Exterra Resources : June 2016 Quarterly Activities Report

JUNE 2016 Quarterly Activities Report

Exterra Resources Limited

ACN 138 222 705

ASX Code: EXC

www.exterraresources.com.au Issued Capital:

Ordinary Shares: 275m

Options: 46.4m

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

28 July 2016

Exterra Resources Limited ("Exterra" or "the Company") is pleased to provide a summary of activities undertaken by the Company during the June 2016 quarter which has focussed on the Linden Gold Project, Second Fortune Mine development, Linden Exploration and the recently acquired Moolyella Lithium Project.

HIGHLIGHTS:

• Signing of a Management and Services Agreement with MITCHELL RIVER GROUP to Develop the Second Fortune Gold Mine at Linden
• Further Exploration success at Linden at the HILL EAST, GOLDEN ORB and ALAWA prospects including:
  • 16m @ 1.75 g/t Au and 7m @ 2.66 g/t Au at Hill East
  • 5m @ 2.86 g/t Au at Golden Orb
  • 1m @ 57.8 g/t Au at Alawa
• Confirmation of highly anomalous Li values to 1.25% Li2O at the MOOLYELLA LITHIUM project
• Identification of high grade historic economic grade drill intersections at the GRASS FLAT GOLD prospect including:

  o 3m @ 18.90 g/t Au

  • 7m @ 8.30 g/t Au
• On 22 April 2016, 23,809,522 fully paid shares were issued at an issue price of 2.1 cents per share in the capital of the Company to raise $500,000. The share issue included a 1 for 2 attaching option, exercisable at 3.5 cents per share, expiring on 21 April 2017.
• On 28 April 2016, a further 12,500,000 fully paid shares were issued at an issue price of 4.0 cents per share in the capital of the Company to raise $500,000. The share issue included a 1 for 4 attaching option that were subject to shareholder approval and approved on 15 June 2016, exercisable at 6.0 cents per share, expiring 15 June 2017.
• On 1 July 2016 the Company successfully completed a share placement to new investors and existing shareholders to raise $1,500,000 by the issue of 37,500,000 fully paid shares at 4 cents per share, with Mitchell River Group associates taking $500K of the total raising.

1. LINDEN GOLD PROJECT, Western Australia (100% interest)
2. Second Fortune Mitchell River Group Agreement

   As announced on the 28 June 2016, Exterra and the Mitchell River Group (MRG), executed a Term Sheet which contemplates the parties entering into a Management Agreement whereby MRG provides an "owners team" and provides the technical and commercial personnel, experienced in project development, to the Linden project on a cost plus basis to ensure a smooth development pathway for the Second Fortune mine. On this basis MRG will be working closely with Exterra and Pybar to finalise financing and an Underground Mining and Services Contract. All profits under this Agreement from gold production remain 100% with Exterra.

   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

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

   MRG's experienced technical and commercial personnel have supported the establishment of a number of substantial project development companies and mining operations, including the following:

   • Exco Resources Ltd which developed the White Dam gold deposits in South Australia and the Mt Margaret Copper projects, QLD (sold to Xstrata) and was taken over by WH Soul Pattinson;

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

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

   • Panoramic Resources Ltd which developed the Savannah (Sally Malay) nickel project in WA.

     To further align MRG with Exterra shareholders, MRG (or it's nominee) has taken a placement of $500k in EXC and subject to shareholder approval, will receive two tranches of incentive options for nil consideration, subject to the following vesting conditions:

     • 17,853,737 options to vest upon first commercial gold production at Second Fortune, exercisable at A$0.06 w

     • 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 execution of the Management Agreement (Tranche 2 Options).

   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 exploration projects at Linden.

3. Linden Exploration

   Drilling at the Hill East, Golden Orb and Alawa prospects during the June 2016 Quarter has further confirmed the potential for significant gold resources at the Linden project. At Hill East, multiple zones of ore grade gold intercepts over at least 1km of strike have been identified, with significant widths in the oxidized zone, and with primary mineralisation associated with quartz stringers in a sequence of mafic volcanics, sediments and porphyry.

   Significantly results at Hill East and Golden Orb confirm gold mineralisation hosted within mafic and porphyry lithologies with highly anomalous silver to 22.60 g/t at Golden Orb and arsenic to 1.35% at Hill East.

   The results confirm the need for further follow-up drilling at Hill East, Golden Orb and Alawa.

   Further assay results from drilling completed at Cuckoo Hawk, Pipeline, Second Fortune Extended, Marloo and Mt Linden are expected shortly.

   Better results from assays reported include:

   • EXAC100 - Hill East: 7 m at 2.66 g/t Au from 32 m, including; 5 m at 3.37 g/t Au from 33 m
   • EXRC006 - Golden Orb: 5 m at 2.86 g/t Au from 30 m, including; 3 m at 3.96 g/t Au from 32 m
   • EXRC012 - Golden Orb: 2 metres at 3.68 g/t Au from 33 metres
   • EXRC030 - Golden Orb: 2 m at 5.22 g/t Au from 11 m, including; 1 m @ 9.31 g/t Au from 11 m
   • EXRC049 - Alawa: 2 m at 29.47 g/t Au from 66 m, including; 1 m @ 57.80 g/t Au from 66 m
   • EXRC051 - Alawa: 1 m at 8.19 g/t Au from 58 m