September 2014 Quarterly Report

30th October 2014

The cornerstone interest in the Weeks Petroleum Royalty continues to underpin cash flow for Royalco Resources and should do so for many years to come.

KEY POINTS

A strong quarter for performance from the Weeks Petroleum Royalty interest, coupled with positive news received after 30 September

on a number of royalty interests.

The Weeks Petroleum Royalty payment of

$256,204 for the production quarter ending June 2014 was the highest quarterly payment generated from this interest in more than three years. Recently released production data by BHP Billiton suggests the next quarterly payment should be even higher.

Oceana Gold announced a "robust" Preliminary Economic Assessment for the Blackwater Project on 22 October.

Royalco has also been informally advised that production has resumed at Mount Garnet.

The ongoing decline in commodity prices causing the evaporation in the share prices of explorers/developers continues to justify our patient review of fresh opportunities in the resource sector.

CORPORATE DETAILS ASX Code: RCO Issued Capital: 52,714,183 shares

Share Price: 26 cents

Market Capitalisation: $13.7 million

Cash/Liquids: $4.05 million

Major Shareholders

Acorn 14.89% Directors 19.01% Anglo Pacific 29.37%

Directors

Peter Topham Executive Chairman David Ogg Director Bruce Pertzel Director Piers Reynolds Director

The company's strategy is to expand a core royalty

portfolio of income-producing base metals, precious metals and energy interests. This may be achieved by direct acquisition, exploration initiatives, or as a result of mezzanine/project

financing activities. In addition, successful exploration activities will be maximised to the benefit of shareholders in whatever corporate format deemed appropriate.

Royalty Interests

Royalco owns a 1% interest in the Weeks Petroleum Royalty (the equivalent of a 0.025% over-riding royalty from the entire hydrocarbon production of the main Bass Strait fields). Income received during the quarter was $256,204, representing payment for the three months ending 30 June 2014.
This "Tier 1" royalty encompasses 19 oil and/or gas production permits in the Offshore Gippsland Basin. Unlike most oil fields which show standard decline curves, these high quality and diverse fields have produced a near constant supply of liquids over the past three years - and have actually increased output, according to production figures issued by BHP Billiton on 22 October. This production profile should be enhanced as the full benefits of the Kipper/Tuna/Turrum field development and the Longford Plant upgrade enter the equation in
2016.
Elsewhere, informal comments made by senior executives of Consolidated Tin Mines Limited (CSD) suggest that production has restarted from the Mt Garnet base metals mine. The mine is currently owned by Snow Peak Mining Pty Ltd. CSD has announced to the ASX a proposal to acquire all of Snow Peak's assets, subject to shareholder approval. Production guidance is for 80,000 tonnes at 9.6% zinc, 0.3% copper and 21 grams per tonne silver. Based on the existing 3% net smelter return applicable to production and prevailing commodity prices, a return in excess of $200,000 is anticipated.
Oceana Gold, the project operator for the Blackwater Project at Reefton in New Zealand, announced the Preliminary Economic Assessment for the project to the ASX on 22 October. The key findings include a 2.5-year pre-production period, a 10-year mine life and an assumed production rate of 58,000 ounces of gold a year. If achieved, and using the current spot price for gold, this would result in Royalco receiving 1740 ounces, or approximately
$2.4 million gross, per year. The operator retains the right to acquire back this interest, pre- decision to mine, based on a CPI-adjusted price of $5 million from a base year of 1991. In terms of current value that is approximately $9 million.
On the Bowdens Project in NSW, where Kingsgate Consolidated Limited is the operator, the ASX has been advised that, along with an Environment Impact Statement, a definitive feasibility study is due for completion this quarter. The Royalco royalty interest in this project starts at a 2% net smelter return until $US5 million has been received, then reverts to a 1% net smelter return for the life of the mine.

No activities of substance have been reported during the quarter on the royalty interests held at Sam's Creek, LFB, Lyndhurst, Red Dam, Stanton and Uganda.

