REACH RESOURCES LIMITED — Capital/Financing Update 2021

Mar 31, 2021

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• 1 April 2021

CAPITAL RAISINGS AND RECAPITALISATION PROPOSAL

Cervantes Corporation Limited (ASX: CVS) ( Cervantes or the Company ) is pleased to provide the following update.

In order to recapitalise and strengthen its balance sheet, the Company is proposing to undertake a series of equity raisings (the Recapitalisation Strategy ) to raise:

• (a) $804,012 through a proposed fully underwritten 1:2 rights issue to existing shareholders ( Rights Issue ) to issue 268,004,155 fully paid ordinary shares in the Company ( Shares ) at an issue price of $0.003 per Share, together with a 1:2 free attaching listed option exercisable within 3 years from the date of issue at $0.01 ( Rights Options );

• (b) up to $2,250,0000 through a proposed placement fully underwritten of 750,000,000 Shares at an issue price of $0.003 per Share ( Placement Shares ), together with a 1:2 free attaching listed option on the same terms as the Rights Options ( Placement Options ) (together, the Placement ); and

• (c) $312,500 through a proposed placement of 625,000,000 options at an issue price of $0.0005 per option. These options will be on the same terms as the Rights Options and Placement Options ( Further Placement Options ) (together the Options Placement ),

(together the Capital Raisings ).

Upon completion of the Capital Raisings as contemplated above, the Company will have raised a total of $3,366,512 (before costs). In accordance with new ASX policy in relation to reinstatement of long-term suspended entities, a full form prospectus will be prepared by the Company for the Capital Raisings.

The issue of the Placement Shares, Placement Options and Further Placement Options are subject to receipt of shareholder approval under Listing Rule 7.1 at an upcoming general meeting. The current directors, Collin Vost, Justin Vost and Marcus Flis wish to participate in the Options Placement, and shareholder approval under Listing Rule 10.11 will be sought for the proposed participation at the general meeting.

Reinstatement to trading on ASX

The Company has been in ongoing discussions with ASX in relation to reinstatement of its securities to trading. Following on from these discussions, the Company provided submissions to ASX setting out the details of the Recapitalisation Strategy and seeking ASX’s confirmation that the proposal will be adequate for the purposes of ASX Listing Rule 12.2 and that, if the Company implements the Recapitalisation Strategy, its financial condition will be sufficient to warrant the lifting of the Company’s current suspension.

ASX has now provided this confirmation, subject to standard conditions, including the Company, without limitation, lodging a full form prospectus with the ASIC/ASX and also:

• (a) the Company providing a ‘working capital statement’ similar to that required by Listing Rule 1.3.3(a) to the effect that following completion of the Capital Raisings,

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CVS will have sufficient working capital at the time of reinstatement to carry out its activities; and

• (b) the Company satisfying the ‘working capital test’ of at least $1.5 million pursuant to Listing Rule 1.3.3(c).

Lead Manager and Underwriter

Westar Capital Limited (ACN 009 372 838) (AFSL: 255789) ( Westar Capital ) has agreed to act as lead manager and underwriter to the Capital Raisings. Westar Capital’s underwriting is subject to ASX confirming that it will reinstate the Company’s securities following completion of the Recapitalisation Strategy. Westar Capital will be paid a fee of 6% (plus GST) of the total gross proceeds raised under the Capital Raisings in consideration for lead manager and underwriting services. Cervantes has executed a lead manager mandate and underwriting agreement with Westar Capital for these purposes.

The Company and Westar Capital have entered into a lead manager mandate to set out the terms of Westar Capital’s engagement ( Westar Mandate ). Under the Westar Mandate:

• (c) Westar Capital will act as sole and exclusive lead manager and underwriter to the Capital Raisings and will provide the Company with all necessary assistance in managing and arranging the Capital Raisings as is customary and appropriate in placements of the nature of the Capital Raising, including: developing and managing the Capital Raisings timetable in conjunction with the Company, coordinating and managing the Capital Raisings generally and establishing and facilitating demand for the Capital Raising securities.

• (d) The Company has agreed to pay Westar Capital a fee of $201,991 (being, 6% of the amount raised under the Capital Raisings) (plus GST).

• (e) If the Company terminates the Westar Mandate, or Westar Capital terminates the Westar Mandate for cause, if the Westar Mandate is terminated prior to completion of the Capital Raisings, a termination fee of A$50,000 (plus GST) will be payable by the Company.

The Westar Mandate otherwise contains terms and conditions considered standard for an agreement of this kind.

The Company and Westar Capital have also entered into an underwriting agreement to set out the terms of Westar Capital’s underwriting ( Underwriting Agreement ). Under the Underwriting Agreement:

• (a) Westar Capital will fully underwrite the securities offered under the Capital Raisings;

• (b) Westar Capital will be paid the fee referred to above, being $201,991 (6% of the underwritten amount) (exclusive of GST). For the avoidance of doubt, this is the sole fee payable to Westar Capital for its lead manager and underwriting services; and

• (c) includes termination events indemnification provisions from the Company, all of which are considered standard for an agreement of this kind.

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Withdrawal of current Rights Issue

The Company refers to its ASX announcement of 26 February 2021 regarding its current nonrenounceable rights issue ( Offer ).

