TANGIERS PETROLEUM LIMITED: Letter to Shareholders

20 December 2012

TANGIERS PETROLEUM LIMITED

A NEW YEAR IS ABOUT TO BEGIN AND TANGIERS IS POISED TO GROW

Dear Shareholder,

With the festive season now well upon us, I would like to take this opportunity to outline the significant progress your Company has made towards its goal of building a substantial oil and gas group and the next steps it plans to take along that path.

A little over 100 days have passed since Tangiers announced the Board restructure in which I was appointed as Executive Chairman. This restructure also saw the appointment of highly experienced geologist Max de Vietri as a Non-executive Director, while Brent Villemarette continued as an Executive Director.

To this end, the new Board immediately set about raising capital and negotiating "farm out" arrangements which have covered virtually all of Tangier's financial obligations on its existing acreage while retaining valuable exposure for the Company should upcoming exploration programs be successful.

In early September, your Company had commitments of over $70 million on its exploration permits in Morocco and Australia, less than $1 million available to spend and a market capitalisation of $28 million. Today, even at our current relatively depressed share price of 32c, the market capitalisation is $42 million and on closure of the farm-out deals, the Company will have about $15 million in cash to contribute to new projects.

As well as generating some valuable cash, I believe these farm-out deals, which cover Tangier's exploration acreage in both Australia and Morocco, have delivered excellent outcomes for the Company in both the short and long terms.

The Moroccan farm-out brings in a valuable partner in Galp Energia. Galp has a market capitalisation of ~$12 billion and operating experience in eight African countries. It is a deepwater producer in Brazil and a fully integrated petroleum company with interests in exploration, development, production, refining, marketing and petrol stations.

Galp will fund the commitments (up to $33 million) that Tangiers previously had for the period up to August 2014 as well as refund our past costs of $7.5 million. The full carry on the well costs is comparable to other deals in surrounding permits, but the level of refund of past costs far exceeds the amounts agreed in these same deals.

It is important to note that the well costs in our Tarfaya block will be relatively low because of our ability to utilise a jack-up rig, typically around half the cost of the floating rigs that will be required to drill in some of the adjacent permits. Tangiers will retain a 25 per cent interest in the Tarfaya offshore area following completion of the farm-in arrangements.

In Australia, a Heads of Agreement has been signed with CWH Resources Ltd and we are now working on completing the definitive agreement. CWH will fund the first $35 million of exploration expenditure in our WA-442-P and NTP/81 permits. This should cover most of our commitment of 3D seismic acquisition and two wells. Tangiers will retain a 27 per cent interest in the permits.

CWH is an ASX-listed company with an extensive network in China, through which CWH has arrangements to fund its exploration projects in Australia. CWH does not intend to raise capital in Australia to fund the exploration programs but will cover the costs through debt financing, some of which will come from the $50 million it has recently secured for acquisition of resources projects in the Northern Territory.

CWH also has other sources of funding through its major shareholders, which have a variety of businesses in China including building materials, chemical industries, investment companies, gas companies, manufacturing, logistics companies, petroleum stations and more.

CWH has advised Tangiers that it has always been supported by these major shareholders and the support is expected to continue into the future. CWH is based in Chongqing, a major municipality in south-west China with a population of ~30 million.

With the farm-out agreements relieving Tangiers of most of its financial obligations on its existing assets, the Company is now ideally placed to pursue the next leg of its growth strategy. This will involve identifying "farm-in" and acquisition opportunities in Africa to grow our portfolio of exploration and production assets.

This process is now underway, with the Board targeting onshore and shallow water opportunities. These parameters recognise the Company's financial resources, which realistically do not stretch to becoming involved in the deep water exploration business that is predominantly a game for the deep pockets of the petroleum majors.

The Board has a preference for oil exploration and production opportunities, though it remains open to involvement in the gas industry provided key criteria such as gas prices and nearby infrastructure meet its requirements.

I believe that the experience of the people within Tangiers, along with the Company's ability to fund suitable farm-ins and acquisitions, will enable us to capitalise on the opportunities in our chosen region of growth.

I look forward to reporting to you in the New Year on the finalisation of the farm-out agreements and progress on sourcing new assets for the Company.

In the meantime, on behalf of the Tangiers Board, I wish you a merry Christmas and a prosperous 2013.

EVE HOWELL Executive Chairman

Tangiers Petroleum Limited Level 2, 5 Ord Street West Perth WA 6005, Australia Ph: +61 8 9485 0990 www.tangierspetroleum.com.au

Contacts

RFC Ambrian Limited (Nominated Adviser) Mr Stuart Laing + 61 8 9480 2506

Old Park Lane Capital PLC (Joint AIM Broker) Mr Michael Parnes Mr Luca Tenuta + 44 20 7493 8188

Shore Capital Stockbrokers Ltd (Joint AIM Broker) Mr Jerry Keen Mr Bidhi Bhoma + 44 20 7408 4090

Mr Ed Portman (Media and Investor Relations - United Kingdom) Tavistock Communications + 44 20 7920 3150

END

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