scandinavian resources target's statement

19 April 2012 By ASX online platform Companies Announcement Office ASX Limited Exchange Plaza 2 The Esplanade PERTH WA 6000 Attention: Wade Baggott Dear Wade TARGET'S STATEMENT - OFF-MARKET TAKEOVER OFFER BY HANNANS REWARD LTD In accordance with item 14 of section 633(1) of the Corporations Act 2001 (Cth), we enclose a copy of the target’s statement (Target’s Statement) dated 19 April 2012 given by Scandinavian Resources Ltd (ACN 132 035 842) (Scandinavian Resources) in relation to the off-market takeover offer by Hannans Reward Ltd (ACN 099 862 129) (Hannans Reward) for all of the fully paid ordinary shares in the capital of Scandinavian Resources. The Target’s Statement has today been lodged with the Australian Securities and Investments Commission and sent to Hannans Reward. Yours faithfully Ian Gregory Director Scandinavian Resources Ltd Encl.

The Independent Directors of Scandinavian Resources Limited unanimously recommend that, in the absence of a superior proposal you accept the Hannans Offer .

SCANDINAVIAN RESOURCES LTDTELEPHONE: + 61 8 9324 1153

FACSIMILE: + 61 8 9324 3366

EMAIL: [email protected]

WEB: www.scandinavianresources.com

TWITTER: scanres | FACEBOOK: Scandinavian Resources

You can ACCEPT the offer by completing the Acceptance Form in the Bidder's Statement from Hannans Reward Limited

TARGET’S STATEMENT prepared by Scandinavian Resources Limited (ACN 132 035 842) in relation to the off-market takeover

ACCEPT

bid by Hannans Reward Limited (ACN 099 862 129) to acquire your shares in Scandinavian Resources Limited.

THE INDEPENDENT DIRECTORS OF SCANDINAVIAN RESOURCES LIMITED UNANIMOUSLY RECOMMEND THAT, IN THE ABSENCE OF A SUPERIOR PROPOSAL, YOU

the takeover offer from Hannans Reward Limited

REASONS TO ACCEPT1. Access to Additional Funding in the Short Term2. Increased Liquidity3. Premium to the price of Scandinavian

4. Exposure to Hannans’ Exploration Portfolio5. Not Fair But Reasonable

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TARGET’S STATEMENT prepared by

Scandinavian Resources Limited ACN 132 035 842

in relation to the off-market takeover bid by

Hannans Reward Limited ACN 099 862 129

to acquire your fully paid ordinary shares in Scandinavian Resources Limited

The Independent Directors of Scandinavian Resources Limited unanimously recommend, in the absence of a superior proposal, you

ACCEPT the takeover offer from Hannans Reward Limited

This Target’s Statement has been issued in response to the off-market takeover offer from Hannans Reward Limited (ACN 099 862 129).

Legal Adviser Corporate Adviser Transaction Support

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to how to deal with this document, you should consult your broker or your legal, financial or other professional adviser as soon as possible.

Important Information

ACCEPT THE HANNANS OFFER

This is the Target’s Statement dated 19 April 2012 given by Scandinavian Resources Limited (ACN 132 035 842) (Scandinavian Resources) under Part 6.5 Division 3 of the Corporations Act. This Target’s Statement is given in response to the Bidder’s Statement issued by Hannans Reward Limited (ACN 099 862 129) (Hannans) dated 20 March 2012 which was sent to Scandinavian Resources Shareholders on or about 4 April 2012.

A copy of this Target’s Statement has been lodged with ASIC. Neither ASIC nor any of its officers takes any responsibility for the contents of this Target’s Statement. A copy of this Target’s Statement has also been lodged with ASX. Neither ASX nor any of its officers takes any responsibility for the contents of this Target’s Statement.

The Directors recommend that you read this Target’s Statement in full and seek independent advice if you have any queries in respect of the Hannans Offer.

DEFINED TERMS

Unless otherwise noted, capitalised terms and certain abbreviations used in this Target’s Statement are defined in the Glossary in section 11 of this Target’s Statement.

INVESTMENT DECISIONS

This Target’s Statement does not take into account your investment objectives, financial situation or particular needs and should not be relied upon as the sole basis of any investment decision in relation to the Hannans Offer. You should seek independent financial and taxation advice before making any investment decision and any decision relating to the Hannans Offer.

TAXATION CONSEQUENCES OF THE HANNANS OFFER

In making a decision whether to accept the Hannans Offer, Scandinavian Resources Shareholders should also have regard to the fact that disposal of Scandinavian Resources Shares may have taxation consequences. Scandinavian Resources Shareholders should refer to section 9.8 of this Target’s Statement and section 8 of the Bidder’s Statement for an overview of potential taxation consequences. However, it is recommended that Scandinavian Resources Shareholders seek their own independent advice as to any such taxation consequence.

FORWARD-LOOKING STATEMENTS

Certain statements in this Target’s Statement relate to the future and are forward-looking statements. These forward-looking statements involve known and unknown risks, key considerations, uncertainties, assumptions and other important factors that could cause the actual results, performance or achievements of Scandinavian Resources to be materially different from future results, performance or achievements expressed or implied by such statements. These factors include, among other things, general economic conditions (including currency exchange rates and interest rates), the regulatory environment, structural changes

in the industries in which Scandinavian Resources operates, competitive pressures, selling prices and market demand. The forward-looking statements in this Target’s Statement reflect views held by Scandinavian Resources only as at the date of this Target’s Statement.

Other than as required by law, neither Scandinavian Resources nor any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Target’s Statement will actually occur or that other events will not occur.

Subject to any continuing obligations under law or the Listing Rules, Scandinavian Resources and the Scandinavian Resources Directors disclaim any obligation or undertaking to disseminate after the date of this Target’s Statement any updates or revisions to any forward-looking statements to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any such statement is based other than to comply with legal obligations or the Listing Rules.

RISK FACTORS

Scandinavian Resources Shareholders should note that there are a number of risks attached to their investment in Scandinavian Resources. Please refer to section 8.1 of this Target’s Statement for further information on those risks.

Scandinavian Resources Shareholders should also note that there are risks involved with accepting the Hannans Offer including, without limitation, risks associated with investing in Hannans. Please refer to section 8.2 of this Target’s Statement and section 9 of the Bidder’s Statement for further information on those risks.

FOREIGN JURISDICTIONS

The release, publication or distribution of this Target’s Statement in jurisdictions other than Australia may be restricted by law or regulation in such other jurisdictions and persons who come into possession of it should seek advice and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations. This Target’s Statement may not be the same as that which would have been disclosed if this Target’s Statement had been prepared in accordance with the laws and regulations outside Australia.

SHAREHOLDER INFORMATION LINE

If you have any queries regarding the Hannans Offer or this Target’s Statement, please contact the official Scandinavian Resources Shareholder Information Line on 08 9324 1153 (from within Australia) or +61 8 9324 1153 (from outside Australia).

COPYRIGHT

Front cover image courtesy of Mr Hans Lindberg © Copyright 2011.

Registered Office: 6 Outram Street, West Perth WA 6005 Postal Address: PO Box 1668, West Perth WA 6872 Phone: +61 8 9324 1153 | Fax: +61 8 9324 3366 Visit www.scandinavianresources.com or www.kirunairon.com to receive the latest ASX and news releases

CONTENTS

ACCEPT THE HANNANS OFFER

Page

IMPORTANT DATES HANNANS OFFER 1 REASONS TO ACCEPT 2 LETTER FROM THE INDEPENDENT DIRECTORS 3 1 Hannans Offer – Summary 6 2 Recommendation of the Independent Directors and why you should ACCEPT the Hannans Offer 7 3 Frequently Asked Questions 13 4 Hannans Offer – Details 17 5 Your Options as a Scandinavian Resources Shareholder 20 6 Scandinavian Resources – Information 21 7 Hannans – Information 29 8 Risk Factors 29 9 Additional Information 32 10 Approval of Target’s Statement 39 11 Glossary and Interpretation 40 12 Corporate Directory 42 Appendix 1 - Independent Expert’s Report 43

IMPORTANT DATES

Announcement Date 29 February 2012

Date of the Hannans Bidder’s Statement 20 March 2012

Date of the Hannans Offer 3 April 2012

Date of this Scandinavian Resources Target’s Statement 19 April 2012

Date for Hannans to give Notice of Status of Conditions 27 April 2012

Scheduled close of Hannans Offer (unless extended or withdrawn)

5.00pm (WST) on 4 May 2012

1 ACCEPT THE HANNANS OFFER

HANNANS OFFER

Hannans is offering three (3) Hannans Shares for every one (1) of your Scandinavian Resources Shares.

The Independent Directors of Scandinavian Resources unanimously recommend, in the absence of a superior proposal that you

ACCEPT the Hannans Offer.

You can ACCEPT the Hannans Offer by carefully following the instructions in

the Bidder’s Statement and completing the Acceptance Form

enclosed with the Bidder’s Statement, prior to expiry of the Offer Period.

The Hannans Offer expires at 5.00pm (WST) on 4 May 2012, unless extended or withdrawn.

For further information on the Independent Directors’ recommendation, reasons to accept the Hannans Offer and considerations for not accepting the Hannans Offer, please refer to sections 2.1, 2.3 and 2.4 of this Target’s Statement respectively.

ACCEPT THE HANNANS OFFER 2

REASONS TO ACCEPT

Scandinavian Resources’ mineral assets have a preferred value of US$140 million1 which is greater than the Company’s enterprise value (EV) of $33 million2.

The Directors believe that the Hannans Offer may reduce the gap between the preferred value of the Company’s mineral assets and the Company’s EV when combined with Scandinavian Resources’ current strategies.

Reasons to ACCEPT the Hannans Offer:

1. Access to additional funding in the short term.

2. Increasing the liquidity of Scandinavian Resources Shareholders’ investment which may attract additional investor interest.

3. Premium to the price of Scandinavian Resources Shares.3

4. Exposure to Hannans’ West Australian minerals exploration portfolio.

5. The Independent Expert has determined that the Hannans Offer is not fair but reasonable.

The Independent Expert’s Report (which also includes the independent valuation of the Company’s mineral assets) is an important document.

Please refer to Appendix 1 to read the Independent Expert’s Report.


For further details on the reasons given by the Independent Expert for determining that the Hannans Offer is not fair but reasonable, please refer to section 2.3 of this Target’s Statement.

1 Based on the preferred value of the Company’s mineral properties as calculated by SRK in its independent valuation of the Company’s mineral assets. Please refer to the

Independent Expert’s Report (which contains the independent valuation prepared by SRK) as set out in Appendix 1 of this Target’s Statement. 2 This is calculated on the assumption that the Company’s market capitalisation is $26.35 million (based on the closing price of $0.23 per Scandinavian Resources Share as at 16 April

2012, the last trading day before this Target’s Statement was sent to print) and net debt position (being debt minus cash as at 16 April 2012, the last trading day before this Target’s Statement was sent to print) is $6.62 million. The Company’s EV has been rounded to the nearest $1 million.

3 Based on the closing price of Hannans Shares and Scandinavian Resources Shares on the last trading day before the Announcement Date


LETTER FROM THE INDEPENDENT DIRECTORS

19 April 2012

Dear Shareholder,

THE HANNANS OFFER

On 29 February 2012, Hannans Reward Limited (Hannans) (ASX:HNR) announced its proposal to acquire all of the fully paid ordinary shares in the capital of Scandinavian Resources Limited (Scandinavian Resources) (ASX:SCR) by way of an off-market takeover bid.

Scandinavian Resources Shareholders who accept the Hannans Offer will receive three (3) Hannans Shares for every one (1) Scandinavian Resources Share they own (Hannans Offer). When the Hannans Offer was announced, this represented a value of $0.28 per Scandinavian Resources Share, based on the closing price of Hannans Shares on 27 February 2012, the last trading day before the Announcement Date. The value of the Offer Consideration has decreased to $0.23 per Scandinavian Resources Share, based on the closing price of Hannans Shares on 16 April 2012, the last trading day before this Target’s Statement was sent to print.4

THE SCANDINAVIAN RESOURCES STRATEGY

Our strategy is to generate a pipeline of valuable mineral assets in Sweden and Norway by combining the extensive knowledge and networks of Scandinavian Resources’ management team together with public and private exploration databases. Through disciplined systems and processes we are striving to identify world class minerals deposits in a jurisdiction that has a long mining history, low sovereign risk and is close to major markets.

Scandinavian Resources’ management team continues to develop and currently comprises Olof Forslund, Christina Lundmark, Amanda Scott and Jorgen Lindsköld and will also shortly include Magnus Arnqvist. This is an experienced and credentialed team with a substantial amount of expertise in the Nordic region. For further details on the members of the Company’s management team, please read sections 6.2 and 6.3 of this Target’s Statement.

The pipeline that has been developed in the two years since the Company’s listing on the ASX is extensive and currently comprises the Kiruna Project, the Finnmark and Troms Projects, and the Caledonides Projects. The Kiruna Iron Project has captured the most attention to date due to its rapidly increasing iron resources, encouraging metallurgical results that suggest a high quality iron product may be produced, its proximity to open access rail and port infrastructure, its proximity to the largest iron mine in Europe and its proximity to the major European markets. The majority of the Company’s expenditure has been allocated towards the Kiruna Iron Project and this is likely to continue. However, it is intended that an increasing focus will be placed on copper-gold and lead-zinc-silver exploration activities in the future. Please refer to section 6 of this Target’s Statement for further details regarding the Company’s projects.

This strategy has been successfully deployed and the Directors believe that repetition of the aforementioned processes by Scandinavian Resources’ management team will lead to a continuous period of quality project generation.

REALISING THE VALUE

As Damian Hicks is a director of both Scandinavian Resources and Hannans, the Company has engaged the Independent Expert to prepare the Independent Expert’s Report that states whether, in the expert’s opinion, the Hannans Offer is fair and reasonable and gives the reasons for forming that opinion. In doing so, the Independent Expert engaged SRK Consulting (Sweden) AB (SRK) to produce an independent valuation of the mineral assets owned by Scandinavian Resources. The Independent Expert’s Report (which contains the independent valuation prepared by SRK) is contained in Appendix 1 of this Target’s Statement. We urge you to read the Independent Expert’s Report (together with the independent valuation prepared by SRK) carefully.

SRK has calculated the preferred value of the Company’s mineral assets as being US$140 million5. The Company’s enterprise value (EV) is currently $33 million6.

The Independent Directors believe that there are a number of reasons that may explain the discrepancy in value including the illiquidity in the Scandinavian Resources Shares on the ASX (which is largely attributable to the concentrated ownership structure), the lack of familiarity of Australian investors with the Nordic region, the generally unpopular domestic views of magnetite as an economic source of iron due to the high capital costs associated with constructing required infrastructure (the infrastructure is modern, accessible and operating in the Nordic region) and the debt position that the Company has carried for the last fifteen months.

In January 2012, the Company advised Scandinavian Resources Shareholders that it was preparing to complete a ‘spin out’ of the Kiruna Iron Project with a subsequent listing on the AIM market operated by the London Stock Exchange. A number of meetings were held in London and Stockholm in late January 2012 as part of a plan to complete a pre-IPO capital raising (Kiruna Raising).

4 As the Offer Consideration comprises Hannans Shares, the value of the Offer Consideration will vary with the market price of Hannans Shares. The value of the Offer Consideration is

based on the closing price of Hannans Shares of $0.077 as at 16 April 2012, the last trading day before this Target’s Statement was sent to print. 5 Based on the preferred value of the Company’s mineral properties as calculated by SRK in its independent valuation of the Company’s mineral assets. Please refer to the

Independent Expert’s Report (which contains the independent valuation prepared by SRK) as set out in Appendix 1 of this Target’s Statement. 6 This is calculated on the assumption that the Company’s market capitalisation is $26.35 million (based on the closing price of $0.23 per Scandinavian Resources Share as at 16 April

2012, the last trading day before this Target’s Statement was sent to print and net debt position (being debt minus cash as at 16 April 2012, the last trading day before this Target’s Statement was sent to print) is $6.62 million. The Company’s EV has been rounded to the nearest $1 million.


Your Directors believe that the difficulty in completing the Kiruna Raising was largely due to the gap between the valuation ascribed to the Company’s mineral assets and the Company’s EV. As a result of the Hannans Offer, the Company has postponed the Kiruna Raising until the outcome of the Hannans Offer is known.

The Board must continue to implement strategies to reduce the gap between the preferred value of the Company’s mineral assets and the Company’s EV by continuing to employ high quality people, increasing exploration activity, initiating studies on the economics of project development and effectively communicating these plans and actions to the global investment community.

THE RECOMMENDATION OF THE INDEPENDENT DIRECTORS

The Independent Directors, Ian Gregory and Olof Forslund, unanimously recommend that, in the absence of a superior proposal you ACCEPT the Hannans Offer. Scandinavian Resources Shareholders should note that they will not receive the Offer Consideration any sooner by accepting the Hannans Offer early and, in any case, will not receive the Offer Consideration until each of the Conditions have been satisfied or waived. Once you have accepted the Hannans Offer, you will be prevented from participating in a superior proposal, should one eventuate, unless the limited circumstances for withdrawal of your acceptance apply. The closing date for the Hannans Offer is 4 May 2012 (unless extended or withdrawn).

REASONS TO ACCEPT

The Independent Directors provide the following reasons to ACCEPT the Hannans Offer:

1. Access to additional funding in the short term:

· Utilising the expected pro-forma net liquid investment position of the merged group of approximately $12.2 million7 will postpone the Company’s current need to complete a capital raising in the short term. If Scandinavian Resources continues on a standalone basis, such a capital raising may have more of a dilutionary effect on Scandinavian Resources Shareholders than the Hannans Offer.

· Successful completion of the Hannans Offer would result in Convertible Loans of approximately $4 million being consolidated into the merged group thereby replacing the need to raise funds in the short term.

In a broad sense, the Directors believe that the Hannans Offer represents an ability to raise capital on favourable terms.

2. The Hannans Offer may result in Scandinavian Resources Shareholders having increased liquidity on the ASX which may also increase investor demand for the merged group.

3. The Offer Consideration represents a premium to the price of Scandinavian Resources Shares8.

4. Scandinavian Resources Shareholders will gain exposure to Hannans’ West Australian minerals exploration portfolio.

5. The Independent Expert has determined that the Hannans Offer is not fair but reasonable. For further details on the reasons given by the Independent Expert for determining that the Hannans Offer is not fair but reasonable, please refer to section 2.3 of this Target’s Statement. The Independent Expert’s Report is set out in Appendix 1 of this Target’s Statement.


The Directors believe that the consolidation of the strategic portfolios of Hannans and Scandinavian Resources under a single entity listed on ASX will create a simpler and stronger platform to promote the merged group to investors and stakeholders.

SUPERIOR PROPOSAL

Your Directors will assess any opportunities that may arise to obtain a superior proposal for your Scandinavian Resources Shares and deal with any such opportunities in a manner consistent with their statutory and fiduciary duties. As at the date of this Target’s Statement, the Scandinavian Resources Directors are not aware of an intention by any third party to make a superior proposal. The Scandinavian Resources Directors will continue to keep you informed of any new developments.

SUPPORT OF TWO MAJOR SCANDINAVIAN RESOURCES SHAREHOLDERS

In the absence of a superior proposal, Equity & Royalty Investments Ltd (ERI) and Craton Capital Funds (CCF) have indicated to Hannans that it is their present intention to accept the Hannans Offer. The directors of ERI are Damian Hicks, Olof Forslund and Ian Gregory, each of whom is a Scandinavian Resources Director. One of the directors of CCF is Markus Bachmann, also a Scandinavian Resources Director. This early indication of support by ERI and CCF recognises the merits of the Hannans Offer and shows support to Hannans. Please refer to section 2.1 of this Target’s Statement for further details.

7 Based on Scandinavian Resources and Hannans’ cash balance and bonds as at 31 December 2011 of $1.46 million and $0.421 million respectively and Hannans’ interest in 4

million fully paid ordinary shares in Atlas Iron Limited (Atlas) (ASX:AGO) at $3.04 being the ASX closing price for Atlas shares on 19 March 2012 less the margin loan of $1.86 million as at 31 January 2012 and as otherwise disclosed in Hannans’s unaudited “Appendix 5B – 2nd Quarter Cash flow Report for the period ended 31 December 2011” released to the ASX on 1 February 2012 and the financial reports for the half year ended 31 December 2011 released by Hannans and Scandinavian Resources to ASX on 15 March 2012. This calculation does not take into account the Scandinavian Resources Shares and Scandinavian Resources Options currently held by Hannans.

8 Based on the last trading day before the Announcement Date.

LETTER FROM THE INDEPENDENT DIRECTORS


PROPOSED EXERCISE OF SCANDINAVIAN RESOURCES OPTIONS

The Company has been advised by ERI, a major Scandinavian Resources Shareholder, that it is ERI’s present intention to exercise 20 million Scandinavian Resources Options exercisable at $0.20 each on or before 31 October 2012 prior to the end of April 2012. If this occurs, the $4 million in funds received by the Company from the exercise of the Scandinavian Resources Options will be allocated to repaying the Convertible Loans and Loans, paying creditors and funding continued exploration until the outcome of the Hannans Offer is known. Please refer to section 6.10 for further details of ERI’s interest in the Company.

KIRUNA IRON EXPLORATION DRILLING

In-fill exploration drilling has been recommenced at the Rakkuri Project with the aim of establishing Indicated and Measured JORC compliant resources9. Further updates will be provided prior to the end of April 2012.

TARGET’S STATEMENT

When assessing whether or not to accept the Hannans Offer, you should consider the information provided to you as well as your own personal circumstances. You should also be aware that the Hannans Offer is subject to various Conditions, including Hannans being entitled to at least 90% of Scandinavian Resources Shares. The Hannans Offer can only succeed if all Conditions are satisfied or waived.

The purpose of this Target’s Statement is to provide you with the information you need to make a decision about whether or not to accept the Hannans Offer. To accept the Hannans Offer you should carefully follow the instructions in the Bidder’s Statement and complete the relevant Acceptance Form enclosed with the Bidder’s Statement. The Hannans Offer is due to close at 5.00pm (WST) on 4 May 2012 unless extended or withdrawn.

If you have any questions in relation to your position as a Scandinavian Resources Shareholder, we encourage you to seek either financial or legal advice without delay or contact the Scandinavian Resources Shareholder Information Line on 08 9324 1153 (from within Australia) or +61 8 9324 1153 (from outside Australia).

We would like to thank you for your long standing support and look forward to providing further updates in due course.

Yours sincerely,

Ian Gregory Independent Director and Company Secretary

Olof Forslund Independent Director

9 It is uncertain whether in-fill exploration at the Rakkuri Project will result in the determination of indicated and measured JORC compliant resources.


1 Hannans Offer – Summary

1.1 HANNANS OFFER

On 29 February 2012, Hannans announced its proposal to acquire all of the fully paid ordinary shares in the capital of Scandinavian Resources by way of an off-market takeover bid.

On 20 March 2012, Hannans lodged its Bidder’s Statement with ASIC and sent it to Scandinavian Resources Shareholders on or about 4 April 2012. The Bidder’s Statement contains the full terms and Conditions of the Hannans Offer, together with other information material to your decision whether or not to accept the Hannans Offer.

1.2 OFFER PERIOD

Unless the Hannans Offer is extended or withdrawn, it is open for acceptance from 3 April 2012 until 5.00pm (WST) on 4 May 2012.

The circumstances in which Hannans may withdraw or extend the Hannans Offer are set out in section 4.7 and 4.8 of this Target’s Statement respectively.

1.3 OFFER CONSIDERATION

Under the Hannans Offer, the Offer Consideration being offered by Hannans is three (3) Hannans Shares for every one (1) Scandinavian Resources Share held.

Based on the closing price of Hannans Shares on the ASX on 27 February 2012, the last trading day before the Announcement Date of $0.094, the value of the Offer Consideration was $0.28 per Scandinavian Resources Share.

Based on the closing price of Hannans Shares on 16 April 2012, the last trading day before this Target’s Statement was sent to print of $0.077, the value of the Offer Consideration was $0.23 per Scandinavian Resources Share.

1.4 PAYMENT OF OFFER CONSIDERATION

Hannans has stated in the Bidder’s Statement that if you accept the Hannans Offer, subject to satisfaction of the Conditions of the Hannans Offer, you will receive three (3) Hannans Shares for every one (1) Scandinavian Resources Share held by you. Full details of when you will receive the Offer Consideration are set out in section 1.7 of Annexure A to the Bidder’s Statement.

If you accept the Hannans Offer and you are an Ineligible Foreign Scandinavian Resources Shareholder or an Unmarketable Parcel Scandinavian Resources Shareholder, you will not be entitled to receive Hannans Shares as consideration for your Scandinavian Resources Shares. In these circumstances, the Hannans Shares which would otherwise have been issued to you will instead be issued to the Sale Nominee who will sell those Hannans Shares and remit the sale proceeds (less any transaction costs) to you by cheque in Australian dollars. See sections 4.15 and 4.16 of the Target’s Statement for further details.

1.5 CONDITIONS TO THE HANNANS OFFER

The Hannans Offer is subject to the Conditions set out in section 1.10 of Annexure A to the Bidder’s Statement. In summary, these Conditions are as follows:

· Hannans acquiring a Relevant Interest in at least 90% of the aggregate of all Scandinavian Resources Shares on issue and becoming entitled to compulsorily acquire all of the outstanding Scandinavian Resources Shares under Part 6A.1 of the Corporations Act;

· Scandinavian Resources not proceeding with the Kiruna Raising or a similar transaction or arrangement which would result in a similar effect;

· no prescribed occurrences;

· no action by any Government Agency adversely affecting the Hannans Offer;

· no material transactions or certain actions undertaken by or relating to Scandinavian Resources’ business;

· no force majeure event; and

· no material adverse change in relation to Scandinavian Resources.

Please refer to section 1.10 of Annexure A to the Bidder’s Statement for the full terms of the Conditions.

1.6 INDEPENDENT EXPERT’S REPORT

As Damian Hicks is a director of both Scandinavian Resources and Hannans, section 640 of the Corporations Act requires this Target’s Statement to include a report by an expert that states whether, in the expert’s opinion, the Hannans Offer is fair and reasonable and gives the reasons for forming that opinion.

The Independent Expert is of the view that the Hannans Offer is not fair but reasonable. The Independent Expert’s Report is included in its entirety at Appendix 1 of this Target’s Statement. You are urged to read that report carefully.


2 Recommendation of the Independent Directors and why you should ACCEPT the Hannans Offer

2.1 INDEPENDENT DIRECTORS’ RECOMMENDATION

The Directors of Scandinavian Resources as at the date of this Target’s Statement are:

· Damian Hicks;

· Olof Forslund (Independent Director);

· Markus Bachmann; and

· Ian Gregory (Independent Director).

In the absence of a superior proposal, the Independent Directors unanimously recommend that Scandinavian Resources Shareholders ACCEPT the Hannans Offer, for the reasons set out in section 2.3 of this Target’s Statement.

Scandinavian Resources Shareholders should note that they will not receive the Offer Consideration any sooner by accepting the Hannans Offer early and, in any event, will not receive the Offer Consideration until each of the Conditions have been satisfied or waived.

Unless the Hannans Offer is extended or withdrawn, it is open for acceptance until 5.00pm (WST) on 4 May 2012. Once you have accepted the Hannans Offer, you will be prevented from participating in a superior proposal, should one eventuate, unless the limited circumstances for withdrawal of your acceptance apply.

As at the date of this Target’s Statement, the Scandinavian Resources Directors are not aware of a proposal by anyone to make a superior proposal.

The Scandinavian Resources Directors will continue to assess any opportunities that may arise to obtain a superior proposal for your Scandinavian Resources Shares and deal with any such opportunities in a manner consistent with their statutory and fiduciary duties. The Scandinavian Resources Directors will continue to keep you informed of any new developments.

As outlined elsewhere in this Target’s Statement:

· Damian Hicks is Chairman of Scandinavian Resources and the Managing Director of Hannans;

· Ian Gregory is a Director and the Company Secretary of Scandinavian Resources and the Company Secretary of Hannans; and

· Markus Bachmann is a Director of Scandinavian Resources and a director and controller of Craton Capital Funds (CCF), a substantial shareholder of Hannans and Scandinavian Resources.

Both Mr Hicks and Mr Gregory were excluded from all discussions of the board of directors of Hannans in relation to formulating the Hannans Offer.

Due to his interest as Managing Director of Hannans, Mr Hicks makes no recommendation in relation to the Hannans Offer.

Notwithstanding his interest as Company Secretary of Hannans, Mr Gregory believes that he is able to make the above recommendation in relation to the Hannans Offer and has done so in order to ensure that Scandinavian Resources Shareholders are fully informed of his views of the Hannans Offer.

Due to his interest as a director and controller of CCF, a substantial shareholder of Hannans, Mr Bachmann makes no recommendation in relation to the Hannans Offer.

As announced by Hannans to ASX on 20 March 2012, Equity & Royalty Investments Ltd (ERI) and CCF, have advised the independent directors of Hannans that they will accept the Hannans Offer, in the absence of a superior proposal.

As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, ERI held 20,000,001 Scandinavian Resources Shares and CCF held 12,200,000 Scandinavian Resources Shares, representing a 17.46% and 10.65% interest in Scandinavian Resources respectively. The 20,000,001 Scandinavian Resources Shares held by ERI are currently classified as restricted securities and subject to escrow until 21 April 2012.

Each of Damian Hicks, Olof Forslund and Ian Gregory are directors of ERI and participated in the decision of ERI to advise Hannans that it intends to accept the Hannans Offer in respect of the Scandinavian Resources Shares it holds, in the absence of a superior proposal. As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, ERI did not hold any Hannans Shares.

Markus Bachmann is a director and controller of CCF and participated in the decision of CCF to accept the Hannans Offer in respect of the Scandinavian Resources Shares it holds, in the absence of a superior proposal. As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, CCF also held 11,000,000 Hannans Shares, representing a 8.36% interest in Hannans.

The Independent Directors have given careful consideration to the Hannans Offer and set out in sections 2.3 and 2.4 below are some of the more relevant matters which were considered.


In considering whether you wish to follow that recommendation, you should:

· read the Bidder’s Statement and this Target’s Statement in full. In particular, Scandinavian Resources Shareholders should note that the Hannans Offer is subject to a number of Conditions which are summarised in section 4.4 of this Target’s Statement;

· consider your individual risk profile, portfolio strategy, tax position and financial circumstances; and

· seek your own independent financial and taxation advice if appropriate.

2.2 INTENTIONS OF THE DIRECTORS

Each of the Directors intend to accept the Hannans Offer, in the absence of a superior proposal towards the end of the Offer Period in relation to the Scandinavian Resources Shares held by them or in which they have a Relevant Interest.

2.3 REASONS TO ACCEPT THE HANNANS OFFER

1. ACCESS TO ADDITIONAL FUNDING IN THE SHORT TERM

If Hannans successfully acquires 100% of Scandinavian Resources, the merged group will be well placed to maintain and grow its position as a result of the following:

Financial Resources

The merged group will have the financial resources to ensure Scandinavian Resources’ projects are funded and developed in a timely and optimal manner as a result of an expected pro-forma net liquid investment position of approximately $12.2 million10, which include:

· Hannans’ cash balance of approximately $0.421 million as at 31 December 2011; and

· 4 million fully paid ordinary shares in the capital of Atlas Iron Limited (Atlas) held by Hannans.

In particular, the financial resources of the merged group will ensure that the Convertible Loans and Loan can be repaid as and when they fall due. Please refer to section 6.5 of this Target’s Statement for further details relating to the Convertible Loans and Loan.

It is also likely that access to the merged group’s financial resources will postpone the Company’s current need to complete a capital raising in the short term. If Scandinavian Resources continues on a standalone basis, such a capital raising may have more of a dilutionary effect on Scandinavian Resources Shareholders than the Hannans Offer as capital raisings are often completed at a discount to the prevailing share price.

Costs Savings

The Independent Directors believe that the consolidation of Scandinavian Resources and Hannans will lead to a strengthening and simplification of the corporate structure and current management arrangements and, as a result, achieve cost savings by realising resourcing efficiencies and reducing corporate overheads.

2. INCREASED LIQUIDITY FOR SCANDINAVIAN RESOURCES SHAREHOLDERS

If Hannans successfully acquires 100% of Scandinavian Resources, the merged group would have an estimated market capitalisation of approximately $32.07 million11. Relative to Scandinavian Resources on a standalone basis, this scale has the potential to provide greater visibility among the international investor community and attract greater coverage by research analysis.

Scandinavian Resources Shareholders who receive Hannans Shares should also enjoy the benefits of increased liquidity. Hannans Shares currently have approximately $5,771.90 of aggregate average daily trading value on the ASX (based on trading over the 3 month, prior to the Announcement Date), which compares to an average daily trading value of approximately $3,145.41 for Scandinavian Resources Shares on the ASX (over the same period).

Please refer to the Independent Expert’s Report in Appendix 1 for an analysis of the Company’s liquidity.

10 Based on Scandinavian Resources and Hannans’ cash balance and bonds as at 31 December 2011 of $1.46 million and $0.421 million respectively and Hannans’ interest in 4 million fully paid ordinary shares in Atlas Iron Limited (Atlas) (ASX:AGO) at $3.04 being the ASX closing price for Atlas shares on 19 March 2012 less the margin loan of $1.86 million as at 31 January 2012 and as otherwise disclosed in Hannans’s unaudited “Appendix 5B – 2nd Quarter Cash flow Report for the period ended 31 December 2011” released to the ASX on 1 February 2012 and the financial reports for the half year ended 31 December 2011 released by Hannans and Scandinavian Resources to ASX on 15 March 2012. This calculation does not take into account the Scandinavian Resources Shares and Scandinavian Resources Options currently held by Hannans. 11 Based on the closing price of Hannans Shares on 16 April 2012, the last trading day before this Target’s Statement was sent to print.


Figure 1: Average daily traded value of Scandinavian Resources Shares v Hannans Shares on ASX over the 12 month period prior to the Announcement Date. Source: Patersons Securities Limited

3. PREMIUM TO SCANDINAVIAN RESOURCES SHARE PRICE

Based on the closing price of Hannans Shares on the ASX on 16 April 2012, the last trading day before this Target’s Statement was sent to print of $0.077, the value of the Hannans Offer is $0.23 per Scandinavian Resources Share.

This represents a premium of:

· nil on 16 April 2012, the last trading day before this Target’s Statement was sent to print;

· 6.1% to the 30-trading day VWAP of Scandinavian Resources Shares on the ASX, the last trading day before the Announcement Date;

· 5.8% premium to the 60-trading day VWAP of Scandinavian Resources Shares on the ASX, the last trading day before the Announcement Date; and

· 3.5% premium to the 90-trading day VWAP of Scandinavian Resources Shares on the ASX, the last trading day before the Announcement Date.

Based on the closing price of the Hannans Shares on the ASX on 27 February 2012, the last trading day before the Announcement Date of $0.094, the value of the Hannans Offer was $0.28.

As shown in Figure 2 below, this represents a premium of:

· 28.2% on 27 February 2012;

· 23.7% to the 30-trading day VWAP of Scandinavian Resources Shares on the ASX, the last trading day before the Announcement Date;

· 25.1% premium to the 60-trading day VWAP of Scandinavian Resources Shares on the ASX, the last trading day before the Announcement Date; and

· 23.0% premium to the 90-trading day VWAP of Scandinavian Resources Shares on the ASX, the last trading day before the Announcement Date.

Figure 2: Scandinavian Resources Share Price v Offer Consideration and VWAPs based on the last trading day before the Announcement Date. Source: Patersons Securities Limited

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000 SCRHNR

Daily traded value

0

10

20

30

40

50

60

70

80

27-Feb-11 27-Mar-11 27-Apr-11 27-May-11 27-Jun-11 27-Jul-11 27-Aug-11 27-Sep-11 27-Oct-11 27-Nov-11 27-Dec-11 27-Jan-12 27-Feb-12

SCR

HNR x 3

Share Price (cents) 30 days 60 days 90 days

90 days VWAP = $0.229

60 days VWAP = $0.225

30 days VWAP = $0.228

Recommendation of the Independent Directors and why you should ACCEPT the Hannans Offer


The actual value of the Hannans Offer will vary depending on the price of Scandinavian Resources Shares during the Offer Period and when the Hannans Shares have been issued to you, should you accept the Hannans Offer.

Scandinavian Resources Shareholders may be required to pay brokerage if they accept the Hannans Offer in respect of their Scandinavian Resources Shares. Further details are set out on page 10 of the Bidder’s Statement.

4. EXPOSURE TO HANNANS’ EXPLORATION PORTFOLIO

If you accept the Hannans Offer and the Hannans Offer becomes unconditional, you will receive shares in Hannans, an ASX listed company with a suite of prospective exploration projects within Western Australia covering nickel, gold and iron.

Scandinavian Resources Shareholders will retain exposure to Scandinavian Resources’ existing exploration portfolio, while gaining access to the Hannans’ portfolio. Hannans Projects include:

(a) Forrestania Project (east of Hyden, Western Australia) - nickel, gold and iron The Forrestania Project, comprising ground in joint venture and wholly owned tenements, is located within the Forrestania nickel belt. Over the past twelve months Hannans has continued to increase its tenement holding over the northern extension of the prospective stratigraphy in the region.

(b) Queen Victoria Rocks Project (south-west of Coolgardie, Western Australia) - nickel and gold The Queen Victoria Rocks Project has been owned 100% by Hannans since it listed on the ASX in 2003.

(c) Lake Johnston Project (west of Norseman, Western Australia) - nickel and gold Exploration activities and a data review completed by Hannans have identified gold in soil anomalies covering a strike extent of approximately 20 kilometres. Hannans’ exploration activities for gold have been focused on additional geochemical sampling, gravity surveys and RC percussion drilling.

(d) East Pilbara Project (east of Newman, Western Australia) - base metals and gold The East Pilbara Project boasts the largest tenement holding of all the projects in Hannans’ portfolio, covering a corridor of ground considered prospective for base metals and gold mineralisation.

Hannans continues to look for opportunities to secure additional land holdings through incremental tenement applications or third party opportunities that can add to the prospectivity of its current portfolio of projects.

Experienced Management

Hannans has an experienced board and management team (including Damian Hicks as Managing Director and Ian Gregory as Company Secretary, each of whom are also Scandinavian Resources Directors) with significant experience in mineral exploration. Together with the financial resources of Hannans, the management team of the merged group will be well placed to realise value from its portfolio of projects, including the Kiruna Iron Project.

5. “NOT FAIR BUT REASONABLE”

In considering whether the Hannans Offer is fair, the Independent Expert has noted in the Independent Expert’s Report that:

· the preferred value of Scandinavian Resources Shares is $0.920;

· the preferred value of the merged entity is $0.894; and

· the preferred value of the Offer Consideration is $0.30.

Given that the preferred value of the Offer Consideration represents a discount to the preferred value of Scandinavian Resources Shares, the Independent Expert has concluded that the Hannans Offer is not fair.

The Independent Expert also considered the advantages and disadvantages of the Hannans Offer set out below:

Advantages

· The merged entity will have a stronger balance and cash position.

· Hannans can offer funding potential in the short to medium term.

· If Hannans acquires 100% of Scandinavian Resources, Scandinavian Resources Shareholders will hold 68.39% of the merged entity.

· ERI and CCF have advised the independent directors of Hannans that they will accept the Hannans Offer in the absence of a superior proposal.

· Scandinavian Resources Shareholders will be exposed to a more diversified portfolio of assets across a greater number of projects.

· The merged entity will have an increased market capitalisation.

· Hannans intends to continue with the Company’s current budgeted expenditure program.

· Potential to realise cost synergies such as corporate overheads and rationalisation of management structures.


Disadvantages

· If Hannans acquires 100% of Scandinavian Resources, Scandinavian Resources Shareholders interest will be diluted to 68.39% of the merged entity.

· Scandinavian Resources Shareholders will have to share benefits of the Company’s asset portfolio with the current shareholders of Hannans.

The Independent Expert concluded that the advantages outweigh the disadvantages and that on this basis, the Hannans Offer is reasonable.

Scandinavian Resources Shareholders should read the Independent Expert’s Report in full. Please refer to Appendix 1 of this Target’s Statement.

2.4 CONSIDERATIONS FOR NOT ACCEPTING THE HANNANS OFFER

Considerations for not accepting the Hannans Offer include the following:

RISKS IN NOT ACCEPTING THE HANNANS OFFER

Since the Announcement Date, the Scandinavian Resources Share price has risen from $0.22 to as high as $0.27 and closed at $0.23 on 16 April 2012, the last trading day before this Target’s Statement was sent to print.

If the Hannans Offer is unsuccessful and no other offers emerge, Scandinavian Resources’ share price may fall below the current trading price and Scandinavian Resources Shareholders will be exposed to the ongoing risks associated with an investment in Scandinavian Resources. In particular:

· given Scandinavian Resources’ limited cash at bank and the impending commitment to repay the Convertible Loans and Loan, Scandinavian Resources will need to raise funds to ensure that the Company can repay the Convertible Loans and Loan as and when they fall due and maintain and carry on its business. There can be no guarantee that Scandinavian Resources will be able to raise funds on terms acceptable to the Company or at all. In the event that Scandinavian Resources is unable to find a suitable source of funding or renegotiate the terms of each of the Convertible Loans and Loan, there is a risk of default under the Convertible Loans and Loan;

· Scandinavian Resources will have full exposure to the development risks associated with the Kiruna Iron Project and will not benefit from Hannans’ net liquid investments and ability to raise additional funding; and

· Scandinavian Resources is yet to raise sufficient funds to undertake further exploration on the Company’s existing projects. There is a risk that it may not be able to do so in a timely manner or on favourable terms, if at all.

Please refer to section 8.1 of this Target’s Statement for further details of the risks involved with an investment in Scandinavian Resources.

If Hannans becomes entitled to compulsorily acquire Scandinavian Resources Shares

Hannans has stated in section 7.4 of the Bidder’s Statement that if the conditions for compulsory acquisition are satisfied, Hannans intends to proceed with compulsory acquisition. If at the end of the Offer Period, Hannans becomes entitled to, and does, compulsorily acquire all outstanding Scandinavian Resources Shares, Scandinavian Resources will become 100% owned by Hannans and no minority Scandinavian Resources Shares will remain. Please refer to section 4.14 of this Target’s Statement for further details.

Scandinavian Resources Shareholders should be aware that, if they do not accept the Hannans Offer and your Scandinavian Resources Shares are compulsorily acquired, they will face a delay in receiving the consideration for their Scandinavian Resources Shares, compared with Scandinavian Resources Shareholders who have accepted the Hannans Offer.

If Hannans does not become entitled to compulsorily acquire Scandinavian Resources Shares

The Hannans Offer is subject to a minimum acceptance Conditions which, if satisfied (and all the other Conditions are satisfied or waived), will entitle Hannans to compulsorily acquire all Scandinavian Resources Shares. A summary of the Conditions of the Hannans Offer is set out in section 4.4 of this Target’s Statement.

