Royalco Resources : December 16 Quarterly Report

December 2016 Quarterly Report‌

31 January 2017

Fitzroy River Corporation Limited launched an off-market bid at 20 cents a share on 14 December 2016. As of 30 January 2017 Fitzroy is entitled to 43.26 per cent of Royalco Resources Limited shares on issue. Royalco directors have unanimously recommended acceptance of the bid.

KEY POINTS FOR THE QUARTER‌

CORPORATE DETAILS

ASX Code:

RCO

• Royalty payments of $139,500 received in the December quarter were derived from only the Weeks Royalty.

  Issued Capital:

  52,714,183 shares

  Share Price:

  20 cents

• The December Weeks payment reflects annual adjustments and is invariably lower than some expectations.

  Market Capitalisation: $10.4 million

  Cash/Liquids:

  $2.694 million

  Directors:

  Peter Topham Executive Chairman

  & Managing Director

  Bruce Pertzel Director

  Nick Boicos Director

• The Weeks Royalty interest benefited from improved Bass Strait petroleum production, along with record spot gas prices along the east coast of Australia.

• Commissioning of the gas processing facilities at Longford began during the quarter.

  Substantial Shareholders:

  Fitzroy River Corporation, Noontide Investments and High Peak Royalties.

• The Bowdens silver project, where Royalco retains a sliding scale royalty interest, is being advanced by Silver Mines Limited.

The company's strategy is to expand a core royalty portfolio of income-producing base metals, precious metals and energy interests. This may be achieved by direct acquisition, exploration initiatives, or as a result of mezzanine/project financing activities. In addition, successful exploration activities will be maximised to the benefit of shareholders in whatever corporate format deemed appropriate.

Royalty Interests

Royalco owns a 1% interest in the Weeks Petroleum Royalty (the equivalent of a 0.025% over-riding royalty from the entire hydrocarbon production of the main Bass Strait fields).

Income received during the quarter (based on production in the September 2016 quarter) was

$139,500, compared with $181,073 received in the September quarter. The outlook is for a continued improvement in returns as production increases and gas prices continue to rise.

The upgrade of the processing facilities at Longford is now ramping up.

In an investor briefing on 5 October 2016, BHP Billiton highlighted other investment opportunities for Bass Strait, including progressing the West Barracouta field and upgrading the Snapper field.

The Bowdens Project near Mudgee in New South Wales, where Silver Mines Limited (ASX code: SVL) is the new operator, remains the subject of both infill and extension drilling. Royalco's sliding scale royalty over the project starts at a 2% net smelter return until US$5 million has been received, and then becomes a 1% net smelter return thereafter.

At Mt Garnet in far north Queensland, a Deed of Company Arrangement was executed by the operators on 8 December 2016. A formal shareholders meeting is scheduled to be held in March at which time the moneys due and payable to Royalco should have been clarified.

Mt Lyndhurst tenements, over which Royalco retained a royalty interest, were relinquished by the operators during the quarter.

No activities of substance have been reported during the quarter on the other royalty interests.

Exploration

No exploration was undertaken during the quarter and no commitments have been entered into.

Corporate

Director Changes

Mr Malcolm McComas resigned from the board of directors with effect from 14 October 2016. Mr Piers Reynolds resigned from the board of directors on 24 November 2016.

Mr Nick Boicos joined the board as a non-executive director on 24 November 2016.

Extraordinary General Meeting

Following voting at the Annual General Meeting on 24 November 2016 a second strike was recorded on the remuneration report and the company is now progressing to a spill meeting on 22 February 2017.

Finance

The company's cash balance at the end of June was $2.694 million. Costs during the quarter were significantly higher than anticipated as a result of takeover and Extraordinary General Meeting legal fees and associated administrative charges.

Peter J Topham

Executive Chairman

& Managing Director

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Appendix 5B

+Rule 5.5

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity
Royalco Resources Limited
ABN	Quarter ended ("current quarter")
53 096 321 532	31 December 2016

Consolidated statement of cash flows		Current quarter $A'000	Year to date (6 months) $A'000
1.	Cash flows from operating activities	140	369
1.1	Receipts from customers
1.2	Payments for	(8)	(19)
(a) exploration & evaluation
(b) development		-	-
(c) production		-	-
(d) staff costs		(122)	(276)
(e) administration and corporate costs		(169)	(275)
1.3	Dividends received (see note 3)	-	41
1.4	Interest received	15
1.5	Interest and other costs of finance paid	-	-
1.6	Income taxes paid	-	-
1.7	Research and development refunds	-	-
1.8	Other (provide details if material)	(7)	(12)
1.9	Net cash from / (used in) operating activities	(151)	(172)

1. Cash flows from investing activities

2. Payments to acquire:

3. property, plant and equipment - -

4. tenements (see item 10) - -

5. investments - (18)

6. other non-current assets - -

7. + See chapter 19 for defined terms

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