HILLGROVE RESOURCES LIMITED — AGM Information 2012

Jun 27, 2012

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Thursday, 28 June 2012

CHAIRMAN’S ADDRESS TO AGM

Please find following the Chairman’s Address made at the Annual General Meeting of Hillgrove Resources Limited (ASX:HGO) at the Radisson Hotel in Sydney today.

For more information contact:

Drew Simonsen Managing Director Tel: +61 (0)2 8247 9300

Russell Middleton Company Secretary Tel: +61 (0)2 8247 9300

ABOUT HILLGROVE

Hillgrove is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) focused on the operation of the Kanmantoo Copper Mine in South Australia, and exploration on its Indonesian tenements, where the Company is targeting the discovery of world class epithermal gold and porphyry copper/gold.

The Kanmantoo Copper Mine is located less than 55km from Adelaide in South Australia. With construction now completed, Kanmantoo is an open-cut mine, and ramping up to an initial throughput of 2.4Mt per annum in 2012, to produce approximately 80,000 tonnes of concentrate per annum.

Global Mineral Resource (March 2012)

	JORC	Tonnage	Cu	Au	Ag	Bi	Cu Metal
	Classification	(Mt)	(%)	(g/t)	(g/t)	(g/t)	(kt)
In Situ	Measured	4.2	0.85	0.13	2.26	173	35.3
Resource	Indicated	20.5	0.87	0.16	2.34	129	178.3
	Inferred	6.5	0.66	0.15	1.73	114	43.0
Long Term	Measured	1.1	0.46	N/A	N/A	N/A	5.0
Stockpiles	Indicated	0.5	0.18	N/A	N/A	N/A	0.9
	Total	32.8	0.80	0.15	2.20	132	262.6

Note: The estimation of Bi is based on limited sampling data. Bi is recognised as a potential penalty element at Kanmantoo.

As at end of March 2012; 2012 In Situ Resource > 0.25% Cu; Long Term Stockpiles > 0.15% Cu. Au, Ag & Bi assays not available.

Ore Reserve (April 2010)

Category	Tonnage	Cu	Au	Ag
	Mt	(%)	(g/t)	(g/t)
Proved	2.3	0.87	0.13	3.2
Probable	12.5	0.84	0.18	3.1
Ore Reserve	14.8	0.85	0.17	3.1

IIII HILLGROVE RESOURCES LIMITED Level 41 Australia Square, 264 George Street, Sydney NSW 2000, Australia T +61 2 8221 0404 F +61 2 8221 0407 www.hillgroveresources.com ACN 004 297 116

HILLGROVE RESOURCES LIMITED

Competent Person's Statements

The information in this report that relates to Kanmantoo Exploration Results, Exploration Targets and Stockpiles is based on information compiled by Mr Pat Manouge, who is a Member of The Australian Institute of Geoscientists. Mr Manouge is the Kanmantoo Copper Mine Exploration Manager for Hillgrove Resources and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code)’.

The information in this report that relates to in situ Mineral Resource estimates is based on information compiled by Mr Aaron Meakin, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Meakin is a full-time employee of AMC Consultants Pty Ltd and has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code)’.

The information in this report that relates to Ore Reserve estimates is based on information compiled by Mr Geoff Davidson, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Davidson is a Principal Consultant and Director of Mining and Cost Engineering Pty Ltd and has sufficient relevant experience to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code)’.

The Competent Persons have consented to the inclusion in the report of the matters based on their information in the form and context in which it appears.

HILLGROVE RESOURCES LIMITED

Chairman’s Address

Hillgrove Resources Limited Annual General Meeting 2012

Ladies and Gentlemen, welcome to the 2012 Annual General Meeting of Hillgrove Resources Limited.

The past year has seen Hillgrove Resources transformed from an exploration company into a copper producer. The project at Kanmantoo in South Australia was completed just three weeks behind schedule, and the final construction cost of AUD143 million represents an overrun of approximately 17% above budget.

The Kanmantoo Copper Mine is still in ramp up stage with significant progress having been made in improving the performance of the project. The most recent announcements by the company show that the mill is now performing to designed throughput of 200,000 tonnes per month. Copper recoveries and concentrate grade are on target at circa 92% and 27% respectively.

Ramp up has been significantly impacted by the under-performance of the fixed jaw crusher that was acquired as part of the equipment package relocated from the former Pillara plant in WA and installed at Kanmantoo along with the rest of the processing plant. Throughput capability to the mill has been supplemented by the purchase of a mobile crusher and stacker, although this has increased operating costs. A feasibility study into design modifications to the ROM bin and replacement of the feeder and jaw crusher is underway. A key aspect of the feasibility study will be to ensure continued ore supply to the mill during any work undertaken on the crushing facility.

The mine operates in a semi-rural environment, under strict lease conditions. As such, our drill-andblast activity must be cognisant of potential impact on the local community and also of our lease conditions. In addition, we are mining through not only old mining areas from the 1800’s, but also voids from underground development from the previous open pit operations in the 1970’s. Early fragmentation in the pit was poor, and this exacerbated the under-performance of the crusher. With steadily increasing experience of conditions and an increase in powder factor in the pit, fragmentation has improved, assisting mining productivity and crushing operations.

