MCS SERVICES LIMITED — Interim / Quarterly Report 2014

Feb 2, 2014

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Appendix 5B – December 31, 2013

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

HIGHLIGHTS

• ￭ Following a strategic review, the Company moves towards a greater copper gold focus on Chile, with commencement of negotiations for a strategic alliance with third parties, and possible exit from its Peruvian activities.

• ￭ Letter of Intention received from Latin American mining entity for proposed purchase of the Company's Peruvian assets, subject to due diligence and various conditions.

• ￭ Company continues negotiations with adjacent concession holders in Majada area with a view to potential aggregation.

• ￭ Placement completed 5 November 2013.

• ￭ All resolutions approved at Annual General Meeting of Shareholders held on 7 November 2013.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

Table of Contents

HIGHLIGHTS...................................................................................................................................... 1
OPERATIONAL ACTIVITIES ..................................................................................................................... 3
COMPETENT PERSON’S STATEMENT .................................................................................................... 8
CORPORATE AND FINANCIAL ................................................................................................................ 9
Appendix 5B ........................................................................................................................................ 12
Mining exploration entity and oil and gas exploration entity quarterly report 12
Consolidated statement of cash flows .......................................................................................... 12
Payments to directors of the entity, associates of the directors, related entities of the entity and
associates of the related entities .................................................................................................. 13
Non-cash financing and investing activities .................................................................................. 14
Financing facilities available .......................................................................................................... 14
Estimated cash outflows for next quarter .................................................................................... 14
Reconciliation of cash ................................................................................................................... 14
Changes in interests in mining tenements and petroleum tenements ........................................ 15
Issued and quoted securities at end of current quarter ............................................................... 15
Compliance statement 17
Notes 17

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

OPERATIONAL ACTIVITIES

Majada Project

During the last quarter of 2013 activities were concentrated on integrating the drilling results completed earlier in 2013. As announced to the ASX on 17 September 2013, these results included two, new separate mineral discoveries being made, at Majada East and Majada West.

• Firstly, of a Copper-Silver-Gold discovery at Majada West, where a mineralised shear zone extends for at least 800 metres along strike, is approximately 15 metres thick and has a down-dip width of at least 150 metres.

• Secondly, of a Copper-Gold-Silver-Molybdenum discovery at Majada East, where high grade vein plus disseminated-style mineralisation identified.

During the Reporting Period and in cooperation with the owners of neighbouring concessions, Red Gum undertook detailed mapping in order to better understand its own mineralisation discoveries in terms of other nearby mineralised deposits and context of likely regional controls. Separately Red Gum has continued negotiations with principals of number of adjacent concessions with a view to forming alliance, consolidating and or aggregation its position within the Majada region.

Red Gum also continued to undertake mapping of its new areas it had recently applied for around the Majada Project including Aquelarre. No field work was conducted at the Martin and Turquesa areas.

About the Majada Copper-Gold Project

The Majada Project encompasses two separate Copper-Gold mineralisation trends, totalling over 5 km in length. The Majada Copper-Gold Project is located within an established IOCG Belt of northern Chile, approximately 120 km south of La Serena in Region IV. The project consists of 587 hectares of third party exploitation mineral claims, distributed in two geographically separated areas; Majada Este (East) and Majada Oeste (West). The Majada Project is close to two significant IOCG discoveries – Manuelito and San Lorenzo. It is proximal to both power and road infra-structure and lies at relatively low altitudes (~600 m) where it is not impacted by adverse weather windows.

The Majada Copper-Gold Project is located within the IOCG Belt of northern Chile, approximately 120 kilometres south of La Serena in Region IV. Red Gum has the right to earn a 100% interest in the nine claims

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

comprising the Project. The nine claims total 587 hectares of third party exploitation mineral claims, distributed in two geographically separated areas; Majada Este and Majada Oeste.

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Figure 1 – Location of Majada and La Negra Projects in Region IV, Chile.

In addition, Red Gum has applied for new exploration claims adjoining the Majada Oeste area, totalling an additional 400 hectares. Despite numerous shallow surface workings there is no evidence of pre-existing drilling within the Majada area.

The Majada Este area , comprising five mineral claims totalling 267 hectares, contains a number of oxide pit workings coincident with the surface outcrop of a belt of intensely sheared and altered andesite volcanics, along the contact of granitic intrusive rocks located to the west. In addition, dump material from a number of small underground adits, at topographically lower levels, display strong sulphide mineralisation (including bornite and chalcopyrite).

