Heron Resources : Ardea Resources Limited - Project Update Jan 2017

Heron Resources Limited

ASX/TSX Release

6 January 2017

Level 7, 191 Clarence St, Sydney, NSW, 2000

[e-mail] [phone] / [phone]

ABN: 30 068 263 098

Ardea Resources Limited Project Update

Recent technical advancements have been realised within Ardea's projects:

• Kalgoorlie Nickel Project (KNP)

  • Cobalt development focus in light of surging demand from tech industry

  • KNP Cobalt Zone has a JORC 2012-compliant resource of 49.7Mt at 0.12% cobalt and 0.86% nickel

  • Cobalt-enriched zones are contained within and are a subset of the broader KNP resource of 805Mt at 0.05% cobalt and 0.7% nickel1, being Australia and the developed world's largest cobalt resource

  • KNP Chrysoprase (semi-precious gemstone) mechanised bulk production opportunity identified

• Lewis Ponds

  • Bulk tonnage Exploration Target defined

  • Significant base metal-gold open-pit potential, with orogenic gold and base metal mineralisation defined which is very similar to other large deposits in the region

  • Lewis Ponds Main Zone and Tom's Zone main shaft mullock sampling by Ardea returned assays of 9.9-12.1g/t gold and 272-539g/t silver, possible epithermal mineralised affinity

• New tenement applications complementing existing Ardea projects

  • Lewis Ponds, NSW - several licence applications secured and already recommended for grant

  • Bedonia West and Perrinvale, WA - high quality Ni-Cu-PGM targets acquired

Heron Resources Limited (Heron or Company) is pleased to provide an update on Ardea Resources Limited (Ardea) and its project activities, as disclosed in the prospectus (Prospectus) lodged with the Australian Securities and Investments Commission on 9 November 2016 and Supplementary Prospectus lodged 18 November 2016.

Ardea's management team has completed preparatory field programs including rock chip sampling ahead of the 2017 listing and project drilling. The recent focus has been on resource estimation and preparation of drilling approvals at Goongarrie South, Black Range and Kalpini (KNP Cobalt Zones) and at Lewis Ponds, and scoping of metallurgical and feasibility work for the KNP Cobalt Zone deposits and the Lewis Ponds stringer mineralisation.

1 The breakdown for the full KNP resource categories is as follows:

Resource Category	Quantity (Mt)	Co (%)	Ni (%)
Measured	9.6	0.081	1.02
Indicated	244.0	0.052	0.75
KNP Total Measured and Indicated	253.6	0.052	0.76
Inferred	551.7	0.046	0.68
KNP Total Resources	805.3	0.048	0.70

1. Cobalt focus for the Kalgoorlie Nickel Project
2. High-grade cobalt resource

   The global KNP resource of 805Mt at 0.05% cobalt and 0.7% nickel contains within it high-grade concentrations of cobalt- rich mineralisation at Goongarrie South, Big Four, Scotia Dam, Aubils and Black Range (refer Ardea Prospectus pages 84- 87 for global resource details).

   An upgraded cobalt-focused global resource for the KNP was defined as 49.7Mt at 0.12% Co and 0.86% Ni (refer Heron ASX announcement 6 January 2017 for global resource details). This resource comprises a recalculation of cobalt resources at Goongarrie South, Big Four, Scotia Dam and Aubils combined with the historic resource calculated for the Black Range area as defined in the Prospectus.

   This new KNP Cobalt Zone resource is comprised as follows:

   Table 1 - KNP Cobalt Zone - Resource Statement from independent consultancy Ridley Mineral Resource Consulting Pty Ltd

   Area	Prospect	Resource category	Cutoff (% Co)	Size (Mt)	Co Ni MgO* FeO* Al2O3* SiO2* CaO* Mn* Cr* (%) % % % % % % % %
   Goongarrie	Goongarrie South	Measured Indicated	0.08 0.08	3.4 11.2	0.14 0.11	1.19 0.92	1.6 1.8	47 43	6.3 6.2	17 23	0.16 0.78	1.02 0.71	1.27 1.20
   	Inferred	0.08	1.4	0.11	0.76	1.8	39	5.9	30	0.32	0.74	1.20
   	Big Four	Indicated	0.08	4.5	0.11	0.89	1.6	40	5.3	32	0.68	0.76	1.07
   	Inferred	0.08	0.2	0.11	0.95	1.6	38	4.2	36	0.25	0.73	1.09
   	Scotia Dam	Inferred	0.08	2.9	0.14	0.88	3.2	34	4.4
   	Goongarrie subtotal			23.6	0.12	0.94

