EMERALD RESOURCES NL — Interim / Quarterly Report 2018

Oct 29, 2018

ASX Announcement & Media Release

30 October 2018

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Fast Facts

ASX Code: EMR Shares on issue: 2,111 million Market Cap: ~$70 million Cash: A$1.3 million (30 Sep 2018) Listed Investments: A$0.3 million (30 Sep 2018)

Quarterly Report for the period ended 30 September 2018

Highlights

Board & Management

Simon Lee AO, Non-Executive Chairman Morgan Hart, Managing Director Mick Evans, Executive Director Ross Stanley, Non- Executive Director Ross Williams, Non-Executive Director Mark Clements, Company Secretary Brett Dunnachie, Chief Financial Officer

Company Highlights

• First mover in an emerging gold province in Cambodia

• Industrial Mining Licence granted over the Okvau Gold Project (100% owned) allowing for the development of the Okvau Deposit

• Okvau Deposit: Indicated and Inferred Mineral Resource Estimate of 1.14Moz at 2.0g/t Au

• DFS completed and demonstrates high grade, low cost, compelling development economics:

• Ore Reserve of 14.3Mt & 2.0g/t Au for 0.9Mozs in a single open pit with waste:ore ratio of 5.8:1

• LOM average annual production of 106,000ozs pa

• AISC US$731/oz over LOM

• Using US$1.250/oz Au gold price:

  • NPV(5%) US$223M pre-tax and US$160M post-tax

  • IRR 48% pa pre-tax and 40% post-tax

  • Payback ~2.2 years pre-tax and 2.5 years post-tax

• Highly credentialed gold project development team

• Significant resource growth potential

Cambodian Activities

Okvau Gold Project

• Significant milestone achieved with the granting of the Okvau Mining Licence covering 11.5km[2] . The Mining Licence has an initial 15-year period with the right to two renewals of up to 10-years for each renewal;

• Completion of the second phase of the grade control drilling program. The second phase consisted of 216 holes for 5,494m taking the total program to 368 holes for 10,166m;

• Results of the grade control program to date strongly support the DFS Ore Reserve estimate in the area tested, particularly in respect to gold grade;

• Strong endorsement received from the Cambodian Government culminating in the granting of the Mining Licence paves the way for Emerald to advance the Okvau Gold Project to development.

Exploration, Joint Venture Agreement and other tenure

• Follow up geochemical soil sampling program at the Peacock Prospect within the Koan Nheak Licence identifies a second gold anomaly with the new discovery substantially increasing the target strike at the prospect (earning up to 80% under the Angkor Gold Corp. Earn-In);

• Initial regional soil and rock chip sampling, following up on a historical anomaly within the Snoul Project, confirms a large gold anomaly (earning up to 70% under the Mekong Minerals Joint Venture Agreement);

• Planning has commenced for Emerald’s maiden reconnaissance drill testing at both the Koan Nheak and Snoul projects.

Corporate

• Mr Mick Evans joins the Board as Executive Director;

• Emerald continues pursuing alternative financing structures and providers on more favourable terms and flexibility than under the previous project financing mandate.

Registered Office 1110 Hay Street West Perth WA 6005

T: +61 8 9286 6300 F: +61 8 9286 6333

• W: www.emeraldresources.com.au

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Cambodian Gold Project

Background

Emerald’s main focus is the exploration and development of its Cambodian Gold Projects which comprise of a combination of 100% owned granted licences, applications and earn-in & joint venture agreements covering a combined area of 1,442km². The 100% owned Okvau Gold Project (‘Okvau Gold Project’) is the Company’s most advanced project which is located approximately 275 kilometres north-east of Cambodia’s capital city of Phnom Penh in the province of Mondulkiri (refer Figures 1 and 2). The town of Kratie is located on the Mekong River approximately 90 kilometres to the west and the capital of Mondulkiri, Saen Monorom is located approximately 60 kilometres to the south-east. In May 2017, Emerald completed a Definitive Feasibility Study (‘DFS’) on the development of the Okvau Gold Project which demonstrated a robust project producing approximately 106,000 ounces of gold per annum on average over 7 years from a single open pit.

In July 2018 the Company was granted the Industrial Mining Licence covering 11.5km² which allows for the development of the

Okvau Gold Project.

Topography of the tenure area is relatively flat with low relief of 80 metres to 200 metres above sea level. There are isolated scattered hills rising to around 400 metres. The area is sparsely populated with some limited historical small-scale mining activity. All-weather gravel haulage roads in the area provide good access to within 25 kilometres of the Okvau exploration camp site. A new 18 kilometre access road will be constructed as part of development of the Okvau Gold Project.

