For personal use only - ASX · The Company commenced community and stakeholder groups consultation for the tenements EL5336, ... It closed in 1960 due to the very low gold prices

Mantle Mining Corporation Limited

ABN 70 107 180 441

Half-Year Financial Report

For the half-year ended

31 December 2015

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Table of Contents

MANTLE MINING CORPORATION LTD ABN 70 107 180 441 2

Corporate Directory 3 Directors’ Report 4 Auditor’s Independence Declaration 19 Consolidated Statement of Comprehensive Income 20 Consolidated Statement of Financial Position 21 Consolidated Statement of Cash Flows 22 Consolidated Statement of Changes in Equity 23 Notes to the Consolidated Financial Statements 24 Directors’ Declaration 29 Independent Auditor’s Review Report 30

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Corporate Directory


Directors

Mr Martin Blakeman Non-Executive Chairman Mr Ian Kraemer Managing Director Mr Stephen de Belle Non-Executive Director Company Secretaries

Mr Winton Willesee Ms Erlyn Dale Principal Place of Business and Registered Office

Suite 25 145 Stirling Highway Nedlands WA 6009 Contact Details

Website: www.mantlemining.com Email: [email protected] Tel: +61 8 9389 3130 Fax: +61 8 9389 3199

Solicitors to the Company

Fairweather Corporate Lawyers 595 Stirling Highway Cottesloe WA 6011 Share Registry

Security Transfer Registrars Alexandria House Suite 1 770 Canning Highway Applecross WA 6153 Tel: +61 8 9315 2333 Fax: +61 8 9315 2233 Auditors

RSM Australia Partners 8 St Georges Terrace Perth WA 6000 Stock Exchange

Australian Securities Exchange 2 The Esplanade Perth WA 6000 ASX Code: MNM, MNMOB and MNMOC

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http://www.mantlemining.com/

mailto:[email protected]

Directors’ Report


The directors of Mantle Mining Corporation Limited submit herewith the financial report of Mantle Mining Corporation Limited and its subsidiaries (the “Group”) for the half-year ended 31 December 2015. In order to comply with the provisions of the Corporations Act 2011, the directors report as follows: The names of the directors of the Company during or since the end of the half-year are: Mr Martin Blakeman – Non-Executive Chairman Mr Ian Kraemer – Managing Director Mr Stephen de Belle – Non-Executive Director All directors were in office for the entire period. Results The loss of the Group for the half-year ended 31 December 2015 after providing for income tax amounted to $922,182 (31 December 2014: $2,417,145). No dividends were declared or paid during the half-year ended 31 December 2015. Review of Operations Mantle Mining is an Australian based minerals exploration and mine development company. Mantle’s principal activities are to acquire exploration tenements and locate economically developable deposits of gold and other minerals. It is Mantle’s intention to progress mineral deposits through feasibility and into mining operations, to the benefit of all stakeholders. Mantle’s existing project locations are shown in Figure 1. Mantle is progressing its gold projects located in Queensland with a priority given to the start-up of the Norton Gold Mine and is finalising the acquisition and commencing start-up of the Morning Star Gold Mine in Victoria. The Company is continuing to investigate brown coal upgrade options through a technology joint venture in Victoria, while also investigating a Solar-Pumped Hydro Energy Storage Project solution for the Latrobe Valley in Victoria.

Figure 1: Mantle’s existing project locations.

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Directors’ Report


Morning Star Gold Mine: During the half year Mantle announced that it had agreed conditional terms to acquire a 95% interest in Morning Star Gold NL (formerly listed on the ASX as MCO), the owner of the Morning Star Gold mine located at Woods Point, Victoria, and announced it had secured funding commitments to meet the initial acquisition payments. The meeting of shareholders of MCO to consider the transaction is to be held on 31 March 2016 however the acquisition transaction is structured whereby should the MCO shareholders elect not to approve the acquisition of interests in MCO then Mantle will be entitled to acquire the assets of MCO directly. A management team has been appointed to facilitate the operational restart program and a preliminary review of the available data and the possible mining and process plant improvements has commenced. Norton Gold Mine: An internal scoping study confirmed the decision to proceed with the re-opening of the Norton Gold Mine and further exploration trenching work located additional high grade gold. This work increased the potential for improvement in the Norton project life and operating economics.

