WOLF MINERALS LIMITED A.B.N AND CONTROLLED ENTITIES INTERIM FINANCIAL REPORT

Transcription

1 INTERIM FINANCIAL REPORT 31 DECEMBER

2 31 DECEMBER CONTENTS CORPORATE DIRECTORY... 1 DIRECTORS REPORT... 2 AUDITOR S INDEPENDENCE DECLARATION... 8 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME... 9 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS DECLARATION INDEPENDENT AUDITOR S REVIEW REPORT This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June and any public announcements made by Wolf Minerals Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

3 CORPORATE DIRECTORY NON-EXECUTIVE CHAIRMAN John Hopkins OAM INTERIM MANAGING DIRECTOR Richard Lucas NON-EXECUTIVE DIRECTORS Ronnie Beevor Nick Clarke Chris Corbett Don Newport Michael Wolley ALTERNATE DIRECTOR Jacob Roorda COMPANY SECRETARY Pauline Carr REGISTERED OFFICE 5/35 Havelock Street WEST PERTH WA 6005 PRINCIPAL PLACE OF BUSINESS Drakelands Mine Drakelands, Plymouth DEVON PL7 5B5 UNITED KINGDOM AUDITORS PKF Mack Level 4, 35 Havelock Street WEST PERTH WA 6005 LAWYERS Hogan Lovells Level 13, St Georges Square 225 St Georges Terrace PERTH WA 6000 SHARE REGISTER Security Transfer Australia 770 Canning Hwy APPLECROSS WA 6153 UK DEPOSITORY Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS99 6ZZ SECURITIES EXCHANGE LISTINGS Australian Securities Exchange (Home Exchange: Perth, Western Australia) Code: WLF Alternative Investment Market London Stock Exchange Code: WLFE BANKERS National Australia Bank 50 St Georges Terrace PERTH WA 6000 WEBSITE 1

4 DIRECTORS REPORT Your Directors submit the financial report of the Consolidated Entity for the half year ended 31 December. DIRECTORS The names of Directors who held office during or since the end of the half year: John Hopkins OAM Non-Executive Chairman Richard Lucas Interim Managing Director Ronnie Beevor Non-Executive Director Nick Clarke Non-Executive Director Chris Corbett Non-Executive Director Don Newport Non-Executive Director Michael Wolley Non-Executive Director Jacob Roorda Alternate Director PRINCIPAL ACTIVITIES During the half year the principal activities of the Consolidated Entity consisted of tungsten and tin mining, conducted through the wholly owned subsidiary, Wolf Minerals (UK) Limited. REVIEW OF RESULTS The Directors of Wolf Minerals Limited ( Wolf or the Company ) announce for the half year to 31 December a net consolidated loss after tax of $35,423,986 (half year to 31 December 2016: $37,688,696). REVIEW OF OPERATIONS Summary Wolf has continued to focus on its operations at the Drakelands mine ( Drakelands ) as part of the Hemerdon tungsten and tin project ( Hemerdon or the Project ) located in Devon, England. During the six months ended 31 December the key achievements included: Improved tungsten concentrate production and sales during the period. Operating turnaround plan activities largely complete and being incorporated into operating practices. Tungsten price improves further reaching a three year high, currently US$319 per mtu. Further funding support provided by Resource Capital Fund VI L.P. Discussions in progress regarding the required funding support to reach steady state operating cash flows. Drakelands Operations Overview There were five lost time injuries during the six months to 31 December. Safety is a core value of Wolf with all incidents investigated and procedures updated as part of the Company s safety effort. The Company s continuing investment in behavioural based safety is being integrated into the business, with further opportunities for improvement identified and under development. The operating turnaround plan has provided improved production and sales, through increased operating time to allow greater understanding of the processing plant operating performance and the ore feed blending requirements. 2

