HEEMSKIRK

Announcement

15 December 2015

Reserves and Resources Update

For further information, please contact:

Peter Bird Managing Director

Heemskirk Consolidated Limited ABN 18 106 720 138

Level 17

303 Collins Street

Melbourne Victoria 3000 Australia

Telephone: +61 3 9614 0666

Facsimile: +61 3 9614 4466 Email: [email protected]

KEY POINTS

Annual Statutory Update of Resources and Reserves

Reported Silica Resources at Moberly Project and recoverable frac sand increased*

The Moberly plant in British Columbia has been operating for over 30 years. Product from this facility is to be used predominantly in the oil and gas drilling services industry. Major developments are underway in this industry which will require significant consumables during the forthcoming decades.

Due to exploitation of these resources and reserves, the major focus of the Company has been advancing the engineering and finance stages of the Moberly Silica operation for a redevelopment producing frac sand. Construction of the footings at the facility completed during 2015. The Company is now focused on completion of project financing with conditions precedent being addressed.

This information is available on our website at www.heemskirk.com

Peter Bird Managing Director

* Refer to Table 1 attached and the associated narrative

1

Moberly Silica Deposit (100% owned by Heemskirk)

The Moberly silica deposit occurs on the flank of Mount Moberly approximately 7km north of the regional centre of Golden, British Columbia and about 215km west of Calgary.

The material that is mined at Moberly is the Ordovician Mount Wilson Quartzite unit. Near Golden it reaches a maximum thickness of 480 metres at Horse Creek (less in the mine area) and Mount Moberly is the northern limit of the unit, where it is terminated by a thrust fault. The quartzite occupies a faulted syncline in the Beaverfoot Range and outcrops in parallel, structurally repeated layers. The quartzite is typically grey to buff coloured massive orthoquartzite with some evidence of crudely laminated and cross laminated beds near the base.

At the mine site the geology is simple. Bedding generally strikes around 118° magnetic and is vertical to steeply NE dipping. The rock consists of an orthoquartzite mostly but variably de- cemented (ie by removal of the silica 'cement' binding the grains) so that most of the area exposed consists of 'altered' quartzite, said to be friable or 'sandy' to varying degrees. Only a small percentage of the rock could be described as 'quartzite' in hand specimen; mostly there is a siliceous skeletal texture with beds, blebs and irregular masses of sand which flows freely when the rock is dug. There appears to be no systematic variation or control of the de-cementing. The composition of the rock is +99% SiO2 as quartz, with the remainder being silicate clays and very rare other silicate minerals.

Petrological studies show that the sand grains within the rock vary between 0.841mm to 0.105mm in diameter (20 mesh to 100 mesh on the US scale).

The deposit was mined from the early 1980s to 2009 for silica processed to silica sand for glass making, golf course sand and similar products. Over these almost 25 years, the resource has been exposed and mined over 200m in vertical extent (along bedding), about 800m in strike (along bedding) and over 250m across strike (perpendicular to bedding) and for at least the last 10 years of full scale production, no portion of the pit varied from silica quality suitable for glass making, confirmed by customer analyses every shipment. The north-east margin of the quartzite unit has not been exposed in the mine area and the quartzite can be traced in air photos to the south-east for at least double the exposed length in the mine area.

Criteria for sand for glass making are SiO2 +99.5% with Al2O3 2O3 2O3

During 2010 - 12 Heemskirk investigated, via an internal pre-feasibility and then a feasibility study (which was updated in early 2015) the possibility of treating the quartzite to produce a 'frac sand'

suitable for use in the oil & gas sector as a proppant1. The studies found the project to be economically viable and the project moved to engineering design of a new frac sand plant on the existing plant site and an increased mining rate, within the same mine footprint, with at least a 35 year mine life. The plant engineering is now complete. Non frac sand residues are saleable either as silica flour (with additional treatment) or as additives for cement making.