Granite Castle Gold Exploration Project: The Granite Castle Project area contains a Measured, Indicated and Inferred gold Resource. During the half year Mantle announced the discovery of anomalous gold around a Carboniferous rhyolite plug which warrants follow-up exploration consisting of further geological reconnaissance, structural mapping, outcrop sampling and ground magnetics. A revised Mineral Development Licence application was lodged for the Granite Castle prospect and EPM 15527 was successfully renewed over 25 sub-blocks. The Charters Towers Gold Project: The Charters Towers Project area contains the Great Britain Inferred gold Resource as well as a number of historic mines, including Day Dawn West, immediately west along strike from the main historic underground mining area. The Gromac/Puzzler area is prospective for deposits of copper, gold, silver and molybdenum. Bacchus Marsh Coal Project: The Bacchus Marsh Project area contains an Inferred Resource of brown coal. Mantle is in Joint Venture with clean coal technology company Exergen Pty Ltd to develop the deposit utilising Exergen’s patented Continuous Hydro-Thermal Dewatering (CHTD) technology and/or alternate brown coal enhancement processes. EL5323 was surrendered during the half year and the EL5294 Bacchus Marsh Brown Coal Resource was upgraded to comply with JORC 2012. A new drilling plan was designed to enable possible re-calculation of EL5294 Brown Coal Resource to Indicated Resource status. The Latrobe Valley Coal Project: During the half year the Company announced plans to develop a Solar-Pumped Hydro Energy Storage project (SPHES). Victorian University research units were consulted and a decision was made to appoint Federation University, Gippsland Campus as lead research unit. A draft MOU was commenced for establishing a scoping study by Federation University students and staff to establish the feasibility of such a project. The scope of such a study is yet to be finalised. The Company commenced community and stakeholder groups consultation for the tenements EL5336, EL5338, EL5428 and EL5429 and partial relinquishment applications were lodged for high competing use areas within three of those tenements. Discussions were held with existing tenement holders within S7 exempt area for a SPHES project site (location not yet finalised) and R & D funding options were examined. As a result of tenement obligations and the need to upgrade the coal resources according to JORC 2012, EL5210 Yalungah Brown Coal Resource was upgraded to comply with JORC 2012.

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Directors’ Report


Corporate: During the period, the Company secured commitments from professional and sophisticated investors for a placement of 250 million shares at $0.01 per share, together with 125 million new options (3c, November 2018) to raise $2.5 million before costs. The placement is to be completed in two tranches with Tranche 1 being the issue of 79,975,793 shares to raise $799,758 and Tranche 2 being the issue of all remaining shares and options under the placement. Tranche 1 was completed on 16 December 2015. Completion of Tranche 2 is subject to the Company proceeding to acquire either its proposed majority interest in MCO or the assets of MCO. Background to Morning Star Gold Mine: The Morning Star gold mine is located near the town of Woods Point approximately 120 km northeast of Melbourne (Figure 2).

Figure 2: Morning Star gold project location. Figure 3: Project tenements.

The mine is located within a large regional tenement holding containing a number of historically high-grade gold mining operations within easy transport distance to the treatment plant. In addition to historic mining in the upper levels, the mine was operated by Gold Mines of Australia (WMC Ltd) between 1934 and 1959 (predominately in the deeper levels) and is reported to have produced 883,000 oz Au at an average grade of 26.6 g/t Au over its lifetime. It closed in 1960 due to the very low gold prices of the time and was allowed to flood (Figures 3 and 4).

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Directors’ Report


Figure 4: Regional gold mines with historic production (A1 and Cohens held by others, Source MCO).

The mine exploits narrow quartz vein deposits hosted in a diorite dyke that is 700m long by 120m wide. The quartz veins are stacked and range up to 2m thick. Historic workings continue underground for 815m below the surface, to 25-level, and the dyke remains open at depth (Figures 4 and 5). Numerous other dyke hosted mines exist on the MCO tenements. MCO acquired the assets in 1992 and spent substantial amounts exploring and developing the tenements. A new headframe and winder have been installed and the mine has been pumped out and the shaft refurbished to 10-level. Development drives have been rehabilitated in the upper levels to access new production areas. A large gap zone remains between the upper levels that were historically mined, and the lower levels that were mined by WMC. MCO initially targeted production from remnant stopes above 10-level. Generally, development targets are located only short distances from the refurbished shaft. Donaldson’s Reef, on 2-level, is only 100 m from the shaft, and Kenny’s Reef, on 9-level, has already been accessed to enable bulk sampling for metallurgical purposes (Figure 5).

Figure 5: Potential production targets in upper areas of the mine (Source MCO).

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Directors’ Report


A new beneficiation plant was installed and a paste backfill plant built. Supporting infrastructure includes a high-speed winder, a water treatment plant, surface and underground power supplies and various site offices, workshops and a miner’s camp. Expenditure on these projects since 2009 is reported to have been close to $20 million (Picture 1).

Picture 1: Morning Star process plant and mine offices.

The gold at Morning Star is traditionally free milling allowing for production of a high grade concentrate from simple gravity processing and the plant is located central to other historically and currently operating gold mines that suffer from a lack of such infrastructure. MCO’s Rose of Denmark (under Joint Venture), All Nations, and Wallaby mines in particular hold substantial potential as additional production sources (Pictures 2 and 3).

Picture 2: First gold pour from Morning Star (2011). Picture 3: Coarse gold from Rose of Denmark mine. F

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Directors’ Report


Background on the Norton Gold Project: The Norton Gold Mine is located 100km by road south of the port city of Gladstone in Queensland (Figure 6).

Figure 6: Norton Gold Mine project location.

