FREEHILL MINING LIMITED. - Capital/Financing Update 2017

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19 December 2017

Company Announcements Office Australia Securities Exchange

CLEANSING NOTICE issued under section 708(12C)(e) of the Corporations Act 2001 (Cth) (as inserted by ASIC Corporations (Sale Offers: Securities Issued On Conversion of Convertible Notes) Instrument 2017/82)

1. INTRODUCTION

This Cleansing Notice has been prepared by Freehill Mining Limited (ACN 091 608 025) ( Company ) for the purposes of section 708A(12C)(e) of the Corporations Act 2001 (Cth) (Corporations Act) (as inserted by ASIC Corporations (Sale Offers: Securities Issued On Conversion of Convertible Notes) Instrument 2017/82). Issuing this Cleansing Notice enables the fully paid ordinary shares in the capital of the Company (Shares) issued on the conversion of the convertible notes issued by the Company on the terms described below to be on-sold to retail investors without further disclosure.

This Cleansing Notice is important and should be read in its entirety.

2. BACKGROUND AND CONTENTS OF CLEANSING NOTICE

2.1 Yaniv Convertible Notes

The Company wishes to inform the market that it has entered into an agreement with Yaniv Equity LP ( Yaniv Equity ) to raise a total of up to $US2 million by the offer ( Yaniv Offer ) of a total of 2,225,000 convertible notes ( Yaniv Convertible Notes ). The Yaniv Offer involves an offer of 849,375 convertible notes in the First Tranche and up to 1,381,250 in the Second Tranche. This Notice is only related to the First Tranche of Yaniv Convertible Notes which have been issued by the Company on 19 December 2017. The Second Tranche of the Yaniv Offer is conditional on the Company obtaining several shareholder approvals, and the Company may elect to reduce the second tranche payment, and the number of convertible notes issued commensurately.

Yaniv Equity is a sophisticated investor for the purposes of section 708 of the Corporations Act.

The terms of the Yaniv Convertible Notes are set out in a convertible securities agreement ( Yaniv Agreement ) executed by the Company in favour of Yaniv Equity and are summarised in Annexure A.

The Yaniv Convertible Notes are for the principal or nominal amount $1.00 per note which is paid for in full by Yaniv Equity on application and have a maturity date of 1 year from the relevant purchase date ( Yaniv Maturity Date ). The Company must pay interest on the amount outstanding in respect of First Tranche at a rate of 12.5% per annum, which interest will:

(a) until the Yaniv Maturity Date, be fixed at 12.5% of the aggregate face value of those Yaniv Convertible Notes, which will accrue and be capitalised on the date of the First Tranche; and
(b) on and after the Yaniv Maturity Date, accrue daily and shall be capitalised and compounded monthly, from the Yaniv Maturity Date until the Company discharges the amount outstanding in full.

2.2 Series 1 Convertible Notes

The Company also offered investors the opportunity to enter into a Convertible Note Subscription Agreement with the Company to raise a total of $AUD1,445,000 ( Series 1 Offer ) for the offer of convertible notes ( Series 1 Convertible Notes ). A total number of 578 Series 1 Convertible Notes have been issued by the Company on 19 December 2017.

The Series 1 Offer was made to investors who are sophisticated, experienced or professional investors for the purposes of section 708 of the Corporations Act.

The terms of the Series 1 Convertible Notes are set out in various convertible note subscription agreements ( Series 1 Agreements ) executed by the Company and subscribing noteholders ( Noteholders ), and are summarised in Annexure B.

The Series 1 Convertible Notes are for the principal of $2,500 per note. The Series 1 Convertible Notes bear interest at the rate of 12% per annum and have a maturity date on the first anniversary of the execution of the Series 1 Agreement ( Series 1 Maturity Date ).

2.3 The rationale for the convertible note raising under the Yaniv Offer and the Series 1 Offer

The Company’s directors ( Directors ) consider that the raising of capital by the issue of the Yaniv Convertible Notes and the Series 1 Convertible Notes is in the best interests of the Company as it will secure, on acceptable terms, funding that is likely to be required by the Company for the continued development and growth of its business.