Exploration

The rationale for Royalco's exploration initiatives is to generate royalties and free-carried interests in a portfolio of projects. It is not necessarily the company's intention to be the operator of any mining project. Third parties would probably be introduced to develop any discovery made.
In the Philippines, exploration activities are on hold pending Phase 3 renewal of tenements. This phase covers the Cableway Prospect which is the highest priority target in the Gambang tenements. The MGB has effectively shut down the processing of tenement renewals despite verbal assurances to the contrary. No indication has been provided as to when this informal moratorium can be expected to be lifted.

Corporate

During the three months ending 30 September, further cost cutting was implemented. The office in the Philippines has been substantially downsized and additional staff retrenchments made. All up, expenses in the Philippines are now running at less than $100,000 a year.
The last of the legal fees ($100,000) relating to the capital return undertaken in 2010 has been settled following protracted but satisfactory negotiations with the Australian Tax Office.
No other items of a significant financial impost are anticipated. As previously advised, income from the Weeks Petroleum Royalty interest broadly matches anticipated head office and exploration costs. Royalco remains well placed to take advantage of opportunities that prevailing market conditions may present. The cash position at 30 September 2014 was $4.05 million, after the dividend paid during the quarter.
The downturn in most commodity prices, coupled with a depressed sharemarket for junior explorers, has had the effect of filtering out second ranked projects and allowing the potential participation in better quality exploration targets. Royalco has reviewed a large number of opportunities, both in Australia and overseas, this calendar year.
Management time is being absorbed by this ongoing review process which is based upon:
a) strong preference for base and precious metals, as well as hydrocarbons, b) projects located in resource development-"friendly" regions,
c) projects at an advanced stage of identifying acceptable commercial potential, and
d) projects that possess a readily identifiable exit strategy, i.e. sale for capital profit and/or royalty creation.
A 1 cent fully franked dividend was paid in September.

Peter J Topham
Executive Chairman

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Appendix 5B

Rule 5.5

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/2013

Name of entity

Royalco Resources Limited

ABN Quarter ended ("current quarter")

53 096 321 532 September, 2014

Consolidated statement of cash flows

Cash flows related to operating activities

1.1 Receipts from product sales and related debtors*

1.2 Payments for (a) exploration & evaluation

(b) development

(c) production

(d) administration

1.3 Dividends received

1.4 Interest and other items of a similar nature received

1.5 Interest and other costs of finance paid

1.6 Income taxes paid

1.7 Other (provide details if material)

Net Operating Cash Flows

* Royalties received

+ See chapter 19 for defined terms.

01/05/2010 Appendix 5B Page 1

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

* Dividend of 1 cent per share fully franked paid 19/09/14

Payments to directors of the entity, associates of the directors, related entities of the entity and associates of the related entities

Current quarter

$A'000

1.23 Aggregate amount of payments to the parties included in item 1.2 108

1.24 Aggregate amount of loans to the parties included in item 1.10

1.25 Explanation necessary for an understanding of the transactions

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

+ See chapter 19 for defined terms.

Appendix 5B Page 2 01/05/2013

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities

3.2 Credit standby arrangements

Estimated cash outflows for next quarter

4.1 Exploration and evaluation

4.2 Development

4.3 Production

4.4 Administration

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as

shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

+ See chapter 19 for defined terms.

01/05/2010 Appendix 5B Page 3

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Changes in interests in mining tenements and petroleum tenements

6.1 Interests in mining tenements and petroleum tenements relinquished, reduced or lapsed

6.2 Interests in mining tenements and petroleum tenements acquired or increased

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

7.5 +Convertible debt securities (description)

+ See chapter 19 for defined terms.

Appendix 5B Page 4 01/05/2013

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

7.6 Changes during quarter

(a) Increases through issues (b) Decreases through securities matured, converted

7.12 Unsecured notes (totals only)

Pursuant to Listing Rule 5.3.3 a schedule of Company tenements and interests therein is provided as follows:

Tenement Status for Quarter ending 30 September 2014

+ See chapter 19 for defined terms.

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Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Compliance statement

1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

2 This statement does give a true and fair view of the matters disclosed.

30th October, 2014

Sign here: ............................................................ Date: ............................ (Company Secretary)

Print name: Nick Boicos .................................................

Notes

1 The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements and petroleum tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement or petroleum tenement, it should disclose the change of percentage interest and

conditions precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.

4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of

Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

+ See chapter 19 for defined terms.

Appendix 5B Page 6 01/05/2013