The Okvau Deposit and other gold occurrences within the tenure are directly associated with diorite and granodiorite intrusions and are best classed as Intrusive Related Gold mineralisation. Exploration to date has demonstrated the potential for large scale gold deposits with the geology and geochemistry analogous to other world class Intrusive Related Gold districts, in particular the Tintina Gold Belt in Alaska (Donlin Creek 38Moz, Pogo 6Moz, Fort Knox 10Moz, Livengood 20Moz).

Figure 1| Cambodian Gold Project | Location

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Figure 2| Cambodian Gold Project | Exploration Licence Areas

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Okvau Gold Project | Definitive Feasibility Study

The DFS was completed in May 2017 on the development of a 2.0Mtpa operation at the Okvau Gold Project and was completed to[+/-] 15% level of accuracy (refer Table Three). The completion of the DFS fulfilled a milestone set by Emerald since becoming involved in the project in March 2016.

The DFS confirms an initial operating LOM of over 7 years, producing approximately 106,000 ounces of gold per annum on average, with ore processed through a plant utilising a single stage crushing circuit and SAG mill, sulphide flotation, regrind mill followed by conventional cyanide leaching.

The estimated operating costs highlight a financially robust project with an average LOM AISC of US$731/oz. The estimated development costs are US$91M with a further US$7M in mining contractor establishment costs and pre-production mining costs. The development costs include a US$4.4M allowance for spare parts and first fills.

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At a gold price of US$1,250/oz, the Okvau Gold Project generates a NPV(5%) of US$223M (A$298M) pre-tax and US$160M (A$213M) post-tax with an Internal Rate of Return (IRR) of 48% pa pre-tax and 40% post-tax. The payback of the total capital funding requirement is expected to be 26 months pre-tax and 30 months post-tax, from first gold pour.

An updated independent JORC Indicated and Inferred Mineral Resource estimate for the Okvau Deposit of 17.7Mt grading 2.01g/t gold containing 1.141Moz (at 0.70g/t gold cut-off) was updated by independent resource consultant EGRM Consulting Pty Ltd as part of the DFS (refer Table One).

Table 1 | Okvau Mineral Resource Estimate

					Okvau Mineral Resource Estimate	Okvau Mineral Resource Estimate
			Indicated Resource			Inferred Resource		Total Resource
	Cut-off	Tonnage	Grade	Contained	Tonnage	Grade (g/t Contained	Tonnage	Grade (g/t	Contained
	(Au g/t)	(Mt)	(g/t Au)	Au (Koz)	(Mt)	Au) Au (Koz)	(Mt)	Au)	Au (Koz)
	0.70	15.11	2.08	1,008	2.57	1.61 133	17.68	2.01	1,141

The Project has a JORC Ore Reserve (Probable) estimate of 14.26Mt @ 1.98g/t Au for 907,000 ounces gold (refer Table 2).

Table 2| Okvau Ore Reserve Estimate

		Okvau	Ore Reserve Estimate
		Tonnage	Grade	Contained
		(Mt)	(g/t Au)	Au (Koz)
	Probable Ore Reserve	14.26Mt	1.98g/t Au	907koz

Key operating and financial outcomes of the DFS, prepared in accordance with the requirements of the JORC Code (2012 Edition), are presented in Table 3.

Table 3| DFS Economics[1]

	Ore Reserve	14.3Mt @	14.3Mt @	2.0g/t gold for 907koz contained
	LOM Strip Ratio (waste t : ore t)			5.8:1
	Throughput			2.0Mtpa
	Life of Mine			7.2 years
	Processing Recovery			84%
	Recovered Ounces			762koz
	Average Annual Production			106koz
	Pre-production Capital Costs2			US$98M
	Sustaining Capital Costs3			US$23M
	Gold Price	US$1,100/oz		US$1,250/oz US$1,400/oz
	Gross Revenue	US$838M		US$952M US$1,066M
	LOM Net Revenue(net of royalties4and refining)	US$801M		US$911M US$1,020M
	Operating Cash Flow pre-tax	US$309M		US$419M US$528M
	Project Cash Flow pre-tax	US$188M		US$298M US$407M
	NPV(5%)pre-tax	US$133M		US$223M US$313M
	NPV(5%)post-tax5	US$95M		US$160M US$224M
	Payback pre-tax	3.0 years		2.2 years 1.6 years
	Payback post-tax	3.3 years		2.5 years 1.8 years
	IRR pre-tax	32%		48% pa 63%
	IRR post-tax5	27%		40% pa 54%
	LOM C1 Cash Costs6	US$650/oz		US$650/oz US$650/oz
	LOM All-In SustainingCosts(‘AISC’)7	US$725/oz		US$731/oz US$737/oz

