RVR.asx Speculative Buy

Red River

29 Jul 2016 Share Price

RED RIVER RESOURCES LTD (RVR)

Base Metals: Explorer / Developer

Hole 1 is a discovery……..Liontown East roars Red River Resources has announced drilling at Liontown East has intersected massive and semi massive sulphide mineralisation including a 7.5m zone of massive and semi massive sulphides from 452m and a 10.35m zone of semi massive sulphides from 472m. Based on field observations, the interval is dominated by sphalerite rich mineralisation. This early success from the first hole into the Liontown East prospect confirms our belief in the significant exploration upside that exists throughout the Thalanga region.

Pipeline of VMS targets to be drilled, more discoveries to come After testing Liontown the Company will look to test a number of other high priority targets within the region. Ermine is a target where re-processing of historic geophysical and geochemical data has identified a significant untested IP and coincident Pb-Zn in soil anomaly. The IP anomaly at Ermine sits along strike from historic shallow high grade zinc intercepts up to 29.2% Zn (similar to Liontown East). Esso’s Waterloo is another high priority target located ~2km east of the Waterloo deposit [707kt @ 19.1% ZnEq] and within the same stratigraphic position which hosts the Thalanga deposits. We continue to see significant potential to discover further VMS-style deposits within the Mt Windsor region.

$0.160

Valuation

$0.43

Price Target (12 month)

$0.41

Brief Business Description: Base metals explorer & developer

Hartleys Brief Investment Conclusion Focussed on restart of the Thalanga operations and becoming Australia's next zinc producer Chairman & MD Brett Fletcher (Chairman) Mel Palancian (MD) Top Shareholders Directors & management

7.7%

Company Address Level 6, 350 Collins Street Melbourne, VIC, 3000 Issued Capital

276.5m

- fully diluted

324.4m

Market Cap

A$44m

- fully diluted

A$52m

Cash (est)

A$10.0m

Debt

A$0.0m

EV

A$34.2m FY17e

FY18e

FY19e

Prod (kt ZnEq)

Prelim. (A$m)

5

24

38

Op Cash Flw

7

35

45

Liontown will be a mine, not currently in the mine plan

Norm NPAT

3

21

36

CF/Share (cps)

2

11

14

With the discovery of massive sulphide mineralisation at Liontown East we have increased confidence that the Liontown orebody will be mined. We see significant potential for the current [2.0Mt @ 8.4% ZnEq] orebody at Liontown to deliver a mineable reserve and the Liontown East prospect could add to the overall tonnes mined at Liontown. We see potential for an open pit and/or underground mine at Liontown which could be a platform to develop the Liontown East prospect (assuming further exploration success)

EPS (cps)

2

11

14

8.1

1.4

1.1

P/E

Mt

ZnEq (%)

Resources

5.5

12.8

Reserves

0.4

15.0

Red River Resources

0.25

12.

Price underpinned by development, exploration upside is real High impact drilling continues at Liontown East with other VMS targets to be tested over the coming months. We see potential for further discoveries within the Mt Windsor region over the coming ~6-12 months. RVR’s current drill program will continue testing some of the best base metals targets we can see in the current market. The current share price is underpinned by a robust development project and with this early exploration success the upside is now real and tangible. We maintain our Speculative Buy recommendation with a price target of 41c, NAV of 43c, spot NAV of 35c.

Fig. 1: Hole 1 is a discovery at Liontown East

14.

0.20 10. 0.15

8.

0.10

6.

A$

M

4. 0.05 2. 0.00 Aug-15

Dec-15

Apr-16

. Jul-16

Source: IRESS Volume - RHS RVR Shareprice - LHS Sector (S&P/ASX SMALL RESOURCES) - LHS

Scott Williamson Resources Analyst Ph: +61 8 9268 3045 E: [email protected] Hartleys has completed a capital raising in the past 12 months for RVR for which it has earned fees. Hartleys has provided corporate advice within the past 12 months and continues to provide corporate advice to RVR for which it has earned and continues to earn fees. The analyst has a beneficial interest in RVR shares.

