AVIRA RESOURCES LTD - Annual Report 2016

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2016 ANNUAL REPORT

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CORPORATE DIRECTORY 2016

CORPORATE DIRECTORY 2016

DIRECTORS

SHARE REGISTRY

Jonathan Back Executive Chairman and Managing Director Gary Kuo Executive Director and Chief Operating Officer Li Hai Jun Non-executive Director Wenshan Zhang (appointed 8 April 2015) Non-executive Director Christopher Chen (appointed 8 April 2015) Non-executive Director

Computershare Investor Services Pty Ltd GPO Box 52, Melbourne, Victoria 3001 Telephone: 1300 552 270 (within Australia) +61 3 9415 4000 (outside Australia)

COMPANY SECRETARY

BANKERS

Alexander Moody (resigned on 14 August 2014) Jacqueline Butler (appointed on 14 August 2014)

Westpac Banking Corporation

NOTICE OF ANNUAL GENERAL MEETING

SOLICITORS TO THE COMPANY

The Annual General Meeting of MGT Resources Limited will be held at: Mazars Australia Offices Level 12, 90 Arthur Street North Sydney, NSW 2060 Time: 11am. Date: 25[th] November 2016

HWL Ebsworth Lawyers Level 14, Australia Square 264-278 George Street Sydney NSW 2000

PRINCIPAL REGISTERED OFFICE

AUDITORS

MGT Resources Limited 1305, Level 13, 109 Pitt Street Sydney, NSW 2000 Telephone: +61 2 9262 1122 Facsimile: +61 2 9299 5175 Email: [email protected] Web: www.mgt.net.au

Mazars Risk & Assurance Pty Limited (formerly Duncan Dovico Risk & Assurance Pty Limited) Level 12, 90 Arthur Street North Sydney, NSW 2060

STOCK EXCHANGE LISTING

CORPORATE GOVERNANCE STATEMENT

MGT Resources Limited is listed on the Australian Securities Exchange Limited (ASX) under the code MGS.

The Corporate Governance Statement for MGT Resources Limited can be found at the ‘About Us’, Corporate Governance tab at http://www.mgt.net.au/about-us/corporategovernance/

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ANNUAL REPORT 2016
CHAIRMAN’S LETTER	4
OPERATIONS REPORT	5
DIRECTOR’S REPORT	19
AUDITOR’S INDEPENDENCE DECLARATION	33
CONSOLIDATED FINANCIAL STATEMENTS	34
DIRECTORS DECLARATION	77
AUDITOR’S REPORT	78
ADDITIONAL STOCK EXCHANGE INFORMATION	80

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CHAIRMAN’S LETTER

CHAIRMAN’S LETTER

Dear Shareholders,

While the past year has continued to present a very difficult environment for the resources industries generally, there have been some indications of stabilisation in markets for resources.

MGT has taken the opportunity to assess its strategic direction and we have concluded, working with our investor partners in China, that we will refocus the company into the primary uranium sector while continuing to extract value from our existing portfolio of tin mining and gold exploration assets.

The primary driver for this is our analysis of the global market for uranium which is of course entirely dependent on the civil nuclear power industry. While the headline spot prices for uranium have been weak, and may continue to be so in the near term, we believe very strongly that the key fundamentals will drive a better price environment for uranium, particularly in relation to the all-important long term contracts which primarily drive the market.

It is all too easy in the resources industries to point to China and see an inexhaustible pool of demand for extractive products. For many commodities this is not proving to be the case. For uranium there are, however, very good reasons to see demand from China as underlying potentially much higher demand in the medium to longer term. China is building as many as ten new reactors per year and will continue to do so for the foreseeable future, as it tries to move its generation mix from predominantly coal (at about 78%) to low carbon alternatives. As of now China only gets about 2.4% of its electricity from nuclear power when the share in most advanced economies is closer to 15%.

We also see a renewal of interest in nations with large existing nuclear power industries. New stations in the UK have attracted a lot of press attention but there are other examples

including Sweden and the State of New York where there has been a renewed appreciation of the role of nuclear power as a key part of a lower carbon generation mix.

