nd 2 Quarter Activities Report 2015/2016

Dear Shareholders, During the 2

nd

Quarter (Oct – Dec 2015) Hannans:

Fast Facts

Exploration & Business Development

ASX Code: HNR



Lapland Nickel-Copper PGE Project – continued with targeting and the preparation of work plans for an initial exploration program.

Capital Structure



Pahtohavare Copper-Gold Project – continued with analysing the drilling program and metallurgical testwork to gain a better understanding of the deposit and controls on the mineralisation; petrographical and hyperspectral scanning results were received.

Shares on issue: 721.9m Market cap: $1.4m (at 0.2c)

Management

Corporate

Managing Director: Damian Hicks



Pahtohavare Copper-Gold Project – Lovisagruvan AB made a positive decision to proceed to Stage 2 of the Joint Venture.



New opportunities – considered a number of transaction proposals including holding advanced discussions with a well-known profitable business with significant growth potential.

Finance & Compliance Manager: Mindy Ku



Discovery Zone Update – commenced action to set aside statutory demand received from Avalon Minerals Ltd.

Non-Executive Directors



Mine Builder Pty Ltd – continued process to recover $800,000 plus interest owed to Hannans from sole director company for sale of mining lease.



Annual General Meeting – held meeting where all resolutions were passed on a show of hands and majority of proxy votes cast were in favour.

Exploration Manager: Amanda Scott

Olof Forslund Markus Bachmann Jonathan Murray

Key Projects

During the 3 Quarter (Jan – Mar 2016) Hannans aims to:

Sole Funded

Exploration & Business Development

Lapland (Nickel-Copper-PGE)



New opportunities – continue to assess the prospectivity of Sweden for Technology Metals such as lithium, cobalt and tin.



Forrestania – monitor exploration for nickel and gold being conducted by joint venture partner Neometals Ltd (ASX:NMT); Hannans holds a 16-20% free-carried interest in the project.

rd

Lannavaara & Rakkuri (Iron) Free-Carried Interest Pahtohavare (Copper-Gold) Lake Johnston (Nickel)

Corporate

QVR (Nickel)



New opportunities – continue to seek out new opportunities that have the potential to add value for shareholders.



Discovery Zone – continue action to set aside statutory demand.



Mine Builder – continue process to recover outstanding $800,000.

WA Exploration Database

Managing Director 30 January 2016

HANNANS 2 N D Q U A R T E R A C T I V I T I E S R E P O R T 2015/2016

EXPLORATION & BUSINESS DEVELOPMENT LAPLAND NICKEL-COPPER-PGE PROJECT The Lapland Project is a major new greenfields exploration project located in north-eastern Sweden (approximately 100km north-east of Kiruna) with the potential to host nickel-copper-platinum group elements and gold mineralisation. EXPLORATION Work during the Quarter included desktop targeting using the information gained from the reconnaissance st field trip completed during the 1 Quarter in addition to continuing the preparation of a workplan for future exploration at the Project. Two permits from the Project were surrendered during the Quarter; the balance of permits for the project is now four. No field exploration was completed at the project during the Quarter. The exploration plan for the next twelve months includes stakeholder meetings, environmental baseline studies, reconnaissance mapping, sampling and prospecting, in-fill airborne gravity and electromagnetic surveys and top-of-bedrock drilling to improve our understanding of the social, environmental and geotechnical (geological, geochemical and geophysical) characteristics of the Lapland Project. Commencement of this exploration work will be subject to funding.

PAHTOHAVARE PROJECT The Pahtohavare Copper-Gold Project is located approximately 8km south-west of Kiruna, northern Sweden. Joint venture partner Lovisagruvan AB is funding the costs of exploration. EXPLORATION Thin section or petrographical samples collected from drillcore from the drilling completed during the 1st Quarter were dispatched to VanPetro in Canada for analysis. The results of this analysis have now been received. It was hoped that the petrographical analysis would help provide some clarification as to the relative timing of clay alteration event, oxidation event and sulphide-bearing infill event. The results were however inclusive although there are at least two stages of clay alteration evident and there is evidence to indicate the sulphide-assemblage is post-dated by oxidation. The results confirmed the host lithologies are bedded sediments which correlate well with the observations made during core logging which identified tuffaceous host lithologies. Clay is the largest constituent in the analysed samples and is also one of the most important minerals in the minerals recovery process so it is imperative that the clay mineralogy is well understood. Specific clay species identification is best done with an XRD or SEM techniques which was not completed as part of this analysis. It is anticipated that additional clay speciation analysis will follow in due course. Continued…

