Hillgrove Resources : Results for Half Year Ended 30 June 2016

Wednesday, 31 August 2016

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2016 HIGHLIGHTS

• Proud winner of South Australian Premier's Award for Excellence in Supporting Communities.

• Release of new Mineral Resource Estimate (MRE) for Kanmantoo Copper Mine, which contains an additional 11,080t of copper compared to the 2013 Resource Model.

• Production against MRE reconciles positively by 17% for the six months.

• Significant progress to address previously announced cash shortfall:

  • A 10% reduction and deferral in wage rates accepted by employees,

  • South Australian Government concessions, and

  • Secured $4.0 million working capital loan provided by South Australian Government.

• No change to full year guidance for production and costs.

  Half year financial performance

• A net loss after tax of $102.7 million which includes impairment charges of $67.1 million after tax for Kanmantoo and a $19.2 million write down of deferred tax asset, with an underlying loss after tax of

  $16.4 million.

• Underlying EBITDA of $19.5m was up $7.0 million from the corresponding half year

• C1 cost for the half of USD1.39/lb, driven by the high proportion of capitalised pre-strip.

• The carrying value of the Kanmantoo operations has been reduced to $61.4 million.

• 6,756t of copper and 7,015oz of gold (in concentrate) produced.

• Revenue of $58.8 million at an average price of A$6,731/tonne.

• The operating loss is predominantly associated with an impairment reflective of the low copper price environment and lower production in the first half.

  Events Post Balance Date

• Bonding obligations under the Mining Act 1971 have been secured directly to the South Australian Government on a first ranking basis;

• Hedging positions (Australian Dollar copper swaps) have been closed out;

• The senior debt of US$13.65 million owed to Ventures Australia LLC has been fully repaid; and

• The sale and leaseback of 450 sea containers improving liquidity and reducing logistic costs.

IIII

HILLGROVE RESOURCES LIMITED ACN 004 297 116 www.hillgroveresources.com

5-7 Kimg William Road, Unley SA 5064, Australia T [phone] F [phone]

HILLGROVE RESOURCES LIMITED

Hillgrove Resources Limited (ASX:HGO) announces revenue generated in the six months to 30 June 2016 from the sale of copper concentrate of $58.8 million, a decrease of $13.2 million from the comparative period revenue of $72.0 million. The revenue was generated at an average realised price of

$6,731 per tonne (30 June 2015: $7,380 per tonne).

A net loss after tax of $102.7 million for the six months ended 30 June 2016 is reported (30 June 2015: loss $44.9 million). The underlying loss after tax was $16.4 million with non-underlying items comprising a Kanmantoo asset impairment write down of $67.1 million and derecognition of deferred tax asset of

$19.2 million.

Underlying EBITDA for the six months ended 30 June 2016 was $19.5 million, a $7.0 million increase from the comparative period (30 June 2015: $12.5 million).

Results for the period ($ million)	6 months to 30 June 2016	6 months to 30 June 2015	Change
Revenue	58.8	72.0	(13.2)
Statutory (loss)/profit	(102.7)	(44.9)	(57.8)
Underlying (loss)/profit	(16.4)	(4.6)	(11.8)
Underlying EBITDA	19.5	12.5	7.0

During the period, 30,369t of dry copper concentrate containing 6,756t copper was produced (30 June 2015: 39,896t of dry copper concentrate containing 9,151t copper). The continuing weaker copper price has resulted in an impairment of Kanmantoo operations by $67.1 million, which has reduced its carrying value to $61.4 million.

Outlook

The most critical issue confronting the company this year has been to ensure there is adequate liquidity in place for the Kanmantoo mine site to sustain operations and unlock shareholder value through to 2020. As can be clearly seen in the Events Subsequent to the Balance Date, there has been significant progress on a broad range of fronts. These are the preliminary outcomes from strategies to simplify funding arrangements, better define the quantum and timing of any shortfall, defer expenditure, reduce costs, achieve production targets and maintain support of business partners which will allow Hillgrove to achieve its objectives.

