Heron Resources Limited

Suite 702, 191 Clarence St, Sydney NSW 2000, AUSTRALIA

[email protected]

+61 2 9119 8111 / +61 8 6500 9200

ASX/TSX Release

29 June 2016

ABN: 30 068 263 098

Heron Resources delivers robust Feasibility Study for Woodlawn Project

Study supports project viability with compelling commercial case for immediate development

Expedited program launched to secure project funding and bring project online to meet global zinc supply shortfall

Heron Resources Limited ("Heron", "Company", ASX:HRR and TSX:HER) is pleased to announce the results of its Feasibility Study (FS) for its 100% owned and fully permitted high-grade Woodlawn Zinc-Copper Project in New South Wales, Australia. The A$11 million study supports the viability of the Starter Case to deliver quality zinc, copper and lead concentrates to market over a significant Reserves-based mine life. This study underpins the Board's decision to advance an accelerated program to secure project finance and bring the Woodlawn Project into production in 2018.

* Results reported using Mineral Reserves as estimated for the FS at an 8% post-tax real discount rate (approximately. 10% post-tax nominal), with AUD/USD FX 0.71, and with flat real commodity prices of US$1.01/lb Zn, US$3.00/lb Cu, US$0.91/lb Pb, US$17.80/oz Ag and US$1,200/oz Au. Other assumptions are detailed later in this release. ** C1 and C3, refer to page 17 for definitions. All currency amounts are in Australian dollars unless otherwise noted.

Key Outcomes:

• Attractive project characteristics

  • Initial 9.3 year mine life based upon the combined underground and tailings Mineral Reserves ("Starter Case")

  • Mineral Reserves-only life-of-mine (LOM) Production Target of 284kt Zn, 67kt Cu, 87kt Pb, 7.5Moz Ag and 28koz Au

  • Campaign processing rate of up to 1.0Mtpa from underground mining, and up to 1.5Mtpa from reclaiming tailings, processed through a standard single-sulphide flotation facility

  • Steady-state (2020-2023) annual Production Target of 40kt Zn, 10kt Cu, 12kt Pb, 900koz Ag and 4koz Au contained within zinc, copper, and lead concentrates

  • Utilising existing local and regional infrastructure to achieve significant reductions in development costs o Close proximity to large service and employment centres (Sydney, Wollongong, Canberra, Goulburn) o Strong local community and regulator support

  • Project is on granted Special Mining Lease SML20 - fully 'permitted' and 'mine ready'

  • Inferred Mineral Resources defined in both the underground and tailings projects demonstrate excellent potential to extend mine life to more than 11.5 years

• Mineral Resources & Mineral Reserves

  • Starter Case based on 51% Proven Reserves and 49% Probable Reserves

  • Underground mine plan focused on the shallower areas of the deposit reflecting the success of the recent Preliminary Economic Assessment (PEA) & FS drilling programs. There is a high level of confidence based on historic data for extensions to this mineralisation both at-depth and along strike

  • Conservative approach taken to the underground Mineral Reserve calculation, excluding all moderate- to higher-risk remnant mining areas. These remnant areas hold future potential which will be reconsidered post mine access with re-assessment from underground

  • Two separate production sources (underground and tailings) provide operational flexibility and reduces risk

  • 20 years of historical operational data removes 'greenfield' unknowns

• Robust economics

  • C1 costs of -US$0.06/lb zinc and C3 of US$0.34/lb expected to place the Project firmly in the lower half of the cost curve (refer to page 17 for definitions)

  • Attractive capital cost metrics based on annual metal Production Targets and Reserves-based mine life

  • Life extension case (PEA equivalent mine plan) shows excellent consistency with previously published PEA

  • Significant leverage to the price outlook for zinc, which comprises approximately 48% of total payable metal value

• Expedited development and financing pathway to meet market opportunity

  • Evaluating options for immediate sourcing of long lead-time items and other alternative second hand equipment procurement options to enhance development timing and reduce costs