As such, our strategy is to acquire interests in uranium mining projects which we believe will offer attractive production costs and where long term offtake contracts will be possible. We have already announced the first such project - we will be taking a stake in the Manyingee Project in Western Australia working with Paladin Energy Ltd to bring that project to production. We have also taken a stake in Cauldron Energy Ltd which has projects in the same area as Manyingee.

The last year has also been significant for MGT as we have reached agreement with the main holders of convertible bonds in the company to exchange those into preference shares and options. This has now been completed and leaves MGT with a much stronger balance sheet moving forward. We are fortunate to be working with investor partners in China who are able to provide significant funding support, but we also wish to expand our profile in the domestic Australian market, and will work to do so going forward.

We believe this is a particularly exciting time to be a shareholder of MGT as we capitalise on the many opportunities in the uranium sector. Lastly, we would as always like to thank all our employees for their contributions to the company, and to thank our shareholders for your continued support.

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Jonathan Back Executive Chairman

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CHAIRMAN’S LETTER

OPERATIONS REPORT

1. MOUNT GARNET TIN PROJECT

89.48% owned by MGT

The Mount Garnet Project includes the following tenements:

ML 4349 “Mount Veteran”; ML 20547 “Summer Hill”; ML 20655 “Heads or Tails”; ML 20066 “Valetta”; EPM 16948 “Nymbool”; EPM25433 “Nanyetta”; EPM25690 “Nymbool West”; EPM25716 “Fuzzy Hill”; EPM25347 “Nymbool Extended”

MGT’s Mt Garnet Tin Project is located approximately 100km (3 hour drive on largely-sealed road) south west of Cairns in far North Queensland.

The Summer Hills Mining Lease ML 20547 was granted for a period of 21 years from 1[st] February 2013. The Summer Hills ML is 1170 Ha in area making it one of the largest mining leases in the region. The Mt Veteran Tin processing plant is located on ML4349; wholly surrounded by the Summer Hills ML 20547. A number of tin mining and exploration targets are located within the Summer Hills ML.

During the current financial year MGT has been working towards an update of the Dalcouth Resource Estimate. This was released to the market on April 19[th] 2016.

1.1 SUMMER HILLS (ML 20547)

Dalcouth resource update increases tonnage by 385%

During the financial year MGT was pleased to announce an updated Mineral Resource estimate for the Dalcouth Prospect (located within the Summer Hills Mining Lease, ML20547). The new estimate was updated to include extensive infill and expansion drilling that MGT has conducted at the prospect. The combined Dalcouth Measured and Indicated Mineral Resource now stands at 495,000t @ 0.31% Sn , an increase of 341% contained tin (and a 385% increase in tonnage) over the 2011 Mineral Resource.

Dalcouth Mineral Resource Summary (0.1% Sn lower cut off)

	ktonnes	Sn %	Sn tonnes
MeasuredResource	408	0.32	1306
IndicatedResource	87	0.24	209
Total Resource	495	0.31	1535

Modelling and estimation was provided by Tim Callaghan, who calculated the previous 2011 resource estimate: 102,400 t @ 0.34% Sn Inferred Resource. The mineral resource estimate is classified in accordance with the JORC (2012) guidelines. Full details of the resource estimate can be found in an announcement made to the market on the 19th April 2015: ‘MGT Increases Dalcouth Mineral Resource Tonnage by 385%.’

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OPERATIONS REPORT

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Figure One : Dalcouth block model on topography (Sn cut-off >0.1%)

The mineralisation of the main Dalcouth deposit occurs over a strike length of 350m, with a maximum width of 130m in the southeast narrowing to the northwest. Close-spaced drilling has defined the deposit to a depth of 100m from the surface. The mineralisation remains open along strike to the northwest and southeast, as well as down dip. Further drilling could potentially expand the Dalcouth resource in these areas. There are also possibilities to develop mineralisation to the east of the main Dalcouth line (Dalcouth Northeast No. 1 and No.2 – see Figure 2).

