TALONX RESOURCES LIMITED — Interim / Quarterly Report 2016

Oct 25, 2016

ASX Code: MTB

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QUARTERLY REPORT FOR THE QUARTER TO 30 SEPTEMBER 2016

• Kihabe Exploration Licence granted to 2022

• Strategic re-launch of the Company and Kihabe Zinc project

• Funds raised and Board strengthened

• Drilling commenced October 2016

With the grant of a new licence over the Company’s original Kihabe Project area early in the year (Figure 1) and encouraging zinc price sentiment, Mount Burgess (The Company; ASX:MTB) has seen considerable activity during the quarter as it prepares for renewed activity at its highly prospective zinc project in Botswana.

The Company’s Board was strengthened with the appointment of Harry Warries, a Mining Engineer and Jason Stirbinskis, a Geologist. A capital raising completed during the quarter provided the necessary funds to commence on-ground activity.

A drill program was commissioned in September and drilling commenced in early October.

The recent strategic activity has resulted in material improvement in the Company’s share price and trading volumes. The Board of Mount Burgess wishes to thank loyal shareholders for persisting with the Company during recent difficult years. The Company is now strategically well placed and looks forward to the results of the first phase of drilling in late November.

KIHABE ZINC PROJECT

The Kihabe project includes the Kihabe deposit and near-by Nxuu deposit consisting of 25 million tonnes of resources @ 3% Zn equivalent grade (2004 JORC Code – see Table 1) at potential open pit depths ranging from 5m below surface to 175m below surface. Metallurgical test work on both oxides (predominately baileychlore and smithsonite for zinc and cerrusite for lead) and sulphides (predominately sphalerite for zinc and galena for lead) confirmed recoveries of >90% and zinc and lead concentrates of good marketable grade with few deleterious elements. Test work has also suggested the possibility of producing zinc metal on site via SX/EW.

A disparity between Reverse Circulation (RC) drill hole and Diamond Drill (DD) hole assay results suggests there is potential to significantly increase the resource grade. The Company believes that sample collection methods employed during historical drilling /sampling have resulted in assays from RC drilling under-calling the grade. As an example, based on a 0.5% ZnEq resource envelope, the existing Kihabe Resource generated a grade of 2.22% Zn equivalent based on all resource definition holes (RC+DD). Based on DD only (20% of holes drilled) the same volume generated a grade of 3.26% Zn equivalent. The spacing of diamond holes does not permit this result to be converted to a Resource. Nevertheless, with additional investigation and validation, the potential under-call of the grade and the possibility of material Germanium credits recently identified (see ASX announcement dated 5/5/16) has the potential to substantially increase the overall Zn equivalent resource grade.

PLANNED DRILLING AT PRIORITY ANOMALIES

The Kihabe and Nxuu resources comprise SEDEX mineralisation that covers a combined strike length of 2.3km. The mineralisation is contained within a mineralised zone of quartz wacke at the contact with the regional dolostone.

This consistent geological profile acts as a significant pathfinder for the discovery of additional resources. Through geochemical soil sampling, the Company has identified six additional zinc geochemical soil anomalies and a copper/cobalt anomaly within the immediate vicinity of the established Resource (Figure 2). The total strike length of these anomalies combined is 13km. Of particular interest is Target 52 (Figure 3), which, at a strike length of 5.2km, is over twice as long as the strike length of the Kihabe and Nxuu deposits combined.

The drilling program announced during the quarter and commenced October 11 will primarily focus on Target 52. Preparations have been made at several of the other identified anomalies within the licence area, with the anticipation of drill testing as many of these targets as possible in this drilling program.

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Figure 1 : The Kihabe Project, prospecting licence PL43/2016, (red box) covers 997km[2] and is located in Botswana near the Namibian Border and border crossing of Dobe. The nearest railhead is 337km west at Grootfontein in Namibia. There is a landing strip on the licence area and an international airport at Maun ~250km east. There is an established camp on the licence area.

CORPORATE ACTIVITY

The Company’s Kihabe licence, covering the original project area, was granted early in 2016 for the standard 3 years with 2 additional extension periods of 2 years each, for a total of 7 years.

The Company’s Board has been strengthened with the appointment of two new Directors, Mr Harry Warries and Mr Jason Stirbinskis.

Mr Warries, is a mining engineer with more than 25 years of experience in the mining industry, and most recently was the Mining Manager at Coffey Mining. Harry has worked on a wide range of projects, including a number of major feasibility studies, he has substantial African experience and has worked across a number of commodities including copper, nickel, cobalt, gold, lead, zinc and graphite.

Mr Stirbinskis is a Geologist and was the CEO of Drake Resources while it was active across gold and base metals projects in Africa and Europe. He has also held MD/CEO roles at Phillips River Mining and Central Asia Resources. Mr Stirbinskis has broad and substantial experience across geology, metallurgy/engineering and financial markets both within Australia and internationally.

