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1 A.B.N INTERIM REPORT Directors' report 2 Interim consolidated financial report Auditor's independence declaration 5 Consolidated statement of profit or loss and other comprehensive income 6 Consolidated statement of financial position 7 Consolidated statement of changes in equity 8 Consolidated statement of cash flows 9 Notes to the consolidated financial statements 10 Directors' declaration 15 Independent auditor's review report to the members 16 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 2016 and any public announcements made by Malachite Resources Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act

2 Interim Consolidated Financial Report For The Half-Year 31 December 2016 DIRECTORS' REPORT Your directors present their report on the consolidated entity consisting of Malachite Resources Limited and the entities it controlled (together, the 'Group') at the end of, or during, the half-year ended 31 December DIRECTORS The names of the Malachite Resources Limited s directors in office during the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated. Mr T Cuthbertson (Non-Executive Chairman) Mr J. Dean (Non-Executive Director) Mr A McMillan (Non-Executive Director) REVIEW AND RESULTS OF OPERATIONS During the Period the Group s main business activity has been focused on advancing the development of the Lorena Gold Project ( Lorena ) near Cloncurry in northwest Queensland. REVIEW OF ACTIVITIES LORENA GOLD PROJECT (MLs 7147, to 90196) The Group has entered into a non-binding Heads of Agreement (Malachite Agreement) with Ore Processing Services Pty Ltd (OPS) to establish and operate a mineral processing plant at Lorena. The key terms of the arrangement are as follows: OPS earns a 30% equity interest in the Lorena project once operations commence. OPS receives lease fees for the provision of the processing plant. OPS earns a management fee of the processing cost of the project. The arrangement between OPS and Malachite is subject to a number of conditions precedent including: a) Completion of appropriate environmental approvals to allow a Carbon in Leach (CIL) plant on site; b) Completion of confirmatory design test work on the CIL circuit; c) The Group raising funds for $2.5m of preparatory site work; d) OPS raising funding for the mineral processing plant; During the Period OPS entered into a binding Heads of Agreement (MKS Agreement) to acquire the plant and equipment previously constructed on the Lorena Gold Project site ( Lorena Concentrator Plant ). When this acquisition is completed OPS will then be required to both finalise the construction of the Lorena Concentrate Plant and supply a modular CIL circuit to provide a complete mineral processing plant capable of producing gold dore on site. In October 2016, the Group entered into a Financing Terms Sheet with ResCap Investments Pty Ltd ( ResCap ) in respect of a $5 million facility for the purpose of funding its obligations to bring the Lorena Gold Project into production. This facility will enable the Group to fund preparatory project site works in the order of $2.5 million and any working capital that may be required. This funding faciility satisfies one of the major condition precedents to the Malachite Agreement noted above. Subsequent to the Period, the Group announced that it had been advised by OPS that it had agreed a financing arrangement that allows OPS to provide the mineral processing plant at Lorena as contemplated by the Malachite Agreement. Also subsequent to the Period, the Group announced that it had received positive confirmatory design test work on the CIL circuit and received an amendment to its Environmental Authority from the Queensland Department of Environment and Heritage Protection to allow a CIL circuit on the site. Given that the Group and OPS have now received financing offers, both parties are currently in the process of finalising documentation to formalise those arrangements and the Malachite Agreement. The Group and OPS are endeavouring to bring Lorena into production around September OTHER TENEMENTS Conrad Silver Project (MLs 5992, 6041 & 6042, EL5977 and EPL1050) During the Period, the Group executed the sale and purchase agreement and royalty agreement with Silver Mines Limited to sell the Conrad Silver Project. Subsequent to the Period the transfer of the Conrad Silver Project titles was approved by the NSW Department of Industry Resources and Energy. The Group retains a 1% net smelter royalty return over the Conrad Silver Project. Tooloom Gold Project (EL6263) The Group holds EL6263 which contains the Phoenix gold prospect. FINANCIAL Consistent with the nature of the Group s activities and its ongoing investment of funds into exploration and development projects the Group has experienced operating losses of $773,292 and negative cash flows from operations of $395,414 during the period ended 31 December During the Period, the Group extended the maturity date of Convertible Notes with a total face value of $2,150,000 from 5th May 2016 to 1 July The maturity date extension and the provision to capitalise interest was approved at the Group's 2016 Annual General Meeting. The Group issued 11,526,223 new ordinary shares during the Period to effect payment of fees in respect of the extension of these Convertible Notes