However, Hannans has the right to waive the minimum acceptance Condition. If Hannans waives the minimum acceptance Condition and the remaining Conditions are satisfied or waived, and Hannans acquires the majority of Scandinavian Resources Shares, there may be a number of important implications for Scandinavian Resources Shareholders who do not accept the Hannans Offer, such as:

· CGT rollover relief may not be available if Hannans acquires less than 80% of the Scandinavian Resources Shares under the Hannans Offer. A general overview of the tax implications of accepting the Hannans Offer for Australian resident Scandinavian Resources Shareholders is set out in section 9.8 of this Target’s Statement and section 8 of the Bidder’s Statement;

· liquidity in Scandinavian Resources Shares may be significantly reduced and the price of Scandinavian Resources Shares may fall substantially;

Recommendation of the Independent Directors and why you should ACCEPT the Hannans Offer


· Hannans will be in a position to cast the majority of votes at a general meeting of Scandinavian Resources, which would enable Hannans to control the composition of the Board, determine Scandinavian Resources’ dividend and capital management policies and control the strategic direction of the business of Scandinavian Resources. Additionally, if Hannans acquires more than 75% of Scandinavian Resources Shares, it will be in a position to cast the votes required for a special resolution at a meeting of Scandinavian Resources Shareholders. This would enable it to pass resolutions, for example, to amend Scandinavian Resources’ constitution;

· Hannans may be entitled to remove Scandinavian Resources from the official list of the ASX (see section 7.3 of the Bidder’s Statement); and

· there may be a reduced likelihood of a subsequent takeover bid for Scandinavian Resources.

Please refer to section 7.5 of the Bidder’s Statement for details of Hannans’ intentions if Scandinavian Resources becomes a controlled entity, but not a wholly owned subsidiary of Hannans.

REDUCED EXPOSURE TO SCANDINAVIAN RESOURCES’ ASSETS

If Scandinavian Resources Shareholders accept the Hannans Offer and the Hannans Offer becomes unconditional, their interest in Scandinavian Resources’ assets and the value that could be realised through successful development of the assets will be diluted. However, this has to be weighed against the dilution that is likely to occur if Scandinavian Resources remains a standalone company and has to raise sufficient capital to repay its Convertible Loans, Loan and fund its projects through further equity raisings. In addition, Scandinavian Resources Shareholders will gain significant exposure to Hannans’ assets, which include nickel and gold exploration assets.

INABILITY TO ACCEPT A SUPERIOR PROPOSAL IF ONE WERE TO EMERGE

Except in the limited circumstances provided for in the Corporations Act, accepting the Hannans Offer will preclude Scandinavian Resources Shareholder from accepting a superior proposal, should one emerge during the Offer Period.

The Scandinavian Resources Directors continue to assess any opportunities that may arise to obtain a superior proposal for your Scandinavian Resources Shares and deal with any such opportunities in a manner consistent with their statutory and fiduciary duties. As at the date of this Target’s Statement, the Directors are not aware of a proposal by anyone to make a superior proposal. The Scandinavian Resources Directors will continue to keep you informed of any new developments.

ACCEPTING THE HANNANS OFFER WOULD PRECLUDE A SCANDINAVIAN RESOURCES SHAREHOLDER FROM SELLING THEIR SCANDINAVIAN RESOURCES SHARES ON MARKET

If you accept the Hannans Offer, you will be precluded from selling your Scandinavian Resources Shares on market. However, accepting the Hannans Offer will not deny a Scandinavian Resources Shareholder the benefit of any superior price offered by Hannans which, under the Corporations Act, must be extended to all Scandinavian Resources Shareholders, including those who have already accepted the Hannans Offer. At the date of this Target’s Statement, Hannans has given no indication that it intends to increase the Offer Consideration.

THE PRICE OF HANNANS SHARES IS UNCERTAIN

Scandinavian Resources Shareholders are being offered Hannans Shares at a fixed ratio regardless of the price they trade at. If Scandinavian Resources Shareholders accept the Hannans Offer, they are subject to any rise or fall in the price of Hannans Shares.

It is also noted that any fluctuations in the share price of Atlas will have an impact on the interest in 4,000,000 fully paid ordinary shares in Atlas held by Hannans.


3 Frequently Asked Questions

This section of the Target’s Statement is designed to help you understand some of the issues relating to the Hannans Offer.

Question Answer Further

information

Why have I received this document?

You have received this Target’s Statement because you are a shareholder or optionholder in Scandinavian Resources. This Target’s Statement is Scandinavian Resources’ formal response to the Hannans Offer. It contains important information prepared by your Directors to help you determine whether to accept or reject the Hannans Offer. In the absence of a superior proposal, the Independent Directors unanimously recommend that you ACCEPT the Hannans Offer. Scandinavian Resources Shareholders should note that they will not receive the Offer Consideration any sooner by accepting the Hannans Offer early and, in any event, will not receive the Offer Consideration until each of the Conditions have been satisfied or waived. Once you have accepted the Hannans Offer, you will be prevented from participating in a superior proposal, should one eventuate, unless the limited circumstances for withdrawal of your acceptance apply. As at the date of this Target’s Statement, the Scandinavian Resources Directors are not aware of a proposal by anyone to make a superior proposal.

Who are the Independent Directors?

The Independent Directors are Olof Forslund and Ian Gregory. Section 2.1 of this Target’s Statement

What am I being offered under the Hannans Offer?

Hannans is offering three (3) Hannans Shares for every one (1) of your Scandinavian Resources Shares.

Sections 1.3 and 4.2 of this Target’s Statement

Who is offering to purchase my Scandinavian Resources Shares?

Hannans Reward Limited, a company incorporated in Australia and listed on ASX under the ASX code ‘HNR’. Hannans is an exploration company focused on nickel, gold and iron within Western Australia. Please refer to the section 3 of the Bidder’s Statement and section 7 of this Target’s Statement for further details.

Section 3 of the Bidder’s Statement and section 7 of this Target’s Statement

What is Hannans’ relationship with Scandinavian Resources?

Hannans currently owns 17.1% of the issued share capital of Scandinavian Resources. Damian Hicks (Chairman of Scandinavian Resources) is also the Managing Director of Hannans. Ian Gregory (Director and Company Secretary of Scandinavian Resources) is also Company Secretary of Hannans. Both Mr Hicks and Mr Gregory were excluded from all discussions of the Hannans Board of Directors in relation to formulating the Hannans Offer.

Sections 2.1, 9.3, 9.4, 9.6(c) and 9.10 of this Target’s Statement

What choices do I have as a Scandinavian Resources Shareholder?

As a Scandinavian Resources Shareholder you have the following choices: · accept the Hannans Offer for all of your Scandinavian Resources Shares. As

discussed below, each Independent Director recommends that you ACCEPT the Hannans Offer in the absence of a superior proposal, and all Directors intend to accept the Hannans Offer towards the end of the Offer Period for the Scandinavian Resources Shares that are held by them or on their behalf;

· reject the Hannans Offer by doing nothing; or · sell your Scandinavian Resources Shares on market (unless you have already

accepted the Hannans Offer and have not validly withdrawn your acceptance). There are implications for you in relation to each of these choices.

Sections 2.1, 2.2, 2.3, 2.4, 4.9 and 5 of this Target’s Statement

What choices do I have as a Scandinavian Resources Optionholder?

The Hannans Offer does not extend to the Scandinavian Resources Options. However, the Hannans Offer extends to all Scandinavian Resources Shares that are issued prior to the end of the Offer Period as a result of the exercise of Scandinavian Resources Options. All of the Scandinavian Resources Options are presently exercisable. Should Scandinavian Resources Optionholders elect to exercise their Scandinavian Resources Options such that they are issued Scandinavian Resources Shares prior to the end of the Offer Period, they will be able to accept the Hannans Offer in respect of those Scandinavian Resources Shares. Hannans states that it intends to make private treaty offers to Scandinavian Resources Optionholders to acquire or cancel their options subject to the Hannans Offer becoming or being declared unconditional. If not all of the Scandinavian Resources Options are exercised (or otherwise cancelled or acquired by Hannans pursuant to private treaty agreements or other arrangements) and Hannans is entitled to compulsorily acquire any outstanding Scandinavian Resources Shares, Hannans has confirmed in section 10.5 of the Bidder’s Statement that it intends to seek to compulsorily acquire or cancel any outstanding Scandinavian Resources Options pursuant to Part 6A.1 of the Corporations Act, although it reserves the right not to do so.

Sections 6.9 of this Target’s Statement and section 10.5 of the Bidder’s Statement


Question Answer Further information

Who is the Independent Expert and what do they do?

As Mr Hicks is a director of both Hannans and Scandinavian Resources, Scandinavian Resources is required by law to instruct an independent expert to provide an opinion on whether the Hannans Offer is fair and reasonable to Scandinavian Resources Shareholders. BDO Corporate Finance (WA) Pty Limited has been appointed as the Independent Expert and has prepared the Independent Expert’s Report contained in Appendix 1 of this Target’s Statement.

Sections 1.6, 2.1 and 9.11 and Appendix 1 of this Target’s Statement

What is the Independent Expert’s opinion in relation to the Hannans Offer?

The Independent Expert has concluded that the Hannans Offer is not fair but reasonable to Scandinavian Resources Shareholders. A copy of the Independent Expert’s Report contained in Appendix 1 of this Target’s Statement.

Section 1.6 and Appendix 1 of this Target’s Statement

What are the Independent Directors of Scandinavian Resources recommending?

The Independent Directors recommend that you ACCEPT the Hannans Offer, in the absence of a superior proposal. The reasons for this recommendation are set out in section 2.3 of this Target’s Statement. Scandinavian Resources Shareholders Scandinavian Resources Shareholders should note that they will not receive the Offer Consideration any sooner by accepting the Hannans Offer early and, in any event, will not receive the Offer Consideration until each of the Conditions have been satisfied or waived. Unless the Hannans Offer is extended or withdrawn, it is open for acceptance until 5.00pm (WST) on 4 May 2012. Once you have accepted the Hannans Offer, you will be prevented from participating in a superior proposal, should one eventuate, unless the limited circumstances for withdrawal of your acceptance apply. As at the date of this Target’s Statement, the Scandinavian Resources Directors are not aware of a proposal by anyone to make a superior proposal. As outlined elsewhere in this Target’s Statement: · Damian Hicks is Chairman of Scandinavian Resources and the Managing Director of

Hannans; · Ian Gregory is a Director and the Company Secretary of Scandinavian Resources and

the Company Secretary of Hannans; and · Markus Bachamnn is a Director of Scandinavian Resources and has a director and

controller of a substantial shareholder of Hannans and Scandinavian Resources. Both Mr Hicks and Mr Gregory were excluded from all discussions of the board of directors of Hannans in relation to formulating the Hannans Offer. Due to his interest as Managing Director of Hannans, Mr Hicks makes no recommendation in relation to the Hannans Offer. Notwithstanding his interest as Company Secretary of Hannans, Mr Gregory believes that he is able to make the above recommendation in relation to the Hannans Offer and has done so in order to ensure that Scandinavian Resources Shareholders are fully informed of their respective views of the Hannans Offer. Due to his interest as a director and controller of CCF, a substantial shareholder of Hannans, Mr Bachmann makes no recommendation in relation to the Hannans Offer.


What do the Scandinavian Resources Directors intend to do with their Scandinavian Resources Shares?

Each of the Directors of Scandinavian Resources intends to accept the Hannans Offer, in the absence of a superior proposal towards the end of the Offer Period in relation to the Scandinavian Resources Shares in which they have a Relevant Interest.

Section 2.2 of this Target’s Statement

When does the Hannans Offer close?

The Hannans Offer will close at 5.00pm (WST) on 4 May 2012 unless it is extended or withdrawn.


How do I accept the Hannans Offer?

Instructions on how to accept the Hannans Offer are set out in section 1.4 of Annexure A to the Bidder’s Statement and on the Acceptance Form which accompanies the Bidder’s Statement. If you want to accept the Hannans Offer, you should follow these instructions carefully to ensure that your acceptance is valid.

Section 5 of this Target’s Statement and section 1.4 of Annexure A to the Bidder’s Statement

How do I reject the Hannans Offer?

To reject the Hannans Offer, you do not need to do anything. If you intend on rejecting the Hannans Offer, do not respond to any telephone calls or correspondence received from Hannans. You should note, however, that if Hannans receives acceptances giving it more than 90% voting power in Scandinavian Resources and acquires at least 75% of the Scandinavian Resources Shares that it offers to acquire under the Hannans Offer, it will be entitled to proceed to compulsory acquisition of Scandinavian Resources Shares held by Scandinavian Resources Shareholders who did not accept the Hannans Offer.

Sections 2.4, 4.14 and 5 of this Target’s Statement



What are the consequences of accepting the Hannans Offer now?

If you accept the Hannans Offer while it is conditional, you will give up your right to sell your Scandinavian Resources Shares on market or otherwise deal with your Scandinavian Resources Shares (including forfeiting the opportunity to benefit from any superior proposal if one was to emerge), while the Hannans Offer remains open, unless Hannans extends its Offer Period by more than one month while the Hannans Offer remains conditional and in which case you may withdraw your acceptance. If you accept the Hannans Offer and it becomes unconditional, you will receive three (3) Hannans Shares for every one (1) of your Scandinavian Resources Shares.


If I accept the Hannans Offer, can I withdraw my acceptance at any time?

You will not be permitted to withdraw your acceptance unless the Offer Period is extended by more than one month (and then only if the Hannans Offer has not become unconditional). In these circumstances, you will have a period of one month after the date that the Hannans Offer is extended to withdraw your acceptance. These statutory withdrawal rights will terminate upon the expiry of that one month period. If the Offer Period is further extended, you may receive further statutory withdrawal rights. If you accept the Hannans Offer after all of the Conditions have been satisfied or waived, you will not be able to withdraw your acceptance.


Can I be forced to sell my Scandinavian Resources Shares?

You cannot be forced to sell your Scandinavian Resources Shares unless Hannans receives acceptances giving it more than 90% voting power in Scandinavian Resources and acquires at least 75% of the Scandinavian Resources Shares that it offers to acquire under the Hannans Offer. In such circumstances, Hannans will be entitled to proceed to compulsory acquisition of Scandinavian Resources Shares held by Scandinavian Resources Shareholders who did not accept the Hannans Offer and, in which case, you will receive the same Offer Consideration for your Scandinavian Resources Shares that you would have received under the Hannans Offer.

Section 4.14 of this Target’s Statement and section 7.4 of the Bidder’s Statement

What happens if Hannans increases the Hannans Offer?

If you accept the Hannans Offer now and Hannans subsequently raises the Offer Consideration under the Hannans Offer, you will receive the higher price if the Hannans Offer becomes unconditional.


Can I accept the Hannans Offer for only some of my Scandinavian Resources Shares?

Not unless you hold Scandinavian Resources Shares as trustee or nominee for or otherwise on account of, another person. See section 1.4 of Annexure A to the Bidder’s Statement for more information about accepting the Hannans Offer.

Section 1.4 of Annexure A to the Bidder’s Statement

What if I want to sell my Scandinavian Resources Shares on market?

During the Offer Period, you may sell your Scandinavian Resources Shares on market for cash (less brokerage), provided you have not accepted the Hannans Offer for those Scandinavian Resources Shares. You should contact your broker for information on how to sell your Scandinavian Resources Shares on ASX and your tax adviser to determine the tax implications of such a sale.

Section 5 of this Target’s Statement

What are the Conditions of the Hannans Offer?

The Hannans Offer is subject to the Conditions set out in Annexure A to the Bidder’s Statement. In summary, these Conditions are as follows: · Hannans acquiring a Relevant Interest in at least 90% of the aggregate of all

Scandinavian Resources Shares on issue and becoming entitled to compulsorily acquire all of the outstanding Scandinavian Resources Shares under Part 6A.1 of the Corporations Act:


· no prescribed occurrences; · no action by any Government Agency adversely affecting the Hannans Offer; · no material transactions or certain actions undertaken by or relating to Scandinavian

Resources’ business; · no force majeure event; and · no material adverse change in relation to Scandinavian Resources.

Sections 1.5 and 4.4 of this Target’s Statement and section 1.10 of Annexure A to the Bidder’s Statement

What happens if the Conditions of the Hannans Offer are not satisfied or waived?

If any of the Conditions of the Hannans Offer are not satisfied or waived before the Hannans Offer closes (or in the case of the “no prescribed occurrences” Condition in section 1.10(a)(iii) of Annexure A to the Bidder’s Statement, before the end of the third business day after the end of the Offer Period), the Hannans Offer will lapse. This means that: · if you have previously accepted the Hannans Offer, your acceptance is void and you

will not be paid the Offer Consideration. Instead, you will continue to be a Scandinavian Resources Shareholder and you will be free to deal with your Scandinavian Resources Shares; or

· if you have not previously accepted the Hannans Offer, you will continue to be a Scandinavian Resources Shareholder and will be free to deal with your Scandinavian Resources Shares.

Sections 4.4 and 4.13 of this Target’s Statement and Annexure A to the Bidder’s Statement

When will Hannans advise as to the status of the Conditions?

Section 1.13 of Annexure A to the Bidder’s Statement indicates that Hannans will give a Notice of Status of Conditions on 27 April 2012. Hannans is required to set out: · whether the Hannans Offer is free of the Conditions; · whether, so far as Hannans knows, the Conditions have been fulfilled on the date the

Section 4.5 of this Target’s Statement and section 1.13 of Annexure A to the



notice is given; and · Hannans’ voting power in Scandinavian Resources. If the Offer Period is extended by a period before the time by which the Notice of Status of Conditions is to be given, the date for giving the Notice of Status of Conditions will be taken to be postponed for the same period and Hannans is required to give notice that states the new date for the giving of the Notice of Status of Conditions. If a Condition is fulfilled (so that the Hannans Offer becomes free of that Condition) before the date on which the Notice of Status of Conditions is required to be given, Hannans must, as soon as practicable, give the ASX and Scandinavian Resources a notice that states that the particular Condition has been fulfilled.

Bidder’s Statement

When will I receive the Offer Consideration if I accept the Hannans Offer?

If you accept the Hannans Offer, Hannans will issue you the Offer Consideration for your Scandinavian Resources Shares on or before the earlier of: (i) one month after you have validly accepted the Offer or the contract resulting from its

acceptance becomes unconditional (whichever is the later); and (ii) 21 days after the end of the Offer Period, provided that the Offer has become

unconditional. Full details of when you will receive the Offer Consideration are set out in section 1.7 of Annexure A to the Bidder’s Statement.

Sections 1.4 and 4.11 of this Target’s Statement and section 1.7 of Annexure A to the Bidder’s Statement

What if I am an Ineligible Foreign Scandinavian Resources Shareholder or an Unmarketable Parcel Scandinavian Resources Shareholder?

If you accept the Hannans Offer and are an Ineligible Foreign Scandinavian Resources Shareholder or an Unmarketable Parcel Scandinavian Resources Shareholder, you will not be entitled to receive Hannans Shares as consideration for your Scandinavian Resources Shares held by you pursuant to the Hannans Offer. The Hannans Shares that Ineligible Foreign Scandinavian Resources Shareholders and Unmarketable Parcel Scandinavian Resources Shareholders which would otherwise have been issued to you will instead be issued to the Sale Nominee who will sell those Hannans Shares and remit the proceeds (less transaction costs) of such sale to you by cheque in Australian dollars. Full details are set out in sections 4.15 and 4.16 of this Target’s Statement and sections 1.8 and 1.9 of Annexure A to the Bidder’s Statement.

Sections 4.15 and 4.16 of this Target’s Statement and sections 1.8 and 1.9 of Annexure A to the Bidder’s Statement

What are the tax implications of accepting the Hannans Offer?

A general outline of the tax implications of accepting the Hannans Offer for Australian resident Scandinavian Resources Shareholders is set out in section 9.8 of this Target’s Statement and section 8 of the Bidder’s Statement. As the outline in section 9.8 of this Target’s Statement is a general guide only, Scandinavian Resources Shareholders are encouraged to seek their own specific professional advice as to the taxation implications applicable to their circumstances.

Section 9.8 of this Target’s Statement and section 8 of the Bidder’s Statement

Can Hannans extend the Offer Period?

While the Hannans Offer is subject to the Conditions, Hannans may extend the Offer Period: · at any time before giving the Notice of Status of Conditions; and · after giving the Notice of Status of Conditions in the circumstances described in

section 650C(2) of the Corporations Act. However, if the Hannans Offer is unconditional (that is, the Conditions are satisfied or waived), Hannans may extend the Offer Period at any time before the end of the relevant Offer Period. In addition, there will be an automatic extension of the Offer Period, if within the last 7 days of the Offer Period: · Hannans increases the Offer Consideration being offered under the Hannans Offer; or · Hannans’s voting power in Scandinavian Resources increases to more than 50%. If either of these two events occurs, the Offer Period for the Hannans Offer is automatically extended so that it ends 14 days after the relevant event occurs.


What are the risks associated with Scandinavian Resources and its business?

The risks associated with an investment in Scandinavian Resources are detailed in section 8.1 of this Target’s Statement.


What are the risks associated with Hannans and its business?

These risks are explained in detail in section 9 of the Bidder’s Statement. Scandinavian Resources Shareholders should read the Bidder’s Statement carefully and consult their professional advisers before deciding whether to accept the Hannans Offer. By accepting the Hannans Offer, Scandinavian Resources Shareholders are investing in Hannans.

Section 9 of the Bidder’s Statement

What happens if I do nothing?

You will remain a Scandinavian Resources Shareholder unless Hannans compulsorily acquires your Scandinavian Resources Shares. Hannans has stated in section 7.4 of the Bidder’s Statement that if the conditions for compulsory acquisition are satisfied, Hannans intends to proceed with compulsory acquisition.

Section 7.4 of the Bidder’s Statement and section 4.14 of this Target’s Statement

If I have further questions in relation to the Hannans Offer what can I do?

If you have any queries regarding the Hannans Offer, please contact the Scandinavian Resources Shareholder Information Line on 08 9324 1153 (from within Australia) or +61 8 9324 1153 (from outside Australia).


4 Hannans Offer – Details

This section contains some more detailed information on the Hannans Offer and its Conditions.

4.1 HANNANS OFFER

On 29 February 2012, Hannans announced its proposal to acquire all of the fully paid ordinary shares in the capital of Scandinavian Resources by way of an off-market takeover bid.

On 20 March 2012, Hannans lodged its Bidder’s Statement with ASIC and sent it to Scandinavian Resources Shareholders on or about 3 April 2012. The Bidder’s Statement contains the full terms and Conditions of the Hannans Offer, together with other information material to your decision whether or not to accept the Hannans Offer.

4.2 OFFER CONSIDERATION

Hannans is offering to acquire all of your Scandinavian Resources Shares. You may only accept the Hannans Offer in respect of all of the Scandinavian Resources Shares registered in your name at the date your Acceptance Form is processed.

Under the Hannans Offer, the Offer Consideration being offered by Hannans is three (3) Hannans Shares for every one (1) Scandinavian Resources Share held. If any Rights are declared, paid, made, arise or accrue to holders of Scandinavian Resources Shares, Hannans may reduce the Offer Consideration by the amount of any Rights, unless the benefit of the Rights is passed to Hannans.

Based on the closing price of Hannans Shares on the ASX on 27 February 2012, the last trading day before the Announcement Date of $0.094, the value of the Offer Consideration is $0.28 per Scandinavian Resources Share.

Based on the closing price of Hannans Shares on 16 April 2012, the last trading day before this Target’s Statement was sent to print of $0.077, the value of the Offer Consideration is $0.23 per Scandinavian Resources Share.

4.3 INTENTIONS

Hannans’ intentions for the business, assets and employees of Scandinavian Resources are set out in section 7.3 of the Bidder’s Statement.

4.4 CONDITIONS OF THE HANNANS OFFER

The Hannans Offer is subject to the Conditions set out in section 1.10 of Annexure A to the Bidder’s Statement. In summary, these Conditions are as follows:

· Hannans acquiring a Relevant Interest in at least 90% of the aggregate of all Scandinavian Resources Shares on issue and becoming entitled to compulsorily acquire all of the outstanding Scandinavian Resources Shares under Part 6A.1 of the Corporations Act;


· no prescribed occurrences;

· no action by any Government Agency adversely affecting the Hannans Offer;

· no material transactions or certain actions undertaken by or relating to Scandinavian Resources’ business;

· no force majeure event; and

· no material adverse change in relation to Scandinavian Resources.

Please refer to section 1.10 of Annexure A to the Bidder’s Statement for the full terms of the Conditions.

If any Condition of the Hannans Offer is not satisfied or waived before the Hannans Offer closes, the Hannans Offer will lapse. This means that:

· if you have previously accepted the Hannans Offer, your acceptance is void and you will not be paid the Offer Consideration. Instead, you will continue to be a Scandinavian Resources Shareholder and be free to deal with your Scandinavian Resources Shares; or

· if you have not previously accepted the Hannans Offer, you will continue to be a Scandinavian Resources Shareholder and will be free to deal with your Scandinavian Resources Shares.

Scandinavian Resources Shareholders who accept the Hannans Offer:

· will only receive the Offer Consideration for their Scandinavian Resources Shares after the Hannans Offer becomes unconditional; and

· cannot withdraw their acceptance while the Hannans Offer is conditional unless Hannans extends the Offer Period by more than one month.

4.5 NOTICE OF STATUS OF CONDITIONS

Section 1.13 of Annexure A to the Bidder’s Statement indicates that Hannans will give a Notice of Status of Conditions on 27 April 2012. Hannans is required to set out:

· whether the Hannans Offer is free of the Conditions;

· whether, so far as Hannans knows, the Conditions have been fulfilled on the date the notice is given; and

· Hannans’ voting power in Scandinavian Resources.

If the Offer Period is extended by a period before the time by which the Notice of Status of Conditions is to be given, the date for giving the Notice of Status of Conditions will be taken to be postponed for the same period and Hannans is required to give notice that states the new date for the giving of the Notice of Status of Conditions.


If a Condition is fulfilled (so that the Hannans Offer becomes free of that Condition) before the date on which the Notice of Status of Conditions is required to be given, Hannans must, as soon as practicable, give the ASX and Scandinavian Resources a notice that states that the particular Condition has been fulfilled.

4.6 OFFER PERIOD

Unless the Hannans Offer is extended or withdrawn, it is open for acceptance from 3 April 2012 until 5.00pm (WST) on 4 May 2012.

The circumstances in which Hannans may withdraw or extend the Hannans Offer are set out in sections 4.7 and 4.8 of this Target’s Statement respectively.

4.7 WITHDRAWAL OF HANNANS OFFER

In accordance with section 652B of the Corporations Act, the Hannans Offer may only be withdrawn with the written consent of ASIC and subject to the conditions (if any) specified in such consent.

4.8 EXTENSION OF OFFER PERIOD

Hannans may extend the Offer Period in accordance with the Corporations Act.

While the Hannans Offer is subject to the Conditions, Hannans may extend the Offer Period:

(a) at any time before giving the Notice of Status of Conditions; and

(b) after giving the Notice of Status of Conditions in the circumstances described in section 650C(2) of the Corporations Act.

However, if the Hannans Offer is unconditional (that is, the Conditions are satisfied or waived), Hannans may extend the Offer Period at any time before the end of the relevant Offer Period. In addition, there will be an automatic extension of the Offer Period, if within the last 7 days of the Offer Period:

· Hannans increases the Offer Consideration being offered under the Hannans Offer; or

· Hannans’ voting power in Scandinavian Resources increases to more than 50%.

If either of these two events occurs, the Offer Period for the Hannans Offer is automatically extended so that it ends 14 days after the relevant event occurs.

4.9 EFFECT OF ACCEPTANCE

The effect of accepting the Hannans Offer is set out in section 1.6 of Annexure A to the Bidder’s Statement.

Scandinavian Resources Shareholders should read these provisions in full to understand the effect that acceptance will have on the Rights attaching to their Scandinavian Resources Shares and the representations and warranties which they give by accepting the Hannans Offer.

The Conditions in Annexure A to the Bidder’s Statement are conditions to performance of Hannans’s obligations. Accordingly, Scandinavian Resources Shareholders who accept the Hannans Offer while the Hannans Offer is still subject to conditions, will give up their right to sell their Scandinavian Resources Shares on the stock market or otherwise deal with their Scandinavian Resources Shares (and the Rights attaching to those Scandinavian Resources Shares) while the Hannans Offer remains open.

4.10 YOUR ABILITY TO WITHDRAW YOUR ACCEPTANCE

You will only be permitted to withdraw your acceptance if Hannans extends the Hannans Offer while it remains subject to conditions by more than one month.

4.11 WHEN YOU WILL RECEIVE THE OFFER CONSIDERATION IF YOU ACCEPT THE HANNANS OFFER

If you accept the Hannans Offer, Hannans will issue you three (3) Hannans Shares for every one (1) of your Scandinavian Resources Shares to which Hannans received good title within one month after the date of your acceptance or, if this Offer is subject to a defeating condition when you accept this Offer, within one month after this Offer becomes unconditional and payment for your Scandinavian Resources Shares will be made within 21 business days after all of the Conditions have been satisfied or waived.

If you accept the Hannans Offer and you are an Ineligible Foreign Scandinavian Resources Shareholder or an Unmarketable Parcel Scandinavian Resources Shareholder, you will not be entitled to receive Hannans Shares as consideration for your Scandinavian Resources Shares. In these circumstances, the Hannans Shares which would otherwise have been issued to you will instead be issued to the Sale Nominee who will sell those Hannans Shares and remit the sale proceeds (less any transaction costs) to you by cheque in Australian dollars. See sections 4.15 and 4.16 of this Target’s Statement for further details.

Full details of when you will receive the Offer Consideration are set out in section 1.7 of Annexure A to the Bidder’s Statement.

4.12 EFFECT OF ANY INCREASE IN OFFER CONSIDERATION

If Hannans improves the Offer Consideration under the Hannans Offer, all Scandinavian Resources Shareholders, whether or not they have accepted the Hannans Offer before that increase in the Offer Consideration, will be entitled to the benefit of that increase in Offer Consideration.

4.13 LAPSE OF HANNANS OFFER

The Hannans Offer will lapse if the Conditions are not freed or fulfilled by the end of the Offer Period (or in the case of the “no prescribed occurrences” Condition in section 1.10(a)(iii) of Annexure A to the Bidder’s Statement, by the end of the third business day after the end of the Offer Period). In these circumstances, all contracts resulting from acceptance of the Hannans Offer and all acceptances that have not resulted in binding contracts are void. In that situation, you will be free to deal with your Scandinavian Resources Shares as you see fit.


4.14 COMPULSORY ACQUISITION

Hannans’ intentions with respect to compulsory acquisition are set out in section 7.4 of the Bidder’s Statement.

In summary, Hannans has indicated that if it becomes entitled to do so under the Corporations Act, Hannans intends to:

· give notices to compulsorily acquire any outstanding Scandinavian Resources Shares in accordance with section 661B of the Corporations Act; and

· to the extent not acquired above, give notices to Scandinavian Resources Shareholders and Scandinavian Resources Optionholders to compulsorily acquire any outstanding Scandinavian Resources Shares and Scandinavian Resources Options in accordance with section 664C of the Corporations Act.

An overview of Hannans’ rights to compulsorily acquire Scandinavian Resources Shares is set out below.

(a) Post bid compulsory acquisition

Hannans will be entitled, under section 661A of the Corporations Act, to compulsorily acquire any Scandinavian Resources Shares in respect of which it has not received an acceptance of the Hannans Offer on the same terms as the Hannans Offer if, during or at the end of the Offer Period, Hannans (together with its associates) has a Relevant Interest in at least 90% (by number) of the Scandinavian Resources Shares and Hannans and its associates have acquired at least 75% (by number) of the Scandinavian Resources Shares that Hannans offered to acquire under the Hannans Offer.

If these thresholds are met, Hannans will have up to one month after the end of the Offer Period within which to give compulsory acquisition notices to Scandinavian Resources Shareholders who have not accepted the Hannans Offer. Scandinavian Resources Shareholders have statutory rights to challenge the compulsory acquisition, but a successful challenge will require the relevant Scandinavian Resources Shareholder to establish to the satisfaction of a Court that the consideration offered does not represent “fair value” for their Scandinavian Resources Shares.

If compulsory acquisition occurs, Scandinavian Resources Shareholders who have their Scandinavian Resources Shares compulsorily acquired will be paid their consideration later than Scandinavian Resources Shareholders who accept the Hannans Offer.

(b) General compulsory acquisition provisions

Hannans will be entitled, under section 664A of the Corporations Act, to compulsorily acquire any outstanding Scandinavian Resources Shares and Scandinavian Resources Options if Hannans’ voting-power in Scandinavian Resources is at least 90% and Hannans (either in its own right or through related bodies corporate) acquires full beneficial interests in at least 90% (by value) of the aggregate of all Scandinavian Resources Shares and Scandinavian Resources Options and:

· Hannans lodges a compulsory acquisition notice with ASIC within 6 months of achieving that 90% holding;

· Hannans proposes a cash sum for the compulsory acquisition of the Scandinavian Resources Shares and Scandinavian Resources Options; and

· obtains the report of an expert stating whether, in the expert’s opinion, the terms proposed in the notice give fair value of the securities covered.

Hannans has not stated in the Bidder’s Statement the cash sum that it would propose for any compulsory acquisition of the Scandinavian Resources Shares or Scandinavian Resources Options that is undertaken by Hannans under section 664A of the Corporations Act.

4.15 INELIGIBLE FOREIGN SCANDINAVIAN RESOURCES SHAREHOLDERS

Ineligible Foreign Scandinavian Resources Shareholders will not be entitled to receive Hannans Shares as consideration for their Scandinavian Resources Shares pursuant to the Hannans Offer.

A Scandinavian Resources Shareholder is an Ineligible Foreign Scandinavian Resources Shareholder for the purposes of the Hannans Offer if their address as shown in the register of members of Scandinavian Resources is in a jurisdiction other than Australia or its external territories or New Zealand. However, such a person will not be an Ineligible Foreign Scandinavian Resources Shareholder if Hannans is satisfied that it is not legally or practically constrained from making the Hannans Offer to a Scandinavian Resources Shareholder in the relevant jurisdiction and to issue Hannans Shares to such a shareholder on acceptance of the Hannans Offer, and that it is lawful for the Scandinavian Resources Shareholder to accept the Hannans Offer in such circumstances in the relevant jurisdiction.

The Hannans Shares which would otherwise have been issued to Ineligible Foreign Scandinavian Resources Shareholders will instead be issued to the Sale Nominee who will sell these shares. The proceeds of the sale (less any transaction costs) of such Hannans Shares will then be remitted to the relevant Ineligible Foreign Scandinavian Resources Shareholders. See section 1.8 of Annexure A to the Bidder’s Statement for further details.

4.16 UNMARKETABLE PARCEL SCANDINAVIAN RESOURCES SHAREHOLDERS

If the total number of Hannans Shares which a Scandinavian Resources Shareholder is entitled to receive as consideration under the Hannans Offer is an Unmarketable Parcel, that Scandinavian Resources Shareholder will be an Unmarketable Parcel Scandinavian Resources Shareholder and will not be entitled to receive Hannans Shares as consideration for its Scandinavian Resources Shares pursuant to the Hannans Offer.

The Hannans Shares which would otherwise have been issued to Unmarketable Parcel Scandinavian Resources Shareholders will instead be issued to the Sale Nominee who will sell those shares. The proceeds of the sale (less any transaction costs) of such Hannans Shares will then be remitted to the relevant Unmarketable Parcel Scandinavian Resources Shareholders. See section 1.9 of Annexure A to the Bidder’s Statement for further details.


5 Your Options as a Scandinavian Resources Shareholder

You should read this Target’s Statement and the Bidder’s Statement before making a decision on whether or not to accept the Hannans Offer.

In considering whether to accept the Hannans Offer, the Directors encourage you to seek professional advice if you are unsure as to whether acceptance of the Hannans Offer is in your best interests, taking into account your individual circumstances.

The Bidder’s Statement contains important information which Scandinavian Resources Shareholders are urged to read carefully. Scandinavian Resources Shareholders should note that Scandinavian Resources has not undertaken any investigations to verify the accuracy or completeness of the information contained in the Bidder’s Statement. To the fullest extent permitted by law, each of those parties disclaims liability to any person who acts in reliance on that information.

Scandinavian Resources Shareholders who would like further information on Scandinavian Resources or its projects before making a decision about the Hannans Offer are encouraged to exercise their right under the Corporations Act to obtain from ASIC copies of all documents lodged by Scandinavian Resources with ASIC or the ASX. Alternatively, they can visit Scandinavian Resources’ website at www.scandinavianresources.com.

During the Offer Period, Scandinavian Resources Shareholders have the following options:

1. ACCEPT the Hannans Offer

If you wish to accept the Hannans Offer, you should follow the instructions in the Bidder’s Statement and the Acceptance Form.

To validly accept the Hannans Offer, Hannans must receive your acceptance before 5.00pm (WST) on 4 May 2012, unless the Offer Period is extended.

Subject to the Conditions of the Hannans Offer being satisfied or waived (including the 90% minimum acceptance Condition), you will receive three (3) Hannans Shares for every one (1) of your Scandinavian Resources Shares. Particular arrangements apply to Ineligible Foreign Scandinavian Resources Shareholders and Unmarketable Parcel Scandinavian Resources Shareholders, as explained in sections 4.15 and 4.16 of this Target’s Statement and sections 1.8 and 1.9 of Annexure A to the Bidder’s Statement.

You should be aware that once you accept the Hannans Offer, your acceptance cannot be withdrawn except in the limited circumstances in the Corporations Act. You should consider the timing of any acceptance of the Hannans Offer in light of the fact that a superior proposal by another party may emerge which you would be precluded from accepting if you had already accepted the Hannans Offer. As at the date of this Target’s Statement, the Scandinavian Resources Directors are not aware of a proposal by anyone to make a superior proposal.

You should be aware that the market price of Scandinavian Resources Shares may rise or fall after you have accepted the Hannans Offer.

Scandinavian Resources Shareholders should be aware that if they accept the Hannans Offer, Hannans waives the 90% minimum acceptance Condition and Hannans declares the Hannans Offer unconditional, CGT rollover relief may not be available if Hannans acquires less than 80% of the Scandinavian Resources Shares under the Hannans Offer. Please refer to section 9.8 of this Target’s Statement for further information.

2. REJECT the Hannans Offer

If you wish to retain your Scandinavian Resources Shares, you need to take no action in relation to the Hannans Offer. Scandinavian Resources Shareholders should note that if Hannans acquires 90% of the Scandinavian Resources Shares under the Hannans Offer, it will be entitled to compulsorily acquire the Scandinavian Resources Shares that it does not already own.

3. SELL your Scandinavian Resources Shares on the ASX

You can sell your Scandinavian Resources Shares on the ASX. The price you will receive will depend on the prevailing market price of Scandinavian Resources Shares at the time of the sale. You should be aware that the market price of Scandinavian Resources Shares may rise or fall during the Offer Period. You should also note that if you sell your Scandinavian Resources Shares on the ASX:

(a) you are likely to pay brokerage on the sale (and GST on that brokerage);

(b) you would not be eligible for CGT rollover relief (see section 9.8 of this Target’s Statement);

(c) you will not benefit from any price increase which may be offered by Hannans or increase in the price of Hannans Shares. Please note that Hannans has given no indication that it intends to increase the Offer Consideration;

(d) you will not be exposed to any price decrease of Scandinavian Resources Shares which may result;

(e) you will receive payment earlier than if you accept the Hannans Offer (typically 3 business days after the sale), as opposed to receiving Hannans Shares in accordance with the Hannans Offer which will be at a later time; and

(f) a sale on the ASX provides certainty, whereas a sale to Hannans by accepting the Hannans Offer will be subject to the Conditions being fulfilled unless the Hannans Offer has already been declared unconditional.


6 Scandinavian Resources – Information

This section includes more detailed information on Scandinavian Resources’ business and outlook.

6.1 OVERVIEW OF SCANDINAVIAN RESOURCES

Scandinavian Resources was incorporated as a public company in Western Australia on 3 July 2008 and listed on ASX on 21 April 2010. As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, Scandinavian Resources had 335 Scandinavian Resources Shareholders and a market capitalisation of approximately $26.35 million (on an undiluted basis).

Scandinavian Resources’ portfolio of projects covers bulk, base and precious metals prospects in Sweden and Norway. The Company aims to create wealth for its shareholders by developing a pipeline of minerals exploration and mining operations within the Scandinavian Shield.

Scandinavian Resources is one of the largest landholders (by area) of minerals exploration projects in Sweden and one of the largest landholders in the world class Kiruna District.

The Company has two wholly owned subsidiaries, namely Scandinavian Resources AB (a company registered in Sweden) (SRAB) and SR Equities Pty Ltd (SRE). Kiruna Iron Plc (a company registered in the United Kingdom) (KIP) is the wholly owned subsidiary of SRE while Resources & Rewards Pty Ltd is a partially owned subsidiary of SRE. Kiruna Iron AB (a company registered in Sweden) (KIAB) is the wholly owned subsidiary of KIP. Scandinavian Iron AB (a company registered in Sweden) (Scandinavian Iron) is the wholly owned subsidiary of KIAB. The chart in Figure 3 shows the corporate structure of the Scandinavian Resources Group.

The Company’s strategy is to ‘incubate’ a highly prospective portfolio of bulk, base and precious metals projects in Scandinavia (primarily Sweden and Norway).

As a company listed on ASX, Scandinavian Resources is subject to regular reporting and disclosure obligations. Further information on Scandinavian Resources and its projects can be found on the Scandinavian Resources’ website or in the announcements and reports released by Scandinavian Resources to the ASX, which can be found on the ASX website.

6.2 DIRECTORS OF SCANDINAVIAN RESOURCES

The Scandinavian Resources Directors as of the date of this Target’s Statement are:

DAMIAN HICKS Chairman

Mr Hicks was a founding director of Hannans in 2002 and was appointed Managing Director on 1 July 2007. He is also a non-executive director of Australian funds manager Growth Equities Pty Ltd.

Mr Hicks holds a Bachelor of Commerce (Accounting and Finance) from the University of Western Australia, is admitted as a Barrister and Solicitor of the Supreme Court of Western Australia, holds a Graduate Diploma in Applied Finance & Investment from FINSIA (formerly the Securities Institute of Australia), a Graduate Diploma in Company Secretarial Practice from Chartered Secretaries Australia and is a Graduate of the Australian Institute of Company Directors.

Mr Hicks was a founding director of Scandinavian Resources together with Olof Forslund.

OLOF FORSLUND Technical Director

Mr Forslund is a geophysicist and has extensive international experience in the mineral exploration industry, particularly in the development and application of geophysical instruments and radar technology. His assignments have covered activities in Sweden, Japan, South Korea, Germany, Belgium, Italy, France, Canada and the USA.

Mr Forslund commenced with Geological Survey of Sweden (SGU) in 1966 and during the period between 2003 and 2007 Mr Forslund was Regional Manager of the Geological Survey of Sweden’s Mineral Resources Information Office in Mala, Sweden (www.sgu.se). SGU’s branch office Mala serves as a ‘one-stop’ information office for all those conducting exploration in Sweden.

Mr Forslund was a founding shareholder and President of MALÅ GeoScience (www.malags.com) between 1994 and 1998. MALÅ is currently the global leader in the design and manufacture of Ground Penetrating Radar systems.

