Sheffield Resources : 2017 Annual Report to shareholders

2017‌‌‌‌‌‌

Annual Report

Corporate Directory	3
Chairman's Letter	4
Review of Operations	5
Ore Reserves & Mineral Resources	20
Directors' Report	24
Auditor's Independence Declaration	36
Consolidated Statement of Comprehensive Income	37
Consolidated Statement of Financial Position	38
Consolidated Statement of Changes in Equity	39
Consolidated Statement of Cash Flows	40
Notes to the Financial Statements	41
Directors' Declaration	64
Independent Auditor's Report	65
ASX Additional Information	69

Directors

Mr Will Burbury, Non-Executive Chairman Mr Bruce McFadzean, Managing Director Mr Bruce McQuitty, Non-Executive Director Mr David Archer, Technical Director

Company Secretary

Mr Mark Di Silvio

Registered Office

Level 2, 41 - 47 Colin Street West Perth WA 6005

T: [phone]

F: [phone]

E: [e-mail]

Principal Place of Business

Level 2, 41 - 47 Colin Street West Perth WA 6005

[phone]

Share Register

Link Market Services 178 St Georges Terrace Perth WA 6000

[phone]

Solicitors

Ashurst

Level 32, Exchange Plaza The Esplanade

Perth WA 6000

Bankers

Australia and New Zealand Banking Corporation

Auditors

HLB Mann Judd

Level 4, 130 Stirling Street

Perth WA 6000

Securities Exchange

Australian Securities Exchange (ASX: SFX)

Website

www.sheffieldresources.com.au

Australian Business Number (ABN)

29 125 811 083

Dear Shareholder,

The 2017 financial year has culminated in a significant period of advancement for your Company. With a backdrop of improving market conditions compared to the last 2-3 years, Sheffield was able to deliver a Company defining Bankable Feasibility Study (BFS) during the year, delivering strong financial metrics.

The primary focus during the year was the completion of the BFS on our flagship Thunderbird mineral sands project. The BFS outcomes confirmed Thunderbird as a world class, high margin project. Key results of the BFS demonstrate a financially robust and technically strong project, forecast to generate EBITDA of A$5.1 billion over a 42 year mine life. Thunderbird is located in one of the most attractive mining investment jurisdictions and is well placed to deliver a long term, secure supply of high quality products to a range of potential customers. Completion of the BFS clears the way for delivery of the next major milestones and the Sheffield team is working hard to secure offtake, permitting and project financing outcomes ahead of a targeted construction start in late 2017.

In conjunction with the delivery of the BFS, we announced an update to the Thunderbird Ore Reserve, totalling 680Mt

@ 11.3% HM, underpinned by exceptionally high in-situ zircon grades of 1% in the Proved category. In terms of production profile, 97% of the first 10 years of production and more than one-third of the Ore Reserve is in the highest confidence category, further confirmation that in terms of grade and tonnage, the Thunderbird Ore Reserve ranks amongst the top tier of mineral sands ore reserves in the world, including those associated with operating mines.

We also undertook a strategic equity raising to both complete the Thunderbird feasibility study and continue with exploration activities, placing the Company in a solid financial position. The $17.1m raised introduced a number of new institutional shareholders to Sheffield and we were highly encouraged by the support from existing shareholders during this process.

Subsequent to the release of the BFS, negotiations with potential offtake partners commenced. These negotiations have culminated in the signing of five non-binding memorandums of understanding ("MOUs") in relation to the sale of premium zircon and zircon concentrate. Sheffield has now established key offtake relationships across Europe, India and China, taking total offtake volume of premium zircon and zircon concentrate to approximately 70% and 45% respectively from Stage 1 of the Thunderbird Project. Offtake arrangements have also progressed in relation to the sale of high quality low temperature roast ("LTR") ilmenite, with a maiden LTR ilmenite MOU signed in May 2017 representing approximately 45% of the estimated Stage 1 production volume. The market demand shown for the range of Thunderbird products has been pleasing.

On the exploration front, we have continued to make significant inroads and position ourselves well for the future. In late 2016, we announced a joint venture agreement with Independence Group NL (IGO) (ASX: IGO) encompassing our package of tenements in the Fraser Range region of Western Australia, enabling Sheffield to retain 30% exposure to exploration success beyond the initial earn-in phase. We also announced the signing of an agreement to earn 100% interest in the Jamieson Project (Project) from Jamieson Minerals Pty Ltd. The Project is located near the township of Jamieson in the central Victorian Goldfields comprising Exploration Licence 5523, and this low cost farm-in represents an exciting opportunity to add value through exploration by targeting high-grade gold mineralisation.

The 2017 financial year has also seen continued development of our management team. Following completion of the BFS, we welcomed Mr Stuart Pether to the Sheffield team, taking on the important role of Chief Operations Officer. I would like to personally thank each of my fellow Directors, our management team and our small team of employees, our consultants and stakeholders for their dedication and effort in delivering valuable BFS results over the past year.

Finally, on behalf of the Board, I would also like to thank our loyal shareholder base, many of whom have been shareholders since the Company's admission to the ASX in December 2010.

Thank you for your continued support and we look forward to an exciting year ahead as we look progress development of Thunderbird.

Yours sincerely

Mr Will Burbury

Non-Executive Chairman