Herencia Resources plc ("Herencia" or the "Company")

Annual Report and Accounts

for the Twelve Months Ended 31 December 2015 CHAIRMAN'S STATEMENT

Whilst it has been a difficult operating environment for junior resources companies, I am glad to be able to update shareholders on the Company's activities during the financial year ended December 2015.

These activities included:

• A first ever JORC 2012 Mineral Resource Estimate for the Company's flagship Picachos Copper Project;

• Expanding the footprint of the Picachos Copper Project, to include additional areas of copper mineralisation;

• Sourcing additional funding despite one of the worst market periods for resource companies;

• Although we are yet to be successful, the Company has progressed a number of negotiations in relation to the potential joint venture or sale of the Picachos Project; and

• Since the end of the period under review, the Company has advanced negotiations in relation to the sale of the Paguanta Project in Northern Chile.

Looking at 2016, Herencia plans to continue to look for partners to assist the Company to develop the Picachos project and would consider further acquisition, sale or joint venture opportunities,

I would like to again thank shareholders, my fellow directors and our small dedicated team in Chile for their efforts during a difficult year.

Hon. John Moore AO Chairman

15 July 2016

The Company will shortly dispatch a notice to convene a general meeting to approve the annual report and accounts at the offices of Shakespeare Martineau LLP, 6th Floor, Allianz House, 60 Gracechurch Street, London EC3V 0HR on Friday 12th August 2016 11.00 am. Copies of the annual report and accounts will be dispatched to shareholders shortly and are also available from the Company's website www.herenciaresources.com.au with effect from today.

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2015

The Directors present their Strategic Report for the year ended 31 December 2015.

Principal Activity and Business Review

The Company is registered in England and Wales, having been incorporated on 27 January 2005 under the Companies Act with registered number 05345029 as a public limited company.

The principal activity of the Group is mineral exploration and development and it owns a portfolio of copper-silver and zinc-silver-lead-copper-gold properties in Chile, South America. The Group operates through its parent and subsidiary undertakings, details of which are set out in note 15 to these accounts.

Review of the business and future prospects

Review of the business

1. Herencia holds an option to acquire 100% of the currently producing Picachos Copper Project in north-central Chile.

2. Herencia also holds a 70% interest in the Paguanta Project in northern Chile and is currently in the process of disposing of this asset.

3. Herencia owns 100% of the Guamanga copper-gold project.

4. In addition, Herencia is also active in seeking new development opportunities with a focus on Chilean projects, given its significant expertise and resources in Chile.

The Picachos Project is an advanced copper project located close to the major city of La Serena and only eight kilometres from the large Carmen de Andacollo copper mine owned by the Canadian major Teck Resources. The region is a significant mining and resources area in Chile.

High grade copper ore grading approximately 2.5% copper is currently mined by private miners at Picachos on a small (artisanal) scale. During 2014, the Company undertook two successful drilling campaigns targeting both the high-grade structures and manto-style copper mineralisation that exists at Picachos. Numerous high grade copper intercepts were achieved in both drill programs.

The Company is advancing negotiations in relation to the potential sale or joint venturing of the project.

The Paguanta Project comprises the:

• 'Patricia' zinc-silver-lead-gold Mineral Resource and extensions to this resource;

• 'Doris' copper/silver prospect;

• 'La Rosa' porphyry-copper prospect; and

• 'Loreto' porphyry-copper style target located immediately south-west of Patricia.

  As announced on 15 June 2016, the Company is actively advancing the sale of the Paguanta project which is expected to be completed by July 2016. To date the Company has executed formal documentation with Golden Rim Resources ("GMR") which would result in the Company's 70% equity in the Paguanta project being sold to GMR for a total of up to US$2.3 million in cash and GMR equity, and GMR agreeing to pay up to US$2.1m towards various contingent liabilities.

  As at 30 June 2016, GMR have largely completed a detailed technical and legal due diligence on the Paguanta project. A number of conditions precedent outlined in the formal documentation remain to be finalised by the Company to the satisfaction of GMR however these are expected to be completed shortly.

  The Guamanga Project is targeting Iron Oxide Copper Gold (IOCG) style mineralisation. A joint venture partner is currently being sought for this project.