2

HANNANS 2 N D Q U A R T E R A C T I V I T I E S R E P O R T 2015/2016

Figure 1: Photomicrograph (LHS) showing fractured chalcopyrite (yellow) being partially replaced by chalcocite (light blue) from PADH15005, 47.3m. Photomicrograph (RHS) showing pseudo-radial crystals of malachite intergrown with iron oxides from PADH15005, 52.5m.

A section of drillcore from PAD15005 was also analysed using a hyperspectral (TerraCore) scanner located in Malå, Sweden to aid in copper mineral identification and distribution. More specifically it was hoped that the scanner would be able to distinguish between malachite and chrysocolla and give a relative abundance of each mineral. The results showed that in the VNIR-SWIR (very-near to short-wave infrared) spectrum the two copper minerals could be separated and distinguished. The scanning was completed on only one core-box as a ‘trial-run’ and further calibration would be required ahead of any additional scanning. Hyperspectral scanning of the mineralised sections of the drillcore could provide a relatively cost-effective method of determining the relative abundances of the various copper minerals present at Central which would contribute significant information to future metallurgical and processing design for the deposit.

Figure 2: VNIR-SWIR hyperspectral scanning image of drillcore from PADH15005, Pahtohavare Copper-Gold Project, northern Sweden. Image courtesy of TerraCore.

No field exploration was completed at the project during the Quarter.

3

HANNANS 2 N D Q U A R T E R A C T I V I T I E S R E P O R T 2015/2016

JOINT VENTURE AGREEMENT During the Quarter Joint venture partner Lovisagruvan AB (AktieTorget:LOVI) decided to proceed to Stage 2 of the joint venture agreement. Details of Stage 2 of the joint venture agreement are as follows: a) prepare and lodge an exploitation concession application (i.e. a mining lease application) for the Central deposit within approximately 12 months; and a) provide Hannans’ wholly owned subsidiary Kiruna Iron AB with a AUD0.475M interest free working capital facility. As part of their Stage 1 commitment Lovisagruvan spent AUD0.7M and completed the following: 





8 new diamond holes and 1 diamond tail for a total of 760.3m. The drilling programme confirmed the wide, high-grade nature of the copper-gold-silver mineralisation at Central but also showed that the mineralisation is complex, likely due to the insitu weathering and subsequent supergene overprinting of the deposit. copper speciation testwork that showed the majority of the copper mineralisation is associated with cuperiferous clays. Copper speciation testwork, undertaken using an aggressive acid (H2SO4) concentration of 50g/L over 1 hour, indicated the percentage of acid soluble copper for each of the three composites ranged from 83.10-87.85%. a preliminary environmental review that showed the waste rock is most likely not acid producing and no major environmental problems are expected from the existing waste dumps.

Figure 2: Location Map showing the location of the Pahtohavare Copper-Gold Project, northern Sweden.

