MCS SERVICES LIMITED — Interim / Quarterly Report 2014

Apr 30, 2014

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Appendix 5B – March 31, 2014

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

HIGHLIGHTS

• ￭ Funding package involving fully underwritten Rights Issue and Convertible Loan Agreements successfully negotiated.

• ￭ Funding places Company in strong position to evaluate new business opportunities and rebuild shareholder value.

• ￭ Company undertakes strategic review, following discussions with key advisers, shareholders and stakeholders and is currently in advanced negotiations with one party.

• ￭ Board implements wide ranging cost cutting measures, commensurate with this transitional phase.

• ￭ Strong support of stockbroker DJ Carmichael, including access to potential “deal-flow” and networks.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

Table of Contents

HIGHLIGHTS...................................................................................................................................... 1
ACTIVITY REVIEW .................................................................................................................................. 3
CORPORATE AND FINANCIAL ................................................................................................................ 4
Appendix 5B .......................................................................................................................................... 9
Mining exploration entity and oil and gas exploration entity quarterly report 9
Consolidated statement of cash flows ............................................................................................ 9
Payments to directors of the entity, associates of the directors, related entities of the entity and
associates of the related entities .................................................................................................. 10
Non-cash financing and investing activities .................................................................................. 11
Financing facilities available .......................................................................................................... 11
Estimated cash outflows for next quarter .................................................................................... 11
Reconciliation of cash ................................................................................................................... 12
Changes in interests in mining tenements and petroleum tenements ........................................ 12
Issued and quoted securities at end of current quarter ............................................................... 12
Compliance statement 14
Notes 14

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

ACTIVITY REVIEW

As previously announced during the Reporting Period, and following consultation with key advisers and other stakeholders, the Board has been reviewing a number of new opportunities, including those outside of the resources sector, as part of its strategy of reinvigorating shareholder value. Currently the Company is in advanced negotiations with parties representing a non-resources sector, value generating and profitable business opportunity.

Pivotal to this was the requirement to obtain sufficient funding, to enable both thorough examination of potential new opportunities and preservation of the Company’s current mining assets. On 10 February 2014 the Company announced that it was negotiating an appropriate funding package for this purpose, through Perth based stockbrokers DJ Carmichael Pty Ltd (“DJ Carmichael”). The details of this package were subsequently announced on 24 February 2014 and 3 March 2014.

A key component of this funding package was a fully underwritten renounceable pro-rata rights issue to shareholders, via a Rights Issue Prospectus dated 10 March 2014 ("Prospectus"), to raise up to approximately $0.582 million before the costs of the offer. As described below, the Company successful raised these funds via the Prospectus, which closed after the Reporting Period.

The Prospectus described the Company's mission as currently perceived by the Board as:

To raise sufficient funds to enable it to seek out and evaluate new investment opportunities suitable for a publicly listed company…. The Directors intend to investigate and select potential assets or projects based on one or a combination of the following criteria:

• 1) the project or asset should be of a sufficient size and development to be capable of generating support in the market place to raise further funds;

• 2) the project should have the capacity to add value to the Company in the medium term; and

• 3) the project or asset should have quality management in place or have the ability to attract such people.

Operationally, activities were held to a minimum as the Company concentrated on its key corporate and financial objectives, reviewed its strategy and implemented cost cutting measures. Concurrently, and as outlined in the announcement made on 31 March 2014, the Company instigated a number of cost cutting measures during the Reporting Period, aimed at minimising cash outflows. Non-essential exploration related activities in Chile and Peru were curtailed or suspended, while operational and administrative overheads were reviewed and reduced. The Executive Chairman agreed to suspend key terms of his existing service contract during this period of reduced work load, and receive remuneration in line with the Board’s nonexecutive directors. In addition the Company has reviewed and implemented cost cutting programs for its Peruvian and Chilean administration overheads, including the relocation and

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

consolidation of the Combarbala operations to Santiago and suspension of applications for new concessional areas.