From 1999-2003 Mr Forslund was also project manager for Georange (www.georange.se), a non-profit organization whose main task is to expand the concept of "development" in the mining and minerals industry in Sweden. Georange has today about 50 members from municipalities, organisations, Universities and private companies. Whilst involved with the Georange project, Mr Forslund was responsible for the raising of approximately SEK100 million from various organisation and governments including the European Union to fund Georange activities.

Mr Forslund has an extensive network of contacts through Scandinavia covering geophysicists, geologists, drilling companies, government and industry. He was responsible for the SGU’s active participation at the Prospectors and Developer’s Conference (otherwise known as PDAC) in Toronto, Canada.

ScandinavianResources Ltd

(ASX:SCR)

Scandinavian Resources AB

100%(Incorporated in Sweden)

SR Equities Pty Ltd100%

Kiruna Iron Plc100%

(Incorporated in theUnited Kingdom)

Kiruna Iron AB100%

(Incorporated in Sweden)

Scandinavian Iron AB100%

(Incorporated in Sweden)

Resources & RewardsPty Ltd1

50%

Figure 3: Corporate structure chart of the Scandinavian

Resources Group

Note:

1 The remaining 50% interest in Resources & Reward Pty Ltd is held by HR Equities Pty Ltd, a wholly owned subsidiary of Hannans. Damian Hicks, a Scandinavian Resources Director, is also the Managing Director of Hannans.


Mr Forslund was a founding director of Scandinavian Resources together with Damian Hicks.

MARKUS BACHMANN Director

Mr Bachmann graduated with Honours (“cum laude”) from the University of Berne, Switzerland and began his corporate finance career in 1993.

In 2001, Mr Bachmann was Senior Portfolio Manager with Coronation Fund Managers in Cape Town when it was awarded the Standard & Poor’s Award for Manager of the Best Performing Large Cap Equity Unit Trust in South Africa.

In 2003, Mr Bachmann was founding partner of Craton Capital (www.cratoncapital.com) and is the Chief Executive Officer. Craton Capital was awarded Fund Manager of the Year at the Mining Journal’s “Outstanding Achievement Awards” announced in London during December 2010 for the Craton Capital Precious Metal Fund.

Mr Bachmann brings an extensive network of contacts in Europe and Africa to the Board which will assist with rapidly growing the Company’s minerals portfolio including its flagship Kiruna Iron Project.

IAN GREGORY Director and Company Secretary

Mr Gregory holds a Bachelor of Business from Curtin University and has over 25 years experience in the provision of company secretarial and business administration services in a variety of industries, including exploration, mining, mineral processing, oil and gas, banking, insurance and aquaculture.

In 2005 he established The Company Secretariat which provides professional and effective company secretarial and business administration services to listed and unlisted companies.

For 6 years prior to this he was the Company Secretary of the Iluka Resources Limited group of companies based in Perth. Iluka is the largest zircon producer in the world and the second largest producer of titanium minerals, with operating mines in Australia and the USA.

Before joining Iluka, Mr Gregory worked for 12 years as Company Secretary and Compliance Manager of IBJ Australia Bank Limited, the Australian operations of The Industrial Bank of Japan, and prior to that he was Company Secretary, for 4 years, of the Griffin Coal Mining group of companies.

Mr Gregory has been the Chairman of the Western Australian Branch Council of the Institute of Chartered Secretaries and Administrators and served on the National Council of that body.

6.3 MANAGEMENT OF SCANDINAVIAN RESOURCES

CHRISTINA LUNDMARK General Manager

Mrs Lundmark is a key person responsible for the overall management of Scandinavian Resources on a day-to-day basis and resides in Malå, Sweden.

Mrs Lundmark completed a Fil.Lic., Luleå University of Technology, Sweden (2003) in Ore Geology during post graduate studies at Division of Ore Geology, Luleå University of Technology, Sweden (2001 to 2006), obtained a Bachelor of Science, Stockholm University, Sweden (1976) in Mineralogy and Petrology and has completed accredited courses in Environmental Law and Marketing & Economy. Mrs Lundmark has more than 15 years experience from mineral exploration in Sweden. Mrs Lundmark was responsible for the SGU’s active participation at the Prospectors and Developers Association of Canada, PDAC Convention (2006 to 2010) and the Fennoscandian Exploration & Mining, FEM conference in Rovaniemi, Finland (2005, 2007 and 2009) amongst other international symposiums.

Mrs Lundmark commenced with Scandinavian Resources on 1 July 2011 and was recently appointed to the position of Chairperson for the SveMin sub-committee for the relations between the reindeer husbandry industry and the mining industry.

MAGNUS ARNQVIST Managing Director - Kiruna Iron AB From 1 May 2012

Mr Arnqvist is a Swedish Mining Engineer and prior to joining Kiruna Iron was Managing Director of Boliden Tara Mines Ltd, a position he held since January 2008. The Tara underground mine, in Navan, County Meath, Ireland is Europe's biggest zinc mine and the world's ninth biggest zinc mine. Boliden is a leading European metals company, it has approximately 4,400 employees and the turnover amounts to approximately SEK 37,000 million annually.

At Tara, Mr Arnqvist was accountable for production targets and production plans; developing plans for near-mine and regional exploration; organisational development to meet existing and future challenges; supporting a culture of continuous improvements and leading a large change management program. Prior to moving to Ireland Mr Arnqvist was employed as a mining engineer with Rapallo based in Kalgoorlie, Western Australia and was Mine Manager of the Kristineberg, Storliden and Maurliden Mines owned by Boliden.

Mr Arnqvist has a Bachelor of Mining from Bergsskolan Filipstad and Luleå University of Technology. He is also a member of AusIMM and will relocate to Kiruna, Sweden.

AMANDA SCOTT Exploration Manager

Ms Scott is a key person responsible for the exploration management of Scandinavian Resources on a day-to-day basis and resides in Malå, Sweden.

Ms Scott was previously Exploration Manager of Hannans (April 2008 to June 2010) where she played an integral role in the development of the Company’s nickel, gold, iron and manganese portfolio and is credited with the discovery of high grade iron mineralisation at the Jigalong Project in the East Pilbara region of West Australia. Previously Ms Scott held roles as Exploration


Geologist with Hannans (October 2007 to March 2008), Navigator Resources Ltd (2005 to 2008) and De Grey Mining Ltd (2004 to 2005). Ms Scott is also a Member of the Australian Institute of Mining & Metallurgy.

Ms Scott has been pivotal in all aspects of the development of the Scandinavian Resources exploration pipeline and commenced with Scandinavian Resources as Exploration Manager on 1 July 2010.

6.4 SCANDINAVIAN RESOURCES’ PROJECTS

The Company’s existing portfolio of projects includes gold, copper-gold and lead-zinc prospects in Sweden and Norway, with a particular focus on the following projects:

(a) Kiruna Iron Project – Sweden;

(b) Finnmark and Troms Projects – Norway;

(c) Caledonide Projects – Sweden; and

(d) Other Projects – Sweden.

A summary of each of the Company’s projects is set out in the following pages:

(a) Kiruna Iron Project

The Kiruna Iron Project is the Company’s main project and is held by KIAB, its wholly owned subsidiary incorporated in Sweden. The Kiruna Iron Project consists of the Kiruna Hub and the Lannavaara Hub.

KIAB’s strategy is to compile 1Bt of iron resources within 80 kilometres of the Kiruna mining centre, develop a central facility to process ore from a number of satellite deposits and then produce a premium quality iron concentrate for use as pellet feed.

The Kiruna Hub consists of a number of projects, the main project being Rakkuri. The Kiruna Hub is extremely well located with regard to infrastructure (rail, power and services) with the Rakkurijoki Project located less than 100 metres from a major road, less than 1 kilometre from rail and 6 kilometres from Kiruna.

The Lannavaara Hub is also located near infrastructure with the project located 80 kilometres from Kiruna and close to Lannavaara. The Lannavaara Hub consists of the Paljasjärvi Project, Kevus Project and Teltaja Projects, among others.

A joint venture agreement with Boliden at the Lannavaara Hub provides for KIAB to own 100% of the iron rights only.

Positive exploration results received from Scandinavian Resources diamond drilling has seen an increase to the Company’s global JORC compliant mineral resource which now stands at 473Mt @ 40% Fe. The global JORC Exploration Target for the Kiruna Iron Project now stands at 203-273Mt @ 32-40% Fe12.

Table 1: Kiruna Iron Project highlighted by the growth in resources ASX Release Date JORC Resources JORC Exploration Target

21/4/2010 - - 28/6/2010 98Mt 8-10Mt @ 25-69% Fe 15/11/2010 185.7Mt @ 35% Fe 150-185Mt @ 25-37% Fe 27/7/2011 412.1Mt @ 39.9% Fe 150-230Mt @ 30-40% Fe 16/1/2012 473Mt @ 40% Fe

(refer to Table 2 for Indicated Mineral Resources and Table 3 for Inferred Mineral Resources)

203-273Mt @ 32-40% Fe

Table 2: JORC Compliant Indicated Mineral Resource Table (HUB 1- KIRUNA HUB) Prospect Mt Fe (%) P (%) S (%)

Sautusvaara South 32.0 37.4 0.06 1.63 Sautusvaara North 11.4 39.7 0.09 0.44

Ekströmsberg 30.4 52.0 Unavailable Unavailable TOTAL 73.8 43.0 - -

Table 3: JORC Compliant Inferred Mineral Resource Table (HUB 1-KIRUNA HUB) Prospect Mt Fe (%) P (%) S (%)

Rakkurijärvi 69.6 28.5 0.07 0.93 Rakkurijoki 74.5 39.7 0.28 0.89

Discovery Zone 10.9 38.7 0.05 0.95 Tributary Zone 4.9 28.6 0.05 1.08

Sautusvaara South 6.8 26.6 0.09 1.82 Sautusvaara North 1.0 44.8 0.05 0.46

Vieto 14.0 35.7 0.14 1.46 Puoltsa 19.1 30.2 0.025 0.01

Renhagen 26.3 32.1 0.23 0.03 Harrejaure 16.2 43.4 0.04 0.01

Ekströmsberg 41.6 52.0 Unavailable Unavailable Tjårrojåkka 52.6 51.0 Unavailable Unavailable

Pattok 62.4 44.2 1.96 Unavailable TOTAL 399.9 38.1 - -

12 The JORC Exploration Targets have been subjected to diamond drill testing, ground geophysics and interpretation by the Geological Survey of Sweden, reviewed by Mr Thomas Lindholm of GeoVista AB. The potential quantity and grade of the exploration targets is conceptual in nature, there has been insufficient interpretation to define a JORC Mineral Resource and it is uncertain if further interpretation will result in the determination of a JORC Mineral Resource.


The second phase of drilling has commenced at the Kiruna Iron Project with the first two infill holes completed at Rakkurijoki. 13,000 metres of infill drilling has also been planned for Rakkurijoki and final approvals have now been received from the Inspector of Mines. At the Altavaara Project, 13 exploratory holes were completed and have returned encouraging preliminary results.

Extensive geophysical modelling of the Paljasjärvi, Kevus and Teltaja Projects in the Lannavaara Hub has occurred and drill planning for these areas is now being finalised ahead of submitting the appropriate applications to the Inspector for Mines.

(b) Finnmark and Troms Projects

The Finnmark Project consists of the Njivlojávri Project and the Fiskarfjellet Project located in Finnmark, Northern Norway. The Troms Project consists of the Ringvassøya Project in Troms, Northern Norway. These projects are held by Scandinavian Resources’ wholly owned subsidiary, SRAB.

Njivlojávri Project

The Njivlojávri Project is located in the Kautokeino Greenstone Belt approximately 35 kilometres northwest of Kautokeino and is prospective for Bidjovagge-type copper-gold mineralisation.

A new copper-gold discovery (Suovrrajávri) was made between two previously known discoveries (Suovrravarri and Njivlojávri) which are separated by a distance of 3.5 kilometres. Mapping of the mineralisation at Suovrrajávri identified a north/south striking, bedding-parallel mineralised zone of pervasively carbonate-albite altered diabase. The north/south structure is weakly mineralised (disseminated and veined chalcopyrite) over a width of 30-35m with copper-gold. However scattered along the length of this north/south zone is fist-sized float of semi-massive to massive chalcopyrite which appears locally derived (i.e. not glacially derived) and very similar to the mineralisation at Suovrravarri to the north and at Njivlojávri to the south.

Results of the C-horizon soil sampling from Njivlojávri has indicated an Au-Cu anomaly of more than 2 kilometres in length. Considering the wide spacing (50m x 200m) of the soil sampling the anomalous trends show remarkable consistency across multiple elements. The widely spaced soil profiles show a distinct gold anomaly bound to the mineralised N-S trending fault or shear zone and a weaker parallel gold anomaly appears approximately 100m to the east and indicates potential for additional auriferous N-S shear structures. The outcropping mineralised structure and its associated gold soil anomaly has, as expected, a coincident copper anomaly.

Early exploration work by Scandinavian Resources at the Njivlojávri Project has confirmed the area as hosting, in outcrop and soils, copper-gold mineralisation over a substantial strike length. Initial mapping has shown that the mineralisation (Suovrravarri to Njivlojávri) is probably at the same stratigraphic level as the Bidjovagge mineralisation and is also located south of and hosted in the same anticline as Suovrarap’pat which is of Bidjovagge-type.

Importantly the structural architecture of the project is conducive to hosting shear hosted gold mineralisation; the mineralisation is located approximately 1 kilometre from the major regional NNW-SSE fault structure and there is potential for further copper-gold discoveries at the project with large areas covered by thin glacial cover.

Detailed mapping of the entire project area has been planned for the upcoming summer field season in addition to ground based geophysics including magnetics and electromagnetics (EM).

Fiskarfjellet Project

The Fiskarfjellet Project is located in the Alta-Kvænangen tectonic window in Finnmark, approximately 20 kilometres south-west of Alta and is prospective for Nussir-type copper mineralisation.

Field mapping and reconnaissance of the project during the 2011 summer field season revealed several kilometres of copper-mineralised dolomite across three separate dolomite horizons namely at Fiskarvatnet, Flomvatnet and Kvartpååttevatnet. The main copper mineralisation at Fiskarvatnet has currently been traced over 6 kilometres in strike length through both outcrop and boulder fields.

The copper mineralisation at the Kvartpååttevatnet Prospect, located in the western part of the Fiskarfjellet Project, has been traced for more than three kilometres to date.

The dolomite horizon at Kvartpååttevatnet continues for a further three kilometres to the south and will be investigated during the 2012 summer field season in addition to ground magnetic, induced polarisation (IP) and EM surveys.

Ringvassøya Project

The Ringvassøya Project is located within the Ringvassøy Greenstone Belt, an Archaean supracrustal belt within the West Troms Basement Complex, 80 kilometres north of Tromsø, Norway.

The Ringvassøya Project consists of the Sørdalshøgda, Holmvasshøgda and Hårskoltan prospects each of which are located near the transition between the greenschist and amphibolite domains.

The gold mineralisation at Sørdalshøgda is hosted in hydrothermal, sugar-grained and laminated quartz veins with disseminated pyrite, chalcopyrite and pyrrhotite. The quartz veins are spatially bound to a quartz-porphyritic, medium-grained felsic intrusive (tonalite) containing tourmaline and are likely the result of the competency contrast between the tonalite and the surrounding greenstones. The vein frequency increases with increased deformation and the veins are generally parallel to foliation in the tonalite, occasionally weakly foliated but not folded. The tonalite is cut by irregular, northwest trending diabase dykes.

The quartz veins at Sørdalshøgda whilst high-grade appear limited in width and length; the main northern vein is 7m long and 30-40cm wide and the main southern vein is several metres long and 45cm wide where exposed in a digging; both of these main veins contain pyrite-chalcopyrite-pyrrhotite mineralisation and have mylonitic, chlorite-ankerite altered contacts.

At Sørdalshøgda South stratabound Au-Zn-As-Ag mineralisation occurs in strongly oxidised quartz-carbonatechlorite schist with abundant magnetite, garnet and biotite. The stratabound Au-Zn-As-Ag mineralisation at Sørdalshøgda South is


considered a high priority target area for future work at the Ringvassøya Project as this type of gold mineralisation is more likely to reach the necessary dimensions and grades for a viable gold deposit.

The structural complexity of the Dåfjord Fault system at the Holmvasshøgda Prospect requires further investigation through detailed magnetic surveys, as gold mineralisation is possibly related to cross-cutting splays off the main Dåfjord fault. An IP survey and bottom-till sampling has been scheduled for the 2012 summer field season at Holmvasshøgda.

A large carbonate altered tonalite outcrops at the Hårskoltan Prospect which has been cut by two generations of diabase dykes. IP and magnetic survey work has been recommended as follow up work at the Hårskoltan Prospect during the 2012 summer field season.

(c) Caledonide Projects

The Caledonide Projects consist of the Särksjön Project, Daningen Project and the Famnvatnet Project located in Sweden. These projects are held by Scandinavian Resources’ wholly owned subsidiary, SRAB.

Särksjön Project

The Särksjön Project is located 800 kilometres northwest of Stockholm, Sweden and approximately 120 kilometres west of Vilhelmina, in the Swedish Caledonides which hosts multiple base metal mineral deposits and mines.

In 1965, four diamond drillholes were completed testing the anomalous outcrop at Särksjön. The holes were all shallow and were not assayed for gold at the time. One of the holes is still kept in archive at the SGU core archive facility in Malå, Sweden and has recently been re-logged, sampled and cut by SRAB. LEI65003 has returned excellent assay results13 and confirms the high grade gold and multi-element mineralisation returned from outcrop sampling completed in 2010 by SRAB14.

In 2011, SRAB completed a fixed-loop transient electromagnetic (FLTEM) survey and an IP survey at the Särksjön Project, both of which returned conductive anomalies. Drill planning has recently been completed and the appropriate paperwork has been submitted to the Inspector of Mines. Diamond drilling of the anomalies is scheduled for July 2012 and will be completed with a heli-portable drill rig.

Daningen Project

A workplan has also been submitted for a combined ground magnetic and EM survey to be completed at the Daningen Project, located approximately 50km southwest of Tärnaby, Sweden. The workplan has also allowed for drilling of possible anomalies generated from the ground geophysics.

The geophysics survey will take place whilst there is still snow on the ground (March-April 2012) to aid in the ease of the survey but any potential drilling would not occur until summer.

Famnvatnet Project

Drill collars at the Famnvatnet Project, located 50 kilometres west of Tärnaby, Sweden, have been surveyed with an accurate real time kinematic global positioning system. The collar surveying has shown that there are elevation differences between actual drill collars and what was planned when modelling the airborne EM data. Re-modelling of the targets using the correct elevation data has shown that several of the modelled anomalies were not reached in the drilling completed in 2010.

Downhole EM surveying of holes which have failed to intersect the modelled conductors has been recommended and is scheduled to take place during the summer field season.

(d) Other Projects

These projects are held by Scandinavian Resources’ wholly owned subsidiary, SRAB.

The Company’s Korpilombolo Project is located approximately 50 kilometres southwest of Pajala, northern Sweden. Gold and copper mineralisation was first discovered at Korpilombolo by prospectors participating in the annual ‘Mineral Hunt’ in 1998.

The local bedrock of the project area mainly consists of migmatic, sillimanite-bearing metasedimentary rocks, amphibolites and dioritic intrusives. Reconnaissance field mapping by Scandinavian Resources’ staff located the mineralised outcrop and observed that bedrock is poorly exposed in the area. Airborne magnetic imagery indicates the presence of multiple regional scale fault structures located within the project area. Additional field reconnaissance and mapping is scheduled for the summer field season.

(e) Competent Persons’ Statements

(i) Mineral Resources – Rakkurijärvi, Rakkurijoki, Discovery, Tributary Zone, and Puoltsa prospects

The information in this Target’s Statement that relates to Mineral Resources for the Rakkurijärvi, Rakkurijoki, Discovery, Tributary Zone and Puoltsa prospects is based on information compiled by Mr Thomas Lindholm, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Lindholm is a full-time employee of Geovista AB, Luleå, Sweden. Mr Lindholm has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined by the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Lindholm consents to the inclusion in this Target’s Statement of the matters based on his information in the form and context in which it appears.

13 All assays submitted to ALS Laboratories (Piteå) for ME-ICPMS and Au-AA25 analysis 14 Refer to ASX announcement dated 11 October 2010 for further details.


(ii) Mineral Resources – Ekströmsberg, Tjårrojåkka and Pattok prospects

The information in this Target’s Statement that relates to Mineral Resources for the Ekströmsberg, Tjårrojåkka, and Pattok prospects is based on information compiled by Dr Christopher Wheatley, who is a member of the Institute of Materials Minerals and Mining. Dr Wheatley is a full-time employee of Behre Dolbear International Ltd in the United Kingdom. Dr Wheatley has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and the activity which he is undertaking to qualify as a Competent Person as defined by the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr Wheatley consents to the inclusion in this Target’s Statement of the matters based on his information in the form and context in which it appears.

(iii) Mineral Resources – Vieto, Sautusvaara, Renhagen and Harrejaure prospects

The information in this Target’s Statement that relates to Mineral Resources for the Vieto, Sautusvaara, Renhagen and Harrejaure prospects is based on information compiled by Mr Geoffrey Reed, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Reed is a full-time employee of Minarco-MineConsult. Mr Reed has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined by the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Reed consents to the inclusion in this Target’s Statement of the matters based on his information in the form and context in which it appears.

(iv) Exploration Targets

The information in this Target’s Statement that relates to Exploration Targets is based on information compiled by Mr Thomas Lindholm, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Lindholm is a full-time employee of Geovista AB, Luleå, Sweden. Mr Lindholm has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined by the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Lindholm consents to the inclusion in this Target’s Statement of the matters based on his information in the form and context in which it appears.

(v) Exploration Results

The information in this Target’s Statement that relates to Exploration Results is based on information compiled by Ms Amanda Scott, Exploration Manager, Scandinavian Resources Limited, who is a Member of the Australasian Institute of Mining and Metallurgy. Ms Scott is a full-time employee of the Company. Ms Scott has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which she is undertaking to qualify as a Competent Person as defined by the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Ms Scott consents to the inclusion in this Target’s Statement of the matters based on her information in the form and context in which it appears.

(f) Forward Looking and Exploration Target Statements

This Target’s Statement may include forward looking statements that are based on management’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Scandinavian Resources, that could cause actual results to differ materially from such statements. Forward looking statements include, but are not limited to, statements concerning the Company’s exploration program, outlook, target sizes, resource and mineralised material estimates. They include statements preceded by words such as “potential”, “target”, “scheduled”, “substantial”, “planned”, “estimate”, “possible”, “future”, “prospective” and similar expressions. The terms “Target” and “Exploration Target”, where used in this Target’s Statement, should not be misunderstood or misconstrued as an estimate of Mineral Resources and Reserves as defined by the JORC Code (2004), and therefore the terms have not been used in this context. Also, Scandinavian Resources makes no undertaking to subsequently update or revise the forward-looking statements made in this Target’s Statement to reflect events or circumstances after the date of this Target’s Statement.


6.5 LOAN ARRANGEMENTS

Set out below:

(a) in items 1 to 5 of the table is a summary of the convertible loans to which the Company (or a wholly owned subsidiary of the Company) is a party (Convertible Loans); and

(b) in item 6 of the table is a summary of the loan to which the Company (or a wholly owned subsidiary of the Company) is a party (Loan).

LENDER CONVERSION TERMS

SECURITY1 INTEREST RATE

PAYABLE PER

ANNUM

REPAYMENT DATE (AS

AMENDED OR VARIED)

ESTIMATED OUTSTANDING AMOUNT (A$)

AS AT REPAYMENT

DATE

CONVERTIBLE LOANS

1. HR Equities Pty Ltd, a wholly owned subsidiary of Hannans2

Convertible to Shares at a conversion rate of 3 Shares for every $1.00 drawn down

First ranking fixed and floating charge over all of the assets of the Company

12.50% 15 September 2012

2,746,844


Convertible to Shares at a conversion rate of 1.5 Shares for every $1.00 drawn down


12.50% 15 September 2012

929,727




21.30% 15 September 2012

946,019

4. An unrelated third party Convertible to Shares at a conversion rate of 3 Shares for every $1.00 drawn down

Second ranking fixed and floating charge over all of the assets of the Company

12.50% Note 3 1,016,2364

5. A director related person of Hannans


N/A 12.50% Note 3 274,2154

LOAN

6. A director related person of Hannans and Scandinavian Resources

N/A Second ranking fixed and floating charge over all of the assets of the Company

12.50% Note 3 165,3194

TOTAL CONVERTIBLE LOANS AND LOAN 6,078,360 Notes:

1 As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, none of the lenders have registered a fixed and floating charge over the assets of the Company.

2 HR Equities Pty Ltd is a wholly owned subsidiary of Hannans. Damian Hicks, a Scandinavian Resources Director, is also the Managing Director of Hannans and Ian Gregory, a Scandinavian Resources Director, is also the Company Secretary of Hannans.

3 Repayment date is that date which is 14 days of receipt by the Company of written notice from the lender that repayment of the Convertible Loan or Loan (as the case may be) is due.

4 These figures are the estimated amounts outstanding based on the earliest possible repayment date, being 30 April 2012. However, as at 16 April 2012, the last trading day before this Target’s Statement was sent to print, no notice had been received by the Company from the relevant lender that repayment of the Convertible Loan or Loan (as the case may be) is due.

As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, Scandinavian Resources has approximately $58,736 cash at bank, which is insufficient to repay the amounts currently outstanding under the Convertible Loans and Loan.

6.6 FUNDING REQUIREMENTS

In addition to the obligation to repay the above Convertible Loans and Loan, Scandinavian Resources will need to raise equity and/or debt funding to undertake further exploration on the Company’s existing projects. There are risks involved in meeting the above funding requirements, which are disclosed in further detail in section 8.1(c) of this Target’s Statement.

6.7 FINANCIAL INFORMATION

Scandinavian Resources’ last published audited financial statements are for the financial for the half year ended 31 December 2011 and were lodged with ASX on 15 March 2012.

Details of Scandinavian Resources’ operational, financial and exploration activities for the intervening periods are provided in Scandinavian Resources’ quarterly reports lodged with the ASX on:

· 31 October 2011 (for the quarter ending 30 September 2011); and

· 1 February 2012 (for the quarter ending 31 December 2011).


So far as is known to the Directors of Scandinavian Resources, the financial position of Scandinavian Resources has not materially changed since the date of the half year report dated 15 March 2012 for the period ending 31 December 2011 other than a reduced cash position in the normal course of operating its business.

6.8 ISSUED CAPITAL

As at the date of this Target’s Statement, Scandinavian Resources’ issued capital consisted of:

· 114,563,266 Scandinavian Resources Shares15; and

· the unlisted Scandinavian Resources Options listed in Table 4.

6.9 SCANDINAVIAN RESOURCES OPTIONS AND TREATMENT UNDER THE HANNANS OFFER

Each Scandinavian Resources Option entitles the Scandinavian Resources Optionholder to one Scandinavian Resources Share upon Scandinavian Resources receiving a properly executed notice of exercise and application monies. Scandinavian Resources will apply for official quotation of all Scandinavian Resources Shares issued and allotted pursuant to the exercise of the Scandinavian Resources Options. Scandinavian Resources Shares issued on exercise of Scandinavian Resources Options will rank equally in all respects with other Scandinavian Resources Shares on issue.

A Scandinavian Resources Option may only be exercised after it has vested and any other conditions imposed by the Scandinavian Resources Board on exercise have been satisfied.

The Scandinavian Resources Options have been granted on various terms and conditions.

Scandinavian Resources operates an Employee Share Option Plan (ESOP). Under the terms of ESOP, Scandinavian Resources Options are subject to a restriction on transfer preventing the Scandinavian Resources Optionholder from transferring those options to any person except with prior written approval of the Board. As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, the Company had not granted any Scandinavian Resources Options pursuant to the ESOP.

The Hannans Offer does not extend to the Scandinavian Resources Options. However, the Hannans Offer extends to all Scandinavian Resources Shares that are issued prior to the end of the Offer Period as a result of the exercise of Scandinavian Resources Options.

All of the Scandinavian Resources Options are presently exercisable. Should Scandinavian Resources Optionholders elect to exercise their Scandinavian Resources Options such that they are issued Scandinavian Resources Shares prior to the end of the Offer Period, they will be able to accept the Hannans Offer in respect of those Scandinavian Resources Shares.

Holders of Scandinavian Resources Options should also note that in section 10.5 of the Bidder’s Statement Hannans states that it intends to make private treaty offers to Scandinavian Resources Optionholders to acquire or cancel their options subject to the Hannans Offer becoming or being declared unconditional.

In section 10.5 of the Bidder’s Statement, Hannans has stated that, if not all the Scandinavian Resources Options are exercised (or otherwise cancelled or acquired by Hannans pursuant to private treaty agreements or other arrangements), and Hannans is entitled to compulsorily acquire any outstanding Scandinavian Resources Shares, Hannans presently intends to seek to compulsorily acquire or cancel any outstanding Scandinavian Resources Options pursuant to Part 6A.1 of the Corporations Act, although it reserves the right not to do so.

6.10 SUBSTANTIAL SCANDINAVIAN RESOURCES SHAREHOLDERS

As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, the Scandinavian Resources Shareholders who have voting power in more than 5% of Scandinavian Resources Shares are as follows:

Notes:

1 This is based on the number of Scandinavian Resources Shares held by ERI as stated in the relevant notices lodged with ASX. Actual voting power may differ from that disclosed in material lodged with ASX as there is no obligation to publicly disclose changes in voting power of less than 1%. Damian Hicks, Olof Forslund and Ian Gregory, the Scandinavian Resources Directors, are directors of ERI. The Scandinavian Resources Shares held by ERI are currently classified as restricted securities and subject to escrow until 21 April 2012. The Company has been advised by ERI that it is ERI’s present intention to exercise 20 million Scandinavian Resources Options exercisable at $0.20 each on or before 31 October 2012 prior to the end of April 2012. Upon exercise of those Scandinavian Resources Options, the number of Scandinavian Resources Shares on issue (assuming that no additional Scandinavian

Resources Shares are issued and no other Scandinavian Resources Options are exercised) will be 134,563,266 and ERI will hold 40,000,001 Scandinavian Resources Shares. This will increase ERI’s Relevant Interest to 29.73%.

2 This is based on the number of Scandinavian Resources Shares held by BlackRock Investment Management (Australia) Limited and its associated entities as stated in the relevant notices lodged with ASX. According to a Form 603 lodged with ASX on 24 February 2012, BlackRock Investment Management (Australia) Limited, BlackRock (Channel Islands) Ltd, BlackRock Investment Management (Korea) Ltd and BlackRock Investment Management (UK) Ltd together hold a Relevant Interest in 12,227,218 Scandinavian Resources Shares. Actual voting power may differ from that disclosed in material lodged with ASX as there is no obligation to publicly disclose changes in voting power of less than 1%.

3 These Scandinavian Resources Shares are held by JP Morgan Nominees Australia Limited <Cash Income A/C> on behalf of CCF. Mr Bachmann is a director and controller of CCF.

4 This is calculated based on the number of Scandinavian Resources Shares on issue as at 16 April 2012, the last trading day before this Target’s Statement was sent to print.

15 22,633,335 of these Scandinavian Resources Shares are classified as restricted securities and subject to escrow until 21 April 2012.

Number Exercise Price Expiry Date 7,986,673 $0.20 31 October 2012 20,133,334 $0.20 31 October 2012

400,000 $0.25 30 June 2013 300,000 $0.50 30 June 2013 300,000 $0.75 30 June 2013

1,500,000 $0.20 31 October 2012 500,000 $0.40 15 December 2012

1,200,000 $0.40 1 February 2013 604,162 $0.20 15 September 2013

Holder of Relevant Interest in Scandinavian Resources

No. of Scandinavian Resources Shares

Relevant Interest4

Equity & Royalty Investments Ltd1 20,000,001 17.46%

HR Equities Pty Ltd 19,605,235 17.11%

BlackRock Investment Management (Australia) Limited and associated entities2

12,227,218 10.67%

Craton Capital Funds3 12,200,000 10.65%

Grangesberg Iron AB 8,200,000 7.16%

Table 4: Scandinavian Resources Options


6.11 RECENT ASX ANNOUNCEMENTS BY SCANDINAVIAN RESOURCES

Since the date of release of the 2011 Annual Report to the ASX, the Company has made the following announcements to ASX:

Date of release to

ASX

Description of Announcement Date of release to

ASX

Description of Announcement

05 Apr 2012 Release of Shares and Options from Escrow 22 Dec 2011 Kiruna Iron - Renhagen Iron Results 04 Apr 2012 Hannans: Notice that Bidders Statement Sent 02 Dec 2011 Completion of Acquisition 03 Apr 2012 Hannans: Bidders Statement Dispatched to SCR

shareholders 29 Nov 2011 2011 AGM Presentation

03 Apr 2012 Takeover Offer Comments 25 Nov 2011 2011 AGM Voting Results 21 Mar 2012 Appendix 3Y 25 Nov 2011 Completion of Acquisition 21 Mar 2012 Bidder`s Statement Received 16 Nov 2011 Kiruna Iron - RMG Investor Presentation 20 Mar 2012 Hannans Bidders Statement for Scandinavian Resources Ltd 14 Nov 2011 Change of Interests of Substantial Holder from OMH 20 Mar 2012 Hannans: T/O offer supported by ScanRes shareholders 11 Nov 2011 Substantial Holder Notices 15 Mar 2012 Investor Presentation Dates 11 Nov 2011 Hannans: Completion of Option Underwriting 15 Mar 2012 Financial Report for Half Year 11 Nov 2011 Updated Capital Structure 15 Mar 2012 Appendix 3Y 07 Nov 2011 Kiruna Iron - Harrejaure Project Drill Results 12 Mar 2012 Appendix 3B Options Exercised 01 Nov 2011 Copper and Gold Discoveries 09 Mar 2012 Take No Action 31 Oct 2011 1st Quarter Cashflow Report 09 Mar 2012 Hannans: Letter to Hannans Shareholders 31 Oct 2011 1st Quarter Activities Report 05 Mar 2012 Sarksjon Project Update 27 Oct 2011 Underwriting of Options 29 Feb 2012 Response to Takeover Offer 27 Oct 2011 Hannans: Underwriting of Options 29 Feb 2012 Hannans: Proposal to Acquire Scandinavian Resources 27 Oct 2011 2011 General Meeting Results 28 Feb 2012 Amending Annexure to original notice - Form 603 25 Oct 2011 Change of Interest of Substantial Shareholder 28 Feb 2012 Request for Trading Halt 25 Oct 2011 Appendix 3B Exercise of Options 28 Feb 2012 Trading Halt 25 Oct 2011 Notice of Meeting 2011 AGM 24 Feb 2012 Becoming a substantial holder 21 Oct 2011 Appendix 3B 01 Feb 2012 2nd Quarter Cashflow Report 21 Oct 2011 Sarksjon Project 01 Feb 2012 2nd Quarter Activities Report 21 Oct 2011 Kiruna Iron - Harrejaure Project 01 Feb 2012 Appendix 3B 17 Oct 2011 Kiruna Iron - High Grade Iron results (Updated) 31 Jan 2012 Notice of Ceasing to be a Substantial Holder from OMH 17 Oct 2011 Kiruna Iron - High Grade Iron Results 23 Jan 2012 Kiruna Iron Investor Presentation 14 Oct 2011 Appendix 3B Options Exercised 23 Jan 2012 Managing Director Appointed at Kiruna Iron 13 Oct 2011 Kiruna Iron Funding Mandate 17 Jan 2012 Kiruna Iron - JORC Resource Update 12 Oct 2011 Appendix 3B Options Exercised 16 Jan 2012 Kiruna Iron - Altavaara Exploration Target Increase 07 Oct 2011 Appendix 3B Options Exercised 13 Jan 2012 Resignation of Director 03 Oct 2011 Reminder Notice to Option Holders 10 Jan 2012 Change of Address 03 Oct 2011 Annual Report 2011 29 Dec 2011 Kiruna Iron - Wide Iron Intercepts

7 Hannans – Information

Hannans Reward Limited (ASX: HNR) is an ASX listed company with a suite of prospective exploration projects in Western Australia, Australia covering nickel sulphides, gold, base metals and bulk commodities.

Hannans’ projects include the Forrestania Project (prospective for nickel, gold and iron), the Queen Victoria Rocks Project (prospective for nickel and gold), the Lake Johnston Project (prospective for nickel and gold) and the East Pilbara Project (prospective for gold and base metals).

As at 19 March 2012, Hannans had 1,722 shareholders and a market capitalisation of approximately $12.2 million.

Please refer to section 3 of the Bidder’s Statement for detailed information on Hannans.

8 Risk Factors

8.1 RISKS OF INVESTMENT IN SCANDINAVIAN RESOURCES

Scandinavian Resources’ business activities are subject to a number of investment risk factors, both specific to its business activities and of a general nature, which may materially affect the future exploration and operating and financial performance of Scandinavian Resources and the value of Scandinavian Resources Shares. You should be aware that rejecting the Hannans Offer may result in Scandinavian Resources Shareholders continuing to be exposed to the following investment risk factors:

(a) General Risks

Factors such as inflation, interest rates, levels of tax, taxation law and accounting practices, government legislation or intervention, natural disasters, social upheaval, war and civil disturbances may have an impact on prices, operating costs and market conditions generally. Accordingly, Scandinavian Resources’ future possible revenue and operations can be affected by these factors, which are beyond the control of Scandinavian Resources. General movements in local and international stock markets, and economic conditions could all affect the market price of Scandinavian Resources Shares.

(b) Convertible Loans and Loan

As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, Scandinavian Resources has approximately $58,736 cash at bank, which is insufficient to repay the amounts currently outstanding under the Convertible Loans and Loan.


The balance payable of the Convertible Loans and Loan as at 16 April 2012, the last trading day before this Target’s Statement was sent to print was $5,805,934. These facilities are repayable in accordance with the table set out in section 6.5 of this Target’s Statement.

The Company may need to renegotiate the terms of the outstanding Convertible Loans and Loan or find alternative sources of funding to meet its obligations to repay the amounts outstanding under the Convertible Loans and Loan by their relevant due date. In the event that the Company is unable to find an alternative source of funding or renegotiate the terms of each of the Convertible Loans and Loan, there is a substantial risk of default under the Convertible Loans and Loan.

(c) Future Capital Requirements

Scandinavian Resources activities will require substantial expenditures. If Scandinavian Resources is unable to use debt or equity to fund development of its projects there can be no assurances that it will have sufficient capital resources for that purpose, or other purposes, or that it will be able to obtain additional resources on terms acceptable to Scandinavian Resources or at all. Any additional equity financing may be dilutive to shareholders and any debt financing, if available, may involve restrictive covenants, which limit its operations and business strategy. Scandinavian Resources failure to raise capital if and when needed could delay or suspend its business strategy and could have a material adverse effect on Scandinavian Resources activities.

(d) Foreign Currency Risk

Foreign currency exchange risk involves exchange rate movements amount currencies that may adversely impact the value of foreign currency-denominated assets, liabilities and off-balance sheet arrangements. Scandinavian Resources has foreign currency borrowings denominated in the SEK that could expose the Company to foreign currency exchange rate risk.

Unfavourable movements in the SEK may have an adverse effect on the Company’s operations and the market price of Scandinavian Resources Shares. The Company does not hedge against these risks.

(e) Sami Interests

It is the view of Sami organisations that the Swedish mining law contravenes the EU Directive on Human Rights and therefore all exploration and mining activity is a breach of these rights. Such organisations have also recently targeted a number of exploration and mining companies in Sweden and Norway including KIAB, a wholly owned subsidiary of Scandinavian Resources.

KIAB is a member of SveMin, an employers and industry association for mines and mineral and metal producers in Sweden. The Ethical Rules of SveMin states that the task of the mining industry is to supply society with minerals and ore in a responsible manner and with long-term profitability. Minerals and metals are essential to a well-functioning and modern society. Metals are produced from ore and may be continuously recycled. SveMin members will promote sustainable development and efficient, balanced, long-term management of energy and natural resources while showing due consideration for people, the economy, the environment and the society in general.

SveMin has recently started a sub-committee for the relations between the reindeer husbandry industry and the mining industry. The chairman of the sub-committee is Mrs Christina Lundmark, General Manager of SRAB and KIAB.

KIAB has carried out its activities at all times in an open and transparent manner with regard to the Sami interests through many face-to-face meetings, the provision of detailed written information and the carrying out of exploration activities at times where the interests of the reindeer herders are not impacted. KIAB is confident that it has exceeded the requirements of the applicable Swedish mining legislation with regard to communications with affected persons and will continue to do so.

(f) Operating Risks

The operations of Scandinavian Resources may be affected by various factors, including failure to achieve predicted grades in exploration and mining; operational and technical difficulties encountered in mining; difficulties in commissioning and operating plant and equipment; mechanical failure or plant breakdown; unanticipated metallurgical problems which may affect extraction costs; adverse weather conditions; industrial and environmental accidents; industrial disputes; infrastructure failures and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.

(g) Resource Estimates

Resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and mining plans which may, in turn, adversely affect Scandinavian Resources’ operations.

(h) Economic Factors

Factors such as inflation, currency fluctuations, interest rates, supply and demand and industrial disruption have an impact on operating costs, commodity prices and stock market processes. Scandinavian Resources’ future possible revenues and share price can be affected by these factors which are beyond the control of Scandinavian Resources and the Scandinavian Resources Directors.

(i) Government Policy Changes

Government policies are subject to review and changes from time to time. Such changes are likely to be beyond the control of Scandinavian Resources and may affect industry profitability as well as Scandinavian Resources’ capacity to explore and mine.


Other than as previously announced Scandinavian Resources is not aware of any reviews or changes that would affect its permits. However, changes in community attitudes on matters such as taxation, competition policy and environmental issues may bring about reviews and possibly changes in government policies. There is a risk that such changes may affect Scandinavian Resources’ exploration plans or its rights and obligations in respect of its permits. Any such government action may also require increased capital or operating expenditures and could prevent or delay certain operations by Scandinavian Resources.

(j) Mineral Price Volatility

If Scandinavian Resources achieves success leading to mineral production, the revenue it will derive through the sale of minerals exposes the potential income of Scandinavian Resources to commodity price and exchange rate risks.

Mineral prices fluctuate and are affected by many factors beyond the control of Scandinavian Resources. Such factors include supply and demand fluctuations for ferrous metals, technological advancements and other macro-economic factors.

(k) Environmental Risks

The operations and proposed activities of Scandinavian Resources are subject to Swedish and Norwegian laws and regulations concerning the environment. As with most exploration projects and mining operations, Scandinavian Resources’ activities are expected to have an impact on the environment, particularly if advanced exploration or mine development proceeds. It is Scandinavian Resources’ intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws. However, this does not necessarily mean that all of Scandinavian Resources proposed activities will be approved by the relevant Swedish and Norwegian environmental authorities.

(l) Sovereign Risk

Scandinavian Resources is conducting its exploration and development activities primarily in Sweden and Norway. There is no assurance that future political and economic conditions in this country will not result in the government adopting policies precluding foreign development and ownership of mineral resources.

