QUARTERLY REPORT 1 JULY 2017 to 30 SEPTEMBER 2017

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1 31 October, 2017 Australian Securities Exchange Level 5, 20 Bridge Street SYDNEY NSW 2000 QUARTERLY REPORT 1 JULY 2017 to 30 SEPTEMBER 2017 Stonewall Resources Limited (ASX: SWJ) Stonewall, Company or the Consolidated Entity is pleased to report on its activities for the three-month period ended 30 September HIGHLIGHTS Discovery of new high grade, potential open-cut target adjacent to CIL plant Initiation of the company s exploration and development plans with contractors appointed Funding initiatives delivering optimistic outcomes with committed funds EXECUTIVE SUMMARY The September quarter continued the work on evaluating pre-development and advanced exploration plans for the company, with the view to maximising value and optimising returns to shareholders. Ongoing geological review continues to reveal new and exciting discoveries spread across our large prospecting precinct, including exciting open-cut targets, which were previously announced in early September (Project Bentley). Whilst yet to be incorporated into the company s JORC resources, high-grade potential of up to 100g/t has been identified warranting near term drilling and further evaluation. Dependent on the results the Company aims to develop a mine plan for execution as soon as possible. It is anticipated that with ongoing geological work and drilling, which is due to commence shortly, significant value will be added in coming months. Finally, following recent and planned capital raises, the long awaited reserve definition-drilling campaign at Rietfontein will commence signaling progress towards the pre-feasibility study and recommencement of gold production as soon as possible thereafter. CORPORATE Arbitration Award Update As announced on 24 July 2017, the Beijing Court has ruled that the Arbitral Award (Case No. HKIAC/A15021) against Shandong Qixing Iron Tower Co., Ltd (now renamed Northcom Group Limited Northcom ) will be enforced under the jurisdiction of the Beijing No.4 Intermediate People s Court. This follows the Company s application to the Beijing Court following the failure by Northcom and its controlling shareholder to comply with the award by the Arbitral Tribunal on 1 September The current value of the award, costs plus interest is in excess of US$17.0 million. To date, Northcom have failed to comply with the award and the Company continues to pro-actively explore 1

2 all legal avenues to enforce the award. The Company has entered into a funding agreement with a consortium, which is entitled to 45% of the award, plus reimbursement of the costs they have funded. The Company s Beijing based lawyers are progressing matters with the Beijing No.4 Intermediate People s Court. Further updates to shareholders will be provided in due course. Cash position and funding As at 30 September 2017, the Consolidated Entity had $184,000 in cash with further committed funds from the recent capital raise. Share Purchase Plan On 22 September 2017, the Company announced an offer of shares to eligible shareholders pursuant to a share purchase plan (SPP Offer). Eligible shareholders for the purpose of the SPP Offer are shareholders who were registered holders of shares on the Record Date, being 21 September 2017, and whose registered address was in Australia or New Zealand. The offer is priced at $0.019 per share. Eligible shareholders will also be entitled to 1 free attaching listed option (Option) for every share subscribed. Each Option will be exercisable at $0.03 per share and expire on 31 October The SPP Offer opens on 3 November 2017 and a prospectus for the offer will be dispatched to eligible shareholders on that date. The SPP Offer closes on 23 November Share Placement On 27 October 2017, the Company announced a share placement at $0.019 per share, each with a free attaching listed option exercisable at $0.03 per share and expiring on 31 October 2020, to raise $2.5 million. The successful placement was made to professional and sophisticated investors. The funds raised from the SPP Offer and share placement above will be used to initiate a number of planned drilling programmes including reserve definition drilling at the high grade Rietfontein gold mine as part of the pre-feasibility study and resource definition drilling at the recently announced Theta Hill and Columbia Hill open pit targets (Project Bentley), for general working capital and to strengthen the Company s balance sheet. Annual General Meeting The 2017 annual general meeting will be held at 12.00pm on 30 November 2017 at Royal Automobile Club of Australia Vintage Room 89 Macquarie Street SYDNEY NSW 2000 Developments post the quarter Work continues on planning for the upcoming drilling programs (now planned across three target areas, Rietfontein, Theta Hill and Colombia Hill). The company recently hosted a Sydney-based independent analyst (Mark Gordon, Independent Investment Research) at the projects. Mark has visited the project previously, and has extensive 2

3 professional experience in gold mining and exploration. Stonewall anticipates two research reports on the company will be forthcoming in the December quarter. Figure 1) Meeting at SWJ s geological consultants in Johannesburg, Minxcon, with (from left) Uwe Engelmann (Director Minxcon), Phil Bentley (Senior Advisor, Exploration - Stonewall) and Mark Gordon (Independent Analyst Sydney) Figure 2) Members of the Stonewall team underground at Rietfontein, with Mark Gordon (Independent Analyst from Sydney), 3

