Gindalbie Metals : Half Yearly Report and Accounts

ABN 24 060 857 614

GINDALBIE METALS LTD AND ITS CONTROLLED ENTITIES

INTERIM FINANCIAL REPORT

31 DECEMBER 2018

GINDALBIE METALS LTD AND ITS CONTROLLED ENTITIES

DIRECTORS' REPORT

Your directors present their report together with the consolidated financial report for the half-year ended 31 December 2018 and the auditor's review report thereon

DIRECTORS

The Directors of the Company during or since the end of the half-year are:

1

GINDALBIE METALS LTD AND ITS CONTROLLED ENTITIES

DIRECTORS' REPORT

REVIEW OF OPERATIONS

Key events for the half year ended 31 December 2018:

•  During the last six months the Group completed the drilling program at the Mount Gunson Copper-Cobalt Project, finalised the mining options study and continued to progress the update the Mt Gunson Copper-Cobalt Project Pre-feasibility.

•  Mt Gunson Copper-Cobalt Project Farm in Stage 1 expenditure commitment of $ 1.37M had been reached during the reporting period. The Company's subsidiary will receive a 25% interest in the Mt Gunson tenement package.

•  As at 31 December 2018, Gindalbie had term deposits of $31.6 million, and cash and cash equivalents of $1.5 million.

RESULTS OF OPERATIONS

The net loss for the six months ended 31 December 2018 was $857 thousand, compared with a net loss of $515 thousand for the six months ended 31 December 2017.

MT GUNSON COPPER-COBALT PROJECT

Mt Gunson Copper-Cobalt Project Farm-in Pre-feasibility Study (PFS) Update

During the last six months, work on the Mt Gunson Project focused on the completion of a large diameter (C8, 200mm) metallurgical drilling program at the MG14 and Windabout deposits, and the commencement of a HQ diamond drilling program at the Emmie Bluff prospect.

The large diameter program comprised eight holes, 2 at MG14 and 6 at Windabout, for a total of 564m drilled. This resulted in a total of 565kg of mineralised (i.e. >0.5% Cu) sample from Windabout and 264 kg of mineralised sample from MG14. The material will be diluted to better represent the overall grade of the known deposits and then split into metallurgically distinct composites. Following this, the total material yield from the drilling programme is expected to be approximately 1,350 kg, which is estimated to be more than sufficient to support the metallurgical test work program through to the completion of the PFS.

Following completion of this program, a second program was undertaken to drill HQ diamond holes at the Emmie Bluff prospect, following up on historical intersections of MG14 style Tapley Hill Formation hosted Cu-Co mineralisation.

Two vertical holes were completed in the December quarter for a combined total of 886m. Both holes included intervals of sulphidic Tapley Hill Formation similar to mineralisation encountered at MG14 and Windabout.

The programme was concluded in early January 2019 with an angled hole to obtain geotechnical information and a third vertical hole. The vertical hole was drilled to a total depth of 456.9m and also encountered sulphidic Tapley Hill Formation. Samples have been submitted for assay and geotechnical assessment. Once assayed, the material will be submitted for metallurgical analysis and the historical (non-JORC compliant) mineral resource model revisited.

2

GINDALBIE METALS LTD AND ITS CONTROLLED ENTITIES

DIRECTORS' REPORT

Mining Options Study

Stage 2 of the mining options study has been finalised with submissions received from mining contractors. The results of the RFQ have provided information to enable the Company to fully evaluate the current base case mining method, which remains based on a conventional truck and shovel for the mining of both MG14 and Windabout. Detailed evaluation and value engineering work is currently underway including work to consider other bulk and selective mining options for the larger Windabout deposit.

Exploration and Resource Development

Following the completion of an exploration targeting study encompassing the entire Mt Gunson tenement area of 750km2, a geological options workshop was held in September 2018 to review the study results and create a detailed plan for additional exploration on the tenements. The primary focus of current work is to explore for low strip ratio, sedimentary hosted copper-cobalt deposits close to planned infrastructure. Several targets have been identified with exploration work expected to commence during the December quarter subject to environmental and heritage approvals.

The Group's primary resource development focus remains on MG14, Windabout and Emmie Bluff. However, work continues to examine the highly prospective Mt Gunson tenement package for additional, low strip ratio, near surface Resources. An extensive passive seismic program has been designed to determine the suitability of the Tromino passive seismic technology for use at Mt Gunson through calibration over known deposits, and, if successful, attempt to determine the extent and thickness of the Tapley Hill formation in areas of geological interest. This survey is likely to be during the next six months. In addition, the company has begun a reassessment of the potential for modern geochemical techniques to discriminate Tapley Hill Formation hosted mineralisation at Mt Gunson, as part of the previously reported Regional Exploration Assessment programme.

Gindalbie has noted BHP's recent exploration success at their Oak Dam project, approximately 10 km NNE of Gindalbie's Emmie Bluff prospect. In light of this regional success, as well as the findings of the recent Regional Exploration Assessment conducted by International Geoscience, Gindalbie has begun a review of IOCG prospectivity on its tenure.

Strategic Development

Gindalbie remains actively engaged in the evaluation of strategic development opportunities both organically within the Mt Gunson Copper-Cobalt Project as well as potential growth through acquisition outside of the Project to leverage its remaining cash assets and drive shareholder value. The Group continues its focus on projects in the post-scoping study to decision-to-mine phase, primarily in the gold and base metals sectors. Gindalbie is in a strong position to act and is conducting due diligence on several potential growth opportunities.

3

GINDALBIE METALS LTD AND ITS CONTROLLED ENTITIES

DIRECTORS' REPORT

KARARA PROJECT (Ansteel 52.16%, Gindalbie 47.84%)

The Karara Project, which is located 200km east of Geraldton in Western Australia, is owned and operated by Karara Mining Limited ("KML", "Karara"), which is a joint venture between Gindalbie Metals Ltd ("Gindalbie") and Anshan Iron and Steel Group Corporation (Ansteel), one of the largest steel-makers and the biggest iron ore producer in China. The Karara Project consists of a long-life, magnetite concentrate operation with a smaller-scale supporting hematite Direct Shipping Ore ("DSO") operation.

Since late 2013, Gindalbie has maintained its interest in Karara Mining as a minority investor with management activities now under the guidance of Ansteel. Gindalbie regularly reviews the value of its investment in Karara Mining, the current holding value of the asset is at a nil value driven primarily by high gearing of Karara and the current iron ore price environment.

Production

A total of 65 shipments were made during the half year totalling 3,776 million dry metric tonnes ('DMT') of combined magnetite concentrate.

4