Testing conducted while engineering design was being done found that a change in 'scrubber' equipment (used as the last stage of grain liberation and to 'polish' the sand grains to increase sphericity and roundness) would increase the yield of frac sands from the feedstock whilst still yielding ISO/API quality frac sands. This led to the incorporation of a commercial mixer unit in the process flow sheet. Recoveries in test work were up to 80% 30# -140# (64% 20# to 140# previously) but the Competent Person settled on 70% recovery of 30# to 140# for the estimation of Resources and Reserves to allow for uncertainties in applying the mixers at full scale. The cut-off for frac product was set at 30# due to the presence of a proportion of grain 'clusters' in the 20# to 30# fraction.

Frac sand is defined within a range of qualities (such as grain size, roundness, sphericity, acid solubility, turbidity, crush resistance and conductivity), each measured to ISO or API (American Petroleum Institute) specifications, rather than a single pass/fail specification, with customers defining the range of each quality that is acceptable for their particular use at a particular time (ie well depth, well location, availability of other product, well logistics).

In the past year Heemskirk continued to negotiate finance arrangements to build the new plant and other works to allow the expanded mining operation. These negotiations have been concluded on terms satisfactory to Heemskirk and the project remains financially robust.

Estimated Mineral Resources and Ore Reserves of silica at Moberly have changed from last year.

As noted above, the estimated recovery of frac sand from the silica ore has changed from 64% of 20#-140# frac sand, to 70% of 30#-140# frac sand as a result of test work leading to a design change to incorporate a pair of commercial mixers into the process design, replacing a 'scrubber' unit of different design.

Also, the strike extent of published Resources has been increased by 150m and consequently, published Reserves by 50m, resulting in increases of tonnages of silica for frac sand or, alternatively, glass making sand and a material increase in recoverable frac sand. The reason for

1 Frac sand consists of silica sand which, having certain characteristic roundness, sphericity, strength and certain other properties is suitable to act as a proppant in oil and gas wells. Proppants are injected into such wells in order to keep fractures open, allowing the continued free flow of the gas or oil from the reservoir. Frac sand is usually used by customers in certain size brackets, e.g. 20 mesh to 40 mesh, 40 mesh to 70 mesh and 70 mesh to 140 mesh.

the increased strike extent in Resources is largely historical. When the Competent Person initially began estimating silica Resources and Reserves at Moberly, the future of the western 50m and eastern 100m extents of the resource was uncertain - vegetation regrowth was progressing and there were adequate resources in the smaller area given the production rates. With the increased tonnages required for the frac plant, and greater certainty of the most recent Mine Plan, the ends of the resource have been brought back into the published figures.

Resources of frac sand residues have decreased due to the increased recovery factor used for frac sands.

Resources and Reserves of silica at Moberly in 2015 are again reported separately for the traditional markets of Moberly silica - firstly for frac sand (with residues suitable for cement making or further processing into silica flour as an additional resource) and also for glass making. These estimates are largely for the same area of the deposit, but utilising different processing routes and end markets. Therefore the resource estimates are not additive, but rather alternatives to one another. Due to the simplicity of the geometry of the resource blocks, traditional cross-sectional techniques were able to be used, based on volumes estimated from AutoCad applied to a digital terrain model (DTM) of the deposit and a 35 year Mine Plan.

Further information is contained in the JORC defined 'Table 1' which is included as Appendix 1 here due to the increase in Resources and Reserves. Parts of Table 1 which have changed are labelled "UPDATE".

Ore Reserves and Mineral Resources this year are estimated as at 30 September, to align with Heemskirk's financial reporting date. The prior estimation was as at 30 June 2014. No changes in the estimations resulted from this date change.

A. Silica for frac sand, frac sand residues and silica flour markets

These Resources and Reserves are for an alternative processing route and market to the glass sand and other products reported in Section B. Resources and Reserves presented in this Section A are therefore not additive to those presented in Section B but rather are alternatives.

In-situ silica destined for the frac sand market has an estimated 70% yield to 30 mesh to 140 mesh sized sand2, with the balance (frac sand residues) suitable for cement additives or further processing to silica flour for high temperature cement additives. Therefore the frac sand is

2 Updated recovery and size range following test work using a mixer 'scrubber' unit and the adoption of this equipment in the circuit.