4

HANNANS 2 N D Q U A R T E R A C T I V I T I E S R E P O R T 2015/2016

CORPORATE PAHTOHAVARE JOINT VENTURE AGREEMENT As discussed above, Lovisagruvan AB made a positive decision to proceed to Stage 2 of the joint venture agreement. As part of this agreement Lovisagruvan has agreed to provide Hannans’ wholly owned subsidiary Kiruna Iron AB with a $475,000 working capital facility secured against the Pahtohavare Project. NEW OPPORTUNITIES During the Quarter Hannans considered a number of transaction proposals including discussions with a wellknown profitable business with significant growth potential. Unfortunately these proposals have not resulted in definitive terms being agreed. The Company will continue with its endeavours to seek out and pursue potential transaction opportunities which may increase shareholder value DISCOVERY ZONE COPPER PROJECT There are three separate but interrelated matters in progress with regards the Discovery Zone Copper Project and Avalon Minerals Ltd (ASX:AVI) (Avalon). The first matter is Hannans’ motion to set aside a statutory demand issued by Avalon in relation to an invoice in the sum of $81,509 issued pursuant to the Heads of Agreement announced to ASX on 6 May 2013 (HOA). Hannans believes there is a genuine dispute about the existence of the alleged debt and the matter is expected to be listed for hearing in March 2016. The second matter is an appeal lodged by Avalon against the decision of the Mining Inspectorate of Sweden to dismiss the Discovery Zone exploitation concession application registered in the name of Avalon’s wholly owned Swedish subsidiary company; Avalon Minerals Adak AB. Hannans will monitor the outcome of the Appeal and its impact on the HOA. The third matter relates to Avalon’s advice to Hannans that it will commence court action to recover $1M paid by Avalon to Hannans pursuant to the HOA. It is important to note that if Hannans is required to refund Avalon, the HOA provides that Hannans can transfer a project of equivalent value to Avalon. There is no requirement in the HOA for Hannans to make a cash payment to Avalon. Hannans reinforces to shareholders that it is reserving all of its rights with regard the HOA. SALE OF MINING LEASE, FORRESTANIA Hannans has not received any payment from Mine Builder Pty Ltd pursuant to the gold rights transaction; the amount owing to Hannans is $0.8M plus interest. Hannans has been closely monitoring Mine Builder’s attempt to restructure its affairs and where possible providing it with assistance as requested. Hannans holds a personal guarantee from Mine Builder’s sole director for the amount owed to Hannans. ANNUAL GENERAL MEETING Hannans held its Annual General Meeting on 24 November 2015; the AGM presentation is available to be viewed at www.hannansreward.com. All resolutions were passed by a show of hands and the majority of proxy votes were cast in favour of all resolutions.

5

HANNANS 2 N D Q U A R T E R A C T I V I T I E S R E P O R T 2015/2016

6

ASX ANNOUNCEMENTS FOR 2nd QUARTER 2015/2016 Date

Announcement

th

Updated Capital Structure

th

2015 AGM Results

th

2015 AGM Presentation

th

Positive Joint Venture Decision

th

Exploration at Forrestania

th

1 Quarter Cashflow Report

th

1 Quarter Activities Report

th

Discovery Zone Update

th

Notice of Annual General Meeting

10 December 2015 24 November 2015 24 November 2015 24 November 2015 16 November 2015 30 October 2015 30 October 2015 28 October 2015 16 October 2015

st st

th

Discovery Zone Update 9 October 2015 nd Table 1: ASX Announcements for 2 Quarter 2015/2016 CONTACTS For further information please contact: Damian Hicks Managing Director +61 419 930 087 [email protected]

Amanda Scott Exploration Manager +46 703 221 497 [email protected]

Tel: +61 8 9324 3388 Web: www.hannansreward.com Email: [email protected] Twitter: @hannansreward Facebook: Hannans Reward

COMPLIANCE STATEMENTS The information in this document that relates to exploration results is based on information compiled by Amanda Scott, a Competent Person who is a Member of the Australian Institute of Mining and Metallurgy (Membership No.990895). Amanda Scott is a full-time employee of Hannans Reward Ltd. Amanda Scott has sufficient experience, which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which has been undertaken to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code). Amanda Scott consents to the inclusion in the report of the matters based on her information in the form and context in which it appears.

HANNANS 2 N D Q U A R T E R A C T I V I T I E S R E P O R T 2015/2016

7

TENEMENT STATUS FOR 2nd QUARTER 2015/2016 CURRENT TENEMENTS

Tenement number

Interest 2 nd Quarter 2015/2016 Start End

KIRUNA IRON AB Location: Norrbotten, Sweden Altavaara 100% Altavaara Norra 100% Gäddmyr nr 1 100% Gäddmyr nr 2 100% Gäddmyr nr 3 100% Pahtohavare nr 2 80% Pahtohavare nr 4 80%

100% 100% 100% 100% 100% 65% 65%

Note

1 1

Tenement number

Interest 2 nd Quarter 2015/2016 Start End

Piedjastjåkko nr 6 Puoltsa nr 4 Rakkurijärvi nr 2 Harrejaure nr 1 Laukujärvi nr 3 Vieto nr 1

