Level 2, 9 Havelock Street, West Perth WA 6005 PO Box 1160, West Perth WA 6872 Telephone: (61 8) 9481 8627‌‌‌‌‌

ABN:44 114 553 392 Facsimile: (61 8) 9481 8445

E-mail: [email protected] Website: www.redhilliron.com.au

28 January 2016

Company Announcements Office ASX Limited

Level 4, 20 Bridge Street

SYDNEY NSW 2000

ACTIVITIES REPORT FOR THE QUARTER ENDED 31 DECEMBER 2015 CORPORATE COMMENTARY‌

• Red Hill Iron Limited (RHI) is a 40% participant in the Red Hill Iron Ore Joint Venture

  (RHIOJV), which is part of the planned development of the West Pilbara Iron Ore Project (WPIOP). The participants in the WPIOP are Aquila Resources, POSCO and AMCI (APIJV Participants).‌

  
  

  API Management Pty Ltd (API), the Manager of the APIJV, has advised RHI that the APIJV Participants have decided, due largely to current iron ore market conditions, to discontinue targeting completion of a definitive feasibility study on the WPIOP for mid- 2016. However key project approvals and areas of potential value enhancement will continue to be pursued over the first quarter of 2016, with the project work programme and schedule reassessed at the end of the quarter.

  
  

• RHI has no direct exposure to current RHIOJV expenditure or to the vagaries of the iron ore price since RHI is carried at the 40% level for all RHIOJV costs until production commences, whereupon RHI can elect to either:

  reduce its participating interest in the RHIOJV to 19% and repay its share of the RHIOJV project carry costs incurred to that date out of 80% of its share of free cash flow, or:

  exchange its 40% RHIOJV interest for a 2% FOB Royalty on 100% of RHIOJV production. In this event all RHIOJV project carry costs provided to that date will be written off.

  
  

• The current WPIOP development concept involves iron ore production of 40 million tonnes per annum (dry) and transportation of the ore to Asian markets via a new 250 km railway and a new deep-water port facility located at Anketell Point.

Aurizon Holdings Limited (Aurizon) has a period of exclusivity until 30 April 2016 to develop an infrastructure solution for the Project (the West Pilbara Infrastructure Project). On 23 December 2015 Aurizon advised the market that, following the APIJV Participants' decision that no further material work would be undertaken on the definitive feasibility study for the Project, Aurizon was actively considering the implications of this decision in relation to Aurizon's carrying value of the project and would update the market further when releasing its half-year results in February.

RHIOJV (RHI 40%)

API has provided the following report on the activities of the RHIOJV for the quarter ended December 31 2015:-

Highlights for the quarter

• Feasibility work was progressed on the development of the RHIOJV as part of the proposed 40Mtpa development of Stage 1 of the broader West Pilbara Iron Ore Project (WPIOP).

  
  

• Feasibility activities on the broader WPIOP during the quarter included exploration, engagement with contractors to provide updated capital and operating cost estimates, the planning and advancement of key project approvals and the signing of Letters of Intent with potential customers in relation to product offtake.

  
  

• Due largely to current iron ore market conditions, in late December the APIJV Participants decided to discontinue the previously targeted completion of a definitive feasibility study on the West Pilbara Mine Project (WPMP) which was planned for mid- 2016. Key project approvals and areas of potential value enhancement will continue to be pursued over the first quarter of 2016, with the project work programme and schedule reassessed at the end of the quarter.

  
  

• Exploration work during the quarter included a total of 111 RC drill holes for 5,626m from first pass drilling targeting the Trixie West CID and infill drilling completed at the Red Hill Creek West, Kens Bore and Swearengen deposits.

  
  

• Total RHIOJV expenditure for the quarter totalled $3.0M in line with budget of $3.0M. December 2015 half year expenditure of $5.7M is below the budget of $7.1M due primarily to the rescheduling of exploration drilling activity. A revised budget is being prepared for the June 2016 half to reflect the suspension of feasibility work.

1. Background

   
   

   API Management Pty Ltd (APIM) is the manager of three joint ventures: the Australian Premium Iron JV (APIJV) between Aquila Steel Pty Ltd (Baosteel & Aurizon) and AMCI (IO) Pty Ltd (AMCI & Posco); the RHIOJV between APIJV and Red Hill Iron Limited and the Mount Stuart Iron Ore JV (MSIOJV) between APIJV and Cullen Exploration Pty Ltd. These joint ventures hold the iron ore rights over a number of deposits that form part of the WPIOP, located in the northern part of Western Australia.