Source: Red River Resources Ltd

Page 1 of 10

Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000 Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Further information concerning Hartleys’ regulatory disclosures can be found on Hartleys website www.hartleys.com.au

Hartleys Limited

Red River Resources Ltd (RVR)

29 July 2016

SUMMARY MODEL Red River Resources RVR

Share Price $0.160

29 July 2016 Speculative Buy

Key Market Information

Directors

Company Information

Share Price

$0.160

Brett Fletcher (Chairman)

Market Capitalisation - ordinary

A$44m

Mel Palancian (MD)

Net Debt (cash) Market Capitalisation - fully diluted

-$10m

Donald Garner (Exec Director)

A$52m

Jim Black (Non-Exec Director)

EV

A$42m

Paul Hart (Non-Exec Director)

Issued Capital

276.5m

Cameron Bodley (Non-Exec Director)

Options

47.9

Melbourne, VIC, 3000 +61 3 9095 7775 +61 3 9670 5942 www.redriverresources.com.au

Mark Hanlon (Non-Exec Director)

Issued Capital (fully diluted inc. all options)

324.4m

Top Shareholders

Issued Capital (fully diluted inc. all options and new capital)

418.2m

Directors & management

Valuation 12month price target

Level 6, 350 Collins Street

$0.43

1

$0.41

2

% 7.7%

Resource

3 P&L

Unit

30 Jun 15

30 Jun 16

30 Jun 17

30 Jun 18

30 Jun 19

30 Jun 20

Net Revenue

A$m

0.0

0.1

16.3

83.9

133.6

Total Costs

A$m

-4.6

-2.3

-12.8

-50.4

EBITDA

A$m

-4.6

-2.2

3.5

- margin

%

0%

0%

Depreciation/Amort

A$m

-0.7

EBIT

A$m

Net Interest

Mt

Cu (%)

Pb (%)

Zn (%)

Au (g/t)

Ag (g/t)

ZnEq (%)

5.5

1.1

1.9

6.6

0.6

43

12.8

149.9

4 TOTAL 5 Measured

0.1

1.5

1.3

4.6

0.2

30

13.7

-78.6

-88.1

6

Indicated

2.5

1.2

2.2

7.7

0.6

50

14.9

33.5

55.0

61.8

7

Inferred

2.9

1.0

1.7

5.6

0.5

37

11.0

22%

40%

41%

41%

8 West 45

0.6

0.6

3.5

8.3

0.3

69

15.2

-1.7

-2.2

-4.8

-7.0

-8.6

9 Far West

1.6

1.7

2.0

6.0

0.2

53

14.9

-5.3

-4.0

1.3

28.7

48.1

53.3

Orient

0.5

0.9

1.8

7.9

0.2

44

13.6

A$m

3.1

1.2

3.1

1.2

3.1

1.2

10 Waterloo

0.7

1.9

1.6

11.0

0.9

50

Norm. Pre-Tax Profit

A$m

-2.3

-2.7

4.4

29.9

51.1

54.5

2.0

0.5

1.6

4.6

0.8

25

Reported Tax Expense

A$m

0.0

0.0

0.0

0.0

-13.0

-16.3

effective rate

%

0.0%

0.0%

0.0%

0.0%

-25.4%

-30.0%

Normalised NPAT

A$m

-1.6

-1.9

3.1

20.9

35.8

38.1

Abnormal Items

A$m

-0.7

-0.8

1.3

9.0

2.4

0.0

Reported Profit

A$m

-2.3

-2.7

4.4

29.9

38.1

38.1

Minority

A$m

0.0

0.0

0.0

0.0

0.0

0.0

Profit Attrib Balance Sheet

A$m Unit

-2.3 30 Jun 15

-2.7 30 Jun 16

4.4 30 Jun 17

29.9 30 Jun 18

38.1 30 Jun 19

38.1 30 Jun 20

Cash

A$m

1.7

1.7

10.3

19.7

47.9

Other Current Assets

A$m

0.2

0.0

0.0

0.0

Total Current Assets

A$m

1.9

1.7

10.3

19.7

Property, Plant & Equip.