Majada Oeste , comprising four claims totalling 320 hectares, is located on a broad N-S brittleductile shear zone, mapped along the contact between granitic intrusive rocks and andesitic volcanic rocks. The distribution of artisanal workings suggests that this zone controls coppergold mineralisation within the area. Although there has been no previous historical exploration drilling on this area it was subject to geochemical sampling, and some magnetic and induced

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

polarisation surveying in 1999. Surface geochemistry sampling of the oxide mineralisation, which was being exploited in the pits, reported maximum copper values up to 2.53% and maximum gold values up to 4.04 g/t (although these have not been verified). Red Gum’s geological mapping has defined a NNW-SSE striking, moderately W-dipping shear zone structure over 3.0 km of strike length.

La Negra Project

In order to strengthen the long term interests of our holding’s in the area Red Gum is currently involved in the conversion of its current concessions covering La Negra exploration claims (concesiones) to exploitation claims (mesuras). This process continued during the Reporting Period.

Cerro Huancash Project

No field activities were undertaken during the Reporting Period. However the Company did receive a non-binding letter of interest from a reputable Latin American mining entity, for its proposed acquisition of Red Gum’s Peruvian assets (Cerro Huancash and Chongos). Under the letter of intent the parties contemplate negotiation of the terms of a sale and purchase agreement to be finalised by early February 2014, subject to satisfaction of various conditions including due diligence.

This path is consistent with that foreshadowed in an announcement made to the ASX on 4 June 2013, in which the Company expressed the belief that it would be better served by selling its Peruvian assets, to enable it to focus on developing opportunities in Chile. In the interim the Company will continue to maintain its concessions in good standing, until an outcome becomes clear.

ASX Listing Rule 5.3.3 tenement details

Tenement reference and location	Nature of interest	Interest at beginning of quarter	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%

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

Tenement reference and location	Nature of interest	Interest at beginning of quarter	Interest at end of quarter
Majada Chile	See below c)	See c)	See c)

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

Nature of Interest

• a) The Company through its wholly owned subsidiary, Red Gum Resources (Peru) Pty Ltd holds all 99.99% of the shares in the Central Peru Resources (“CPR”), which in turn holds 100% of the four Peruvian Projects. The $70,000 acquisition cost has been capitalised as tenement cost.

• A letter of intent has been received from Latin American mining entity for proposed purchase of the Company’s Peruvian assets, subject to due diligence and various conditions.

• 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. As announced on 28 November 2012 under the terms of the Letters of Intent Red Gum had 60 days to decide whether to execute formal purchase agreements (“Option Agreements”) between the respective mineral claim holders (“Owners”) and 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 would acquire 100% interest in the 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 from the date of signature.

Safety and the Environment

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

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

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COMPETENT PERSON’S STATEMENT

The information in this Report, or where applicable the information in the Report to which this statement is attached, that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by independent consultant Mike Easdon. Mr Easdon holds B.Sc and M.Sc degrees from McGill University Canada and has more than 40 years industry experience, principally in North America and Latin America, in precious and base metal mineral exploration and development. Mr Easdon is not employed by the Company or by any other party, and is a consultant. He is a member of a "Recognised Overseas Professional Organisation" included in a list promulgated by the ASX from time to time, since he is a Certified Practicing Geologist (CPG07646) with the American Institute of Professional Geologists.

Mr Easdon 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 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Easdon consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

CORPORATE AND FINANCIAL

Corporate Activities

￭ Change in Capital Structure – Cancellation of Unquoted Options

As announced to the market on 18 November 2013, Unquoted Options totalling 18,744,690 (ASX:RGXAI), exercisable at $0.07 and expiring on 15 November 2013, were not exercised and have now been cancelled.

The issued option securities of the Company as at that date are : Quoted options RGXO ex $0.10 exp 1/03/16 61,234,053 Unquoted options RGXAY ex $0.25 exp 9/06/14 1,000,000 Unquoted options RGXAK ex $0.15 exp 30/04/16 5,000,000.

￭ Change in Capital Structure – Placement

As announced to the ASX on 5 November 2013 the Company placed 15 million new shares at 2 cents per share. A total of $300,000 gross was raised.

The issued share securities of the Company as at that date are : ORD 97,042,165 ORD restricted RGXAU (until 17/01/14) 30,425,932.

• ￭ Annual Report and Announcement of Annual General Meeting

On 30 September 2013 the Company released its Annual Report for the 2013 Financial Year. On 7 October 2013 the Company issued its 2014 Notice of Annual General Meeting, which was held in Adelaide on 7 November 2013. All resolutions put to Shareholders were subsequently passed at this Meeting.