   
   

   The current WPIOP development concept involves iron ore production of 40 million tonnes per annum (dry), transportation of the ore via a new 250 km railway and export to Asian markets via a new deep-water port facility located at Anketell Point. APIM has been conducting mine and market feasibility studies for the potential development of the WPIOP. Project partner - Aurizon - a well-established logistics operator across Australia, has been conducting a feasibility study relating to rail and port components of the WPIOP.

   
   

2. Exploration

   
   

   A total of 111 RC drill holes for 5,626m were completed in the December Quarter with first pass drilling targeting the Trixie West Channel Iron Deposit (CID) located within the RHIOJV

   project area (Figures 1 to 5) and infill drilling completed at the Red Hill Creek West, Kens Bore and Swearengen deposits.

   
   

   The first pass drilling at Trixie targeted areas of outcropping CID mineralisation that was formed by the alluvial and chemical deposition of iron rich sediments in palaeo-river channels. Drilling was completed to 100 x100m centres in order to constrain mineralised zones.

   
   

   Infill drilling results at Kens Bore, Red Hill Creek West and Swearengen (assays pending) are generally consistent with previous drill assays and geological interpretations. The best RC drill assay intercepts received included:

   Red Hill Creek West Deposit

   • 46m @ 56.0% Fe from surface in KBRC1657 Trixie West Prospect

   • 18m @ 56.5% Fe from surface in TXRC0096 Kens Bore Deposit

   • 16m @ 56.0% Fe from surface in MBRC0032

     
     

     Intercepts are true widths and calculated for greater than 52% Fe.

     
     

     A full set of better intercepts (≥ 10m thick) are reported in Table 1. Table 3 (Appendix) contains all drill results with Figures 1 to 5 (Appendix) showing deposit and drill hole locations.

     
     

     Work will continue in the March 2016 quarter focussing on completing geological modelling of the Trixie West Deposit.

     
     

     Table 1 - Better Drilling Intercepts Received - December 2015 Quarter

     
     

     Prospect	Site ID	Easting	Northing	RL	Depth From	Intercept	Al2O3%	SiO2%	P%	S%	LOI1000%	Hole Depth
     Trixie West	TXRC0030	413953.1	7571800.1	229.0	0	12.0m @ 54.34% Fe	4.26	8.13	0.045	0.044	9.36	60
     Trixie West	TXRC0038	413892.6	7572169.4	232.8	0	20.0m @ 53.37% Fe	5.51	8.05	0.055	0.019	9.49	34
     Trixie West	TXRC0039	413839.6	7572246.9	231.9	0	18.0m @ 54.52% Fe	4.78	7.77	0.051	0.025	8.98	40
     Trixie West	TXRC0041	413927.5	7571905.7	228.8	0	14.0m @ 56.47% Fe	3.96	5.62	0.057	0.025	9.28	40
     Trixie West	TXRC0096	415587.2	7570295.7	246.8	0	18.0m @ 56.49% Fe	3.29	6.45	0.056	0.028	9.14	70
     Trixie West	TXRC0097	415510.3	7570299.8	243.3	0	14.0m @ 56.98% Fe	3.48	5.67	0.060	0.032	8.97	58
     Trixie West	TXRC0180	415525.4	7570441.8	238.8	4	12.0m @ 53.53% Fe	4.01	9.61	0.067	0.020	9.32	40
     Trixie West	TXRC0181	415491.7	7570402.2	239.6	0	20.0m @ 53.52% Fe	3.53	10.10	0.063	0.014	9.13	70
     Trixie West	TXRC0181	415491.7	7570402.2	239.6	26	10.0m @ 53.44% Fe	3.72	10.49	0.184	0.007	8.30	70
     Trixie West	TXRC0182	415605.3	7570220.9	248.6	0	10.0m @ 54.07% Fe	3.85	9.05	0.064	0.024	8.97	34
     Trixie West	TXRC0183	415608.0	7570389.6	244.7	0	10.0m @ 55.27% Fe	3.32	9.10	0.094	0.024	7.98	40
     Trixie West	TXRC0184	415595.9	7570446.2	242.6	0	16.0m @ 54.64% Fe	4.65	5.89	0.099	0.043	10.74	40
     Red Hill Creek West	KBRC1657	425038.1	7557890.1	285.6	0	46.0m @ 56.05% Fe	3.59	6.75	0.109	0.016	8.72	70
     Red Hill Creek West	KBRC1789	427525.8	7557949.4	287.5	2	30.0m @ 56.22% Fe	2.70	6.90	0.133	0.017	9.39	58
     Red Hill Creek West	KBRC1790	427446.3	7557955.7	286.7	6	22.0m @ 56.37% Fe	2.13	7.37	0.131	0.018	9.29	40
     Red Hill Creek West	KBRC1792	427495.0	7557834.3	287.0	4	18.0m @ 56.68% Fe	2.84	7.25	0.117	0.006	7.98	34
     Red Hill Creek West	KBRC1794	424960.7	7557711.2	263.9	8	24.0m @ 54.47% Fe	3.66	8.34	0.152	0.006	9.24	52
     Kens Bore	MBRC0032	414007.8	7562401.3	190.7	0	16.0m @ 55.96% Fe	4.21	6.50	0.030	0.017	8.74	40
     Kens Bore	MBRC0035	413798.6	7562978.9	189.5	24	12.0m @ 54.88% Fe	4.34	7.44	0.040	0.009	9.20	64
     Kens Bore	MBRC0036	413806.6	7562600.4	188.5	32	12.0m @ 56.12% Fe	4.26	5.60	0.046	0.010	9.50	76
     Kens Bore	MBRC0047	413594.6	7562605.6	187.9	22	10.0m @ 55.98% Fe	3.96	6.02	0.045	0.009	9.30	70