Any such changes in policy may result in changes in laws affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, repatriation of income and return of capital, which may affect both Scandinavian Resources’ ability to undertake exploration and development activities in respect of future properties in the manner currently contemplated, as well as its ability to continue to explore and develop those properties in respect of which it has obtained exploration and development rights to date. The possibility that a future government may adopt substantially different policies, which might extend to expropriation of assets, cannot be ruled out. There can be no assurance that the governments of Sweden and Norway or their instrumentalities, agencies or controlled entities and operations will not impose measures that could have material adverse effects on Scandinavian Resources’ operations or will renew or issue new exploration or exploitation permits to Scandinavian Resources.

(m) Title Risks

Although Scandinavian Resources has obtained legal advice with respect to its Swedish and Norwegian properties, there is no guarantee that title to such properties will not be challenged or impugned. The properties may be subject to prior unregistered agreements or transfers or land claims and title may be affected by undetected defects.

There is no guarantee that the prospecting permits granted by the governments of Sweden and Norway in connection with the properties will be renewed upon their termination. In addition, according to the terms and conditions of its exploration permits and agreements with other parties relating to some of its properties, Scandinavian Resources undertook certain obligations with respect to the exploration activities to be conducted on these properties. If Scandinavian Resources does not meet its obligations, it may lose its interests in the properties.

Government approvals and permits are currently, and may in the future be, required in connection with Scandinavian Resources’ operations. To the extent such approvals are required and not obtained, Scandinavian Resources may be curtailed or prohibited from proceeding with planned exploration or development of mineral properties.

(n) Legal Risks

The introduction of new legislation or amendments to existing legislation by governments, developments in existing common law, or the interpretation of the legal requirements in any of the legal jurisdictions which govern Scandinavian Resources’ operations or contractual obligations, could impact adversely on the assets, operations and, ultimately, the financial performance of Scandinavian Resources and the Scandinavian Resources Shares. In addition there is a commercial risk that legal action may be taken against Scandinavian Resources in relation to commercial matters.

(o) Stock Market Conditions

Stock market conditions may affect the listed shares regardless of the operating performance. Stock market conditions are affected by many factors such as:

· general economic outlook;

· movements in, or outlook on, interest rates and inflation rates;

· currency fluctuations;

· commodity prices;

· changes in investor sentiment towards particular market sectors; and

· the demand for, and supply of, capital.

Many factors outside the operations of Scandinavian Resources will affect the price of the Scandinavian Resources Shares including local and international stock markets, movements in interest rates, economic conditions and investor sentiment generally.


(p) Uninsured Loss and Liability

Exploration for and development of minerals involves hazards and risks that could result in Scandinavian Resources incurring losses and liabilities to third parties. There is a risk that Scandinavian Resources may not be insured against all losses or liabilities that could arise from its operations. If Scandinavian Resources incurs losses or liabilities which are not covered by its insurance policies, the funds available for exploration and development will be reduced and the value and/or tenure of Scandinavian Resources’ assets may be at risk.

8.2 RISKS OF ACCEPTING THE HANNANS OFFER

Scandinavian Resources Shareholders should be aware of the following implications and risks that arise from the Hannans Offer and that may affect the future performance and value of Scandinavian Resources Shares.

(a) Share Price Fluctuation

Scandinavian Resources Shareholders are being offered specific quantities of Hannans Shares as consideration under the Hannans Offer. As a result, the value of the Offer Consideration will fluctuate depending on the market value of Hannans Shares.

(b) Inability to accept an alternative offer

Except under limited circumstances provided in the Corporations Act, Scandinavian Resources Shareholders who accept the Hannans Offer will not be able to accept an alternative offer, should any emerge. Scandinavian Resources Shareholders may only withdraw their acceptances and accept an alternative offer if Hannans extends the Offer Period for more than one month and the Hannans Offer remains subject to any Condition at that time.

(c) Availability of CGT rollover relief

Hannans has the right to waive the minimum acceptance Condition. If Hannans waives the minimum acceptance Condition and the remaining Conditions are satisfied or waived, CGT rollover relief may not be available if Hannans acquires less than 80% of the Scandinavian Resources Shares under the Hannans Offer. A general overview of the tax implications of accepting the Hannans Offer for Australian resident Scandinavian Resources Shareholders is set out in section 9.8 of this Target’s Statement and section 8 of the Bidder’s Statement.

(d) Risks of investing in Hannans

If the Hannans Offer becomes unconditional, Scandinavian Resources Shareholders who accept the Hannans Offer will become shareholders of Hannans. In those circumstances, Scandinavian Resources Shareholders will be exposed to the general risks associated with investing in a mineral exploration company and risks which are specific to an investment in Hannans.

In preparing the information relating to Hannans contained in this Target’s Statement, Scandinavian Resources has relied on publicly available information relating to Hannans. As a result, risks may exist in relation to Hannans of which Scandinavian Resources is not aware. If any material risks are known to the directors of Hannans, they must be disclosed in the Bidder’s Statement.

These risks are explained in detail in section 9 of the Bidder’s Statement. Scandinavian Resources Shareholders should read the Bidder’s Statement carefully and consult their professional advisers before deciding whether to accept the Hannans Offer. By accepting the Hannans Offer, Scandinavian Resources Shareholders are investing in Hannans.

9 Additional Information

This section includes information on the interests of the Scandinavian Resources Directors and taxation considerations for Scandinavian Resources Shareholders.

9.1 SCANDINAVIAN RESOURCES DIRECTORS’ INTERESTS IN SCANDINAVIAN RESOURCES SECURITIES

The marketable securities that Scandinavian Resources has on issue are Scandinavian Resources Shares and Scandinavian Resources Options.

The number and description of marketable securities of Scandinavian Resources in which the Scandinavian Resources Directors have a Relevant Interest as at the date of this Target’s Statement is set out below.

Notes:

1 These Scandinavian Resources Shares are held direct by Olof Forslund and are escrowed until 21 April 2012.

2 These Scandinavian Resources Shares are held by CCF. Mr Bachman is a director and controller of CCF.

3 These Scandinavian Resources Shares are held by Mr Gregory’s spouse, Carole Gregory. 383,334 Scandinavian Resources Shares are escrowed until 21 April 2012.

4 These Scandinavian Resources Options are held by Mr Gregory’s spouse, Carole Gregory.

Scandinavian Resources Director

Scandinavian Resources

Shares

Scandinavian Resources

Options Damian Hicks - - Olof Forslund 1,250,0001 - Markus Bachmann 12,200,0002 - Ian Gregory 493,3343 133,3344


9.2 SCANDINAVIAN RESOURCES DIRECTORS’ DEALINGS IN SCANDINAVIAN RESOURCES SHARES

Damian Hicks ceased to be a beneficiary of the DPH Trust as of 1 December 2011 and therefore ceased to have a Relevant Interest in the 1,000,000 Scandinavian Resources Shares held by Acacia Investments Pty Ltd as trustee for the DPH Trust.

No other Scandinavian Resources Director has acquired or disposed of a Relevant Interest in any Scandinavian Resources Shares in the four month period immediately preceding the date of this Target’s Statement.

9.3 SCANDINAVIAN RESOURCES DIRECTORS’ INTERESTS IN SECURITIES OF HANNANS

The marketable securities that Hannans has on issue as at 20 March 2012 are set out in section 4 of the Bidder’s Statement.

The number and description of marketable securities of Hannans or any of Hannans’s related bodies corporate in which the Scandinavian Resources Directors have a Relevant Interest as at the date of this Target’s Statement is as follows:

Notes:

1 Mr Hicks holds 1 Hannans Share in his own name. The remaining 302,258 Hannans Shares are held by Rock Biz Pty Ltd as trustee for Hicks Group Superannuation Fund #3. Mr Hicks is a beneficiary of the superannuation fund.

2 These Hannans Shares are held by CCF. Mr Bachman is a director and controller of CCF.

3 These Hannans Resources Shares are held by Mr Gregory’s spouse, Carole Gregory.

9.4 SCANDINAVIAN RESOURCES DIRECTORS’ DEALINGS IN HANNANS SHARES

Damian Hicks ceased to be a beneficiary of the DPH Trust as of 1 December 2011 and therefore ceased to have a Relevant Interest in the Hannans Shares held by Acacia Investments Pty Ltd as trustee of the DPH Trust.

No other Scandinavian Resources Director has acquired or disposed of a Relevant Interest in any Hannans Shares in the four month period immediately preceding the date of this Target’s Statement.

9.5 OFFICERS’ INDEMNITIES AND INSURANCE

To the extent permitted by law and subject to restrictions in the Corporations Act, Scandinavian Resources indemnifies past and present officers of Scandinavian Resources against:

· any liabilities (other than for legal costs); and

· reasonable legal costs incurred in defending an action for liability incurred by them as an officer of Scandinavian Resources.

Scandinavian Resources has also paid a premium in respect of a contract insuring all directors, secretaries and officers of Scandinavian Resources against liabilities incurred in their capacity as a director or officer, as the case may be, of Scandinavian Resources. The period of the policy extends from 22 April 2011 to 22 April 2012. The Company intends to renew this insurance contract prior to its expiry on 22 April 2012 on standard and commercial terms.

9.6 BENEFITS AND AGREEMENTS

(a) Agreements connected with or conditional on the Hannans Offer

There are no agreements made between any Scandinavian Resources Director and any other person in connection with, or conditional on, the outcome of the Hannans Offer.

(b) Payments and benefits from Hannans

As a result of the Hannans Offer, no benefit (other than a benefit permitted by sections 200F or 200G of the Corporations Act) has been, or will be, given to a person:

(i) in connection with the retirement of a person from a Board or managerial office in Scandinavian Resources or a related body corporate of Scandinavian Resources; or

(ii) who holds, or has held a Board or managerial office in Scandinavian Resources or a related body corporate of Scandinavian Resources or a spouse, relative or Associate of such a person, in connection with the transfer of the whole or any part of the undertaking or property of Scandinavian Resources.

(c) Interests of Scandinavian Resources Directors in contracts with Hannans

Other than as set out elsewhere in this Target’s Statement, no Scandinavian Resources Directors have any interests in contracts with Hannans or any of Hannans’ related bodies corporate as at the date of this Target’s Statement.



· Ian Gregory is a non-executive director and company secretary of Scandinavian Resources and the company secretary of Hannans; and

· Markus Bachmann is a non-executive director of Scandinavian Resources and has an interest as a director and controller of CCF, a substantial shareholder of Hannans and Scandinavian Resources.

Damian Hicks has entered into an Executive Services Agreement, a Deed of indemnity, insurance and access and two loan agreements with Hannans. The material terms of each of these agreements are set out below:

(i) Executive Services Agreement – Damian Hicks has entered into an executive services agreement with Hannans to act as Managing Director of Hannans effective on and from 21 December 2009 (ESA). Under the ESA, Mr Hicks will be paid $230,000 per annum (exclusive of superannuation), and entitled to reimbursement of work related expenses, provision of a motor vehicle and a provision for a performance based bonus as determined by the Hannans Board. Either party may terminate the ESA with three months written notice and

Scandinavian Resources Director

Hannans Shares

Hannans Options

Damian Hicks 302,2591 - Olof Forslund - - Markus Bachmann 11,000,0002 - Ian Gregory 131,1173 -


payment by Hannans to Mr Hicks of all statutory annual and long service leave entitlements. Mr Hicks’ salary was increased to $241,500 per annum from 1 July 2010.

(ii) Deed of indemnity, insurance and access – Damian Hicks has entered into a deed of indemnity, insurance and access with Hannans. Under this deed, Hannans has agreed to indemnify Mr Hicks to the extent permitted by the Corporations Act against any liability arising as a result of Mr Hicks acting as an officer of the Company. Hannans is also required to maintain insurance policies for the benefit of Mr Hicks and must also allow him to inspect board papers in certain circumstances.

(iii) Loan agreements – Damian Hicks has entered into two loan agreements with Hannans pursuant to which Hannans has provided:

(a) a loan of $200,000 with interest payable at a rate of 20% per annum and a repayment date of 30 April 2012; and

(b) a loan of $300,000 with interest payable at a rate of 6% per annum and a repayment date of 31 March 2015.

The loans are unsecured and an arrangement has been entered into whereby the interest payable in respect of the loans is being repaid monthly by sacrificing part of Mr Hick’s salary.

(d) Transactions with Hannans

Scandinavian Resources has entered into three Convertible Loans with HR Equities Pty Ltd, a wholly owned subsidiary of Hannans. Please refer to section 6.5 of this Target’s Statement for a summary of the material terms of the Convertible Loans.

Corporate Board Services, a division of Hannans, performs certain transaction services for the Company, for which a transaction fee is payable. For the financial year ended 30 June 2011, transaction fees of $46,902 were paid by the Company to Corporate Board Services for the services it provided to the Company. As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, transaction fees of $73,740 (which includes $14,770 interest) have been paid by the Company to Corporate Board Services for the services it provided to the Company during the current financial year. Amounts billed are based on normal market rates for such services and are due and payable under normal payment terms. As at 16 April 2012, the last trading day before this Target’s Statement was sent to print, transaction fees of $51,802 and interest of $884 remain unpaid by the Company. In addition, Corporate Board Services has been engaged by the Company to provide transaction support in relation to the Hannans Offer. It is estimated that the Company will pay $11,000 to Corporate Board Services in respect of these services.

On or about 30 June 2011, an unsecured loan of $14,108 was provided by the Company to Resources & Rewards Pty Ltd. The loan is non-interest bearing and has no specified repayment date, nor is it subject to any formal agreement. As set out in section 6.1 of this Target’s Statement, each of SR Equities Pty Ltd (a wholly owned subsidiary of the Company) and HR Equities Pty Ltd (a wholly owned subsidiary of Hannans) holds a 50% interest in Resources & Rewards Pty Ltd.

9.7 MATERIAL CONTRACTS

To the best of the Scandinavian Resources Directors’ knowledge, none of the material contracts to which Scandinavian Resources is a party contain change in control provisions which may be triggered as a result of, or as a result of acceptances of, the Hannans Offer and which may have a material adverse effect on the assets and liabilities, financial position and performance, profits and losses and prospects of Scandinavian Resources.

9.8 TAXATION CONSIDERATIONS FOR SCANDINAVIAN RESOURCES SHAREHOLDERS

(a) Australian tax implications for Scandinavian Resources Shareholders

The following is a general description of the Australian income and capital gains tax (CGT) consequences for Scandinavian Resources Shareholders on disposing of their Scandinavian Resources Shares, in return for Hannans Shares.

The information is based upon taxation law and practice in effect at the date of this Target’s Statement. It is not intended to be an authoritative or comprehensive analysis of the taxation laws of Australia. The summary does not consider any specific facts or circumstances that may apply to particular shareholders. Further, it does not deal with the taxation consequences of disposing of shares issued under an employee share scheme, which may be subject to specific tax provisions.

You are advised to seek independent professional advice regarding the Australian tax consequences of disposing of your Scandinavian Resources Shares according to your own particular circumstances.

The Australian tax consequences of disposing of your Scandinavian Resources Shares will depend on a number of factors including: · whether you are an Australian resident or non resident for tax purposes; · whether you hold your Scandinavian Resources Shares on capital account, revenue account or as trading

stock; · when you acquired your Scandinavian Resources Shares; · whether you are an individual, a company or a trustee of a complying superannuation entity; and · whether scrip for scrip CGT roll-over relief is available – see section 9.8(e) of this Target’s Statement.

(b) Scandinavian Resources Shareholders who are Australian residents

(i) Disposal of Scandinavian Resources Shares held as trading stock

If you hold your Scandinavian Resources Shares as trading stock (for example, as a share trader) you will be required to include the value of the consideration from the disposal of your Scandinavian Resources Shares in your assessable income.


(ii) Disposal of Scandinavian Resources Shares held on revenue account

If you acquired your Scandinavian Resources Shares with the main purpose of reselling them at a profit you may be considered to hold your Scandinavian Resources Shares on revenue account for tax purposes. You will then be required to treat any gain or loss arising on the disposal of your Scandinavian Resources Shares as either assessable income or an allowable deduction.

The gain or loss will be calculated as the difference between the value of the consideration (the value of the Hannans Shares received) and the cost of acquiring your Scandinavian Resources Shares.

(iii) Disposal of Scandinavian Resources Shares held on capital account

If you hold your Scandinavian Resources Shares as a passive investment with a view of generating dividend income and long-term capital growth, you may be considered to hold your Scandinavian Resources Shares on capital account.

The disposal of Scandinavian Resources Shares which were acquired or deemed to have been acquired on or after 20 September 1985 and which are held on capital account, will generally have Australian CGT implications. The disposal of the Scandinavian Resources Shares pursuant to acceptance of Hannans Offer will constitute a CGT event for CGT purposes.

The CGT implications of a disposal of your Scandinavian Resources Shares will depend upon a number of factors, including:

· the date your Scandinavian Resources Shares were acquired;

· your taxpayer status;

· the length of time you have held your Scandinavian Resources Shares; and

· whether or not you are entitled to scrip for scrip rollover relief – see section 9.8(e) of this Target’s Statement.

If your Scandinavian Resources Shares were acquired on or after 20 September 1985 then a capital gain or loss will arise depending on the difference between the value of the capital proceeds (the value of the Hannans Shares received) and the cost base or reduced cost base of the Scandinavian Resources Shares (which would generally include the amount paid to acquire the shares plus any incidental costs of acquisition such as brokerage fees and transfer duty).

The value of the Hannans Shares will be their market value on the date when the contract for their disposal is entered into (which is the date that you accept the Hannans Offer).

If you are an individual, trust or complying superannuation fund that has held your Scandinavian Resources Shares for 12 months or longer at the time the Hannans Offer is accepted, the discount capital gains provisions may apply. This means that:

· if you are an individual or trust, only one-half of the capital gain will be taxable;

· if you are a complying superannuation fund, only two-thirds of the capital gain will be taxable; or

· if you are the trustee of a trust, the discount capital gains provisions may also apply to a distribution of the capital gain to beneficiaries in the trust (other than beneficiaries that are companies).

Note that the discount capital gain provisions do not apply to shareholders and trust beneficiaries that are companies.

If your Scandinavian Resources Shares have been held for less than 12 months or you are not an eligible category of shareholder (for example, a company) then the discount capital gains concession is not available and a capital gain derived upon disposal of the shares, being any excess of the value of the capital proceeds over the unindexed cost base of the shares, will be assessable in full.

(c) Scandinavian Resources Shareholders who are not Australian residents

(i) Disposal of Scandinavian Resources Shares held as trading stock or on revenue account

If you are a non-resident of Australia and your Scandinavian Resources Shares were acquired as trading stock or otherwise on revenue account then the Australian tax treatment will depend on the source of any gain and whether or not a double tax agreement exists between your country of residence and Australia.

(ii) Disposal of Scandinavian Resources Shares held on capital account

If you are a non-resident of Australia and hold your Scandinavian Resources Shares on capital account you will generally not be subject to CGT on the disposal of your Scandinavian Resources Shares unless:

· you (and your associates) owned at least 10% of Scandinavian Resources either at the time you sold your Scandinavian Resources Shares or for at least 12 months during the 24 months before you sold your Scandinavian Resources Shares; and

· 50% or more of the value of Scandinavian Resources is represented by real property in Australia.

Your Scandinavian Resources Shares will also be taxable if you used your Scandinavian Resources Shares at any time in carrying on a business through a permanent establishment in Australia or if you have previously chosen to disregard a capital gain or capital loss on ceasing to be an Australian resident.

(d) GST

No GST should be payable on the transfer of Scandinavian Resources Shares, with the exception of GST payable on brokerage charged by your broker for carrying out your instructions.


(e) Scrip for scrip rollover relief

Scrip for scrip rollover relief enables a shareholder to elect to defer the capital gain they make from disposing of a share as part of a corporate takeover or merger, if the shareholder receives a replacement share in exchange.

You may be entitled to elect to obtain scrip for scrip rollover relief if:

· your Scandinavian Resources Shares were acquired after 19 September 1985;

· you accept the Hannans Offer and receive Hannans Shares as consideration;

· you would otherwise make a capital gain;

· Hannans obtains a holding of at least 80% of the voting shares in Scandinavian Resources; and

· you are a non-resident of Australia and the Hannans Shares you acquire as a replacement interest for your Scandinavian Resources Shares is ‘taxable Australian Property’.

If you choose to elect for scrip for scrip rollover relief then the capital gain that would otherwise arise from the disposal of your Scandinavian Resources Shares will be disregarded.

The Hannans Offer is subject to a Condition that at the end of the Offer Period, the number of Scandinavian Resources Shares that Hannans has a relevant interest in is at least 90% of all the Scandinavian Resources Shares.

If that Condition is satisfied, Hannans will have obtained a holding of at least 80% of the voting shares in Scandinavian Resources. Hannans does not currently intend to declare the Hannans Offers free of that Condition unless it has obtained a holding of at least 80% of the voting shares in Scandinavian Resources. However, Hannans reserves its right to waive that Condition in its absolute discretion. The availability of rollover relief will also depend on your individual circumstances (for example, it is not available if your Scandinavian Resources Shares are trading stock or revenue assets). You should consult your own tax adviser to clarify whether or not the CGT rollover relief will be available to you.

If the minimum acceptance Condition as set out in section 1.10(a)(i) of the Bidder’s Statement is satisfied, Hannans will have the right to give notice of its intention to compulsorily acquire outstanding Scandinavian Resources Shares. The CGT consequences of a compulsory acquisition of Scandinavian Resources Shares may differ from the consequences of accepting Hannans Shares as consideration under the Hannans Offer. You should consult your own tax adviser to determine the CGT consequences of a compulsory acquisition of your Scandinavian Resources Shares.

(f) Shareholders who sell Scandinavian Resources Shares on the ASX

The taxation consequences for Scandinavian Resources Shareholders who choose to sell their Scandinavian Resources Shares on the ASX will depend upon the individual circumstances of the Scandinavian Resources Shareholder. One must therefore consider various factors such as those mentioned in section 9.8(a) of this Target’s Statement. Scrip for scrip roll-over relief will however not be available in the event that Scandinavian Resources Shares are sold on the ASX.

(i) Scandinavian Resources Shareholders who are Australian residents

(a) Disposal of Scandinavian Resources Shares held as trading stock

If you hold your Scandinavian Resources Shares as trading stock (for example, as a share trader) you will be required to include the value of the consideration from the disposal of your Scandinavian Resources Shares on the ASX in your assessable income.

(b) Disposal of Scandinavian Resources Shares held on revenue account

If you acquired your Scandinavian Resources Shares with the main purpose of reselling them at a profit you may be considered to hold your Scandinavian Resources Shares on revenue account for tax purposes. You will then be required to treat any gain or loss arising on the disposal of your Scandinavian Resources Shares on the ASX as either assessable income or an allowable deduction.

The gain or loss will be calculated as the difference between the value of the consideration (the prevailing market price of the Scandinavian Resources Shares at the time of sale), and the cost of acquiring your Scandinavian Resources Shares.

(c) Disposal of Scandinavian Resources Shares held on capital account

If you hold your Scandinavian Resources Shares as a passive investment with a view of generating dividend income and long-term capital growth, you may be considered to hold your Scandinavian Resources Shares on capital account.

The disposal of Scandinavian Resources Shares which were acquired or deemed to have been acquired on or after 20 September 1985 and which are held on capital account, will generally have Australian CGT implications. The disposal of the Scandinavian Resources Shares on the ASX will constitute a CGT event for CGT purposes.

The CGT implications of a disposal of your Scandinavian Resources Shares will depend upon a number of factors, including:

· the date your Scandinavian Resources Shares were acquired;

· your taxpayer status; and

· the length of time you have held your Scandinavian Resources Shares.

If your Scandinavian Resources Shares were acquired on or after 20 September 1985 then a capital gain or loss will arise depending on the difference between the value of the capital proceeds (the prevailing market price of the Scandinavian Resources Shares at the time of sale) and the cost base or reduced cost base of the Scandinavian Resources Shares (which would generally include the amount paid to acquire the shares plus any incidental costs of acquisition such as brokerage fees and stamp duty).


If you are an individual, trust or complying superannuation fund that has held your Scandinavian Resources Shares for 12 months or longer at the time shares are sold on the ASX, the discount capital gains provisions may apply. This means that:

· if you are an individual or trust, only one-half of the capital gain will be taxable;

· if you are a complying superannuation fund, only two-thirds of the capital gain will be taxable; or

· if you are the trustee of a trust, the discount capital gains provisions may also apply to a distribution of the capital gain to beneficiaries in the trust (other than beneficiaries that are companies).

Note that the discount capital gain provisions do not apply to shareholders and trust beneficiaries that are companies.

If your Scandinavian Resources Shares have been held for less than 12 months or you are not an eligible category of shareholder (for example, a company) then the discount capital gains concession is not available and a capital gain derived upon disposal of the Scandinavian Resources Shares, being any excess of the value of the capital proceeds over the unindexed cost base of the Scandinavian Resources Shares, will be assessable in full.

(ii) Scandinavian Resources Shareholders who are not Australian residents

(a) Disposal of Scandinavian Resources Shares held as trading stock or on revenue account

If you are a non-resident of Australia and your Scandinavian Resources Shares were acquired as trading stock or otherwise on revenue account then the Australian tax treatment will depend on the source of any gain and whether or not a double tax agreement exists between your country of residence and Australia.

(b) Disposal of Scandinavian Resources Shares held on capital account

If you are a non-resident of Australia and hold your Scandinavian Resources Shares on capital account you will generally not be subject to CGT on the disposal of your Scandinavian Resources Shares unless:

· you (and your associates) owned at least 10% of Scandinavian Resources either at the time you sold your Scandinavian Resources Shares or for at least 12 months during the 24 months before you sold your Scandinavian Resources Shares; and

· 50% or more of the value of Scandinavian Resources is represented by real property in Australia.

Your Scandinavian Resources Shares will also be taxable if you used your Scandinavian Resources Shares at any time in carrying on a business through a permanent establishment in Australia or if you have previously chosen to disregard a capital gain or capital loss on ceasing to be an Australian resident.

(iii) GST

Brokerage, including GST on brokerage will be charged by your broker for carrying out your request to sell your Scandinavian Resources Shares on the ASX.

(g) Scandinavian Resources Optionholders

Scandinavian Resources Options have been granted on various terms and conditions.

Accordingly it is not possible to provide taxation advice covering all circumstances unique to each Scandinavian Resources Optionholder. It is recommended that Scandinavian Resources Optionholders seek their own independent professional taxation advice regarding their particular circumstances.

Scandinavian Resources Shareholders should consult their own tax adviser for tax advice tailored to their own particular circumstances. Scandinavian Resources Shareholders should not solely rely on this section 9.8 of the Target’s Statement and section 8 of the Bidder’s Statement in relation to the taxation implications of accepting the Hannans Offer. In particular, Scandinavian Resources Shareholders who are subject to taxation outside Australia should obtain their own advice as to the tax consequences for them of the Hannans Offer, which may be different to those applicable to Australian resident Scandinavian Resources Shareholders.

9.9 MATERIAL LITIGATION

To the best of the Scandinavian Resources Directors’ knowledge, Scandinavian Resources is not involved in any ongoing or threatened litigation which is material in the context of Scandinavian Resources.

9.10 DIRECTORS’ CONFLICTS OF INTEREST



· Ian Gregory is a non-executive director and company secretary of Scandinavian Resources and the company secretary of Hannans; and

· Markus Bachamnn is a non-executive director of Scandinavian Resources and has an interest as a director and controller of CCF, a substantial shareholder of Hannans and Scandinavian Resources.

Both Mr Hicks and Mr Gregory were excluded from all discussions of the board of directors of Hannans in relation to formulating the Hannans Offer.

Due to his interest as Managing Director of Hannans, Mr Hicks makes no recommendation in relation to the Hannans Offer.

Notwithstanding his interest as company secretary of Hannans, Mr Gregory believes that he is able to make the above recommendation in relation to the Hannans Offer and has done so in order to ensure that Scandinavian Resources Shareholders are fully informed of their respective views of the Hannans Offer.


Due to his interest as a director and controller of CCF, a substantial shareholder of Hannans, Mr Bachmann makes no recommendation in relation to the Hannans Offer.

9.11 INDEPENDENT EXPERT’S REPORT

As Damian Hicks is a director of both Scandinavian Resources and Hannans, section 640 of the Corporations Act requires this Target’s Statement to include a report by an expert that states whether, in the expert’s opinion, the Hannans Offer is fair and reasonable and gives the reasons for forming that opinion.

The Independent Expert is of the view that the Hannans Offer is not fair but reasonable. The Independent Expert’s Report is included in its entirety at Appendix 1 of this Target’s Statement. You are urged to read that report carefully.

9.12 CONSENTS

Each of the persons listed below has given and has not, before the lodgement of this Target’s Statement with ASIC, withdrawn their consent to the inclusion of the following information in this Target’s Statement in the form and context in which it is included and to all references in this Target’s Statement to that information in the form and context in which they appear:

(a) each Director – to being named as a Director, to the inclusion of statements made by him and to the references to those statements;

(b) Gilbert + Tobin – to being named as legal adviser to Scandinavian Resources;

(c) Patersons Securities Limited – to being named as corporate adviser to Scandinavian Resources;

(d) BDO Corporate Finance (WA) Pty Ltd – to being named as Independent Expert, to the inclusion of its Independent Expert’s Report in Appendix 1 of this Target’s Statement and to the references to the Independent Expert’s Report in this Target’s Statement;

(e) BDO Tax (WA) Pty Ltd – to being named as tax adviser to Scandinavian Resources and to the inclusion of the statements contained in section 9.8 of this Target’s Statement;

(f) SRK Consulting (Sweden) AB – to the inclusion of its valuation report being included in the Independent Expert’s Report in Appendix 1 of this Target’s Statement and to the references to its valuation report in this Target’s Statement; and

(g) Corporate Board Services (a division of Hannans) – to being named as transaction support to Scandinavian Resources.

Each person named above as having given its consent to the inclusion of a statement or report or to being named in this Target’s Statement:

(a) does not make, or purport to make, any statement in this Target’s Statement or any statement on which a statement in this Target’s Statement is based other than, in the case of a person referred to above as having given their consent to the inclusion of a statement or report, a statement or report included in this Target’s Statement with the consent of that person; and

(b) to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Target’s Statement, other than a reference to its name and, in the case of a person referred to above as having given their consent to the inclusion of a statement or report, any statement or report which has been included in this Target’s Statement with the consent of that party.

As permitted by ASIC Class Order 01/1543, this Target’s Statement contains statements which are made, or based on statements made, in documents lodged with ASIC or the ASX (in compliance with the ASX Listing Rules). Pursuant to this Class Order, the consent of persons to which such statements are attributed is not required for the inclusion of those statements in this Target’s Statement.

As permitted by ASIC Class Order 03/635, this Target’s Statement may include or be accompanied by certain statements: · fairly representing a statement by an official person; or · from a public official document or published book, journal or comparable publication.

Pursuant to this Class Order, the consent of persons to which such statements are attributed is not required for the inclusion of those statements in this Target’s Statement.

Any Scandinavian Resources Shareholder who would like to receive a copy of any of the documents (or parts of the documents) that contain the statements which have been included pursuant to Class Order 01/1543 may obtain a copy free of charge by contacting the Scandinavian Resources Shareholder Information Line.

9.13 PUBLICLY AVAILABLE INFORMATION

As permitted by ASIC Class Order 01/1543, this Target’s Statement may contain statements which are made, or based on statements made in documents lodged with ASIC or ASX in compliance with the Listing Rules.

Pursuant to Class Order 01/1543, the consent of such persons to whom such statements are attributed is not required for the inclusion of those statements in this Target’s Statement.

Any Scandinavian Resources Shareholder who would like to receive a copy of any of the documents (or parts of the documents) that contain the statements which have been included may obtain a copy free of charge during the Offer Period by calling the Scandinavian Resources Shareholder Information Line on 08 9324 1153 (from within Australia) or +61 8 9324 1153 (from outside Australia) between 9.00am and 5.00pm (WST), Monday to Friday or by writing to Scandinavian Resources’ Company Secretary.

Copies of all announcements by Scandinavian Resources may also be obtained from its website at www.scandinavianresources.com.


9.14 CONTINUOUS DISCLOSURE

Scandinavian Resources is a “disclosing entity” under the Corporations Act and is subject to regular reporting and disclosure obligations under the Corporations Act and the Listing Rules. These obligations require Scandinavian Resources to notify the ASX of information about specified matters and events as they occur for the purpose of making that information available to the market. In particular, Scandinavian Resources has an obligation (subject to limited exceptions) to notify the ASX immediately on becoming aware of any information which a reasonable person would expect to have a material effect on the price or value of Scandinavian Resources Shares.

Copies of the documents filed with the ASX may be obtained from the ASX website at www.asx.com.au or from the Scandinavian Resources website at www.scandinavianresources.com.

In addition, copies of the following documents may be inspected at Scandinavian Resources’ offices at 6 Outram Street, West Perth, Western Australia, 6005 (between 9.00am and 5.00pm (WST) on Business Days) or requested (and will be provided free of charge) by contacting Scandinavian Resources: · Scandinavian Resources’ 2011 Annual Report; · Scandinavian Resources’ financial report for the half year ended 31 December 2011; · Scandinavian Resources’ Constitution; and · any continuous disclosure document lodged by Scandinavian Resources with the ASX between the release of its 2011

Annual Report on 3 October 2011 and the date of this Target’s Statement.

Copies of documents lodged with ASIC in relation to Scandinavian Resources may also be obtained from, or inspected at, an ASIC office.

9.15 NO OTHER MATERIAL INFORMATION

This Target’s Statement is required to include all information that Scandinavian Resources Shareholders and their professional advisors would reasonably require to make an informed assessment whether to accept the Hannans Offer, but: · only to the extent to which it is reasonable for investors and their professional advisors to expect to find the information

in this Target’s Statement; and · only if the information is known to any of the Scandinavian Resources Directors.

Each of the Directors of Scandinavian Resources who authorised this Target’s Statement are of the opinion that the information that Scandinavian Resources Shareholders and their professional advisors would reasonably require to make an informed assessment of whether to accept the Hannans Offer is the information contained in: · the Bidder’s Statement (to the extent that the information is not inconsistent with or superseded by information in this

Target’s Statement); · the Scandinavian Resources’ financial report for the half year ended 31 December 2011; · the Scandinavian Resources’ 2011 Annual Report; · Scandinavian Resources’ releases to the ASX prior to the date of this Target’s Statement; and · this Target’s Statement.

The Directors of Scandinavian Resources who authorised this Target’s Statement have assumed, for the purposes of preparing this Target’s Statement, that the information contained in the Bidder’s Statement is accurate (unless they have expressly indicated otherwise in this Target’s Statement). However, those Directors of Scandinavian Resources do not take any responsibility for the contents of the Bidder’s Statement and are not to be taken as endorsing, in any way, any or all of the statements contained in it.

In deciding what information should be included in this Target’s Statement, the Directors of Scandinavian Resources who authorised this Target’s Statement have had regard to: · the nature of the Scandinavian Resources Shares (being fully paid ordinary shares); · the matters which Scandinavian Resources Shareholders may reasonably be expected to know; · the fact that certain matters may reasonably be expected to be known to the professional advisors of Scandinavian

Resources Shareholders; and · the time available to Scandinavian Resources to prepare this Target’s Statement.

10 Approval of Target’s Statement

This Target’s Statement has been approved by a resolution of the Scandinavian Resources Board. Each Scandinavian Resources Director (other than Damian Hicks and Markus Bachmann, who did not vote on the resolution because they are not considered to be Independent Directors) has voted in favour of the resolution authorising this Target’s Statement.

Dated: 19 April 2012

Signed for and on behalf of Scandinavian Resources Limited

Ian Gregory Independent Director and Company Secretary


11 Glossary and Interpretation

11.1 GLOSSARY

The following terms have the meanings set out below unless the context requires otherwise:

$ means Australian dollars.

Acceptance Form means the form of acceptance of the Hannans Offer enclosed with the Hannans Offer and the Bidder’s Statement or, as the context requires, any replacement or substitute acceptance form provided by, or on behalf of, Hannans.

Announcement Date means the date that the Hannans Offer was announced on the ASX, being 29 February 2012.

ASIC means the Australian Securities & Investments Commission.

Associate has the meaning given to it in section 12(2) of the Corporations Act.

ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the financial market known as the Australian Securities Exchange operated by it.

ASX Settlement means ASX Settlement Pty Ltd ABN 49 008 504 532.

ASX Settlement Operating Rules means the operating rules of the settlement facility provided by ASX Settlement.

Bid Period has the meaning given to it in the Corporations Act.

Bidder’s Statement means the bidder’s statement in relation to the Hannans Offer, prepared by Hannans and dated 20 March 2012.

Board or Scandinavian Resources Board means the board of directors of Scandinavian Resources.

Boliden means Boliden Mineral AB.

Bt means billion tonnes.

Business Day has the meaning given to that term in the Listing Rules.

CCF means Craton Capital Funds.

CGT means Australian capital gains tax.

CHESS means Clearing House Electronic Subregister System, which provides for electronic security transfer in Australia.

Company or Scandinavian Resources means Scandinavian Resources Limited (ACN 132 035 842).

Conditions means the conditions of the Hannans Offer as detailed in Annexure A of the Bidder’s Statement.

Convertible Loans has the meaning given to it in section 6.5 of this Target’s Statement.

Corporations Act means the Corporations Act 2001 (Cth) and any regulations made under that Act.

Directors means Scandinavian Resources Directors.

EM means electromagnetic.

Employee Share Option Plan or ESOP means the employee share option plan of Scandinavian Resources.

ERI means Equity & Royalty Investments Ltd (ACN 129 549 435).

EV or Enterprise Value means the market capitalisation plus net debt.

FLTEM means fixed-loop transient electromagnetic.

Government Agency means a government or government department, a governmental or semi-governmental or judicial person (whether autonomous or not) charged with the administration of any applicable law.

Hannans or the Bidder means Hannans Reward Limited (ACN 099 862 129).Hannans Offer means the off-market takeover offer by Hannans to acquire Scandinavian Resources Shares under Chapter 6 of the Corporations Act on the terms set out in the Bidder’s Statement.

Hannans Share means a fully paid ordinary share in the capital of Hannans.

Independent Directors means Olof Forslund and Ian Gregory, each of whom wishes to make, and considers himself justified to make, a recommendation to Scandinavian Resources Shareholders in respect of the Hannans Offer.

Independent Expert means BDO Corporate Finance (WA) Pty Ltd.

Independent Expert’s Report means the report of the Independent Expert dated 17 April 2012 and as set out in Appendix 1 of this Target’s Statement.

Indicated Resource or Indicated Mineral Resource has the meaning given to Indicated Mineral Resource in the JORC Code.


Ineligible Foreign Scandinavian Resources Shareholder means any Scandinavian Resources Shareholder whose address, as entered in the register of members of Scandinavian Resources, is in a jurisdiction other than Australia (and its external Territories) and New Zealand, unless Hannans otherwise determines after being satisfied that it is not unlawful, not unduly onerous and not unduly practicable to make the Hannans Offer to such a Scandinavian Resources Shareholder in the relevant jurisdiction and to issue Hannans Shares to such a Scandinavian Resources Shareholder on acceptance of the Hannans Offer, and that it is not unlawful for such a Scandinavian Resources Shareholder to accept the Hannans Offer in such circumstances in the relevant jurisdiction.

Inferred Resource or Inferred Mineral Resource has the meaning given to Inferred Mineral Resource in the JORC Code.

IP means induced polarisation.

JORC Code means the 2004 Edition of the “Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”, which is available at www.jorc.org.

KIAB means Kiruna Iron AB (a company registered in Sweden).

Kiruna Iron Project means KIAB’s Kiruna Iron Project located in Northern Sweden, an overview of which is set out in section 6.4(a) of this Target’s Statement.

Kiruna Raising means the US$12,500,000 Scandinavian Resources was seeking to raise prior to a spin-out of the Kiruna Iron Project, as contemplated in the announcement made by the Company to ASX on 13 October 2011.

Listing Rules means the listing rules of ASX as amended or varied from time to time.

Loan has the meaning given to it in section 6.5 of this Target’s Statement.

Minimum Acceptance Condition has the same meaning as given to that term in the Bidder’s Statement.

Notice of Status of Conditions means Hannans’s notice disclosing the status of the Conditions which is required to be given under section 630(3) of the Corporations Act.

Offer Period has the same meaning as given to that term in the Bidder’s Statement.

Offer Consideration means three (3) Hannans Shares for every one (1) Scandinavian Resources Share held.

RC means reverse circulation drilling.

Relevant Interest has the same meaning as given to it in sections 608 and 609 of the Corporations Act.

Reports means the Independent Expert’s Report which also includes the Independent Valuation of Mineral Properties in Appendix 1 of this Target’s Statement

Rights means all accretions and rights attaching to Scandinavian Resources Shares after the date the Bidder’s Statement is lodged with ASIC including all rights to receive dividends, to receive or subscribe for shares, notes, options or other securities and all other distributions or entitlements declared, paid, made or issued by Scandinavian Resources after that date, including without limitation, any capital return made or paid by Scandinavian Resources after that date.

Sale Nominee means has the meaning given to it in section 1.8 of Annexure A to the Bidder’s Statement.

Scandinavian Iron means Scandinavian Iron AB (a company registered in Sweden).

Scandinavian Resources or the Company means Scandinavian Resources Limited (ACN 132 035 842).

Scandinavian Resources Director or Director means a director of Scandinavian Resources.

Scandinavian Resources Options means options to subscribe for Scandinavian Resources Shares granted by Scandinavian Resources.

Scandinavian Resources Optionholder means a person who is registered as the holder of Scandinavian Resources Options in the Scandinavian Resources Register.

Scandinavian Resources Register means the register of Scandinavian Resources Shareholders maintained by Scandinavian Resources in accordance with the Corporations Act.

Scandinavian Resources Share means a fully paid ordinary share in the capital of Scandinavian Resources.

Scandinavian Resources Shareholder means a person who is registered as the holder of Scandinavian Resources Shares in the Scandinavian Resources Register.

SEK means the Swedish krona.

SRAB means Scandinavian Resources AB (a company registered in Sweden).

SRK means SRK Consulting (Sweden) AB.

Target’s Statement means this document.

Unmarketable Parcel means a number of Hannans Shares which is less than a marketable parcel under the market rules of the ASX (currently a parcel of less than $500), calculated based on the highest closing price for Hannans Shares published during the Bid Period (or, in relation to Hannans Shares issued in respect of accepting Scandinavian Resources Shareholders during the Bid Period, based on the highest closing price for Hannans Shares published between the start of the Bid Period until the last trading day before Hannans issues those Hannans Shares).


Unmarketable Parcel Scandinavian Resources Shareholder means a Scandinavian Resources Shareholder in respect of whom the total number of Hannans Shares to which that Scandinavian Resources Shareholder would be entitled to receive as consideration under the Hannans Offer is an Unmarketable Parcel.

US dollars means United States dollars.

VWAP or volume weighted average price means the volume weighted average price of Scandinavian Resources Shares sold on ASX over the relevant period.

WST means Western Standard Time in Perth, Western Australia.

11.2 INTERPRETATION

(a) Appendices to the Target’s Statement form part of this Target’s Statement.

(b) Words and phrases to which a meaning is given by the Corporations Act, the Listing Rules or the ASX Settlement Operating Rules have that meaning in this Target’s Statement unless that meaning is inconsistent with the context in which the word or phrase is used.

(c) Headings are for convenience only and do not affect the interpretation of this Target’s Statement.