A$m

7.9

6.6

29.4

45.9

51.8

Exploration

A$m

0.8

2.8

5.8

9.8

13.8

Investments/other

A$m

9.5

9.5

9.5

9.5

Tot Non-Curr. Assets

A$m

18.1

18.8

44.6

65.1

75.1

80.7

Total Assets

A$m

20.0

20.6

54.9

84.8

122.9

161.1

20.1 8.4

Liontown Production Summary

Unit

Mill Throughput

Mt

Mined grade

Zn Eq (%)

0.0

0.0

14.1

13.6

13.4

14.2

13.7

Combined Recovery & Payability

%

71.2%

71.2%

71.2%

71.2%

71.2%

71.2%

71.2%

Zinc

kt

0.0

0.0

3.1

13.9

20.8

23.4

20.8

Lead

kt

0.0

0.0

1.2

4.1

4.5

4.5

Copper

kt

0.0

0.0

0.2

2.1

4.6

5.8

4.6

Silver

koz

0.0

0

75

306

361

415

316

80.4

Zinc Eq

kt

0.0

0.0

5.0

24.3

38.2

45.4

39.2

0.0

0.0

Zinc Eq

mlb

0.0

0.0

11.1

53.5

84.2

100.0

86.3

47.9

80.4

Modelled mine Life

yr

6

6

5

4

3

2

53.4

Modelled mining inventory

Mt

2.2

2.2

2.2

2.1

1.9

1.5

1.0

17.8

Modelled mining inventory Costs

Zn Eq (%) Unit

13.7 Jun 15

13.7 Jun 16

13.8 Jun 17

14.0 Jun 18

14.7 Jun 19

15.8 Jun 20

19.4 Jun 21

Cost per milled tonne

$A/t

-

-

256.0

201.4

196.4

195.7

194.7

EBITDA / tonne milled ore

$A/t $A/lb

-

-

70.9

134.0

137.6

137.4

104.6

-

-

1.16

0.94

0.93

0.88

0.90

- ex royalties C1: Operating Cash Cost = (a)

$A/lb

-

-

1.04

0.81

0.80

0.76

0.79

$A/lb

-

-

0.72

0.75

0.76

0.72

0.74

(a) + Royalty = (b) C2: (a) + depreciation & amort. = (c)

$A/lb

-

-

0.84

0.87

0.89

0.84

0.86

$A/lb

-

-

(a) + actual cash for dev. = (d) C3: (c) + Royalty

$A/lb

-

-

13.10 3.26

3.07 1.22

2.28 0.96

2.19 0.86

2.87 0.87

$A/lb

-

-

13.22

3.19

2.40

2.31

2.98 0.99

9.5

9.5

Total cash costs

Jun 15

Jun 16

Jun 17

Jun 18

Jun 19

Jun 20

Jun 21

0.0

0.0

0.05

0.25

0.40

0.45

0.40

4.0

1

Short Term Borrowings

A$m

-

-

-

-

-

-

Other

A$m

2.0

1.5

1.5

1.5

1.5

1.5

Total Curr. Liabilities

A$m

2.0

1.5

1.5

1.5

1.5

1.5

Long Term Borrowings

A$m

-

-

15.0

15.0

15.0

15.0

Other

A$m

9.1

9.1

9.1

9.1

9.1

9.1

Total Non-Curr. Liabil.

A$m

9.1

9.1

24.1

24.1

24.1

24.1

Total Liabilities

A$m

11.1

10.6

25.6

25.6

25.6

25.6

$A/lb

-

-

3.38

1.35

1.09

0.98

Net Assets

A$m

8.9

10.0

29.3

59.2

97.3

135.5

Total cash costs as per P&L

$A/lb

-

-

1.16

0.94

0.93

0.88

0.90

Net Debt (cash)

A$m

-1.7

-1.7

4.7

-4.7

-32.9

-65.4

All in sustaining cash cost (AISC) Price Assumptions

$A/lb

AUDUSD Zinc Lead Copper Silver

Cashflow

Unit

30 Jun 15

30 Jun 16

30 Jun 17

30 Jun 18

30 Jun 19

30 Jun 20

EBITDA

A$m

-4.6

-2.2

3.5

33.5

55.0

61.8

Working Capital

A$m

2.7

-0.3

0.0

0.0

0.0

0.0

Operating Cashflow

A$m

-1.9

-2.5

3.5

33.5

55.0

61.8

Income Tax Paid

A$m

0.0

0.0

0.0

0.0

-13.0

-16.3

Interest & Other

A$m

0.1

1.2

3.1

1.2

3.1

1.2

Operating Activities

A$m

-1.8

-1.3

6.6

34.7

45.1

46.7

Property, Plant & Equip.