5 DIRECTORS REPORT (CONTINUED) Mining Activities During the period, mining activities remained focused upon ore feed blending for the processing plant and the commencement of Stage 3.1 construction of the Mining Waste Facility ( MWF ). A total of 1,386,550 bank cubic metres of material was moved during the six month period with ore grade averaging 0.21% WO 3 and 0.03% Sn. The improvement in the processing plant performance has provided valuable information for mine planning on the blending strategy for optimal ore feed quality. A stable operating platform will continue to enhance this process, especially as the gravity fines circuit contribution further improves pre-concentrate recovery. In addition, following encouraging test work during the period, the Company has initiated a preprocessing trial on lower quality ore feed to identify potential improvements in processing efficiency and project cashflows. The trial is expected to commence pre-processing in February and will run for the next two quarters on a range of ore feed quality and mineralised waste. Processing Plant During the six month period the processing plant treated 959,958 tonnes of ore and produced 79,099 metric tonne units ( mtu ) of tungsten concentrate. During the period, both production and sales improved significantly, up 36% and 37% respectively on the previous period on an equivalent operating basis, providing an increase in revenue and taking advantage of higher tungsten prices. The throughput tonnes demonstrated an incremental improvement on the June period, after adjusting for the reduced weekend operations, however significant gains were constrained towards the end of the period by commissioning the modifications in the gravity fines circuit under the operating turnaround plan. The dense media separation ( DMS ) circuit continued to provide improvements in tungsten preconcentrate recovery, with further optimisation activities being driven by more consistent circuit run time and performance data analytics. The improvements in the gravity fines circuit are expected to provide a further lift to pre-concentrate recovery towards target levels, once stable operating parameters are achieved. In the refinery, further improvement in reliability and run time provided an increase in kiln throughput for the period, with a total of 744 tonnes in November alone providing significant growth in tungsten concentrate production. The increased kiln throughput has fully consumed the previous bagged pre-concentrate inventories and has additional capacity to accommodate further increases in front end throughput and pre-concentrate volumes. The refinery performance is also expected to benefit from improved pre-concentrate quality as DMS and gravity fines circuit recovery grades increase, along with higher concentrate grade from improved kiln reducing conditions prior to magnetic separation. The major activities within the operating turnaround plan were largely completed by the end of the period, with only two more outstanding items in the refinery and gravity fines to be implemented. These remaining activities will be scheduled over the coming months as the operating turnaround plan has been incorporated into daily activities and the focus moves to optimisation and performance improvement in a more stable environment. 3

6 Sustainability WOLF MINERALS LIMITED DIRECTORS REPORT (CONTINUED) At the end of December the site recorded 28 injury free days following five lost time injuries during the period (compared to six in the previous period). Following the behaviour based safety training program, a follow up exercise was undertaken on the application of the skills learned in the training and to provide one-to-one coaching for supervisors and safety representatives. In addition, another awareness initiative was implemented to encourage a preventative, injury free safety culture through greater hazard observation, supported by field level risk assessments and authority to work procedures. This initiative was very well supported, providing a number of opportunities to improve safety performance. One Category A environmental incident occurred during the period. This related to a planned flow shutoff in a constructed compensation channel to control a discharge of potentially impacted surface water. The flow shutoff had a limited impact on the local fish population and the subsequent investigation recommended a change in the flocculant dosing procedure to ensure that flow could be maintained in the future. The incident was reported to the Environment Agency ( EA ) and no further action is required by the Company. During the period, the Company also implemented a temporary period of weekend modified operations in which the vibrating screens in the processing plant were turned off each week from 11pm on Friday until 6am the following Monday. The Company also conducted additional investigations to progress the development of low frequency noise ( LFN ) solutions, including obtaining input from five different global expert engineering teams on noise and acoustic treatments. After an extensive investigative programme, each expert presented its findings and the potential solutions were peer reviewed and evaluated to determine the best available techniques to address LFN emissions from the processing plant. The process culminated in an LFN noise and vibration management plan, together with a summary of the work undertaken by the experts, being submitted to the EA for review. Subsequent to period end, the noise and vibration management plan has been agreed with the EA, with the solution identified from best available techniques being to re-clad the existing building structure with a proprietary acoustic panelling system at an estimated cost of up to 7.5 million. The Company has also returned to 7 days a week operation in January, including regular updates to the community on scheduled shutdown periods whilst the LFN noise and vibration management plan is implemented. Previously, the Company assessed the costs of ongoing LFN rectifications and announced on 17 August that it had decided to notify its lead construction contractor, GR Engineering Services Limited ( GRES ), of its intention to recover these costs from the 7.5 million Performance Bond under the construction contract if GRES did not take all necessary actions to do so at its own cost. Further discussions and correspondence have taken place with GRES and are ongoing in relation to achieving a resolution. 4