3 Interim Consolidated Financial Report For The Half-Year 31 December 2016 DIRECTORS' REPORT REVIEW AND RESULTS OF OPERATIONS (CONTINUED) FINANCIAL(continued) As at 31 December 2016, the Group had liabilities in respect of Convertible Notes with a face value of $2,150,000 and capitalised interest of $437,581. In November 2016, the Group raised $384,000 via a Share Purchase Plan with the issue of 153,600,000 fully paid ordinary shares. During the Period, unsecured loans to the Group from Key Management Personnel increased from $275,000 to $305,000. The funds raised during the Period will be used for working capital purposes. GOING CONCERN Consistent with the nature of the Group s activities and its ongoing investment of funds into exploration and development projects the Group has experienced operating losses of $773,292 and negative cash flows from operations of $395,414 during the period ended 31 December At 31 December 2016, the Group has net current liabilities amounting to $3,214,546 (30 June 2016:$2,966,425) comprising Convertible Notes with a value of $2,587,581 (includes capitalised interest) and unsecured loans of $305,000 from Key Management Personnel. The Group s cash position at balance date was $123,276 which will not be sufficient to fund the Group s forecast cash outflows from operations for the period to March The Group relies on the Lorena Gold Project for the continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments. As a result of these matters, there is a material uncertainty related to events or conditions that may cast significant doubt on whether the Group will continue as a going concern and, therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. The continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments as and when they fall due are dependent upon the Group being successful in the following: executing the Malachite Agreement with OPS which requires OPS to finalise its funding to complete the construction of the Lorena Concentrator Plant and construct and supply a modular CIL circuit to enable gold dore to be produced on site; and finalising the Financing Facility from ResCap of $5.0 million to allow for the development of the Lorena project under the Malachite Agreement with OPS; and extending the maturity of the Convertible Notes for a longer period of time to suit available resources and the timing of the cash flows from the Lorena Gold Project or alternatively, converting the Convertible Notes into shares or redeeming them via a capital raising; and - funding for corporate working capital via either loans or equity; and - achieving positive cash flows from the Lorena Gold Project as soon as practical through the development of the project to commercial production; or - entering into a corporate transaction. The Group has a successful track record of raising new capital from both existing shareholders and strategic investors when required. The Group has also been successful in extending the term of the Convertible Notes. The Group is also confident that it will be able to generate cash inflows from its Lorena Gold Project in the near future. On that basis the directors believe it is reasonable to expect that the Group will be successful in the above matters and, accordingly, have prepared the financial report on a going concern basis. At this time, the directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is recorded in the financial report at 31 December Accordingly, no adjustments have been made to the financial report relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern

4 Interim Consolidated Financial Report For The Half-Year 31 December 2016 DIRECTORS' REPORT MATTERS SUBSEQUENT TO THE END OF THE PERIOD Subsequent to the Period, the Group announced that it had been advised by OPS that it had agreed a financing arrangement that allows OPS to provide the mineral processing plant at Lorena as contemplated by the Malachite Agreement. Also subsequent to the Period, the Group announced that it had received positive confirmatory design test work on the CIL circuit and received an amendment to its Environmental Authority from the Queensland Department of Environment and Heritage Protection to allow a CIL circuit on the site. Given that the Group and OPS have now received financing offers, both parties are currently in the process of finalising documentation to formalise those arrangements and the Malachite Agreement. At the date of this report, other than noted above, there has not been any matter or circumstance that has arisen since the end of the interim period that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. AUDITOR'S INDEPENDENCE DECLARATION A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5. Signed in accordance with a resolution of the directors. Terry Cuthbertson Non-Executive Chairman Sydney, 15 March