A rotated block modelled resource estimation was calculated using an ordinary kriged algorithm (see Figure 1). The resource estimation is based on 227 RC drillholes, 4 diamond holes and surface geological mapping. The resource is well-defined from close spaced drilling, and the structural controls on mineralisation and continuity above a 0.1% Sn hard boundary are well understood and well-defined. The resource has been classified as Measured Resource where the drill spacing is 20m or less, and this makes up more than 80% of the Dalcouth deposit. The remainder of the resource that was within 60m of drill intersections has been classified as Indicated Resource.

This improvement in the resource confidence level, from the 2011 Inferred Resource, is a result of work undertaken by MGT to increase the geological understanding of the Dalcouth area through drilling of diamond core holes, detailed geological mapping, geological modelling, petrographic studies and bulk density measurements. In addition, MGT conducted extensive QAQC work including independent laboratory analyses to verify results.

In the Dalcouth Western, Central and Eastern Zones, and Dalcouth Northwest (see Figure 2) where there is a high level of confidence in the geological model and grade estimation, the resource has been defined as Measured Resource.

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OPERATIONS REPORT

Although there is no reason to suggest that mineralisation is not continuous, where there was a drill spacing greater than 40m, including along strike of the main Dalcouth deposit to the northwest and below 660mRL, resources have been classified as Indicated Resource.

There is a moderate level of confidence in the Dalcouth Northeast No.1 and No. 2 resource estimation, Mineralised domains are defined by a limited number of drillholes, and the deposits remain open along strike and down dip. These resources have been classified as Indicated Resource and require further drilling.

Approximately 35% of the resource is within the oxidised zone and is likely to be free digging for conventional open cut development.

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Figure Two : Dalcouth Mineralised domains and drillhole location in plan view.

Improved geological model of Dalcouth

The geological model of the Dalcouth deposit is much improved since the 2011 resource estimation. A significantly increased amount of accurate geological information derived from 10m sectional RC drilling has greatly assisted the geological understanding of the deposit. The drilling programs have been complimented by detailed surface mapping, petrographic and metallurgical studies and a LeapfrogTM geological interpretation.

Tin mineralisation of the Dalcouth deposit is hosted in Hodgkinson Formation turbiditic sandstones and siltstones. The sediments have been strongly deformed into complexly faulted northwestsoutheast, north-south and northeast-southwest trending folds. A rhyolite intrusive is spatially associated with the three main mineralised zones, and is clearly important to the formation of the deposit, although a genetic association has not yet been established.

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OPERATIONS REPORT

Mineralisation is hosted in fine anastomosing quartz-cassiterite veins and fractures associated with strong chlorite alteration of the host rock. Chlorite alteration presents as strong hematite development within the weathered zone. Quartz veining, rhyolite intrusives and mineralisation are associated with a northwest trending, steeply southwest dipping fracture zone.

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Figure Three : Sectional LeapfrogTM modelling showing the three zones of mineralisation and quartz percentage and rhyolite intrusive association with Sn mineralisation. >800ppm modelled Sn is shown in light blue. Quartz percentage values are shown overlaying modelled tin (0.5-1% QV- yellow, 1-2% QV- orange, >2% QV- red). The Correlation between quartz veining and Sn mineralisation is evident. The modelled rhyolitic body is shown in dark blue and the close association between this intrusive and the western zone of mineralisation is clear.

Mineralisation extends northwest over 350m in length and achieves a maximum width of 130m at the southeast end, possibly representing a dilation zone. The main Dalcouth area consists of three main structural zones of mineralisation, the Western Zone, Central Zone and Eastern Zone (see Figure 3). Each zone consists of multiple stacked lenses of mineralisation. The three zones merge in the centre of the deposit at approximately 8055830N 304050E. Mineralisation is less complex and more constrained northwest of this point, but this may possibly be a function of broader drillhole spacing.

A small area of close spaced drilling has defined the Dalcouth Northwest domain approximately 150m directly along strike from the main Dalcouth deposit. It is very likely that mineralisation is continuous through this zone, and further drilling is required. The deposit remains open along strike both northwest and southeast, as well as down dip, and future resource extensions are likely with further exploration.

In addition to the Dalcouth deposit, other targets exist on MGT’s tenements, and further exploration will delineate further resources.