A$m

-5.0

-0.4

-25.0

-21.3

-12.9

-10.2

Exploration and Devel.

A$m

-2.1

-2.0

-4.0

Other

A$m

-0.4

0.0

0.0

0.0

0.0

0.0

Investment Activities

A$m

-7.5

-2.4

-28.0

-25.3

-16.9

-14.2

(d) + Royalty

Jun 15

Jun 16

3.09 Jun 17

1.38 Jun 18

1.14 Jun 19

1.03 Jun 20

1.00 Jun 21

A$/US$

0.81

0.73

0.72

0.72

0.75

0.76

0.77

US$/lb

0.91

0.91

1.02

1.13

1.17

1.03

1.03

US$/lb

0.79

0.82

0.86

0.91

0.94

0.90

US$/lb

2.62

2.49

2.66

2.82

2.99

2.84

2.84

US$/oz

15.67

15.96

17.66

18.29

18.98

17.46

17.46

Jun 15

Jun 16

Jun 17

Jun 18

Jun 19

Jun 20

Jun 21

No

No

No

No

No

No

No

Unit

Hedging Hedges maturing? Sensitivity Analysis

-3.0

-4.0

-4.0

Valuation

FY18 NPAT

Base Case

0.43

29.9

Spot Prices

0.35 (-18.1%)

19.7 (-34.0%)

Spot USD/AUD 0.75, Zinc $1.00/lb, Lead $0.82/lb, Copper $2.22/lb, Silver $20.18/oz. AUDUSD +/--10% 0.35 / 0.53 (-18.6% / 22.7%)

22.5 / 38.0 (-24.6% / 27.2%)

Borrowings

A$m

0.0

0.0

15.0

0.0

0.0

0.0

Zinc +/--10%

0.47 / 0.39 (10.2% / -10.2%)

34.1 / 25.6 (14.2% / -14.2%)

Equity or "tbc capital"

A$m

10.6

3.8

15.0

0.0

0.0

0.0

Production +/--10%

0.52 / 0.34 (21.2% / -21.2%)

37.6 / 21.5 (25.9% / -28.1%)

Dividends Paid

A$m

0.0

0.0

0.0

0.0

0.0

0.0

Operating Costs +/--10%

0.39 / 0.47 (-9.4% / 9.4%)

Financing Activities

A$m

10.6

3.8

30.0

0.0

0.0

0.0

Unpaid Capital Year Expires

25.9 / 33.9 (-13.4% / 13.4%) No. (m)

$m

Avg price

% ord

Net Cashflow

A$m

1.3

0.0

8.6

9.4

28.2

32.5

30-Jun-15

0.0

0.0

0.00

Shares

Unit

30 Jun 15

30 Jun 16

30 Jun 17

30 Jun 18

30 Jun 19

30 Jun 20

30-Jun-16

0.0

0.0

0.00

Ordinary Shares - End

175.6

175.6

269.4

269.4

269.4

269.4

30-Jun-17

20.8

2.7

0.13

8%

Ordinary Shares - Weighted

m m

175.6

175.6

222.5

269.4

269.4

269.4

30-Jun-18

27.2

4.0

0.15

10%

Diluted Shares - Weighted Ratio Analysis

m Unit

175.7 30 Jun 15

175.7 30 Jun 16

222.5 30 Jun 17

269.4 30 Jun 18

269.4 30 Jun 19

269.4 30 Jun 20

TOTAL

47.9

6.7

0.14

17%

Cashflow Per Share

A$ cps

-1.0

-0.8

3.0

12.9

16.7

17.3

Cashflow Multiple

x

0.0

0.0

0.0

0.0

0.0

0.0

Earnings Per Share

A$ cps

-1.3

-1.6

2.0

11.1

14.2

14.2

Price to Earnings Ratio

x

-12.3

-10.2

8.1

1.4

1.1

1.1

Dividends Per Share

AUD

-

-

-

-

-

-

Dividend Yield

%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

Tax (NPV future liability)