100% 100% 100% 75% 75% 75%

100% 100% 100% 75% 75% 75%

Ekströmsberg nr 5

100%

100%

Location: Norrbotten, Sweden Lannavaara nr 8 100% Jalokoski nr 1 0% Merasjoki nr 1 0% Parkajoki nr 1 0% Kaalamakoski nr 1 0% Paljasjärvi nr 2 100%

100% 100% 100% 100% 100% 100%

Note

SCANDINAVIAN IRON AB Location: Norrbotten, Sweden Ekströmsberg nr 4 100%

100%

SCANDINAVIAN RESOURCES AB Location: Västerbotten, Sweden Våtmyrberget nr 6 100% Särksjön nr 2 100%

100% 100%

HANNANS REWARD LTD Location: Lake Johnston, Australia E63/1365 20%

20%

2

Note: 1 Kiruna Iron AB holds 65% interest and Lovisagruvan AB holds 35% interest. 2 Hannans Reward Ltd holds 20% interest. Reed Exploration Pty Ltd holds 80% interest.

TENEMENTS UNDER APPLICATION Nil

RELINQUISHED, REDUCED OR LAPSED TENEMENTS Tenement number

Daningen nr 2 Suijaivaara nr 1

Interest 2 nd Quarter 2015/2016 Start End 100% 100%

0% 0%

Note

Tenement number

Lannavaara nr 1002 Suorkivaara nr 2

Interest 2 nd Quarter 2015/2016 Start End 100% 100%

0% 0%

Note

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

HANNANS REWARD LTD ABN

Quarter ended (“current quarter”)

52 099 862 129

31 DECEMBER 2015

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors (a) (b) (c) (d)

exploration & evaluation development production administration

Current quarter $A’000 –

Year to date (6 months) $A’000 –

(58) – – (120)

(47) – – (221)

1.2

Payments for

1.3

Dividends received

–

–

1.4

Interest and other items of a similar nature received

4

5

1.5

Interest and other costs of finance paid

(1)

(1)

1.6

Income taxes paid

–

–

1.7

Other (provide details if material)

–

–

(175)

(264)

Cash flows related to investing activities Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets

– – –

– – –

Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets

– – 7

– 5 7

1.10

Loans to other entities

–

–

1.11

Loans repaid by other entities

–

–

1.12

Other (Release of security bonds)

20

–

Net investing cash flows

27

32

(148)

(232)

Net Operating Cash Flows 1.8

1.9

1.13

Total operating and investing cash flows (carried forward)

  + See chapter 19 for defined terms.    01/05/2013  Appendix 5B  Page 1   

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report 1.13

Total operating and investing cash flows (brought forward)

(148)

(232)

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

250

250

1.17

Repayment of borrowings

(1)

(2)

1.18

Dividends paid

–

–

1.19

Other (provide details if material)

–

–

Net financing cash flows

249

248

Net increase (decrease) in cash held

101

16

1.20

Cash at beginning of quarter/year to date

412

475

1.21

Exchange rate adjustments to item 1.20

(13)

9

1.22

Cash at end of quarter

500a

500

In addition to the cash shown at 1.22 above Hannans has access to a $475,000 interest free loan facility from joint venture partner Lovisagruvan AB. Refer ASX release dated 24 November 2015. Approximately half of this facility was drawn down in January 2016 and is therefore not reflected in the available cash as at 31 December 2015. Furthermore Hannans is owed $800,000 by unrelated private company MineBuilder Pty Ltd (refer to ASX announcements lodged on 12 March 2015 and 31 July 2015 for further details). This amount is overdue and it is uncertain when it will be received. a

Payments to directors of the entity, associates of the directors, payments to related entities of the entity and associates of the related entities Current quarter $A'000 1.23

Aggregate amount of payments to the parties included in item 1.2

36

1.24

Aggregate amount of loans to the parties included in item 1.12

–

1.25

Explanation necessary for an understanding of the transactions 1.23 Payment of Managing Director’s salary, superannuation and taxes. To assist the Company with managing its cash flow the Managing Director deferred part of his remuneration from April 2013 to March 2015 (2 years) and the NonExecutive directors agreed to defer their remuneration from January 2014. The Managing Director’s deferred salary portion from 1 April 2013 to 31 March 2015 totalled to $209,008 as of 31 December 2015 while the Non-executive directors deferred fees from 1 January 2014 to 31 December 2015 totalled to $183,113.