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6 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Notes Half-year $ $ Other revenue ,313 Accounting expense (19,600) - Audit expense (15,000) (17,615) Corporate expenses (164,650) (148,713) Depreciation and amortisation expense (25,084) (15,650) Employee benefits expense (69,016) (145,439) Exploration and development expenditure 3 (236,277) (328,589) Finance cost (219,409) (135,530) Occupancy expenses (9,505) (30,548) Other expenses (15,416) - Loss before income tax expense (773,292) (819,771) Income tax expense - - Loss for the half-year (773,292) (819,771) Other comprehensive income - - Total comprehensive income for the half-year (773,292) (819,771) Loss for the period is attributable to: Owners of Malachite Resources Limited (773,292) (819,771) Total comprehensive income is attributable to: Owners of the company (773,292) (819,771) Basic and diluted loss per share (cents per share) (0.07) (0.07) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

7 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 Notes 31 December 30 June $ $ CURRENT ASSETS Cash and cash equivalents 123,276 66,728 Trade and other receivables 58, ,257 TOTAL CURRENT ASSETS 181, ,985 NON-CURRENT ASSETS Receivables 7 325, ,281 Plant and equipment 99, ,563 Exploration and evaluation expenditure 3 11,475,000 11,475,000 TOTAL NON-CURRENT ASSETS 11,899,760 11,974,844 TOTAL ASSETS 12,081,715 12,166,829 CURRENT LIABILITIES Trade and other payables 4 808, ,012 Borrowings 5 2,587,581 2,405,398 TOTAL CURRENT LIABILITIES 3,396,501 3,158,410 NON-CURRENT LIABILITIES Borrowings 5 305, ,000 TOTAL NON-CURRENT LIABILITIES 305, ,000 TOTAL LIABILITIES 3,701,501 3,433,410 NET ASSETS 8,380,214 8,733,419 EQUITY Contributed equity 6 56,964,455 56,544,368 Reserves 2,207,581 2,207,581 Accumulated losses (50,791,822) (50,018,530) TOTAL EQUITY 8,380,214 8,733,419 The above consolidated statement of financial position should be read in conjunction with the accompanying notes

8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to owners of Malachite Resources Limited Contributed Equity Reserves Accumulated losses Total Equity $ $ $ $ Balance as of 1 July ,544,368 2,175,178 (48,451,461) 10,268,085 Loss for the half-year - - (819,771) (819,771) Total comprehensive income for the half- year 56,544,368 2,175,178 (49,271,232) 9,448,314 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Employee and non-employee share options - 32,403-32,403 Balance as of 31 December ,544,368 2,207,581 (49,271,232) 9,480,717 Balance as of 1 July ,544,368 2,207,581 (50,018,530) 8,733,419 Loss for the half-year - - (773,292) (773,292) Total comprehensive income for the half- year 56,544,368 2,207,581 (50,791,822) 7,960,127 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs 420, ,087 Employee and non-employee share options Balance as of 31 December ,964,455 2,207,581 (50,791,822) 8,380,214 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

9 CONSOLIDATED STATEMENT OF CASH FLOWS Half-year $ $ CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees (122,705) (210,841) Exploration and evaluation expenditure (236,277) (361,448) Interest received 665 2,313 Interest paid (37,097) (129,359) Net cash (outflow) from operating activities (395,414) (699,335) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from refund of security deposit 50,000 - Proceeds from sale of assets - 400,000 Repayment of hire purchase loan - (11,177) Net cash inflow/(outflow) from investing activities 50, ,823 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share purchase plan 371,962 - Proceeds from loan from related parties 30,000 50,000 Net cash inflow from financing activities 401,962 50,000 NET INCREASE/(DECREASE) IN CASH HELD 56,548 (260,512) CASH AT THE BEGINNING OF THE HALF-YEAR 66, ,543 CASH AT THE END OF THE HALF-YEAR 123, ,031 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