During the quarter the Company successfully placed 26,987269 ordinary shares to sophisticated investors which raised $229,847, providing the necessary funds to commission drilling at the Kihabe project.

Subsequent to the end of the quarter, the Company has raised a further $404,000 through the placement of 26,933.335 shares at 1.5c per share to sophisticated investors.

Table 1: Resource Statement for the Kihabe and Nxuu deposits. Reported 15/5/13

Deposit	External Cut %	Indicated M Tonnes %	Inferred M Tonnes %	Total M Tonnes %
Kihabe	1.5%	11.4 @ 2.90%	3.0 @ 2.60%	14.4 @ 2.84%
Nxuu	0.3%	-	10.9 @ 3.20%	10.9 @ 3.20%
		11.4 @ 2.90%	13.9 @ 3.07%	25.3 @ 3.00%
Kihabe resource calculated on metal prices as at 17 July 2008: Zn US$1,810/t Pb US$1,955/t Ag US$18.75/oz Grades applied: Zn 1.8% Pb 0.8% Ag 7.7 g/t Nxuu resource calculated on zinc & lead par value Grades applied: Zn 1.8% Pb 1.4%

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KIHABE-NXUU METAL RECOVERIES

Independent metallurgical testwork has confirmed the metal recoveries shown in the table below. Accordingly the Company believes these recoveries are achievable. Zinc recovered from acid leaching oxide zones will enable Zn metal to be recovered on site from electro-winning.

	DEPOSIT	Zone	Time	Zinc	Lead	Silver
	Kihabe
	Oxide Zone
	Acid leaching @40oC 30 kg/t acid	Oxide *	24 hrs	96.9%	91.9%	n/a
	Sulphide Zone
	Rougher flot	Sulphide	90 seconds	91.9%	84.8%	94%
		Sulphide	15.5 mins	93.8%	88.1%	96.4%
	Nxuu
	All Oxide
	Acid leaching @25OC 30 kg/t acid	Oxide *	12 hrs	93%	93%	n/a

* Note: Zn mineralisation in the oxidised zones is hosted within Smithsonite and Baileychlore and independent test work has confirmed both of these are amenable to acid leaching.

This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

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Figure 2: Thus far the Company has identified 6 additional zinc soil anomalies near the boundary of quartz wacke and Dolostone and within the immediate vicinity of the established resource.

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Figure 3 : One of the priority geochemical anomalies is Target 52.

Forward Looking Statement:

This presentation contains forward looking statements in respect of the projects being reported on by the Company. Forward looking statements are based on beliefs, opinions, assessments and estimates based on facts and information available to management and/or professional consultants at the time they are formed or made and are, in the opinion of management and/or consultants, applied as reasonably and responsibly as possible as at the time that they are applied.

Any statements in respect of Ore Reserves, Mineral Resources and zones of mineralisation may also be deemed to be forward looking statements in that they contain estimates that the Company believes have been based on reasonable assumptions with respect to the mineralisation that has been found thus far. Exploration targets are conceptual in nature and are formed from projection of the known resource dimensions along strike. The quantity and grade of an exploration target is insufficient to define a Mineral Resource. Forward looking statements are not statements of historical fact, they are based on reasonable projections and calculations, the ultimate results or outcomes of which may differ materially from those described or incorporated in the forward looking statements. Such differences or changes in circumstances to those described or incorporated in the forward looking statements may arise as a consequence of the variety of risks, uncertainties and other factors relative to the exploration and mining industry and the particular properties in which the Company has an interest.

Such risks, uncertainties and other factors could include but would not necessarily be limited to fluctuations in metals and minerals prices, fluctuations in rates of exchange, changes in government policy and political instability in the countries in which the Company operates.

Competent Persons Statement:

The information in the resource statement that relates to the Kihabe Resource is compiled by Byron Dumpleton, B.Sc., a member of the Australasian Institute of Geoscientists. The information that relates to the Nxuu Resource is compiled by Mr Ben Mosigi, M.Sc., (Leicester University – UK), B.Sc., (University of New Brunswick – Canada), Diploma Mining Tech (Haileybury School of Mines – Canada), a member of the Geological Society of South Africa.

Mr Dumpleton is an independent qualified person and Mr Mosigi was a Technical Director of the Company during the period in which the resource was calculated. Both Mr Dumpleton and Mr Mosigi have sufficient experience relevant to the style of mineralisation under consideration and to the activity to which they have undertaken to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code of Reporting of Mineral Resources and Ore Reserves”. Both Mr Dumpleton and Mr Mosigi consent to the inclusion in this report of the matters based on the information in the form and context in which it appears.

The information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.