In light of the lack of investor interest in the Company's Majada Project in Chile, and notwithstanding two new mineralisation discoveries during the 2013 drilling program, the Company also decided to put on hold further option payments and enter into discussions to renegotiate the terms of the farmin agreements with the concession holders at Majada. The Company gave notice of its intention to withdraw from the original arrangements, while at the same time it sought to renegotiate terms with the concession holders, in order to minimise further cash payments for the Project until such time as the future direction of the Company is clarified. Under the terms of the farmins, announced in March 2013, the Company has the right to acquire 100% interest in nine claims, comprising the Project, by making staged, six monthly, option payments totalling 679.5 million Chilean pesos (A$ 1.44 million at the then exchange rate) to the owners over a 3 year period. The Company is entitled to withdraw without penalty, at any time during that period. Red Gum’s 100% owned concessions, at Cerro Huancash, Chongos and La Negra, will continue to be maintained in good standing.

Safety and the Environment

During the Reporting Period there were no safety or environmental issues reported as a result of the Company’s activities.

CORPORATE AND FINANCIAL

As outlined above much of the Company’s activities during the Reporting Period focused on corporate and financial imperatives. Details of key aspects of these activities are outlined below.

￭ Rights Entitlement

The Company advised on 24 February 2014 it had entered into a mandate with DJ Carmichael to undertake and underwrite a renounceable pro rata entitlement issue (“Entitlement Offer”), on the basis of two (2) new shares for every three (3) shares on issue at an issue price of $0.003 per share, together with one (1) free option for each four (4) new shares issued. The options issued will be exercisable at $0.01, on or before 15 November 2017. Subsequently the Prospectus for the Entitlement Offer was lodged with ASIC on 10 March 2014, to raise up to approximately $0.582 million before the costs of the offer. The Prospectus and Entitlement and Acceptance Form were sent to shareholders on 24 March 2014, and rights trading ended on 31 March 2014.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

￭ Convertible Loan

As announced to the ASX on 23 February 2014 and 3 March 2014, Red Gum entered into a number of Convertible Loan Agreements (“Agreements”) with clients of DJ Carmichael, to borrow an aggregate of $530,000 (“Loans”).

On 29 April 2014, the Loans were converted into 176,654,220 Ordinary Shares, 44,163,555 RGXOA Options following shareholder approval at an Extraordinary General Meeting (“EGM”) held on 28 April 2014. The Loans were converted into fully paid ordinary shares in Red Gum at the conversion price of $0.003 per share. For each 4 shares issued, Red Gum also issued one free option exercisable at $0.01 per share on or before 15 November 2017. In the event that the Loans are fully converted, Red Gum will issue 100,000,000 shares and 25,000,000 options to satisfy the repayment obligation of the Loans.

￭ Expiry of Restriction Period

Following the Company’s IPO and listing on 17 January 2012, a total of 36,766,409 ordinary shares were restricted for varying periods, 30,425,932 restricted ordinary shares were released from these escrow arrangements on 17 January 2014. The remaining 6,340,477 shares had been released prior to the Reporting Period.

￭ Notice of Extraordinary General Meeting ("EGM")

As announced to the ASX on 28 March 2014, the Company convened an EGM to be held at 11 am on 28 April 2014. Details of the business are outlined in the Explanatory Memorandum accompanying the Notice of Meeting, and relate to seeking shareholder approval of the conversion of the Loans, as well as approvals for future additional and two prior placements.

￭ Changes in Board Composition

As announced to the ASX on 6 January 2014, Torey Robert Marshall resigned as a non-executive director of the Company.

As announced to the ASX on 3 March 2014, Edwin Edward Bulseco was appointed to the board as a non-executive director of the Company.

￭ Half Yearly Report and Accounts

The Half Yearly Report and Accounts for the period 1 July 2013 to 31 December 2013 were announced to the ASX on 14 March 2014.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

Subsequent Events

• ￭ As announced to the market on 9 April 2014, the Entitlement Offer for the Rights Issue closed on the Closing Date of 7 April 2014, in accordance with the Prospectus timetable.

• ￭ As announced to the market on 14 April 2014, the Entitlement Offer Allotment report for the Rights Issue was lodged.

• ￭ On 17 April 2014 an Appendix 3B was lodged with the ASX, for the shortfall Rights Issue securities subscribed for by the Underwriter.

