ASTRON LIMITED — Annual Report 2017

Aug 31, 2017

Astron Corporation Limited

ARBN 154 924 553 Incorporated in Hong Kong, company number 1687414

Preliminary Final Report - Unaudited Year ended 30 June 2017

Contents

• Corporate Directory

• Appendix 4E

• Consolidated Financial Statements

CORPORATE DIRECTORY

Directors

Mr Gerard King (Chairman) Mr Alexander Brown (Managing Director) Mdm Kang Rong (Executive Director)

Company Secretary and Registered Office

McCabe Secretarial Service Limited 16[th] Floor, Wing-On-Centre 111 Connaught Road Central, Hong Kong

Australian Corporate Offices

73 Main Street, Minyip, VIC 3392 Telephone: 61 3 5385 7088 Fax: 61 3 5385 7050

China Business Office

c/- Yingkou Astron Mineral Resources Co Ltd Room 612, Huafu Building No. 9, Tuanjie Road Shenhe District Shenyang 110013 Telephone/Fax: 86 22595960

Bankers

Commonwealth Bank of Australia 48 Martin Place Sydney NSW 2000, Australia

Share Registrar

Computershare Investor Services Limited Level 3, 60 Carrington Street Sydney NSW 2001, Australia

Computershare Hong Kong Investor Services Limited

Hopewell Centre, 46[th] floor 183 Queen’s Road East Wan Chai, Hong Kong

Auditors

Grant Thornton Audit Pty Limited Level 17, 383 Kent Street Sydney NSW 2000, Australia

Grant Thornton Hong Kong Limited Level 12, 28 Hennessy Road Wan Chai, Hong Kong

Internet Address

www.astronlimited.com

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Summary of results and commentary

For the Year Ended 30 June 2017 PRELIMINARY FINAL INFORMATION GIVEN TO THE ASX UNDER LISTING RULE 4.3A Name of entity ASTRON CORPORATION LIMITED ARBN 154 924 553 Reporting period Previous corresponding period 30 June 2017 30 June 2016 The information contained in this report should be read in conjunction with the most recent annual financial report. CONTENTS Page Results for announcement to the market 4 Commentary on results 5 Consolidated Statement of Profit or Loss and Other Comprehensive Income 8 Consolidated Statement of Financial Position 10 Consolidated Statement of Changes in Equity 11 Consolidated Statement of Cash Flows 13 Additional information 14

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Summary of results and commentary

For the Year Ended 30 June 2017

RESULTS FOR ANNOUNCEMENT TO THE MARKET

OPERATIONAL HIGHLIGHTS

• Continuing optimisation of the Donald Project in terms of mining method and technical process improvement. Progress made in obtaining approvals for a new test pit which will allow further testing of the HMC offtake in Astron’s China facilities.

• Updated feasibility of the Donald Project with the inclusion of the third party tender financials.

• Two-stage infill drilling at the Donald and Jackson deposits in 2013 and 2015 substantially increased the Donald Mineral Sands project’s total Measured and Indicated Mineral Resource estimates - the sum of in situ HM tonnes in these two categories increased from 52Mt in the 2011 Mineral Resource estimate to 115Mt in this Mineral Resource estimate (both at 1% HM cut-off) (refer ASX release 7 April 2016).

• Mining licence in Senegal obtained, final approvals being obtained, equipment being purchased in advance for mine development post year end.

• The research & development program during 2016 resulted in a $727,895 tax refund, the 2017 R&D tax refund is expected to be lower due to the nature of the 2017 expenditure.

• Receipts from the proceeds from the sale of land in China continued with a further $1,730,499 received subsequent to year end.

		FINANCIAL HIGHLIGHTS
	Net tangible asset value per share	Down 18.3%		to 24.4 cps
	Revenue from continuing operations	Up 305.9%		to $1,899,763
	Cash (outflow) from operating activities	Up $704,072		to ($3,222,111)
	Loss before tax from continuing operations attributable to
	members	Down $994,761		to ($4,009,418)
	Loss after tax attributable to members	Down $1,817,352		to ($2,590,844)
	Total comprehensive income for the year	Up	$2,722,731	to ($3,978,717)

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Summary of results and commentary

For the Year Ended 30 June 2017

COMMENTARY ON RESULTS

Overview

Astron Corporation Limited (Astron HK) is the group’s holding company. Astron HK controls 100% of Astron Limited and Senegal Mineral Sands Limited. Astron Limited in turn controls three wholly owned operating subsidiaries: Donald Mineral Sands Pty Limited (“DMS”), Yingkou Mineral Resources Company Limited (Resources) and Astron Titanium Yingkou Company Limited (Titanium). DMS holds the Donald mineral sands mining project (Donald Project). Resources and Titanium are Astron’s Chinese operating companies.