In particular, the Company intends to use the proceeds from the issue of the Convertible Notes:

(a) to make improvements in its crushing capacity;
(b) to undertake drilling programs; and
(c) to provide for its general working capital purpose.

This Cleansing Notice sets out the following:

(a) in relation to the Offer:
1) the effect of the issue on the Company;
2) a summary of the rights and liabilities attaching to the Yaniv Convertible Notes (with respect to the First Tranche);
3) a summary of the rights and liabilities attaching to the Series 1 Convertible Notes;
4) a summary of the rights and liabilities attaching to the Shares that will be issued on conversion of the Yaniv Convertible Notes and the Series 1 Convertible Notes; and
(b) any information that:
1) has been excluded from continuous disclosure notice in accordance with the ASX Listing Rules;
2) is information that investors and their professional advisors would reasonably require for the purpose of making an informed assessment of:
- A. the assets and liabilities, financial position and performance, profits and losses and prospects of the Company; and
- B. the rights and liabilities attaching to the Shares; and
3) any other information relating to the Company’s status as a disclosing entity and where documents may be obtained.

3. THE EFFECT OF THE OFFER ON THE CAPITAL STRUCTURE OF THE COMPANY

3.1 Effect of the issue on the Company

The principal effects of the issue of the Convertible Notes on the Company will be to:

(a) increase the Company’s cash reserves by approximately $US755,000 million upon the issue of the Yaniv Convertible Notes (before any expenses associated with the issue of the Yaniv Convertible Notes) under the First Tranche;
(b) increase the Company’s cash reserves by approximately $AUD1,445,000 upon the issue of the Series 1 Convertible Notes (before any expenses associated with the issue of the Series 1 Convertible Notes);
(c) give rise to the Company having liability for the amount of the face value of the Yaniv Convertible Notes and the Series 1 Convertible Notes ( Redemption Amount ); and
(d) if the Yaniv Convertible Notes or the Series 1 Convertible Notes are converted, either in whole or in part, increase the number of Shares on issue as a consequence of the issue of Shares on conversion of the Convertible Notes ( Conversion Shares ).

3.2 Pro forma balance sheet of the Company taking into account issue of the Convertible Security

(a) Set out below is a pro forma consolidated Statement of Financial Position as at 30 June 2017 for the Company based on the consolidated Statement of Financial Position as at 30 June 2017 for the Company.
(b) The pro forma financial information is presented in an abbreviated form in so far as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial statements. The pro forma financial information is not audited. The classification of the allocations between debt and equity for the Convertible Notes may change in the future.

Pro Forma Statement of Financial Position as at 30 June 2017

Assets Current assets Cash and cash equivalents Trade and other receivables Other Total current assets Non-current assets Investments accounted for using the equity method Mining Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Total current liabilities Non-current liabilities	Convertible Actual Notes Pro Forma 30-Jun-17 Issued 31-Dec-17 40,684 2,277,305 2,317,989 492,521 492,521 11,219 11,219
	544,424 2,277,305 2,821,729
	- - - 7,384,963 - 7,384,963
	7,384,963 - 7,384,963

	7,929,387 2,277,305 10,206,692
	880,974 - 880,974 1,286,648 2,277,305 3,563,953
	2,167,622 2,277,305 4,444,927

Borrowings Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity	- - -
	- - -

	2167622 2277305 4444927
	5,761,765 - 5,761,765
	10,280,380 - 10,280,380 -125,353 - -125,353 -4,393,262 - -4,393,262
	5,761,765 5,761,765

Notes

US$755,000 was converted at a USD/AUD exchange rate of 0.7686
Proceeds have been adjusted for estimated transaction costs of $150,000.

