QUARTERLY REPORT

June 2010 Quarter Activities Report

PROJECT ACTIVITY - INDONESIA

ARX Project Location Map

Trenggalek Project, East Java (ARX - 95%)

The Company operates a joint venture with P.T. Sumber Mineral Nusantara, which holds the Trenggalek Exploration IUP license covering 30,044 ha (~300 km2) in the Southern Mountains of East Java. The Southern Mountains comprise an older segment of the Sunda-Banda magmatic arc that is highly prospective for epithermal gold-silver and porphyry-related copper-gold deposits.

The main project activity during the quarter was continuation of scout drilling to test multiple gold targets. Results will be used to focus future work with the aim of delineating resources within the tenement. A total of 2,520 metres drilled in 22 holes partially tested targets at Sentul, Buluroto, Dalangturu and Jati. A list of drill holes and mineralised intercepts is presented in the tables at the back of this report.

SENTUL

Six holes (TRDD-6, 7, 8, 9, 18 and 21) further tested the West Sentul Vein on four step-out sections from the drill section reported in the previous quarter (TRDD-2, 3, 4, and 5). These latest holes returned low to medium grade gold intersections within a 5 to 15 m wide vein structure and confirm that the West Sentul Vein has a mineralised strike-length of at least 450 m open along strike in both directions and down dip.

Gold intercepts include 11.95 m at 2.12 g/t Au & 5 g/t Ag obtained from 37.45 m down-hole in TRDD-6 and 18.85 m at 0.98 g/t Au & 16 g/t Ag obtained from 31.35 m down-hole in TRDD-18. These intercepts contain higher grade parts of 1.95 m at 5.32 g/t Au & 7 g/t Ag in TRDD-6 and 1 m at 6.31 g/t Au & 208 g/t Ag in TRDD-18.

Favourable vein textures, such as banded and brecciated chalcedony-quartz-adularia-sulphide, persist to at least 150 m below surface in TRDD-4 and contained high grade gold intersections (2 m at 17.2 g/t Au).

Holes TRDD-6 to 9 show an overprint of late barren quartz and carbonate which has diluted gold grades but favourable textures occur in these lower grade intersection indicating potential for additional high-grade gold shoots elsewhere along the West Sentul vein structure.

Six holes drilled on the East Sentul Vein (TRDD-11 to 16), about 300-400 m east of and parallel to the West Sentul Vein tested a 300 m segment of the vein. All holes intersected narrow zones of low-grade gold mineralization within a 5 to 10 m wide, brecciated and banded chalcedony-quartz-adularia vein.

The best mineralized intercept was in TRDD-12 which intersected the vein at about 40 m below surface and returned 3 m at 5.53 g/t Au & 14 g/t Ag from 39.5 m down-hole, including a best 1 m intercept of 7.57 g/t Au & 16 g/t Ag. A breccia vein/stockwork deeper in this hole produced a broad low-grade gold intercept of 16 m at 0.17 g/t Au with a true-width of about 10 m.

Sentul will be further evaluated during the next quarter.

Note: This long section shows the pierce-points of the highest grade gold intercepts returned in each hole drilled along the West Sentul Vein; it does not represent all of the gold intercepts, including broader haloes of lower grade gold mineralisation intersected within the vein.

BULUROTO

The Buluroto Prospect is defined at surface by a 100-120 m long and 10-15 m wide gossanous breccia zone developed near the confluence of two quartz veins. Previous trenching on the breccia returned up to 10 m at 12.7 g/t Au and 96 g/t Ag in channel samples. Shallow drilling by a previous explorer returned an intercept of 11.9 m at 4.9 g/t Au in oxidised breccia.

Two holes (TRDD-23 and 25) drilled during the current quarter tested the breccia below the base of oxidation at about 50 m and 90 m below surface. TRDD-23 returned 7.2 m at 0.63 g/t Au from 48.8 m down-hole and TRDD-25 drilled down-dip intersected 15 m at 0.58 g/t Au from 103.0 m, and 27.3 m at 0.49 g/t Au and 0.19% Cu from 135.8 m down-hole.

The deeper mineralised intercept in TRDD 25 is unlike any other from Trenggalek and highlights the potential for porphyry-related gold-copper mineralisation in the project area. The Tujuh Bukit gold-copper project lies about 250 km to the east, where Intrepid Mines has confirmed the presence of a potentially large porphyry and high-sulphidation gold-copper system.

Buluroto will be further evaluated during the next quarter.


DALANGTURU

Four scout holes (TRDD-17, 19, 20 and 22) were completed at Dalangturu during the quarter to test the northern part of a large IP chargeability and associated soil geochemical anomaly that is co-incident with a distinctive flat topped hill capped by the shallow eroded remnants of a mineralised epithermal stockwork-breccia system.

Holes TRDD-17, 19 and 22 on the north-western slope of the hill, intersected narrow zones of thin (<1-10 cm) banded chalcedony-quartz-adularia-sulphide veins in weakly propylitic andesite. Selective sampling of these holes returned a few narrow gold intercepts of +1g/t Au within narrow envelopes of lower grade mineralization (0.1-0.5 g/t Au).

Hole TRDD-20, to the east, intersected intense clay-sulphide alteration and sulphide stringers below a shallow cover of soil and perched alluvium containing silicified breccia boulders. This intense alteration contains low gold but anomalous pathfinder elements such as arsenic, antimony and mercury, averaging 244 ppm As, 26 ppm Sb and 0.41 ppm Hg over 70.5 m from 1.8 m down-hole. Stockwork veined propylitic-altered andesite deeper in the hole returned a broad low-grade gold intercept of 31.3 m at 0.11 g/t Au from 74.3 m down-hole.