   Yerilla Aubils Inferred 0.08	6.0 0.15	0.90 6.4 33 4.7 31 4.57 0.91
   KNP TOTAL	49.7 0.12	0.86

   Siberia Black Range Inferred 0.50(Ni) 20.1 0.10 0.75 7.9 28 6.7

   *Estimates for MgO, FeO, Al2O3, SiO2, CaO, Mn and Cr are provided for reference only and do not constitute Mineral Resources

   Figure 1 - KNP pyrolusitic ore. This drill sample from 2001 assayed approximately 1% Co and 2% Ni. The cobalt-rich material occurs within the upper part of the cobalt-nickel laterite profile.

   Figure 2 - Run-of-mine KNP siliceous ore. This mine face includes green chrysoprase veining. Chrysoprase material tends to occur within the lower part of the cobalt-nickel laterite profile.

   Figure 3 - Ardea WA projects, showing the Goongarrie South, Big Four, Scotia Dam, Black Range and Aubils Cobalt Zones.

   Figure 4 - Goongarrie South - work currently underway, showing 0.08% Co trimmed block model grade shell

3. Goongarrie South

   The resource estimation reviewed existing KNP 0.5% Ni cut- off grade blocks which coincidentally exceed 0.08% Co and where they define coherent mining shapes. These grade shells were subsequently trimmed on an individual wireframe basis, excluding wireframe pods with less than three mineralised drillhole intersections, except where nearby adjacent drillhole intersections demonstrate continuity of the mineralisation above the 0.08% Co cut-off grade.

   The cobalt review included the Goongarrie South-Big Four- Scotia Dam resource belt. This area will clearly will be the focus of Ardea's future cobalt program.

   The current working concept is a Goongarrie South to Scotia Dam production rate of 2Mtpa at 0.12% Co and 0.94% Ni for approximately 2ktpa cobalt in intermediate product (a cobalt- and nickel-bearing manganese oxide) with in addition some 16ktpa nickel (distributed between battery feedstock and conventional nickel refinery feed). Plant site location would be at Goongarrie South at the northern end of the cobalt belt, with initial mine scheduling being a zone at Goongarrie South termed the "Pamela Jean Deeps".

4. KNP, Australia's largest cobalt resource

   Containing 386,400 tonnes of contained cobalt metal, the KNP is Australia's largest cobalt deposit. By this measure, it is more than three times larger than Australia's second

   largest cobalt deposit. The newly-reported cobalt resource from the high-grade KNP Cobalt Zone is a subset of the larger KNP resource, and this subset is by itself Australia's fourth largest cobalt resource, containing 59,600 tonnes of cobalt metal. The KNP Cobalt Zone also has one of the highest cobalt grades in Australia.

   The updated resource reporting for cobalt-rich zones provides an insight into the potential to define further cobalt-rich zones in the KNP on the basis of remodeling work planned by Ardea that is focused on cobalt. Updated resource reporting on the cobalt-rich mineralisation at the KNP marks the first part of a refocusing for the KNP onto the cobalt component of the deposit.

   Forthcoming drilling and metallurgical studies will move the KNP towards a PFS focusing on feedstocks for the lithium ion batteryindustry (Lithium Nickel Manganese Cobalt Oxide - LiNiMnCoO2 or NMC).

   The drilling focus in ranking will be the contiguous cobalt zones in the Goongarrie South belt and at Black Range and Kalpini. The drilling will secure material for bench-scale metallurgical assessment.

5. Semi-precious gemstones within the KNP - Chrysoprase ("Australian Jade")

6. The Kalgoorlie Nickel Project is characterised by widespread occurrences of the semi-precious gemstone chrysoprase. Chrysoprase is a rare, highly valued, nickel-bearing variety of chalcedony. Colour varies from apple green to deep green, and the highest quality material is translucent. Chrysoprase is commonly known by gemologists as "Australian jade" and is often used in jewellery as a substitute for jade due to its harder wearing characteristics. Chrysoprase is highly valued in east Asia notably China.

   The occurrence of chrysoprase in shallow strongly weathered horizons throughout the KNP is directly analogous to the occurrence of opal in the opal fields of Coober Pedy (SA) and Lightning Ridge (NSW). As in the opal fields, chrysoprase has developed in veins within cracks and crevices in the clay-rich host rocks. In the KNP, the highest quality, deepest green chrysoprase shows a direct spatial relationship to the cobalt- and nickel-rich parts of the orebodies. Ardea has defined five advanced stage chrysoprase pit opportunities within the KNP.