Exterra Resources : Agreement Executed with Mitchell River Group to Develop Second Fortune Gold Mine

EXTERRA EXECUTES MANAGEMENT AND SERVICES AGREEMENT WITH MITCHELL RIVER GROUP AND CONFIRMS GO-AHEAD ON DEVELOPMENT OF THE SECOND FORTUNE GOLD MINE AT LINDEN Exterra Resources Limited

ACN 138 222 705

ASX Code: EXC

www.exterraresources.com.au Issued Capital:

Ordinary Shares: 275.7m

Options: 45.7m

Cash (30 June 2016) $1.6 million

Directors and Management: John Davis

Managing Director

Justin Brown

Non-Executive Director

Peter Cole

Non-Executive Director

Dennis Wilkins

Company Secretary

1 August 2016

Exterra Resources Limited ("Exterra" or "the Company") (ASX:EXC) is pleased to advise that it has executed a Management and Services Agreement with the Mitchell River Group (MRG). MRG is an independent mining investment partnership and technical services consultancy, working predominately within the minerals and energy sector in Australia and overseas, will manage the development of the Second Fortune gold mine at Linden.

MRG brings the requisite skills to the Linden Project on a cost plus basis to ensure a smooth development pathway for the Second Fortune Mine. In order to further align the parties, a MRG representative will be appointed to the Board of Exterra.

As announced on 28 June 2016, MRG invested $500,000 in Exterra by participating in the successful $1.5 million share placement.

Under the Agreement MRG will provide, in consultation with Exterra, the following:

• Commercial management of the mining contract and processing agreements;

• Technical supervision of the mining contractor and management of the mine plan;

• Supervision of mine geology, grade control and database management;

• Managing financing of capital requirements and working capital; and

• Management of Gold Hedging programmes and agreements.

  MRG, established in 1999, is a private investment partnership specialising in the metal and energy industries, providing seed funding and management for projects to move through feasibility stages into production.

  Mitchell River Group's experienced technical and commercial personnel have supported the establishment of a number of substantial project development companies and mining operations over the past years including:

  • Exco Resources Limited which developed the White Dam gold deposit in South Australia and the Mt Margaret Copper Projects, Qld (sold to Xstrata) and was taken over by WH Soul Pattinson;

  • Anova Metals Limited which is developing the Big Springs gold mine in Nevada, USA;

  • African Energy Resources Limited which is developing the Sese Integrated Power Project (coal mine and power plant) in Botswana;

  • Panoramic Resources Limited which developed the Savannah (Sally Malay) nickel project in WA;

Exterra's Managing Director John Davis said: "We are very pleased to have the Mitchell River Group as part of the "owners team" to develop the Second Fortune gold mine in a very strong gold market, and as a shareholder of the Company, which shows support for the Company's projects and potential. Their experience in project management, funding and development should provide a smooth pathway to profitable gold production from Second Fortune and we look forward to MRG being part of the team".

To further align MRG with Exterra shareholders, MRG (or it's nominee) will, subject to shareholder approval at a meeting of shareholders, receive two tranches of incentive options for nil consideration, subject to vesting conditions as follows:

• 17,853,737 options to vest upon first commercial gold production at Second Fortune, exercisable at A$0.06 within 3 years of the date of the Management Agreement (Tranche 1 Options).

• 17,853,737 options to vest upon production of 15,000 ounces of gold at Second Fortune Project, exercisable at A$0.08 within 3 years of the date of the Management Agreement (Tranche 2 Options).

Exterra will now pursue debt funding in a very strong gold market, using the experience of MRG, to fund development of the Second Fortune mine and with all profits from gold production remaining 100% Exterra.

MRG have commenced on ground activities at Second Fortune and will be on site on 1 and 2 August 2016. This coincides with a site tour during the Diggers and Dealers Conference in Kalgoorlie, with a group of investors (including clients of Sydney based stockbrokers Taylor Collison), viewing the Second Fortune mine site and discussing the mining and development programme.

Figure 1: Second Fortune Main Lode long section showing mineralised zones, Resource and Probable Reserve1 outlines and schematic decline design from existing Feasibility Study.

1http://www.exterraresources.com.au/images/uploads/Second_Fortune_PFS_ASX_Release_July_2014.pdf

Figure 2: Linden Project Regional Location Plan