This initial scout drilling at Dalangturu has confirmed a large, shallowly eroded, epithermal system that has been mapped over an area of at least 600 m by 1,200 m. Similar features are seen at the neighbouring prospects of Jati, Suruh, Gregah and Timahan.
The presence of gold mineralised vein-stockwork adjacent to the clay-sulphide alteration zone in hole TRDD-20 confirms that the system is gold-bearing and may contain high-grade veins, stockwork or breccia zones at deeper levels.

Dalangturu and adjacent prospects will be further evaluated in the next quarter to better define the limits of this large epithermal system plan further drilling.

JATI

Three scout holes (TRDD-24, 26 and 27) were completed at Jati to test for the source of high grade vein float along a ridgeline on the northern edge the prospect where float sampling has given values ranging from 8.8 to 28 g/t Au. The three holes did not intersect any significant veining and the source of the high grade angular vein-float remains unexplained.

Further surface evaluation will be undertaken to try to locate the source of the high grade float.


SYNOPSIS - TRENGGALEK

Exploration at Trenggalek has confirmed the occurrence of a large epithermal gold-vein field within the 300 km² project area.

Scout drilling has produced potentially economic gold and silver intercepts at several prospects and one prospect has returned copper-gold intercepts indicating potential for bulk porphyry copper-gold targets as well as gold-silver bearing epithermal veins.

A number of other prospects identified by the Company remain to be drill tested. There remains considerable upside in Trenggalek.

At this early stage of exploration Trenggalek displays characteristics comparable to other epithermal vein districts such as Vera-Nancy and Cracow, where persistence with drilling resulted in major ore discoveries.

Further surface exploration and drilling are necessary at Trenggalek to ascertain the full potential of this extensive epithermal vein field.

Exploration expenditure at Trenggalek during the quarter totalled A$ 633,835.



Bima Project - East Sumbawa (ARX - 95%)

The company operates a joint-venture with P.T. Sumber Mineral Nusantara which holds the Bima IUP tenement in East Sumbawa, West Nusa Tenggara Province. The Exploration IUP covers 24,980 hectares (~250 km2) and is valid for 5 years.

The Bima Project about 230 km east of Newmont's giant Batu Hijau and Elang porphyry copper-gold deposits lies on the same segment of the Sunda-Banda magmatic arc. Targets so far identified are gold and base metal-rich intermediate-sulphidation epithermal veins, high-level silicification in limestones, and acid clay alteration in volcanic rocks, possibly related to buried porphyry copper-gold deposits.

50m x 100m grid soil sampling over the Kowo Prospect during the quarter has identified coincident gold-lead-barium anomalies in soil over mineralised and altered volcanic rock surrounded by barren younger cover (see figure below).

Continuous rock chip samples within the area of anomalous gold in soils returned results of 8.5 m at 0.14 g/t Au, 1335 ppm Pb & 7421 ppm Ba, 7 m at 0.15 g/t Au, 1024 ppm Pb & 4703 ppm Ba, and 13 m at 0.2 g/t Au, 356 ppm Pb & 3332 ppm Ba. Selective rock chip samples taken from quartz-chalcedony-baryte-sulphide stockwork exposed within the soil anomaly returned 0.2 to 1.84 ppm Au in eleven of 31 samples. Silver, copper, lead and barium are also highly anomalous in selective rock chips, returning maximum results of 210 ppm Ag, 1580 ppm Cu, 1310 ppm Pb and 13.6% Ba in rock.

These results are encouraging and indicate potential for bulk tonnage gold-base metal sulphide deposits in the project area. Further work will be conducted at Bima in the next quarter to prepare for scout drilling in 2011.

Exploration expenditure at Bima during the quarter totalled A$ 59,143.

Aisasjur Project: Anglo Strategic Alliance (ARX - 20%)

The Company has a 20% interest in a strategic alliance with the Anglo American Group (Anglo) to explore for large porphyry copper-gold deposits in the Papua and West Papua provinces. The interest is fully funded by Anglo through to a development decision.

The first project in the ARX-Anglo alliance, Aisasjur, in West Papua originally comprised three KP tenements which were amalgamated into a single Mining Business Licence (IUP) during the quarter. The new Exploration IUP covers 99,410 hectares (nearly 1,000 km2) is valid for 7 years.

The Aisasjur IUP is within the same belt of rocks that host the giant copper-gold deposits of Grasberg and Ertsberg. Exploration to date has identified epithermal gold and porphyry-related gold and copper mineralisation in the project area and the alliance is planning further exploration to build on the early success.


This report is dated 30 July 2010. For further information please contact:

Andrew J. Cooke
Company Secretary
Tel: + 61 2 9419 8044
Email: andrewcooke@arx.net.au

TRENGGALEK PROJECT, EAST JAVA
Summary of Drill-hole Details

TRENGGALEK PROJECT, EAST JAVA
Significant Mineralised Intercepts

TRENGGALEK PROJECT, EAST JAVA
Significant Mineralised Intercepts (Cont.)

Notes:

1) Assay results are from half-core samples split with a power saw. Logging, allocation of sample intervals, sampling & dispatching were done under the strict control of the Company's geologists.
2) Sample preparation and analyses were conducted by P.T. Intertek Utama Services in Jakarta.
3) Gold was assayed by 50g Fire Assay/AAS Finish.
4) Silver & Copper assayed by mixed acid digest/AAS Finish.
5) NSR - No Significant Gold Results

The information in this report that relates to Exploration Results is based on information compiled by Mr John Carlile, who is a Fellow of the Australian Institute of Mining and Metallurgy, and Mr Brad Wake, who is a member of the Australian Institute of Geoscientists. Mr Carlile and Mr Wake have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.' Mr. Carlile and Mr. Wake are full time employees of Arc Exploration Limited and consent to the inclusion in this report of the matters based on their information in the form and context in which it appears.

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