1 All economics are 100% attributable to Emerald 5 Taxation is based on Cambodian tax law and does not allow for any incentives or tax relief

2 Includes US$4.4M of capital spares and first fills and US$7.0M of 6 C1 Cash Costs include site based mining, processing and admin operating mining capital and pre-production mining costs costs plus transport and refining costs

3 Includes US$14.4M of rehabilitation and closure costs 7 Includes C1 Cash Costs plus royalties, sustaining capital costs, contributions to environmental & community funds and rehabilitation & closure costs

4 Royalties include Government royalty of 2.5% gross and a thirdparty royalty of 1.5% gross (capped to A$22.5M)

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Activities during the Quarter

Okvau Gold Project | Development Activities

Development Permitting

The focus for Emerald has been to obtain the grant of the Okvau Mining Licence to allow for development of the Okvau Gold Project. During the current Quarter, Emerald was pleased to announce that it had achieved this significant milestone with the granting of the Okvau Mining Licence by the Cambodian Ministry of Mines & Energy covering 11.5km[2] . The Mining Licence has an initial 15-year period with the right to two renewals of up to 10-years for each renewal in accordance with Cambodian laws.

The grant of the Mining Licence follows approval of the Okvau Gold Project by the Office of Council Ministers for both the rezoning of the project area to ‘Sustainable Use’ within the Phnom Prich Wildlife Sanctuary (‘PPWS’) and the granting of the Mining Licence.

The rezoning of the Mining Licence area to ‘Sustainable Use’ lawfully permits commercial development under Cambodian law and follows the successful negotiation and approval of the environmental contract (the ‘Environmental Contract’) and environmental licence (‘Environmental Licence’) in December 2017. Both the Environmental Contract and Environmental Licence have been approved by the Minister of Environment (‘MoE’). The terms of the Environmental Contract are in accordance with Emerald’s Environmental and Social Impact Assessment (‘ESIA’). These terms include commitments by Emerald to make various annual contributions to Environmental and Social Funds established for the benefit of local communities and ongoing environmental management. These amounts were included in Emerald’s DFS released in May 2017. In addition, Emerald is required to provide surety to the MoE for rehabilitation of the Okvau Gold Project upon closure. This surety will be provided progressively over 5 years and was also provided for in Emerald’s ESIA.

Emerald also continued to progress the negotiation of a Mineral Investment Agreement (‘MIA’). Emerald is currently working to schedule the next Inter-Ministerial Committee meeting to be attended by various Cambodian Ministries and bodies that are instrumental in the material components of the MIA, including the Ministry of Mines and Energy, Ministry of Economy and Finance and Council for the Development of Cambodia. The MIA is an agreement Emerald has requested and is allowed under the Cambodian Law on Mineral Resources to provide long term certainty regarding the operation of the Okvau Gold Project and the fiscal regime. The MIA is not required for the lawful development and operation of the Okvau Gold Project.

Emerald continued to advance a number of other ancillary items during the Quarter in preparation for development/production.

Project Financing

The Company had been working with potential debt financiers with both technical and legal due diligence well advanced. Emerald is currently continuing with the due diligence process and assessing financing structures and providers which will provide optimal terms and flexibility. Emerald will provide shareholders with its proposed financing strategy in due course.

Development Work

In order to further de-risk the development of the Okvau Gold Project, Emerald has embarked on a 10,166m, 368 hole shallow (~25m) grade control program drilled on 10m by 10m spacing. The first phase of the program consisted of an initial 152 holes for a total of 4,672m and was completed in December 2017. The second phase commenced in July 2018 and consisted of 216 holes for 5,494m. Drilling was completed in September 2018 with assays results released subsequent to Quarter end. Results to date support the DFS Ore Reserve, particularly in respect to gold grade. For full results refer to ASX Announcement dated 3 and 24 October 2018. The cost of the program will represent an operating cost saving.

Okvau Gold Project | Resource Growth

The DFS only considered an open pit mining operation. The Okvau Deposit remains open with potential to define additional ounces from both shallow extensions along strike to the north-east. There is also potential at depth with high grade shoots providing longer term underground potential. High grade resources have been defined immediately below the floor of the final pit design.

Regional Exploration

Mekong Minerals Ltd | Joint Venture (Emerald Earning 70% Interest)

The Snoul and Phnom Khtong Projects cover 411km² of highly prospective tenure with historical drilling demonstrating significant gold discovery potential in close proximity to the Okvau Gold Project.