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OPERATIONS REPORT

Next Steps for Mt Garnet

MGT Resources is seeking further funding for the Mt Garnet Project, and the increase in size and confidence in the Dalcouth JORC resource will assist in MGT securing a funding partner.

Further exploration/infill drilling at Dalcouth is warranted, to test extensions to mineralisation to the north-west, south-east, as well as further exploration of the Dalcouth Northeast deposits to increase their size and confidence level. Greater geological understanding has identified a number of key areas that could be exploited. MGT also plans to conduct follow-up drilling at the Summer Hill prospect, which was drilled in 2014 and returned encouraging results.

2. THE PYRAMID GOLD PROJECT (EPM 12887) 89.48% owned by MGT

The Pyramid Project includes the following tenements:

EPM12887 “Pyramid”; EPM25154 “Pyramid 2”; EPM19554 “Pyramid 3”

The Pyramid Project is located in the Drummond Basin, North Queensland, which is one of Australia’s most significant gold producing regions. The area is host to many successful deposits including Pajingo, Yandan, Wirralie, Mount Coolon and Twin Hills. The project area lies on a major northnortheast trending belt of gold mineralisation developed over a strike length of 20km.

The Pyramid Project is located approximately 170km south of Townsville and 120km southeast of Charters Towers. Access from Townsville is via the Flinders Highway to Mingela, then sealed road to the Burdekin Dam Falls and then by graded council road to Pyramid Station.

During the current financial year MGT focused on finalising a review of the results from the drilling and soil sampling programs conducted in the previous financial year (details of these programs were reported in the 2015 Annual Report).

A number of targets for exploration have arisen from joint examination of soil and modelled drill data.

At Sellheim, a large soil Au anomaly to the east of the ridge has two holes in it, but has not been satisfactorily explained and remains largely untested (see Figure 4A). In general the strongest soil anomalies are located at Sellheim and neither has been convincingly tested.

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OPERATIONS REPORT

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OPERATIONS REPORT

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Figure Four : Exploration potential at Pyramid. B and C are 100m wide perspective views centred on locations shown in A.

The width of the mineralised envelope at Gettysberg is ~150 m wide and 750 m long, but this is not indicative of the maximum extent as explained below.

Sellheim and Gettysberg are separated by a fault that strikes approximately EW. The fault appears to dip to accommodate thrusting but its sense of throw is unclear. South of the fault and north of Gettysberg, a significant soil anomaly with Au 30-45 ppb lies at the northern end of a finger of anomalous Au that extends from just NW of the drilled part of the Gettysberg prospect (Figure 4A and B). This anomaly is untested and has the potential to increase the volume of the prospect.
The core of the Gettysberg prospect is anticlinal. The soil anomaly extends eastward for over 400 m toward the conglomerate ridges. It becomes less distinct on the ridges, and the slope of the anomaly is greatest at the base of the ridges. This may be significant in that the Ukalunda Formation dips to the east on that side and mineralised rocks may extend below the conglomerate ridges (Figure 4C). Even without extension below the conglomerate, a successful drilling program in this zone has the potential to increase the volume of the prospect.
The major Gettysberg soil anomaly is constrained between two known fault zones, with opposite shear sense (i.e. generally conjugate). The intersection of these zones, east of the drilled part of the prospect and within the extent of the soil anomaly described above, is likely to be prospective.
At Devil’s Den in the southwest of the prospect, the overall trend of mineralisation is strongly WSW to EW trending. The truncation occurs along the trace of a known fault (Figure 4A and B) but as presently drilled the mineralisation is not continuous to depth. Additionally, its continuity EW along strike in both directions (particularly NE) is relatively poorly constrained.
The mineralisation is open to the North at depth (north of hole MGTRC018), and lateral continuity to the SE is untested.

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OPERATIONS REPORT

Next steps for Pyramid

Terra Search Pty Ltd, MGT’s consultant Geologists for the project, have made some recommendations for future exploration to be conducted at the Pyramid Project.

Further drilling at all sites should be preceded by ground truthing of all potential gold targets around the mineralised intercept. This field work could involve a structural assessment and focused mapping of identified soil anomalies to better constrain drill positions. Future holes at Gettysberg should be staked out by a full RTK survey to ensure optimal targeting.

