Variscan Mines : Annual Report 2016

Annual Report 2016

Contents

Chairman's Letter . . . . . . . . . . . . . . . . . . 2

Operations Review . . . . . . . . . . . . . . . . . 4

Tenement Schedule . . . . . . . . . . . . . . .18 Summary of Joint Ventures . . . . . . . .19 Directors' Report . . . . . . . . . . . . . . . . .20 Auditor's Independence

Declaration . . . . . . . . . . . . . . . . . . . . . . .29

Consolidated Statement

of Comprehensive Income . . . . . . . . .30

Consolidated Statement

of Financial Position . . . . . . . . . . . . . . .31

Consolidated Statement

of Cash Flows . . . . . . . . . . . . . . . . . . . . .32

Consolidated Statement

of Changes in Equity . . . . . . . . . . . . . . .33

Consolidated Notes to

the Financial Statements . . . . . . . . . .34 Directors' Declaration . . . . . . . . . . . . .59 Independent Auditor's Report . . . . .60 Additional Information . . . . . . . . . . . .62 Corporate Directory . . . . . . . . . . . . . .65

Highlights

i Multi-project portfolio enhanced with the addition

i Other exploration licence applications within the approvals process, each with good potential for short-term resource generation and major new discoveries

i Maiden Mineral Resource estimate completed for the Porte-aux- Moines (PAM) volcanogenic massive sulphide (VMS) deposit to JORC 2012 reporting standards

i Mineral Resource is 2 .2 million tonnes grading 6 .0% zinc, 1 .3% lead, 0 .8% copper, 80 .6 g/t silver and 0 .9 g/t gold

i Places the deposit within the first grade quartile on a zinc equivalent basis for zinc-rich deposits worldwide

i Suggests good potential for economic extraction provided sufficient tonnage can be defined

i Excellent potential for additional VMS deposits in the same rock units that host PAM

i Two main trends of VMS mineralisation containing seven distinct mineralised centres defined over a total strike length of 22 kilometres

i Prospects include Les Essarts Prospect where shallow drilling by the BRGM during the 1970s recorded a number of zinc-lead-

i 1 .25 metre @ 7 .0% zinc, 3 .0% lead, 0 .22% copper from 80 metres in LSS2

i 1 .0 metre @ 5 .5% zinc, 2 .7% lead and 0 .26% copper from 66 metres in LSS3

i Drilling of PAM to commence shortly

i Follow-up around a 21 .5g/t gold rock chip at Belleville Prospect defined an 900 x 400 metre zone of strongly anomalous gold values with up to 2 .4g/t gold in soils

i A historic data review at the Ville Tirard prospect revealed 1952 drilling intersected near-surface gold mineralisation with reported grades averaging around 3-4g/t gold over widths in excess of 15 metres

i Drill programmes to test these prospects planned to commence shortly

Dear fellow Variscan shareholders,

During the year we continued to concentrate on delivering Variscan's strategy of targeting 'brownfields' mineral projects in France - a country that has seen minimal modern exploration over the last two decades. We are now entering the exciting stage as we are about to commence drilling on the Merléac and St Pierre PERs.

2 Annual Report 2015

We have the unique position of being the first mover in the renaissance of mineral exploration and development in France

adjusted for entitlements issues we have made. We find this somewhat disappointing, given our Merléac zinc project is shaping up very well and the zinc price has started to reflect the supply cutbacks from mine closures.The London Metals Exchange 3-month Forward zinc price fell from around US$1,800/tonne to US$1,500/tonne by January 2016 but has now risen to around US$2,300/tonne.

Metals demand generally continues to grow modestly as Global th rates remain subdued and, in particular, China's growth has eased. Many metals markets appear to o demand/supply equilibrium and reported stocks educing. This augurs well for prices looking forward emand side continues even modest growth.

most Central Banks around the world continue to odative monetary policies as they continue to tion is a serious economic threat and inflation is ined around 1-2% in major developed economies.

Reserve is a potential exception where some rest rates is being telegraphed. Overall, interest tremely low (or negative) by any historical owever, these monetary policies have done little al economic growth (and possibly the reverse) as

ficiaries of Zero (or Negative) Interest Rate Policies ernments who predominantly continue to run which are primarily driven by consumption and

ending rather than investment. It seems almost ee through to: what happens next? There does ossibility of strong demand and prices for gold d assets) as an investment preference by many y seek a shelter from negative interest rates.

uncertainities many commodity prices are likely to rices have been below the cash costs of higher-cost

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