  Future Prospects

  Herencia's goals for 2016 include:

• advancing the sale process for the Paguanta Project; and

• Source additional funding solutions for the Company.

  The Group's primary business remains mineral exploration and development which is subject to risks including discovery of economic mineral resources, delays in work programme plans and schedules, changes in market conditions affecting the resources industry or commodity price levels, the outcome of commercial negotiations and technical or operating factors, political, environmental and regulatory controls and approvals, and availability and retention of suitable employees and consultants. Any one or more of these risk factors could have a material adverse impact on the value of the Company.

  Due to the early stage of the development of the Group and the nature of its activities, it is not meaningful to consider a review of the key financial performance indicators in respect of the year.

  The La Serena Project is located approximately 50 km north of the city of La Serena in Region IV within the La Serena porphyry copper belt (part of the main Chilean porphyry copper belt). The package is highly prospective for leached cap, blanket style chalcocite copper mineralisation and/or porphyry gold. No work is envisaged at La Serena for the next year.

  Strategy Review

  The Company's strategic plan is to achieve the sale of its advanced Chilean projects and to ensure the financial viability of the Group to be able to apply itself to acquiring and advancing mineral projects in Chile, leveraging off our significant operating experience in that country.

  Hon. John Moore AO Chairman

  15 July 2016

  DIRECTORS' REPORT

  FOR THE YEAR ENDED 31 DECEMBER 2015

  The Directors present their Directors' report together with the audited accounts of the Group ("Herencia Resources plc and its subsidiary undertakings") and the Company ("Herencia Resources plc") for the year ended 31 December 2015.

  Results and dividends

  For the year ended 31 December 2015, the Group reported a loss of £13,977,097 which includes an impairment charge to the Paguanta project (as detailed below) of £10,908,123. Excluding the impairment charge and foreign exchange loss charge, the loss for the year was £2,173,970 compared to £2,545,188 in the previous year.

  This result reflects the decrease in administration expenses of £374,064 as the Company has undertaken a comprehensive cost reduction program across all aspects of its business including the Corporate and Chilean business centres. The cost reduction measures include salaries of the Non- Executive Directors and the Managing Director which have been reduced by 56% (refer Director's Report for details).

  The Board undertook an impairment review of the carrying value in response to the pending sale for the 70% equity in the Paguanta project. Based on the cash consideration to be received, this has resulted in an impairment charge of £10,908,123.

  In respect of the Picachos, Guamanga and La Serena Projects, the Board concluded that no impairment provision was required due to to the progressing state of the projects including the positive results from completed exploration to date and the potential for future discovery and development.

  The Directors do not recommend any distribution by way of a dividend for the year ended 31 December 2015.

  Going Concern

  Note 28 details the Group's objectives, policies and processes for managing its capital financial risk, including exposures to credit and liquidity risk. The Group's capital management policy has been to raise sufficient funds through equity to fund exploration activity and development activities.

  At 31 December 2015 the Group had cash balances of £207,183 and the Group will need to raise additional funds in 2016 in order to maintain sufficient cash resources for its working capital needs for the next twelve month and to this end, the following is noted:

• During the year, the Group raised a total of £512,000 (gross) in equity funding. However, since September 2015, as the Company's share price has been trading below the nominal value of the Ordinary Shares in issue of 0.1p, the ability to raise future funds through the issue of further equity was not possible under the Companies Act 2016. To rectify this, the Directors proposed a subdivision of each Ordinary Share into 1 ordinary share of 0.01p and a deferred share of 0.09p at the Annual General Meeting held on 29 June 2016. The Directors are pleased to report that this was passed by shareholders and it now allows the Company to use the issue of shares as a source of funding which has otherwise been unavailable since the last equity raise in September 2015.

• In recent months and as announced to the market, the Company has entered into funding arrangements by way of Secured Convertible Facilities totalling US$750,000 with two of its major shareholders, the Australian Special Opportunity Fund ("Lind Partners") and Oriental Darius Co. Ltd ("Oriental"). The Shareholders have been very supportive and a total of US$350,000 has been drawn down under this facility to date with a further US$400,000 that can be advanced at the discretion of the Shareholders.