Red Hill Iron : Quarterly Activities, Cash Flow and Tenement Reports 30 September 2016

Level 2, 9 Havelock Street, West Perth WA 6005
PO Box 1160, West Perth WA 6872
Telephone: [phone]
ABN: 44 114 553 392	Facsimile: (61 8) 9481 8445
E-mail: [e-mail]
Website: www.redhilliron.com.au

31 October 2016

Company Announcements Office ASX Limited

Level 4, 20 Bridge Street

SYDNEY NSW 2000

ACTIVITIES REPORT FOR THE QUARTER ENDED 30 SEPTEMBER 2016 MAJOR INTERESTS OVERVIEW‌ New gold and base metal joint venture

• During the quarter, Red Hill Iron announced a new joint venture agreement with Chalice Gold Mines Limited to investigate the gold and base metal potential of the Company's West Pilbara tenement package which encompasses the Red Hill Iron Ore Joint Venture's (RHIOJV) iron ore deposits in which the Company currently has a 40% interest and all "Other Minerals" to which Red Hill Iron has a 100% entitlement. The new joint venture terms give Chalice the right to earn up to 70% in Red Hill Iron's gold and base metals interests through expenditure of

  $3M with an initial minimum commitment of $500,000.

  Red Hill Iron Ore Joint Venture

• Continued higher iron ore prices give rise to project development optimism.

• As previously reported the API joint venture participants are currently finalising a desktop study to consider an integrated rail and port infrastructure solution for WPIOP Stage 1 which envisages a 40 million tonne per year project production rate over 20 years sourcing the majority of CID ores from the RHIOJV.

• RHI currently retains a 40% interest in the RHIOJV, all costs of which are provided by joint venturer API Management Pty Ltd (API) until production commences at which point the Company may elect either to reduce its interest to a participating 19% or convert it to a 2% FOB Royalty on total RHIOJV production.

QUARTERLY ACTIVITIES

1 Gold and base metal exploration

Chalice Gold Mines Limited (Chalice) has supplied the following report on the recent Farm-in and Joint Venture Agreement which covers Red Hill Iron's tenements in the West Pilbara region of Western Australia:-

The joint venture area is significantly under-explored for gold and base metals. The recent Farm-in and Joint Venture with Chalice (ASX: CHN) covers Red Hill Iron's large block of tenements located in the highly prospective Ashburton Mineral Field in the Western Australia Pilbara region, which is located just 8km from the Paulsens Gold Mine, owned by Northern Star Resources (ASX: NST).

During the quarter, Red Hill Iron and Chalice entered into a binding agreement whereby Chalice may farm-in to all minerals other than iron ore and certain construction materials within Red Hill Iron's West Pilbara tenement block in which Red Hill Iron owns 100% of all mineral rights except for iron ore, which is the subject of the separate RHIOJV.

The project, now called the West Pilbara Gold Project (WPG), covers an area of 1,390km² (Figure 1) and is located approximately 160km south-southwest of Karratha.

Figure 1. Location of West Pilbara Gold Project

The Project extends almost continuously some 90km north from the northern margin of the Wyloo Dome, an important regional geological feature which hosts the +3Moz Paulsens gold deposit, the Paulsens gold mine, which is owned and operated by successful mid-tier gold miner Northern Star Resources (ASX: NST), is located 8km south-west of the southern extent of the Project.

Chalice can earn up to 70% interest in the WPG Project by funding $3 million worth of exploration with a minimum commitment of $500,000 within the first 12 months. Chalice may spend an aggregate of $1 million within the first two years (including the minimum commitment) to earn 51%, at which point Red Hill Iron has a one-off election to contribute to its 49% pro rata interest. If Red Hill Iron elects not to contribute, Chalice may then spend a further $2 million to earn a further 19% within no set time period, or withdraw and retain no interest.

The WPG Project lies in the north-western sector of the Ashburton Basin and is dominated by volcanic and sedimentary successions comprising the Lower Wyloo Group. The eastern extent of the Project area is coincident with the western margin of the Hamersley Basin.

The contact between the two basins is referred to as the Paraburdoo Hinge Zone, defined by major fault/shear structures paralleling the contact (including the Nanjilgardy Shear), proximal to the multi-million ounce gold deposits at Paulsens and Mt Olympus. The west- north-west orientation of the Nanjilgardy Shear on the southern margin of the Hamersley Basin flexes north-north-west at the Wyloo Dome where similar defining structures, the Urandy Shear and Bitherabooga Shear, pass through the Project area (see Figure 2), creating a potentially fertile area for the development of gold deposits.

Exploration for gold and base metals across the Project has been carried out in various periods since the 1980s, with the most recent work undertaken by Red Hill Iron completed between 2006 and 2009. No gold or base metal exploration has been undertaken on the project since 2009.

Red Hill Iron identified a number of targets, primarily Carlin-style and vein/shear-hosted gold mineralisation through regional soils and RAB drill programs, many of which require further exploration. Of the prospects identified, Derek's Bore and Urandy are the most advanced, with Red Hill Iron completing widely spaced follow-up RC drilling at both prospects.

At the Urandy Prospect, RC drilling returned a best intercept of 9m at 4.52 g/t Au from 46m in drill hole RCW007 and 9m at 1.79 g/t Au from 14m in drill hole RCW006, the up- dip projection of the RCW007 mineralised zone. Drill sections 50m to the north and south of drill holes RCW006 and 007 returned intercepts of 5m at 0.2 g/t Au from 14m (RCW005) and 4m at 0.8 g/t Au from 41m (RCW009) respectively.(RHI & CHN ASX release 21 September 2016)

Gold mineralisation at Urandy is associated with a zone of strong silicification within sediments of the Mt McGrath Formation (Wyloo Group) adjacent to major structures associated with the Bitherabooga Fault / Shear zone. RC drilling has defined the mineralised zone over 100 metres to date with surface mapping identifying the extent of silicification to over 1 km.

Figure 2. Regional geological setting

Planned Exploration

Chalice advises that it plans to complete an analysis of all data and is undertaking field work on the identified targets including prospect-scale mapping and rock-chip sampling. Drill programs will follow the field mapping program at the earliest opportunity. The Urandy and Kens Bore prospects will be prioritised for follow-up RC drilling.