During the Quarter, an initial regional soils program was undertaken over several prospects within the Snoul Licence. The program was designed to follow up on historical drilling results which consisted of a total of 10 RC holes and 37 diamond holes and was targeted partly on a gold anomaly defined by shallow soil samples. Emerald undertook a 427 auger soil sampling program which confirmed the large gold in soil anomaly and results will assist with the planning of a proposed drill program to infill the significant historical drilling results. For full results refer to ASX Announcement dated 3 August 2018.

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Angkor Gold Corp. | Earn-In Agreement (Emerald Earning 80% Interest)

The Koan Nheak Project is a Joint Venture with Angkor Gold Corp (‘Angkor Gold’, TSX listed) whereby Emerald may earn up to an 80% interest. Emerald has previously undertaken initial reconnaissance field work within the Koan Nheak exploration licence focusing in and around the Peacock Prospect. No drilling has ever been undertaken within the exploration licence.

During the current Quarter, follow up soil sampling was undertaken at the Peacock Prospect. During the current program, additional auger soil samples have infilled the Peacock prospect to a 50m x 50m grid on the southern anomaly and 100m x 100m grid on the northern anomaly. To date, 596 Auger samples have been taken from the Peacock prospect. The follow up geochemical soil sampling program at the Peacock Prospect identified a second gold anomaly with the new discovery substantially increasing the target strike at the prospect. For full results refer to ASX Announcement dated 3 August 2018.

Other Tenure | New Grants and Applications

Emerald has completed the exploration EIA on its 100% owned Svay Chras Project covering 74.3km². The completion of this EIA allowed for Emerald to commence an initial regional soils program which was completed during the prior Quarter. A follow up infill soils program is currently being planned to commence during the upcoming dry season.

Emerald has submitted exploration licence applications in its own name over the Preak Khlong and O’Khtung Projects covering 392km². Emerald has completed IEIAs over these two projects and were completed to allow for the progression of the application process.

Corporate Activities

On 3 October 2018, the Company announced that Michael Evans had joined the Board as Executive Director. Mr. Evans was appointed Chief Operating Officer of the Company in May 2016 and has over 20 years experience in various mining and processing industries throughout Australia and Africa. Prior to joining the Company he spent 7 years with Regis Resources Ltd (ASX:RRL) firstly as Projects Manager and in April 2014 he was appointed as Chief Development Officer and was responsible for the construction of the processing plant at the Moolart Well, Garden Well and Rosemont gold mines. Before that, Mr Evans spent 10 years with Equigold NL where he was instrumental in the construction of the Bonikro processing plant in Cote D’Ivoire.

Mr Evans has developed a very strong understanding of the Okvau Project and will take responsibility for all design, development and construction activities for the Project.

Emerald’s consolidated cash and listed investment position at 30 September 2018 was approximately A$1.6 million, comprising A$1.3 million in cash plus A$0.3 million in listed investments. Expenditure during the Quarter mainly related to costs associated with further work for project licencing, due diligence costs for development financing and exploration programs undertaken to meet joint venture and earn-in commitments.

The Company holds 2,361,528 shares and 1,180,764 options (20 cents) in Riversgold Limited (‘Riversgold’; ASX:RGL). At the current Riversgold share price of 9.0 cents, Emerald’s holding has a value of approximately A$0.2 million.

During the Quarter, entities associated with certain Directors have provided unsecured loan facilities totalling up to A$3 million for an initial term of the lesser of completion of the Okvau Gold Project development financing and 12 months (‘Facility’). The Facility will be unsecured with an interest rate of 8.0% pa (6.5% plus RBA Cash Rate Target) capitalising quarterly. No other fees will be payable on the Facility. The Facility has been drawn by A$2 million at Quarter end.

About Cambodia

Cambodia is a constitutional monarchy with a constitution providing for elections every 5 years with last election recently held in July 2018. The population of Cambodia is approximately 16 million.

Cambodia has a relatively open trading regime and joined the World Trade Organisation in 2004. The government’s adherence to the global market, freedom from exchange controls and unrestricted capital movement makes Cambodia one of the most business friendly countries in the region.

The Cambodian Government has implemented a strategy to create an appropriate investment environment to attract foreign companies, particularly in the mining industry. Cambodia has a modern and transparent mining code and the government is supportive of foreign investment particularly in mining and exploration to help realise the value of its potential mineral value.

Detailed information on all aspects of Emeralds’ projects can be found on the Company’s website www.emeraldresources.com.au .

