HAMMER METALS LIMITED — Capital/Financing Update 2016

May 24, 2016

ASX Announcement (ASX: HMX)

25[th] May 2016

Mount Isa Exploration Update Drilling to Commence at Millennium and Scalper

Hammer Metals Limited (ASX: HMX) (“Hammer” or “the Company”) wishes to update shareholders on the Company’s activities.

• Drilling scheduled to commence in late June at Hammer’s 100%-owned Millennium and Scalper prospects after hole positions are finalised and heritage clearances obtained;

• Upcoming RC drilling program at the recently purchased Millennium copper-cobalt-gold prospect;

• Drilling at Millennium is designed to follow up recent high grade cobalt and copper intersections with the objective of outlining a JORC standard resource;

• Data review indicates less than 50% of the 3km strike length of the copper-cobalt anomalous zone at Millennium has been tested by drilling;

• Hammertime and Kalman South drill planning works currently being undertaken;

• Field programs under the Farm-in and Joint Venture Agreement with Newmont to complete data acquisition and progress the copper-gold targets to the drilling stage are well under way.

As announced to the ASX on 4[th] May 2016 Hammer acquired five granted mining leases over the Millennium copper-cobalt-gold project near Cloncurry. The acquisition secures a prospective high-grade cobalt-coppergold target that complements Hammer’s existing tenement portfolio in the region.

The Millennium leases are situated on the northern projection of the Pilgrim Fault, approximately 50km north of the Company’s Kalman deposit and 16km west of the Rocklands copper-cobalt mine. Previous drilling indicates the potential for significant copper-cobalt-gold mineralisation in the area of the historical workings including previous drill intersections of up to 19m at 1.27% Cu, 0.38% Co and 0.7g/t Au which would equate to 18m at 4% CuEq.(Refer to the CYU ASX release dated 4/12/2013 and the attached figures for details.) _(CuEq % = Cu % + 5.161702Co % + 0.868754Au ppm.)_

Data compilation and drill hole planning are nearing completion with a preliminary program of approximately 2000m allocated to further test the higher grade sections of the lode, as well as provide an initial drill test of the extensive and as yet untested copper-cobalt soil anomaly to the north. Depending on the results of this program it is anticipated that a further program of resource definition drilling will follow.

At Scalper, a program of geological mapping and sampling, gravity and ground magnetics has outlined zones of magnetic “red-rock” altered and brecciated material coincident with the geophysical anomalies and adjacent to Hammer’s previous drill intersection of 58m at 0.58% Cu and 0.13g/t Au including 12m @ 1.9% Cu and 0.13g/t Au in SCRC001. Scalper has similarities to the Overlander IOCG target where shear-related copper mineralisation occurs marginal to strong magnetic and gravity features. Drilling is planned to test for extensions to the mineralised zone in SCRC001 and also to provide an initial test of the adjacent gravity/magnetic target (Refer to the attached figures and to ASX release 19 November, 2014).

At Hammertime additional geological mapping and processing of geophysical data is being undertaken prior to finalising the drilling program for this prospect. The Kalman South high grade shoot is currently being evaluated for a step out drilling program.

Field programs are continuing under the Farm-in and Joint Venture Agreement with Newmont in order to complete data acquisition and progress the copper-gold targets to the drilling stage.

1

- ENDS -

For further information, please contact:

Alex Hewlett Executive Director info@hammermetals.com.au

Russell Davis Executive Chairman +61 (0)419195087

==> picture [463 x 65] intentionally omitted <==

Competent Person’s Statement

The information in this report as it relates to exploration results and geology was compiled by Mr. Mark Whittle, who is a Member of the AusIMM and a consultant to the Company. Mr. Mark Whittle 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 as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr. Whittle consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

2

==> picture [459 x 496] intentionally omitted <==

Mount Isa Project Area

3

==> picture [399 x 604] intentionally omitted <==

Millennium - Significant Intersections

4

==> picture [387 x 561] intentionally omitted <==

Millennium Cross Section 7722800mN

5

==> picture [387 x 559] intentionally omitted <==

Millennium Cross Section 7723600mN

6

==> picture [423 x 624] intentionally omitted <==

Scalper Plan

7

==> picture [459 x 419] intentionally omitted <==

Scalper Cross Section showing magnetic and gravity modelling

8

JORC Code, 2012 Edition

Table 1 report – RC Drilling Scheduled

The attached release informs the market that it is the intention of Hammer Metals to begin drilling on its two of its prospects during June. With Scalper, in addition to recent geophysical inversions of magnetics and gravity data, the information presented shows drill data which has been previously released (ASX:HMX – 19 November 2014).