Oriented diamond core would greatly enhance the understanding of the orientation and controls on high gold grades at Gettysberg, and probably other prospects. The existing historical diamond cores, despite their poor condition have proven invaluable in providing additional information in the association of mineralisation with small scale structure. Identification of breccia within the core strongly suggests the importance of north west faulting for mineralisation, but the kinematics of the fault are still unconstrained and existing core does not allow unique characterisation of the structures and their relationship to surface mapped geology. Oriented cores drilled within a known mineralised shoot will provide the best opportunity to achieve this goal and will greatly aid in the understanding of the mineralisation.

Finer scale soil Au sampling would be appropriate in several localities, particularly at Marrakesh where a strong anomaly is clearly located on the southern slope of a valley. The apparently strong relationship between magnetic susceptibility and Au suggests that a high resolution magnetic survey of the Gettysberg and Sellheim prospects would be a very cost effective targeting method.

3. THE SOUTHERN QUEENSLAND PROJECT (EPM8402, EPM12834 and EPM15426)

MGT has three separate gold prospect areas in Southeast Queensland, Yarrol (EPM 8402), Mt Steadman (EPM12834) and Gooroolba (EPM 15426). These are non-core assets and MGT is considering divestment options.

In January 2016, a small soil sampling program was conducted at the Mt Steadman tenement.

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OPERATIONS REPORT

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Figure Five: Infill soil sampling at the Fitzroy Main prospect, Mt Steadman. New infill soil results are overlayed on historical Probe Resources Ltd contours. Gold assays show good consistency with previous results, however a 1.2g/t gold result in the southernmost line extends the gold anomaly further to the south. Opportunistic rock sampling locations and best results are also shown.

Infill soil sampling and rock chip sampling was conducted at the Fitzroy Main and Fitzroy North gold prospects (see the March Quarterly Report, announced to the ASX on the 27th April 2016, for more details). Previous sampling by historical holders had been on a 50m spacing, and MGT collected ten infill lines of soil samples at 25m spacing, in order to better define and validate the mineralised zone. Additional reconnaissance work at the nearby historical Venus and London Gold Mine workings was also conducted.

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OPERATIONS REPORT

Previous drilling has been conducted at these prospects by the Probe Resources Ltd/CRAE Joint Venture, including 17 RC and diamond core holes to test for gold at the Fitzroy Main and Fitzroy South prospects. Probe expanded the CRAE soil grid and drilled 22 RC holes for a total of 1120 m into the Fitzroy Main Zone, Fitzroy North, and London and Venus areas. A number of these holes were drilled beneath the soil gold anomalies. The two drilling programs resulted in an indicated resource of 1,170,000 tonnes @ 0.95 g/t gold. In 2006, Diatreme Resources Ltd drilled seven RC holes (980 m) at the London, Steadman and Venus workings.

The 65 soil samples submitted to ALS Orange were analysed for gold using a fire assay technique, and molybdenum and arsenic using an ICPAES technique. Gold assays ranged up to 1.56g/t and showed good consistency with previous gold-in-soil assay contours on most infill sampling lines at Fitzroy Main (see Figure 5). Of most interest is a 1.2 g/t gold result on the southernmost line, which may extend the gold anomaly further to the south in future sampling.

Infill soil sampling at Fitzroy North was conducted to further define the existing gold anomaly and establish, if possible, local quartz veining orientations. Gold results seemed inconsistent with previously drawn contours around existing anomalies, however a 0.57g/t Au assay and a 0.41 g/t Au ppm assay lend support for further work at this prospect.

The 16 rock samples submitted were analysed for gold using a fire assay technique and molybdenum and arsenic using an ICPAES technique. Sampling was opportunistic. Significant gold values occurred in quartz veining sampled at Fitzroy Main including samples with 9.42 g/t Au, 3.67 g/t Au and 13.5 g/t Au (see Figure 5). Two of the samples taken from Fitzroy North, from an in-situ aplite dyke and granite with a large quartz vein contained 2.89 g/t Au and 4.85 g/t respectively.