The Board and management team are committed to the highest standards of worker safety and the Company continues to work cooperatively with our contractors to achieve this.

The transport of copper concentrate to the Port of Adelaide in specially designed and purpose-built containers is working well and has facilitated environmentally clean loading of ships at the Port. We appreciate the close working relationship and support developed with J P Morgan Metals and Concentrate in the sale of our concentrate under the off-take agreement. That business has now been sold to Freepoint Commodities LLC and we welcome them as a substantial shareholder.

As part of the Project Financing undertaken in late 2010 to support development of the Kanmantoo Copper Mine, the Company sold forward 40,000 tonnes of copper concentrate over the debt period of about 40 months, commencing in June 2012. This represents approximately 50-55% of the

HILLGROVE RESOURCES LIMITED

projected copper production during this period. The Company achieved an average hedge price for copper of AUD8,320/tonne, net of the credit margin payable to the banks. The Company also purchased 7,000 tonnes of put options to underpin revenue during the important phase following commissioning, from June 2012 to March 2013. The combination of forwards and puts means that the Company is effectively hedged for 100% of output for the next nine months at an average price of about AUD8,000/tonne.

On behalf of the Board I thank the management team and the operators at Kanmantoo for their hard work and efforts in firstly, constructing and commissioning the mine during 2011, and secondly their efforts to lift performance of the operation during the current ramp up stage. Now that the design throughput of the mill and process plant has been demonstrated the focus of the team is on achieving a sustainable operation with a growing positive cash flow.

Hillgrove Resources posted a net loss after tax for the twelve months ended 31 January 2012 of A$8.5 million. During the past year net assets increased to A$210 million, from A$185 million in 2011.

Results for the Year Ended	2012 AUDM	2011 AUDM	2010 AUDM	2009 AUDM
Revenue and other income	14.7	9.0	98.2	46.8
Profit/(loss) after tax	(8.5)	(14.2)	55.6	11.1
Earnings per share – diluted (cents)	(1.0)	(2.5)	12.7	3.4

NET ASSETS (AUDM)

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250
210.0
184.8
200 163.8
150
84.2
100
55.2
38.7
50
0
2007 2008 2009 2010 2011 2012
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The Kanmantoo Copper Mine is the core asset of your Company, and our strategic focus is on extending the life of the mine. As I have said before, this will add value to the Company and is clearly aligned to shareholder interests. In the past year the company has spent $2.25 million on exploration at Kanmantoo. The successful drilling program and initial mining has contributed to an increase in the Measured Mineral Resource tonnage by 129% to 5.2 Mt. Together, the combined Measured and Indicated Mineral Resource categories now constitute 80% of the global Mineral Resource tonnage of 31.2 Mt. (>0.25% Cu).

Exploration on our two projects in Indonesia has also progressed well over the past year.

HILLGROVE RESOURCES LIMITED

On Sumba Island, where we are principally targeting epithermal gold deposits, our team has had exploration success, discovering the Karipi gold prospect. Initial scout drilling at Karipi has returned significant gold intersections along a 2km corridor of surface mineralisation. We are continuing with our initial drilling evaluation of this deposit and remain excited about its potential.

On the Birds Head project in West Papua, where we are exploring for porphyry copper-gold– molybdenum deposits, we have successfully negotiated the grant of necessary government permits and have commenced diamond drilling of the West Delta porphyry prospect. Our plan is to undertake an initial programme of 5,000m of scout drilling to evaluate the target to a depth of 500m. Initial assay results from the first drill hole confirm low grade, porphyry-related copper mineralisation, with the principal porphyry target yet to be intersected. The project represents significant potential value to your Company should exploration efforts prove successful.

The overall impact of the extended ramp up phase of Kanmantoo has meant an increase in the financial commitment by Hillgrove Resources to the project. In addition, the company is assessing the need for an increase in forward expenditure on the project in order to rectify ramp up issues which primarily includes the installation of a new primary crusher. In light of the adverse global situation in which we now operate the company is reviewing all aspects of its operations, including our capital requirements to enable the project to perform to its optimal level. This is our number one priority and will include a review of all expenditure programs.

Mr Douglas Snedden was appointed to the Board on 1 January 2012 as an independent nonexecutive director. He has provided valuable financial acumen, along with audit and management experience. Doug replaced Ronald Belz who retired at the end of 2011. I congratulate and thank Ron on his outstanding contribution as a founding director of the Company. Doug is standing for reappointment today, together with John Quirke.

I would like to commend and thank the staff of Hillgrove for their hard work and commitment to the success of the Company over the past year. We are a small but growing company and the Board is aware of the work load and the stresses and strains placed upon the relatively few staff during the past year of achievement. This particularly applies to the management team with the completion of construction at Kanmantoo, the ramp up of production of copper-gold-silver concentrate, and the drilling program underway in Indonesia. I also thank the other Board members for their very professional input to the Company.

We thank our shareholders for their support during the development and commencement of production of the Kanmantoo Copper Mine. I certainly look forward to reporting back to you in a year’s time.

The Hon. Dean Brown, AO Chairman