7 DIRECTORS REPORT (CONTINUED) Increased Bridge Facility with Resource Capital Fund VI L.P. As announced on 27 October, the Company reached agreement with Resource Capital Fund VI L.P. ( RCF VI ) to increase its secured bridge loan facility (the Bridge Facility ) and provide the Company with a further 10 million subordinated loan, bringing the total subordinated loans amount to 55 million. The subordinated loans are accruing interest at a rate of 15% per annum, which is being capitalised. If certain conditions precedent are satisfied (including shareholder approval), RCF VI can elect that the subordinated loans switch to subordinated convertible notes. The Company will, in due course, seek shareholder approval to enable the issue of the convertible notes and subsequent conversion into ordinary shares in accordance with the convertible note terms under the Bridge Facility. The convertible notes are also conditional upon, amongst other things, RCF VI obtaining FIRB approval. Subsequent to period end on 31 January 2018, the Company s funding and offtake standstill arrangements from the debt restructure in October 2016 were due to end and revert to the original terms announced to the market on 24 October 2016, including the re-commencement of principal debt repayments under the Senior Facilities Agreement. A one month extension was granted to 28 February 2018 to allow negotiations to be completed. On 28 February 2018, the Company announced that it had executed agreements for an extension to the standstill and further restructure of the senior debt facilities and additional funding support by way of a further 10 million subordinated loan facility from RCF VI repayable in October The standstill extension continues to grant relief from financial and other covenants for a further 12 months to 31 January The restructure includes reduced principal debt repayments for the next three quarters to October 2018, with the deferred amounts added to repayments in 2020, unless a revised repayment schedule is agreed before 31 July In addition, the Company s tungsten concentrate supply agreements have been amended to align with the extended standstill period. Tungsten Market Trends USD per mtu London Metal Bulletin European APT price USD/mtu The ammonium paratungstate ( APT ) price published by London Metal Bulletin (FOB Europe) had another solid performance during the period, rising from US$220 per mtu to US$294 per mtu by the end of the period. The average for the period was US$272 per mtu up from US$206 per mtu in the previous period an increase of 32%. 5

8 Tungsten Market Trends (Continued) WOLF MINERALS LIMITED DIRECTORS REPORT (CONTINUED) Subsequent to period end, the APT price has risen further to US$319 per mtu. The rise in the APT price during the period has been attributed to a combination of tight concentrate supply and increased buying interest in China. The Company considers that further price rises over the next three to six months will largely depend on the extent of Chinese production capacity permanently removed from the market following the enforcement of higher environmental standards. End user markets remain positive, particularly the United States and Russia where oil and gas demand for tungsten carbide continues to strengthen. Mining Tenements As at 31 December, Wolf has an interest in the following projects: Tenement Location Interest Status Grant Date Hemerdon United Kingdom 100% Leased 10/02/2014 All tenements are held by Wolf Minerals (UK) Limited, a wholly owned subsidiary of the Company. No farm-in or farm-out agreements are applicable. No mining or exploration tenements were acquired or disposed of during the period. Planned Upcoming Activities Wolf will continue to progress the operations at Drakelands. Details of proposed activities include: Continuing emphasis on personal safety awareness and hazard observations. Building upon processing plant performance and ramp up, including optimisation of the mine plan and gravity fines circuit. Commencing the ore pre-processing trial. Implementing the noise and vibration management plan to reduce LFN emissions. Completing negotiations for further funding support. AFTER BALANCE DATE EVENTS On 28 February 2018, the Company announced that it had executed agreements for an extension to the standstill and further restructure of the senior debt facilities and additional funding support by way of a further 10 million subordinated loan facility from RCF VI repayable in October The standstill extension continues to grant relief from financial and other covenants for a further 12 months to 31 January The restructure includes reduced principal debt repayments for the next three quarters to October 2018, with the deferred amounts added to repayments in 2020, unless a revised repayment schedule is agreed before 31 July In addition, the Company s tungsten concentrate supply agreements have been amended to align with the extended standstill period. 6

9 DIRECTORS REPORT (CONTINUED) AUDITOR S DECLARATION The lead auditor s independence declaration under section 307C of the Corporations Act 2001 is set out on page 8 for the half year ended 31 December. This report is made in accordance with a resolution of the Directors. Richard Lucas Interim Managing Director Dated: 6 March

