD Capital completed an additional investment of US$2.0 million (A$2.6 million) in the form of non-redeemable, non-interest-bearing convertible loan notes.

•Prairie has cash reserves of A$17 million. With CD Capital’s right to invest a further A$55 million as a cornerstone investor, plus with the Strategic Co-operation Agreement Prairie has with China Coal for financing and construction of Jan Karski, Prairie is in a strong financial position to progress with its planned development activities at Debiensko and Jan Karski.

Ben Stoikovich, Chief Executive Officer commented „Following coal quality testing that demonstrated premium quality ultra-low ash semi-soft coking coal at Jan Karski, it is clear that we hold one of the most advanced coking coal projects of significant scale in the Northern Hemisphere. Alongside our partner China Coal, we are nearing completion of all requisite studies required to facilitate already advanced discussions with Chinese debt providers. Jan Karski’s development will provide substantial economic and social benefits for Eastern Poland and we look forward to submitting our Mining Concession application shortly. At Debiensko, we continue works in order to restart the mine at a time when long term coking coal supply has become increasingly important to the European steel industry.”