(d) The singular includes the plural and vice versa and words importing any gender include the other gender, and references to persons include corporations.

(e) References to sections are to sections of this Target’s Statement, unless stated otherwise.

(f) References to paragraphs are references to paragraphs within the section of this Target’s Statement in which the reference to the paragraph is made.

(g) References to time are references to the time in Perth, Australia on the relevant date, unless stated otherwise.

(h) References to “dollars”, “$” or “cents” are to Australian currency.

12 Corporate Directory

Legal Adviser

Gilbert + Tobin

1202 Hay Street WEST PERTH WA 6005

Phone: +61 8 9413 8400 Fax: +61 8 9413 8444

Corporate Adviser Patersons Securities Limited

Level 23, Exchange Plaza 2 The Esplanade PERTH WA 6000

Phone: +61 8 9263 1111 Fax: +61 8 9325 6452

Independent Expert

BDO Corporate Finance (WA) Pty Ltd

38 Station Street SUBIACO WA 6008

Phone: +61 8 6382 4600 Fax: +61 8 6382 4601

Tax Adviser

BDO Tax (WA) Pty Ltd

38 Station Street SUBIACO WA 6008

Phone: +61 8 6382 4600 Fax: +61 8 6382 4601

Transaction Support

Corporate Board Services

6 Outram Street WEST PERTH WA 6005

Phone: +61 8 9322 3383 Fax: +61 8 9324 3366


Appendix 1 - Independent Expert’s Report

SCANDINAVIAN RESOURCES LTD Independent Expert’s Report

17 April 2012

BDO CORPORATE FINANCE (WA) PTY LTD

Financial Services Guide

17 April 2012

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (“BDO” or “we” or “us” or “ours” as appropriate) has been engaged by Scandinavian Resources Ltd (“Scandinavian”) to provide an independent expert’s report on the offer made by Hannans Reward Ltd (“Hannans Reward”) to acquire all of the outstanding fully paid ordinary shares in Scandinavian by way of an off-market takeover bid. You will be provided with a copy of our report as a retail client because you are a shareholder of Scandinavian. Financial Services Guide In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (“FSG”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees. This FSG includes information about:

Who we are and how we can be contacted; The services we are authorised to provide under our

Australian Financial Services Licence, Licence No. 316158;

Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;

Any relevant associations or relationships we have; and

Our internal and external complaints handling procedures and how you may access them.

Information about us BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services. We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business. Financial services we are licensed to provide We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients. When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you. General Financial Product Advice We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. Fees, Commissions and Other Benefits that we may receive We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of

the agreement. The fee for this engagement is approximately $25,000. Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report. Other Assignments BDO prepared two separate independent expert’s reports in September 2011 for the Company on the proposals to issue 30,000,000 shares to Equity and Royalty Investments Ltd and 20,817,225 shares to OM Holdings Ltd. The total fee charged for both assignments was $38,000. BDO Tax (WA) Pty Ltd has provided taxation advice in regard the Target’s Statement to be prepared by Scandinavian. The total fee charged for this assignment was $3,500. Remuneration or other benefits received by our employees All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee from Scandinavian for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report. Referrals We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide. Complaints resolution Internal complaints resolution process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 Subiaco WA 6872. When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination. Referral to External Dispute Resolution Scheme A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (“FOS”). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is 12561. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below. Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected] Contact details You may contact us using the details set out at the top of our letterhead on page 1 of this FSG.

TABLE OF CONTENTS

1. Introduction 1

2. Summary and Opinion 1

3. Scope of the Report 3

4. Outline of the Offer 4

5. Profile of Scandinavian Resources Ltd 5

6. Profile of Hannans Reward Ltd 8

7. Economic analysis 11

8. Industry analysis 12

9. Valuation approach adopted 13

10. Valuation of Scandinavian 14

11 Valuation of consideration offered 21

12 Is the Offer fair? 25

13. Is the Offer reasonable? 26

14. Conclusion 28

15. Sources of information 28

16. Independence 28

17. Qualifications 28

18. Disclaimers and consents 29

Appendix 1 – Glossary

Appendix 2 – Valuation Methodologies

Appendix 3 - Independent Valuation of Mineral Assets held by Scandinavian Resources Ltd by SRK Consulting (Sweden) AB

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

17 April 2012 The Directors Scandinavian Resources Ltd 6 Outram Street West Perth WA 6005 Dear Sirs

INDEPENDENT EXPERT’S REPORT

1. Introduction On 29 February 2012, Scandinavian Resources Ltd (“Scandinavian” or “the Company”) announced that it had received an offer from Hannans Reward Ltd (“Hannans Reward”) to acquire all of its outstanding fully paid ordinary shares by way of an off-market takeover bid (“Offer”). In consideration for the Offer, Scandinavian shareholders are being offered three Hannans Reward shares for every one Scandinavian share held. Hannans Reward also intends to enter into private treaty arrangements with Scandinavian option holders to acquire their options.

Hannans Reward is currently Scandinavian’s second largest shareholder and currently holds approximately 19.6 million shares in Scandinavian, representing 17.11% of the Company’s issued shares.

2. Summary and Opinion 2.1 Purpose of the report

The directors of Scandinavian have requested that BDO Corporate Finance (WA) Pty Ltd (“BDO”) prepare an independent expert’s report (“our Report”) to express an opinion as to whether or not the Offer from Hannans Reward is fair and reasonable to the non associated shareholders of Scandinavian (“Shareholders”).

Our Report is prepared pursuant to section 640 of the Corporations Act and is to be included in the Target’s Statement for Scandinavian in order to assist the Shareholders in their decision whether to accept the Offer.

2.2 Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (“ASIC”) Regulatory Guide 111 (“RG 111”), ‘Content of Expert’s Reports’ and Regulatory Guide 112 (“RG 112”) ‘Independence of Experts’.

In arriving at our opinion, we have assessed the terms of the Offer as outlined in the body of this report. We have considered:

How the value of a Scandinavian share compares to the value of the consideration offered by Hannans Reward and the value of the notionally combined entity;

The likelihood of a superior alternative offer being available to Scandinavian;

Other factors which we consider to be relevant to the Shareholders in their assessment of the Offer; and

The position of Shareholders should the Offer not be successful.

2.3 Opinion

We have considered the terms of the Offer as outlined in the body of this report and have concluded that, in the absence of a superior offer, the Offer is not fair but reasonable to Shareholders.

2

In our opinion, the Offer is not fair because the preferred value of a Scandinavian share is greater than the preferred value of the consideration offered by Hannans Reward.

However, we consider the Offer to be reasonable because the advantages of accepting the Offer are greater than the disadvantages. Most notably, upon accepting the Offer, Scandinavian shareholders will hold a majority of 68.39% of the merged entity.

2.4 Fairness

In Section 12 we determined that the Offer consideration of three Hannans Reward shares compares to the value of one Scandinavian share, as detailed hereunder.

Ref Low

$ Preferred

$ High

$

Assessed value of a Scandinavian share 10.3 $0.552 $0.920 $1.216

Value of the notionally combined entity 11.2 $0.555 $0.871 $1.124

Value of Consideration offered under the QMP method 11.1 $0.270 $0.300 $0.330

We note from the table above that the value of the notionally combined entity is consistent with the assessed value of a Scandinavian share. However, since the preferred value of the notionally combined entity is less than the preferred value of a Scandinavian share we do not consider the Offer to be fair. We have not incorporated the market value of Hannans Reward’s mineral assets in this assessment as we have not had access to the Bidder. It is possible that by reflecting the market value of Hannans Reward’s mineral assets in our calculation that the preferred value of the notionally combined entity may exceed the preferred value of a Scandinavian share.

The value of the consideration offered calculated using the Quoted Market Price (“QMP”) methodology is less than the value of a Scandinavian share. Accordingly, under this basis we do not consider the Offer to be fair.

Given that Shareholders will hold 68.39% of the notionally combined entity we consider that the most appropriate measure of value for Shareholders is the value of the notionally combined entity.

The above valuation ranges are graphically presented below:

The above pricing indicates that, in the absence of any other relevant information, and a superior offer, the Offer is not fair for Shareholders.

2.5 Reasonableness

We have considered the analysis in Sections 12 and 13 of this report, in terms of both:

advantages and disadvantages of the Offer; and

alternatives, including the position of Shareholders if the Offer is not successful.

In our opinion, the position of Shareholders if the Offer is accepted is more advantageous than the position if the Offer is not accepted. Accordingly, in the absence of any other relevant information and/or a superior proposal we believe that the Offer is reasonable for Shareholders.

0.15 0.35 0.55 0.75 0.95 1.15 1.35

Value of consideration under QMP method

Value of the notionally combined entity

Value of a Scandinavian share prior to Proposal

Valuation ($)Low Preferred High

3

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES

Section Advantages Section Disadvantages

13.1.1 Creation of a combined group with a stronger balance sheet

13.2.1 Dilution of existing shareholders’ interests

13.1.2 Future funding potential 13.2.2 Scandinavian shareholders will have to share any upside potential of Scandinavian assets with Hannans Reward shareholders

13.1.3 Scandinavian shareholders will retain a controlling interest in the merged entity with exposure to Hannans Reward’s projects

13.1.4 Major shareholders of Scandinavian have declared that they will accept the Offer in the absence of a superior offer

13.1.5 Diversification and exposure to additional assets

13.1.6 Increased market capitalisation

13.1.7 Intentions regarding expenditure program for Scandinavian projects

13.1.8 Synergistic benefits

Other key matters we have considered include:

Section Description

13.3.1 Alternative Proposals

13.3.2 Potential decline in Scandinavian share price

13.3.3 Post announcement share price of Hannans Reward

3. Scope of the Report 3.1 Purpose of the Report

Hannans Reward has prepared a Bidder’s Statement in accordance with Section 636 of the Corporation Act 2001 (Cth) (“the Act”). Under Section 633 Item 10 of the Act, Scandinavian is required to prepare a Target’s Statement in response to the Bidder’s Statement.

Section 640 of the Act requires the Target Statement to include an independent expert’s report to shareholders if:

The bidder’s voting power in the target is 30% or more; or

The bidder and the target have a common director or directors.

The Managing Director of Hannans Reward, Mr Damian Hicks, is also the Non-Executive Chairman of Scandinavian. Therefore, an independent expert’s report is required for inclusion in the Target’s Statement. The independent directors of Scandinavian have engaged BDO to satisfy this requirement.

3.2 Regulatory guidance

Neither the Listing Rules nor the Corporations Act defines the meaning of “fair and reasonable”. In determining whether the Offer is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

This regulatory guide suggests that where the transaction is a control transaction the expert should focus on the substance of the control transaction rather than the legal mechanism to affect it. RG 111 suggests that where a transaction is a control transaction it should be analysed on a basis consistent with a takeover bid.

In our opinion the Offer is a control transaction as defined by RG 111 and we have therefore assessed the Offer to consider whether in our opinion it is fair and reasonable to Shareholders.

3.3 Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities that are the subject of the offer. In the case of Scandinavian, the Company’s ordinary shares offered to Hannans Reward are the subject of the offer and the consideration offered is three Hannans Reward shares for every one Scandinavian share held.

4

This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length. When considering the value of the securities subject of the offer in a control transaction the expert should consider this value inclusive of a control premium.

Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

Is the Offer fair (section 12)

A comparison between the value of a Scandinavian share and the value of the consideration offered, being three Hannans Reward shares and the value of the notionally combined entity.

Is the Offer reasonable (section 13)

An investigation into other significant factors to which Shareholders might give consideration, prior to accepting the Offer, after reference to the value derived above.

This assignment is a Valuation Engagement as defined by APES 225 Valuation Services. A Valuation Engagement means an engagement or assignment to perform a valuation and provide a valuation report where we determine an estimate of value of the Company by performing appropriate valuation procedures and where we apply the valuation approaches and methods that we consider to be appropriate in the circumstances.

4. Outline of the Offer On 29 February 2012, Scandinavian Resources Ltd announced that it had received an offer from Hannans Reward Ltd to acquire all of its outstanding fully paid ordinary shares by way of an off-market takeover bid. In consideration for the Offer, Scandinavian shareholders are being offered three Hannans Reward shares for every one Scandinavian share held.

The Non-Executive Chairman of Scandinavian, Mr Damian Hicks, is also the Managing Director of Hannans Reward and Mr Ian Gregory, who is a Non-Executive Director and Company Secretary of Scandinavian, is also the Company Secretary of Hannans Reward.

As at the date of this report Hannans Reward currently holds 19,605,235 shares in Scandinavian, representing 17.11% of the Company. Hannans Reward also has an interest in approximately 1.9 million Scandinavian options currently on issue. The following table summarises the number of shares the respective companies have on issue, the number of shares that Hannans Reward would need to issue to Shareholders and the number of shares on issue upon acceptance of the Offer.

The Offer will be extended to any Scandinavian shares that are issued during the Offer period as a result of the exercise of Scandinavian options or conversion of convertible notes on issue before the Offer opens. Hannans Reward has indicated that it intends to enter into private treaty arrangements with Scandinavian option holders to acquire their options.

Ineligible foreign Scandinavian shareholders who accept the Offer, and Scandinavian shareholders who, if they accept the Offer, would be entitled to an unmarketable parcel of Hannans Reward shares, will not receive shares in Hannans Reward. The Hannans Reward shares held by the ineligible shareholder will be sold by an ASIC approved nominee and those shareholders will receive the sale proceeds less expenses in cash.

Summary of Merged Entity Number

Number of shares Scandinavian has on issue 114,563,266

Number of Scandinavian shares on issue held by Hannans Reward 19,605,235

Total shares on issue subject to the Offer 94,958,031

Exchange ratio, number of Hannans Reward shares for each Scandinavian share 3

Maximum number of Hannans Reward shares to be issued under the Offer 284,874,093

Hannans Reward Ltd after the Offer

Number of shares Hannans Reward has on issue* 131,648,715

Maximum number of shares to be issued to Scandinavian shareholders under the Offer 284,874,093

Maximum number of shares on issue on completion of the Offer 416,522,808

Interest held by Scandinavian shareholders 68.39%

Interest held by existing Hannans Reward shareholders 31.61%

100.00%

*Number of share on issue for Hannans Reward Ltd obtained from 12 March 2012 ASX announcement

5

Conditions Precedent

The Offer is subject to conditions, including but not limited to:

90% minimum acceptance;

no spin out or demerger of Scandinavian’s iron assets (including the Kiruna Iron Project);

no prescribed occurrences;

no action by any Government Agency adversely affecting the Hannans Reward Offer;

no material transactions or certain actions undertaken by or relating to Scandinavian’s business;

no force majeure event; and

no material adverse change occurs in relation to Scandinavian.

Full disclosure of the conditions precedent to the Offer is included in the Target’s Statement.

5. Profile of Scandinavian Resources Ltd Scandinavian Resources Ltd was incorporated on 3 July 2008 and was admitted to the Official List of the Australian Securities Exchange (“ASX”) on 19 April 2010 after successfully completing an Initial Public Offer raising of approximately $6.7 million. Scandinavian is a diversified mineral explorer operating in Scandinavia, primarily in Sweden and Norway. The majority of projects held by the Company are at an early stage of development with the Company’s most advanced projects located in the Kiruna area. The exploration permits for a number of the Company’s projects are held by Scandinavian Resources AB, formerly Hannans Scandinavia AB, which was acquired as part of the Hannans Scandinavia AB Acquisition Agreement entered into in July 2008. Kiruna Iron AB is 100% owned by Scandinavian Resources AB which is registered in Sweden and Scandinavian Resources AB is 100% owned by Scandinavian.

The Company’s head office is located in Perth, Western Australia and the current Board of Directors consists of Damian Hicks as Non-Executive Chairman, Olof Forslund as Technical Director, and Ian Gregory and Markus Bachmann as Non-Executive Directors.

On 11 November 2011 Scandinavian announced that it had allotted and issued 17,462,734 ordinary shares to HR Equities Pty Ltd (“HR Equities”), a wholly owned subsidiary of Hannans Reward, at $0.25 each to raise $4,365,684 before costs. These were issued as part of an underwriting agreement whereby HR Equities Pty Ltd agreed to underwrite the listed $0.25 options that were due to expire on 31 October 2011.

On 2 December 2011, the Company announced that it had made the final payment for the acquisition of the Rakkuri Project. This final payment consisted of US$1.5 million and 6,157,635 fully paid ordinary shares issued to Anglo American Exploration B.V and Rio Tinto Mining and Exploration Ltd. The Rakkuri Project contains an exploitation concession application for the mining of copper-gold.

The Company also announced on 23 January 2012 that it is seeking to secure between US$12.5 million and US$15 million in funds for the Kiruna Iron Project. The funds raised are to be used for exploration activities, acquisition costs and the repayment of third party loans, which includes repayment of loans to HR Equities.

Kiruna Iron Project

Scandinavian’s Kiruna Iron Project, which consists of all the Company’s assets within the Kiruna area, is held by Scandinavian’s wholly owned subsidiary Kiruna Iron AB and is located within 50 km of the mining town of Kiruna in Northern Sweden. Access to the project can be made via the main highway during the winter months which is when the majority of field work is carried out as the ground is frozen and access to the project is considered easier. The majority of the assets in the Kiruna area are assumed to be skarn-type iron ore deposits. There are also a few cases of apatite-magnetite iron ore deposits. The Kiruna Iron Project includes a number of assets such as Sautusvaara, Ekstromsberg, Rakkurijarvi and Rakkurijoki, Tjarrojakka and Vieto. A number of the assets within the Kiruna Iron project have mineral resource estimates.

6

5.1 Historical Balance Sheet

Source: Unaudited management accounts as at 11 April 2012, Reviewed financial statements for the half-year ended 31 December 2011 and Audited financial statements for the year ended 30 June 2011.

5.2 Historical Statement of Comprehensive Income

Source: Reviewed financial statements for the half-year ended 31 December 2011 and Audited financial statements for the years ended 30 June 2011 and 30 June 2010.

Commentary on Historical Financial Statements

We have not undertaken a review of Scandinavian’s unaudited accounts in accordance with Australian Auditing and Assurance Standard 2405 “Review of Historical Financial Information” and do not express an opinion on this financial information. However

Unaudited as at Reviewed as at Audited as at

11-Apr-12 31-Dec-11 30-Jun-11

$ $ $

CURRENT ASSETS

Cash and cash equivalents 41,376 1,459,264 128,430

Trade and other receivables 61,608 568,569 821,538

TOTAL CURRENT ASSETS 102,984 2,027,833 949,968

NON-CURRENT ASSETS

Trade and other receivables - 7,291 7,504

Property, plant and equipment 78,728 74,842 79,775

Other assets 1 1 1

TOTAL NON-CURRENT ASSETS 78,729 82,134 87,280

TOTAL ASSETS 181,713 2,109,967 1,037,248

CURRENT LIABILITIES

Trade and other payables 992,775 1,290,214 1,860,000

Employee Benefits 61,308 5,172 5,172

Deferred consideration - - 3,734,944

Other financial liabilities 5,752,560 5,652,774 3,540,590

TOTAL CURRENT LIABILITIES 6,806,643 6,948,160 9,140,706

TOTAL LIABILITES 6,806,643 6,948,160 9,140,706

NET ASSETS/(LIABILITIES) (6,624,930) (4,838,193) (8,103,458)

EQUITY

Issued capital 21,731,063 21,691,064 12,195,148

Reserves 1,199,356 1,383,609 1,008,504

Accumulated losses (29,555,349) (27,912,866) (21,307,110)

TOTAL EQUITY/(DEFICIENCY) (6,624,930) (4,838,193) (8,103,458)

Statement of Financial Position

Reviewed for the half Audited for the year Audited for the year

year ended 31-Dec-11 ended 30-Jun-11 ended 30-Jun-10

$ $ $

Employee and contractors expenses (225,879) (350,448) (36,624)

Depreciation expenses (26,630) (22,420) (79)

Consultants expenses (423,313) (223,397) (115,282)

Occupancy expenses (36,281) (67,921) (43,291)

Marketing expenses (79,064) (35,631) (42,513)

Exploration and evaluation expenses (3,919,384) (18,562,689) (875,820)

Provision against recoverability of loan - (14,108) -

Other expenses (189,775) (188,458) (114,275)

Loss from operating activities (4,900,326) (19,465,072) (1,227,884)

Finance income 21,677 608,071 65,393

Finance costs (1,727,107) (930,966) (14,927)

Loss before income tax (6,605,756) (19,787,967) (1,177,418)

Income tax (expense)/benefit - - -

Loss from continuing operations after income tax (6,605,756) (19,787,967) (1,177,418)

Foreign currency translation differences 308,324 514,306 (29,030)

Total comprehensive loss for the year (6,297,432) (19,273,661) (1,206,448)

Statement of Comprehensive Income

7

nothing has come to our attention as a result of our procedures that would suggest the financial information within the management accounts has not been prepared on a reasonable basis.

Cash has increased from $0.13 million as at 30 June 2011 to $1.46 million as at 31 December 2011. During this period the Company received proceeds of $4.37 million from the issue of 17,462,734 ordinary shares at $0.25 each to HR Equities. This was part of the agreement between Scandinavian and HR Equities whereby HR Equities agreed to partially underwrite the Company’s listed $0.25 options that expired on 31 October 2011. Scandinavian also made a cash payment of US$1.5 million on 30 November 2011 relating to deferred consideration payable on the acquisition of the Rakkuri Project as well as two other cash payments, totalling US$1.5 million, during August and November 2011 relating to deferred consideration amounts payable to Grangesberg Iron AB for the acquisition of nine iron permits. Cash has since decreased to $41,376 as at 11 April 2012 as a result of exploration expenditure incurred as well as interest expenses.

The Company has advised BDO that major shareholder, Equity & Royalty Investments Ltd, is expected to exercise 20 million options exercisable at $0.20 each to raise $4 million on 23 April 2012. The Company has advised that they will allocate these funds to the payment of all outstanding creditors, all third party convertible notes (excluding convertible notes and loans provided by HR Equities which are due for repayment on 15 September 2012) and fund the recommencement of exploration activities at Kiruna. As at 11 April 2012 the Company also has available to it undrawn loan facilities of $905,000. It is noted that the Company is not permitted to raise additional capital whilst a takeover is in progress without shareholder approval.

Deferred consideration of approximately $3.73 million as at 30 June 2011 related to the acquisition of the Rakkuri Project by Scandinavian’s wholly owned subsidiary, Kiruna Iron AB and the acquisition of nine iron permits from Grangesberg Iron AB. All deferred consideration amounts were paid during the half-year ended 31 December 2011 hence the nil balance as at 31 December 2011.

The majority of financial liabilities relate to convertible loans which the Company had entered into. As at 31 December 2011 the Company has six convertible loans of which three had been entered into since 30 June 2011:

On 25 July 2011 a convertible note was entered into which allowed $250,000 to be drawn down with interest payable at the rate of 12.5% per annum. Shareholder approval was obtained to rollover the loan into a convertible note with an extended repayment date of 31 March 2012 and which allowed each note to be converted into 1.5 ordinary shares in Scandinavian. The full amount of the notes has been drawn down.

On 12 August 2011 the Company entered into a convertible note with HR Equities which allowed $750,000 to be drawn down with interest payable at a rate of 21.3% per annum. HR Equities can at any time convert the amount drawn down into ordinary shares at a rate of 1.5 shares for every dollar drawn down. The full amount of the notes has been drawn down and the repayment date of 31 March 2012 has been extended.

A loan facility, with a drawdown amount of $150,000 and interest payable at a rate of 12.5% per annum which was originally required to be repaid on 30 November 2011, has had its repayment date extended to 15 April 2012. The full amount of this loan has been drawn down.

As at 11 April 2012 the Company had interest bearing liabilities of $5.75 million.

The issued capital has increased from approximately $12.20 million as at 30 June 2011 to $21.73 million as at 11 April 2012. This increase resulted from the issue of 6,157,635 shares as part of the consideration for the Rakkuri Project, the issue of 17,462,734 to HR Equities as part of the underwriting agreement and the conversion of listed options during the period.

The majority of exploration and evaluation expenditure of $18.6 million as at 30 June 2011, recorded in the statement of comprehensive income, relates to the acquisition of the Rakkuri Project and the portfolio of nine iron permits from Grangesberg Iron AB. For the half-year ended 31 December 2011 exploration and evaluation expenditure totalled $3.92 million. This expenditure related to exploration activities focussed on the Kiruna project.

The majority of finance costs of $1.73 million for the half-year ended 31 December 2011 relate to convertible note expenses, effective interest on deferred consideration balances and exchange rate losses. These costs contributed to a loss of $6.30 million for the half-year ended 31 December 2011.

5.3 Capital Structure

The share structure of Scandinavian as at 16 April 2012 is outlined below:

Source: Computershare registry

Number

Total ordinary shares on issue* 114,563,266

Top 20 shareholders 93,350,719

Top 20 shareholders - % of shares on issue 81.48%

*This includes 22,633,335 shares classified as restricted securities upon date of quotation on the ASX. These are

escrowed to 21 April 2012, being 24 months after official quotation.

8

The range of shares held in Scandinavian as at 16 April 2012 is as follows:


The ordinary shares held by the most significant shareholders as at 16 April 2012 are detailed below:


Scandinavian has the following options on issue as at 16 April 2012:

Source: Scandinavian management

6. Profile of Hannans Reward Ltd 6.1 History

Hannans Reward Ltd was incorporated on 11 March 2002 and admitted to the ASX on 5 December 2003. Hannans Reward is a diversified minerals exploration company, focussed on nickel, gold and iron, within Western Australia. Its flagship project is the Forrestania nickel project. The current Board of Directors consists of Richard Scallan as Chairman, Damian Hicks as Managing Director and William Hicks and Jonathan Murray as Non- Executive Directors.

Hannans Reward is divided up into three separate divisions. The first being its exploration activities, the second being an investment arm which operates by way of an investment committee and aims to maximise returns through its equity portfolio, operated under Hannans Investment Management (“HIM”), and the third is corporate management and transaction services operated under Corporate Board Services (“CBS”).

On 11 November 2011 Hannans announced that its 100% owned subsidiary, HR Equities, had been issued 17,462,734 ordinary shares in Scandinavian. These were issued as part of an underwriting agreement whereby HR Equities agreed to underwrite Scandinavian’s listed $0.25 options due to expire on 31 October 2011. At the time of issue this gave Hannans Reward an approximate 18% holding in Scandinavian.

On 13 February 2012, Hannans Reward announced that it had successfully completed the proposed restructure of its assets through the ‘spin out’ of its manganese project to a newly formed subsidiary, Errawarra Resources Ltd. Errawarra Resources Ltd has a specific manganese focus and will consolidate manganese projects in the East Pilbara region of Western Australia.

Range of Shares Held

1 - 1,000 5 1,613 0.00%

1,001 - 5,000 31 95,972 0.08%

5,001 - 10,000 56 521,706 0.46%

10,001 - 100,000 166 6,787,107 5.92%

100,001 - and over 77 107,156,868 93.54%

TOTAL 335 114,563,266 100.00%

Percentage of Issued

Shares (%)

Number of Ordinary

Shareholders

Number of Ordinary

Shares

Name

Equity & Royalty Investments Ltd 20,000,001 17.46%

HR Equities Pty Ltd 19,605,235 17.11%

JP Morgan Nominees Australia Ltd <Cash Income A/C> 13,383,197 11.68%

HSBC Custody Nominees (Australia) Limited 8,231,034 7.18%

Subtotal 61,219,467 53.44%

Others 53,343,799 46.56%

Total ordinary shares on Issue 114,563,266 100.00%

Number of Ordinary

Shares Held


Shares (%)

Details Number

Options exercisable at $0.20 on or before 31 October 2012 7,986,673

Options exercisable at $0.20 on or before 31 October 2012 (escrowed to 21 April 2012) 20,133,334

Options exercisable at $0.25 on or before 30 June 2013 400,000



Options exercisable at $0.20 on or before 31 October 2012 1,500,000

Options exercisable at $0.40 on or before 15 December 2012 500,000

Options exercisable at $0.40 on or before 1 February 2013 1,200,000

Options exercisable at $0.20 on or before 15 September 2013 604,162

9

6.2 Key Projects

Forrestania

The Forrestania project area is located east of Hyden, Western Australia. It spans over 1,155 km2 and includes exploration interests in nickel, gold and iron. The exploration activities conducted by Hannans Reward are achieved through their 100% owned tenements as well as tenements which they have entered into as part of a joint venture.

East Pilbara

The East Pilbara project, located in the East Pilbara region of Western Australia, boasts the largest tenement holding out of all the projects in the Hannans Reward portfolio covering 1,758 km2. Hannans Reward has interests in base metals and gold mineralisation in the area.

Lake Johnston

The Lake Johnston project covers an area of 375 km2 and is noted for its close geographical proximity to Russian Mining giants Norilsk’s Maggie Hays and Emily Ann nickel sulphide mines. The exploration activities conducted by Hannans Reward have been focussed on nickel and gold mineralisation at various sites including Ernest, Hardcore and Charles Prospect.

Queen Victoria Rocks

The tenements associated with the Queen Victoria Rocks project have been 100% owned by Hannans Reward since its listing on the ASX. The project area covers 420 km2 and exploration has been focussed on nickel exploration.

6.3 Historical Balance Sheet

Source: Reviewed financial statements for the half-years ended 31 December 2011 and 31 December 2010 and Audited financial statements for the year ended 30 June 2011.

Reviewed as at Audited as at Reviewed as at

31-Dec-11 30-Jun-11 31-Dec-10

$ $ $

CURRENT ASSETS

Cash and cash equivalents 218,292 570,840 5,379,849

Trade and other receivables 254,542 332,495 263,327

Other financial assets 19,563,345 27,335,464 20,230,358

TOTAL CURRENT ASSETS 20,036,179 28,238,799 25,873,534

NON-CURRENT ASSETS

Other receivables 312,227 212,225 212,224

Property, plant and equipment 148,145 162,022 169,167

Other financial assets 300,000 300,000 300,002

TOTAL NON-CURRENT ASSETS 760,372 674,247 681,393

TOTAL ASSETS 20,796,551 28,913,046 26,554,927

CURRENT LIABILITIES

Trade and other payables 1,338,037 332,902 637,808

Provisions 101,279 66,258 98,489

Borrowings 1,050,134 - -

Other financial liabilities 20,901 20,086 9,459

TOTAL CURRENT LIABILITIES 2,510,351 419,246 745,756

NON-CURRENT LIABILITIES

Provisions 36,854 32,906 -

Deferred tax liabilities 251,045 3,280,989 2,311,714

Other financial liabilities 65,680 76,340 96,425

TOTAL NON-CURRENT LIABILITIES 353,579 3,390,235 2,408,139

TOTAL LIABILITES 2,863,930 3,809,481 3,153,895

NET ASSETS 17,932,621 25,103,565 23,401,032

EQUITY

Issued capital 20,135,891 20,135,891 20,135,891

Reserves 9,420,435 18,876,128 14,608,773

Retained profits (11,623,705) (13,908,454) (11,343,632)

TOTAL EQUITY 17,932,621 25,103,565 23,401,032


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6.4 Historical Statement of Comprehensive Income

Source: Reviewed financial statements for the half-year ended 31 December 2011 and Audited financial statements for the years ended 30 June 2011 and 30 June 2010.

Commentary on Historical Financial Statements

Hannans Reward’s other financial assets balance has decreased from $27.34 million as at 30 June 2011 to $19.56 million as at 31 December 2011. The majority of the 31 December 2011 balance is made up of investments in listed entities totalling $15.62 million and loans to Kiruna Iron AB, a wholly owned subsidiary of Scandinavian, totalling $3.74 million. These loans consist of three separate convertible note loan agreements allowing $2.5 million, $1.25 million and $750,000 to be drawn down respectively.

As at 31 December 2011 there was an amount of $300,000 as other financial assets. This balance relates to a loan agreement entered into with Damian Hicks, Hannans Reward’s Managing Director, for $0.30 million at 6% per annum repayable on or before 31 March 2015.

Hannans Reward had borrowings of $1.05 million as at 31 December 2011 which related to a margin lending facility opened by HR Equities. This facility is secured by 20% of the underlying value of shares pledged to the lender as security for the loan, which as at 31 December 2011 is 3.73 million Atlas Iron Limited shares.

There has been no movement in the issued capital of Hannans Reward between 31 December 2010 and 31 December 2011. Reserves have decreased from $18.88 million as at 30 June 2011 to $9.42 million as at 31 December 2011. The majority of this decrease resulted from the revaluation of available for sale assets.

The majority of income received for the half-year ended 31 December 2011 relates to gains on the sale of shares which occurred during the period. This contributed approximately $5.56 million for the half-year ended 31 December 2011.

In accordance with Hannans Reward’s accounting policy all exploration expenditure incurred during the half-year ended 31 December 2011 has been written off to the statement of comprehensive income. Hannans Reward made a loss of $7.28 million for the year ended 31 December 2011 in comparison to profits of $4.27 million and $13.19 million for the years ended 30 June 2011 and 30 June 2010 respectively.

6.5 Capital Structure

The share structure of Hannans Reward as at 27 September 2011 is outlined below:

Source: Hannans Reward Annual Report 30 June 2011

Reviewed for the half Audited for the Audited for the

year ended 31-Dec-11 year ended 30-Jun-11 year ended 30-Jun-10

$ $ $

Revenue 299,140 320,914 191,229

Other income 538,386 189,772 5,292,638

Gain on disposal of shares 5,560,601 3,335,087 153,180

Total income 6,398,127 3,845,773 5,637,047

Employee and contractors expense (388,864) (513,225) (498,352)

Depreciation expenses (21,378) (47,844) (14,044)

Consultants expenses (140,859) (113,332) (105,249)

Occupancy expenses (37,809) (62,037) (80,083)

Marketing expenses (26,157) (89,423) (45,553)

Exploration and evaluation expenses (3,323,160) (4,432,070) (3,009,739)

Other expenses (175,151) (433,569) (200,206)

(Loss)/Income from continuing operations

before income tax 2,284,749 (1,845,727) 1,683,821

Income tax (expense)/benefit - - -

(Loss)/Income from continuing operations 2,284,749 (1,845,727) 1,683,821

Net fair value gains on available for sale

assets net of deferred taxation (2,890,944) 8,654,619 11,638,395

Net change in fair value of available for

sale assets transferred to profit and loss (6,675,352) (2,539,256) (135,836)

Total comprehensive (loss)/income for the

year (7,281,547) 4,269,636 13,186,380

Statement of Comprehensive Income

Number

Total ordinary shares on issue 131,648,715

Top 20 shareholders 52,961,574

Top 20 shareholders - % of shares on issue 40.23%

11

The range of shares held in Hannans Reward as at 27 September 2011 is as follows:


The ordinary shares held by the most significant shareholders as at 27 September 2011 are detailed below:


Hannans Reward has the following Options on issue as at 12 March 2012:

Source: ASX announcement dated 12 March 2012

7. Economic analysis Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. Several countries in Europe will record very weak outcomes, but the US economy is continuing a moderate expansion. Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future. Conditions around other parts of Asia softened in 2011, partly due to natural disasters, but are not showing signs of further deterioration. Some moderation in inflation has allowed policymakers in the region to ease monetary policies somewhat. Commodity prices declined for a few months last year and are noticeably off their peaks, but have been relatively stable for a while now, at quite high levels. Australia’s terms of trade have peaked, though they remain high.

Financial market sentiment has generally continued to improve in recent weeks and capital markets are supplying funding to corporations and well-rated banks. At the margin, wholesale funding costs are tending to decline, though they remain higher, relative to benchmark rates, than in mid 2011. But the task of putting European banks and sovereigns onto a sound footing for the longer term remains large and Europe will remain a potential source of adverse shocks for some time yet.

In Australia, growth in domestic demand ran at its fastest for four years in 2011, driven by private spending. Nonetheless the balance of recent information suggests that output growth was somewhat below trend over the year. There are differences in performance between sectors, and considerable structural change is occurring. Labour market conditions softened during 2011, though the rate of unemployment has been little changed for some time.

Interest rates for borrowers remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some signs of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft. The exchange rate has remained high over recent months, even though the terms of trade have declined somewhat.

In underlying terms, inflation was around 2½ per cent in 2011. CPI inflation was higher than that but will fall over the next quarter or two. It is currently expected that inflation will be in the 2–3 per cent range over the coming one to two years. This forecast abstracts from the effects of the carbon price and also embodies an assumption that productivity growth in the economy increases somewhat as a result of the structural change now occurring. At its next meeting, the Board of the Reserves Bank of Australia will have the opportunity to reassess the outlook for inflation, taking into account not only data on demand and output but also forthcoming information on prices.

Source: www.rba.gov.au Statement by Glenn Stevens, Governor: Monetary Policy Decision 3 April 2012

Range of Shares Held

1 - 1,000 76 28,064 0.02%

1,001 - 5,000 293 1,036,540 0.79%

5,001 - 10,000 310 2,661,703 2.02%

10,001 - 100,000 916 34,293,744 26.05%

100,001 - and over 185 93,628,664 71.12%

TOTAL 1,780 131,648,715 100.00%

Number of Ordinary

Shareholders

Number of Ordinary

Shares


Shares (%)

Name

JP Morgan Nominees Australia Limited <Cash Income A/C> 11,168,023 8.48%

Marfield Pty Limited 8,724,543 6.63%

Aust Global Resources Pty Ltd 3,636,363 2.76%

Acacia Investments Pty Ltd atf the DPH Trust* 3,554,697 2.70%

Subtotal 27,083,626 20.57%

Others 104,565,089 79.43%

Total ordinary shares on Issue 131,648,715 100.00%

*We have been advised the Damian Hicks is neither a Director, shareholder or beneficiary of this trust

Number of Ordinary

Shares Held


Shares (%)

Details Exercise price Number

Unlisted options exercisable on or before 30 June 2012 $0.80 1,000,000

Unlisted options exercisable on or before 30 June 2012 $0.40 100,000



12

8. Industry analysis 8.1. Mining in Scandinavia

The Scandinavian region within Europe is made up of Norway, Denmark, Sweden and Finland. Mining has been a key industry within the region for hundreds of years. This has led to a stable workforce that is amongst the most proficient in the industry with a consequent benefit to productivity.

Long established mining companies have not stinted on investing in the latest technology and equipment making their operations, through use of remote controlled drilling and other automated processes, amongst the most cost effective of any worldwide.

Long term growth prospects appear promising as all countries within the region are actively engaged in encouraging the development of mining. The region is abundant in base metals, precious metals and industrial minerals and much of the region is underexplored making a prime region for potential discoveries.

Sweden

Sweden is a major European mining centre. Sweden has an extensive mining history and is the largest producer of iron ore within the European Union. It is also a leading producer of base metals such as copper, zinc and lead and a leading producer of precious metals such as gold and silver.

Legislation in Sweden is favourable towards mineral explorers with generous exploration permits and exploitation concessions as well as a royalty of only 0.2% of the average value of minerals mined and no minimum expenditure commitment required.

Until 1992, only the Swedish state was permitted to explore for minerals. Since then more than one hundred exploration companies have become active in Sweden. More than US$90 million was spent on exploration in 2007. This is backed by quality databases of mining data, highly trained personnel and cutting edge mining technology to support mining companies.

The richest mining region within Sweden is the Skelleftea region in northern Sweden. There have been approximately 40 mines operated within the region since 1920.

Norway

Mining in Norway has also been occurring for hundreds of years. The mining industry within Norway produces products such as titanium minerals for use in pigments, iron ore, calcium carbonate slurry (used in paper), coal and construction materials for export.

Mining in Norway has mostly moved away from base metals, due to reserves being exhausted, to industrial minerals such as dimension stone, graphite, olivine and calcite. There are also significant coal reserves within Norway.

A focus on offshore hydrocarbon resources such as petroleum and natural gas in Norway has meant that the mainland has been under explored.

8.2. Iron Ore Mining in Scandinavia

Sweden’s largest iron ore producer is LKAB, a state owned company, which operates two underground mines and produces the bulk of Sweden’s annual production.

The largest iron ore deposit in Sweden is currently being mined by LKAB near the town of Kiruna and, as well as being one of the largest ore bodies in the world, is the largest underground iron ore mine in the world. Mining in this deposit has been secured until 2035. Decades of mining have meant that the town site itself will be moved over the next 40 to 50 years, with the town centre being moved to approximately four kilometres from where it is now.

Mining in Sweden is supported by a robust rail network, developed over the past one hundred years, which allows deposits to be transported to Sweden’s ports where the majority of iron ore products are exported.

Compared to Sweden Norway has, historically, not produced large amounts of iron ore. The largest deposits of iron ore in Norway were in the Sor-Varanger region near the border with Russia and in the Caledonide Orogen region. Deposits within these regions have generally been exhausted.

Northern Iron, an ASX listed company, owns the Sydvaranger Project which consists of three magnetite iron deposits and further prospects within the region that they currently operate within. This has led to an increase in iron ore production within Norway.

8.3. Nickel Mining in Australia

Nickel can be found in two different geological states, nickel sulphide and nickel laterite. The latter is associated with more complex mining processes and is generally mined at newer mining sites. In Australia, approximately 80% of nickel is mined from its nickel sulphide geological state. Total world production for nickel increased between 2010 and 2011 and during the same period nickel mining in Australia increased from 170,000 to 180,000 metric tonnes, making it the fifth largest producer in the world. The figure below provides a breakdown, by country, of total world production in 2011:

13

Source: Bloomberg and BDO Analysis

The success of the nickel mining industry in Australia is reliant upon the prices of nickel, the exchange rate, nickel output and general demand and supply for the metal. Nickel is primarily used in the manufacturing of stainless steel products which account for nearly two-thirds of the consumption of nickel worldwide. The global demand for stainless steel is currently being driven by the economic conditions in China. During 2011, China experienced an increase in stainless steel output of approximately 13.5% in comparison to an increase in output of 0.7% for the rest of the world. The figure below shows the fluctuations in nickel spot prices from 1 January 2005 through to 13 March 2012 as well as forecasts for the remainder of 2012.


The figure above illustrates that nickel prices decreased substantially in 2008 during the global economic crisis. Following this, there has been a general improvement in the health of the economy, which has seen both the demand and price for nickel increase. As shown above, the forecast nickel price is expected to increase marginally over the 2012 year. This price could be affected by overproduction in global stainless steel which may lead to cutbacks in the demand for nickel. The nickel price could also be further affected by appreciation of the Australian dollar against the US dollar, which may lead to a softening of nickel prices and revenues.

9. Valuation approach adopted There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows:

Capitalisation of future maintainable earnings (“FME”);

Discounted Cash Flow (“DCF”);

Quoted Market Price Basis (“QMP”);

Net Asset Value (“NAV”); and

Market Based Assessment.

A summary of each of these methodologies is outlined in Appendix 2.

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information.

16.6%

13.7%

13.7%

11.9%

10.7%

8.3%

4.9%

4.8%

15.4%

Nickel Production 2011

Russia IndonesiaPhilippinesCanadaAustraliaNew CaledoniaBrazil ChinaOthers

0

10,000

20,000

30,000

40,000

50,000

60,000

31-Dec-04 31-Dec-05 31-Dec-06 31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 31-Dec-12

Nic

kel P

rice

(U

SD/t

)

Nickel Spot Price (USD/t)

Nickel Spot Price Nickel Forecast Price

14

9.1. Valuation of Scandinavian

In our assessment of the value of Scandinavian shares, we have chosen to employ the following methodologies:

NAV approach as our primary method; and

QMP approach as our secondary method.