ML 80035 covers the majority of the historically known gold veins within the Norton gold field. An independent JORC (2012) Mineral Resource estimate was calculated for the Norton Gold Mine to a maximum depth of 150m below surface. An internal scoping study was also undertaken and the key scoping study inputs, assumptions and outcomes are shown in Table 1.

Parameter Assumption or Output

Resource % in Indicated category 76%

% in Inferred category 24%

Mine design Initial mine life 2.5 years

Mining rate 25 000 tpa ROM

ROM head grade 6.5 g/t

Gold Recovery Onsite concentrate 90%

Toll Treatment 90%

Revenue Gold recovered 10 340 oz

Gold price $1 500 /oz

Justification All in sustaining cost (AISC) $775 /oz

NPV (8% discount rate) $4.7 million

Table 1: Key Scoping Study Parameters.

The Scoping Study is based on low-level technical and economic assessments, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised. There is a low level of geological confidence associated with inferred mineral resources and there is no certainty that

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Directors’ Report


further exploration work will result in the determination of Indicated Mineral Resources or that the production target itself will be realised. The best gold grades in the Frampton and Never Never workings are associated with zones of silicification and quartz that can pinch and swell laterally and vertically within the host structures. The mineralised veins at Norton are known to sub-crop between surface and 5m deep (in bedrock). To define additional potentially economic mineralisation, a trenching program was undertaken. The program was aimed at progressing the understanding of potential grades, subsurface geometry and structural setting of some of the major mineralised veins that are not currently included in the Resource estimate. Trenching is limited to 1.5 m deep for safety purposes so if bedrock is not encountered by 1.5 m depth this does not necessarily mean that mineralised veins do not exist. Trenches are cut with an excavator 0.6 m wide and between 5 and 30 m long and once uncovered, the veins were sampled by chipping channels along the wall with chisels and crack hammers. Chipping is sometimes done across a broad interval, but often it was targeted where the veins were easily discernible (Pictures 4 and 5).

Picture 4: Typical trench. Picture 5: Trench sampling. The results are very encouraging as they show the presence of gold mineralisation in structures where not previously confirmed. The results of the trenching program support the potential for improvement in the Norton project life and economics and provide focus for targeted exploration and resource drilling. Trench locations and the best (greater than 1 g/t per metre basis) trench results are shown in the Table 2 along with rock chip grade locations in Figures 7 and 8.

Table 2: Selected trenching results.

Trench From (m) To (m) Interval (m) Au_ppm Auxm g/t Ag_ppm As_ppm

TR15-03 12.5 14 1.5 0.68 1.02 4.8 5390

TR15-03 20.1 20.4 0.3 13.7 4.11 20.8 14400

TR15-03 25.8 25.9 0.1 28.6 2.86 35.6 4620

TR15-03 28 30 2.0 0.97 1.94 1.5 904

TR15-06 3 3.6 0.6 4.45 2.67 4.6 5350

TR15-06 3.4 3.55 0.2 18.15 3.63 28.9 12950

TR15-08 3.6 4.6 1.0 35.6 35.6 163 3450

TR15-11 15 16 1.0 7.59 7.59 35.2 41100

TR15-11 17.9 18 0.1 46 4.6 82.5 15050

TR15-12 0.6 0.7 0.1 50.5 5.05 44.6 29300

TR15-12 1.1 1.9 0.8 3.47 2.78 7.1 12350

TR15-12 1.9 3 1.1 1.62 1.78 1.9 710

TR15-13 11.8 13 1.2 1.65 1.98 4.6 5460

TR15-15 6.2 6.7 0.5 8.13 4.07 10.5 22500

TR15-16 1.6 1.7 0.1 13.7 1.37 22.8 53300

TR15-16 2.7 3 0.3 3.43 1.03 7.2 13700

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Directors’ Report


Figure 7: Trench locations. Figure 8: Sample grades.

Background on the Granite Castle Gold Exploration Project: Granite Castle is located 260km west of Townsville and 120km north of Hughenden (Figure 9).

Figure 9: Granite Castle project location.

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Directors’ Report


Figure 10: Tenements on surface geology. Figure 11: Mineralised shears.

EPM 14179 contains the Granite Castle Mineral Resource, which is contained in a 600m long portion of a near vertically plunging shear. The shear remains open to the east, the west and at depth and the area contains a large swarm of gold-silver mineralised shears exposed at surface semi parallel to the Granite Castle shear. The geologic model of the Granite Castle Mineral Resource is relatively simple with the majority extending from surface, sub-vertically to 150 m depth. Strong IP anomalies were identified on both the Granite Castle and Coronation shears and subsequent drilling confirmed shear-hosted gold mineralisation below these outcrops. It is apparent there is excellent potential to deliver a major expansion of the existing resource by drilling on multiple mineralised shears at shallow depths. At Granite Castle, gold is deposited along a series of WNW trending shear zones. Prior drilling programs at the Coronation shear have highlighted that gold is more strongly concentrated near changes in strike of the shear. Close inspection of the areas around shear zone intersections carrying high grades recognised a second set of conjugate shears cutting across the main mineralised shears. An important interpretation of these observations is that gold is more strongly concentrated along and around shear zone intersections, where changes in volume and shear strain have influenced fluid flow. As a result, new detailed mapping was undertaken in order to further understand these structural controls. Mantle recently undertook a drainage sampling program around a felsic intrusive plug in the area. This area has been given the name Oaky and the drainage values returned show a broad area of +1ppb gold anomalism in the southern one-third of the survey area. 1ppb Au values appear to be significant in the context of a regional background of below 0.5ppb Au, and values greater than 10ppb are of definite interest (Figure 12 and Table 3).