Opportunistic samples taken from mine dumps at the Venus and London workings also returned significant gold results including 2.08 g/t Au, 3.95 g/t Au, 6.4 g/t Au and 15.95 g/t Au. The latter sample contained visible gold and was taken from the Venus workings.

The recording of both east-west and northeast-southwest oriented quartz vein sets, with moderate to steep easterly dips, at the Fitzroy Main, Fitzroy North and Venus and London gold workings suggests that future drill hole planning should take both trends into consideration.

4. CORPORATE

The following significant transactions and events occurred during the financial year:

Annual general meeting

MGT Resources Limited held its annual general meeting on 18 November 2015. All resolutions put to shareholders were passed.

General meeting

MGT Resources Limited held a general meeting on 30 June 2016. All resolutions put to shareholders were passed.

Funding

On 24 November 2015, Auskong International Mining Investment Co., Limited exercised its 24,000,000 unlisted options into ordinary shares at 5 cents per share, raising $1,200,000.

On 3 June 2016, MGT Resources Limited announced that Joseph Capital (Hong Kong) Limited had agreed to subscribe for 30,303,030 ordinary shares at $0.033 per share for $1,000,000 in new funding. The placement was completed on 19 July 2016.

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OPERATIONS REPORT

Uranium strategy

On 29 March 2016 MGT Resources Limited announced that, working with its key investment partners, it will pursue a strategy of investment in uranium mining assets, as well as seeking to maximise value from its existing tin and gold assets.

In line with this strategy, as announced to the market on 30 March 2016, MGT Resources Limited purchased 16,949,176 fully paid ordinary shares and 20,000,000 unlisted options exercisable by 31 December 2016 at $0.138 per option, in Cauldron Energy Limited (ASX: CXU) for $2,000,000. Cauldron Energy holds uranium assets.

In further pursuit of this Uranium strategy, MGT Resources Limited announced on 21 July 2016, that it had entered into a binding term sheet with Paladin Energy Limited (ASX:PDN) over Manyingee Mining Leases (M08/86, M08/87 M08/88) (Manyingee Uranium Project) in North Western Australia.

5. CHANGES IN CAPITAL STRUCTURE

Issue of shares

MGT Resources Limited issued the following during the year ended 30 June 2016:

On 26 November 2015, Auskong International Mining Investment Co., Limited was issued 24,000,000 ordinary shares in MGT Resources Limited upon the exercise of $1,200,000 unquoted share options at 5 cents per option.
On 9 June 2016, Auskong International Mining Investment Co., Limited converted their $1,500,000 Convertible note into 50,000,000 ordinary shares in MGT Resources Limited.
On 30 June 2016, following the general meeting of shareholders, MGT Resources Limited issued 60,606,061 ordinary shares in MGT Resources Limited to Auskong International Mining Investment Co., Limited on the conversion of the $2,000,000 Converting Note issued to Auskong International Mining Investment Co., Limited on 29 March 2016.

Options exercised

On 26 November 2015, Auskong International Mining Investment Co., Limited converted its 24,000,000 unquoted options exercisable at 5 cents each, into one ordinary share per option.

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OPERATIONS REPORT

6. ANNUAL RESOURCES STATEMENT

Table 1 Mineral Resource Estimates at 30th June 2016

PROJECT	JORC Resource	JORC Category	Date Reported	SG	Cut Off
Smiths Creek Tin	200 000 – 250 000 tonnes grading between 1% and 2% tin	Exploration Target	VWPL September 2014
Mount Veteran MLs Tin lode systems	All lodes except Dalcouth/Extended 250 000 to 450 000 tonnes grading between 0.3% and 0.7% tin	Exploration Target	VWPL September 2014
Dalcouth Tin	408,000 tonnes grading 0.32% 87,000 tonnes grading 0.24%	Measured Indicated	Tim Callaghan, March 2016	2.7 2.7	Cut-off at 0.1% tin - Top-cut at 97.5th percentile
Extended Tin	9,500 tonnes grading 0.35%	Inferred	Tim Callaghan July 2011	2.5	Cut-off at 0.1% tin - Top-cut at 97.5th percentile
Nymbool Gold	12 200 000 tonnes minimum grading 0.4 g/t gold contains 2 250 000 tonnes grading 0.73 g/t gold,	Indicated Indicated	VWPL 2006 Murray 1996, Davis 2006	2.5 2.5	0.5 g/t gold 0.5 g/t gold
Yarrol Gold	273 000 tonnes grading 1.5 g/t gold 877 000 tonnes grading 1.5 g/t gold	Indicated Indicated	Gallo 1996, Murray 1997 Gallo 1996, Murray1997	2.5 2.5	0.5 and 20 g/t top cut 0.5 g/t gold
Mount Steadman Gold	1 170 000 tonnes grading 0.95 g/t gold	Indicated	Gallo 1996	2.5	0.5 g/t gold