10 AUDITOR S INDEPENDENCE DECLARATION TO THE DIRECTORS OF WOLF MINERALS LIMITED In relation to our review of the financial report of Wolf Minerals Limited for the half year ended 31 December, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. PKF MACK SIMON FERMANIS PARTNER 6 MARCH 2018 WEST PERTH, WESTERN AUSTRALIA 8

11 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER Note 31 December 31 December 2016 $ $ Revenue 8 23,120,776 10,939,075 Cost of sales 9 (43,720,308) (39,279,665) Gross profit/(loss) (20,599,532) (28,340,590) Other income 27,371 9,722 Financial instrument loss (3,043,943) (3,080,826) Corporate costs (1,645,149) (2,569,420) Depreciation (9,377) (13,217) Operating profit/(loss) (25,270,630) (33,994,331) Finance income 1,672 89,751 Finance costs 10 (10,155,028) (3,784,116) Net financing (10,153,356) (3,694,365) Loss before income tax (35,423,986) (37,688,696) Income tax benefit - - Loss for the period after income tax (35,423,986) (37,688,696) Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations (net of tax) 114,824 (9,604,913) Movement in the cash flow hedge reserve (net of tax) 6,141,506 (3,354,772) Total comprehensive loss for the period (29,167,656) (50,648,381) Earnings per share Basic and diluted loss per share (cents) (3.26) (3.48) The above condensed consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 9

12 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER Note 31 December 30 June $ $ CURRENT ASSETS Cash and cash equivalents 6,599,138 8,333,662 Trade and other receivables 3,745,207 2,328,126 Inventory 11 5,407,091 3,098,154 Other current assets 813, ,497 TOTAL CURRENT ASSETS 16,564,470 14,291,439 NON-CURRENT ASSETS Mine properties and development 12 5,458,624 5,582,197 Property, plant and equipment ,444, ,749,966 Other non-current assets 18,953,610 17,189,663 TOTAL NON CURRENT ASSETS 296,856, ,521,826 TOTAL ASSETS 313,421, ,813,265 CURRENT LIABILITIES Trade and other payables 21,936,634 22,978,838 Provisions 111, ,960 Derivative financial instruments ,499 4,202,631 Borrowings 15 10,792,315 59,874,424 TOTAL CURRENT LIABILITIES 33,205,973 87,249,853 NON CURRENT LIABILITIES Provisions 7,027,153 6,778,765 Derivative financial instruments ,877 Borrowings ,897,988 97,060,134 TOTAL NON CURRENT LIABILITIES 199,925, ,205,776 TOTAL LIABILITIES 233,131, ,455,629 NET ASSETS 80,290, ,357,636 EQUITY Issued capital ,160, ,080,313 Reserves (366,617) (6,642,857) Accumulated losses (193,503,806) (158,079,820) TOTAL EQUITY 80,290, ,357,636 The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes. 10

13 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER Issued Capital Accumulated Losses Share Based Payments Reserve Cash Flow Hedge Reserve Foreign Currency Translation Reserve $ $ $ $ $ $ Balance at 1 July ,544,711 (83,543,179) 1,743,297 (10,671,031) 9,252, ,326,524 Loss for the period - (37,688,696) (37,688,696) Other comprehensive income Foreign currency translation differences (9,604,913) (9,604,913) Movement in cash flow hedge reserve (3,354,772) - (3,354,772) Total comprehensive profit/(loss) for the period - (37,688,696) - (3,354,772) (9,604,913) (50,648,381) Transactions with owners, recorded directly in equity Issue of share capital 67, ,973 Share issue costs (35,693) (35,693) Equity compensation benefit 143,368 - (68,492) ,876 Balance at 31 December ,720,359 (121,231,875) 1,674,805 (14,025,803) (352,187) 139,785,299 Balance at 1 July 274,080,313 (158,079,820) 1,552,790 (6,383,755) (1,811,892) 109,357,636 Loss for the period - (35,423,986) (35,423,986) Other comprehensive income Foreign currency translation differences , ,824 Movement in cash flow hedge reserve ,141,506-6,141,506 Total comprehensive profit/(loss) for the period - (35,423,986) - 6,141, ,824 (29,167,656) Transactions with owners, recorded directly in equity Issue of share capital 84, ,000 Share issue costs (3,826) (3,826) Equity compensation benefit , ,910 Balance at 31 December 274,160,487 (193,503,806) 1,572,700 (242,249) (1,697,068) 80,290,064 The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Total 11