Net Debt / Net Debt + Equity

%

-23%

-21%

14%

-9%

-51%

-93%

Expected future franking credits

Interest Cover

X

1.8

3.3

na

na

na

na

Return on Equity

%

na

na

10%

35%

37%

28%

Share Price Valuation (NAV) 100% Thalanga (pre-tax NAV at disc. rate of 12%) Other Exploration Hedging Corporate Overheads Net Cash (Debt)

Options & Other Equity Total

0% 0%

Risked Est. A$m

Est. A$/share

164

0.39

50

0.12

0

0.00

-16

-0.04

10

0.02

-34

-0.08

0

0.00

5

0.01

179

0.43 Last Updated: 29/07/2016

Analyst: Scott Williamson +61 8 9268 3045 "tbc capital" could be equity or debt. Our valuation is risk-adjusted for how this may be obtained. Sources: IRESS, Company Information, Hartleys Research

Page 2 of 10

0.90

Hartleys Limited

Red River Resources Ltd (RVR)

29 July 2016

LIONTOWN PROJECT

Liontown was discovered in 1905 and Liontown East was discovered in 2016 by RVR

Liontown Resources (LTR) delineated the maiden resource estimate at Liontown in 2007

The Liontown deposit was discovered in 1905 and historical mining in the early 1900’s focussed on the shallow, high grade Cu-Au mineralisation. Historic underground workings and remnant surface infrastructure exist within the Liontown project area. The Liontown deposit is located ~30km east of the Thalanga processing plant (direct line) and existing road infrastructure via Charters Towers would see a haulage route of ~100km via all-weather roads. The Liontown deposit is a VMS style of mineralisation consisting of two principal south-dipping lodes and some Cu-Au stringer vein mineralisation. The Liontown lode lies within the Liontown horizon hosted by dacite in the footwall and a greywacke-type sediment in the hangingwall. The Carrington lode lies within the footwall sediments about 30m from the Liontown lode. The Liontown and Carrington lodes are predominantly sphalerite mineralisation with minor galena. The footwall stringer mineralisation has an uncertain relationship with the Carrington lode and the Cu-Au mineralisation seems to be poorly understood and underexplored by previous owners. Liontown has a current resource estimate of 2.0Mt @ 0.5% Cu, 1.6% Pb, 4.6% Zn, 0.8g/t Au, 25g/t Ag. The RVR estimate suggests a small portion (~1%) of the Liontown resource lies within an interpreted oxide zone. Of particular interest is an east plunging higher grade core (10-20% ZnEq) open at depth and requiring follow up drilling. Liontown East is an IP anomaly located ~800m along strike to the east of the current Liontown resource. The anomaly is interpreted as a potential extension of the Liontown deposit at depth and to the east. The anomaly consists of a broad zone of high chargeability extending 600m east and 350m down dip. Geochemical anomalism is recorded in historic shallow percussion holes directly up dip of the zone of chargeability. One deeper historic hole aimed at testing beneath the geochemical anomaly failed to test the zone of chargeability. Fig. 1:

Liontown East hole 1 drill core

Kagara acquired Liontown in late 2009

Liontown was mined historically for shallow, high grade Cu-Au mineralisation

Source: Red River Resources Ltd

Page 2 of 10

Hartleys Limited

Red River Resources Ltd (RVR)

Fig. 2:

Liontown East cross section

Liontown East discovery hole 1

Source: Red River Resources Ltd

Fig. 3:

Liontown East hole 1 massive sulphides

Massive Sulphides discovered at Liontown East

Source: Red River Resources Ltd

Page 3 of 10

29 July 2016

Hartleys Limited

Red River Resources Ltd (RVR)