10 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT This general purpose financial report is for Malachite Resources Limited and its controlled entities (together, the 'Group') in respect of the interim half-year reporting period ended 31 December 2016 and has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act This condensed 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 2016 and any public announcements made by Malachite Resources Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. Significant matters relating to the ongoing viability of operations Consistent with the nature of the Group s activities and its ongoing investment of funds into exploration and development projects the Group has experienced operating losses of $773,292 and negative cash flows from operations of $395,414 during the period ended 31 December At 31 December 2016, the Group has net current liabilities amounting to $3,214,546 (30 June 2016:$2,966,425) comprising Convertible Notes with a value of $2,587,581 (includes capitalised interest) and unsecured loans of $305,000 from Key Management Personnel. The Group s cash position at balance date was $123,276 which will not be sufficient to fund the Group s forecast cash outflows from operations for the period to March The Group relies on the Lorena Gold Project for the continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments. As a result of these matters, there is a material uncertainty related to events or conditions that may cast significant doubt on whether the Group will continue as a going concern and, therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. The continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments as and when they fall due are dependent upon the Group being successful in the following: executing the Malachite Agreement with OPS which requires OPS to finalise its funding to complete the construction of the Lorena Concentrator Plant and construct and supply a modular CIL circuit to enable gold dore to be produced on site; and finalising the Financing Facility from ResCap of $5.0 million to allow for the development of the Lorena project under the Malachite Agreement with OPS; and extending the maturity of the Convertible Notes for a longer period of time to suit available resources and the timing of the cash flows from the Lorena Gold Project or alternatively, converting the Convertible Notes into shares or redeeming them via a capital raising; and - funding for corporate working capital via either loans or equity; and - achieving positive cash flows from the Lorena Gold Project as soon as practical through the development of the project to commercial production; or - entering into a corporate transaction. The Group has a successful track record of raising new capital from both existing shareholders and strategic investors when required. The Group has also been successful in extending the term of the Convertible Notes. The Group is also confident that it will be able to generate cash inflows from its Lorena Gold Project in the near future. On that basis the directors believe it is reasonable to expect that the Group will be successful in the above matters and, accordingly, have prepared the financial report on a going concern basis. At this time, the directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is recorded in the financial report at 31 December Accordingly, no adjustments have been made to the financial report relating to the recoverability and classification of asset carrying amounts or the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern

11 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 December 31 December 2 REVENUE $ $ From continuing operations Other revenue Interest 665 2, , December 30 June 3 EXPLORATION AND EVALUATION EXPENDITURE $ $ Costs carried forward in respect of areas of interest in exploration and evaluation phases 11,475,000 11,475,000 Movement for the period Balance brought forward at the beginning of the period 11,475,000 11,525,000 Current period expenditure 236, ,499 Expenditure expensed in current period (236,277) (494,499) Impairment - - Transferred to assets held for sale - (50,000) Balance at the end of the period 11,475,000 11,475, December 30 June 4 CURRENT LIABILITIES - PAYABLES $ $ Trade creditors 175, ,844 Other creditors 633, ,063 Employee entitlements - 25, , ,012 5 BORROWINGS 31 December 30 June Current $ $ Unsecured convertible note (a) 2,587,581 2,405,398 Derivative on convertible note, conversion option - - Unsecured loan (b) - - Hire purchase liabilities - - Total current borrowings 2,587,581 2,405,398 Non Current Unsecured loan (b) 305, ,000 Total non current borrowings 305, ,000 Total borrowings 2,892,581 2,680,398 (a) Unsecured convertible note The Convertible Notes totalling $2,150,000 have a maturity date of 1 July The key terms of the Convertible Notes are summarised as follows: Maturity Date 1st July 2017 ; Interest Rate 15% per annum ; Conversion at the election of Noteholders at any time; Conversion Price - lesser of $0.015 or a 20% discount to the 30 Day VWAP at the time of conversion. (b) Unsecured loan Unsecured loans from Key Management Personnel to the Group increased by $30,000 to $305,000. The loans have an interest rate of 12% per annum

12 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6 CONTRIBUTED EQUITY 31 December 30 June $ $ 1,298,041,044 fully paid ordinary shares 56,964,455 56,544,368 (June 2016: 1,132,914,821) 56,964,455 56,544,368 Fully paid ordinary shares carry one vote per share and carry the right to dividends and have no par value. Movement in ordinary share capital Balance at the beginning of the period 56,544,368 Shares issued during the period 420,087 Balance at the end of the period 56,964,455 The funds raised are being used to provide working capital to continue project generation and project enhancement. 31 December 30 June 7 OTHER RECEIVABLES $ $ Tenement Security Deposits 325, , , ,281 8 CONTINGENT LIABILITIES There are no contingent liabilities since the last annual reporting date