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Directors’ Report


Figure 12: Central intrusive with drainage and fracture patterns and anomalous gold grades.

Sample Gold (ppb) ST43 Gold (ppb) ME-MS41 Arsenic (ppm)

112202 5 12.2 0.95

112205 0.4 1 1.27

112214 25 6.8 1.75

112216 0.9 1.8 0.78

112220 0.4 1.1 0.84

Table 3: Selected drainage sampling program results.

Field follow-up has yet to be completed to determine the source of this gold anomalism.

The Latrobe Valley Solar-Pumped Hydro Energy Storage (SPHES) Project: Mantle’s SPHES Project is targeting a location near one of the existing brown coal open cut pits within the Latrobe Valley, shown as the brown cross-hatched areas in Figure 13. The greyed areas in Figure 13 are Mantle’s current exploration licences and the blue area is the S7 Exempt Area where tenement acquisition must be negotiated directly with the Government (normal application processes do not apply). Mantle is currently negotiating with some of the holders of existing tenements (white areas within the S7 exempt area). Alternatively, an application may be made directly to the Victorian Government for a suitable location for the project. The SPHES project is a long-term, innovative concept to enable the utilisation of disused brown coal open-cut mines while developing alternate renewal energy generation and storage to help replace existing brown coal-fired power stations, as they are gradually phased out of service. The existing open-cut pits must be rehabilitated and for the pit walls to remain geo-technically stable the pits must be filled. The only commercial way of filling these vast surface voids is with water, thus forming large surface reservoirs.

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Directors’ Report


Figure 13: Location of SPHES Project.

Despite black coal exploration within the Latrobe Valley having been non-existent to date, Mantle has long held the belief that black coal of suitable quality exists in commercially mineable quantities underground. Existing plans to drill 1 or 2 deeper, small diameter, diamond-core holes in each of the surrounding Exploration Licences will assist in defining the presence, extent, structure and quality of the black coal at depth. Previous deep oil exploration drill holes by others, confirm the presence of thin black coal seams at depth.

The mining of black coal by bord and pillar methods beneath the Latrobe Valley would provide underground void space, with negligible structural damage to surrounding strata or aquifers, which could be used as the underground reservoir in a pumped hydro generation system linked to a surface reservoir. When power is required, water is piped from the upper reservoir through hydroelectricity generators into the underground voids which have been sealed with a concrete lining. Solar electricity arrays would then power multiple smaller pumping units to return the water to the upper reservoir to be available for the next generation period (Figure 14).

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Figure 14: Final concept diagram. Mined black coal could be used to co-fire the existing brown coal-fired stations thus reducing their CO2 emissions during the transition to renewables. Alternatively, the deeper black coal may be suitable to be exported as coking or PCI coal for use in steelmaking processes. If this was the case, transport to port loading facilities would potentially be via buried slurry pipelines along existing pipeline easements to eliminate any visual or traffic impacts on the landscape and transport infrastructure. Trackable solar arrays on some of the north-facing slopes of the Strzelecki Hills would reclaim previously forested areas where careful natural reafforestation could be carried out by Traditional Owner groups to complement the visual aspect of the solar panels. Pontoon mounted solar arrays would float on the surface reservoirs and be designed to prevent evaporation, resist storm events and be able to move with the slight decrease and increase in water level. The visual and community amenity of the rehabilitated mine pits (examples only, pictures 6 and 7) would be improved with more native species plantings and public recreational areas.

Picture 6: Rehabilitated YNX pit Picture 7: Rehabilitated Yallourn Pit

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Directors’ Report


During the half year, discussions with the research units of many of the Universities in Melbourne and the Gippsland Region took place to ascertain interest in a collaborative research project with Mantle. This research would examine and scope the technical feasibility and engineering aspects of the project leading into the commercial feasibility and engineering design. With the long-term goal of setting up a Centre of Excellence for Renewable Systems within the Latrobe Valley, Mantle is in the process of drafting an MOU with Federation University, Gippsland Campus (at Churchill), to act as lead research unit and coordinator with other Universities and research bodies. As power station and mining jobs phase out in the Latrobe Valley, it is hoped that these jobs will be upskilled into the renewable energy sector while remaining local to the Latrobe Valley. Mantle’s Tenement Schedule is detailed in Table 4:

Tenement Project Name Grant Date Expiry Date Area Interest (%)