• ￭ As announced to the market on 28 April 2014, shareholders approved all resolutions considered at the EGM held on that day.

• ￭ On 28 April 2014 an Appendix 3B was lodged with the ASX, noting the issue of 40,000,000 Underwriter's options.

• ￭ On 29 April 2014 an Appendix 3B was lodged with the ASX, noting the issue of 176,654,220 shares and 44,163,555 options, following conversion of the Loans, and the issue of 467,554 attaching options relating to a prior placement, both as approved by shareholders on 28 April 2014.

• ￭ On 30 April 2014 a Cleansing Prospectus was lodged with ASIC and ASX relating to the securities issued in conformity with the Convertible Loan – as approved by Shareholders on 28 April 2014.

The Capital Structure of the Company as at 30 April 2014:

Number	Class
500,000,000	Ord excl restricted
61,234,053	Quoted options RGXO Ex$0.10 exp1/03/2016
133,132,982	Quoted options RGXOA Ex$0.01 exp15/11/2017
5,000,000	Unquoted options RGXAK Ex$0.15 exp30/04/2016
1,000,000	Unquoted options RGXAY Ex$0.25 exp09/06/2014

Reconciliation of expenditure

This is the third quarterly report for Red Gum Resources Limited for the year ending 30 June 2014.

Exploration and evaluation

The estimated exploration and evaluation expenditure cash flows amounted to $75,000 actual expenditure amounted to $37,000. The decrease is due to certain project costs being paid later than budgeted.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

Administration

The estimated administration expenditure cash flows included in the previous report amounted to $288,000, actual expenditure amounted to $369,000. The increase is due to creditors from the prior quarter being paid.

Cash at the end of the Quarter Cash at 31 March 2014 amounted to $100,301.

In April 2014 $582,022 was raised under the Entitlements Offer.

Attached is the Appendix 5B Consolidated Statement of Cash Flows for the period from 1 January 2014 to 31 March 2014.

Raymond D Shaw

B.Sc (Hons), Ph.D (Univ of Syd) , Member of AusIMM

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – March 2014

ASX Listing Rule 5.3.3 tenement details

Tenement reference and location	Nature of interest	Interest at beginning ofquarter	Interest at end of quarter
Cerro Huancash Peru	See below a)	100%	100%
Chongos A Peru	See below a)	100%	100%
Chongos B Peru	See below a)	100%	100%
Chongos C Peru	See below a)	100%	100%
La Negra Chile	See below b)	100%	100%
Majada Chile	See below c)	See c)	See c)

Nature of Interest - Notes

• a) The Company through its wholly owned subsidiary, Red Gum Resources (Peru) Pty Ltd holds 99.99% of the shares in the Central Peru Resources (“CPR”), which in turn holds 100% of the four Peruvian Projects.

• b) During the year ended 30 June 2012 the Company exercised the Option Deed dated 10 November 2009, with Inversiones y Mineria Andale Ltda (Andale) for a total consideration of USD $1,020,000 and the issue of 1,000,000 shares in the Company (refer to Note 20 for further details), whereby the Company has been granted an option to acquire 100% of the interest in La Negra. In accordance with Chilean law, in September 2011 the Company established a wholly owned Chilean subsidiary called Red Gum Resources Chile SpA (Red Gum Chile). Under the La Negra Option Red Gum Chile acquired the La Negra project which is made up of the exploration mining concessions named “Karina 1”, “Karina 2”, “Karina 3”, “Karina 4”, “Karina 5”, “Karina 6”, “Karina 7”, “Karina 8” and “Karina 9”, and the exploitation mining concessions named “Karina1/20” and “Karina 21/40”. The La Negra Option is registered in the Mortgages and Encumbrances Registry of the Custodian of Mines of Combarbalá.

• c) During the year ended 30 June 2013 the Company entered into eight separate letter agreements (Letters of Intent) with a number of private individuals for an option to acquire 100% of the Majada Copper-Gold Project. On 27 March 2013 the Company announced its intention to execute the Option Agreements, by which the Company could acquire the nine claims, comprising the Project, by making staged, six monthly, optional payments totalling 679.5 million Chilean pesos (A$ 1.44 million at the then exchange rate) to the owners over a 3 year period from the date of signature. During the Reporting Period the Company to give notice of its intention to withdraw but at the same time sought to renegotiate terms with the concession holders. The Company earns no interest in the Majada Project until the final option payments are made.

