Valor Resources : Acquisition of Radio Gold Project Farm-In.pdf

ASX Release

4 September 2019

VALOR RESOURCES LIMITED ACN 076 390 451

22 Lindsay Street

PERTH, WA

Australia

Tel: [phone]

Fax: [phone]

Contact: Nick Lindsay

E-mail:

[e-mail]

Directors

Brian McMaster

Dr Nicholas Lindsay

Paula Smith

Company Secretary

Paula Smith

ASX Code:

VAL

AGREEMENT SIGNED FOR ACQUISITION OF RADIO GOLD

PROJECT FARM-IN

Valor Resources Limited (ASX: VAL) (Valor) is pleased to announce that it has signed a binding Heads of Agreement with public unlisted company, Sulphide-X Limited (Sulphide-X) to acquire 100% of the fully paid ordinary shares of its wholly owned subsidiary, Bullfinch One Pty Ltd (Bullfinch One). Bullfinch One holds the contractual rights to earn an interest in the Radio Gold Mine project (Radio Project) located 40km north of Southern Cross, Western Australia currently owned by Resources & Energy Group Limited's (ASX: REZ) subsidiary Radio Gold Pty Ltd. Refer to REZ ASX Announcement dated 1 August 2019 entitled "Radio Gold $4m Farm-inPartnership".

Highlights

• Radio Gold Mine has historical gold production of over 72,000oz @ 38.5g/t Au (refer REZ ASX Announcement dated 1 August 2019 entitled "Radio Gold $4m
  Farm-in Partnership");
• Acquisition creates a near-term gold production opportunity with excellent exploration upside;
• Benefit from the enhanced financial strength and the ability to optimise funding of the combined projects; Bullfinch One capitalised with $700,000 cash; and an increase in the level of liquidity and exposure to a growing and expanding investor base;
• Appointment of experienced board members Kabir Osman and Ian Murie, currently Sulphide-X Directors, to the Board of Valor;
• Work program to start production to commence immediately upon settlement of the acquisition;
• Delivery of an immediate growth story and diversified investment risk.

Commenting on the acquisition, Valor CEO, Dr Nick Lindsay said, "Valor has compiled an exciting portfolio of exploration and development gold assets during a challenging period in the market. These new assets combined with our existing projects expose Valor to significant short and medium term potential in the copper, silver and gold space. We believe we can bring the Radio Project into production in the near term, and having a producing Australian gold mine in the portfolio is an important strategic position with an opportunity to generate revenue from 2020 onwards.

We are delighted to shortly welcome Kabir and Ian to the Board of Directors and look forward to the knowledge and experience they will bring to the Company."

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Key Terms of the Agreement

Settlement of the acquisition (Settlement) will be conditional on the satisfaction of certain conditions precedent, including the parties completing due diligence, Bullfinch One confirming that it has $700,000 in cash and obtaining all necessary regulatory and third party approvals.

ASX has confirmed to Valor that it will not exercise its discretion to apply ASX Listing Rule 11.1.2 or 11.1.3 to the acquisition.

It is expected that Settlement will occur later in September.

In consideration for the acquisition, Sulphide X will be issued 100,000,000 fully paid ordinary shares in Valor (Valor Shares).

Valor has also agreed to issue the following Valor Shares subject to satisfaction of certain milestones:

1. Milestone 1 - 150,000,000 Valor Shares upon the announcement of a JORC (2012) compliant resource of a minimum of 100,000 oz of gold at an average grade of at least 3g/t Au at the Radio Project within 12 months from Settlement; and
2. Milestone 2 - 150,000,000 Valor Shares upon the announcement that production at the minimum rate of 300 oz of gold per month has occurred at the Radio Project for a month in the 24 months from Settlement.

It has also been agreed that on and from Settlement, Kabir Osman and Ian Murie, currently Sulphide-X directors will be appointed to the Board of Valor.