￭ Proposal for a Significant Expansion of Chilean Activities

On 30 October 2013 the Company announced to the ASX that it was currently in negotiation to form a strategic alliance with Rio Perdido Copper Ltd (“RPC”), which has a strong Chilean based, experienced management and operational teams and options with third parties to access significant exploration concessions and copper processing facilities in Chile. Subject to agreement on terms, Red Gum believes that such an alliance would bring about significant benefits, including access to a significant consolidated acreage position – focused on RGX’s existing Combarbala operational base, fast-tracking of revenue production, and access to a new investor base via RPC’s existing shareholders and their Chilean networks.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

￭ Review

In response to the drilling results at Majada, other local opportunities and future funding, the Company reviewed its options for its future direction. As outlined in the Chairman’s presentation to shareholders on 7 November 2013, the Company was adjusting its operations to meet the demanding investor conditions. This included discussions with third parties concerning alliances, its focus on gold rather than polymetallics, pursuing a formal process to crystallise the value of our Peruvian assets, changes in board composition and a reduction in directors' fees. The review outcomes recognized the need to engage in short term sustainable, revenue generating activities, and the need to ensure sufficient working capital and funds for new projects.

Subsequently, on 23 December 2013 the Company sought a Trading Halt in order to finalise its due diligence on the proposed RPC alliance and negotiations for the sale of its Peruvian assets, for which it had received a non-binding offer from a third party. This Trading Halt has been subsequently extended and the Company remains in voluntary suspension as at the date of this Appendix 5B, due to the protracted nature of these negotiations, and the delays caused by the holiday period. The Company is also considering other corporate actions, as alternatives to the proposed RPC alliance and/or the sale of its Peruvian assets. The Company's short term focus is on the need to ensure sufficient working capital, given the very difficult market conditions for small exploration companies.

Subsequent Event

As announced to the market on 6 January 2014, and in the expectation of the completion of the transactions on foot, the Company plans to appoint at least one new director to the Board in the near term, to align with its future focus. Mr Torey Marshall at that time had taken the opportunity to resign as a Director of the Board. The Board takes this opportunity to thank Mr Marshall for his valuable contributions to the Company. Mr Marshall was a founding director of the Company and was instrumental in its listing, and the Company has benefited from his considerable managerial and technical expertise and assistance.

Reconciliation of expenditure

This is the second 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 $229,000. The increase is due to $121,000 Chile Majada project costs being paid earlier than budgeted.

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Red Gum Resources Limited (ASX : RGX) Appendix 5B – December 2013

Administration

The estimated administration expenditure cash flows included in the previous report amounted to $210,000, actual expenditure amounted to $144,000. The increase is due to higher creditors than in the prior quarter.

Cash at the end of the Quarter

Cash at 31 December 2013 amounted to $8,948. The Company is negotiating a suitable funding facility and expects to make a detailed announcement in that respect later today.

Attached is the Appendix 5B Consolidated Statement of Cash Flows for the period from 1 September 2013 to 31 December 2013.

Raymond D Shaw

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

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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

Name of entity	Name of entity
RED GUM RESOURCES LIMITED
ABN 66 119 641 986	Quarter ended (“current quarter”)
66 119 641 986	31 December 2013

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 (6 months) $A’000
	- (229) - - (144) - - - - -	- (657) - - (362) - 3 - - -
	(373)	(1,016)
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 1.13 Total operating and investing cash flows (carried forward)	- - - - - - - - -	- - - - - - - - -
	-	-
	(373)	(1,016)

• 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

	Current quarter $A’000	Year to date (6 months) $A’000
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 1.18 Dividends paid 1.19 Other (provide details if material) Net financing cash flows	300 - - - - (17)	300 - - - - (46)
	283	254
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	(90) 99 -	(762) 771 -
	9	9

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

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
	80
	-
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 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	Nil	Nil
	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
	75
	-
	-
	288
Total	363

Reconciliation of cash

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	9 - -	99
		-
		-

• See chapter 19 for defined terms.

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Appendix 5B Page 14

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

5.4 Other (provide details)	-	-
Total: cash at end of quarter(item 1.22)	9	99

Changes in interests in mining tenements and petroleum tenements

6.1 Interests in mining tenements and petroleum tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements and petroleum tenements acquired or increased	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

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	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 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs	127,468,097 Includes 30,425,932 of escrowed shares	97,042,165
	15,000,000	15,000,000	$0.02	$0.02
7.5 +Convertible debt securities (description)	Nil	Nil

• See chapter 19 for defined terms.

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Appendix 5B Page 15

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)
7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted		Nil		Nil
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 RGXAI		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
		18,744,690		Nil	$0.07	15/11/2013
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 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.

31 January 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 17