For further information please contact Emerald Resources NL Morgan Hart Managing Director

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Forward Looking Statement

This announcement contains certain forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company’s current expectations, estimates and projections about the industry in which Emerald Resources operates, and beliefs and assumptions regarding the Company’s future performance. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”’ “estimates”, “potential” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known or unknown risks, uncertainties and other factors, some of which are beyond the control of the Company, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, which reflect the view of Emerald Resources only as of the date of this announcement. The forward-looking statements made in this release relate only to events as of the date on which the statements are made. Emerald Resources will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

This announcement has been prepared in compliance with the current JORC Code 2012 Edition and the ASX listing Rules. All material assumptions on which the forecast financial information is based have been included in this announcement.

The Company believes that is has a reasonable basis for making the forward-looking statements in this announcement, including with respect to any production targets and financial estimates, based on the information contained in this announcement. All material assumptions underpinning the production target or the forecast financial information continue to apply and have not materially changed.

100% of the production target referred to in the 1 May 2017 announcement is based on Probable Ore Reserves.

Emerald has a highly experienced management team, undoubtedly one of the best credentialed gold development teams in Australia with a proven history of developing projects successfully, quickly and cost effectively. They are a team of highly competent mining engineers and geologists who have overseen the successful development of gold projects in developing countries such as the Bonikro Gold Project in Cote d’Ivoire for Equigold NL and more recently, Regis Resources Ltd.

The Company believes it has a reasonable basis to expect to be able to fund and develop the Okvau Gold Project for the reason set out above and in this announcement. However, there is no certainty that the Company can raise funding when required.

Competent Persons Statements

The information in this report that relates to Exploration and Grade Control Results is based on information compiled by Mr Keith King, who is an employee to the Company and who is a Member of The Australasian Institute of Mining & Metallurgy. Mr Keith King has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Keith King has reviewed the contents of this release and consents to the inclusion in this announcement of all technical statements based on his information in the form and context in which it appears.

The information in this report that relates to the Mineral Resources for the Okvau Gold Deposit was prepared by EGRM Consulting Pty Ltd, Mr Brett Gossage, who is a consultant to the Company, who is a Member of the Australasian Institute of Mining & Metallurgy (AIG), and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined by the 2012 edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Gossage has reviewed the contents of this news release and consents to the inclusion in this announcement of all technical statements based on his information in the form and context in which it appears.

Information in this announcement that relates to Ore Reserves for the Okvau Gold Deposit is based on, and fairly represents, information and supporting documentation prepared by Mr Glenn Williamson, an independent specialist mining consultant. Mr Williamson is a Fellow of the Australasian Institute of Mining & Metallurgy. Mr Williamson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person (or “CP”) as defined in the 2012 edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Williamson has reviewed the contents of this news release and consents to the inclusion in this announcement of all technical statements based on his information in the form and context in which it appears.

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Appendix One| Tenements

Mining and exploration tenements held at the end of September 2018 Quarter

	Project	Location	Tenement	Interest at 30 September 2018
	Okvau	Cambodia	Okvau Industrial Mining Licence	100%
	Okvau	Cambodia	Okvau Exploration LicenceA	100%A
	O’Chhung	Cambodia	O’Chhung Exploration LicenceA	100%A
	Svay Chras	Cambodia	Svay Chras Exploration Licence	100%

A Emerald Resources NL has been granted exclusive rights to apply for exploration rights.

Mining and exploration tenements and licenses acquired and disposed during the September 2018 quarter

	Project Location Tenement Interest at beginning of quarter Interest at end of quarter
	Tenements Disposed
	Nil
	Tenements Acquired
	Okvau Cambodia Okvau Industrial Mining Licence 0% 100%

Beneficial percentage interests in joint venture and earn-in agreements at the end of the September 2018 quarter

	Project	Location	Tenement	Interest at end of quarter
	Koan Nheak	Cambodia	Koan Nheak Exploration Licence	0%B
	Phnom Khtong	Cambodia	Phnom Khtong Exploration Licence	0%C
	Snoul	Cambodia	Snoul Exploration Licence	0%C

B Emerald Resources NL is earning up to an 80% interest from Angkor Gold Corp.

C Emerald Resources NL is earning up to a 70% interest from Mekong Minerals.

Beneficial percentage interests in joint venture and earn-in agreements acquired or disposed of during the September 2018 quarter

	Project Location Tenement Interest at beginning of quarter Interest at end of quarter
	Joint Venture Interests Disposed
	Nil
	Joint Venture Interests Acquired
	Nil

Interests in royalties

The Company has a 5% overriding royalty interest in all gas production from various oil and gas interests located in Magoffin County, Kentucky. During the Quarter, there was no product recovered and sold from the Leases and the royalty received for the period was Nil.

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