     
     

     All drill holes targeting CID were drilled vertically. All co-ordinates are in MGA94 Zone 50.

     Intercepts are true widths ≥ 10m thick and calculated using a 52% Fe cut-off.

3. RHIOJV Feasibility Study

   
   

   RHIOJV Feasibility Study activities have been scheduled to maintain integration with the broader WPIOP, which is comprised of Feasibilities Studies on the West Pilbara Mine Project (WPMP) (being undertaken by the APIJV) and the West Pilbara Infrastructure Project (WPIP) (being undertaken by Aurizon).

   
   

   A draft RHIOJV Feasibility Study was previously scheduled for delivery by mid-2016. However, in late December, the Manager was advised by the APIJV Participants ("API JVPs") that due largely to the current iron ore market conditions, they have decided to discontinue the previously targeted completion of a definitive feasibility study on the WPMP by mid-2016. Key project approvals and areas of potential value enhancement will continue to be pursued over the first quarter of 2016, with the project work programme and schedule reassessed at the end of the quarter.

   
   

   In light of the APIJVP's decision, the APIJV approved a revised work programme and budget for the APIJV from 1 January 2016 and, to ensure alignment with the broader WPMP, the Manager is currently preparing revised work programmes and budgets for consideration and approval by the RHIOJV and MSIOJV Management Committees.

   
   

   The RHIOJV Feasibility Study was being completed on the basis that RHIOJV ore will be crushed, screened and blended with ore from other WPIOP Stage 1 deposits and sales agreements will be entered into with respect to the participants' share of such blended ore.

   Details on key Feasibility Study activities during the quarter for both the RHIOJV and broader WPIOP are set out in following sections.

   
   

4. Mining Studies

   
   

   WPMP mining studies continued with the receipt of market based mining and haulage cost estimates from AMC Consultants. Responses received to contract mining and road haulage Expression of Interest (EOI) packages were also evaluated ahead of shortlisting of parties. This is a precursor to a Request for Quotation (RFQ) phase which would be used to derive updated mining and haulage capital and operating cost estimates for the RHIOJV and broader WPMP Feasibility Study.

   
   

5. Engineering (for broader WPMP)

   
   

   Feasibility activities for the broader WPMP undertaken by the APIJV during the quarter included ongoing engagement with potential contractors for key elements of the WPMP development and operation. This work was focused on deriving cost estimates for the project. The work included completion of an Early Contractor Involvement (ECI) phase for the Central Processing Plant (CPF) by two shortlisted contractors, with both undertaking market pricing for equipment and cost estimating activities.

   
   

   Cost estimates from potential contractors for other works packages (non-process infrastructure and pioneering works) for the WPMP were also received as a precursor to subsequent contract packaging, shortlisting and selection processes.

   
   

6. Tenure

In October 2015, Mining Leases were granted for the WPIOP Stage 1 deposits (except Red Creek West, Red Hill Creek and Buckland Hills - see below).