29 July 2016

ERMINE PROJECT

Ermine is ~40km from Charters Towers and ~105km from Thalanga

Significant intercepts include 6.8m @ 14.05% Zn

The Ermine project is located ~40km from Charters Towers and ~105km by road from the Thalanga processing plant. Ermine was identified in 1992 from an outcropping gossan with a coincident airborne EM and stream sediment samples. Historic exploration has identified zinc rich VMS mineralisation at Ermine & Ermine North both with strike lengths of ~300m. The host rocks at Ermine are interpreted to be in the same stratigraphic horizon as the Thalanga deposits. Historical drilling at Ermine includes forty one drillholes for a total of 5,294m, significant intercepts include: ERCD14A; 6.8m @ 14.05% Zn from 20.4m, ERC1; 12m @ 6.08% Zn from 32m and ERC11 4m @ 9.2% Zn from 47m. The drilling has intercepted transported mineralisation in sulphide boulders and the Company is looking to find the source of the debris flow. Mapping in the Ermine area has confirmed that the favourable horizon continues to the north east to the Echidna prospect where strong Cu-Pb-Zn soil anomalies and coincident IP anomalies remain untested by drilling. The Company has identified significant coincident geochemical and geophysical anomalies along strike to the north east which potentially reflect the source of the high grade debris flows identified at Ermine. Fig. 4:

Ermine project IP and geochemical anomaly

Echidna has a strong Cu-Pb-Zn soil anomaly and coincident IP anomalies

Ermine North and Echidna prospects require follow up drilling

Source: Red River Resources Ltd

Page 4 of 10

Hartleys Limited

Red River Resources Ltd (RVR)

29 July 2016

WATERLOO PROJECT The Waterloo deposit was discovered in 1985 by drilling through the Campaspe Formation after BHP Minerals discovered a small outcrop of altered volcanic rock in an adjacent creek. The Waterloo deposit is located ~35km east of the Thalanga processing plant (direct line) and existing road infrastructure via Charters Towers would see a haulage route of ~95km via all-weather roads. Waterloo was discovered in 1985 by BHP Minerals

Waterloo is located ~35km from the Thalanga processing plant (direct line)

Waterloo is a blind deposit located under the Campaspe cover with mineralisation currently open down plunge and along strike. The mineralisation at Waterloo is similar to Thalanga although hosted entirely within the Trooper Creek Formation which is well above the interpreted Thalanga horizon. The VMS massive sulphide lenses at Waterloo develop on or near the contact between the footwall pyrite sericite quartz schist and coarse rhyolitic volcaniclastics which include the quartz eye volcaniclastics similar to the host rocks at Thalanga. In April 2015 RVR announced a resource estimate for Waterloo of 707kt @ 1.9% Cu, 1.6% Pb, 11.0% Zn, 0.9g/t Au, 50g/t Ag [19.1% ZnEq]. Our estimates suggest Waterloo has potential to feed ~150ktpa for ~4 years or more. The Waterloo deposit remains open to the east and possibly down dip, we see potential to delineate further mineable tonnes at Waterloo. The Waterloo resource estimate has a portion (~23%) of transitional ore which is expected to yield a lower metallurgical recovery than the fresh/sulphide material. We believe the higher grade portion of the transitional zone will be economic regardless of the lower recoveries. The Waterloo deposit is a similar style of mineralisation to Thalanga and the Company believes it is appropriate to apply similar metallurgical recoveries. The Waterloo project looks to be an economic and feasible satellite underground opportunity for RVR to progress through to development. Waterloo is located on a granted exploration permit and the Company is looking to convert the tenement into a mining lease.

Waterloo was discovered from a small outcrop in an adjacent creek

The Esso’s Waterloo prospect is located ~2km west of Waterloo and has known economic intersections. The prospect has seen minimal exploration work since it was first identified in the 1970’s. Historic drilling at Esso’s Waterloo consists of ten shallow RAB holes, twelve percussion holes and one diamond hole. A review of existing drilling by RVR has determined the drilling at Esso’s Waterloo focussed on testing immediately below the peak soil geochem anomaly while a large zone of high chargeability exists at depth and remains untested.

Page 5 of 10

Hartleys Limited

29 July 2016

Red River Resources Ltd (RVR)

VALUATION

We model a 6 year minelife at Thalanga

Our sum of parts valuation for RVR assumes a 6 year minelife at Thalanga with production from early CY17 after a ~6 month development build time. Our modelling of Thalanga assumes a pre-production capex requirement of $20m followed by sustaining capex of $15mpa for the first ~2 years of production while the Company establishes three small, high grade underground mines at West 45, Far West and Waterloo. We model the Thalanga operations in line with the Company’s restart study and some minor additional minelife. We consider the restart study as a base case scenario and see significant potential to extend the current deposits and discover further high grade mineralisation within the region. We assume a nominal $A50m ($0.12/share) value for exploration upside potential. We believe RVR is well positioned for further brownfield exploration success at Thalanga.