3.3 Potential effect on Share Structure

(a) As at the date of this Cleansing Notice the issued capital of the Company comprises of 349,378,673 issued ordinary shares.
(b) The Company has issued 849,375 Yaniv Convertible Notes ( First Tranche ) at $1.00 per Convertible Note in order for the Company to raise a total amount $US755,000.
(c) The Company has issued 578 Series 1 Convertible Notes at $2,500 per Series 1 Convertible Note and has raised a total amount of $AUD 1,445,000.
(d) The capital structure of the Company will be affected by the conversion of the Yaniv Convertible Notes by Yaniv Equity which will result in additional Shares being issued and the liability position of the Company decreasing

accordingly.

(e) The capital structure of the Company will be affected by the conversion of the Series 1 Convertible Notes by the Noteholders which will result in additional Shares being issued and the liability position of the Company decreasing accordingly.
(f) The number of Shares issued under the Yaniv Convertible Notes will be calculated by dividing the amount elected to be converted by the lesser of:
i. $0.095; and
ii. The lowest trading price during the 15 trading days immediately prior to the Conversion Notice Date, as report by ASX excluding any trades made by Yaniv or any of its affiliates ( Yaniv Conversion Price ) up to the Company’s maximum placement capacity of 15,935,952 shares. The Company has agreed to seek shareholder approval for the maximum number of shares to be issued on conversion to be 27,887,915.

The actual effect on the Share capital of the Company will differ depending on how many Yaniv Convertible Notes are converted and the actual Yaniv Conversion Price as at the time of the conversion.

(g) The number of Shares issued under the Series 1 Convertible Notes will be calculated by dividing the amount elected to be converted by $0.095 ( Series 1 Conversion Price ). The maximum number of Shares that would be issued if the Noteholders convert the maximum number of Series 1 Convertible Notes is approximately 17,035,789.
(h) In consideration for the First Tranche, subject to shareholder approval, the Company will issue to the note subscriber options exercisable for ordinary shares in the Company at $0.1425 per share. The number of options issued will be determined by dividing 25% of the amount equivalent to (the purchase price of the notes x 1.125), converted into Australian Dollars at the exchange rate on the trading day immediately prior to the date of issue of the options, by the option exercise price. The options will have an expiry date which is 5 years from the date of their issue.
(i) In consideration for the Series 1 Noteholders entering into Series 1 Agreements, a total of 7,475,000 shares will be issued to the Series 1 Noteholders and Aegis Investment Capital Pty Ltd as a promoter as establishment fee.
(j) The Yaniv Convertible Notes can be converted at any time prior to the Yaniv Maturity Date at the request of the Yaniv Equity.
(k) The Series 1 Convertible Notes can be converted at any time prior to the Series 1 Maturity Date at the request of the Noteholder.

4. RIGHTS AND LIABILITIES ATTACHING TO THE CONVERTIBLE NOTES

A summary of the key terms of the Yaniv Convertible Notes are set out at Annexure A. A summary of the key terms of the Series 1 Convertible Notes are set out at Annexure B.

5. RIGHTS AND LIABILITIES ATTACHING TO SHARES ISSUED ON CONVERSION OF THE CONVERTIBLE SECURITY

The Shares to be issued to Yaniv Equity and the Noteholders on the conversion of the Yaniv Convertible Notes and the Series 1 Convertible Notes will rank equally in all respects with all of the Company’s existing Shares. The rights attaching to Shares, including the new Shares to be issued to Yaniv Equity and the Noteholders on the conversion of the Yaniv Convertible Notes and the Series 1 Convertible Notes, are set out in the Company’s constitution ( Constitution ) and, in certain circumstances, regulated by the Corporations Act, the ASX Listing Rules and the general law.

Full details of the rights and liabilities attaching to Shares are set out in the Constitution, a copy of which can be inspected, free of charge, at the Company’s registered office during normal business hours.

The following is a general description of the more significant rights and liabilities attaching to the Shares. This summary is not exhaustive. Full details of provisions relating to rights attaching to the Shares are contained in the Company’s Constitution, a copy of which is available for inspection at the Company’s registered office during normal business hours, and in certain circumstances, regulated by the Corporations Act, Listing Rules and the general law.

Voting Rights

Subject to any special rights or restrictions (at present there are none), at any meeting each member present in person or by proxy has one vote on a show of hands, and on a poll has one vote for each share held.