We have chosen these methodologies for the following reasons:

As Scandinavian is an exploration company, its core value is in the exploration assets that it holds. We have instructed SRK Consulting (Sweden) AB (“SRK”) to act as independent specialist to value these assets and have considered these in the context of Scandinavian’s other assets and liabilities on a NAV basis;

Scandinavian is listed on the ASX and this provides an indication of the market value where an observable market for the securities exists;

Scandinavian does not generate regular trading income. Therefore there are no historic profits that could be used to represent future earnings. This means that the FME valuation is not appropriate; and

Scandinavian is still in the early stage of exploration and is not expected to be in production in the foreseeable future. Therefore the application of the DCF method is not appropriate.

9.2. Valuation of Consideration

We are unable to value Hannans Reward on an NAV basis as we do not have access to the books and records of Hannans Reward, in particular information in relation to exploration and evaluation assets on which an independent specialist geologist valuation can be performed. Therefore, we have chosen to employ the following methodologies:

9.2.1. QMP approach

Hannans Reward is an ASX listed company and therefore the QMP method is considered an appropriate valuation method.

When assessing non-cash consideration in control transactions, RG 111.31 suggests that a comparison should be made between the value of the securities being offered (allowing for a minority discount) and the value of the target entity’s securities, assuming 100% of the securities are available for sale. This comparison reflects the fact that:

(a) the acquirer is obtaining or increasing control of the target; and

(b) the security holders in the target will be receiving scrip constituting minority interests in the combined entity.

RG 111.32 suggests that if we use the quoted market price of securities to value the offered consideration, then we must consider and comment on:

(a) the depth of the market for those securities;

(b) the volatility of the market price; and

(c) whether or not the market value is likely to represent the value if the takeover bid is successful.

As Hannans Reward is offering scrip to Shareholders as consideration and we do not have access to the books and records of Hannans Reward, the QMP method is an appropriate valuation method.

9.2.2. Notionally combined entity

RG111.34 states that if, in a scrip bid, the target is likely to become a controlled entity of the bidder, the bidder’s securities can also be valued assuming a notionally combined entity. The comparison should include the assets and liabilities of the target and the dilution effect of the acquisition on the target’s earnings, asset backing and dividends.

If the Offer is accepted we note that Scandinavian shareholders will hold a majority of 68.39% of the merged entity. Although we do not have access to the books and records of Hannans Reward and have not received an independent specialist geologist valuation of Hannans Reward’s mineral assets, we have combined the assets and liabilities of both Scandinavian and Hannans Reward and taken into account the dilution effect of the Offer to obtain a value per share of the notionally combined entity.

We have not deducted a minority discount from the value of the notionally combined entity as Scandinavian shareholders will hold a majority of the merged entity and will therefore still retain the ability to receive a future takeover premium.

10. Valuation of Scandinavian 10.1 Net Asset Valuation of Scandinavian

The NAV methodology we applied is on a going concern basis method that estimates the market values of the net assets of an entity but does not take into account any realisation costs.

15

When performing a NAV valuation, we must determine the following:

The assets and liabilities of the Company as at the date of valuation (or the closest available information); and

The adjustments to be made to these assets and liabilities to reflect their market values.

The value of Scandinavian assets on a going concern basis is reflected in our valuation below:

We have been advised that there has not been a significant change in the net assets of Scandinavian since 11 April 2012 except for those discussed below. The following adjustments were made to the net assets of Scandinavian as at 11 April 2012 in arriving at our valuation.

(a) Cash

We have assumed that all options currently on issue with an exercise price of $0.20 would be exercised, excluding any options currently held by Hannans Reward. Based on the $0.20 exercise price we have increased cash by $5,794,834, from $40,376 to $5,836,210, which reflects the amount that would be received by the Company upon exercise of these options.

(b) Valuation of Scandinavian’s mineral assets

We instructed SRK to provide an independent specialist valuation of the mineral assets held by Scandinavian. The table below provides a summary of this valuation:

SRK considered a number of different valuation methods when valuing the mineral assets held by Scandinavian. Due to the majority of licences held being in an early development stage SRK applied three separate methods, including the past expenditure method, the yardstick method and the comparable transaction method, to provide a range of appropriate values.

SRK has used the past expenditure method to obtain the low value of US$84.3 million and the yardstick method to obtain the high value of US$184.8 million. SRK also applied the comparable transaction method which provided a value of US$151.5 million. From the values obtained SRK provided a preferred value of Scandinavian’s mineral assets of US$140 million.

Unaudited as at Low Preferred High

11-Apr-12 Value Value Value

Notes $ $ $ $

CURRENT ASSETS

Cash and cash equivalents (a) 41,376 5,836,210 5,836,210 5,836,210

Trade and other receivables 61,608 61,608 61,608 61,608

TOTAL CURRENT ASSETS 102,984 5,897,818 5,897,818 5,897,818

NON-CURRENT ASSETS

Property, plant and equipment 78,728 78,728 78,728 78,728

Exploration expenditure (b) - 80,030,000 132,900,000 175,430,000

Other assets 1 1 1 1

TOTAL NON-CURRENT ASSETS 78,729 80,108,729 132,978,729 175,508,729

TOTAL ASSETS 181,713 86,006,547 138,876,547 181,406,547

CURRENT LIABILITIES

Trade and other payables 992,775 992,775 992,775 992,775

Employee Benefits 61,308 61,308 61,308 61,308

Other financial liabilities 5,752,560 5,752,560 5,752,560 5,752,560

TOTAL CURRENT LIABILITIES 6,806,643 6,806,643 6,806,643 6,806,643

TOTAL LIABILITES 6,806,643 6,806,643 6,806,643 6,806,643

NET ASSETS (6,624,930) 79,199,904 132,069,904 174,599,904

Shares on issue (number) 114,563,266 114,563,266 114,563,266

Value per share ($) $ 0.641 $ 1.102 $ 1.473

Diluted shares on issue (number) (c) 143,537,434 143,537,434 143,537,434

Diluted value per share ($) $ 0.552 $ 0.920 $ 1.216

Scandinavian Resources Limited Low value Preferred value High value

Mineral Assets $m $m $m

Exploration and evaluation assets (USD) 84.30 140.00 184.80

Exchange rate (USD/AUD) 0.9493 0.9493 0.9493

Total 80.03 132.90 175.43

*Exchange rate as at date of SRK valuation on 26 March 2012 sourced from Bloomberg

16

SRK has provided a technical value of Scandinavian’s mineral assets. A technical value, as defined by the Code for Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (“the Valmin Code”), is an assessment of a mineral asset’s future net economic benefit at the valuation date under a set of assumptions deemed most appropriate by an expert, excluding any premium or discount to account for such factors as market or strategic considerations. A market value comprises two components, being the technical value and a premium or discount relating to market, strategic or other considerations.

The preferred value provided by SRK was based largely on the comparable transaction method. As this method is based on previous transactions in the market we believe this value already takes into account any discounts or premiums relating to market or strategic considerations. We therefore have no reason to believe that the preferred technical value provided by SRK does not also represent the preferred market value of Scandinavian’s mineral assets.

SRK’s independent valuation report can be found at Appendix 3.

(c) Diluted shares on issue

As discussed in adjustment (a) above, the current number of shares on issue does not include the shares that would be issued on the exercise of all $0.20 options. If these options were exercised, the shares on issue would increase by 28,974,168, from 114,563,266 to 143,537,434.

Based on the above, we have determined that the net asset value of a Scandinavian share, on a diluted basis, is between $0.552 and $1.216, with a preferred value $0.920.

10.2 QMP for Scandinavian Securities

To provide a comparison to the valuation of Scandinavian in Section 10.1, we have also assessed the quoted market price for a Scandinavian share.

The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

RG 111.11 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

control over decision making and strategic direction

access to underlying cash flows;

control over dividend policies; and

access to potential tax losses.

RG 111.13 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. We have considered Hannans Reward’s practical level of control, if the Offer is accepted, in section 13.

Therefore, our calculation of the quoted market price of a Scandinavian share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control.

Minority interest value

Our analysis of the QMP of a Scandinavian share is based on the pricing prior to the announcement of the Offer. This is because the value of a Scandinavian share after the announcement may include the effects of any change in value as a result of the Offer. However, we have considered the value of a Scandinavian share following the announcement when we have considered reasonableness in section 13.

Information on the Offer was announced to the market on 29 February 2012. Therefore, the following chart provides a summary of the share price movement over the year to 27 February 2012, which was the last trading day prior to the announcement.

17


The daily price of Scandinavian shares from 1 March 2011 to 27 February 2012 has ranged from a low of $0.20 on 8 February 2012 to a high of $0.65 on 5 April 2011. On 27 February 2012 the share price closed at $0.22.

As shown above, although there has been a gradual decline in the share price of Scandinavian over the year prior to the announcement, the most notable fall occurring during June 2011. We note that on 8 June 2011 the Company announced that Kiruna Iron AB had acquired iron ore permits in consideration for 8.2 million fully paid shares in Scandinavian and a US$2 million payment with further payments dependent on future production. There were also a large number of $0.25 options, which were due to expire on 31 October 2011, that were exercised over the period.

On 2 August 2011, the day after Scandinavian announced its 4th quarter activities and cash flow report, the Scandinavian share price climbed to $0.52. Following this, the share price of Scandinavian slowly declined until it reached a low of $0.20 on 8 February 2012. During this period the volume of Scandinavian shares traded was very low, especially in comparison to earlier in 2011 when the share price was up around $0.60. We note that during this period a number of options were exercised at $0.25. These options were due to expire on 31 October 2011 and those that hadn’t been exercised had been underwritten by HR Equities. Apart from the exercise of options there was limited trading in Scandinavian shares over this period, which may have lead to the continued decline in the Scandinavian share price.

To provide a comparison of the movements in Scandinavian’s share price to the market over the same period we have provided a graph of both the S&P/ASX 200 and Scandinavian’s closing share price below:


-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

Volu

me

(mill

ions

)

Shar

es P

rice

($)

Volume Scandinavian closing share price

3,000

3,500

4,000

4,500

5,000

5,500

6,000

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

S&P/

ASX

200

Inde

x va

lue

SCR

clos

ing

shar

e pr

ice

($)

Scandinavian share price S&P/ASX 200

18

As shown above, the S&P/ASX 200 index fell significantly during August 2011. This period was marred by significant volatility in the market after US treasury bonds were downgraded resulting in widespread instability. Markets were also cautious at this time about the contentious issue of the US raising their debt ceiling. This period coincided with a significant fall in Scandinavian’s closing share price also. However, while Scandinavian’s share price continued to decline for the remained of 2011 and the start of 2012, the S&P/ASX 200 index gradually rose towards the end 2011 and continued to climb until February 2012.

During this period The Company made a number of announcements to the market. We have analysed the key announcements in order to understand the effect on the Scandinavian share price below:


We also note that in addition to the announcements discussed above, Scandinavian had issued a Notice of Meeting which included an independent expert’s report prepared by BDO on 23 September 2011. We note that even though the independent expert’s report concluded that the preferred value of a Scandinavian share was $1.456 under the NTA method, there was limited market response to this valuation. Scandinavian’s share price remained fairly consistent with the closing price of $0.30 prior to the Notice of Meeting being released to the market. The volume of Scandinavian shares traded remained relatively low post this announcement also.

To provide further analysis of the market prices for a Scandinavian share, we have also considered the volume weighted average market price (“VWAP”) for 10, 30, 60 and 90 day periods to 27 February 2012.

27 February 2012 10 Days 30 Days 60 Days 90 Days

Closing Price $0.220

Volume Weighted Average $0.242 $0.228 $0.225 $0.229


The above weighted average prices are prior to the date of the announcement of the Offer, to avoid the influence of any increase in price of Scandinavian shares that has occurred since the offer was announced.

An analysis of the volume of trading in Scandinavian shares for the six months to 27 February 2012 is set out below:

Closing Share Price

Following

Announcement

Closing Share Price

Three Days After

Announcement

$ (movement) $ (movement)

28-Feb-12 Trading Halt 0.22 (-) 0.24 ( 9%)

01-Feb-12 2nd Quarter Activities Report 0.25 (-) 0.21 ( 16%)

01-Feb-12 2nd Quarter Cashflow Report 0.25 (-) 0.21 ( 16%)

17-Jan-12 Kiruna Iron - JORC Resource Update 0.22 ( 10%) 0.22 (-)

16-Jan-12 Kiruna Iron - Altavaara Exploration Target Increase 0.20 (-) 0.22 ( 10%)

29-Dec-11 Kiruna Iron - Wide Iron Intercepts 0.20 (-) 0.20 (-)

22-Dec-11 Kiruna Iron - Renhagen Iron Results 0.20 (-) 0.20 (-)

07-Nov-11 Kiruna Iron - Harrejaure Project Drill Results 0.25 (-) 0.25 (-)

01-Nov-11 Copper and Gold Discoveries 0.27 (-) 0.25 ( 7%)

31-Oct-11 1st Quarter Cashflow Report 0.27 (-) 0.25 ( 7%)

31-Oct-11 1st Quarter Activities Report 0.27 (-) 0.25 ( 7%)

27-Oct-11 HNR: Hannans - Underwriting of Options 0.27 (-) 0.27 (-)

21-Oct-11 Sarksjon Project 0.30 (-) 0.30 (-)

21-Oct-11 Kiruna Iron - Harrejaure Project 0.30 (-) 0.30 (-)

17-Oct-11 Kiruna Iron - High Grade Iron results (Updated) 0.30 (-) 0.30 (-)

17-Oct-11 Kiruna Iron - High Grade Iron Results 0.30 (-) 0.30 (-)

13-Oct-11 Kiruna Iron Funding Mandate 0.30 (-) 0.30 (-)

07-Sep-11 Kiruna Iron - Drilling and Assay Update 0.36 (-) 0.35 ( 3%)

06-Sep-11 Cooperation Agreement with Boliden 0.36 (-) 0.35 ( 3%)

06-Sep-11 Kiruna Iron Drilling and Assay Update 0.36 (-) 0.35 ( 3%)

01-Aug-11 4th Quarter Cashflow Report 0.44 (-) 0.49 ( 11%)

01-Aug-11 4th Quarter Activities Report 0.44 (-) 0.49 ( 11%)

29-Jul-11 JORC Resources Significantly Exceed Targets 0.44 ( 10%) 0.44 (-)

13-Jul-11 Kiruna Iron Project - Update 0.42 ( 5%) 0.40 ( 5%)

08-Jun-11 Kiruna Iron - Acquisition of Strategic Iron Permits 0.50 (-) 0.50 (-)

11-May-11 Kiruna Iron Project Drilling Update 0.62 (-) 0.62 (-)

02-May-11 3rd Quarter Reports 0.62 (-) 0.62 (-)

18-Apr-11 Kiruna Iron Drilling Update 0.62 ( 1%) 0.62 (-)

04-Mar-11 Kiruna Iron Project - Drilling at Rakkurijarvi Prospect 0.60 ( 2%) 0.59 ( 2%)

Date Announcement

19

Share price low Share price high Cumulative Volume traded As a % of Issued capital

1 day $0.22 $0.22 17,500 0.02%

10 days $0.22 $0.28 112,767 0.10%

30 days $0.20 $0.28 831,100 0.73%

60 days $0.20 $0.28 921,100 0.80%

90 days $0.20 $0.28 1,174,870 1.03%

180 days $0.20 $0.52 2,954,718 2.58% Source: Bloomberg and BDO Analysis

This table indicates that Scandinavian’s shares display a low level of liquidity, with 2.58% of the Company’s current issued capital being traded in a six month period. We note 22,633,335 (19.76%) of Scandinavian’s issued share capital is held in escrow until 21 April 2012 and that the top two shareholders of Scandinavian (Equity & Royalty Investments Ltd and HR Equities) held a combined 39,605,236 (34.57%) of the issued capital at the announcement date. If we were to exclude these shares in escrow and the top two shareholders holdings from the calculation above, approximately 5.65% of the issued capital has been traded in a six month period.

For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Regular trading in a company’s securities;

Approximately 1% of a company’s securities are traded on a weekly basis;

The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and

There are no significant but unexplained movements in share price.

A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

Our assessment is that a range of values for Scandinavian shares based on the QMP method, after disregarding post announcement pricing, is between $0.22 and $0.24.

Control Premium

The concept of a premium for control reflects the additional value that attaches to a controlling interest. In determining whether including a control premium is appropriate in this instance, we believe there are two key considerations. Firstly, we believe it is appropriate to consider the level of control currently held by Hannans Reward and what additional level of control/ability to influence the Company Hannans Reward would gain if the Offer is accepted and whether a premium for control is appropriate given the current position of the company.

We have reviewed the announced control premia paid by acquirers for target iron ore companies listed on the ASX since 2005. A summary of the control premia is noted in the table below:

Source: BDO Analysis and Bloomberg

Note: (1) We have excluded the acquisition premium paid for the compulsory acquisition by Cliffs Natural Resources Inc of the remaining 14.8% shareholding interest in Cliffs Asia

Pacific Iron Ore Holdings Pty Ltd as Cliff Natural Resources Inc held an effective controlling interest in Cliffs Asia Pacific Iron Ore Holdings Pty Ltd prior to the transaction.

Announce

Date Target Name Acquirer Name

Deal Value

(A$ million)

Shareholding

Interest Post

Transaction

Announced

Premium

Implied

Premium

27/06/2011 FerrAus Limited Atlas Iron Ltd 125.49 100.0% 27.6% 25.0%

23/05/2011 Territory Resources Ltd Noble Group 122.06 100.0% 75.4% N/A

21/12/2010 Giralia Resources NL Atlas Iron Ltd 983.83 100.0% 52.5% 30.0%

10/03/2010 Aurox Resources Ltd Atlas Iron Ltd 131.49 100.0% 128.6% 26.5%

16/10/2009 United M inerals Corp NL BHP Billiton Ltd 191.82 100.0% 38.6% N/A

7/09/2009 Warwick Resources Ltd Atlas Iron Ltd 48.59 100.0% 60.1% 26.5%

20/08/2009 Polaris Metals NL Mineral Resources Ltd 138.63 100.0% 109.2% 20.0%

14/03/2008 Midwest Corp Ltd Sinosteel Corp 1,068.62 100.0% 36.0% N/A

10/01/2008 Cliffs Asia Pacific Iron Ore Holdings Pty Ltd Cliffs Natural Resources Inc 559.42 100.0% 16.8% N/A

24/07/2006 Aztec Resources Ltd/Australia Mount Gibson Iron Ltd 207.24 100.0% 36.5% N/A

11/01/2005 Cliffs Asia Pacific Iron Ore Holdings Pty Ltd Cliffs Natural Resources Inc 508.28 80.4% 36.5% N/A

Average 60.1% 25.6%

Median 45.6% 26.5%

Effective Control Acquisitions

20

We have reviewed the announced control premia paid by acquirers for target mining companies listed on the ASX since 2006. A summary of the control premia is noted in the table below:

Source: BDO Analysis and Bloomberg

In arriving at an appropriate control premium to apply we note that observed control premiums can vary due to the:

Nature and magnitude of non-operating assets

Nature and magnitude of discretionary expenses

Perceived quality of existing management

Nature and magnitude of business opportunities not currently being exploited

Ability to integrate the acquiree into the acquirer’s business

Level of pre-announcement speculation of the transaction

Level of liquidity in the trade of the acquiree’s securities.

Based on the table above, we observe that significant control premia on a company’s share price are paid for Australian iron ore companies. These significant premia, in part reflect the strategic value of the target to the acquirer above the conventional level of control premium paid. We also observed that a higher control premium is paid for iron ore transactions resulting in an effective control with a range of 36.0% to 128.6% with an average of 60.1% and median of 45.6%. We have also analysed the implied premia. These premia have been obtained from the targets’ Independent Expert’s Report and represent the control premium used when analysing the target’s share price. From our analysis, an average premium of 25.6% and a median of 26.5% have been used.

Across the general Australian mining industry, the average annual control premium paid for effective control transactions over 2006 to 2011 ranged between 22.26% and 39.34% with an average of 32.19%.

If the Offer is accepted, Hannans Reward will acquire 100% of Scandinavian therefore giving Hannans Reward effective control over the Company.

Taking the factors above into consideration in applying a control premium to Scandinavian’s quoted market share price we believe an appropriate range to be 20% - 30% which is consistent with our analysis of the implied premia within the market. We have chosen this range as these premia are calculated based on an independent expert’s opinions on the specific transactions in the table above and are not influenced by the level of share trading of an entity’s securities. The announced market premia are calculated on a company’s share price and can be potentially higher if a security has a low level of liquidity which could lead to its share price not being reflective of the underlying value. We believe this range, determined from implied premia, is the most appropriate to use.

QMP including control premium

Applying a control premium to Scandinavian’s quoted market share price results in the following quoted market price value including a premium for control:

Low $

High $

QMP value per share $0.22 $0.24

Control premium 20% 30%

QMP valuation including a premium for control $0.264 $0.312

Therefore, our valuation of a Scandinavian share based on the quoted market price method and including a premium for control is between $0.264 and $0.312.

Year Number of Transactions Average Deal Value (AUD $m) Average Control Premium (%)

2011 13 710.34 33.07

2010 28 688.52 39.34

2009 33 91.18 34.36

2008 8 591.43 38.87

2007 28 570.63 25.26

2006 29 174.63 22.26

Average 471.12 32.19

Median 581.03 33.71

21

10.3 Assessment of Scandinavian Value

The results of the valuations performed are summarised in the table below:

Low

$ Preferred

$ High

$

NTA approach (Section 10.1) $0.552 $0.920 $1.216

QMP approach (Section 10.2) $0.264 $0.288 $0.312

We note that there is a difference between the preferred value of a Scandinavian share derived under each methodology in the table above. From our analysis under section 10.2, we note that approximately 5.65% of Scandinavian’s current issued capital (excluding the shares held in escrow and the holdings of the top two shareholders) has been traded within the six month period prior to the announcement of the Offer. This indicates that there does not appear to be a deep market for Scandinavian shares.

We have also undertaken further analysis of Scandinavian’s share price movements in section 10.2, in order to understand the cause of the decrease in the price of Scandinavian. We noted that although there were external market conditions which may have lead to this decrease during August to October 2011 there did not appear to be any further significant external factors or announcements made by Scandinavian that would have caused the Company’s share price to continue to decrease to an eventual low of $0.20 on 8 February 2011. There was however a significant number of options exercised during the period which had an exercise price of $0.25 and were due to expire on 31 October 2011.

We also note that even though the independent expert report, released to the market on 23 September 2011, concluded that the preferred value of a Scandinavian share was $1.456, there did not appear to be any positive market response as a result. There may be a number of explanations as to why Scandinavian’s share price does not reflect this underlying value of the mineral assets, as provided by SRK. One reason may be that the majority of Scandinavian’s mineral assets are at an early development stage and shareholders may be taking into account any dilutionary impact that may occur in order to progress these assets to a point of commercialisation. We also note that the top two shareholders of Scandinavian hold a combined 34.57% of the Company. This large holding may have had a negative effect on the share price, such as being a deterrent to alternative takeover offers, and there may also be contributing factors as a result of the limited knowledge or information available to shareholders surrounding iron ore mining in Scandinavia. As a combination of all these factors we can conclude that the QMP method cannot be considered a reliable reflection of the value of a Scandinavian share.

Therefore, we have relied on the NAV methodology which values a Scandinavian share between $0.552 and $1.216, with a preferred value of $0.920.

11 Valuation of consideration offered

11.1 QMP for Hannans Reward Securities

Shareholders of Scandinavian are being offered three Hannans Reward shares for every one Scandinavian share they hold. As explained in section 9.2 we have assessed the quoted market price for a Hannans Reward share to arrive at the value of the consideration offered by Hannans Reward. The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

Under RG 111.34 it is noted that if, in a scrip bid, the target is likely to become a controlled entity of the bidder, the bidder’s securities can also be valued using a notionally combined entity. However, it should still be noted that the accepting holders are likely to hold minority interests in that combined entity.

Our analysis of the quoted market price of a Hannans Reward share is based on the most recent trading price over the last 12 months prior to the date of announcement of the Offer on 29 February 2012.

The following chart provides a summary of the share price movement over the year to the last trading day prior to the announcement of the Offer, 27 February 2012.

22


The daily price of Hannans Reward shares from 1 March 2011 to 27 February 2012 has ranged from a low of $0.092 on 27 February 2012 to a high of $0.25 on 8 March 2011. On 27 February 2012 the share price closed at $0.092.

During this period a number of announcements were made to the market. The key announcements are set out below:


As shown above the price of a Hannans Reward share has decreased gradually from its high of $0.25 on 8 March 2011 until the date of announcement. To provide further analysis of the market prices for a Hannans Reward share, we have also considered the VWAP for 10, 30, 60 and 90 day periods to 27 February 2012.

27 February 2012 10 Days 30 Days 60 Days 90 Days

Closing Price $0.094

Volume Weighted Average $0.100 $0.113 $0.110 $0.114


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Closing Share Price

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$ (movement) $ (movement)

28-Feb-12 Trading Halt 0.09 (-) 0.10 ( 11%)

01-Feb-12 2nd Quarter Activities Report 0.12 ( 4%) 0.12 (-)

01-Feb-12 2nd Quarter Cashflow Report 0.12 ( 4%) 0.12 (-)

22-Dec-11 Encouraging Results at Jigalong Project 0.11 (-) 0.11 (-)

22-Dec-11 Drilling Update at Lake Johnston Project 0.11 (-) 0.11 (-)

14-Nov-11 Drilling Commences at Lake Johnston Project 0.12 (-) 0.13 ( 4%)

01-Nov-11 Manganese at Jigalong 0.12 ( 11%) 0.13 ( 8%)

01-Nov-11 1st Quarter Activities Report 0.12 ( 11%) 0.13 ( 8%)

31-Oct-11 1st Quarter Cashflow Report 0.135 ( 4%) 0.12 ( 15%)

27-Oct-11 Underwriting of Options 0.14 ( 8%) 0.14 (-)

15-Sep-11 Manganese Drilling Begins at Jigalong Project 0.15 (-) 0.15 (-)

02-Sep-11 Forrestania Project Commencement of Drilling 0.16 (-) 0.16 (-)

29-Jul-11 4th Quarter Cashflow Report 0.19 (-) 0.19 (-)

29-Jul-11 4th Quarter Activities Report 0.19 (-) 0.19 (-)

20-Jul-11 Forrestania Project Exploration Update 0.18 ( 6%) 0.20 ( 11%)

06-Jul-11 Jigalong Project Exploration Update 0.19 ( 5%) 0.19 ( 3%)04-Jul-11 Lake Johnston Project Exploration Update 0.20 (-) 0.20 ( 3%)27-Jun-11 New Iron and Manganese Company 0.16 (-) 0.18 ( 9%)

02-May-11 3rd Quarter Reports 0.20 ( 3%) 0.19 ( 5%)

Date Announcement

23

The above weighted average prices are prior to the date of the announcement of the Offer, to avoid the influence of any increase in price of Hannans Reward shares that has occurred since the offer was announced.

An analysis of the volume of trading in Hannans Reward shares for the six months to 27 February 2012 is set out below:

Share price low Share price high Cumulative Volume traded As a % of Issued capital

1 day $0.092 $0.094 22,500 0.02%

10 days $0.092 $0.105 442,500 0.34%

30 days $0.092 $0.125 1,874,383 1.42%

60 days $0.092 $0.125 3,132,754 2.38%

90 days $0.092 $0.140 4,494,733 3.41%

180 days $0.092 $0.205 15,145,361 11.50%


This table indicates that Hannans Reward’s shares display a low level of liquidity, with 11.50% of the Company’s current issued capital being traded in a six month period.

This table indicates that Hannans Reward’s shares display a low level of liquidity, with 11.50% of the Company’s current issued capital being traded in a six month period. For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Regular trading in a company’s securities;

Approximately 1% of a company’s securities are traded on a weekly basis;

The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and

There are no significant but unexplained movements in share price.

A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

As discussed it section 9.2, we are unable to value Hannans Reward on an NAV basis as we do not have access to the books and records of Hannans Reward, in particular information in relation to exploration and evaluation assets on which an independent specialist geologist valuation can be performed. As such we have assessed the value of a Hannans Reward share under the QMP method.

Our assessment is that a range of values for Hannans Reward shares based on market pricing, after disregarding post announcement pricing, is between $0.09 and $0.11. As noted in section 4, the consideration for the Offer is that Scandinavian shareholders will receive three Hannans Reward shares for every one Scandinavian share held. The value of the consideration offered is show below:

Low $

High $

QMP value per Hannans Reward share $0.09 $0.11

Number of shares offered as consideration 3 3

Value of Consideration offered (QMP method) $0.27 $0.33

11.2 Notionally combined entity

As discussed in section 9.2, under RG111.34, a bidder’s securities can also be valued assuming a notionally combined entity.

In the table below, we have combined the assets and liabilities of both Scandinavian and Hannans Reward and taken into account the dilution effect if the Offer is accepted to obtain a value per share of the notionally combined entity. This value represents the value per share that Scandinavian shareholders will be receiving if the Offer is successful.

24

The following adjustments were made to the net assets of the notionally combined entity in arriving at our valuation:

(a) Other financial assets

The other financial assets balance reflects the market value of equity investments held by Hannans Reward as at 31 December 2011. We have adjusted this balance to remove Hannans Reward’s investment in Scandinavian. As at 31 December 2011, Hannans Reward held 19,585,235 ordinary fully paid shares in Scandinavian which we have valued at $3,917,047. We have therefore reduced the other financial assets in the notionally combined entity from $19,563,345 to $15,646,298. All other investments held by Hannans Reward have remained at 31 December 2011 values.

(b) Exploration expenditure

We have included the valuation of Scandinavian’s mineral assets, which has been provided by SRK, in the net assets of the notionally combined entity. Hannans Reward’s statement of financial position as at 31 December 2011 does not have any value assigned to the exploration assets it holds. As we do not have access to the books and records of Hannans Reward and have not received an independent specialist geologist valuation of these mineral assets we have assigned nil value to exploration expenditure for Hannans Reward. We note that any value attributable to these mineral assets will be of benefit to Scandinavian shareholders if the Offer is successful.

(c) Other financial liabilities

As at 11 April 2012, Scandinavian has a loan of $4,314,834 payable to Hannans Reward which is recorded under other financial liabilities. Although we do not have access to Hannans Reward’s books and records, we expect that this amount would be recorded as a financial asset for Hannans Reward. If the Offer is successful these amounts will be eliminated upon consolidation in the notionally combined entity. Therefore we have not adjusted these balances in the notionally combined entity as the effect on the net assets will be nil.

Hannans Reward

Low Preferred High 31-Dec-11 Low Preferred High

Notes $ $ $ $ $ $ $

CURRENT ASSETS

Cash and cash equivalents 5,836,210 5,836,210 5,836,210 218,292 6,054,502 6,054,502 6,054,502

Trade and other receivables 61,608 61,608 61,608 254,542 316,150 316,150 316,150

Other financial assets (a) - - - 19,563,345 15,646,298 15,646,298 15,646,298

TOTAL CURRENT ASSETS 5,897,818 5,897,818 5,897,818 20,036,179 22,016,950 22,016,950 22,016,950

NON-CURRENT ASSETS

Trade and other receivables - - - 312,227 312,227 312,227 312,227

Property, plant and equipment 78,728 78,728 78,728 148,145 226,873 226,873 226,873

Exploration expenditure (b) 80,030,000 132,900,000 175,430,000 - 80,030,000 132,900,000 175,430,000

Other assets 1 1 1 300,000 300,001 300,001 300,001

TOTAL NON-CURRENT ASSETS 80,108,729 132,978,729 175,508,729 760,372 80,869,101 133,739,101 176,269,101

TOTAL ASSETS 86,006,547 138,876,547 181,406,547 20,796,551 102,886,051 155,756,051 198,286,051

CURRENT LIABILITIES

Trade and other payables 992,775 992,775 992,775 1,338,037 2,330,812 2,330,812 2,330,812

Employee Benefits 61,308 61,308 61,308 101,279 162,587 162,587 162,587

Borrowings - - - 1,050,134 1,050,134 1,050,134 1,050,134

Other financial liabilities (c) 5,752,560 5,752,560 5,752,560 20,901 5,773,461 5,773,461 5,773,461

TOTAL CURRENT LIABILITIES 6,806,643 6,806,643 6,806,643 2,510,351 9,316,994 9,316,994 9,316,994

NON-CURRENT LIABILITIES

Provisions - - - 36,854 36,854 36,854 36,854

Deferred tax liabilities - - - 251,045 251,045 251,045 251,045

Other financial liabilities - - - 65,680 65,680 65,680 65,680

TOTAL NON-CURRENT LIABILITIES - - - 353,579 353,579 353,579 353,579

TOTAL LIABILITES 6,806,643 6,806,643 6,806,643 2,863,930 9,670,573 9,670,573 9,670,573

NET ASSETS 79,199,904 132,069,904 174,599,904 17,932,621 93,215,478 146,085,478 188,615,478

Shares on issue (number) (d) 143,537,434 143,537,434 143,537,434 503,445,312 503,445,312 503,445,312

Value per share ($) 0.552$ 0.920$ 1.216$ 0.185$ 0.290$ 0.375$

Value of consideration ($) (e) 0.555$ 0.871$ 1.124$


Scandinavian Resources Ltd Notionally Combined Entity

25

(d) Shares on issue

As noted in section 4, if the Offer is accepted, a total of 416,522,808 shares in the merged entity will be on issue. This does not include the shares that would be issued upon exercise of any of the current 28,974,168 Scandinavian options that have an exercise price of $0.20. For comparative purposes we have assumed that these options will be exercised and a further 86,922,504 shares in the notionally combined entity will be issued under the Offer. Therefore, we have increased shares on issue in the notionally combined entity from 416,522,808 to 503,445,312.

(e) Value of consideration

As Scandinavian shareholders will be receiving three Hannans Reward shares for every one Scandinavian share that they hold, we have multiplied the derived value per share in the merged entity by three to represent the total value of the consideration that Scandinavian shareholders will receive.

11.3 Assessment of consideration offered

The value of the consideration offered under both the QMP method and the notionally combined entity method is show below:

Low $

Preferred $

High $

Value of Consideration offered under the QMP method $0.270 $0.300 $0.330

Value of the notionally combined entity $0.555 $0.871 $1.124

12 Is the Offer fair?

The value of the Offer consideration and the value of one Scandinavian share are compared below:

Ref Low $

Preferred $

High $

Assessed value of a Scandinavian share 10.3 $0.552 $0.920 $1.216

Value of notionally combined entity 11.2 $0.555 $0.871 $1.124

Value of Consideration offered under the QMP method 11.1 $0.270 $0.300 $0.330

The above valuation ranges are graphically presented below:

We note from the table and graph above that the value of the notionally combined entity is consistent with the assessed value of a Scandinavian share. However, since the preferred value of the notionally combined entity is less than the preferred value of a Scandinavian share we do not consider the Offer to be fair. We have not incorporated the market value of Hannans Reward’s mineral assets in this assessment as we have not had access to the Bidder. It is possible that by reflecting the market value of Hannans Reward’s mineral assets in our calculation that the preferred value of the notionally combined entity may exceed the preferred value of a Scandinavian share.

The value of the consideration offered calculated using the QMP methodology is less than the value of a Scandinavian share. Accordingly, under this basis we do not consider the Offer to be fair.

Given that Shareholders will hold 68.39% of the notionally combined entity we consider that the most appropriate measure of value for Shareholders is the value of the notionally combined entity.

0.15 0.35 0.55 0.75 0.95 1.15 1.35

Value of consideration under QMP method

Value of the notionally combined entity

Value of a Scandinavian share prior to Proposal

Valuation ($)

Low Preferred High

26

13. Is the Offer reasonable? 13.1 Advantages of accepting the Offer

The key advantages of accepting the Offer for Scandinavian shareholders are set out below:

13.1.1 Creation of a combined group with a stronger balance sheet

For the period ended 11 April 2012, Scandinavian incurred a loss of $8.23 million and had net liabilities of $6.62 million with cash of $41,376. As at 31 December 2011, Hannans Reward had net assets of $17.93 million.

If the Offer is accepted the merged entity will have a stronger balance sheet and cash position with approximately $12.2 million in cash and liquid investments. This may enable it to advance current exploration and development activities and pursue future growth opportunities when they arise. A stronger financial position is expected to give the merged entity increased media coverage, a greater ability to obtain debt and equity finance, including an increased level of investment interest in the financial markets and possibly an access to a wider range of investors.

13.1.2 Future funding potential

Scandinavian announced on 23 January 2012 that it was seeking to secure between US$12.5 million and US$15 million in funds for its Kiruna Iron project. The funds raised are to be used for exploration activities, acquisition costs and the repayment of third party loans (including amounts owed to HR Equities). The ability to raise funds in the current equity market has been difficult and although this does not indicate that these funds cannot be raised, it does indicate that pricing uncertainty and timing issues may exist.

The Offer provides Scandinavian shareholders with a more immediate alternative, with Hannans Reward indicating that they have sufficient working capital, through the utilisation of existing cash reserves and via the sale of ASX listed investments, to carry out the current project expenditure in the short to medium term.

13.1.3 Scandinavian shareholders will retain a controlling interest in the merged entity

If the Offer is accepted, Scandinavian shareholders will own 68.39% of Hannans Reward post merger and existing Hannans Reward shareholders will own 31.61%, on an undiluted basis. Through a majority shareholding Scandinavian shareholders will still retain a significant interest in Scandinavian’s current exploration assets while also gaining exposure to any potential upside within Hannans Reward’s exploration and investment portfolio.

Scandinavian shareholders will also retain the ability to receive a future takeover premium.

13.1.4 Major shareholders in Scandinavian intend accepting Offer

As announced to the market on 20 March 2012, Equity & Royalty Investments Ltd and Craton Capital Fund, who collectively own approximately 28.10% of Scandinavian’s current ordinary shares on issue, have advised that they will accept the Offer for Scandinavian shares in respect of all shares that they hold, in the absence of a superior offer. When combined with Hannans Reward’s current shareholding in Scandinavian of 17.11%, the combined interest will increase to 45.21%. Therefore, the prospects of another bidder emerging may be low.

13.1.5 Diversification and exposure to additional assets

If the Offer is successful, Scandinavian shareholders will be exposed to a more diversified portfolio of assets across a greater number of projects. This includes exploration projects within Australia covering nickel, gold and base metals, particularly the Forrestania project and the East Pilbara project.

13.1.6 Increased market capitalisation

If the Offer is successful, the merged entity would have an estimated market capitalisation of approximately $32.07 million. This increased market capitalisation, relative to Scandinavian’s market capitalisation on a standalone basis, is expected to provide greater media coverage and an increased liquidity.

13.1.7 Intentions of regarding expenditure program for Scandinavian projects

Hannans Reward intends to continue with the current budgeted expenditure program in relation to the Scandinavian projects. Initially, cash reserves of the merged entity will be used to fund this expenditure and if further funds are required, Hannans Reward have indicated that they will seek to raise additional capital as appropriate in order to fund the projects in the longer term.

13.1.8 Synergistic benefits

There is the potential to realise certain cost synergies such as ASX listing costs, corporate overheads and rationalisation of management structures in the combined entity. Hannans Reward intends to consolidate the corporate head office of Scandinavian by centralising the company secretarial, financial management and accounting functions.

13.2 Disadvantages of accepting the Offer

13.2.1 Dilution of existing shareholders’ interest

Prior to the Offer, Scandinavian shareholders owned 82.89% of the Company with Hannans Reward owning 17.11%. If the Offer is accepted Scandinavian shareholders’ interests will be diluted to 68.39% of the merged entity.

27

13.2.2 Scandinavian will have to share benefits of its assets with Hannans Reward

If the Offer is successful, Scandinavian shareholders will hold a diluted interest in the merged entity’s assets and will have to share any development or exploration upside in its assets portfolio, particularly the Kiruna Iron project, with the current shareholders of Hannans Reward.

13.3 Other considerations

13.3.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the Shareholders of Scandinavian a premium over the value ascribed to that resulting from the Offer.

13.3.2 Potential decline in Scandinavian share price

We have analysed movements in Scandinavian’s closing share price since the Offer was announced. A graph of Scandinavian’s share price leading up to and following the announcement is set out below.


Following the announcement of the Offer on 29 February 2012, Scandinavian’s share price increased to close at $0.24 on 1 March 2012, an increase of 9.1%, with a volume of 180,000 shares being traded on that day. Since the announcement, Scandinavian’s share price has remained stable and on 16 April 2012 closed at $0.23.

Given the above analysis, it is possible that if the Offer is not accepted, then Scandinavian’s share price may decline back to pre-announcement levels.

13.3.3 Post announcement share price of Hannans Reward

RG 111.33 states that trading after a bid is announced may reflect some of the benefits of the combined entity, depending on whether the market has confidence that the transaction will proceed. Therefore, we have analysed movements in Hannans Reward’s closing share price since the Offer was announced. A graph of Hannans Reward’s share price leading up to and following the announcement is set out below.


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Announcement date

28

Following the announcement of the Offer on 29 February 2012, Hannans Reward’s share price increased to close at $0.10 on 1 March 2012, an increase of 6.4%. Hannans Reward’s share price remained between $0.09 and $0.10 until 23 March 2012 where it fell to $0.081. It closed at $0.077 on 16 April 2012.

14. Conclusion We have considered the terms of the Offer as outlined in the body of this report and have concluded that the Offer is not fair but reasonable to the Shareholders of Scandinavian.

15. Sources of information This report has been based on the following information:

Draft Target’s Statement on or about the date of this report;

Bidder’s Statement dated 20 March 2012;

Reviewed financial statements of Scandinavian Resources Ltd and Hannans Reward Ltd for the half-years ended 31 December 2011 and 31 December 2010;

Audited financial statements of Scandinavian Resources Ltd and Hannans Reward Ltd for the years ended 30 June 2011 and 30 June 2010;

Unaudited management accounts of Scandinavian Resources Ltd as at 11 April 2012;

Independent Valuation of Mineral Assets held by Scandinavian Resources Ltd prepared by SRK Consulting (Sweden) AB as at 26 March 2012;

Share registry information for Scandinavian Resources Ltd as at 20 March 2012;

Information in the public domain; and

Discussions with Directors and Management of Scandinavian Resources Ltd.

16. Independence BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $25,000 (excluding GST and reimbursement of out of pocket expenses). Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by Scandinavian in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the Scandinavian, including the non provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to Scandinavian and Hannans Reward and any of their respective associates with reference to ASIC Regulatory Guide 112 “Independence of Experts”. In BDO Corporate Finance (WA) Pty Ltd’s opinion it is independent of Scandinavian and Hannans Reward and their respective associates.

A draft of this report was provided to Scandinavian and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).

17. Qualifications BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

29

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants in Australia. He has over twenty years experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 150 public company independent expert’s reports under the Corporations Act or ASX Listing Rules. These experts’ reports cover a wide range of industries in Australia. Sherif Andrawes is the Chairman of BDO in Western Australia.

Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam’s career spans 13 years in the Audit and Assurance and Corporate Finance areas. Adam has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors.