The Directors of the Company have resolved to withdraw the Offer as set out in the prospectus dated 15 January 2021 ( Prospectus ). By this announcement, the Company formally withdraws the Offer and confirms that the expiry date of the Prospectus is brought forward to the date of this announcement. No securities have been issued prior to the date of this Prospectus, and the Company will not issue any securities under the Prospectus.

A supplementary prospectus accompanies this announcement confirming withdrawal of the Offer.

All application monies received will be returned to applicants, there is no need for those parties to request a refund.

Indicative Capital Structure

Upon completion of the Capital Raisings (assuming full subscription under the Placement, Options Placement and Rights Issue), the capital structure of the Company will be as follows:

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----- Start of picture text ----- Shares OptionsCurrent issued capital 536,008,309 43,750,000 [4]Securities to be issued pursuant to the Rights Issue 268,004,155 [1] 134,002,075Securities to be issued pursuant to the Placement 750,000,000 [2] 375,000,000Securities to be issued pursuant to the Options Nil625,000,000 [3]PlacementTOTAL 1,554,012,464 1,177,752,075 [4]----- End of picture text -----

Notes:

1. This assumes the Company raises a total of $804,012 under the Rights Issue at an issue price of $0.003 per Share.

2. This assumes the Company raises a total of $2,250,000 under the Placement at an issue price of $0.003 per Share.

3. This assumes the Company raises a total of $312,500 under the Option Placement at an issue price of $0.0005 per Option.

4. Comprising:

   • (i) 25,750,000 unlisted options exercisable at $0.01 per option with an expiry date of 31 December 2022; and

   • (ii) 18,000,000 unlisted options exercisable at $0.01 per option with an expiry date of 31 December 2023.

Proposed Use of Funds

The exploration focus of the Company moving forward will be on the Primrose Project (noting that the Company will also look at other opportunities in the resource sector). The Company’s proposed budget for the next 12 months in the event the Company completes the Recapitalisation Strategy is set out below:

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----- Start of picture text ----- Item AmountExploration and Evaluation of the Primrose Project, comprising: $575,00015-25 hole RC drilling programme at Blue Heaven prospect ~$250,000 -$300,00030-100 hole RC drilling programme at Pansy Pit prospect ~$250,000Rates and rents ~$25,000 -$30,000Annual Environmental Report & Mine Closure Plan ~$25,000Liabilities (aged debtors/loans) $909,000Assessing new projects $75,000Expenses of the Offer $250,000Working capital and corporate administration $360,000TOTAL $2,169,000----- End of picture text -----

The above table is a statement of current intentions as at the date of this announcement and is subject to change. Intervening events may alter the way funds are ultimately applied by the Company.

Additional capital raised under the offers will be retained and allocated in accordance with determined budgets in subsequent years.

Board Changes

The Company acknowledges that the timing is right for some changes to its board of directors. As a result, on completion of the Recapitalisation Strategy, the following changes will occur:

• (a) Collin Vost will resign as a director and employee of the Company;

• (b) Justin Vost will resign as a director of the Company and will continue in a consultancy capacity for a period of 12 months to assist with an orderly handover to the new directors; and

• (c) Robert Downey (Non-Executive Chairman) and Matthew O’Kane (Non-Executive Director) will be appointed as new directors (their bios are set out below).

Robert Downey – Non-Executive Chairman

Rob is admitted as a barrister and solicitor in Western Australia and has practiced as a corporate and commercial lawyer for over 20 years. He advises a wide range of public and private companies as well as high net worth individuals in relation to commercial and corporate transactions, including carbon credits and carbon offset projects, infrastructure, energy, health and technology projects. Mr Downey has previously worked as General Counsel for a Canadian dual listed AIM/TSXV oil and gas company overseeing its dual listing and subsequent sale by way of scheme of arrangement. Mr Downey is currently involved in advising on the establishment of various carbon offset projects, particularly in relation to soil

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carbon projects. Mr Downey has also been a director of many publicly listed and private companies and has significant experience as a director of ASX listed companies. He has particular experience in relation to the day-to-day listing rule compliance, disclosure and governance issues that arise in the public context as well as all of the other administrative and governance issues that arise including the challenges that are arising from the wider ESG interest of stakeholders.

Matthew O’Kane – Non-Executive Director

Matthew is an experienced mineral industry executive and company director with 25 years’ experience in the mining, commodities and automotive sectors. He has held senior leadership roles in Australia, the USA and Asia, in both developed and emerging markets, from startup companies through to MNC’s. He has served on the board and as an executive of mining companies in Canada, Hong Kong and Australia, and is currently the Managing Director of Comet Resources Limited, Non-Executive Director of Pursuit Minerals Ltd and NonExecutive Director of Azarga Uranium Corporation. During his career he has worked with company’s involved in production, exploration and development.

Proposed Timetable

The indicative proposed timetable to complete the Recapitalisation Strategy is set out below:

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----- Start of picture text ----- Event DateASX announcement of the Capital Raisings and 1 April 2021underwriting by Westar CapitalProspectus lodged with ASIC/ASX for Capital Raisings 16 April 2021General Meeting (to approve resolutions relevant to the 10 May 2021Recapitalisation Strategy)Completion of the Capital Raisings 17 May 2021Reinstatement to Official Quotation 20 May 2021----- End of picture text -----

The above timetable is indicative only and subject to change.

Authorised by the Board of Directors.

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