Dividend Rights

Subject to any special rights (at present there are none), any dividends that may be declared by the Company are payable on all Shares in proportion to the amount paid up.

Variation of Rights

The rights attaching to the Shares may only be varied by the consent in writing of the holders of three-quarters of the Shares, or with the sanction of a special resolution passed at a general meeting.

Transfer of Shares

Subject to the Company’s Constitution, the Corporations Act or any other applicable laws of Australia and the Listing Rules, the Shares are freely transferable. The Directors may refuse to register a transfer of Shares only in limited circumstances, such as where the

Company has a lien on those Shares.

General Meetings

Each shareholder is entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive all notices, accounts and other documents required to be furnished to shareholders under the Company’s Constitution, the Corporations Act and the Listing Rules.

Rights on Winding Up

If the Company is wound up, the liquidator may, with the sanction of a special resolution;

divide among the shareholders the whole or any part of the Company’s property; and
decide how the division is to be carried out between the shareholders.

6. THE COMPANY IS A “DISCLOSING ENTITY”

The Company is a “disclosing entity” under the Corporations Act and, accordingly, is subject to regular reporting and disclosure obligations under both the Corporations Act and the ASX Listing Rules.

These obligations require the Company to notify ASX of information about specific events and matters as they arise. In particular, the Company has an obligation under ASX Listing Rule 3.1 and section 674 of the Corporations Act (subject to certain limited exceptions) to notify the ASX immediately once it is or becomes aware of information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Shares.

The Company is also required to prepare and lodge with ASIC yearly and half-yearly financial statements accompanied by a Directors’ statement and report, and an audit report or review. Copies of documents lodged with ASIC in relation to the Company may be obtained from, or inspected at, an ASIC office.

7. COPIES OF DOCUMENTS

The Company will provide a copy of each of the following documents, free of charge, to any person on request:

(a) the annual financial report most recently lodged by the Company with ASIC, being the financial report of the Company for the year ended 30 June 2017 (2017 Financial Report);
(b) any half-year financial report lodged by the Company with ASIC after the lodgement of the 2017 Financial Report and before the lodgement of this Cleansing Notice with ASX; and
(c) any continuous disclosure documents given by the Company to ASX after the lodgement of the 2017 Financial Report and before the lodgement of this Cleansing Notice with ASX.

A list of the continuous disclosure documents given by the Company to ASX after the lodgement of the 2017 Financial Report and before the lodgement of this Cleansing Notice with ASX is set out in the table below.

Date	Announcement
19/12/2017	Appendix 3B
18/12/2017	Operations and Capital RaisingUpdate
23/11/2017	Results of Meeting
23/11/2017	COO's Presentation to Shareholders
23/11/2017	Chairman's Address to Shareholders
8/11/2017	Appendix 3B New Shares and CleansingNotice
31/10/2017	Appendix 5B
31/10/2017	QuarterlyReport September 2017
23/10/2017	Notice of 2017 Annual General Meeting/ProxyForm
19/10/2017	Operational Update
11/10/2017	Appendix 3B New Shares and CleansingNotice
6/10/2017	Notice of Reinstatement to OfficialQuotation
6/10/2017	Appendix 4G - Corporate Governance Council Principles and Recommendations
6/10/2017	Corporate Governance Statement
6/10/2017	2017 Annual Report to Shareholders

8. INFORMATION EXCLUDED FROM THE CONTINUOUS DISCLOSURE NOTICE

As at the date of this Cleansing Notice, the Company advises that it has fully complied with its disclosure obligations under the ASX Listing Rules and the Corporations Act, and, in particular, there is no information which the Company has excluded from any of its continuous disclosure notices given in accordance with the ASX Listing Rules and the Corporations Act as at the date of this Cleansing Notice which it would be reasonable for investors and their professional advisors to require for the purpose of making an informed assessment of:

(a) the assets and liabilities, financial position and performance, profits and losses and prospects of the Company; and
(b) the rights and liabilities attaching to the Convertible Notes and Shares.

Yours faithfully