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

  + See chapter 19 for defined terms.    01/05/2013  Appendix 5B  Page 2   

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

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1

Loan facilities

Amount available d $A’000 487,000c

Amount used $A’000 250,000b

3.2 Credit standby arrangements – – On 22 October 2015 Hannans signed a binding Terms Sheet for a working capital facility of $250,000 with an unrelated third party on normal commercial terms. On 17 November 2015 the loan was fully drawn down and will be repaid during the Quarter. c On 24 November 2015 Hannans announced a positive joint venture decision by partner Lovisagruvan AB (LOVI) which included provision of a $475,000 interest free loan facility by LOVI to Hannans. $237,000 of this facility was drawn down in January 2016. d The $487,000 total therefore comprises the $250,000 facility and the first $237,000 of the LOVI facility. The second half of the LOVI facility can be drawn down in April 2016 and is therefore not included in the aforementioned total. b

Estimated cash outflows for next quarter

a

4.1

Exploration and evaluation

4.2

Development

4.3

Production

4.4

Administration

$A’000 40 – – 448a

Total This includes repayment of the $250,000 loan facility referred to in paragraph 3.1b above.

488

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. 5.1 Cash on hand and at bank

Current quarter $A’000 500

Previous quarter $A’000 412

5.2

Deposits at call

–

–

5.3

Bank overdraft

–

–

5.4

Other (provide details)

–

–

Total: cash at end of quarter (item 1.22) 500c 412 c In addition to the cash at bank Hannans is currently owed a total of $800,000 by MineBuilder Pty Ltd. Hannans holds a personal guarantee from the sole director for the total amount owing.

Continued…

  + See chapter 19 for defined terms.    01/05/2013  Appendix 5B  Page 3   

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

Changes in interests in mining tenements and petroleum tenements

6.1

Tenement reference and location Interests in mining tenements SWEDEN and petroleum tenements Daningen nr 2 relinquished, reduced or Lannavaara nr 1002 lapsed Suijaivaara nr 1 Suorkivaara nr 2 Pahtohavare nr 2 Pahtohavare nr 4

6.2

^

Nature of interest (note (2))

Interest at beginning of quarter

Interest at end of quarter

Lapsed Lapsed Relinquished Relinquished

100% 100% 100% 100%

0% 0% 0% 0%

Reduced^ Reduced^

80% 80%

65% 65%

Interests in mining tenements and petroleum tenements acquired or increased On 24 November 2015 the Company announced that Lovisagruvan AB has earned a further 15% interest in Pahtohavare Project by agreeing to lodge an exploitation concession application within 12 months, providing the Company with a SEK 3 million interest free working capital facility and establishing a corporation (a Swedish aktiebolag) as a vehicle for the further development of the project.

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

–

–

–

–

(a) Increases through issues

–

–

–

–

(b) Decreases through returns of capital, buy-backs, redemptions

–

–

–

–

721,966,133

721,966,133

–

–

(a) Increases through issues

–

–

–

–

(b) Decreases through returns of capital, buy-backs

–

–

–

–

–

–

–

–

(a) Increases through issues

–

–

–

–

(b) Decreases through securities matured, converted

–

–

–

–

7.1

Preference +securities (description)

7.2

Changes during quarter

7.3

+Ordinary securities

7.4

Changes during quarter

7.5

+Convertible debt securities (description)

7.6

Changes during quarter

  + See chapter 19 for defined terms.    01/05/2013  Appendix 5B  Page 4   

Issue price per Amount paid up per security (see note 3) security (see note 3) (cents) (cents)

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report 7.7

Options (description and conversion factor)

Exercise price

Expiry date

12,016,668

0.8 cents

20 November 2017

12,016,668

0.5 cents

20 November 2018

20 November 2019 VWAP* for 10 trading days after 20 Nov 2016 PLUS a premium of 50%

12,016,664

7.8

Issued during quarter

–

–

–

–

7.9

Exercised during quarter

–

–

–

–

7.10

Expired during quarter

–

–

–

–

7.11

Debentures (totals only)

–

–

7.12

Unsecured notes (totals only)

–

–

Compliance statement 1 2

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). This statement does give a true and fair view of the matters disclosed.

Damian Hicks Managing Director 29 January 2016

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.    01/05/2013  Appendix 5B  Page 5