Financials

Statement of profit or loss and other comprehensive income

• Total revenue comprising sales, interest received and other income increased over the prior year. This is primarily due to the increase in trading in Chinese markets as the Zircon market continues to improve, interest earned increased while rental and other income remained steady.

• Overhead expenditure decreased by $645,975 compared to 2016 with prudent management control over expenditure.

Statement of financial position

• The increase in intangible assets arises from development expenditure capitalised in respect of the Donald and Senegal Projects.

• Land use rights comprise 50 year land use leases. These leases are capitalised and amortised over the 50 year period.

• The movement in the net tangible assets value from 29.9 cps at 30 June 2016 (restated) to 24.4 cps at 30 June 2017 reflects the increase in capitalised intangible expenditure into the Donald and Senegal projects.

Operations review

Donald

The development of the Donald project (“DMS”) continued during the year. Progress was made in the following areas:

Engineering

Conceptual engineering and design was completed in early 2017 to allow for a feasibility level tendering process to be carried out. The mapping, budgeting and operational assessments were completed.

Detailed mine planning including tailing plan and mapping was completed for the feasibility level.

Execution strategy

The execution strategy for the project will involve a standalone design contract for the Australian processing plant, reflecting a modular plant construction and assembly through a Chinese fabrication yard. The module assembly, and all wraparound construction will be conducted under several local construction contracts, and managed by a single integrated owners team.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Summary of results and commentary

For the Year Ended 30 June 2017

Approvals

A summary of the status of relevant approvals is as follows:

Approval type	Status	Date
Environment or Effects Statement (ESS)	Approved	2008
Mininglicence	Approved
Cultural HeritageManagement plan	Approved	January2014
Water rights	Secured	2012
Radiation licence	Approved	December 2014
Export permit	Approved	December 2016
Workplan	Submitted
Work Authority	Submitted

Project Infrastructure

It is estimated that 13km of local road upgrades will be required, together with 11km for the installation of designated water supply to the project site. Wherever possible, funding assistance has been considered from state and regional departments.

Detailed Engineering has been undertaken for site access roadways and Minyip township heavy vehicle bypass routes were completed in Q3 2016. These designs were completed with review and approval from state regulators and relevant stakeholders.

Power Systems are proposed to be by way of gas / diesel powered generation system, for which compatibility and suitability assessments were completed in Q4 2016. The specific nature of the site with a modulated plant design supports localised generation systems. The ability to install additional generator banks as needed supports the project with the ability to increase production physicals as necessary.

In relation to the water pipeline, hydraulic assessments and pipeline engineering designs were completed in Q3 2016. The piping system design catered for full scale operations with capacities for future expansions. Discussions with public, private, partnership (PPP) groups have commenced. With integration, supply and network load sheading from the local pipeline network has the potential for localised network infrastructure to potentially provide the project commencement water supply demand.

Separation test work on China floatation and product trials for customers

Bulk sample approval was received post year end. The bulk sample is anticipated to provide 3000t of ore material for floatation methods and product trials for customers.

Risk assessment

Risk assessments have been conducted at various stages, and major risks have been ranked and prioritized. The most significant technical risks are associated with site water and tailings management, and operational logistics of large mining equipment inside the pit. Test work has been conducted to quantify these risks and management plans have been put in place to address these. These risks have been logged as part of the Victorian WorkPlan process. Additional risks will be associated with ensuring that long-lead items are expedited, and that module assembly is completed on schedule and to an acceptable level of quality. These risks will all be specifically managed with specific management plans and designated hires into the project team.

Funding

Astron continues to work with interested parties to fund this project. Astron and CMEC have extended their current EPC Contract to 1 December 2017.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Summary of results and commentary

For the Year Ended 30 June 2017

Environmental

Data collection and surveys commenced with consultancy groups to populate the mine site Work Plan permit for Noise, Air Quality and Dust, Native Vegetation, Sensitive receptors and Radiation.

Work plan

The work plan has been submitted.

Community Engagement

DMS representatives have attended courses and workshops in Melbourne and Bendigo to compliment DMS ability to develop and execute DMS’ community engagement plan which required certification, which has now been received.

China operations

Work in China continued to test and develop technology to be applied for downstream advancement of Group minerals.

Mineral sales increased as the Zircon market demand continues to improve.

Senegal

Mining licence

The Mining Licence was awarded in June 2017.

Environmental Approval

Conceptual workshops in Senegal and China have produced clear transportation and logistics plans to be included in the amended environmental approval.

Detailed Mine Design

MinxCon from South Africa commenced detailed mine design in mid-August 2017.