ML 80035 1 Norton Norton 04/04/1996 30/04/2017 22 Ha 90

EPM 14388 Charters Towers

Charters Towers 24/02/2005 23/02/2020 7 sub blocks 100

EPM 14179 Granite Castle Range Creek 25/11/2004 24/11/2017 6 sub blocks 100

EPM 15527 Granite Castle Oaky Creek 30/11/2007 29/11/2019 25 sub blocks

100

MDL 493 Granite Castle Range Creek application 1,935 Ha 100

EL 5294 2 Bacchus Marsh Bacchus Marsh 23/03/2011 22/03/2016 154 graticules

50

EL 5210 Latrobe Valley Yalungah 03/06/2009 02/06/2019 25 graticules 100

EL 5336 Latrobe Valley Jeeralang 30/04/2015 29/04/2020 368 graticules

100

EL 5337 Latrobe Valley Thorpdale 20/04/2011 19/04/2016 79 graticules 100

EL 5338 Latrobe Valley Baromi 30/04/2015 29/04/2018 3 graticules 100

EL 5428 Latrobe Valley Mirboo 01/06/2015 31/05/2020 21 graticules 100

EL 5429 Latrobe Valley Callignee 01/06/2015 31/05/2020 29 graticules 100

Table 4: Mantle’s Tenement Schedule.

1. Remaining 10% interest held by Joint Venture partner Avanti Mining and Contracting Pty Ltd. 2. Remaining 50% interest held by Joint Venture partner Exergen Pty Ltd.

Mantle’s Mineral Resource Base The Norton Gold Mine project contains an Indicated and Inferred gold and silver Resource (above 2 g/t Au cut-off).

Class Tonnes Au (g/t) Au (oz) Ag (g/t) Ag (oz)

Indicated 107,000 6.2 21,100 15 50,300

Inferred 141,000 3.9 17,700 12 52,600

Total 248,000 4.9 38,800 13 103,000

Table 5: Norton Gold Mine Resources. The information in Table 5 is extracted from the report entitled “Norton Gold Mine Resource Estimate” created on 15 May 2015 and is available to view on www.mantlemining.com.

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Directors’ Report


The Granite Castle Gold Project area contains a Measured, Indicated and Inferred gold and silver Resource (above 1 g/t Au cut-off).


Measured 111,000 4.3 15,500 58 205,800

Indicated 250,000 3.6 28,800 71 567,900

Inferred 403,000 2.5 32,900 56 727,200

Total 765,000 3.1 77,200 61 1,500,900

Table 6: Granite Castle Gold Project Resources.

The information in Table 6 is extracted from the report entitled “Improved Confidence Levels for Granite Castle Resource” created on 28 May 2008 and is available to view on www.mantlemining.com. The Charters Towers Gold Project area contains an Inferred gold Resource (above 1 g/t Au cut-off).


Inferred 1,535,000 2.2 109,000

Total 1,535,000 2.2 109,000

Table 7: Charters Towers Gold Project Resources. The information in Table 7 is extracted from the report entitled “Disclosure Document” created on 2 October 2006 and is available to view on www.mantlemining.com. The Bacchus Marsh Coal Project area contains an Inferred coal Resource (below 30% Ash cut-off).

Class Tonnes (Billion)

TM (%) Ash (% db)

VM (% db)

FC (% db)

TS (% db)

GDSE (MJ/kg)

Inferred 1.6 56.3 10.4 47.2 42.4 3.4 24.5

Total 1.6 56.3 10.4 47.2 42.4 3.4 24.5

Table 8: Bacchus Marsh Coal Project Resources. The information in Table 8 is extracted from the report entitled “Victorian Brown Coal Resources Update” announced on 1 December 2015 and is available to view on www.mantlemining.com. The Latrobe Valley Coal Project area contains an Inferred coal Resource (greater than 4metre Thickness cut-off).

Class Tonnes (Million)

TM (%) Ash (% db)

VM (% db)

FC (% db)

TS (% db)

GDSE (MJ/kg)

Inferred 225 61.3 7.6 50.7 41.7 0.4 23.6

Total 225 61.3 7.6 50.7 41.7 0.4 23.6

Table 9: Latrobe Valley Coal Project Resources. The information in Table 9 is extracted from the report entitled “Victorian Brown Coal Resources Update” announced on 1 December 2015 and is available to view on www.mantlemining.com. In relation to Tables 5 through 9, the Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcements. The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Mark Maxwell and Mr Stuart Moore, both Employees of Mantle Mining Corporation Ltd. Mr Maxwell and Mr Moore are both Members of the Australasian Institute of Mining and Metallurgy and both have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking 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”. Mr Maxwell (for Coal) and Mr Moore (for Minerals other than Coal) consent to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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Directors’ Report


Auditor’s independence declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included within this half-year financial report. Signed in accordance with a resolution of directors made pursuant to s306(3) of the Corporations Act 2001. On behalf of the Directors

MARTIN BLAKEMAN Chairman Dated at Perth this 15th day of March 2016

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THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

8 St Georges Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844

T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the review of the financial report of Mantle Mining Corporation Limited for the half year ended 31 December 2015, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