18. Disclaimers and consents This report has been prepared at the request of Scandinavian for inclusion in the Target’s Statement which will be sent to all Scandinavian Shareholders. Scandinavian engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the offer from Hannans Reward Ltd to acquire all of its outstanding fully paid ordinary shares by way of an off-market takeover bid.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Target’s Statement. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Target’s Statement other than this report.

BDO Corporate Finance (WA) Pty Ltd has not independently verified the information and explanations supplied to us, nor has it conducted anything in the nature of an audit or review of Scandinavian or Hannans Reward in accordance with standards issued by the Auditing and Assurance Standards Board. However, we have no reason to believe that any of the information or explanations so supplied are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence in relation to Hannans Reward. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time.

With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Offer, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of Scandinavian, or any other party.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for the mineral assets held by Scandinavian Resources Ltd.

The valuer engaged for the mineral assets valuation, SRK Consulting (Sweden) AB, possess the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and the assumptions made in arriving at their valuation are considered appropriate for this report. We have received consent from the valuer for the use of their valuation report in the preparation of this report and to append a copy of their report to this report.

The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd has no obligation to update this report for events occurring subsequent to the date of this report.

Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD

Sherif Andrawes Director

Adam Myers Director

30

Appendix 1 – Glossary of Terms Reference Definition

The Act The Corporations Act 2001 (Cth)

ASIC Australian Securities and Investments Commission

ASX Australian Securities Exchange

BDO BDO Corporate Finance (WA) Pty Ltd

The Company Scandinavian Resources Ltd

DCF Discounted Future Cash Flows

EBIT Earnings before interest and tax

FME Future Maintainable Earnings

FSG Financial Services Guide

Hannans Reward Hannans Reward Ltd

HIM Hannans Investment Management

HR Equities HR Equities Pty Ltd

NAV Net Asset Value

QMP Quoted Market Price

The Offer The proposal from Hannans Reward Ltd to acquire all the fully paid ordinary shares of Scandinavian Resources Ltd by way of an off-market takeover bid.

Our Report This Independent Expert’s Report prepared by BDO

RG111 Content of expert reports (March 2011)

RG112 Independence of experts (March 2011)

Scandinavian Scandinavian Resources Ltd

Shareholders Shareholders of Scandinavian Resources Ltd not associated with Hannans Reward Ltd

SRK SRK Consulting (Sweden) AB

The Valmin Code Code for Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports 2005 Edition

VWAP Volume Weighted Average Price

31

Appendix 2 – Valuation Methodologies Methodologies commonly used for valuing assets and businesses are as follows:

1 Net asset value (“NAV”)

Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

Orderly realisation of assets method Liquidation of assets method Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when an entity is not making an adequate return on its assets, a significant proportion of the entity’s assets are liquid or for asset holding companies.

2 Quoted Market Price Basis (“QMP”)

A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a “deep” market in that security.

3 Capitalisation of future maintainable earnings (“FME”)

This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (“EBIT”) or earnings before interest, tax, depreciation and amortisation (“EBITDA”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used for FME.

4 Discounted future cash flows (“DCF”)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows.

5 Market Based Assessment

The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation.

32

Appendix 3 – Independent Valuation

Report Prepared by

SRK Consulting (Sweden) AB SE394

VALUATION OF MINERAL ASSETS HELD BY SCANDINAVIAN

RESOURCES

Prepared For

BDO Corporate Finance (WA) Pty Ltd

SRK Consulting SCR Valuation – Details

SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012

COPYRIGHT AND DISCLAIMER Copyright (and any other applicable intellectual property rights) in this document and any accompanying data or models is reserved by SRK Consulting (Sweden) AB ("SRK") and is protected by international copyright and other laws.

This document may not be utilised or relied upon for any purpose other than that for which it is stated within and SRK shall not be liable for any loss or damage caused by such use or reliance. In the event that the recipient of this document wishes to use the content of this document in support of any purpose beyond or outside that which it is expressly stated or for the raising of any finance from a third party where the document is not being utilised in its full form for this purpose, the recipient shall, prior to such use, present a draft of any report or document produced by it that may incorporate any of the content of this document to SRK for review so that SRK may ensure that this is presented in a manner which accurately and reasonably reflects any results or conclusions produced by SRK.

© SRK Consulting (Sweden) AB 2011

SRK Legal Entity: SRK Consulting (Sweden) AB

SRK Address: Trädgårdsgatan 13-15 931 31 Skellefteå

Sweden

Date: March, 2012

Project Number: SE394

SRK Project Director: Johan Bradley Managing Director & Senior Consultant (Geology)

SRK Project Manager: Johan Bradley Managing Director & Senior Consultant (Geology)

Client Legal Entity: BDO Corporate Finance (WA) Pty Ltd

Client Address: 38 Station Street Subiaco

WA 6008 Australia

SRK Consulting (Sweden) AB Trädgårdsgatan 13-15 931 31 Skellefteå Sweden E-mail: [email protected] URL: www.srk.se.com Tel: + 46 (0) 910 545 90 Fax: + 46 (0) 910 545 99

Registered Address: Trädgårdsgatan 13-15, 931 31 Skellefteå, Sweden

SRK Consulting (Sweden) AB Reg No 556768-5689

Group Offices: Africa

Asia Australia

Europe North America South America

EXECUTIVE SUMMARY VALUATION OF MINERAL ASSETS HELD BY SCANDINAVIAN

RESOURCES

1 INTRODUCTION Scandinavian Resources Limited (“SCR”), hereinafter also referred to as the “Company”, engaged BDO Corporate Finance (WA) Pty Ltd (BDO) to prepare an Independent Expert’s Report in relation a proposal made by Hannans Reward Ltd (“Hannans”) to acquire all of the outstanding fully paid ordinary shares in SCR by way of an off-market takeover bid. At the request of BDO in its role as independent expert, SRK was engaged on 8 March 2012, as an independent specialist to provide BDO with an opinion on the technical valuation of mineral assets (the “Assets”) held by SCR.

In line with the requirements stipulated by BDO, SRK has prepared a Valuation Report in accordance with the 2005 edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the “VALMIN Code”), the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”) and ASIC Regulatory Guides 111 (Content of Expert Reports) and 112 (Independence of Experts). Specifically, SRK has prepared a Technical Valuation of the Assets, valid at 26 March 2012.

This report is based to a large extent on the work carried out as part of a technical valuation of the Assets prepared by SRK in August 2011, also at the request of BDO in its role as independent expert, acting on behalf of the Company. Since the August valuation, SRK notes the Company has undertaken further work on the Assets, resulting in certain key developments, specifically:

• The preparation of Mineral Resource Estimates prepared for three deposits which were previously Exploration Targets;

• The acquisition of two additional Exploration Targets; and

• A substantial increase in the potential tonnage estimated for one of the Exploration Targets.

In the course of this work, SRK has completed a review of material project data, held discussions with Company staff and its consultants and carried out site visits to the key Assets to review the geology of these firsthand and assess the methods used by the Company to explore these. SRK’s most recent site visit was carried out in July 2011.

SRK has not conducted any legal due diligence on the ownership of the exploration permits or exploitation concessions themselves.

SRK Consulting SCR Valuation –Executive Summary

SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page ii of vi

1.1 Overview of SCR Assets

SCR has interests in a number of exploration projects in Sweden and Norway. The majority of the Assets held by SCR are at an early stage of development. The Assets can be grouped in order of materiality as follows:

• Assets with Mineral Resource Estimates;

• Exploration Targets with potential grade-tonnage ranges; and

• Early stage Exploration Targets without potential grade-tonnage ranges.

The majority of the Company’s Assets by number, and the overwhelming majority by materiality, are located within 50km of the town of Kiruna (northern Sweden), with iron being the primary commodity of interest. Kiruna has an extensive mining history and is located close to the world class Kiirunavaara magnetite iron mine in the northern part of the Fennoscandian Shield.

Figure 1: Company Assets and exploration permits relative to Kiruna town and

local infrastructure

The majority of the Assets in the Kiruna area are assumed to be skarn-type iron ore deposits and in a few cases apatite-magnetite Fe ore deposits (e.g. Tjårrojåkka).

The Mineral Resource Estimates and Exploration Target potential grade-tonnage ranges as presented below are a reproduction of those reported by SCR in its Australian Securities Exchange (ASX) release of 17 January 2012. SRK has provided comment on these and has in each case adjusted the valuation to reflect SRK’s confidence in the estimates.


SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page iii of vi

Table 1: SCR Mineral Resource Statement (Indicated category Fe deposits), 17 January 2012

Table 2: SCR Mineral Resource Statement (Inferred category Fe deposits), 17 January 2012

Table 3: SCR Mineral Resource Statement (Total Inferred & Indicated category Fe deposits), 17 January 2012


SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page iv of vi

Table 4: SCR potential tonnage and grade ranges for exploration assets, modified from SCR’s ASX release 17 January 2012.

Reference to the terms “Mineral Resource” and “Exploration Targets” are in accordance with the definitions of such presented in the JORC Code. SRK notes that the tonnage and grade ranges presented in Table 4 above are conceptual in nature, that there is either insufficient exploration data and/or interpretation to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

In addition to the assets discussed above, the Company owns numerous early stage exploration properties outside the Kiruna area, in northern Sweden and northern Norway. These assets are also discussed briefly in this report and considered in the valuation.

1.2 Valuation

SRK’s approach is to consider various valuation methodologies to give a range of appropriate values.

The methods used by SRK are as follows:

Past Expenditure Method: Applying a Prospectivity Multiplier, of either 1.0 or 2.0

Yardstick Method: Based on 1% of a market consensus long term price of contained metal as follows:

• Iron – USc1.2/dmtu

• Gold – USD10/oz

• Copper – USD56/t

Comparable Transaction Method: Applying a value of USD1.0 per tonne contained iron, based on an analysis of the market capitalisation and total resource base of companies with purely iron ore assets.


SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page v of vi

A Confidence Factor (“CF”) has then been applied to the Yardstick and Comparable Transaction values to reflect SRK’s opinion of the relative confidence in the particular estimate. All valuations presented herein have been adjusted to reflect SCR’s ownership of the Assets. Table 5 below presents a summary of the range of values by methodology for the Assets.

Table 5: Valuation of SCR Assets by method

Asset Name Past

Expenditure (USDM)

Comparable (USDM)

Yardstick (USDM)

SCR Ownership

(%) Assets with Mineral Resource

Estimates

Renhagen 3.3 6.3 7.6 75% Harrejaure 0.9 5.3 6.3 75%

Puoltsa 3.4 5.8 6.9 100% Ekströmsberg 15.9 11.2 13.5 100%

Pattok 2.3 11.0 13.2 100% Rakkurijärvi/Discovery/Tributary 9.0 25.4 32.7 100%

Rakkurijoki 21.5 29.6 35.5 100% Sautusvaara South 5.2 10.3 12.4 75% Sautusvaara North 2.0 3.7 4.5 75%

Tjårrojåkka 5.9 13.4 16.9 100% Vieto 4.1 3.7 4.5 75%

Sub-total 73.6 125.9 154.1 Exploration Targets with potential

grade-tonnage ranges

Åkosjegge 0.2 0.3 0.4 100% Altavaara 2.0 6.3 7.6 100% Tjåorika 0.4 1.7 2.0 75%

Laukkujärvi 2.1 0.6 0.7 75% Leppäjoki 0.0 0.2 0.3 100%

Paljasjärvi/Sautusjärvi 0.6 7.0 8.4 100% Kevus 0.5 3.8 4.5 100% Teltaja 0.5 5.7 6.8 100%

Sub-total 6.0 25.6 30.7 Early Stage Exploration Targets

Other Kiruna Projects 1.0 100% Näsberg-Våtmyrberget Projects 0.0 100%

Caledonides Projects 1.7 100% Finnmark Projects 1.6 100%

Other 0.1 100% Sub-total 4.5

Total 84.3 151.5 184.8


SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page vi of vi

It is generally accepted in the exploration industry that the valuation of exploration properties is a subjective process and is greatly influenced by the prevailing market conditions. The observations, comments and results of technical analyses presented in this report represent SRK’s opinions as at the date of this report. SRK is confident that the opinions presented are reasonable and that the overall valuation is a fair reflection of the Technical Value of the Assets on 26 March 2012.

SRK considers that the Technical Value of the proportion of the Assets held by SCR lies in the range of USD84.3M to USD184.8M. SRK’s preferred value is USD140M, which is the mean of the three valuation methods.

SRK Consulting SCR Valuation – Table of Contents Main Report

SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page i of iii

Table of Contents 1 INTRODUCTION ................................................................................................. 1

1.1 Background .............................................................................................................................. 1

1.2 Terms of Reference ................................................................................................................. 1

1.3 Requirements and Compliance ............................................................................................... 1

1.4 Independence .......................................................................................................................... 2

1.5 Limitations ................................................................................................................................ 2

2 MINERAL TENURE ............................................................................................. 4

2.1 Mineral Tenure in Sweden ....................................................................................................... 4

2.2 Mineral Tenure in Norway ........................................................................................................ 5

2.3 Agreements ............................................................................................................................. 5

2.4 SRK Comments ....................................................................................................................... 6

3 ASSET DESCRIPTIONS AND LOCATIONS ...................................................... 7

3.1 Overview of SCR Assets ......................................................................................................... 7

3.2 Kiruna Area .............................................................................................................................. 8

3.2.1 Introduction .................................................................................................................... 8

3.2.2 Mining and previous exploration .................................................................................... 8

3.2.3 Climate and fieldwork in the Kiruna area ...................................................................... 9

3.2.4 Geological Setting ......................................................................................................... 9

3.2.5 Deposit types ............................................................................................................... 11

3.3 Description of Assets with Mineral Resource Estimates ....................................................... 11

3.3.1 Introduction .................................................................................................................. 11

3.3.2 Sautusvaara (North & South) ...................................................................................... 13

3.3.3 Ekströmsberg .............................................................................................................. 17

3.3.4 Rakkurijärvi and Rakkurijoki ........................................................................................ 18

3.3.5 Tjårrojåkka ................................................................................................................... 25

3.3.6 Vieto ............................................................................................................................ 25

3.3.7 Pattok .......................................................................................................................... 28

3.3.8 Puoltsa ......................................................................................................................... 29

3.3.9 Harrejaure and Renhagen ........................................................................................... 31

3.4 Description of Exploration Targets with potential tonnage and grade ranges. ...................... 33

3.4.1 Laukkujärvi .................................................................................................................. 34

3.4.2 Altavaara ..................................................................................................................... 35

3.4.3 Paljasjärvi .................................................................................................................... 35

3.4.4 Åkosjegge .................................................................................................................... 35

3.4.5 Tjåorika ........................................................................................................................ 36

3.4.6 Kevus & Teltaja ........................................................................................................... 36

3.4.7 Leppäjoki ..................................................................................................................... 36

3.5 Early stage Exploration Targets ............................................................................................ 37


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4 VALUATION OF MINERAL ASSETS HELD BY SCR ...................................... 39

4.1 Methodology .......................................................................................................................... 39

4.2 Valuation ................................................................................................................................ 40

4.2.1 Valuation of Assets with Mineral Resource Estimates ................................................ 40

4.2.2 Valuation of Exploration Targets with potential tonnage-grade ranges ...................... 42

4.2.3 Valuation of early stage Exploration Targets .............................................................. 44

4.3 Valuation Summary ............................................................................................................... 45

5 DECLARATIONS .............................................................................................. 47

6 REFERENCES .................................................................................................. 48


SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page iii of iii

List of Tables Table 2-1: Summary of Company valid mineral tenure by type and country ................................. 4 Table 2-2: Summary of Company mineral tenure by status and location ...................................... 4 Table 3-1: Summary of Assets by development stage and location .............................................. 7 Table 3-2: SCR Mineral Resource Statement (Indicated category Fe deposits), 17 January 2012

..................................................................................................................................... 13 Table 3-3: SCR Mineral Resource Statement (Inferred category Fe deposits), 17 January 2012

..................................................................................................................................... 13 Table 3-4: SCR Mineral Resource Statement (Total Inferred & Indicated category Fe deposits),

17 January 2012 .......................................................................................................... 13 Table 3-5: Meterage of drilling per year ........................................................................................ 14 Table 3-6: Meterage of drilling per year ........................................................................................ 22 Table 3-7: Meterage of drilling per year ........................................................................................ 26 Table 3-8: Meterage of drilling per year ........................................................................................ 30 Table 3-9: Meterage of drilling per year ........................................................................................ 31 Table 3-10: Meterage of drilling per year ........................................................................................ 32 Table 3-11: SCR potential tonnage and grade ranges for exploration assets, modified from SCR’s

ASX release 17 January 2012. .................................................................................... 34 Table 3-12: Summary of SCR early stage exploration projects ..................................................... 37 Table 4-1: Comparable Transactions ........................................................................................... 40 Table 4-2: Valuation of SCR Assets by method ........................................................................... 46 Table 5-1: Contributors to this report ............................................................................................ 47

List of Figures Figure 3-1: Company key project areas in the Nordic Region ......................................................... 8 Figure 3-2: Geological map showing the location of Kiruna in relation to Norrbotten and Sweden

(modified from Smith et al. 2007). ............................................................................... 10 Figure 3-3: Company Assets and exploration permits relative to Kiruna town and local

infrastructure ................................................................................................................ 12 Figure 3-4: Location of Sautusvaara drilling relative to the exploration permit boundary

(Sautusvaara nr. 1) ...................................................................................................... 15 Figure 3-5: Fe% Grade-Tonnage curve for Sautusvaara North >20% Fe ..................................... 16 Figure 3-6: Fe% Grade-Tonnage curve for Sautusvaara South >20% Fe .................................... 16 Figure 3-7: Location of the Rakkuri project exploration permits main deposits covered by the

Rakkurijärvi exploration permits, relative to local infrastructure .................................. 19 Figure 3-8: Rakkurijärvi no.1, Rakkurijärvi no.2, Pahtohavare no.2, and Pahtohavare no.4

exploration licences combined showing drillhole collars and mineralisation wireframes ..................................................................................................................................... 21

Figure 3-9: Fe% Grade-Tonnage curve for Rakkurijoki >20% ...................................................... 23 Figure 3-10: Fe% Grade-Tonnage curve for Rakkurijärvi Tributary Zone >20% ............................. 23 Figure 3-11: Fe% Grade-Tonnage curve for Rakkurijärvi Tributary Northeast >20% ..................... 24 Figure 3-12: Fe% Grade-Tonnage curve for Rakkurijärvi Tributary Southwest >20% .................... 24 Figure 3-13: Fe% Grade-Tonnage curve for Rakkurijärvi Discovery >20% .................................... 24 Figure 3-14: Vieto exploration permit boundary relative to drill collars and mineralisation

wireframes ................................................................................................................... 27 Figure 3-15: Fe% Grade-Tonnage curve for Vieto >20% ................................................................ 28 Figure 3-16: Fe% Grade-Tonnage curve for Puoltsa....................................................................... 30 Figure 3-17: Fe% Grade-Tonnage curve for Harrejaure ................................................................ 32 Figure 3-18: Fe% Grade-Tonnage curve for Renhagen .................................................................. 33

SRK Consulting (Sweden) AB Trädgårdsgatan 13-15 931 31 Skellefteå Sweden E-mail: [email protected] URL: www.srk..se.com Tel: + 46 (0) 910 545 90 Fax: + 46 (0) 910 545 99

Registered Address: Trädgårdsgatan 13-15, 931 31 Skellefteå, Sweden

SRK Consulting (Sweden) AB Reg No 556768-5689

Group Offices: Africa

Asia Australia

Europe North America South America

VALUATION OF MINERAL ASSETS HELD BY SCANDINAVIAN RESOURCES

1 INTRODUCTION 1.1 Background

Scandinavian Resources Limited (“SCR”), hereinafter also referred to as the “Company”, engaged BDO Corporate Finance (WA) Pty Ltd (“BDO”) to prepare an Independent Expert’s Report in relation a proposal made by Hannans Reward Ltd (“Hannans”) to acquire all of the outstanding fully paid ordinary shares in SCR by way of an off-market takeover bid. At the request of BDO in its role as independent expert, SRK Consulting (Sweden) AB (“SRK”) was engaged on 8 March 2012, as an independent specialist to provide BDO with an opinion on the technical valuation of mineral assets (the “Assets”) held by SCR.

1.2 Terms of Reference SRK was provided with a letter from BDO on 8 March 2012, indicating brief Terms of Reference. Specifically, SRK has:-

• Completed a review of material project data, management information and recent exploration reports, including a review of existing mineral resource estimates where possible;

• Held discussions with Company staff and consultants;

• Visited the Company’s offices and drill core archive to inspect drill core first hand (August 2011);

• Carried out a site visit to key Assets in the Kiruna area between 25 and 29 July, 2011 and in addition, confirmed the location of certain drill collars from both historical and on-going drilling;

• Determined an appropriate valuation method or methods;

• Carried out the valuation itself; and

• Prepared a report in accordance with the VALMIN Code summarising the results of the above and containing an appropriate value.

1.3 Requirements and Compliance In line with the requirements stipulated by BDO, SRK has prepared a Valuation Report in accordance with the 2005 edition of the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (“VALMIN Code”), the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”) and ASIC Regulatory Guides 111 (Content of Expert Reports) and 112 (Independence of Experts).

SRK Consulting SCR Valuation – Main Report

SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012 Page 2 of 52

The VALMIN Code defines a Technical Value as an assessment of future net economic benefit and a Fair Market Value as one which adds or subtracts from a Technical Value a premium or discount relating to market, strategic or other conditions. SRK has prepared a Technical Valuation of the Assets.

Reference to the terms “Mineral Resource” and “Exploration Targets” are in accordance with the definitions of such presented in the JORC Code.

1.4 Independence The relationship between SRK and SCR is solely one of professional association between client and independent consultant. SRK’s professional fees are based on time charged for work actually carried out and are not contingent on any prior understanding concerning the conclusions to be reached. Fees arising from the preparation of this report are charged at SRK’s standard rates and are approximately $15,000 (excluding any applicable value added tax and reimbursement of out of pocket expenses). Except for this fee, SRK has not received, and will not receive, any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

None of SRK and the two signatories to this report have a material interest in SCR or Hannans or any of their respective projects.

Prior to accepting its engagement to prepare this report, SRK has considered its independence with respect to SCR and Hannans and their respective associates with reference to ASIC Regulatory Guide 112 (Independence of Experts). In SRK’s opinion, it is independent of SCR and Hannans and their respective associates.

1.5 Limitations In preparing this report, SRK has relied on information provided by SCR. SRK has no reason to believe that this information is materially misleading, incomplete or contains material errors. SCR has been provided with a draft of this report to enable the correction of any factual errors and notation of any material omissions. The content of this report as expressed by SRK is based on the assumption that all the data provided by SCR is complete and correct to the best of SCR’s knowledge. Further, SRK understands that SCR has sought consent from its consultants, Geovista AB, Behre Dolbear International Ltd and Runge Limited trading as Minarco-MineConsult, to include in this report technical information and opinions expressed by them. No other entities referred to in this report have consented to the inclusion of any information or opinions and have only been referred to in the context of reporting any relevant activities.

The Mineral Resource estimates and Exploration Target grade-tonnage ranges as presented in this report are a reproduction of those reported by SCR in its Australian Securities Exchange (ASX) release of 17 January 2012. SRK does not take responsibility as a Competent Person as defined by the JORC Code in respect of the estimates presented herein.



SRK notes that in most cases where Mineral Resources are quoted by the Company, insufficient information was made available to SRK to facilitate a full audit of these. In some instances this was due to the fact that these were in the process of being updated by the Company’s consultants, while in others cases, the final reports supporting the estimates lacked sufficient detail in key areas. SRK has provided comment on these and has in each case adjusted the valuation to reflect its confidence in the estimates. SRK cautions that the valuations presented below may differ if audited Mineral Resource statements produced in due course are different to those presented by the Company.

Further, SRK has not audited data relating to the pre-Mineral Resource Assets, but has rather attempted to verify that the information has been prepared in accordance with industry norms and as such, is of acceptable quality and reliability. Where this is not the case, SRK has provided comment and has made an appropriate adjustment to the valuation to reflect this.

SRK has not conducted any legal due diligence on the ownership of the exploration permits or exploitation concessions themselves and has accepted these in good faith.



2 MINERAL TENURE Table 2-1 and Table 2-2 below present a summary of the Company’s mineral tenure by permit type and location.

Table 2-1: Summary of Company valid mineral tenure by type and country

Country Exploration Permits Mining Concession

Applications Mining

Concessions Valid Sweden 69 1 0 Norway 528 0 0 Totals 597 1 0

Table 2-2: Summary of Company mineral tenure by status and location

Project Area Valid Exploration

Permits

Exploration Permits Under Extension

Application Exploration Permits Under Application

Kiruna Area 58 0 0 Swedish Caledonides 7 0 0

Skellefte field 4 0 0 Norwegian Projects 528 0 0

Totals 597 0 0

Sections 2.1 and 2.2 below present a brief summary of the key aspects of mineral tenure under current Swedish and Norwegian Mining Law.

2.1 Mineral Tenure in Sweden There are four types of permits necessary to develop a deposit from the exploration stage to the development stage in Sweden. These are: exploration permits, exploitation concessions, environmental permits and building permits. Exploration permits are granted initially for three years, with possible extensions of up to 15 years. Annual fees for the first three year period are SEK4, SEK6, and SEK10/ha in each successive year.

An exploitation concession (Bearbetnings koncession) gives the holder the right to exploit a proven, extractable mineral deposit for a period of 25 years, which may be extended. The exploitation concession is the next step in mine permitting after the granting of an exploration permit.

There is no requirement to legally survey the boundaries of exploitation concessions in Sweden; instead boundaries are assigned Swedish RT90 coordinates by the Inspector of Mines on granting.

Mineral Royalty in Sweden is 0.20% of gross revenue.



2.2 Mineral Tenure in Norway In Norway, minerals are either owned by the State or by private landowners. The following permits and licenses are necessary to develop a deposit from the exploration stage to the development stage for State owned minerals in Norway: 1) exploration permit, 2) pilot extraction permit for extraction of up to 2,000m3 of material, should the Company wish to carry out bulk sampling, 3) extraction permit for a commercially viable deposit, 4) operating licence if more than 10,000m3 of material is to be extracted, 5) environmental permit and 6) building permit.

Exploration permits are initially granted for seven years, with possible extensions of up to three years. The exploration area should be no larger than 10km2. Compensation is payable to the landowner for damages, e.g. loss of agricultural land. An extraction permit for a commercially viable deposit is valid for 10 years with possible extensions of 10 years at a time. An operating licence may only be granted to the holder of an extraction permit. The period of validity of the operating licence is set out in an agreement with the landowner.

Certain administrative fees are charged to process the aforementioned permits and license. Exploration fees payable annually to the State for the second and third calendar years are NOK10/ha, this increases to NOK30/ha for the fourth and fifth years and then further to NOK50/ha for the sixth and seventh years. If an exploration permit is extended beyond the seventh year, then an annual fee of NOK 50/ha is required to be paid to the State for each explored unit.

A fee of NOK100/ha is payable annually to the State to retain an extraction permit. The annual charge per extraction area though is not less than NOK1,000.

Mineral Royalty in Norway is 0.20% of gross revenue. Special exploration, pilot extraction, extraction permits and operating licences are required in Finnmark (a county in the northeast of Norway inhabited by Sami, the indigenous reindeer herders). Minerals extracted on Sami owned land are subject to an additional 0.25% mineral royalty (gross revenue).

Certain specific requirements are applicable in cases where minerals are owned by the landowner.

Permit boundaries are assigned co-ordinates in the UTM system EUREF 89 (WGS 84) by Bergvesenet, the Norwegian Directorate of Mining.

2.3 Agreements SRK notes that the Company has entered into certain agreements with other exploration companies, as discussed in the Company’s ASX Release of 29 July 2011 and 6 September 2011. Specifically the Company currently holds:-

• A 75% interest in the Tasman Joint venture properties (Vieto, Sautusvaara, Renhagen, Harrejaure, Laukkujärvi and Tjåorika) with the opportunity to increase this interest to 90% after funding a feasibility study on one of the deposits;

• A 100% interest in the projects (Rakkurijärvi, Rakkurijoki, Discovery and Tributary Zone) acquired from Anglo America and Rio Tinto, announced to ASX on 15 November 2010 and settled on 2 December 2011;



• A 100% interest in the projects (Ekströmsberg, Tjårrojåkka, Pattok and Åkosjegge) acquired from Grängesberg Iron AB announced to ASX on 8 June 2011 and settled on 2 December 2011; and

• A 100% interest in the iron rights to the Kevus and Teltaja projects, as part of an earn-in agreement with Boliden Mineral AB.

SRK has reviewed the terms of these agreements at a high level and has made the appropriate adjustments to the valuation in order to properly reflect the proportion of the Assets currently owned by the Company.

2.4 SRK Comments For the purpose of this valuation, exploration permits are all that are required to provide the Company with exclusive mineral rights to the properties in question.

SRK is not aware of any environmental liabilities associated with any of the exploration permits held by the Company and discussed in this report.



3 ASSET DESCRIPTIONS AND LOCATIONS 3.1 Overview of SCR Assets

SCR has interests in a number of exploration projects in Sweden and Norway. The majority of the Assets held by SCR are at an early stage of development. The Assets can be grouped in order of materiality as follows:

• Assets with Mineral Resource Estimates;

• Exploration Targets with potential grade-tonnage ranges; and

• Early stage Exploration Targets without potential grade-tonnage ranges

Table 3-1 below presents the Assets by development stage and region/country, while Figure 3-1 illustrates the location of these project areas in the Nordic Region. The majority of the Company’s Assets by number, and the overwhelming majority by materiality, are located in the Kiruna area, with iron being the primary commodity of interest.

Table 3-1: Summary of Assets by development stage and location

Development Stage

Kiruna Area (Sweden)

Caledonides (Sweden)

Skellefte field / Våtmyrberget

(Sweden)

Finnmark (Norway)

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Resource Estimates

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potential grade-tonnage ranges

8 0 0 0

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Targets

11 (including

Korpilombolo) 4 5 11 3

Total 30 4 5 11 3



Figure 3-1: Company key project areas in the Nordic Region

3.2 Kiruna Area 3.2.1 Introduction

This section of the report presents a brief introduction to the Kiruna area in the context of its mining and exploration history and including its geological setting. This is followed by a short description of the Assets, in order of materiality, as mentioned above.

3.2.2 Mining and previous exploration The town of Kiruna has a population of approximately 24,000 and has all the services commensurate with its size. The area has more than one hundred years iron ore mining history and is located close to the world class Kiirunavaara magnetite iron mine.

The Kiirunavaara orebody was discovered in 1696 and was developed into a large-scale mine in 1890. It is classified as an apatite-iron ore deposit and is over 4,000m in strike length, averages 80m in width and extends to a depth of over 1,500m. Current production is in the order of 26 Mt of magnetite ore per year. The mine is owned and operated by Luossavaara-Kiirunavaara Aktiebolag (“LKAB”), a Swedish State owned company.

http://en.wikipedia.org/wiki/Aktiebolag



Between 1963 and 1972 the Swedish government commissioned a regional investigation into the iron ore potential of Norbotten County which became known as the Iron Ore Inventory Programme. The investigation involved regional and detailed mapping, geophysical ground measurements (magnetic, gravimetric, Slingram and Self-potential) and over 100,000m of diamond drilling, covering 23 map sheets at a scale of 1:50,000.

The majority of the Company’s material Assets in the Kiruna area were either discovered and / or first described in detail during exploration carried out in this period. A certain amount of drill core from these programmes is retained at the National Drill Core Archive at the Swedish Geological Survey (“SGU”) in Malå.

3.2.3 Climate and fieldwork in the Kiruna area Snow cover extends from late October to mid-April with a maximum snow thickness varying from 0.6 to 2.0 meters.

During the summer months (June-August) temperatures are mostly between 5°C and 20°C, and during the winter months (November-April) mostly between - 5°C and - 30°C. The sun remains below the horizon for twenty days in winter and the sun does not set for twenty days in summer.

3.2.4 Geological Setting The Kiruna projects are located in the northern part of the Fennoscandian Shield. The Archaean basement (>2.68Ga) in this area is overlain by Proterozoic rocks of Karelian (~2.4-1.96Ga) and Svecofennian (~1.96-1.75Ga) ages. The Karelian rocks formed in a rift-related tectonic setting and are overlain by Svecofennian supracrustal metavolcanic and epiclastic rocks. The Svecofennian supracrustal rocks are made up of the older Porphyrite Group of rocks comprised of metamorphosed low-Ti andesite, basalt and intercalations of felsic tuffaceous rock. The younger Porphyry/Kiirunavaara Group of rocks are comprised of metamorphosed high-Ti basalt, minor trachyandesite and rhyolite. The Haparanda and Perthite calc-alkaline and alkali-calcic monzonite granite suites intrude rocks of the Porphyry/Kiirunavaara Group and are associated with deformation and metamorphism of the supracrustal sequence, with conditions peaking at upper greenschist or lower amphibolites facies during the Svecofennian Orogeny from 1.9 to 1.8Ga (Skiöld, 1987).



Figure 3-2: Geological map showing the location of Kiruna in relation to Norrbotten and Sweden (modified from Smith et al. 2007).

The Norrbotten province is characterised by regionally developed scapolitisation, albitisation, which is most intense in areas of major crustal deformation, and iron and copper mineralisation. The ore deposits within the area tends to be spatially related to zones of deformation suggesting a possible genetic relationship between the formation of the deposits and a tectonic event. The Kiruna Project, for example, is located on two limbs of a major shear zone.

The Norrbotten district in Sweden is an important mining district hosting some of the world’s largest apatite-iron orebodies, Kiirunavaara and Malmberget, and the Aitik Cu-Au deposit. Whilst the area has been classified as an iron oxide copper gold (“IOCG”) district by many, a definitive genetic link between spatially related iron-oxide and copper deposits of Norrbotten is yet to be established. The Kiirunavaara apatite-iron ore deposit is the type locality for Kiruna sub-type IOCG deposits.



The geology of the Kiruna Project area consists largely of Palaeoproterozoic supracrustal rocks belonging to the Porphyry/Kiirunavaara Group including trachyandesitic lavas (formally named syenite porphyry), pyroclastic rhyodacite (formally named quartz-bearing porphyry), minor andesitic-basaltic mafics, while the south western portion of the Kiruna project is dominated by greenstones of the older Porphyrite Group.

3.2.5 Deposit types The majority of the Assets in the Kiruna area are assumed to be skarn-type iron ore deposits and in a few cases apatite-magnetite Fe ore deposits (e.g. Tjårrojåkka). Deposits of IOCG-type are found in mid-Proterozoic aged stratigraphy (Kiruna Porphyry Group) and are best represented by the Kirunavaara apatite-magnetite Fe deposit.

3.3 Description of Assets with Mineral Resource Estimates 3.3.1 Introduction

The Company’s Assets in the Kiruna area (collectively known as the Kiruna Iron Project assets) are located within a radius of approximately 50km from Kiruna town centre (Figure 3-3). Paved road and rail access is reasonable and power connections serve homes and businesses in the towns and settlements. There is an airport at Kiruna and a heli-port at Nikkaluokta.

Figure 3-3 below illustrates the location of the Company’s exploration permits and key Assets in relation to the town of Kiruna and local infrastructure.



Figure 3-3: Company Assets and exploration permits relative to Kiruna town and local infrastructure

The following Mineral Resource statements have been re-produced from SCR’s ASX Release of 29 July 2011.



Table 3-2: SCR Mineral Resource Statement (Indicated category Fe deposits), 17 January 2012

Table 3-3: SCR Mineral Resource Statement (Inferred category Fe deposits), 17 January 2012

Table 3-4: SCR Mineral Resource Statement (Total Inferred & Indicated category Fe deposits), 17 January 2012

A short description of each of the Assets listed in the tables above is presented below, along with comments by SRK.

3.3.2 Sautusvaara (North & South) The descriptions of Sautusvaara set out below were largely extracted from the report; Reed G. C., (2010): Sautusvaara Project Mineral Resource Estimate June 2010.

Location and Access

The project lies close to the town of Kiruna in the county of Norrbotten (Figure 3-3). The approximate RT90 coordinate for the centre of the Sautusvaara ‘nr 1’ claim is 1 708 600 mE and 7 540 800 mN. The project is located on the flanks of the Palo-Sautusvaara hill with an average license elevation of approximately 420 metres above sea level (masl). The site is well serviced by both road and rail. The Kiruna to Luleå rail line which transports iron ore on a daily basis passes 15 km south of the licence.

History

The Sautusvaara project was discovered in 1896 as a magnetic anomaly. The project was explored in various campaigns by the SGU comprising trenching, diamond drilling and ground



geophysics until the 1980’s. In 2002, the project was claimed by Lundin Mining AB (then as South Atlantic Ventures Ltd), with the Norrbotten ‘nr 112’ and ‘nr 127’ claims who held this for three years.

The project was acquired by SCR in June 2010 from Tasman Metals Ltd, a TSX Venture Exchange (TSXV) listed company. Whilst the Sautusvaara Project was held by Tasman Metals Ltd, NI43-101 compliant reports, inclusive of Mineral Resource Estimates, were completed on both the Sautusvaara South and Sautusvaara North deposits by Mr. Geoffrey Reed of ReedLeyton Consulting (“ReedLeyton”). These estimates were subsequently updated and reported in compliance with the JORC Code by ReedLeyton in June 2010 and again in July 2011.

Local Geology & Mineralisation

The Sautusvaara project is a typical example of the “skarn iron ores of the Greenstone Group” class, lying within a typical high level stratigraphic setting, immediately below conglomerates of the Kiirunavaara Porphyry Group. Skarn mineralogy is well developed. Iron ore mineralisation at Sautusvaara extends for approximately 2,500 metres along strike in a NW-SE direction and the deposit consists of two ore bodies separated by faults, referred to as North and South Sautusvaara respectively.

Mineral Resource Estimate (MRE)

The most recent Mineral Resource Estimate (MRE) for the Sautusvaara deposit was produced by Runge Limited (Trading as Minarco-MineConsult (MMC)) in July 2011.

SRK was provided with two block models, separately for Sautusvaara North and South, an exploration drilling database and a set of geological wireframes. SRK has reviewed the estimate based on the model and accompanying reports.

In total, 82 diamond drillholes were included in the database, representing 16,919 m of drilling and comprising 5,500 assay intervals averaging 1 m in thickness. Of these holes, 76 contained assayed intervals. Five of the holes were drilled relatively recently by SCR; the other 71 were drilled between 1963 and 1967. Table 3-5 shows the breakdown of meterage drilled per year, along with the number of holes containing assays.

Table 3-5: Meterage of drilling per year Year 1963 1964 1965 1966 1967 20111 No. Of holes 2 12 26 28 9 5 Meterage 312 2,741 5,013 5,304 2,151 1,399 No. of holes with Assays 2 11 24 26 8 5

1 Holes drilled by SCR

The average drill spacing is 100x50 m in the southern portion of Sautusvaara South, and 40x50 m in the northern portion of Sautusvaara South. Sautusvaara North was mainly drilled on a 40x40 m grid, with differing azimuths and dips with the change in the interpreted orientation of the mineralisation.



Figure 3-4: Location of Sautusvaara drilling relative to the exploration permit boundary (Sautusvaara nr. 1)

Grade tonnage curves were produced in order to visualise the distribution of grade with increasing cut-off grades, as shown in Figure 3-5 and Figure 3-6.

North

South



Figure 3-5: Fe% Grade-Tonnage curve for Sautusvaara North >20% Fe

Figure 3-6: Fe% Grade-Tonnage curve for Sautusvaara South >20% Fe

Metallurgical Testwork

The document “2011 07 Draft Sighter Test Work Report Scandinavian Res” was produced by SMI Technology Transfer in July 2011, and outlines testwork performed on samples from Sautusvaara, including Davis Tube Recovery (DTR), comminution, and head assay tests. These were performed on composite samples of drill core from two holes, comprising 10 individual samples over a combined interval of 99m and weighing a total of 48kg.

DTR testwork produced good quality concentrates assaying >69% Fe, < 1.5% SiO2, < 1.4% S, and P below the limit of detection. Fe recoveries ranged between 72 and 96% dependent on the Fe head-grade.

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Comminution tests showed a range of crushing and grinding characteristics reflecting ore variability. In terms of crushing index, the data suggests a single population with a consistent variation in crushing index with element geochemistry. However, the grinding behaviours reflect at least two grinding domains in the orebody, with controls that are probably mineralogical in nature.

3.3.3 Ekströmsberg The descriptions of Ekströmsberg contained in the following sections were largely extracted from the report; JORC code resources in the Ekströmsberg, Tjårrojåkka and Pattok prospect, Norrbotten, Sweden by Behre Dolbear International Limited (2011).

Location and Access

The Ekströmsberg iron deposit is located 30km west-southwest of Kiruna and 25km east-southeast of Nikkaluokta (Figure 3-3). The Kalixfors main-line railway station is 30km to the east. Access is along an asphalt road between Kiruna and Nikkaluokta, from a settlement at Laukkuluspa across a lake and onto a track suitable for four-wheel drive vehicles.

The area is on a whale-back ridge at about 600 masl and rock outcrops are most common on the ridge and on the southern slope, towards a wide marshy, muskeg-covered valley. Vegetation is sparse, comprising mainly stunted brushwood and dwarf birch.

History

Mineralisation was first discovered in 1818. Geological mapping, ground magnetics and one diamond drill hole were completed between 1897 and1900, followed by further mapping and ground magnetics and the drilling of 12 more drill holes between 1950 and 1954 by SGU.

Between 1965 and 1969, detailed magnetic and gravity surveys were completed and a further 35 diamond drill holes were drilled totalling 7,539m. 25 trial pits and trenches were also dug to expose the magnetite-bearing horizons. In all, SGU drilled 48 holes totalling 9,510m.

Local Geology and Mineralisation

The Ekströmsberg deposit is hosted by pyroclastic rhyodacite which is locally sericite-altered. The orebody contains intercalations of trachy-andesitic lava which are orientated parallel with the direction of the orebodies. The mineralised area at Ekströmsberg measures approximately 1.5km in length and 150 to 160m in width and contains a 50m-wide magnetite lens; though in the southern part the lens narrows. The mineralisation consists of magnetite-martite-hematite, strikes NW and dips vertically, or sub-vertically to the west. Behre Dolbear International Ltd reported that martite, a non-magnetic alteration product of magnetite, concentrates in the supergene, oxidized portions of the magnetite zone above 100m depth.

Mineral Resource Estimate

A manual polygonal grade-tonnage estimate for Ekströmsberg was prepared by the SGU (Frietsch et al.) in 1974, who reported a total resource of 36 Mt grading 56% Fe, to a depth of 300m. This included a magnetite resource of 19 Mt with a mean grade of 55% Fe, a martite resource of 7 Mt with a mean grade of 57% Fe and a hematite resource of 10 Mt with a mean grade of 56% Fe. A cut-off of 20% Fe was used and intercepts were projected mid-way between drill holes.



In its report, Behre Dolbear International Ltd states “examination of the polygons and representative drill core in 2008 confirmed continuity of the estimated blocks and allows the estimate to be categorised as an Indicated resource.”

Behre Dolbear International Ltd reports 30.4 Mt grading 52% Fe in the Indicated category and 41.6 Mt grading 52% Fe in the Inferred category, applying a cut-off of 20% Fe and minimum width of 2m, to 300m below surface.


