HEEMSKIRK

Announcement

15 December 2015

Debt funding conditions to be satisfied by equity raising

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]

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

Peter Bird Managing Director

• A$10 million (approximately) capital raising

  
  

• Construction capital estimate increased by 14%

  
  

• Ungeared Project NPV C$78 million (AUD 33 cps pre-raising^)

The Moberly Project capital estimate has increased due to subcontractor pricing variations and fluctuations in the timeline and exchange rates. The capital price is now US$26.6 million*; up 14% on the previous estimate. The project construction timeline is estimated to be 14 months.

The variation in the capital estimate, conditions precedent, additional requirements and working capital needs through to the post commissioning phase have necessitated a A$10 million (approximately) rights issue which is fully underwritten.

As announced on 15 July 2015, the funding package from Taurus Funds Management is broken into two tranches:

• Tranche 1: US$25m to complete the 300,000 tpa construction and production development project (Stage 1)

  
  

• Tranche 2: US$15m to complete an expansion of the project (Stage 2) to a 600,000 tpa production level, once phase one has been successfully completed.

Project and market financial metrics have changed slightly with the project NPV7.5% now C$78 million compared to C$82m previously announced (announced 23 February 2015).

^ post raising AUD 14 cps

* price may vary due to foreign exchange fluctuations

• costs associated with mine haul road construction, engineering and insurances

  ^ includes mining and hauling costs

  # to fund working capital requirements beyond commissioning of Stage 1 of the plant and to advance the engineering design work on Stage 2 expanded production case of 600,000tpa

  
  

  Project Metrics - Key Assumptions: Stage 1 Development

  
  

  The following provides a breakdown of the key project metrics for Stage 1 development:

  
  

  • Nameplate production output capacity - 300,000 metric tonnes

    
    

  • Recoveries in appropriate frac sand product size range of approximately 75%

    
    

  • Capital costs with contingencies - US$26.6m

    
    

    • Plant construction US$23.9m

      
      

    • Other US$2.7m

      
      

  • Funding Stage 1 - US$25m

    
    

  • Project Free Cash Flow Undiscounted annual average - C$11.2m

    
    

  • Ungeared Project Internal Rate of Return Stage 1: 33%

    
    

  • Current C$/US$ exchange rate is 0.75

    
    

  • Payback Period Stage 1: 2.9 years

    
    

    
    

  • Project NPV is C$78m for Stage 1*

    
    

  • Estimated time to completion of construction 14 months

    
    

  • Customer demand remains

    
    

  • API specification frac sand product

    
    

  • Defined in situ JORC Reserve is more than sufficient to satisfy current 20 year mine plan

    
    

  • Appropriate permits in place

    
    

  • The Project has an estimated terminal value of up to $360 million† assuming Stage 1 construction only

Fully underwritten Rights Issue

The rights issue will offer eligible shareholders the opportunity to subscribe for 10 new shares for every 7 shares held on 21 December 2015 at an issue price of $0.03 per new share to raise approximately A$10 million ("Rights Issue").

Below is a summary of the key terms of the Rights Issue:

* Using a Real Discount Rate of 7.5% (10.6% Nominal). The discount rate has been recently reviewed with the real WACC calculated at 6.37% and hence the chosen discount rate of 7.5% is regarded as being conservative. The Project model was independently audited with no material issue identified in model structure or inputs.

† Depending upon valuation method used.

Eligible Shareholders

Eligible shareholders have the following options available in respect of the Rights Issue. They may:

1. take up all of their Entitlement;

   
   

2. take up all of their Entitlement and also apply for additional New Shares under the Shortfall Facility;

3. take up some of their Entitlement and subscribe for some of the New Shares in respect of their Entitlement; or

4. sell all or part of their Entitlement prior to 8 January 2016; or

   
   

5. not take up any of their Entitlement.