(ii) any applicable code of professional conduct in relation to the review. RSM AUSTRALIA PARTNERS Perth, WA ALASDAIR WHYTE Dated: 15 March 2016 Partner

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Consolidated Statement of Comprehensive Income for the half-year ended 31 December 2015


31 December

2015 31 December

2014 $ $ Interest income 2,041 4,698 Administrative expenses (123,982) (76,857) Consultancy and legal expenses (261,901) (89,726) Compliance and regulatory expenses (46,472) (33,448) Depreciation expense (24,881) (24,300) Director and employee related expenses (353,376) (183,300) Other exploration expenses (88,594) (34,197) Interest expense (25,017) - Write-down of exploration expenditure - (1,038,391) Write-down of investment - (941,624)

Loss before income tax expense

(922,182) (2,417,145)

Income tax benefit - - Other comprehensive income

- -

Total comprehensive loss for the period

(922,182) (2,417,145)

Total comprehensive loss attributable to members of the Company

(922,182) (2,417,145)

Basic loss per share (cents)

(0.15) (0.68)

Diluted loss per share (cents) (0.15) (0.68)

The accompanying notes form part of these financial statements.

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Consolidated Statement of Financial Position as at 31 December 2015


Note 31 December

2015 30 June

2015 $ $ Current assets Cash and cash equivalents 2 798,819 541,373 Trade and other receivables 91,663 44,974 Other current assets 145,182 33,482

Total current assets 1,035,664 619,829

Non-current assets Receivables 21,614 28,931 Plant and equipment 179,666 178,047 Exploration and evaluation expenditure 3 6,541,242 5,969,483

Total non-current assets 6,742,522 6,176,461

Total assets 7,778,186 6,796,290

Current liabilities Trade and other payables 311,028 276,776 Provisions 52,904 51,278 Borrowings 424,059 75,000

Total current liabilities 787,991 403,054

Non-current liabilities Provisions 50,233 -

Total non-current liabilities 50,233 -

Total liabilities 838,224 403,054

Net assets 6,939,962 6,393,236

Equity Contributed equity 5 24,072,037 22,770,676 Reserves 5 1,606,980 1,439,433 Accumulated losses (18,739,055) (17,816,873)

Total equity

6,939,962 6,393,236


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Consolidated Statement of Cash Flows for the half-year ended 31 December 2015


31 December

2015 31 December

2014 $ $ Cash flows from operating activities Cash payments in the course of operations (710,339) (349,198) Cash payments for exploration expenditure (598,759) (453,670) Interest received 2,041 6,088 Interest paid (17) -

Net cash (used in) operating activities (1,307,074) (796,780)

Cash flows from investing activities Payments for plant and equipment (26,500) (43,452) Payments for investment deposit (100,000) - Proceeds from sale of exploration interests 27,000 -

Net cash (used in) investing activities (99,500) (43,452)

Cash flows from financing activities Proceeds from issue of shares 1,049,758 860,001 Proceeds from issue of options 157,947 - Share issue costs (42,744) (106,990) Borrowings 499,059 25,000

Net cash provided by financing activities 1,664,020 778,011

Net change in cash and cash equivalents 257,446 (62,221) Cash and cash equivalents at the beginning of the period

541,373 250,150

Cash and cash equivalents at the end of the period

798,819 187,929


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Consolidated Statement of Changes in Equity for the half-year ended 31 December 2015


Contributed

equity Reserves Accumulated

losses Total

$ $ $ $ Balance at 1 July 2014 20,793,682 1,439,433 (14,544,095) 7,689,020

Total comprehensive loss for the period - - (2,417,145) (2,417,145)

Shares issued 991,236 - - 991,236 Share issue costs (106,990) - - (106,990) Share options issued - - - -

Balance at 31 December 2014 21,677,928 1,439,433 (16,961,240) 6,156,121

Balance at 1 July 2015 22,770,676 1,439,433 (17,816,873) 6,393,236

Total comprehensive loss for the period - - (922,182) (922,182)

Shares issued 1,399,305 - - 1,399,305 Share issue costs (97,944) - - (97,944) Share options issued 167,547 - 167,547

Balance at 31 December 2015 24,072,037 1,606,980 (18,739,055) 6,939,962


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Notes to the Consolidated Financial Statements for the half-year ended 31 December 2015


1. Significant accounting policies Statement of compliance The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 “Interim Financial Reporting”. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 “Interim Financial Reporting”. The half-year report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report. Basis of preparation The consolidated financial statements have been prepared on the basis of historical costs. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Company’s annual financial report for the year ended 30 June 2015, except in relation to the matters disclosed below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. New and revised Accounting Standards and Interpretations The consolidated entity has adopted all of the new and revised Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current reporting period. The adoption of these new and revised Accounting Standards and Interpretations has not resulted in a significant or material change to the consolidated entity’s accounting policies. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted by the consolidated entity.