Fig. 5: We assume a nominal A$50m for exploration upside potential

Hartleys sum of parts valuation for RVR is A$0.43/share

Hartleys Sum of Parts Valuation for RVR

100% Thalanga (pre-tax NAV @ 12%) Other Exploration Hedging Corporate Overheads Net Cash (Debt) Tax (NPV future liability) Expected future franking credits Options & Other Equity Total

A$m

A$/share

164.4 50.0 0.0 -15.6 10.0 -34.0 0.0 4.7 179.4

0.39 0.12 0.00 -0.04 0.02 -0.08 0.00 0.01 0.43

Source: Hartleys Estimates

PRICE TARGET Our price target for RVR is based on a 6 year minelife at the Thalanga Operations. We model in line with the Company’s restart study. We include weighting for our valuation at spot and consensus pricing.

Fig. 6:

RVR Price Target Methodology Weighting

Price Target Methodology

Hartleys 12 month price target is 41 cents per share

Spot

12 mth out

NPV base case

60%

$0.43

$0.48

NPV base case at spot commodity and fx prices

30%

$0.35

$0.39

Net cash backing

10%

$0.04

$0.04

Risk weighted composite 12 Months Price Target

$0.37 $0.41

Shareprice - Last

$0.160

12 mth total return (% to 12mth target + dividend)

Source: Hartleys Estimates

Page 6 of 10

154%

Hartleys Limited

29 July 2016

Red River Resources Ltd (RVR)

EV/EBITDA BANDS Fig. 7:

Using Hartleys base case commodity forecasts

Shareprice 1.40 RVR Actual

1.20

Hartleys Target

1.00

8x EV/EBITDA 6x EV/EBITDA

.80

4x EV/EBITDA

.60

2x EV/EBITDA 1x EV/EBITDA

.40 .20 .00

Source: Hartleys Estimates, IRESS

Fig. 8:

Using spot commodity prices

Shareprice 1.00

.90

RVR Actual

.80

8x EV/EBITDA

.70

6x EV/EBITDA

.60

4x EV/EBITDA

.50 2x EV/EBITDA

.40

1x EV/EBITDA

.30

.20 .10 .00

Source: Hartleys Estimates, IRESS

Page 7 of 10

Hartleys Limited

29 July 2016

Red River Resources Ltd (RVR)

RISKS Fig. 9:

Key assumptions and risks for valuation

Assumption

6 year mine life at Thalanga

Moderate

Risk to valuation if assumption is incorrect Meaningful

Model parameters

Moderate

Meaningful

We have made a number of large assumptions in our valuation of RVR, changes in these assumptions can change our valuation to both the upside and downside

Exploration upside potential

Moderate

Meaningful

We assume exploration upside at Thalanga. Some downside risk to our valuation exists if RVR have no exploration success

Restart / Ongoing Exploration Funding

Low to Medium

High

Orebody Risk

Low to Medium

Meaningful

Moderate

High

Commodity prices Conclusion

Risk of not realising assumption

Comment

RVR is leveraged to the success of the restart of the Thalanga Operations. We model a 6 year minelife in line with the restart study. If the operations vary largely from our modelling our valuation will be at risk

We model conventional debt & equity funding, we believe the low capex requirement should see our modelling assumptions achievable though there is some risk associated with funding in the current environment As with all orebodies there is risk around geology, geotech and metallurgy although with a production history at Thalanga these risks are somewhat negated

RVR is reliant on strong commodity prices although is economic at current spot prices We have made significant assumptions but believe these are achievable.