With Millennium, the information presented draws on data which has been previously released by Chinalco Yunnan Copper Resources Limited (ASX:CYU - 24 October 2014 and 4 December 2013). The drilling was conducted in the fourth quarter of 2013.

Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections in this information release.)

Criteria	JORC Code explanation	Commentary	Commentary
Sampling	 Nature and quality of sampling (eg cut		Geophysical data pertaining to recent
techniques	channels, random chips, or specific		gravity and magnetic data processing
	specialised industry standard		is presented in this release. The
	measurement tools appropriate to the		modelling builds on the acquisition of
	minerals under investigation, such as		gravity and magnetics data which was
	down hole gamma sondes, or		completed during March 2016.
	handheld XRF instruments, etc).
	These examples should not be taken		The ground gravity survey was
	as limiting the broad meaning of		conducted on 100 metre centres to
	sampling.		enable depth modelling. The gravity
	 Include reference to measures taken		was undertaken by Haines Surveys
	to ensure sample representivity and		Pty Ltd utilising a Scintrex CG-5
	the appropriate calibration of any		Autograv Gravity meter which has an
	measurement tools or systems used.		accuracy of 0.01 mgal.
	 Aspects of the determination of
	mineralisation that are Material to the		Locations were captured using a GPS
	Public Report.		RTK system which after AUSPOS
	 In cases where ‘industry standard’		processing provided control to +-5cm.
	work has been done this would be
	relatively simple (eg ‘reverse		The Magnetics modelling data was
	circulation drilling was used to obtain 1		sourced by a survey conducted by
	m samples from which 3 kg was		Fugro Airborne Surveys using a
	pulverised to produce a 30 g charge		Diamond DA-42 aircraft, housing a
	for fire assay’). In other cases more		Scintrex CS-3 caesium vapour
	explanation may be required, such as		magnetometer. Horizontal locational
	where there is coarse gold that has		accuracy of 1-2cm was achieved
	inherent sampling problems. Unusual		using GPS post processing. Vertical
	commodities or mineralisation types		accuracy of <5m was achieved using
	(eg submarine nodules) may warrant		a radar altimeter. Data was collected
	disclosure of detailed information.		at 7m spacing along lines spaced
			50m apart.
Drilling	 Drill type (eg core, reverse circulation,		For Millennium, the drilling method
techniques	open-hole hammer, rotary air blast,		was reverse circulation utilising a face
	auger, Bangka, sonic, etc) and details		samplingbit. Schramm 610 with

9

Criteria	JORC Code explanation	Commentary
	(eg core diameter, triple or standard	100cjm @450psi air.
	tube, depth of diamond tails, face-	For Scalper drilling see ASX:HMX, 19
	sampling bit or other type, whether	November 2014
	core is oriented and if so, by what
	_method, etc). _
Drill	 Method of recording and assessing	For Scalper drilling see ASX:HMX, 19
sample	core and chip sample recoveries and	November 2014
recovery	results assessed.	For Millennium drilling see ASX:CYU,
	 Measures taken to maximise sample	4 December 2013
	recovery and ensure representative
	nature of the samples.
	 Whether a relationship exists between
	sample recovery and grade and
	whether sample bias may have
	occurred due to preferential loss/gain
	of fine/coarse material.
Logging	 Whether core and chip samples have	For Scalper drilling see ASX:HMX, 19
	been geologically and geotechnically	November 2014
	logged to a level of detail to support	For Millennium drilling see ASX:CYU,
	appropriate Mineral Resource	4 December 2013
	estimation, mining studies and
	metallurgical studies.
	 Whether logging is qualitative or
	quantitative in nature. Core (or
	costean, channel, etc) photography.
	 The total length and percentage of the
	relevant intersections logged.
Sub-	 If core, whether cut or sawn and	For Scalper drilling see ASX:HMX, 19
sampling	whether quarter, half or all core taken.	November 2014
techniques	 If non-core, whether riffled, tube	For Millennium drilling see ASX:CYU,
and	sampled, rotary split, etc and whether	4 December 2013
sample	sampled wet or dry.
preparation	 For all sample types, the nature,
	quality and appropriateness of the
	sample preparation technique.
	 Quality control procedures adopted for
	all sub-sampling stages to maximise
	representivity of samples.
	 Measures taken to ensure that the
	sampling is representative of the in situ
	material collected, including for
	instance results for field
	duplicate/second-half sampling.
	 Whether sample sizes are appropriate
	to the grain size of the material being
	sampled.
Quality of	 The nature, quality and	For Scalper drilling see ASX:HMX, 19
assay data	appropriateness of the assaying and	November 2014
and	laboratory procedures used and	For Millennium drilling see ASX:CYU,
laboratory	whether the technique is considered	4 December 2013
tests	partial or total.
	 For geophysical tools, spectrometers,	At Scalper, the gravity was
	handheld XRF instruments, etc, the	undertaken byHaines Surveys Pty