Going concern These financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. As disclosed in the financial statements, the consolidated entity incurred a net loss of $922,182 and had net cash outflows from operating activities of $1,307,074 and investing activities of $99,500 for the half year ended 31 December 2015. The consolidated entity’s ability to continue as a going concern is dependent on raising further capital and / or reducing costs. These factors indicate significant uncertainty as to whether the consolidated entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

The Directors believe that it is reasonably foreseeable that the consolidated entity will continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report after consideration of the following factors:

The Company has the ability to issue additional equity securities under the Corporations Act 2001 to raise further working capital and has a been successful in doing this previously, as evidenced by the successful placements undertaken by the Company over the course of the financial half year, and in preceding years.

The Company has received commitments from investors in the amount of approximately $1.70 million to participate in tranche two of a two tranche capital raising

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to fund the Company’s proposed acquisition of interests in Morning Star Gold NL (with tranche one having been completed in December 2015). Completion of Tranche 2 is subject to the Company acquiring either its proposed majority interest in MCO or the assets of MCO.

The Company is confident it will be successful in sourcing further capital to fund the ongoing operations of the Company;

In the past, directors and other key management personnel have agreed to accept equity in lieu of cash fees. There is no reason to believe this will not continue, specifically given that from the 1 December 2015, directors have agreed to take between 12.5% and 37.5% of directors fees and salaries (as applicable) in equity; and

The consolidated entity has the ability to scale back its operations in order to curtail expenditure, in the event capital raisings or mergers are delayed, or insufficient cash is available to meet projected expenditure.

Accordingly, the Directors believe that the consolidated entity will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report. The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the consolidated entity does not continue as a going concern.

2. Cash and cash equivalents For the purposes of the half-year statement of cash flows, cash and cash equivalents are comprised of the following:

Consolidated 31 December

2015 30 June

2015 $ $ Cash at bank and in hand 683,519 426,073 Cash on deposit 115,300 115,300

798,819 541,373

3. Exploration and evaluation expenditure

Consolidated

31 December 2015

30 June 2015

$ $ Opening balance 5,969,483 7,525,155 Exploration and evaluation expenditure 598,759 913,571 Part sale of 10% Norton Gold Mine (27,000) - Impairment of exploration expenditure - (2,469,243)

6,541,242 5,969,483

4. Dividends No dividend has been declared or paid during the half-year or the previous corresponding period. The Company does not have any franking credits available for current or future years as it is not in a tax paying position.

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5. Contributed equity & Reserves

Contributed equity Consolidated 31 December

2015 30 June

2015 $ $ Fully paid ordinary shares 24,072,037 22,770,676

Movement in ordinary shares on issue Number $ Balance at beginning of period 491,787,391 22,770,676 Share placements 100,809,126 1,049,758 Shares issued in lieu of services performed

3,418,919 57,600

Shares issued in lieu of directors’ fees 3,325,032 39,170 Shares issued in lieu of salaries to employees

1,307,281 15,277

Shares issued in satisfaction of loans 12,500,000 237,500 Share issue costs - (97,944)

Balance at end of period 613,147,749 24,072,037

Option reserve Balance at beginning of period 1,439,433 1,364,432 Issue of listed options for cash 157,947 - Issue of options - share based payments 9,600 75,001

Balance at end of period 1,606,980 1,439,433

6. Segment reporting The Company has considered the operating segments standard but does not currently have operating segments at this time. As the Company operates wholly in one business segment, being mineral exploration and in one geographical segment, being Australia, the Company has not identified and therefore, not disclosed, any segment information on the basis of the internal reports being provided to the chief decision maker, which is the Board of Directors as a whole.

7. Contingent assets and liabilities

The Directors of the Company are unaware of any existing contingent assets and liabilities. 8. Commitments

Contractual Commitments During the period, the Company entered into a recapitalisation deed with Morning Star Gold NL (Subject to Deed of Company Arrangement) (Controllers appointed) (MCO), the secured creditor of MCO (Secured Creditor), the Deed Administrators of MCO and the Controllers of MCO’s assets (appointed by the Secured Creditor) (Recapitalisation Deed) pursuant to which Mantle has conditionally agreed to recapitalise MCO. Under the Recapitalisation Deed, Mantle will subscribe for an interest free convertible note fully convertible into 5,402,050,778 fully paid ordinary shares in MCO (being an approximate 95% shareholding interest in MCO) (Convertible Note). The Convertible Note will be secured by a third ranking general security over the assets of MCO in favour of Mantle. The consideration for the Convertible Note is a cash payment by Mantle of $750,000 to MCO, $100,000 of which has

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already been paid to the Deed Administrators by Mantle, on behalf of MCO, as a deposit. The outstanding amount of $650,000 (Initial Payment) will be paid by Mantle on settlement under the Recapitalisation Deed occurring and will be apportioned between the Deed Administrators (to satisfy the claims of the unsecured creditors of MCO) and the Secured Creditor (to satisfy part of the debt owed to it by MCO).

Following settlement occurring under the Recapitalisation Deed, MCO has agreed to pay the following further amounts to the Secured Creditor in satisfaction of the remainder of the entire debt owed to it by MCO); (i) $1,000,000 on or before 30 April 2016 (First Secured Creditor Payment);

(ii) $1,000,000 on or before 31 August 2016; and

(iii) $1,000,000 on or before 28 February 2017.