  • Rapid development schedule of 15 months from commencement of construction until completion of wet commissioning

  • First production targeted early 2018 to meet projected favourable zinc market conditions

• Excellent exploration upside

  • Drill program to commence imminently to test high-priority near mine targets

  • Highly successful exploration drilling programs over the last 18 months

  • Significant exploration potential on SML20 remains including near-surface targets that have the scope to materially increase the Mineral Resources

  • Deeper underground extensions to be targeted with underground drilling post-commissioning

  • Significant medium grade base metal stringer mineralisation identified (metallurgical evaluation commenced)

  • Regional 'Massive Sulphide District' discovery potential within Heron's 682 square kilometres of regional tenure

The complete NI 43-101 Technical Report in support of the FS study will be published on Heron's web site and SEDAR www.sedar.com (TSX:HER) within 45 days of this news release. While summarised here, this Technical Report will contain expanded information with respect to key assumptions, parameters and risks associated with the results of the FS.

Heron Resources Managing Director and CEO, Mr. Wayne Taylor, said:

"The study presents a very compelling case for the development of the Woodlawn Project and confirms Heron's position as one of the most advanced Australian near term zinc producers. The resource and embedded low operating and competitive development costs due to existing site infrastructure all combine to make Woodlawn a clear choice amongst its peers.

From the outset it has been our aim to deliver a Reserve base that allows us to bring the project online quickly to take advantage of the significant opportunity that exists due to favourable zinc market fundamentals. The resulting economics place us in an ideal position to secure funding and target first production in 2018 with significant project upside still to be quantified.

I would like to recognise the tireless efforts of our employees and consultants who have helped deliver this study on time and under budget. It has been an enormous task which has been met with hard work and enthusiasm and is a credit to the individuals involved."

Please refer to page 23 for important Cautionary and Forward Looking Statements that are to be read in conjunction with this release.

Project Overview

The Woodlawn deposit is a high-grade, Volcanogenic Massive-Sulphide (VMS) deposit situated in New South Wales, Australia, approximately 50km northeast of Canberra, and 250km southwest of Sydney (Figure 1).

The Woodlawn deposit was discovered in 1970 with open-pit operations commencing in 1978 and underground operations in 1987. The operation was closed in March 1998 primarily due to corporate issues within then owners, Denehurst Ltd. Between 1978 and 1998 the operation reported production of 13.8Mt @ 9.1% Zn, 1.6% Cu, 3.6% Pb, 0.5g/t Au and 74g/t Ag. In 1999, Tri Origin Exploration Ltd (subsequently becoming TriAusMin Ltd) acquired the mineral rights to the site from the Denehurst Administrator.

Heron acquired its interest in the Woodlawn Project through the merger with TriAusMin Ltd which was completed in August 2014. Since this time the Company has advanced the project through the completion of a Preliminary Economic Assessment (PEA) in April 2015 covering the combined development of the underground and reclaimed tailings projects. The PEA summary results provided the commercial basis for advancing the project through this FS.

The Woodlawn Project consists of two production sources, comprising underground and tailings ore, which will be processed through a single sulphide flotation plant. The Woodlawn Project benefits from an existing granted mining lease (SML20) and major statutory project approvals. The mineral rights and production are 100%-owned by Heron. The Woodlawn site layout including location of the proposed plant is illustrated in Figure 2.

The Woodlawn mining lease, SML 20, and surrounding larger (179 sq km) exploration license, EL 7257, contain the previously producing Currawang Mine located 9km to the north-west of Woodlawn, and the Cowley Hills Mine located 2km to the north. A further 503 square kilometres are held by Heron under exploration licenses within the district covering the highly prospective Woodlawn felsic volcanics, the host of the VMS mineralisation.

Figure 1: Woodlawn location map

Figure 2: Woodlawn Site Layout