14 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 31 December 31 December 2016 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 23,577,965 10,297,927 Payments to suppliers and employees (42,236,129) (38,980,279) Other income 27,371 9,722 Net cash used in operating activities (18,630,793) (28,672,630) CASH FLOWS FROM INVESTING ACTIVITIES Payments for mine development assets (120,341) - Payments made in respect on bonds and collateral deposits (1,311,250) (255,975) Payments for property, plant and equipment (12,463,941) (10,548,554) Interest received 1,676 23,599 Net cash used in investing activities (13,893,856) (10,780,930) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 38,536,630 23,891,000 Repayment of borrowings - (4,694,582) Payment of borrowing costs (4,627,901) (4,096,833) Financial instrument payments (2,681,883) (5,137,568) Payments for share issue costs (3,826) (35,693) Net cash from financing activities 31,223,020 9,926,324 Net decrease in cash and cash equivalents (1,301,629) (29,527,236) Effects of exchange rate changes on the balance of cash held in foreign currencies (432,895) (1,677,541) Cash and cash equivalents at the beginning of the period 8,333,662 35,010,327 Cash and cash equivalents at the end of the period 6,599,138 3,805,550 The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes. 12

15 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER NOTE 1: STATEMENT OF COMPLIANCE Wolf Minerals Limited (the Company ) is a public company, limited by shares, domiciled and incorporated in Australia and listed on the Australian Securities Exchange and Alternative Investment Market. The interim financial report of the company for the six months ended 31 December, comprise the Company and its subsidiaries (the Consolidated Entity or Group ). The interim financial report is a general purpose financial report prepared in accordance with the requirements of 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 interim financial report does not include full disclosures of the type normally included in an annual financial report. Accordingly, it is recommended that this interim financial report be read in conjunction with the annual financial report for the year ended 30 June and any public announcements made by Wolf Minerals Limited and its controlled entities during the interim reporting period in accordance with the continuous disclosure requirements arising under the Corporations Act These condensed consolidated financial statements were approved by the Board of Directors on 6 March NOTE 2: BASIS OF PREPARATION The condensed consolidated financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. The presentation and functional currency is in Australian Dollars. The accounting policies and methods of computation adopted in the preparation of the condensed consolidated financial statements are consistent with those adopted and disclosed in the Group s annual financial report for the financial year ended 30 June. Going concern basis The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. The Consolidated Entity incurred a loss after tax of $35,423,986 for the half year ended 31 December (half year to 31 December 2016: $37,688,696). Furthermore the Consolidated Entity has a working capital deficit of A$16,641,503 as at 31 December (30 June : A$72,958,414). The ability of the Company and the Consolidated Entity to maintain compliance with its debt obligations and covenants and continue to pay its debts as and when they fall due is dependent upon receiving additional funding support, successfully ramping up production to nameplate capacity and rescheduling fixed debt repayments with senior debt lenders. 13

16 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER NOTE 2: BASIS OF PREPARATION (CONTINUED) Going concern basis (continued) On 28 February 2018, the Company announced that it had executed agreements for an extension to the standstill and further restructure of the senior debt facilities and additional funding support by way of a further 10 million subordinated loan facility from RCF VI repayable in October The standstill extension continues to grant relief from financial and other covenants for a further 12 months to 31 January The restructure includes reduced principal debt repayments for the next three quarters to October 2018, with the deferred amounts added to repayments in 2020, unless a revised repayment schedule is agreed before 31 July In addition, the Company s tungsten concentrate supply agreements have been amended to align with the extended standstill period. The Directors have appropriate plans in place to support these funding arrangements and enable the Company to reach self-sustaining cashflows and meet its debt obligations and covenants. The plans include improvements in operational cashflows through additional revenue streams, cost reduction initiatives and release of cash escrowed amounts on the balance sheet, which will enable the principal loan repayments to be rescheduled with the senior debt lenders to avoid any non compliance with senior debt conditions and financial ratios. In the event that the Company and Consolidated Entity do not achieve the above outcomes, there exists a material uncertainty that casts significant doubt as to whether the Company and Consolidated Entity will be able to continue as going concerns and realise their assets and extinguish their liabilities in the normal course of business. The Directors believe it is appropriate to prepare the condensed consolidated financial statements on a going concern basis. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company and Consolidated Entity not continue as going concerns. Critical accounting estimates and judgements The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Actual results may differ from these estimates. Significant items subject to such estimates are set out in the Accounting Policies to the Group s annual report. The nature and amounts of such estimates have not changed significantly during the interim period, expect for the key assumptions surrounding the estimated impairment of property, plant and equipment. The key assumption changes are an updated tungsten price range of US$310 US$320 per mtu, a tin price of US$20,580/tonne and a USD/GBP FX rate of The recoverable amount is sensitive to possible changes in these key assumptions which would cause the carrying amount to exceed the recoverable amount. Based on these key assumption changes the net present value as at 31 December exceeds the carrying value of the property, plant and equipment, therefore no impairment has been recorded. 14