Community Engagement and Resettlement

Meetings and collaboration have been undertaken with local and state representatives for the implementation of the re-settlement plan of the local isolated communities situated within the mining licence lease area.

Procurement

Review, design and procurement of equipment and consumables commenced in July 2017.

Resources have been sourced in Dakar including office space, accounting support, commercial legal support and transport during July and August 2017. Logistics and operational processes work is ongoing with Contractual agreements set for execution beginning September 2017.

America

Astron continues to seek mineral sands opportunities in the USA for processing and sale in China.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Year Ended 30 June 2017

		Year Ended	Year Ended
		30 June	30 June
		2017	2016
		$	$
Sales revenue Cost of sales Gross profit Interest income Other income Distribution expenses Marketing expenses Occupancy expenses Administrative expenses Write back/(down) of stock Bad debts provision Costs associated with Gambian litigation Finance costs Other expenses Loss before income tax expense Income tax benefit Net loss for the year Other comprehensive income Items that may be reclassified subsequently to profit and loss Increase/(Decrease) in fair value of available-for-sale financial assets Decrease in Foreign currency translation differences Other comprehensive income for the year, net of tax Total comprehensive income for the year Loss for the year attributable to: Owners of Astron Corporation Limited Total comprehensive income for the year attributable to: Owners of Astron Corporation Limited		1,899,763 467,999 (1,534,332) (434,218)
		365,431 33,781 135,943 56,929 519,606581,485 (33,089) (9,085) (8,490)(10,145) (6,761) (9,351) (4,803,470)(4,463,156) 327,753 (171,077) (226,716) - (134,987) (946,786) (8,379) (10,766) (136,259)(56,008)
		(4,009,418) (5,004,179) 1,418,574 595,983
		(2,590,844)(4,408,196)
		164,799(151,973) (1,552,672)(2,141,279)
		(1,387,873)(2,293,252)
		(3,978,717) (6,701,448)
		(2,590,844)(4,408,196) (3,978,717) (6,701,448)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Year Ended 30 June 2017

	Year Ended	Year Ended
	30 June	30 June
	2017	2016
1. EARNINGS/(LOSS) PER SHARE For loss for the year
Basic loss earnings per share (cents per share)	(2.12) (3.60)
2. COMPARISON OF HALF-YEAR RESULTS Consolidated loss after tax attributable to owners reported for the first half year Consolidated loss after tax attributable to owners reported for the second half year Total consolidated profit/(loss) after tax for the year	(2,432,360) (2,018,915) (158,484) (2,389,281)
	(2,590,844) (4,408,196)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Consolidated Statement of Financial Position

Consolidated Statement of Financial Position	Consolidated Statement of Financial Position
As at 30 June 2017
	As at	As at
30 June 2017 $		30 June 2016
		$
ASSETS Current assets Cash and cash equivalents 1,317,231 Term deposits greater than 90-days 60,898 Trade and other receivables 6,087,761 Inventories 1,888,353 Available-for-sale financial assets 217,293 Current taxassets -		5,104,594 60,685 14,143,379 730,564 540,237 460,380
Total current assets 9,571,536		21,039,839
Non-current assets Trade and other receivables 6,396,921 Property, plant and equipment 19,953,921 Intangible assets 71,825,267 Land userights 3,010,784		- 21,046,191 69,118,158 3,255,981
Total non-current assets 101,186,893		93,420,330
TOTAL ASSETS 110,758,429		114,460,169
LIABILITIES Current liabilities Trade and other payables 4,526,306 Provisions 58,088		3,548,955 67,783
Total current liabilities 4,584,394		3,616,738
Non-current liabilities Deferred tax liabilities 4,388,800 Long-termprovisions 40,000		5,079,479 40,000
Total non-current liabilities 4,428,800		5,119,479
TOTAL LIABILITIES 9,013,194		8,736,217
NET ASSETS 101,745,235		105,723,952
EQUITY Contributed equity 1,605,048 Reserves 8,834,956 Retained earnings 91,305,231		1,605,048 11,061,760 93,057,144
TOTAL EQUITY 101,745,235		105,723,952

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Consolidated Statement of Changes in Equity

For the Year Ended 30 June 2017

			Financial	Foreign
			Assets	Currency
	Issued	Retained	Available For	Translation
	Capital	Earnings	Sale Reserve	Reserve	Total Equity
Year Ended 30 June 2017	$	$	$	$	$
Equity as at 1 July 2016	1,605,048	93,057,144	709,332	10,352,428	105,723,952
Loss for the year	-	(2,590,844)	-	-	(2,590,844)
Other comprehensive income
Decrease in fair value of
available-for-sale financial
assets	-	838,931	(674,132)	-	164,799
Exchange differences on
translationof foreignoperations	-	-	-	(1,552,672)	(1,552,672)
Total comprehensive profit
for theyear	-	(1,751,913)	(674,132)	(1,552,672)	(3,978,717)
Transactions with owners in
their capacity as owners
Returnofcapital	-	-	-	-	-
Total of transactions with
owners in their capacity as
owners	-	-	-	-	-
Equity as at 30 June 2017	1,605,048	91,305,231	35,200	8,799,756	101,745,235