10

Criteria	JORC Code explanation	Commentary
	parameters used in determining the	Ltd utilising a Scintrex CG-5 Autograv
	analysis including instrument make	Gravity meter which has an accuracy
	and model, reading times, calibrations	of 0.01 mgal. Locations were
	factors applied and their derivation,	captured using a GPS RTK system
	etc.	and post processed to achieve 5cm
	 Nature of quality control procedures	vertical and horizontal accuracy.
	adopted (eg standards, blanks,	Control points in the areas surveyed
	duplicates, external laboratory checks)	were established from existing trig
	and whether acceptable levels of	stations and benchmarks. Where this
	accuracy (ie lack of bias) and precision	was not possible the Geoscience
	have been established.	Australia AUSPOS processing facility
		was used for control. Gravity control
		was established relative to local
		control stations. Haines Surveys
		conducted repeat readings at a
		minimum frequency of 3%.
Verification of	 The verification of significant intersections by either independent or	 For Scalper drilling see ASX:HMX, 19 November 2014. For Millennium
sampling and	alternative company personnel.  The use of twinned holes.	drilling see ASX:CYU, 4 December 2013. No twinned holes have been
assaying	 Documentation of primary data, data	conducted.
	entry procedures, data verification,
	data storage (physical and electronic)
	protocols.  Discuss any adjustment to assay data.	 Scalper Gravity: All readings were transferred to Haines personnel on a
		daily basis for review. The data was
		also transferred to Southern
		Geoscience Consultants and Hammer
		Metals for further examination and
		verification.
Location of	 Accuracy and quality of surveys used	For Scalper drilling see ASX:HMX, 19
data points	to locate drill holes (collar and down-	November 2014
	hole surveys), trenches, mine workings	For Millennium drilling see ASX:CYU,
	and other locations used in Mineral	4 December 2013
	Resource estimation.	Gravity Station locations were
	 Specification of the grid system used.	captured using a GPS RTK system
	 Quality and adequacy of topographic	and post processed to achieve 5cm
	control.	vertical and horizontal accuracy.
Data	 Data spacing for reporting of	The ground gravity survey was
spacing	Exploration Results.	conducted on 100 metre station
and	 Whether the data spacing and	spacing.
distribution	distribution is sufficient to establish the	The ground magnetic data was
	degree of geological and grade	collected at 1 second intervals along
	continuity appropriate for the Mineral	100m spaced lines.
	Resource and Ore Reserve estimation	The geophysical data density is
	procedure(s) and classifications	considered appropriate to the target
	applied.	type being sought.
	 Whether sample compositing has been
	applied.

11

Criteria	JORC Code explanation	Commentary
Orientation	 Whether the orientation of sampling	For Scalper drilling see ASX:HMX, 19
of data in	achieves unbiased sampling of	November 2014
relation to	possible structures and the extent to	For Millennium drilling see ASX:CYU,
geological	which this is known, considering the	4 December 2013
structure	deposit type.	The magnetic line direction and gravity
	 If the relationship between the drilling	station layout was oriented
	orientation and the orientation of key	perpendicular to major structural
	mineralised structures is considered to	features.
	have introduced a sampling bias, this
	should be assessed and reported if
	material.
Sample	 The measures taken to ensure sample	For Scalper drilling see ASX:HMX, 19
security	security.	November 2014
		For Millennium drilling see ASX:CYU,
		4 December 2013
		Gravity data was transferred daily to
		Haines Surveys and then onto
		Southern Geoscience for independent
		review. Data was also transferred daily
		to Hammer personnel for digital
		storage.
Audits or	 The results of any audits or reviews of	For Scalper drilling see ASX:HMX, 19
reviews	sampling techniques and data.	November 2014
		For Millennium drilling see ASX:CYU,
		4 December 2013
		As mentioned above as gravity data
		was collected, daily data review was
		conducted by Southern Geoscience
		Consultants for independent review
		during the execution of the program.

Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

Criteria	JORC Code explanation	Commentary
Mineral	 Type, reference name/number,	For Scalper, the survey was
tenement and	location and ownership including	conducted over EPM25486.
land tenure	agreements or material issues with	For Millennium the work was
status	third parties such as joint ventures,	conducted over ML’s 2512, 7506,
	partnerships, overriding royalties,	7507, 2761 and 2762.
	native title interests, historical sites,	All tenements are in good standing
	wilderness or national park and	with the Qld DME
	environmental settings.
	 The security of the tenure held at the
	time of reporting along with any
	known impediments to obtaining a
	licence to operate in the area.
Exploration	 Acknowledgment and appraisal of	At Scalper little or no work was
done by other	exploration by other parties.	conducted by previous parties.
parties		At Millennium, the work conducted by

12

Criteria	JORC Code explanation	Commentary	Commentary	Commentary
			CYU was designed to test work
			conducted during the 1970’s and
			early 1980’s.
Geology	 Deposit type, geological setting and		The Millennium mineralisation occurs
	style of mineralisation.		in close proximity to the regional
			scale Pilgrim and Fountain Range
			Faults. The fault zone is a major
			crustal feature in the Mount Isa Inlier
			separating the Wonga and Quamby-
			Malbon sub-provinces. Other
			deposits in comparable locations are
			the HMX Kalman Cu-Au-Mo-Re
			Deposit.
			Scalper occurs close to the eastern
			margin of the Overlander Granite in
			altered Corella Formation sediments.
			The Scalper mineralisation shares
			many features with the HMX
			Overlander Deposit.
Drill hole	 A summary of all information material		For Scalper drilling see ASX:HMX, 19
Information	to the understanding of the		November 2014
	exploration results including a		For Millennium drilling see ASX:CYU,
	tabulation of the following information		4 December 2013
	for all Material drill holes:
	o easting and northing of the drill
	hole collar
	o elevation or RL (Reduced Level –
	elevation above sea level in
	metres) of the drill hole collar
	o dip and azimuth of the hole
	o down hole length and interception
	depth
	o hole length.
	 If the exclusion of this information is
	justified on the basis that the
	information is not Material and this
	exclusion does not detract from the
	understanding of the report, the
	Competent Person should clearly
	explain why this is the case.
Data	 In reporting Exploration Results,		For Scalper drilling see ASX:HMX, 19
aggregation	weighting averaging techniques,		November 2014
methods	maximum and/or minimum grade		For Millennium drilling, Hammer
	truncations (eg cutting of high		Metals has utilised Copper Equivalent
	grades) and cut-off grades are		data compositing.
	usually Material and should be		The copper equivalence calculation
	stated.		is:	Cu_Eq = Cu % + (Co % x 5.161702)
	 Where aggregate intercepts		+ (Au ppm x 0.868754)
	incorporate short lengths of high		The prices employed in the
	grade results and longer lengths of		calculation are in $US - Au $1270/oz,
	low grade results, the procedure used		Cu	$4700/t, Co $24260/t
	for such aggregation should be stated
	and some typical examples of such

13

Criteria	JORC Code explanation	Commentary	Commentary
	aggregations should be shown in
	detail.
	 The assumptions used for any
	reporting of metal equivalent values
	should be clearly stated.
Relationship	 These relationships are particularly		For Geophysical modelling – Not
between	important in the reporting of		Applicable.
mineralisation	Exploration Results.		For Scalper – The true width is 45%
widths and	 If the geometry of the mineralisation		of intersected length. However, it
intercept	with respect to the drill hole angle is		must be noted that the prospect has
lengths	known, its nature should be reported.		insufficient drilling density to
	 If it is not known and only the down		characterise the mineralisation.
	hole lengths are reported, there		For Millennium – The true width is
	should be a clear statement to this		75% of the intersected length.
	effect (eg ‘down hole length, true
	_width not known’). _
Diagrams	 Appropriate maps and sections (with		See attached figures
	scales) and tabulations of intercepts
	should be included for any significant
	discovery being reported These
	should include, but not be limited to a
	plan view of drill hole collar locations
	and appropriate sectional views.
Balanced	 Where comprehensive reporting of all		At Scalper only one hole has been
reporting	Exploration Results is not practicable,		drilled into the prospect and this has
	representative reporting of both low		been reported to the market on 19
	and high grades and/or widths should		November 2014.
	be practiced to avoid misleading		At Millennium all holes were reported
	reporting of Exploration Results.		by CYU on 4 December 2013.
Other	 Other exploration data, if meaningful		Refer to the release.
substantive	and material, should be reported
exploration	including (but not limited to):
data	geological observations; geophysical
	survey results; geochemical survey
	results; bulk samples – size and
	method of treatment; metallurgical
	test results; bulk density,
	groundwater, geotechnical and rock
	characteristics; potential deleterious
	or contaminating substances.
Further work	 The nature and scale of planned		These areas will be drilled during the
	further work (eg tests for lateral		second quarter of 2016.
	extensions or depth extensions or
	large-scale step-out drilling).
	 Diagrams clearly highlighting the
	areas of possible extensions,
	including the main geological
	interpretations and future drilling
	areas, provided this information is not
	commercially sensitive.

14