17 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER NOTE 3: SIGNIFICANT ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared under the historical cost convention. The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Group s annual report for the financial year ended 30 June. NOTE 4: SEGMENT INFORMATION NOTES The Consolidated Entity has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director to make decisions about resources to be allocated to the segments and assess their performance. The Consolidated Entity has one reportable segment being its mining activities in the United Kingdom. The financial information presented in the consolidated statement of profit or loss and other comprehensive income and statement of financial position is the same as that presented to the Interim Managing Director. NOTE 5: CONTINGENT LIABILITIES As at 31 December the Consolidated Entity did not have any contingent liabilities other than a rental guarantee totalling $46,540. NOTE 6: DIVIDENDS The Board of Directors have recommended that no dividend be paid. No dividends were paid during the period or prior financial year. 15

18 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER NOTE 7: KEY MANAGEMENT PERSONNEL Remuneration arrangements of key management personnel are disclosed in the annual financial report for 30 June. 31 December 31 December 2016 $ $ NOTE 8: REVENUE Revenue tungsten 20,336,016 9,749,446 Revenue tin 2,784,760 1,189,629 23,120,776 10,939, December 31 December 2016 $ $ NOTE 9: COST OF SALES Mining 9,782,685 9,010,050 Processing 17,657,287 16,436,255 Site administration 7,483,988 5,121,429 Depreciation 8,796,348 8,711,931 43,720,308 39,279, December 31 December 2016 $ $ NOTE 10: FINANCE COSTS Bank charges 7,442 4,957 Interest expense 9,209,729 3,394,507 Borrowing costs 837, ,623 Rehabilitation discount unwind 100,673 86,029 10,155,028 3,784, December 30 June $ $ NOTE 11: INVENTORY Consumables at cost 5,407,091 3,098,154 5,407,091 3,098,154 16

19 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 31 December 30 June NOTE 12: MINE PROPERTIES AND DEVELOPMENT $ $ Mine properties: At cost 6,599,673 6,349,227 Accumulated amortisation (1,141,049) (767,030) Total mine properties 5,458,624 5,582,197 Mine properties $ Balance at 1 July ,474,647 Expenditure capitalised during the year 809,377 Amortisation (388,158) Effect of foreign currency exchange differences (313,669) Balance at 30 June 5,582,197 Expenditure capitalised during the period 120,341 Amortisation (350,837) Effect of foreign currency exchange differences 106,923 Balance at 31 December 5,458,624 17

20 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 31 December 30 June NOTE 13: PROPERTY, PLANT & EQUIPMENT $ $ Plant and equipment: At cost 171,641, ,660,199 Accumulated depreciation (23,502,089) (18,067,950) Total plant and equipment 148,139, ,592,249 Motor vehicles: At cost 627, ,526 Accumulated depreciation (489,439) (445,882) Total motor vehicles 137, ,644 Land and buildings: At cost 137,007, ,758,344 Accumulated depreciation (12,840,032) (8,769,271) Total land and buildings 124,167, ,989,073 Total property, plant and equipment 272,444, ,749,966 Motor Plant and Land and Total vehicles equipment buildings $ $ $ $ Balance at 1 July , ,436, ,107, ,841,685 Additions - 4,595,618 15,399,576 19,995,194 Depreciation expense (111,586) (11,253,748) (5,883,000) (17,248,334) Effect of foreign currency exchange differences (17,757) (9,186,208) (6,634,614) (15,838,579) Balance at 30 June 168, ,592, ,989, ,749,966 Additions - 5,653,543 6,631,050 12,284,593 Disposals - (545) - (545) Depreciation expense (33,703) (4,952,287) (3,819,735) (8,805,725) Effect of foreign currency exchange differences 2,739 2,846,536 2,366,910 5,216,185 Balance at 31 December 137, ,139, ,167, ,444,474 18

