Hexagon Resources : Quarterly Activities Report – 31 December 2016 31 January 2017

ASX ANNOUNCEMENT 31 January 2017

HIGHLIGHTS:

McIntosh Flake Graphite Project:

• Excellent reversible capacity of >370mAh/g across the entire flake size distribution from a bulk scale, representative McIntosh flake graphite blended concentrate (coin cell data, electrode: 91.9 wt% graphite, 2% conducting carbon, 6.1% binder)

• Reversible capacity results are within experimental error of full theoretical capacity for graphite at 372mAH/g

• These outstanding results have been achieved prior to any spheronisation or coating process being applied
• Pre-feasibility study progressing with the Company focusing efforts on environmental, hydrogeological, geotechnical assessments along with engineering and process design
• An aerial electro-magnetic survey was completed over the Marlin and Mahi Mahi prospects aimed at significantly expanding the overall potential of the McIntosh Project
• CSA Global completed an independent assessment of the Company's tenements in the Kimberley of Western Australia, with a specific focus on their gold and base metal potential

  Corporate:

• Announcement of the Sale Agreement of the subsidiary company that holds its South Korean assets to Battery Mineral Resources Limited ("BMR")
• Subsequent to the end of the quarter; Hexagon closed the amended sale of the subsidiary company that holds its South Korean assets to BMR

MCINTOSH FLAKE GRAPHITE PROJECT

Test work was conducted on a 97.5% TC blended flake graphite concentrate containing all the flake sizes, produced from a 300kg representative sample from HQ diamond drill core from the McIntosh project by an independent company in the USA.

Test work demonstrate excellent reversible capacity >370mAh/g on a representative McIntosh flake graphite blended concentrate (coin cell data, electrode: 91.9 wt% graphite, 2% conducting carbon, 6.1% binder). These reversible capacity results are within experimental error of full theoretical capacity for graphite (372mAH/g) and were achieved prior to any spheronisation or coating process being applied

Crystallite size and BET surface are normal for flake graphite, and surface area after grinding to 635 mesh is ~ 6.2m2/g being a good result for next stage processing of spheronisation and coating. The McIntosh representative, blended concentrate displays high reversible capacity and at this stage of testing does not exhibit any characteristics that would make it not suitable for LIB applications

• Open pit mining optimisation results demonstrate the potential for multiple low strip ratio, open pit operations across a range of production scenarios
• Environmental surveys for the mining proposal are well advanced with baseline flora and fauna surveys completed
• Hexagon in advanced discussions with key potential end users in the US, Europe and Asia
• Drilling program completed to upgrade further resources in preparation for commencement of mining
• Superior metallurgy +99% TC ultra-high purity graphite concentrate can be achieved from conventional crush, grind and flotation without the use of chemicals
• Hexagon is well positioned to take advantage of the unprecedented demand from the lithium ion battery market, and the rapidly emerging graphene market, by producing premium quality graphite and graphene

During the quarter Hexagon reported on the results of a high-level desktop assessment regarding gold, base metal and platinum group element prospectivity on its 100% owned tenements located in the East Kimberley region of Western Australia.

The desktop assessment will provide the Company a forward looking work program aimed at providing confidence to the Company to progress with the development of these assets. Whilst our focus remains graphite, we believe it very important that we find ways to maximize our shareholders value with respect to significant potential of our Halls Creek tenements and this is our first steps to do so.

Figure 1: Hexagon's 100% Tenement Holdings in the East Kimberley, Western Australia

The areas of interest arising from CSA Global's study include:

• Magmatic Sulphide (Ni / Cu / PGE) in the McIntosh and Mabel Downs projects (see Figures 2 & 3):

  • The McIntosh project area immediately along strike in either direction to the Copernicus Open Cut Mine.

  • The Mabel Downs project area immediately along trend of the Savannah Mine where there are a number of mafic-ultramafic intrusive bodies of the Sally Malay suite.

  • The remainder of these two project areas (McIntosh and Mabel Downs) remain highly prospective for conduit hosted magmatic hosted Nickel / Copper / PGE massive sulphide mineralization.

Figure 2: Hexagon's Tenement Holdings at the McIntosh Project