With the balance sheet now lightly geared, restrictions on access to cash now removed, and significant progress having been made in reducing the creditor position since the start of 2016, the Board is confident that the company is now in a sound position to raise any capital required to fund operations for the remaining mine life.

Having reviewed the performance to date and taking into account all material to hand, the Directors have left the annual guidance range unchanged for both production and costs.

For more information contact:

Mr Steven McClare Mr Paul Kiley

CEO & Managing Director Interim CFO & Company Secretary

Tel: [phone] Tel: [phone]

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Appendix 4D Interim Report Half year ended 30 June 2016

Name of entity	Hillgrove Resources Limited
ABN	73 004 297 116
Half year ended	30 June 2016
Previous corresponding reporting period	30 June 2015

Results for announcement to the market Revenue from ordinary activities	down	18.3%	to	$58,814,000
Loss from ordinary activities after tax attributable to the owners of Hillgrove Resources Limited	down	129%	to	$102,694,000
Loss for the period attributable to the owners of Hillgrove Resources Limited	down	129%	to	$102,694,000

Dividends

No dividends were paid or proposed to members during the half year ended 30 June 2016 or in the previous period.

Brief explanation of results

A net loss after tax of $102,694,000 is reported by the Group for the half year (30 June 2015: loss of

$44,858,000).

Refer to the directors' report, financial statements and supporting notes in the attached Interim Report for the half year ended 30 June 2016 for additional detail.

Statements

The following statements are included in the attached Interim Report for the half year ended 30 June 2016:

• income statement

• statement of comprehensive income

• statement of financial position

• statement of changes in equity

• statement of cash flows.

Dividend reinvestment plans

There are no dividend reinvestment plans in operation.

Net tangible assets per security

NTA backing	Current period	Previous period
Net tangible asset backing per ordinary security (undiluted)	15.2 cents	109.7 cents

Control gained or lost during the period Control gained

There were no transactions entered into by the Group during the half year ended 30 June 2016 that resulted in control being gained over any entities.

Control lost

There were no transactions entered into by the Group during the half year ended 30 June 2015 that resulted in control being lost over any entities.

Subsidiaries

The consolidated results incorporate the assets, liabilities and results of the following subsidiaries.

Name of entity	Country of incorporation	Class of Share	Equity Holding 2015	Equity Holding 2014
Controlled entity	%	%
Hillgrove Copper Pty Ltd	Australia	Ordinary	100	100
Hillgrove Copper Holdings Pty Ltd	Australia	Ordinary	100	100
Hillgrove Exploration Pty Ltd	Australia	Ordinary	100	100
Hillgrove Mining Pty Ltd	Australia	Ordinary	100	100
Hillgrove Operations Pty Ltd	Australia	Ordinary	100	100
Hillgrove Wheal Ellen Pty Ltd	Australia	Ordinary	100	100
Kanmantoo Properties Pty Ltd	Australia	Ordinary	100	100
Mt Torrens Properties Pty Ltd	Australia	Ordinary	100	100
SA Mining Resources Pty Ltd	Australia	Ordinary	100	100
Hillgrove Indonesia Pty Ltd	Australia	Ordinary	100	100
Hillgrove Singapore Pte Ltd	Singapore	Ordinary	80	80
Hillgrove Singapore No 2 Pte Ltd	Singapore	Ordinary	80	80
Hillgrove Singapore No 3 Pte Ltd	Singapore	Ordinary	100	100
Hillgrove Singapore No 4 Pte Ltd	Singapore	Ordinary	100	100
PT Akram Resources Pte Ltd	Indonesia	Ordinary	80	80
PT Fathi Resources Pte Ltd	Indonesia	Ordinary	80	80
PT Hillgrove Indonesia Pte Ltd	Indonesia	Ordinary	100	100

The proportion of ownership interest is equal to the proportion of voting power held.