21 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER NOTE 14: FAIR VALUE MEASUREMENT Fair value hierarchy The following tables detail the Consolidated Entity's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. 31 December Level 1 Level 2 Level 3 Total $ $ $ $ Assets Option foreign exchange contracts Forward foreign exchange contracts Total assets Liabilities Amortising interest rate swaps - 154, ,065 Forward foreign exchange contracts - 211, ,434 Total liabilities - 365, , June Level 1 Level 2 Level 3 Total $ $ $ $ Assets Option foreign exchange contracts Forward foreign exchange contracts Total assets Liabilities Amortising interest rate swaps - 366, ,877 Forward foreign exchange contracts - 4,202,631-4,202,631 Total liabilities - 4,569,508-4,569,508 The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities. Valuation techniques for fair value measurements categorised within level 2. Level 2 hedging derivatives comprise forward foreign exchange contracts, forward foreign exchange options and interest rate swaps. These forward foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market. Interest rate swaps are fair valued using forward interest rates extracted from observable yield curves. The effects of discounting are generally insignificant for Level 2 derivatives. This valuation technique maximises the use of observable market data where it is available and relies as little as possible on entity specific estimates. 19

22 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 31 December 30 June NOTE 15: BORROWINGS $ $ Current: Senior secured loan 10,792,315 3,558,976 Bridge loan facility - 56,315,448 10,792,315 59,874,424 Non-current: Senior secured loan 92,895,154 97,060,134 Subordinated loan facility 100,002, ,897,988 97,060,134 Details of the senior secured loan: Senior secured loan Tranche A 50,560,058 49,544,820 Senior secured loan Tranche B 60,040,070 58,834,474 Less: unamortised transaction costs (6,912,659) (7,760,184) 103,687, ,619,110 Details of the Bridge loan facility: Bridge loan facility - 57,278,513 Subordinated loan facility 100,776,137 - Less: unamortised transaction costs (773,303) (963,065) 100,002,834 56,315,448 On 27 October Wolf Minerals Limited executed a binding agreement with RCF VI L.P. ( RCF VI ) to amend the existing bridge facility in place with RCF VI (as announced on 24 October 2016 and 28 June ) ( the Bridge Facility ) pursuant to which RCF VI agreed to provide the Company with an additional 10 million taking the total outstanding to 55 million. The additional funding was provided on the same terms as the Bridge Facility announced on 24 October 2016 and 28 June (other than as described below), including that it will be fully secured. Pursuant to its terms, the Bridge Facility mandatorily switched to a three year subordinated loan on 21 October and the new funds were therefore an additional subordinated loan repayable in October If certain conditions precedent are satisfied (including shareholder approval), RCF VI can elect that the subordinated loans switch to subordinated convertible notes. As soon as reasonably practicable, the Company will seek shareholder approval to enable the issue of the convertible notes and subsequent conversion into ordinary shares in accordance with the convertible note terms under the Bridge Facility. The convertible notes are also conditional upon, amongst other things, RCF VI obtaining Foreign Investment Review Board ( FIRB ) approval. On 24 October 2016 Wolf Minerals Limited also executed binding agreements with its existing senior lenders for a standstill and restructure of the 64m senior debt currently outstanding. The terms of the debt restructure provide that all senior debt principal repayments are deferred until January 2018 and the tenor of the senior debt is extended until June The standstill provides that a limited number of events of default shall apply under the senior debt and bridge facility, along with certain waivers of, and amendments to, the senior debt conditions for any noncompliance and grants relief from financial and other covenants. There were no events of default under either facility in the current reporting period. 20