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Consolidated Statement of Changes in Equity

For the Year Ended 30 June 2017

			Financial
			Assets	Foreign
			Available	Currency
	Issued	Retained	For Sale	Translation
	Capital	Earnings	Reserve	Reserve	Total Equity
Year Ended 30 June 2016	$	$	$	$	$
Equity as at 1 July 2015	1,605,048	97,465,340	861,305	12,493,707	112,425,400
Loss for the year	-	(4,408,196)	-	-	(4,408,196)
Other comprehensive income
Increase in fair value of
available-for-sale financial assets	-	-	(151,973)	-	(151,973)
Exchange differences on
translationof foreignoperations	-	-	-	(2,141,279)	(2,141,279)
Total comprehensive profit for
theyear	-	(4,408,196)	(151,973)	(2,141,279)	(6,701,448)
Transactions with owners in
their capacity as owners
Returnofcapital	-	-	-	-	-
Total of transactions with
owners in their capacity as
owners	-	-	-	-	-
Equity as at 30 June 2016	1,605,048	93,057,144	709,332	10,352,428	105,723,952

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Consolidated Statement of Cash Flows

For the Year Ended 30 June 2017

	Year Ended	Year Ended
	30 June	30 June
	2017	2016
	$	$
Cash flows from operating activities: Receipts from customers 2,108,483 847,259 Payments to suppliers and employees (6,635,229) (4,506,639) Interest received 135,943 58,125 Finance costs (8,304)(10,767) Income taxes received 1,176,9961,093,983
Net cash(outflow) from operating activities (3,222,111) (2,518,039)
Cash flows from investing activities: Receipts from investments in short term deposits (213) (360) Receipts from disposal of investments 466,602 223,817 Receipts from disposal of land receivable 1,873,007 7,033,747 Acquisition/disposal of property, plant and equipment (253,985) (151,499) Capitalised exploration, evaluationexpenditure and development costs **(2,079,970) ** (3,828,923)
Net cash inflow from investing activities 5,441 3,276,782
Cash flows from financing activities: Repayment ofborrowings - (1,000,000)
Net cash(outflow)/inflow from financing activities - (1,000,000)
Net (decrease)/ increase incash held (3,216,670) (241,257)
Cash and cash equivalents at beginning of the year 5,104,594 5,796,027 Net foreign exchange differences (570,693) (450,176)
Cash and cash equivalents at end of the year 1,317,231 5,104,594

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

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Astron Corporation Limited and its Subsidiaries

ARBN 154 924 553

Additional Information

For the Year Ended 30 June 2017

1. DETAILS OF CONTROLLED ENTITIES

• During the financial year ended 30 June 2017, no new subsidiaries were acquired. Subsequent to year end a new wholly-owned subsidiary in Senegal will be incorporated.

2. DETAILS OF ASSOCIATES AND JOINT VENTURE ENTITIES

The Group has no associates or joint venture entities.

3. DIVIDENDS / RETURN OF CAPITAL

No dividends were paid or proposed for the years ended 30 June 2017 and 30 June 2016. There is no Dividend Reinvestment Plan in operation.

4. ACCOUNTING STANDARDS

Australian Accounting Standards and International Financial Reporting Standards have been used in preparing the information contained in this Appendix 4E.

5. SIGNIFICANT ACCOUNTING POLICIES

• Accounting policies, estimation methods and measurement bases used in this Appendix 4E are the same as those used in the last annual report and the last half-year report.

6. CONTINGENCIES

The Group contingencies are broadly in line with those disclosed in the last annual report.

7. OTHER INFORMATION REGARDING THE PRELIMINARY REPORT

The information contained in this Appendix 4E is based on accounts that have not yet been audited.

8. COMPARATIVE INFORMATION

The comparative financial information has been presented on a consistent basis with the prior year’s audited financial Statements.

9. TRADE AND OTHER RECEIVABLES

During the year ended 30 June 2015 the Group reported the disposal of leasehold land in China, as at 30 June 2017 there is $10,050,196 (2017: $12,558,176) AUD outstanding and receivable under the terms of the sale contract. A further $1,730,499 has been received subsequent to year end.

There is no other significant information requiring disclosure in the preliminary report.

10. OTHER SIGNIFICANT INFORMATION

There is no other significant information requiring disclosure in the preliminary report.

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