Phillip Chippindale, CFA [email protected] | Tel. +61 2 8247 3149 22 January 2015
Liam Schofield, CFA [email protected] | Tel. +61 2 8247 3173

HILLGROVE RESOURCES LIMITED (HGO)

Hedging program expands; current hedge book worth $11.9m

ANNOUNCEMENT HIGHLIGHTS

 HGO has announced additional copper hedging which was entered into in Dec-14. The company hedged an additional 2,887mt at A$7,749/mt (A$3.52/lb).

 As a result of this additional hedging HGO now has hedged 78% of payable copper production to Mar-2016, at an avg price of A$7,726/mt (A$3.50/lb). This compares favourably with the current copper price of A$3.17/lb.

 HGO value this hedge book alone at A$11.9m (mark to market). Compare this to a current EV for the company of

~$60m (WHTMe).

CHART: HGO'S HEDGE BOOK FOR COPPER PRODUCTION

Source: Company data

WHTM VIEW Initial analysis

 This is a great strategic move by the company, and the price achieved for the additional hedging is a pleasant surprise.

 The statement from the company that they are now hedged for 78% of payable copper production between now and the end of Mar-16 qtr (~18.5kt) implies payable production for CY15 of ~19-20kt, inline with our forecast.

Wilson HTM Equities Research - Preliminary Signals - Hillgrove Resources Limited

Issued by W ilson HTM Ltd ABN 68 010 529 665 - Australian Financial Services Licence No 238375. Important disclosures regarding companies that are subject of this report and an explanation of recommendations can be found at the end of this document. W ilson HTM Co rporate Finance Ltd acted as Lead Manager for the placement in Hillgrove Resources Limited in September 2013 and as Lead Manager for the placement in Hillgrove Resources Limited in July 2012 and earned fees for acting.

22 January 2015
Preliminary Signals
Hillgrove Resources Limited

Earnings implications

 We expect slight consensus CY15 earnings upgrades on the back of today's announcement.

Investment view

 We have a BUY rating and a target price of A$0.90ps.

Wilson HTM Equities Research - Preliminary Signals - Hillgrove Resources Limited 2

22 January 2015
Preliminary Signals
Hillgrove Resources Limited

Traffic light key: The traffic lights are a prioritisation tool, and are designed to assist the reader in prioritising work-flow.

 Red light: Announcement substantially different to WHTM expectations - STOP

 Orange light: Announcement largely as per W HTM expectations, but some factors need closer examination - SLOW DOWN

 Green light: Announcement in line with or better than W HTM expectations - GO

O White light: Due to compliance reasons coverage or investment view is restricted at this time

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Disclosure of Interest. Hillgrove Resources Limited

The Directors of Wilson HTM Ltd advise that at the date of this report they and their associates have relevant interests in Hillgrove Resources Limited. They also advise that Wilson HTM Ltd and Wilson HTM Corporate Finance Ltd A.B.N. 65 057 547 323 and their associates have received and may receive commissions or fees from Hillgrove Resources Limited in relation to advice or dealings in securities. Some or all of Wilson HTM Ltd authorised representatives may be remunerated wholly or partly by way of commission.
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Regulatory Disclosures

Wilson HTM Corporate Finance Ltd acted as Lead Manager for the placement announced by Hillgrove Resources Limited in September 2013 and earned fees for acting in this capacity. Wilson HTM Corporate Finance Ltd acted as Lead Manager for the placement announced by Hillgrove Resources Limited in July 2012 and earned fees for acting in this capacity. Wilson HTM Investment Group Ltd and its related bodies corporate trades or may trade as principal in the securities that are subject of the research report. Wilson HTM Corporate Finance Ltd has received compensation for corporate advisory services from this company, its subsidiaries or affiliates during the previous 12 months

Wilson HTM Equities Research - Preliminary Signals - Hillgrove Resources Limited 3