Mantle will guarantee the payment by MCO of the Initial Payment and the First Secured Creditor Payment (totaling $1,650,000) upon satisfaction of the conditions precedent to the Recapitalisation Deed. Should the guaranteed First Secured Creditor Payment not be made by Mantle, an agreed default remedy mechanism allows Mantle a period of time to remedy the default. The Recapitalisation Deed contains warranties, indemnities and other clauses considered customary for an agreement of this nature.

Settlement of the Recapitalisation Deed (and the various other transactions noted above) is conditional upon the receipt of MCO shareholder and creditor approval and other conditions precedent considered customary for a transaction of this nature, however the acquisition transaction is structured whereby should the MCO shareholders elect not to approve the acquisition of interests in MCO then Mantle will be entitled to acquire the assets of MCO directly. Exploration expenditure commitments Consolidated 31 Dec 2015 30 June 2015 $ $ Within one year 208,675 208,675 After one year but not more than five years 2,301,150 3,149,650

2,509,825 3,358,325

The above exploration expenditure commitments assume no relinquishments or reductions during the period. Leasing commitments The Company’s office space lease renewed on 31 May 2015 on month to month terms requiring 1 months’ notice for termination. Future minimum rentals payable under this operating lease are as follows: Consolidated 31 Dec 2015 30 June 2015

$ $ Within one year 1,690 1,859 After one year but not more than five years - -

1,690 1,859

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9. Events subsequent to balance date IBML Scheme of Arrangement On 21 January 2016, the Company announced the execution of a non-binding Heads of Agreement (HoA) with cash-rich unlisted Australian mineral exploration and development company, International Base Metals Limited (IBML) for a “merger of equals” via a Scheme of Arrangement. On 3 March 2016, the Company announced that the parties had been unable to reach mutually beneficial binding commercial terms and accordingly the proposed merger will not proceed. China Success On 21 January 2016, Mantle announced that it would not proceed with the Memorandum of Understanding between the Company and China Success International Limited (China Success) for the provision of equity funding, process equipment and concentrate sales for Norton Gold Mine in Queensland. As per the announcement on 30 November 2015, it was originally intended that:

China Success would invest $1.5 million at $0.01 per share in the following tranches:

Tranche 1: $50,000 non-refundable deposit

Tranche 2: $450,000 by 31 December 2015

Tranche 3: $1,000,000 by 31 January 2016

Mantle would acquire up to $700,000 worth of mine site processing equipment from or with the assistance of China Success.

The parties would enter into a Market Off-Take Agreement whereby China Success would agree to purchase high grade concentrate from the Norton Gold Mine for the first 3 years of its life, including assisting Mantle to target enhanced production rates.

Subsequent to 31 December 2015, the Company announced that it had determined not to proceed with the transaction with China Success at that time however maintained contact with China Success. Tranche 1 deposit funds of $50,000 received by Mantle prior to 31 December 2015 were subsequently returned to China Success after balance date. Director Fee Plan On 3 February 2016, the Company issued a total of 5,499,533 fully paid ordinary shares to certain directors and consultants of the Company in lieu of cash remuneration totalling $78,342 which was outstanding as at 31 December 2015. The shares were issued under the Company’s Directors and Employees Fee which was approved by shareholders at the Company’s 2014 AGM. Other than as detailed above there are no significant events subsequent to reporting date which may affect the financial position for the Group.

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Directors’ Declaration


The directors of the company declare that: 1. The financial statements and notes, as set out in this half-year financial report, are in accordance

with the Corporations Act 2001, including:

a. complying with Accounting Standard AASB 134: Interim Financial Reporting; and

b. giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date.

2. In the director’s opinion there are reasonable grounds to believe that the company will be able to

pay its debts as and when they become due and payable. This declaration is signed in accordance with a resolution of the Board of Directors.

MARTIN BLAKEMAN Chairman Dated at Perth this 15th day of March 2016

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THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

8 St Georges Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844

T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111

www.rsm.com.au

INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF

MANTLE MINING CORPORATION LIMITED We have reviewed the accompanying half-year financial report of Mantle Mining Corporation Limited which comprises the statement of financial position as at 31 December 2015, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Mantle Mining Corporation Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations act 2001, which has been given to the directors of Mantle Mining Corporation Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Mantle Mining Corporation Limited is not in accordance with the Corporations Act 2001 including:

(a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

Emphasis of Matter

Without qualifying our conclusion, we draw attention to Note 1 to the financial statements, which indicates that the consolidated entity incurred a net loss of $922,182 and had net cash outflows from operating activities of $1,307,074 and investing activities of $99,500 during the half-year ended 31 December 2015. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.

RSM AUSTRALIA PARTNERS Perth, WA ALASDAIR WHYTE Dated: 15 March 2016 Partner

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Documents

For personal use only - ASX · The Company commenced community and stakeholder groups consultation for the tenements EL5336, ... It closed in 1960 due to the very low gold prices