Heron Resources Ltd is pleased to provide its report for the March 2020 quarter.

WOODLAWN ZINC-COPPER PROJECT

Heron holds a direct 100% ownership of the mineral rights at the Woodlawn Mine site situated 40km south of Goulburn and 250km south-west of Sydney, in southern NSW, Australia. Heron's aim is to create a profitable, long-life, low-cost mining operation, producing base metal concentrates.

Over the past five years Heron has developed the Woodlawn Zinc-Copper Project through planning, construction, commissioning and ramp up to commercial production. Construction was completed in the June 2019 quarter and the first lead and zinc concentrates were produced and shipped in September and October 2019. The first concentrate sales revenue was received in October 2019.

Woodlawn Project - Operations Report

January saw the highest monthly throughput to date with 109kt of tails reclaim feed processed and 4,300 tonnes of combined concentrate produced. Planned underground ore processing in February was adversely impacted by a significant and prolonged wet weather event that significantly reduced crusher throughput, with maintenance on tails reclaim equipment impacting the option of postponing the crushing campaign. During March, reasonable tails reclaim feed throughput rates were being achieved, averaging 166tph, until the suspension of operations on 24 March 2020.

Suspension of Operations: Heron announced on 25 March 2020 that operations were suspended at Woodlawn the previous day due to travel and other restrictions imposed by Australian Federal and State Governments in response to the COVID-19 pandemic, along with related health and safety concerns for site personnel. The site is currently in care & maintenance mode with the majority of employees and all contractors now demobilised. The mine and process plant infrastructure assets are being maintained by remaining personnel to a level that will support a rapid re-start of operations. Regulatory compliance is being maintained along with stringent security, health, safety and environmental protection protocols.

Safety: Safety performance improved significantly relative to the previous quarter with zero Lost Time Injuries (LTIs) incurred. No known cases of COVID-19 were recorded in the Woodlawn workforce, and protocols aligned with the Minerals Council of Australia COVID-19 protocols have been put in place across the site.

Hydraulic Mining: Hydraulic mining continued in the main production area of Tailings Dam South (TDS). Performance was impacted by poor hydraulic mining and pumping equipment reliability. The improvements required to achieve the required reliability have been identified and included in re-start plans for the operation.

Tailings Reclaim Processing: A total of 204kt of tails reclaim feed was processed during the quarter with a number of positive indicators achieved with respect to throughput and flotation performance, however feed stability issues impacted overall production performance.

Underground Mine: Underground mine development was below target in the December 2019 quarter due to mining contractor personnel and equipment issues, and this continued into January 2020. Mining performance improved significantly in February and March up until the suspension of operations on 24 March. A total of 1,079 metres of development was completed during the quarter, and at the point of suspension, the planned development drives for access to Kate lens had been achieved. Ore production for the quarter was below target with 23.5kt delivered to the ROM pad, with the mining of lower grade ore lenses substituted for development activity, particularly in the decline. Paste filling continued, although limited stopes required fill.

Underground Ore Processing: A total of 28.5kt of underground ore was processed during the quarter, all in February. The campaign was significantly impacted by an unusually heavy and persistent wet weather sequence which caused material handling issues throughout the crushing and screening circuit. These issues have been clearly identified and included in the re-start plans for the operation.

Concentrate Production/Sales: A total of 5,368 dry metric tonnes (dmt) of zinc concentrate and 1,796 dmt of copper concentrate were shipped during the quarter. Concentrate grade and metal recoveries continued to improve during the quarter, particularly during periods of stable operation.

Woodlawn Project - Exploration

Woodlawn North Targets: Heron's current exploration focus is on the discovery and delineation of additional mineralised VMS lenses directly north of the Woodlawn mine's known ore resources. Prospects targeted are within a 2.5km arc to the NW and NE of Woodlawn. A down-hole electromagnetic (EM) survey was completed in the quarter on the four diamond core holes drilled in 2019 (CHDD0002, CHDD0003, WNDD0152, WNDD0153), which intersected a number of zones of significant indicative alteration. Two strong EM conductors were identified and coincided with graphitic shales which is sufficient to explain these anomalies. A number of weak, late time conductors were also identified and current work is focussed on constraining the extent of these anomalies. A further down-hole EM survey was completed at the Montrose prospect, 6.5km NW of Woodlawn, and returned a complex array of highly conductive EM anomalies. Further work is planned to constrain these anomalies and establish a drill target.

New Frontiers Cooperative Drilling Grant Awarded: During the quarter Heron was awarded a New Frontiers Cooperative Drilling grant from the NSW government for its Peelwood project, 100 km north of Woodlawn. This grant will subsidise 50% of the direct drilling costs of the planned exploration drilling program at Peelwood.

Woodlawn Regional Prospects: Heron continues to hold a strategic 1,372 km2 tenement package covering the prospective Silurian volcanic rocks, which hosts the Woodlawn VMS base metal deposit. Heron's exploration focus is on historically known mineralisation zones with prospective geology and comparable grade and metallurgy to Woodlawn, and within potential trucking distance of the Woodlawn mine and processing facility.

Exploration Joint Venture Projects

Heron retains interests in tenement holdings within the Lachlan Fold Belt of NSW and the Eastern Goldfields of Western Australia. This tenure is held through farm-in and joint venture interests, which include a number of other free-carried residual or royalty interests that results in minimal costs to Heron.

Sky Metals Farm-In And Joint Venture Agreement

As announced on the 9 October 2019, a farm-in agreement was signed with Sky Metals Ltd (ASX:SKY) relating to three tenements at Cullarin (EL 7954) and Kangiara (EL 8400, EL 8573), targeting initially McPhillamy's style gold mineralisation. Key terms of the agreement are $400k minimum expenditure in first year, a further $1.6M expenditure over the next 2 years to earn 80% with Heron free carried to DFS or $10M of expenditure, and the issue to Heron of 10M Sky options at a strike price of 15c. Sky announced (ASX:SKY 1 April 2020) that it has reached its initial minimum expenditure ($400k) and is moving to earn an 80% interest in the tenements. In accordance with agreement, Heron's 10 million options have now vested and can be exercised by the Company at any time. Sky also announced assay results from its maiden drilling program at the Hume prospect (previously known as Wet Lagoon) within the Cullarin tenement. Exceptional results were returned and verified the gold intercepts announced in historic drilling (ASX:SKY 10 February 2020).

Sky has raised an additional $10.5 million and is pursuing a vigorous exploration program at Cullarin.

Alchemy Farm-In and Joint Venture (Overflow, Girilambone, Eurow And Yellow Mountain)

Heron entered into a Farm-In Agreement with Alchemy Resources Limited (ASX:ALY) covering a portfolio of Heron's NSW exploration tenements in May 2016. The Farm-In Agreement covers 674 km2 of the central Lachlan Orogen in NSW. At the end of the December 2019 quarter Alchemy had earnt a 51% interest in the JV tenements after spending $1 million and has the option to earn 80% by spending an additional $1 million by 30 May 2021. During the current quarter Alchemy has continued drill site preparations for drilling of the down plunge extensions of the gold-silver-zinc-lead mineralised zone at Overflow. No ground work was completed on other NSW projects due to interstate travel restrictions associated with the COVID-19 pandemic.

Contact:

Tel: +61 2 9119 8111

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