Hillgrove Resources : Ore Reserve Estimation

1 September 2016

KANMANTOO COPPER MINE ORE RESERVE ESTIMATE

Hillgrove Resources Limited (ASX:HGO) advises that a new Ore Reserve Estimate has been prepared for the Kanmantoo Copper Mine in accordance with The JORC Code 2012 Edition.

Table 1 Ore Reserve Estimate at 30 June 2016

Mine	JORC 2012	Tonnage	Cu	Au	Ag
	Classification	(Mt)	(%)	(g/t)	(g/t)
Kanmantoo Copper Mine	Proved	6.6	0.6	0.08	1.1
	Probable	2.2	0.5	0.05	0.8
Total	8.8	0.6	0.08	1.1

Note: Economic Cut Off Grade is 0.20% Cu.

The Ore Reserve Estimate follows on from the Mineral Resource Estimate released in May 2016 as the Company continues to improve the reliability of its geological modelling which underpin the production forecasts and longer term project value.

Copper metal produced by the process plant has positively reconciled against the recent Mineral Resource Estimate for each month this year. Table 2 highlights that the amount of copper metal mined has exceeded the 2016 Mineral Resource Estimate over the 6 months to 30 June 2016, which is a significant improvement on the reliability of the 2013 Ore Reserve Estimate which over stated copper metal production by 24kt over the 40 month period to 30 June 2016 as shown in Figure 1. Although the favourable reconciliation has a positive impact on cash flows and as such is welcome, the 2016 Mineral Resource Estimate will be reviewed to improve the grade estimation accuracy.

Table 2 Reconciliation of Mineral Resource Estimate 2016 against Ex-Pit Production

Period: 1 Jan to 30 Jun 2016	Tonnage	Cu	Cu Metal
(kt)	(%)	(t)
Mineral Resource Estimate 2016	1,280	0.41	5,300
Ex-Pit Production (mill reconciled)	1,260	0.49	6,220
Ex-Pit production against MRE	-2%	+20%	+17%

Remaining within the Giant Pit mine design and below the 30 June 2016 topographic surface there is approximately 14kt copper metal classified as Inferred Mineral Resources above 0.2% Cu cut- off. A Reverse Circulation infill drilling program aimed at improving the confidence level of the Mineral Resource Estimate was completed in August 2016 as detailed in a separate announcement on 1 September 2016. In the December quarter, a revised Mineral Resource Estimate and Ore Reserve Estimate will be prepared to incorporate the drilling results and address the positively reconciling grade estimation.

Figure 1 Reconciliation of 2013 and 2016 Ore Reserve Estimates (kt of copper metal)

200

180

160

157 60

140

120

100

80

60

24

73 10

12 51

40

20

0

Reserve 2013 Depletion Reconciliation Depleted

Reserve 2013

Resource 2016 Modifying

Factors

Reserve 2016

Summary of major changes in the Ore Reserve Estimate

Depletion Mined areas have been depleted to the end of month survey surface as at 30 June 2016. All long term ore stockpiles have been depleted to zero stocks as of 30 June 2016. The Ore Reserve Estimate 2013 overstated copper metal by 24kt of copper metal when compared to the milled production during the period 28 February 2013 to 30 June 2016. The Mineral Resource Estimate 2016 as outlined in the Mineral Resource Statement released 26 May 2016. The Ore Reserve Estimate 2016 is spatially constrained to the disturbance area approved within the Program for Environmental Protection and Rehabilitation (PEPR), which considers only the open pit extraction of the Giant Pit. This constraint removes Rodda, Critchley and Paringa and Kavanagh North open pits from the 2016 Ore Reserve Estimate which were previously included in the 2013 Ore Reserve Estimate but are no longer considered viable to extract. Reconciliation Resource 2016 Modifying Factors

For detailed assumptions please refer to Appendix A: JORC Table 1.

ABOUT HILLGROVE

Hillgrove is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) focused on the operation of the Kanmantoo Copper Mine in South Australia, and with exploration projects on its Indonesian tenements. The Kanmantoo Copper Mine is located less than 55 kilometres from Adelaide in South Australia. With construction completed in late 2011, Kanmantoo is an open-cut mine with a throughput of 3.0 - 3.5Mt p.a., to produce up to 100,000 dry metric tonnes of copper concentrate per annum, containing approximately 20,000t copper and associated gold and silver per annum over the current life of mine.

Competent Person's Statement

The information in this release that relates to Mineral Reserves is based upon information compiled by Mr Lachlan Wallace, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Wallace is a fulltime employee of Hillgrove Resources Limited and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code)'. Mr Wallace has consented to the inclusion in the release of the matters based on their information in the form and context in which it appears.

The information in this release that relates to the 2016 Mineral Resource for Giant is based upon information compiled by Mr Peter Rolley, who is a Member of The Australian Institute of Geoscientists. Mr Rolley is a full-time employee of Hillgrove Resources Limited and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code)'. Mr Rolley has consented to the inclusion in the release of the matters based on their information in the form and context in which it appears.

For more information contact:

Mr Steven McClare Mr Paul Kiley

CEO & Managing Director CFO & Company Secretary

Tel: [phone] Tel: [phone]

HILLGROVE RESOURCES LIMITED APPENDIX A - JORC Table 1 Section 1 Sampling Techniques and Data

Criteria

Commentary

Sampling techniques

Reverse circulation (RC) and diamond drill hole (DD) samples collected by Hillgrove Resources personnel have been used for the geological interpretation and estimation. No historic samples have been used in this mineral resource estimate. Drill hole sampling was conducted as per the Hillgrove Resources procedures and QAQC protocols. 2004 to 2007 drilling: A rig mounted 75/25 splitter was used to collect a bulk sample and smaller split sample (3-4kg) directly off the drill rig at 1m intervals. The split sample was then split down manually if required using a cone or riffle splitter to generate a sample of ~3kg. 1m intervals were assayed with samples being prepared by Genalysis Laboratories in Adelaide. Each sample was pulverised to ~95% passing - 75µm and the remaining pulp shipped to Genalysis Perth for analysis. 1m bulk samples were collected during drilling with smaller split samples (3-4kg) for assay being collected primarily using a cone or riffle splitter directly off the rig. Specific target intervals and/or samples exhibiting visible mineralisation were assayed at 1m intervals. All other sample intervals were composited (using spear sampling) to 4m intervals for assaying. On return of assay results, the 4m composite results were examined and any 4m composites returning an economic copper grade (>0.2%) were re-assayed using the original 1m samples (collected from original bulk sample using spear sampling to produce a representative 1.5kg to 3kg sample). Samples were prepared by ALS Adelaide with each sample being riffle split to a maximum size of 3kg then pulverised split to 85% passing 75µm or better and then shipped to ALS Perth for assay. Core samples were sawn in half using a diamond core saw. A small percentage of core samples were sawn in quarters. Sampling was undertaken at 1m intervals or to geological boundaries as determined by the supervising geologist. Half or quarter core samples were sent for assay and the remaining core kept in core trays for future reference. Samples were prepared by Genalysis Laboratories in Adelaide using a jaw crusher to ~2mm. Each sample was then pulverised to ~95% passing - 75 µm and the remaining pulp shipped to Genalysis Perth for assaying. RC Drilling:  2011 - 2012 drilling: Diamond core:

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