13 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9 SEGMENT INFORMATION The economic entity operates in two segments within mineral exploration and development in Australia. The Group has two reportable segments, as described below, for which the Board of Directors (the chief operating decision maker) reviews internal management reports on a monthly basis. Lorena The development of the Group's main mining project, the Lorena Gold Project ( Lorena ) near Cloncurry in northwest Queensland. Other Tenements Carrying out exploration and seeking further development of other tenements. The key segment assets as reported to the Board are as follows: 31 December 30 June Exploration $ $ Lorena 11,450,000 11,450,000 Other Tenements 25,000 25,000 11,475,000 11,475, December 2016 Lorena Other Corporate Total Tenements Revenue from continuing operations Accounting and audit expense - - (34,600) (34,600) Corporate expenses - - (164,650) (164,650) Depreciation and amortisation expense (14,823) - (10,261) (25,084) Employee benefits expense - - (69,016) (69,016) Exploration expenditure expensed (233,687) (2,590) - (236,277) Finance costs - - (219,409) (219,409) Occupancy expenses - - (9,505) (9,505) Other expenses - - (15,416) (15,416) Loss before income tax expense (248,510) (2,590) (522,192) (773,292) Income tax expense Net loss for the half year (248,510) (2,590) (522,192) (773,292) 31 December 2015 Lorena Other Corporate Total Tenements Revenue from continuing operations - - 2,313 2,313 Accounting and audit expense - - (17,615) (17,615) Corporate expenses - - (148,713) (148,713) Depreciation and amortisation expense (9,031) - (6,619) (15,650) Employee benefits expense - - (145,439) (145,439) Exploration expenditure expensed (323,337) (5,252) - (328,589) Finance costs - - (135,530) (135,530) Occupancy expenses - - (30,548) (30,548) Loss before income tax expense (332,368) (5,252) (482,151) (819,771) Income tax expense Net loss for the half year (332,368) (5,252) (482,151) (819,771)

14 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10 MATTERS SUBSEQUENT TO THE END OF THE PERIOD Subsequent to the Period, the Group announced that it had been advised by OPS that it had agreed a financing arrangement that allows OPS to provide the mineral processing plant at Lorena as contemplated by the Malachite Agreement. Also subsequent to the Period, the Group announced that it had received positive confirmatory design test work on the CIL circuit and received an amendment to its Environmental Authority from the Queensland Department of Environment and Heritage Protection to allow a CIL circuit on the site. Given that the Group and OPS have now received financing offers, both parties are currently in the process of finalising documentation to formalise those arrangements and the Malachite Agreement. At the date of this report, other than noted above, there has not been any matter or circumstance that has arisen since the end of the interim period that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 11 FAIR VALUE MEASUREMENTS All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, and based on the lowest level input that is significant to the fair value measurements as a whole: Level 1 Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities. Level 2 Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly observable). Level 3 Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable). The following table represents a comparison between the carrying amounts and fair values of financial assets and liabilities: As at 31 December 2016 As at 30 June 2016 Carrying amount Fair value Carrying amount Fair value Level $ $ $ $ Financial assets Cash and cash equivalents 1 123, ,276 66,728 66,728 Trade and other receivables 1 58,679 58, , ,257 Receivables 1 325, , , , , , , ,266 Financial liabilities Trade and other payables 1 808, , , ,012 Borrowings 1 2,892,581 2,892,581 2,680,398 2,680,398 3,701,501 3,701,501 3,433,410 3,433,410 The following table represents a comparison between the carrying amounts and fair values of non-financial assets: As at 31 December 2016 As at 30 June 2016 Carrying amount Fair value Carrying amount Fair value Level $ $ $ $ Non-financial assets Plant and equipment 2 99,479 99, , ,563 Exploration and evaluation expenditure 2 11,475,000 11,475,000 11,475,000 11,475,000 11,574,479 11,574,479 11,599,563 11,599,

15 DIRECTORS' DECLARATION In the directors' opinion: (a) the financial statements and notes set out on pages 6 to 14 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards AASB 134: Interim Financial Reporting, and the Corporations Regulations 2001 ; and (ii) giving a true and fair view of the Group's financial position as at 31 December 2016 and of its performance for the half-year ended on that date, and (b) whilst there are conditions that may cast significant doubt on the Group's ability to continue as a going concern as outlined in note 1, there are reasonable grounds to believe that Malachite Resources Limited 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 directors. Terry Cuthbertson Non-Executive Chairman Sydney, 15 March

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