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The directors of Prospect Resources Ltd (ASX:PSC) ("the Company") submit hereby the annual report of the Company and its subsidiaries, (together the "Consolidated Entity" or "Group") for the financial year ended 30 June 2016.



In last year's annual report we mentioned that one of our major shareholders reminded Harry Greaves and Hugh Warner of a famous quote by Bill Ackman: "Investing is a business where you can look very silly for a long period of time before you are proven right"... and rewarded handsomely.

Well shareholders have in fact been rewarded this year for their support. When Harry Greaves and I began the Company's African business plan, we raised funds at 1c. Over the course of this year, we have seen our share price rise to as high as 7.1c and at the time of print our share price is approximately 5c.

Prospect has a market capitalisation of approximately $80,000,000 (based on a share price of 5c) and cash reserves of approximately $17,000,000. Most importantly, we have a very valuable asset in the Company's Arcadia High Grade Lithium Project and the financial capacity to undertake a detailed exploration and drilling programme at our Gwanda East Gold Camp. As shareholders, we are in a great position to profit from both the growth in the lithium market and high gold prices.

Growth Strategy

As all shareholders are aware, the Company is seeing tremendous growth in value because of our pivot in corporate focus from gold to lithium and more generally towards the mineral components of the lithium battery cycle. We are also benefiting from owning a mineral asset (the Arcadia High Grade Lithium Project) which is demonstrating significant scale on a global basis. When we acquired the asset, we had an exploration target of some 15-18Mt of lithium bearing pegmatite. We believe we have exceeded this target with our existing drilling programmes despite having only drilled approximately 10% of our mining licence area.

We intend to continue to target other large scale projects within the lithium battery cycle and large scale gold projects. With our strong balance sheet, we can now approach the exploration of our Gwanda East Gold Camp in the more

traditional sense - via a series of large scale drilling programmes. This sort of exploration is something that the Gwanda East greenstone belt has never seen. We can now target large scale resources rather than the more traditional narrow high grade gold deposits of the region. We think, through the on ground observations of our non-executive director Gerry Fahey, that the under-explored Gwanda Greenstone Belt appears to have geological similarities to the Laverton Greenstone Belt in Western Australia, from which tens of millions of ounces have been discovered in the past 30 years through good systematic exploration.

With regards to production, our strategy has not changed. It is our intention to rapidly define JORC reportable Mineral Resources and Ore Reserves and bring these assets into production as soon as possible. What this means at Gwanda is that we plan to focus more attention on resources definition in the short term in an effort to identify a large scale Mineral Resource. Whilst we are generating very high grades in our drilling, see a table of results below, we intend to focus on the large scale potential of the gold hosted monzonites. First production from our Arcadia High Grade Lithium Project is planned for 30 June 2017.

Our Shareholder Group

I suspect that we have quite a unique shareholder distribution for an ASX listed company. As at 20 September 2016, the shareholder distribution is as follows:

Shareholder Location - %

- Australian based shareholders 49%
- African based shareholders 27%
- Asia based shareholders 24%

Directors/ Top Reports - %

- Directors & Management 18%
- Top 20 shareholders 69%

With our focus on lithium and the results being generated from the Company's Arcadia High Grade Lithium Project we have attracted the interest of a number of high net worth Chinese investors (both mainland China and Australian based).

It is because of their support both on market and via the Company's recent 5c share placement of some $17m that we have been able to raise significant equity funds during calendar year 2016 and progress our lithium project so quickly.

Harry Greaves and I are now regularly travelling to China to meet our China based shareholder group and to also meet with lithium carbonate manufacturers, lithium hydroxide manufacturers and lithium battery manufacturers. Shareholders will be pleased to read that the level of interest in our Arcadia High Grade Lithium Project and its future products is high.

As we travel through China, it is easy to see why there is such an interest in our project and the lithium battery industry.

As we are all aware, China's poor air quality is having a major impact on the health of its population. As a consequence, the Chinese government is making policy changes to quickly address the pollution problems. We are told that one such change is the incentive for people to buy electric cars (EV). Incentives come in the form of subsidies to the consumer, subsidies to the EV manufacturers, free licencing of electric cars and no restriction on when they can enter congested cities of Beijing and Shanghai.

Lithium batteries are now an everyday part of our lives within mobile phones, laptop computers and now electric vehicles and high capacity house storage batteries (or battery walls). It is also worth remembering the more traditional uses of lithium including glass, ceramics and fibreglass. These industries are also growing with the world economies and so does the demand for lithium based products.

To view the full report, please visit:

About Prospect Resources Ltd

Prospect Resources Limited (ASX:PSC) is based in Australasia with operations in Zimbabwe and is a publicly listed company. We are committed to creating value for Prospect's shareholders and the communities in which our company operates. Our vision is to build a Southern African based mining company of international scale.



Hugh Warner
Executive Chairman
Prospect Resources Ltd
T: +61-413-621-652

Harry Greaves
Prospect Resources Ltd
Executive Director
T: +263-772-144-669

Link: 2016 Annual Report

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