4 Figure 3) High grade quartz vein on the gold reef within Adit #3 Rietfontein Mine SOUTH AFRICAN PROJECTS (SWJ: 74%) Project Bentley The high grade Project Bentley was announced to the market on 6 September, based on the preliminary results of data compilation and modeling undertaken to investigate a high grade, multiple-level gold reef system at the Company s TGME Project in South Africa. Many of multiple horizontal gold reefs are stacked vertically with potential to be accessed via lowcost, open cut mining. Two areas are of primary focus the Theta Hill area and the Columbia Hill area, work on which is ongoing. There are other areas also being identified along the 80 km breadth of this large gold district, as part of Project Bentley. At Theta Hill, an Exploration Target of 3.4Mt to 5.6Mt has been established, including the Lower Theta seam with a target of 1.0Mt to 1.7Mt at 16.6g/t to 26.6g/t Au: Table 1) Theta Hill Exploration Target* Reef Ave. Reef Min. Max. Min. reef Max. reef Width (cm) tonnes (Mt) tonnes (Mt) grade (g/t) grade (g/t) Beta Lower Theta *Refer to Cautionary Statement Cautionary Statement The potential quantity and grade of the Exploration Target referred to above is conceptual in nature, and there has been insufficient exploration conducted to estimate a Mineral Resource hence there is no certainty that planned exploration will result in the estimation of a Mineral Resource. 4

5 A drilling program at Theta Hill to confirm the grade and tonnage within the multiple-level gold reef system is planned, subject to funding, with the aim of establishing a resource base for potential open cut mining operations. The Theta Hill area is adjacent to the TGME CIL processing plant at Pilgrim s Rest, and has been the focus of mostly underground mining up until the 1950 s, with the last mining in 1956 focused on open cut. The work undertaken to date by SWJ has involved modeling of historical drilling and sampling data, which, subject to funding, SWJ plans to follow up shortly with drilling with the aim of establishing a Mineral Resource. Figure 4) Gold nuggets panned in a creek below Theta Hill in October 2017 The driving force behind Project Bentley has been the recognition of the potential for high grade, near-surface resources that were not extracted by previous mining for a variety of factors. This work is complementary to our plans to develop the historical high-grade underground mines at Rietfontien and Beta, which remains the focus of the Company as we progress towards restarting gold mining operations through a refurbishment and upgrade to the TGME processing plant at Pilgrim s Rest. Competent Person Statement The information in this report that relates to the exploration targets is based on work completed by Mr Uwe Engelmann (BSc (Zoo. & Bot.), BSc Hons (Geol.), Pr.Sci.Nat. No /08, MGSSA), a director of Minxcon (Pty) Ltd and a member of the South African Council for Natural Scientific Professions, and is based on, and fairly represents, information and supporting documentation prepared by Mr Engelmann. The potential exploration target ranges are conceptual in nature and there is insufficient exploration data to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource. The original report titled Project Bentley dated 6 September 2017 was released to the Australian Securities Exchange on that date. The Company confirms that- it is not aware of any new information or data that materially affects the information included in the Australian Securities Exchange announcement; and all material assumptions and technical parameters underpinning the estimates in the Australian Securities Exchange announcement continue to apply and have not materially changed. 5

6 Figure 5) Location of Project Bentley showing Theta Hill Exploration Target* The majority of ounces in the Exploration Target are located in the Lower Theta reef. Historically, the Theta Hill Mine was reportedly the highest-grade underground gold mine in the world at one time, with an average head grade of 60g/t Au. In addition to the Beta and Lower Theta reefs, there are three other seams in the sequence including Bevett s Conglomerate, Upper Theta, and below the Beta reef, the Portuguese Reef. These reefs do not yet have Exploration Targets estimated due to the insufficiency of data, however will be assessed as part of the planned exploration program. Based on the shallow average depth of cover of 45m (to the base of the Lower Theta seam), SWJ intends to investigate Theta Hill for both open cut and underground potential. 6

7 Figure 6) Theta (& Browns) Hill Exploration Target with the 5 reefs identified shown. Source: Minxcon Rietfontein and Beta Mine The company plans to commence drilling at Rietfontein in coming weeks, with the aim of further upgrading both the size and level of confidence in the existing high grade resource. Further details on the schedule and location of drilling are due to be announced shortly. AUSTRALIAN PROJECT (SWJ: 100%) Lucky Draw (EL 8540) The Lucky Draw tenement is situated near the township of Burraga, approximately 3 hours west of Sydney. The Lucky Draw tailings dam is located 1.3 kilometers northeast of the Lucky Draw gold mine, an open cut mine that ceased operation in The Company s application for renewal of the tenement was approved by the NSW Department of Minerals and Energy on 22 March This project is not a current focus for the company. ABOUT STONEWALL RESOURCES LIMITED Stonewall Resources Limited (ASX: SWJ) is a gold mining company that holds a range of prospective gold assets in a world-renowned South African gold mining region. These assets include several surface and near-surface high-grade gold projects, provide cost advantages relative to other gold producers in the region. SWJ s core project is TGME, located next to the historical gold mining town of Pilgrim s Rest, in Mpumalanga Province, some 370km east of Johannesburg by road or 95km north of Nelspruit (Capital City of Mpumalanga Province). Following small-scale production from , the Company is currently focussing on the refurbishment of the existing CIL plant and nearby mines with the intention of resuming gold production in The Company aims to build a solid production platform to over 100kozpa based primarily around shallow, adit-entry hard rock mining sources. 7

8 Stonewall has access to over 43 historical mines and prospect areas that can be accessed and explored. Figure 7) Mining Pilgrims Rest Area, late 19 Please visit our website: For further information please contact: Robert Thomson, Managing Director Stonewall Resources Limited M: E: 8