23 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER 31 December 30 June $ $ NOTE 16: ISSUED CAPITAL Issued and fully paid shares Fully paid ordinary shares (net of capital raising costs) 274,160, ,080, ,160, ,080,313 Number of shares $ Balance at the beginning of the period 1,087,645, ,080,313 Shares issued during the period 1,050,882 84,000 Capital raising costs - (3,826) Balance at the end of the period 1,088,696, ,160,487 NOTE 17: COMMITMENTS (a) Development commitments Under the terms of the forty year lease for the minerals and rights at the Project the Group has to pay an annual rent of ~$119,638 ( 69,231) indexed annually. The option lapses if the Group fails to maintain its obligations under the lease. Under the same option agreement the Group is required to procure security for various parties in the event that it is not able to meet its contractual obligations in terms of environmental rehabilitation and restoration at the conclusion of the Project. 21

24 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER NOTE 17: COMMITMENTS (Continued) (b) Lease expenditure commitments 31 December 30 June $ $ Not longer than one year 142, ,133 Longer than one year, but not longer than five years 72, , , ,871 The Company has entered into the following lease on commercial terms for office accommodation: Location Term Expiry 22 Railway Road Subiaco 4 years 19 June 2019 (c) Other contractual commitments Mining Services Contract In 2013 Wolf Minerals (UK) Limited awarded a 85 million (~A$162 million) Mining Services Contract ( MSC ) for the Hemerdon tungsten and tin project to CA Blackwell (Contracts) Limited. The MSC is rates based and made up of two parts: Phase 1, Mining pre-strip and Mine development, Phase 2, Mine production. The MSC term for phase one finished on 31 March Phase 2 has a five year term from completion of phase 1 work. The MSC is able to be terminated by Wolf at any time with 60 days notice. Supply agreements The Group has signed supply agreements for the future sale of mining outputs from the Project. These agreements are contingent on the Company meeting certain milestones in the project and contracted quantities being met; if these conditions are not met the agreements are terminable at the discretion of the buyer. NOTE 18: EVENTS SUBSEQUENT TO REPORTING DATE On 28 February 2018, the Company announced that it had executed agreements for an extension to the standstill and further restructure of the senior debt facilities and additional funding support by way of a further 10 million subordinated loan facility from RCF VI repayable in October The standstill extension continues to grant relief from financial and other covenants for a further 12 months to 31 January The restructure includes reduced principal debt repayments for the next three quarters to October 2018, with the deferred amounts added to repayments in 2020, unless a revised repayment schedule is agreed before 31 July In addition, the Company s tungsten concentrate supply agreements have been amended to align with the extended standstill period. 22

25 DIRECTORS DECLARATION The Directors of the Company declare that:- 1. The financial statements and notes, as set out on pages 9 to 22 are in accordance with the Corporations Act 2001, and: (a) Complying with Accounting Standard AASB 134: Interim Financial Reporting and Corporation Regulations 2001; and (b) Giving a true and fair view of the Consolidated Entity s financial position as at 31 December and of its performance for the half year ended on that date. 2. In the Directors opinion there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors: Richard Lucas Interim Managing Director Dated: 6 March

26 INDEPENDENT AUDITOR S REVIEW REPORT TO THE MEMBERS OF WOLF MINERALS LIMITED Report on the Half-Year Financial Report Conclusion We have reviewed the accompanying half-year financial report of Wolf Minerals Limited (the company) and controlled entities (consolidated entity), which comprises the consolidated statement of financial position as at 31 December, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes, and the directors declaration of the consolidated entity comprising the company and the entities it controlled at 31 December, or during the half year. 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 Wolf Minerals 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, and of its financial performance for the half-year ended on that date; and (b) complying with the Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations Emphasis of Matter Without modifying our conclusion, we draw attention to Note 2 in the half-year financial report, which highlights that the consolidated entity incurred a net loss after tax of $(35,423,986) during the half year ended 31 December (31 December 2016: $(37,688,696)) in addition to having a working capital deficit of $(16,641,503) at 31 December (30 June : $(72,958,414). These conditions along with other matters as set out in Note 2, indicate the existence of a material uncertainty that 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. The financial report of the consolidated entity does not include any adjustments in relation to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act In accordance with the Corporations Act 2001, we have given the directors of the company a written Auditor s Independence Declaration. 24

27 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 the Australian Accounting Standards and the Corporations Regulations 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 and its performance for the half year ended on that date, and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of Wolf Minerals Limited and the entities it controlled during the half year, 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. PKF MACK SIMON FERMANIS PARTNER 6 MARCH 2018 WEST PERTH, WESTERN AUSTRALIA 25