Flinders Mines : Half Year Accounts

Flinfv1 §?! I

AB N 46 091 118 044

(To be read in conjunction with the 30 June 2016 Annual Report)

Flinders Mines Limited ABN 4e oe1 11a o44

Financial report - 31 December 2016

Contents

Directors' report

Auditor's Independence Declaration Interim financial statements

Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position

Consolidated statement of changes in equity Consolidated statement of cash flows

Notes to the consolidated financial statements Directors' declaration

Independent auditor's review report to the members

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These interim financial statements are the consolidated interim financial statements of the consolidated entity consisting of Flinders Mines Limited and its subsidiaries. The interim financial statements are presented in the Australian currency.

Flinders Mines Limited is a company limited by shares, listed on the Australian Securities Exchange (ASX) under the code "FMS" and incorporated and domiciled in Australia. Its registered office and principal place of business is:

Flinders Mines Limited Level 1, 135 Fullarton Road Rose Park

Adelaide South Australia 5067 The registered postal address is:

Flinders Mines Limited

PO Box 4031

Norwood South

Adelaide South Australia 5067

The interim financial statements were authorised for issue by the Directors on 28 February 2017. The Directors have the power to amend and reissue the interim financial statements.

Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial reports and other information are available on our website: www.flindersmines.com.

Flinders Mines Limited Directors' report 31 December 2016

Directors' report

Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Flinders Mines Limited (referred to hereafter as the Parent Entity or the Company) and the entities It controlled at the end of, and during, the half-year ended 31 December 2016.

Directors

The following persons held office as Directors of Flinders Mines Limited during the financial period:

Nell Fredrick Warburton (Non-execulive Director) (appointed 19 October 2016) (Non-executive Chairman) (appointed 20 December 2016)

Robert Michael Kennedy (Non-tJxecutive Chairman) (until 20 December 2016) (Non-executive Director) (appointed 20 December 2016)

Kevin John Malaxos (Non-executive Director) (until 19 October 2016)

Ewan John Vickery (Non-execut;ve Director) (until 19 October 2016)

David Kent McAdam (Non-executive Director) (appointed 19 October 2016) Michael Brian Wolley (Non-executive Director) (appointed 19 October 2016) Evan Welch Davies (Non-executive Director) (appointed 19 October 2016) Nicholas John Smart (A/lemate Director for RM Kennedy)

Review of operations

All tenements remain in good standing.

During the half year the Company :

(i) announced significant changes to the Board with the appointment of Mr Neil Warburton and Mr David McAdam as Independent non-executive directors and Mr Michael Wolley and Mr Evan Davies as non-executive directors. Mr Kevin Malaxos and Mr Ewan Vickery retired as non-executive directors of the Company . Subsequent to his appointment to the Board, Mr Warburton was appointed as the Company·s chainnan with effect from 20 December 2016 . Mr Robert Kennedy remains on the Board.

(Ii} completed a 1:10 non-renounceable entitlement offer (Entitlement Offer) successfully raising $4, 184,989 (before issue costs). Subscribers to the Entitlement Offer included major shareholders TIO (NZ) Limited and OCJ Investment (Australia) Ply ltd. Part of the proceeds raised by the Entitlement Offer was utilized to repay a loan (Including Interest) from PIO Mines Pty ltd (a subsidiary of TIO (NZ) Limited).

(iii) received from the Federal Government Department of the Environment and Energy conditional approval for the development of an expanded operation at the Pllbara Iron Ore Project (PIOP). This approval allows the development of additional mine pits and Infrastructure such as external access roads, airport , ore processing facility, power station, accommodat ion camp and tailings storage facility .These changes allow an increase In the production of iron ore from 15Mtpa to 25Mtpa. The approval,which has effect until 31 December 2037 , Is subject to certain conditions,all of which are acceptable to Flinders. The environmental approval, an important primary approval milestone for the project, demonstrates that the PIOP can be developed in an environmentally acceptable manner.

An independent Strategic Review of all the company's assets has been initiated and is expected to be completed by mid-March 2017.

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 3.

This report is signed and made in accordance with a resolution of Directors.

Grant Thornton House Level 3

170 Frome Street

Adelaide, SA 5000 Correspondence to: GPO Box 1270

Adelaide SA 5001

T 61 8 8372 6666

F 61 8 8372 6677

E info.sa@au.gt.com

W www.grantthornton.com.au

AUDITOR'S INDEPENDENCE DECLARATION

TO THE DIRECTORS OF FLINDERS MINES LIMITED

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Flinders Mines Limited for the half-year ended 31 December 2016, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

2. No contraventions of any applicable code of professional conduct in relation to the review.

GRANT THORNTON AUDIT PTY LTD

Chartered Accountants

J

Au " t & Assurance

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