Mr Osman is a mining engineer (graduate of Western Australian School of Mines/Curtin University) with over 25 years' experience in operations, consulting and corporate roles. He has held numerous Board and Management positions at various private companies predominantly in the mining sector. Mr Osman has worked both in Australia and overseas, covering a range of commodities including gold, nickel, copper, iron ore, manganese, coal and bauxite, in both underground and open pit environments. His skills range from project and study management, mine design, costing and scheduling, project implementation and fund raising, both at corporate and operational level.

Mr Osman was part of the original ownership team and Chief Operating Officer of Salt Lake Mining Pty Ltd ("Salt Lake"). Salt Lake bought the Consolidated Minerals Limited Kambalda assets and restarted the Beta Hunt nickel and gold mine in the Western Australian Goldfields region, which was subsequently sold to Royal Nickel Corporation, a TSX listed entity.

Mr Murie is a legal practitioner with over 40 years' experience, practising predominantly in commercial matters. He has been a director of four publicly listed companies over the past three years and has been a member of numerous due diligence committees for various Managed Investment Schemes.

Radio Project Agreement

Under the agreement between Bullfinch One and Radio Gold Pty Ltd:

• Bullfinch One shall have a 50% beneficial interest, and the right to be transferred a 50% legal interest, in the Radio Project when it meets the minimum expenditure of $4 million over a two-yearfarm-in period;
• Bullfinch One has the right to acquire up to a further 25% interest in the Radio Project in instalments for $2,000,000 cash over 24 months from commencement payable by:
  o $500,000 cash paid on commencement;
  o $250,000 six months from commencement;
  o $250,000 twelve months from commencement;
  o $1,000,000 twenty-four months from commencement;
• Bullfinch One, upon commencement of operations, retains 50% of the proceeds of product sales after recouping operating cost.
• The Radio Gold agreement is expected to commence in September 2019.

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Next Steps

• At Settlement, Valor will issue the 100,000,000 Valor Shares under the Company's existing 15% placement capacity.
• The Company will seek shareholder approval to issue the Milestone 1 and Milestone 2 Shares at the Company's forthcoming Annual General Meeting which is expected to be held in November 2019. If required, the Company will also look to apply for a waiver from Listing Rule 7.3.2 to allow Milestone Shares to be issued outside the three month period from Settlement.

Radio Project Summary

The Radio Project is a high-grade gold operation, which has historically produced over 70,000oz Au predominantly from an underground mine. It is located near Bullfinch, 40 km north of Southern Cross in Western Australia (Figure 1), and is part of the Southern Cross Greenstone Belt (SCGB). As such it is typical greenstone-type structurally controlled gold mineralisation in quartz veins.

Figure 1. Location of the Radio Project (Bullfinch) in Western Australia

In 2017, REZ reopened and refurbished access to the Radio Main and East Lode at 100m. A sampling program was carried out, which identified high grade areas accessible for mining. From this work some 2,700t of development ore grading an average 5.8g/t Au was mined and processed at the Minjar plant. Refer to REZ ASX Announcements dated 4 June 2019 titled "Radio Gold Sampling Results, Development Ore 6.2g/t", 3 July 2018 titled "Radio Gold Maiden 2012 JORC Resource", 4 April 2019 titled "Investor Presentation Updated" and 21 August 2019 titled "Investor Presentation". On 3 July 2018, REZ announced a maiden JORC 2012 Resource for the Project

Based on due diligence done to date, Bullfinch One estimates that approximately $400,000 will be required to return the Radio Project to production within 3-4 months following Settlement. The restart of the operations will require mobilisation of an electrical generator and air compressor to allow for services to be re-established to the underground. Bullfinch One has completed a process of identifying suppliers and the availability of equipment and upon Settlement will engage and mobilise to site.

Valor has sufficient cash on hand to undertake the initial stages of the planned work programs.

Under the terms of the Radio Agreement, Bullfinch One will have a right to retain 50% of the proceeds (after recoupment of the operating costs which form part of the minimum expenditure requirements) from the

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sale of any product produced at the Radio Project. Accordingly, Valor expects that the proceeds of the production on the Radio Project will fund a significant amount of the minimum expenditure requirements.