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

Rule 5.5

Appendix 5B

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, 01/05/2013

Name of entity

RED GUM RESOURCES LIMITED

ABN

66 119 641 986

Quarter ended (“current quarter”) 31 MARCH 2014

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows	Current quarter $A’000	Year to date (9 months) $A’000
	- (37) - - (369) - - - - -	- (694) - - (731) - 3 - - -
	(406)	(1,422)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows	- - - - - - - - -	- - - - - - - - -
	-	-

• See chapter 19 for defined terms.

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Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

	Current quarter $A’000	Year to date (9 months) $A’000
1.13 Total operating and investing cash flows (carried forward) Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings- convertible loan 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows	(406)	(1,422)
	6 - - 530 - (38)	306 - - 530 - (84)
	498	752
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	92 9 -	(670) 771 -
	101	101

Payments to directors of the entity, associates of the directors, related entities of the entity and associates of the related entities

1.23 Aggregate amount of payments to the parties included in item 1.2 1.24 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
	74
	-
1.25 Explanation necessary for an understanding of the transactions

Cash payment in respect of directors’ gross remuneration and fees.

• See chapter 19 for defined terms.

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

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

N/A

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest N/A

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities Convertible loans were converted into shares in April 2014. 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	539	539
	Nil	Nil

Estimated cash outflows for next quarter

Estimated cash outflows for next quarter
4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	72
	-
	-
	153
Total	225

• See chapter 19 for defined terms.

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Appendix 5B Page 11

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

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details)	9	9
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	9	99

Changes in interests in mining tenements and petroleum tenements

Changes in interests in mining tenements and petroleum tenements	Changes in interests in mining tenements and petroleum tenements	nements and petroleum	nements and petroleum	tenements	tenements
Tenement reference and location Nature of interest (note (2)) 6.1 Interests in mining tenements and petroleum tenements relinquished, reduced or lapsed n/a n/a 6.2 Interests in mining tenements and petroleum tenements acquired or increased n/a n/a Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with		Tenement reference and location		Nature of interest (note (2))		Interest at beginning ofquarter		Interest at end of quarter
		n/a		n/a		n/a		n/a
		n/a		n/a		n/a		n/a
	Total number		Number quoted		Issue price per security (see note 3) (cents)		Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions	Nil		Nil
	Nil		Nil
7.3 +Ordinary securities	129,338,312		129,338,312

• See chapter 19 for defined terms.

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Appendix 5B Page 12

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

	Total number	Total number	Number quoted	Number quoted	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.4 Changes during quarter (a) Increases through issues Expiry of escrow (b) Decreases through returns of capital, buy- backs		1,870,215 n/a		1,870,215 30,425,932	$0.003	$0.003
7.5 +Convertible debt securities Convertible loan 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted		See (1)		Nil
		See (1)		Nil		(1) On 29 April 2014 $529,963 of Conver- tible Loans issued in February 2014 were converted into 176,654,220 Shares at $0.003 each and 44,163,555 RGXOA Options.
7.7 Options (description and conversion factor) RGXO RGXAY RGXAK 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter		61,234,053 1,000,000 5,000,000 67,234,053		61,234,053 Nil Nil 61,234,053	Exercise price $0.10 $0.25 $0.15	Expiry date 01/03/2016 09/06/2014 30/04/2016
		Nil		Nil
		Nil		Nil
7.11 Debentures (totals only)		Nil		Nil
7.12 Unsecured notes(totals only)		Nil		Nil

• See chapter 19 for defined terms.

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Appendix 5B Page 13

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

Compliance statement

1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

2 This statement does /does not* (delete one) give a true and fair view of the matters disclosed.

30 April 2014 Sign here: ............................................................ Date: ............................ (Company secretary)

Mr Malcolm Lucas Smith

Print name: .........................................................

Notes

1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements and petroleum tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement or petroleum tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

=============

• See chapter 19 for defined terms.

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Appendix 5B Page 14