Document number “J475-RP-000-003-0” was produced by Mineral Engineering, Perth in December 2010, and outlines metallurgical testwork performed on samples collected from the Vieto, Laukkujarvi and Ekströmsberg deposits, including Davis Tube Recovery, head assay, and magnetic susceptibility tests that were undertaken. The report indicates that samples were selected from 102 individual drill core samples, representing an intersection of 103.1m in length from one drillhole.

Magnetic susceptibility tests on samples from Ekströmsberg showed the presence of mixed populations of oxides, with a high proportion of the samples containing non-magnetic Fe.

The Ekströmsberg samples showed very high Fe grades (the majority >59%), with low S, Al2O3 and SiO2, but high P (0.3-3%). Some of this material can be classified as Direct Shipping Ore (DSO) potential, with the need to refine the P grades. The lower grade samples still exhibited high P grades.

In total, 49 composites (including samples from other projects) were chosen for DTR testwork. Some were rejected due to their very low Fe content. The results showed that a consistent 70% Fe concentrate grade could be achieved from the majority of samples, demonstrating that even the lowest magnetite grades were easily upgraded. The Ekströmsberg non-magnetite samples showed low recovery, as expected, but still produced a high grade concentrate. The Al2O3 and SiO2 grades were considered acceptable.

Ekströmsberg produced good quality concentrate, with marginal P grades. The potential to upgrade the para-magnetic iron oxides has yet to be determined.

3.3.4 Rakkurijärvi and Rakkurijoki The descriptions of Rakkurijärvi and Rakkurijoki set out below were largely extracted from the technical review report prepared by Laurikko in 2007 and Smith et al. 2007, along with Geovista (2011): GVR11042 DRAFT Rakkurijoki and Rakkurijärvi mineral resource estimation.

Location and Access

The Rakkurijärvi and Rakkurijoki project area is easily accessible by paved road from Kiruna town centre, which lies roughly 6km north of the project area (Figure 3-3 and Figure 3-7).



Figure 3-7: Location of the Rakkuri project exploration permits main deposits covered by the Rakkurijärvi exploration permits, relative to local infrastructure

Several prospects are covered by the exploration permits of the Rakkuri project. These prospects are as follows:

• Rakkurijoki

• Rakkurijärvi

• Rakkurijärvi Discovery Zone

• Rakkurijärvi Tributary Zone

• Pahtohavare

History

The Rakkurijoki deposit has been known for over 100 years, with the first recorded exploration campaign carried out in the late 19th century. The deposits at Rakkurijärvi have been known to exist since the 1960’s, when the SGU and LKAB carried out drilling in the area as part of the Swedish Iron Ore Inventory program.

The small Pahtohavare Cu-Au deposit was mined using underground methods by LKAB during the 1990’s, producing 1.7 Mt grading 1.9% Cu and 0.9 g/t Au.

Rio Tinto, Anglo American and Lundin Mining were all active in the Rakkuri project area, through various exploration campaigns, principally over the last 10 years and following the discovery of Cu-Au mineralisation in the “Discovery Zone”.




The Rakkurijärvi and Rakkurijoki prospects consist of a group of mineralised magnetite and lithic breccias within the ca. 2.05- to 1.90-Ga Proterozoic supracrustal sequence of the Kiruna district. Cu and Au, largely in the form of chalcopyrite, and other sulphide assemblages, are hosted in brecciated magnetite and metavolcanic rocks. The deposit is hosted by brecciated greenschist facies metavolcanic rocks within and adjacent to an east-northeast–trending shear zone. Reconnaissance bulk-rock chemistry of the host volcanic rocks is consistent with an intermediate volcanic protolith, but much of the original character of the rocks is masked by albitization and incipient iron, sodic, and potassic alteration.

2011 Mineral Resource Estimate

The most recent Mineral Resource Estimate (MRE) for the Rakkuri project (including the Rakkurijärvi and Rakkurijoki deposits) was prepared by GeoVista in July 2011. SRK was provided with five block models, an exploration drilling database, and a set of geological wireframes. The estimate was accompanied by spreadsheet based grade and tonnage reports and a draft report outlining some details of the estimate. SRK has reviewed the estimate based on the model and accompanying reports.



Figure 3-8: Rakkurijärvi no.1, Rakkurijärvi no.2, Pahtohavare no.2, and Pahtohavare no.4 exploration licences combined showing drillhole collars and mineralisation wireframes

(Note: the drilling outside the licence towards the southeast is within licence Rakkurijärvi no.3)

In total, 137 diamond drillholes were included in the database, with a total meterage of 26,463 m, with 3,964 assay intervals (662 modern) averaging 1.5 m thickness. Of the drilled holes, 99 contained assayed intervals and only 13 were modern holes drilled by SCR; the other 86 were drilled between 1965 and 2006. Table 3-7 shows the breakdown of meterage drilled per year, along with the number of holes containing assays.



Table 3-6: Meterage of drilling per year

Year Unknown Historic 1969 1970 1972 1973 1979 1999 2000 2001 2002 2003 2004 2005 2006 20111

No. Of holes 15 6 2 3 3 4 4 3 9 12 12 27 20 4 13

Meterage 3,571 736 250 501 523 745 618 681 1,619 1,701 2,400 4,128 3,352 1,329 4,308

No. of holes with Assays 11 4 3 6 12 9 26 15 3 10




The drill spacing is approximately 200x150 m at Rakkurijoki, 100m along strike (only one hole per section) at Rakkurijärvi Northwest, 100x100 m at Rakkurijärvi Southeast, 150x50 m at Rakkurijärvi Tributary Zone, and 50x50 m at Rakkurijärvi Discovery Zone.

The Rakkurijärvi Southwest, Rakkurijärvi Northeast and Rakkurijoki mineralisation all follow a similar trend of 60⁰ azimuth and 70-90⁰ dip to the southeast. The Rakkurijärvi Tributary Zone trends east-west with a gentle fold dipping vertically. The Rakkurijärvi Discovery Zone has a more complex structure with a general strike of 100⁰, varying dip of between 20-90⁰ with a plunging feature trending 45⁰ towards the east. The drilling comprised a combination of fanning from a single collar and vertical holes.

Grade-tonnage curves were produced in order to visualise the distribution of grade with increasing cut-off grades, as shown in Figure 3-9 to Figure 3-13.

Figure 3-9: Fe% Grade-Tonnage curve for Rakkurijoki >20%

Figure 3-10: Fe% Grade-Tonnage curve for Rakkurijärvi Tributary Zone >20%

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Figure 3-11: Fe% Grade-Tonnage curve for Rakkurijärvi Tributary Northeast >20%

Figure 3-12: Fe% Grade-Tonnage curve for Rakkurijärvi Tributary Southwest >20%

Figure 3-13: Fe% Grade-Tonnage curve for Rakkurijärvi Discovery >20%

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3.3.5 Tjårrojåkka The descriptions of Tjårrojåkka contained in the following sections were largely extracted from the report; JORC code resources in the Ekströmsberg, Tjårrojåkka and Pattok prospect, Norrbotten, Sweden by Behre Dolbear International Limited (2011).

Location and Access

Tjårrojåkka is located 25km southwest of Ekströmsberg and 50km west-southwest of Kiruna at 730 masl (Figure 3-3). Access to Tjårrojåkka is generally by helicopter during the summer months and snow scooter in winter.

History

A total of 62 drill holes have been completed, amounting to 14,678m. Airborne magnetic and radiometric data were collected in the 1980s, with flight lines at 30m above ground on north-south lines spaced 200m apart and sampled at 35m along the lines. Gravity highs were found to be related to bedrock syenites and high potassium/thorium ratios were observed over Tjårrojåkka and Ekströmsberg.


The Tjårrojåkka area is dominated by extrusive and intrusive rocks of basic to intermediate composition. The intermediate volcanic rocks belong to the Porphyrite Group and are associated with volcaniclastic rocks and later quartz-monzodioritic intrusions. The bedrock has been affected by several stages of alteration related to metamorphic and mineralisation processes. The most widespread alteration occurs within and adjacent to major deformation zones and mineral occurrences, and is characterised by scapolite, K-feldspar, epidote, and albite.

The apatite-iron ore at Tjårrojåkka consists of a massive core (60-70% Fe and 0.5-1.3%P) surrounded by an ore breccia (25-60% Fe and 0.4-3%P) with low grade copper (± Mo, Au & Ag) mineralisation, whereas the copper (± gold) deposit forms an elongated body of disseminated copper sulphides with magnetite-apatite veining in the footwall. In view of the spatial relationship between the Tjårrojåkka apatite-iron ore and copper (± gold) deposits, Tjårrojåkka has been classified as IOCG-type by Edfelt (2007).

Mineral Resource Estimate

At Tjårrojåkka, the iron and copper deposits are 400m apart. A resource estimate was prepared by the SGU (Frietsch et al.) in 1975 based on a manual polygonal method. The original estimate reports a magnetite-hematite resource of 52.6 Mt grading 51.5% Fe. The SGU also produced a estimate for the Tjårrojåkka copper deposit of 5 Mt grading 0.6% Cu, at a cut-off of 0.4% Cu.

Behre Dolbear accepted these estimates based on its own observations on surface and in drill core.

3.3.6 Vieto The descriptions of Vieto set out below were largely extracted from a Technical Report by ReedLeyton, May 2009, along with Reed G.C., (2011): 3811_JORC Mineral Resource Statement Suatusvaara and Vieto Iron Ore deposits.



Location and Access

The Vieto project lies roughly 20km west of Kiruna. Approximate RT90 coordinates for the centre of the Vieto permit are 1 663 950 mE and 7 533 500 mN (Figure 3-3). The average license elevation is approximately 540 masl. The local topography is rolling, with a strong glacial influence that has imparted a south westerly grain that is apparent in the elongated shapes of the lakes and hills. The Vieto project lies between elevations of 500 and 600 masl in an area of low wooded hills and swamps.

The village of Aitejakk lies to the immediate east of the license boundary, whilst the larger town of Kiruna is located 18 km to the east of the project area. A paved road provides access to within 1km of the site, and from there the project is easily access by a well maintained forestry track. The closest rail head is at Kiruna, 20km to the east.

History

Iron ore was discovered at Vieto in 1914 and was investigated with geophysics, trenching and drilling until 1969. A resource was estimated on the basis of this drilling in late 1979.


Iron ore at Vieto is hosted by the Kiruna Greenstone Group, within the southern part of a larger coherent greenstone area, close to the contact with the felsic porphyries of the Kirunavaara Porphyry Group. The local host sequence consists of limestone/marble, mafic tuff, graphite schist, pillow lava and subordinate mafic subvolcanic intrusive.


The most recent MRE for the Vieto deposit was produced by MMC in July 2011. SRK was provided with a block model, an exploration drilling database, and a set of geological wireframes. The estimate was accompanied by spreadsheets containing grade and tonnage data, and a supporting report which SRK has reviewed.

In total, 55 diamond drillholes were included in the database, with a total meterage of 9,119 m, with 927 assay intervals (210 modern) averaging 1.4 m thickness. Of the drilled holes, 30 contained assayed intervals and only 5 were modern holes drilled by SCR; the other 25 were drilled between 1919 and 1987. Table 3-7 shows the breakdown of meterage drilled per year, along with the number of holes containing assays.

The drill spacing is 100x50 m but reduces to 50x50 m in areas of increased complexity. The azimuth of drilling changes with the interpreted orientation of the mineralisation, between 160-200⁰ towards the southwest/southeast, with an average dip of 55⁰.

Table 3-7: Meterage of drilling per year Year 1919 1967 1968 1969 1971 1978 1987 20111

No. Of holes 4 5 16 11 2 7 5 5

Meterage 369 740 3,303 1,400 289 1,055 959 1,006 No. Of holes with Assays

5 15 5

5 1 Holes drilled by SCR



Figure 3-14: Vieto exploration permit boundary relative to drill collars and mineralisation wireframes

A grade tonnage curve was produced in order to visualise the distribution of grade with increasing cut-off grades as shown in Figure 3-15 below. Two populations of data are observed, which represent the low and high grade populations domained separately.



Figure 3-15: Fe% Grade-Tonnage curve for Vieto >20%


Document number “J475-RP-000-003-0” was produced by Mineral Engineering, Perth in December 2010, and outlines metallurgical testwork performed on samples from Vieto, including DTR, head assay, and magnetic susceptibility tests. The tests were performed on selected samples from 45 individual drill core samples representing a total intersection of 44.5m from a single drillhole.

Magnetic susceptibility tests confirmed that the vast majority of Fe-rich samples for Vieto were magnetic, presumed to be predominantly magnetite.

The head assay results showed elevated S and P values for Vieto, along with a mixture of Fe grades from <10% to >58%, with an average grade of 32%. It was clear therefore that the ore would require beneficiation to create a saleable product.

In total, 49 composites (including samples from other projects) were chosen for DTR testwork, some were ejected due to the extreme low Fe content. The results show a consistent 70% Fe concentrate grade can be achieved from the majority of samples. This showed that even the lowest magnetite grades were easily upgraded. The Al2O3 and SiO2 grades were considered acceptable. Vieto showed some samples with high S concentrate grades, but acceptable P grades.

3.3.7 Pattok The descriptions of Pattok contained in the following sections were largely extracted from the report; JORC code resources in the Ekströmsberg, Tjårrojåkka and Pattok prospect, Norrbotten, Sweden by Behre Dolbear International Limited (2011).

Location and Access

Pattock lies on the northeast flank of the Pattok mountain roughly 40km southwest of Kiruna. Access is via helicopter during the summer months and snow scooter during winter.

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History

Mineralisation was discovered in 1960 by SGU during follow-up of airborne magnetic surveys and has been tested by 23 diamond drill holes, totalling 5,164m.

Geology and Mineral Resource Estimate

The host rocks at Pattock are reported by the SGU to be andesitic to basaltic greenstones with layers of volcanics with low content of quartz.

The SGU report a historic resource estimate (Ambros et al. 1973) of 68.0Mt at 45.1% Fe and 1.99% P to a depth of 250m, which Behre Dolbear International Ltd classified as Inferred.

3.3.8 Puoltsa

The descriptions of Puoltsa set out below were largely extracted from Geovista AB, (2012): Puoltsa mineral resource estimate full.

Location and Access

Puoltsa is located approximately 15km southwest of the town of Kiruna (Figure 3-3) and is accessible via the paved road to Nikkaluokta and from there by forest tracks.

History and Geology

Puoltsa was discovered in 1960 by the SGU, who measured the magnetic vertical field and the gravity field and drilled a total of 46 holes in the 1960´s. The mineralisation is classified as a skarn iron ore, with magnetite as the major iron mineral. The deposit is intersected by several types of dykes and intrusions.

Historic Grade-Tonnage Estimate

In 1973, the SGU (Hallgren et al.) estimated a resource of 31.54 Mt at 34,3 % Fe to a depth of approximately 200 m. SCR subsequently drilled 7 diamond drill holes at the property, for a total of 1,714 m.


The most recent MRE for Puoltsa deposit was prepared by GeoVista AB in December 2011. SRK was provided with one block model, an exploration drilling database, and a set of geological wireframes. The estimated model was accompanied by a draft report outlining details of the estimate.

In total, 53 diamond drillholes were included in the database, with a total meterage of 11,679 m, with 3,678 assay intervals, averaging 1.1 m. Table 3-8 shows the breakdown of meterage drilled per year, along with number of holes containing assays.



Table 3-8: Meterage of drilling per year YEAR 1963 1964 1965 1966 1967 20111

Count 2 9 10 16 9 7

Meterage 459 1,984 2,177 3,615 1,730 1,714 Nr. of drill holes

with assays 2 8 7 16 9 7 1 Holes drilled by SCR

A grade tonnage curve was produced in order to visualise the distribution of grade with increasing cut-off grades as shown in Figure 3-15 below.

Figure 3-16: Fe% Grade-Tonnage curve for Puoltsa


Metallurgical testwork on drill core samples by Mineral Engineering (2010) indicated that the Puoltsa ore comprises a vanadiferous Fe-magnetite mineralisation. The report also suggested that the majority of samples from Puoltsa contained high Fe grades along with strong magnetic susceptibility signatures, indicating the majority of Fe mineralisation is magnetite. The Al2O3 and SiO2 grades vary greatly, and some samples prove that additional beneficiation work would be essential. Both S and P levels were low in the majority of samples.

The DTR testwork on the Puoltsa samples produced positive results, with a very high recovery, and consistent 70% Fe concentrate grades. This is due to the high proportion of Fe present as magnetite and the fact that the P, S, Al2O3 and SiO2 grades were all low. The results show that the Puoltsa ore is readily upgraded to a high quality concentrate via magnetic separation alone.



3.3.9 Harrejaure and Renhagen

The descriptions of Harrejaure and Renhagen set out below were largely extracted from Reed, G.C., (2012) Kiruna_Iron_ AB_ DRAFT_ Mineral_Resource_Estimate_Report_v01.

Location and Access

The Renhagen and Harrejaure projects are located 33 km west-southwest of Kiruna (Figure 3-3) and covered by a single exploration permit, Harrejaure nr1. Access in the summer is via helicopter and by snow scooter during the winter months.

History and Geology

Outcropping mineralisation was first discovered at Renhagen in 1949 by the SGU and was followed up by ground magnetic and trenching. The SGU undertook magnetic and gravity measurements between 1962 and 1963, and completed 5 diamond drill holes for a total of 891m in 1968. A BHP Billiton JV project drilled two drill holes in 2002. A resource for Renhagen was reported by the SGU in 1971 comprising 4.8 Mt with 42% Fe and 6.5 Mt with 28% Fe, to a depth of 175m. Geovista AB carried out modelling of geophysical data in 2010, and SCR has now drilled 7 holes totalling 1236m.

The Harrejaure iron occurrence was discovered in the 1940’s as a result of an airborne magnetic survey. A northwest trending magnetic anomaly was identified over a distance of greater than 1000m. The mineralisation has been tested by “Rederiaktiebolaget Nordstjernan” who drilled 18 holes over 1.7 km of strike. The reported resource for Harrejaure is 5 Mt of ore with 65.5% Fe, 0.015% P and 0.03% S. In 2011 SCR completed ground magnetic and gravity surveys at Harrejaure which identified coincident magnetic and gravimetric anomalies. In addition, SCR has drilled 5 holes as part of a programme of 6 holes for a total of 1,005m.

2011 Harrejaure Mineral Resource Estimate

The most recent MRE for the Harrejaure deposit was produced by (MMC) in January 2012. SRK was provided with a block model, an exploration drilling database, and a set of geological wireframes. The estimated model was accompanied by a draft report outlining details of the estimate.

In total, 32 diamond drillholes were included in the database, with a total meterage of 6,017 m, with 714 assay intervals averaging 1.1 m thickness. Table 3-9 shows the breakdown of meterage drilled per year, alone with number of holes containing assays.

Table 3-9: Meterage of drilling per year Year 1950 1960 1961 1962 1963 20111 Count 9 2 9 5 1 6 Meterage 1,016 323 2,093 1,259 295 1,031 Count with Assays 0 0 0 0 0 6


A grade tonnage curve was produced by SRK to visualise the distribution of grade with increasing cut-off grades as shown in Figure 3-17 below.



Figure 3-17: Fe% Grade-Tonnage curve for Harrejaure

2011 Renhagen Mineral Resource Estimate

The most recent MRE for the Renhagen deposit was produced by MMC in January 2012. SRK was provided with a block model, an exploration drilling database, and a set of geological wireframes. The estimated model was accompanied by a draft report outlining details of the estimate.

In total, 14 diamond drillholes were included in the database, with a total meterage of 2,512 m, with 966 assay intervals (733 modern) averaging 1.5 m thickness. Table 3-10 shows the breakdown of meterage drilled per year, along with the number of holes containing assays.

Table 3-10: Meterage of drilling per year

Year 1968 2001 20111

Count 5 2 7

Meterage 889 375 1,248

Count with Assays 5 1 7 1 Holes drilled by SCR

A grade tonnage curve was produced in order to visualise the distribution of grade with increasing cut-off grades as shown in Figure 3-18 below.

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Figure 3-18: Fe% Grade-Tonnage curve for Renhagen

3.4 Description of Exploration Targets with potential tonnage and grade ranges. SCR reports that these Assets have been subjected to diamond drill testing, ground geophysics and historic interpretation by the SGU, which has then been subject to review by Mr Thomas Lindholm of GeoVista AB.

SRK notes that the potential tonnage and grade ranges presented in Table 3-11 below are conceptual in nature, that there is either insufficient exploration data and/or interpretation to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

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Table 3-11: SCR potential tonnage and grade ranges for exploration assets, modified from SCR’s ASX release 17 January 2012.

A description of each of the Assets listed in Table 3-11 above is presented below, along with comments by SRK.

3.4.1 Laukkujärvi The Laukkujärvi project is located approximately 30km west of Kiruna, just north of the paved road toward Nikkaluokta (Figure 3-3).

The Laukkujärvi magnetite mineralisation was discovered 1898. SGU measured the magnetic vertical field and the gravity field in the between 1950 and 1970 and drilled 5 drillholes on the iron occurrence. The mineralisation occurs within the Kiruna Greenstones and is classified as a skarn iron ore. The southernmost lens is largely altered to martite. Chalcopyrite mineralisation occurs within the iron mineralisation (best section 22 m with 0.38% Cu) and within conglomerate and porphyries c. 500 m west of the iron deposit (best section 12.07 m with 1.1% Cu and 0.1 g/t Au).

A resource estimate was produced by the SGU in 1973 who reported 6 Mt at 25-30% Fe, 0.07-0.3% P and 1-2% S to a depth of 100 m. Geovista carried out an interpretation and modelling exercise of ground magnetic, airborne magnetic and regional gravity in 2010.

Metallurgical testwork from drill core samples was carried out by Mineral Engineering (2010). Magnetic susceptibility tests confirmed that the vast majority of Fe-rich samples for Laukkujarvi were magnetic, presumed to be predominantly magnetite. Head assays showed mixed results, with one sample containing very high Fe (45-51%), with low P (0.02-0.04%), S (0.009-0.1%), but high Al2O3 (4%) and SiO2 (16%), and another sample with extremely low Fe (2-9%), which was considered waste material. The high grade sample still required beneficiation to account for the high Al2O3 and SiO2. Davis Tube test work results confirmed all samples had acceptable P and S grades from Laukkujärvi, suggesting that a saleable concentrate could be produced through magnetic separation alone.



3.4.2 Altavaara Altavaara is located 15 km east of Kiruna and 2 km south of the village of Jukkasjärvi. The deposit was discovered in 1897 and explored in several campaigns through ground geophysics and diamond drilling.

Three deposits are known in the Altavaara area, namely; Altavaara North, South and East. The South and East deposits are reported by the Company to be insignificant in size.

Five holes were drilled between 1916 and1917. The cores from this drilling campaign were stored at LKAB in Kiruna and they were re-assayed 1964. Another four holes were drilled in 1964 after the area had been investigated with geophysics. One of these holes was drilled in the Altavaara North deposit.

The historical investigations and a compilation of results are presented in the SGU report BRAP00885 (Eriksson and Espersen 1965). The SGU produced a resource estimate and reported Altavaara North to contain 7.1 Mt at 25.8% Fe.

The Company’s geophysical consultants GeoVista carried out modeling and interpretation of historic ground magnetic and gravity data which was supported by density measurements on historic drill core.

3.4.3 Paljasjärvi Paljasjärvi is located 90 km northeast of Kiruna and 12 km east of the road between Vittangi and Karesuando. The magnetic anomaly associated with the mineralisation is located between the ridge formed by Rangasvaara, next to Sautustunturi and the small creek Sautusjoki.

Paljasjärvi is a skarn iron ore typical of the upper part of the Karelian greenstones consisting of magnetite together with serpentine, pyroxene, amphibole and minor amounts of pyrite. The ore horizon is about 3,800m long, and dips steeply towards the east. Historic drilling suggests the mineralisation is approximately 30m wide.

The Paljasjärvi deposit was explored by Jonson & Co in 1963, who drilled 7 drillholes for a total of 830m, estimating a tonnage and grade of 45Mt at 40% Fe to a depth of 300m.

The Paljasjärvi area was recently flown by the Geological Survey of Finland (GTK), although the date and technical specifications of the survey are not known. Through modelling of this data and utilising the results of historic drilling as control, the Company’s geophysical consultant (GeoVista AB) has derived a potential grade and tonnage range for Paljasjärvi (Table 3-11).

3.4.4 Åkosjegge The Åkosjegge prospect is 35km northwest of Jokkmokk and 17km southwest of Porjus.

Mineralisation occurs in an east-northeast striking zone with magnetite-skarn layers.

In 1969, SGU conducted magnetic and gravimetric measurements at Åkosjegge and the results revealed a 2.5km long and 100m to 400m wide magnetic anomaly. The gravimetric anomaly is broader and has a width of 600m to 800m. The SGU produced a tonnage estimate of approximately 75Mt at Åkosjegge, based purely on the results of ground geophysics.



3.4.5 Tjåorika The Tjåorika project is located 33 km west-southwest of Kiruna (Figure 3-3) and covered by a single exploration permit, Harrejaure nr1. Access in the summer is via helicopter and by snow scooter during the winter months.

The Tjåorika iron occurrence was discovered in the 1950s by a private Swedish exploration company and was subsequently investigated by “Rederiaktiebolaget Nordstjernan” who carried out geophysical measurements and drilled 4 holes. A historic resource estimate has not been derived for the Tjåorika project. However, the SGU estimated a conceptual exploration target for Tjåorika, of 2.5 million tonnes of ore with 57% Fe.

3.4.6 Kevus & Teltaja The Kevus and Teltaja iron deposits were discovered in the early 1920’s after following up magnetic anomalies in the Lannavaara area. Both deposits have been investigated by detailed geophysical surveys as well as seven diamond drill holes into each deposit for a total of 1,500m. This work was carried out by the SGU in the early 1970’s. The interpretation of the geophysical surveys in combination with the results of the diamond drilling led the SGU to declare an inventory of 38.8 Mt at 30% Fe for Kevus and 43 Mt at 43 % Fe for Teltaja. On this basis, the Company declared JORC Exploration Targets for the two deposits of 35-45 Mt at a grade of 28-35% Fe (Kevus) and 39-47 Mt at a grade of 40-48% Fe (Teltaja).

3.4.7 Leppäjoki SRK has not been presented with information regarding the interpretation of historic data, or recent work carried out at Leppäjoki.



3.5 Early stage Exploration Targets Table 3-12 provides a summary of the early stage exploration projects within the SCR portfolio, and the methods of exploration performed to date. This includes work carried out by the Company and previous exploration. The Norwegian projects are divided into the two regions of Finnmark and Norwegian Caledonides. The Swedish projects are divided into the Swedish Caledonides, Kiruna District, Korpilombolo and Våtmyrberget (Figure 3-1).

Table 3-12: Summary of SCR early stage exploration projects

Country Region Asset / Project Name Diamond Drilling

Trenching / Test Pits

Ground Geophysics

Historic Production

Sweden

Kiruna

Karenisvare √ Gäddmyr √ √

Hotnjos/Leavka √ √ Saivo √

Maunisvaara Piedjastjåkka/ Skuokimjokk √ Rappakojärvi √ Staggotjåkka √

Eustillako √ Tervakoski

Korpilombolo Korpilombolo

Våtmyrberg /Skellefte field

Våtmyrberget

Näsberg √ √

Våtmyrberget √ Granberg / Näsberg √

Caledonides

Unna Gaissa √ Ankarvarvattnet √ √ √

Daningen √ Särksjön √ √

Norway

Caledonides

Husvika √ √ Famnvatnet/ Rössvattnet √ √ √

Övre Elsvatnet √ √

Finnmark

Notsynene & Neiden Gjeddevann/ Kobbfoss √ √

Gorvvessjavri Njivlojavri

Geassamaras √ √ Kåfjord/ Raipas √ √ √

Vilgesrassa Fiskarfjellet

Vaddas √ √

Birtavarre √ √ Sørdalshøgda/

Sørdalshøgda-South/ Hårskoltan/

Holmvasshøgda

√



The majority of the projects are very early stage exploration targets, with limited exploration data. Some of the projects have been mined historically on a small scale and others have historic grade-tonnage estimates. These are not considered of material importance to the valuation, and have not been described in detail due to the lack of supporting information. Further, while some of these early stage projects show promise in terms of exploration potential, SRK has not considered this as part of the valuation in this instance and has instead based the valuation of these assets purely on an estimate of historic expenditure, using the Company’s exploration budgets as a guide to the Prospectivity Multiplier, as discussed below.



4 VALUATION OF MINERAL ASSETS HELD BY SCR 4.1 Methodology

SCR has interests in a number of exploration projects in Sweden and Norway. This section presents a valuation of these Assets which is valid at 26 March 2012. The majority of the licences held by SCR are at an early of development. Valuations of such projects are subjective and SRK’s approach is to consider various valuation methodologies and so derive a range of appropriate values.

The methods used by SRK in this case were as follows:

Past Expenditure Method: This considers (a) exploration expenditure by SCR through a review of management information and (b) historical expenditure that has increased knowledge of the asset and added value to it, and values this in terms of how much this work would likely cost in today’s terms. A Prospectivity Multiplier (PM), of either 1.0 or 2.0 has been applied to this past expenditure to reflect SRK’s opinion of prospectivity, with a factor of 2.0 applied to Kiruna area projects and 1.0 to all others projects. While planned future expenditure has not been included, SCR’s exploration budget for the next 12 months has been used to guide the relative Prospectivity Multiplier applied to each area. In general, SRK considers this methodology to provide a minimum value for each Asset.

Yardstick Method: Where a Mineral Resource Estimate is available for an asset, or a potential grade-tonnage range has been presented for an Exploration Target, a value per tonne of contained metal has been assigned. A Confidence Factor (CF) has been applied to this, to reflect SRK’s opinion on the relative confidence of the particular estimate. Assets with Mineral Resource Estimates have been assigned Confidence Factors of between 0.3 and 1.0. Grade-tonnage ranges associated with Exploration Targets have been assigned Confidence Factors of between 0.1 and 0.4 based on the quantity and quality of available supporting data.

The majority of the Assets valued in this way target iron as the primary commodity of interest. However, there are also two Assets for which copper and gold mineralisation has also been estimated. The following values per tonne of contained metal have been used by SRK:

• Iron – USc1.2/dmtu (being 1% of a market consensus long term price of USc120/dmtu);

• Gold – USD10/oz (being 1% of a market consensus long term price of USD1,025/oz);

• Copper – USD56/t (being 1% of a market consensus long term price of USD5,600/t)

The Yardstick methodology often gives the maximum value of an asset at this stage of exploration.

Comparable Transaction Method: Based on an analysis of values of iron ore assets and companies, SRK has applied a value of USD1.0 per tonne contained iron where the Asset has either a Mineral Resource Estimate or an Exploration Target grade-tonnage range. SRK has derived the value of USD1.0 per tonne based on analysis of the market capitalisation and total resource base of eight companies with purely iron ore assets. The majority of the companies used in this analysis are at exploration/pre-production stage. Table 4-1 presents a summary of the information used, all of which is available in the public domain. The median of the values presented below gives a value of USD0.80/t whereas the average is USD1.09/t



and as such SRK has used USD1.0 per tonne contained iron for purposes of the comparable transaction valuation methodology.

Table 4-1: Comparable Transactions

Company Market Cap (USDm)1

Resource Tonnes (Mt)2

Grade (Fe %)

Contained Fe (Mt)

Value (USD/t)

African Minerals 2 694 12 751 31% 3 971 0.68 Sundance Resources 1 233 3 199 44% 1 420 0.87 London Mining 576 2 125 34% 722 0.80 Zanaga 532 2 170 33% 718 0.74 Bellzone 369 4 916 27% 1 307 0.28 Afferro 115 1 994 32% 645 0.18 Ferrexpo 2 890 8 341 32% 2 669 1.08 Northlands 542 757 32% 239 2.27

1: Market capitalisation as at 22 March 2012. 2: Resource Tonnages apportioned by ownership status

As with the Yardstick Method, a Confidence Factor (CF) has then been applied to reflect SRK’s opinion of the relative confidence in the particular estimate. This methodology generally gives a value which lies between the Past Expenditure and Yardstick methods.

All valuations presented herein have been adjusted to reflect SCR’s ownership of the Assets. All Assets are 100% owned by SCR with the exception of Vieto, Sautusvaara (North and South), Renhagen, Harrejaure, Tjåorika and Laukkujärvi which are 75% owned by SCR.

4.2 Valuation 4.2.1 Valuation of Assets with Mineral Resource Estimates

Sautusvaara South

Estimated historical spend on this asset amounts to some USD2.6M. SRK has applied a PM of 2.0 to this asset to give a Past Expenditure value of some USD5.2M.

As noted above, this asset is estimated to contain a mineral resource of 38.8Mt with a mean grade of 35.5% Fe and containing some 13.8Mt of iron. SRK has applied a CF of 1.0 to this estimate to give a Comparable Transaction valuation of some USD10.3M and a Yardstick valuation of some USD12.4M based on 75% ownership of this asset.

Sautusvaara North





Ekströmsberg



Rakkurijärvi/Discovery/Tributary


As noted above, this asset is estimated to contain a mineral resource of 85.4Mt with a mean grade of 29.8% Fe and containing some 25.5Mt of iron. In addition, this asset includes a mineral resource estimate for copper and gold of some 10.9Mt with a mean grade of 0.31% Cu and 0.08g/t Au and containing some 34,200t copper and 26,300oz of gold. SRK has applied a CF of 0.80 to these estimates to give a Comparable Transaction valuation of some USD20.4M and a Yardstick valuation of some USD26.1M based on 100% ownership of this asset.

Rakkurijoki

Estimated historical spend on this asset amounts to some USD10.8M. SRK has applied a PM of 2.0 to this assert to give a Past Expenditure value of some USD21.5M.


Tjårrojåkka


As noted above, this asset is estimated to contain resources of 52.6Mt with a mean grade of 51.0% Fe and containing some 26.8Mt of iron. In addition, this asset includes a resource estimate for copper of some 5.0Mt with a mean grade of 0.60% Cu and containing some 30,000t copper. SRK has applied a CF of 0.50 to these estimates to give a Comparable Transaction valuation of some USD13.4M and a Yardstick valuation of some USD16.4M based on 100% ownership of this asset.

Vieto




As noted above, this asset is estimated to contain resources of 14.0Mt with a mean grade of 35.7% Fe and containing some 5.0Mt of iron. SRK has applied a CF of 1.0 to this estimate to give a Comparable Transaction valuation of some USD3.8M and a Yardstick valuation of some USD4.5M based on 75% ownership of this asset.

Pattok



Puoltsa



Renhagen



Harrejaure



4.2.2 Valuation of Exploration Targets with potential tonnage-grade ranges

Tjåorika




SCR considers this asset to have an Exploration Target potential tonnage and grade range of 15-30Mt at 45-55% Fe. Assuming the mid-point of this target range and applying a CF of 0.20, SRK estimates a Comparable Transaction valuation of some USD1.7M and a Yardstick valuation of some USD2.0M based on 75% ownership of this asset.

Laukkujärvi



Altavaara



Paljasjärvi



Åkosjegge



Leppäjoki





Kevus



Teltaja



4.2.3 Valuation of early stage Exploration Targets For early stage exploration assets, SRK has applied only a Past Expenditure valuation method.

Kiruna Projects

Estimated historical spend on these assets amounts to some USD1.0M. SRK has applied a PM of 1.0 to these assets to give a Past Expenditure value of some USD1.0M.

Våtmyrberget Projects

Estimated historical spend on these assets amounts to some USD0.03M. SRK has applied a PM of 1.0 to these assets to give a Past Expenditure value of some USD0.03M.

Caledonide Projects

Estimated historical spend on these assets amounts to some USD1.7M. SRK has applied a PM of 1.0 to this asset to give a Past Expenditure value of some USD1.7M.

Finnmark Projects




Other Projects


4.3 Valuation Summary Table 4-2 below presents a summary of the range of values by methodology for the Assets, with percentage ownership applied to reflect the value held by SCR.

The table has been split to show sub-totals for; Assets with Mineral Resource Estimates, Exploration Targets with potential grade-tonnage ranges and early stage Exploration Targets.

It is generally accepted in the exploration industry that the valuation of exploration properties is a subjective process and is greatly influenced by the prevailing market conditions. The observations, comments and results of technical analyses presented in this report represent SRK’s opinions as at the date of this report. SRK is confident that the opinions presented are reasonable and that the overall valuation is a fair reflection of the Technical Value of the Assets on 26 March 2012.

SRK considers that the Technical Value of the proportion of the Assets held by SCR lies in the range of USD84.3M to USD184.8M. SRK’s preferred value is USD140M, which is the mean of the three valuation methods.



Table 4-2: Valuation of SCR Assets by method

Asset Name Past

Expenditure (USDM)

Comparable (USDM)

Yardstick (USDM)

SCR Ownership

(%) Assets with Mineral Resource

Estimates

Renhagen 3.3 6.3 7.6 100%

Harrejaure 0.9 5.3 6.3 100%

Puoltsa 3.4 5.8 6.9 100%

Ekströmsberg 15.9 11.2 13.5 100%

Pattok 2.3 11.0 13.2 75%

Rakkurijärvi/Discovery/Tributary 9.0 25.4 32.7 75%

Rakkurijoki 21.5 29.6 35.5 100%

Sautusvaara South 5.2 10.3 12.4 75%

Sautusvaara North 2.0 3.7 4.5 75%

Tjårrojåkka 5.9 13.4 16.9 75%

Vieto 4.1 3.7 4.5 100%

Sub-total 73.6 125.9 154.1 Exploration Targets with potential

grade-tonnage ranges

Åkosjegge 0.2 0.3 0.4 100%

Altavaara 2.0 6.3 7.6 100%

Tjåorika 0.4 1.7 2.0 75%

Laukkujärvi 2.1 0.6 0.7 75%

Leppäjoki 0.0 0.2 0.3 100%

Paljasjärvi/Sautusjärvi 0.6 7.0 8.4 100%

Kevus 0.5 3.8 4.5 100%

Teltaja 0.5 5.7 6.8 100%

Sub-total 6.0 25.6 30.7 Early Stage Exploration Targets

Other Kiruna Projects 1.0 100% Näsberg-Våtmyrberget Projects 0.0 100%

Caledonides Projects 1.7 100% Finnmark Projects 1.6 100%

Other 0.1 100% Sub-total 4.5

Total 84.3 151.5 184.8



5 DECLARATIONS SRK is part of the international consulting group, SRK Consulting (Global) Limited (the SRK Group). The SRK Group comprises over 1,400 staff, offering expertise in a wide range of resource engineering disciplines. The SRK Group’s independence is ensured by the fact that it holds no equity in any project. The SRK Group has a demonstrated track record in undertaking independent assessments, project evaluations and audits, Mineral Experts Reports, Competent Persons’ Reports, Independent Valuation Reports and independent feasibility studies to bankable standards on behalf of exploration and mining companies and financial institutions worldwide.

Contributors to this report are listed in Table 5-1 below.

Table 5-1: Contributors to this report Name Qualifications Affiliations Involvement

Johan Bradley BA(Hons), MSc FGS CGeol, EurGeol Report Author

Dr Mike Armitage BSc, PhD MIMMM, CEng Peer Reviewer

Neither SRK nor the contributors to this report listed in Table 5-1 above have any business relations with either SCR or BDO, other than the carrying out of individual consulting assignments as engaged.

Neither SRK nor the contributors to this report listed in Table 5-1 above nor their immediate families have any interests in SCR. SRK has no pecuniary interest, association or employment relationship with SCR or BDO.

SRK is being paid a fee according to its normal per diem rates and out of pocket expenses in the preparation of this report. SRK’s fee is not contingent upon the outcome of the transaction upon which this report is based.

This report and its conclusions are effective as at 26 March, 2012.



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Triumf C.-A., Lindholm T., Martinsson O., (2011): Renhagen. Drilling program modified. RENHAGEN_20110301_modified_drilling_p.docx

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Zachrisson, E.(1971): The Structural setting of the Stekenjokk Ore Bodies, Central Swedish Caledonides. The Structual Setting of the Stekenjokk Ore Bodies.pdf

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Årebäck H., Wasström A., Mattsson B., (2004): The Näsberget layered intrusion –PGE-Au exploration 2002-2003. Boliden. GP2003-03.pdf

For and behalf of SRK Consulting (Sweden) AB

Johan Bradley Managing Director & Principal Consultant (Geology), SRK Consulting (Sweden) AB

Mike Armitage Chairman and Corporate Consultant (Resource Geology), SRK Consulting (Sweden) AB

SRK Consulting SCR Valuation – Abbreviations and Units

SE394_ScandinavianResourcesValuation_March2012_final.docx March, 2012

Definitions ASX Australian Securities Exchange CF Confidence Factor Ga billion years Hannans Hannans Reward Limited IOCG iron oxide copper gold JORC Code the 2004 Edition of the “Australian Code for Reporting Exploration Results,

Mineral Resources and Ore Reserves” LKAB Luossavaara-Kiirunavaara Aktiebolag Masl metres above sea level mE metres Easting MMC Runge Limited trading as Minarco-MineConsult mN metres Northing MRE Mineral Resource estimate NOK Norwegian Krone SEK Swedish Krona SGU Swedish Geological Survey USc United States cents USD United States dollars USDM million United States dollars VALMIN Code the 2005 edition of the Code for the Technical Assessment and Valuation of

Mineral and Petroleum Assets and Securities for Independent Expert Reports

VMS Volcanogenic massive sulphide

Units T Metric tonnes Kt Thousand Tonnes Mt Million metric tonnes SG Specific Gravity DTR Davis Tube Recovery Fe Iron (element) Cu Copper (element) S Sulphur (element) P Phosphorous (element) Au Gold (element) Co Cobalt (element)

http://en.wikipedia.org/wiki/Aktiebolag

The Independent Directors of Scandinavian Resources Limited unanimously recommend that, in the absence of a superior proposal you accept the Hannans Offer .

SCANDINAVIAN RESOURCES LTDTELEPHONE: + 61 8 9324 1153

FACSIMILE: + 61 8 9324 3366

EMAIL: [email protected]

WEB: www.scandinavianresources.com

TWITTER: scanres | FACEBOOK: Scandinavian Resources

You can ACCEPT the offer by completing the Acceptance Form in the Bidder's Statement from Hannans Reward Limited

TARGET’S STATEMENT prepared by Scandinavian Resources Limited (ACN 132 035 842) in relation to the off-market takeover

ACCEPT

bid by Hannans Reward Limited (ACN 099 862 129) to acquire your shares in Scandinavian Resources Limited.

THE INDEPENDENT DIRECTORS OF SCANDINAVIAN RESOURCES LIMITED UNANIMOUSLY RECOMMEND THAT, IN THE ABSENCE OF A SUPERIOR PROPOSAL, YOU

the takeover offer from Hannans Reward Limited

REASONS TO ACCEPT1. Access to Additional Funding in the Short Term2. Increased Liquidity3. Premium to the price of Scandinavian

4. Exposure to Hannans’ Exploration Portfolio5. Not Fair But Reasonable

SR_ACCEPT_430mm_2.pdf 1 4/16/2012 9:34:10 PM

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