JORC 2012 Mineral Resource Confirmation for ASX LR 5.8.1

As noted above, REZ announced a maiden JORC Resource for the Project on 3 July 2018 as follows:

Radio Gold Mine - Resources

						Indicated			Inferred			Total Resources
		Cut-off (g/t Au)		Kt	g/t Au		Koz Au	Kt	g/t Au		Koz Au	Kt		g/t Au	Koz Au
		Main Lode	1.0		25.8	3.81		3.2	76.1	3.47		8.5	101.9		3.55	11.6
		East Lode	1.0		25.5	5.33		4.2	84.4	4.72		12.8	108.9		4.85	17.0
		Total	1.0		50.3	4.55		7.4	160.4	4.12		21.3	210.7		4.23	28.6

Table 1 - Radio Gold Mine JORC 2012, Mineral Resource Summary

For the purposes of ASX Listing Rule 5.8, the Company provides the following summary of all information material to understanding the reported mineral resource estimate, and refers to Appendix 2 in compliance with Table 1 of Appendix 5A (JORC Code). The information was compiled and provided by REZ and has been independently reviewed and verified by the Company's Competent Person.

The Company confirms that it is not aware of any new data that materially affects the information included in the original announcements pertaining to this resource, and that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed.

Radio Gold Mine Mineral Resource Summary

The Radio Gold Mine mineral resource in Table 1 is located in two sub-parallel quartz lodes that strike northeast and dip to the south-east (Figure 2). The lodes are referred to as the Main Lode (foot wall) and the East Lode (hanging wall). These lodes appear to be continuous over a strike length of 130m and can be traced, although discontinuously, on the surface for a total strike length of 720 metres.

Figure 2: 3D plot (looking NNE) with the Main Lode in blue, East Lode in Green, historical drives in red, and the historical open pit in orange. The Main and East Lode wireframes are the extents for which mineralisation is being reported.

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Resources within the Main and East lodes have been controlled in their lateral and vertical extents by a geological model. The geological model was created from a number of exploration campaigns which have been completed over the past 32 years. This work has been augmented by observations from recent mine development, survey, and face sampling.

The mineralised extents for the resource estimate were constrained by 1 g/t Au cut-off over a minimum lode width of at least 1.5m. The wire-framing, modelling, grade interpolation and Mineral Resource classification were carried out using Micromine 3D software, with application of inverse distance3 interpolation (ID3). Within the mineralized domains, a parent and sub-cell block size (XYZ) of 2.5m by 5.0m by 2.5m, and 0.5m by 1 m by 0.5m was applied respectively.

The Mineral Resource was further constrained within the existing workings of the Radio Gold Operation. These resources have been reported at a cut-off grade of 1gt/ au and are shown on Table 1 above. The lower cut-off grade for reporting was determined after discussion with site mining engineers, along with consideration of the spatial distribution of lower grade material within the model.

Geology and Geological Interpretation

The Radio Gold Mine (Project) is located on the eastern side of the Southern Cross Greenstone Belt (Figure 3), where the greenstones overlap onto the western margin of the granitoid Ghooli Dome. The host rock to the mineralised lodes is a foliated heterogeneous granite containing abundant rafts of partially assimilated greenstones adjacent to the main greenstone belt.

Figure 3. Location of the Radio Gold Mine in the context of the SCGB

Historical mining activity has generally targeted quartz lodes that are located within faulted granite adjacent to mafic schists/amphibolite. Two styles of mineralisation have been identified at the Project (Figure 4), from which the majority of ore was mined historically.

• Main Lode: This is a white highly fractured quartz vein that varies from a few centimetres up to 6m with the average being 1.5m in thickness. It has a strike extent of 265m, down dip extent of approximately 230m, and dip azimuth of 35/110
• East Lode. This is a laminated white to blue-grey, very competent quartz vein that varies from a few centimetres up to 1.0m wide, with an average of ~0.5m in thickness. It has a strike extent of approximately 220m, down dip extent of 200m and dip azimuth of 34/111

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