Source: Hartleys Research

Page 8 of 10

HARTLEYS CORPORATE DIRECTORY Research Trent Barnett Mike Millikan Scott Williamson Simon Andrew Janine Bell

Head of Research Resources Analyst Resources Analyst Energy Analyst Research Assistant

+61 8 9268 3052 +61 8 9268 2805 +61 8 9268 3045 +61 8 9268 3020 +61 8 9268 2831

Institutional Sales

Director & Head of Corp Fin. Director Director Associate Director Associate Director Associate Director Associate Director Manager

+61 8 9268 2829

Wealth Management

Corporate Finance Dale Bryan Richard Simpson Paul Fryer Ben Wale Ben Crossing Stephen Kite Scott Weir Rhys Simpson

+61 8 9268 2824 +61 8 9268 2819 +61 8 9268 3055 +61 8 9268 3047 +61 8 9268 3050 +61 8 9268 2821 +61 8 9268 2851

Registered Office Level 6, 141 St Georges TcePostal Address: PerthWA 6000 GPO Box 2777 Australia Perth WA 6001 PH:+61 8 9268 2888 FX: +61 8 9268 2800 www.hartleys.com.au [email protected] Note: personal email addresses of company employees are structured in the following manner:[email protected]

Hartleys Recommendation Categories Buy Accumulate

Neutral Reduce / Take profits Sell No Rating Speculative Buy

Share price appreciation anticipated. Share price appreciation anticipated but the risk/reward is not as attractive as a “Buy”. Alternatively, for the share price to rise it may be contingent on the outcome of an uncertain or distant event. Analyst will often indicate a price level at which it may become a “Buy”. Take no action. Upside & downside risk/reward is evenly balanced. It is anticipated to be unlikely that there will be gains over the investment time horizon but there is a possibility of some price weakness over that period. Significant price depreciation anticipated. No recommendation. Share price could be volatile. While it is anticipated that, on a risk/reward basis, an investment is attractive, there is at least one identifiable risk that has a meaningful possibility of occurring, which, if it did occur, could lead to significant share price reduction. Consequently, the investment is considered high risk.

Carrick Ryan Justin Stewart Simon van den Berg Chris Chong Digby Gilmour Veronika Tkacova Nicola Bond Bradley Booth Adrian Brant Nathan Bray Sven Burrell Simon Casey Tony Chien Tim Cottee David Cross Nicholas Draper John Featherby Ben Fleay James Gatti John Goodlad Andrew Gribble David Hainsworth Neil Inglis Murray Jacob Gavin Lehmann Shane Lehmann Steven Loxley Andrew Macnaughtan Scott Metcalf David Michael Jamie Moullin Chris Munro Michael Munro Ian Parker Charlie Ransom Conlie (CEO) Salvemini Mark Sandford David Smyth Greg Soudure Sonya Soudure Dirk Vanderstruyf Samuel Williams Jayme Walsh

+61 8 9268 2864 +61 8 9268 3062 +61 8 9268 2867 +61 8 9268 2817 +61 8 9268 2814 +61 8 9268 3053 +61 8 9268 2840 +61 8 9268 2873 +61 8 9268 3065 +61 8 9268 2874 +61 8 9268 2847 +61 8 9268 2875 +61 8 9268 2850 +61 8 9268 3064 +61 8 9268 2860 +61 8 9268 2883 +61 8 9268 2811 +61 8 9268 2844 +61 8 9268 3025 +61 8 9268 2890 +61 8 9268 2842 +61 8 9268 3040 +61 8 9268 2894 +61 8 9268 2892 +61 8 9268 2895 +61 8 9268 2897 +61 8 9268 2857 +61 8 9268 2898 +61 8 9268 2807 +61 8 9268 2835 +61 8 9268 2856 +61 8 9268 2858 +61 8 9268 2820 +61 8 9268 2810 +61 8 9268 2868 +61 8 9268 2833 +61 8 9268 3066 +61 8 9268 2839 +61 8 9268 2834 +61 8 9268 2865 +61 8 9268 2855 +61 8 9268 3041 +61 8 9268 2828

Disclaimer/Disclosure The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities. Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice mentioned in publications to clients. Hartleys has completed a capital raising in the past 12 months for Red River Resources Limited ("Red River") for which it has earned fees. Hartleys has provided corporate advice within the past 12 months and continues to provide corporate advice to Red River Resources Limited ("Red River") for which it has earned and continues to earn fees. Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs. Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued. Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law.

Page 9 of 10