MGT conducted its annual resource review on the 20th August 2015.

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OPERATIONS REPORT

Review of the material changes

Table 2: Changes to MGT’s Tin JORC Mineral Resource

	Inferred	Indicated	Measured
2015 Resource	110,000 t @ 0.34% Sn	Nil	Nil
2016 Resource	9,500 t @ 0.35% Sn	87,000 t @ 0.24% Sn	408,000 t @ 0.32% Sn

During the current financial year, MGT conducted an upgrade of the Dalcouth Resource Estimate. The original resource estimate was completed in 2011, by Tim Callaghan – Resource and Exploration Geology. Since that time an extensive amount of new drilling has been conducted at the prospect, with an additional 137 holes (7,124m) drilled during 2013 and 2014.

MGT also worked towards increasing the JORC confidence level of the Dalcouth Resource Estimate through extensive QAQC work, including independent laboratory analyses to verify results, as well as work conducted to increase the geological understanding of the Dalcouth area through drilling of diamond core holes, detailed geological mapping, geological modelling, petrographic studies and bulk density measurements.

An updated resource has been completed by Tim Callaghan – Resource and Exploration Geology, in accordance with the JORC 2012 guidelines. Table 2 shows the changes to the Tin JORC Mineral Resource. The update has resulted in an increase of 341% in contained tin over the 2011 Mineral Resource. The confidence level has increased from Inferred Resource level, with over 80% of MGT’s tin resource now classified as Measured Resource, and the majority of the rest as Indicated Resource in accordance with the 2012 edition of the JORC code.

Summary of Governance Arrangements and Internal Controls

Governance of MGT Resource Limited’s mineral resource development is a key responsibility of the Executive Management of the Company.

MGT’s governance involves engaging independent experts in resource review and calculation. For this resource review Veronica Webster Pty Ltd conducted a full review of MGT’s resource inventory to assure compliance with the updated JORC code. Resources are reported based on compliance with this external standard; the Australian Joint Ore Reserves Committee (JORC) Codes, 2004 Edition and 2012 Edition.

Exploration work is overseen by independent consulting Geologists from Rangott Mineral Exploration Ltd and Terra Search Pty Ltd. Within MGT’s structure the Chief Operating Officer and Operations Geologist oversee reviews and evaluations and are responsible for monitoring exploration and resource development. These activities are conducted within a framework of quality assurance and quality control, with appropriate practices engaged at all stages.

Internal assessment of data veracity is managed by the Operations Geologist, in conjunction with Rangott Mineral Exploration Ltd and Terra Search Pty Ltd.

Competent Persons named by MGT Resources Ltd are members of the Australian Institute of Geologists and/or the Australian Institute of Mining and Metallurgy, and qualify as Competent Persons as defined in the JORC Code.

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OPERATIONS REPORT

Competent Person Statements

The Exploration Results presented here are extracted from the following reports: ‘MGT increases Dalcouth Mineral Resource tonnage by 385%,’ 19[th] April, 2016; and the ‘March Quarterly Activities Report’, 27[th] April, 2016. These reports are available for view on the website of the Australian Securities Exchange (ASX: MGS). The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement. The company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

Information in this report related to Mineral Resources is based on data compiled by MGT technical staff and reviewed by Mr Les W Davis. Mr Davis is a member of both the AIG and the AusIMM and is a Chartered Professional Geologist. Mr Davis has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Davis consents to the inclusion in the report of the statements based on the information in the form and context in which it appears.

Mineral Tenements held at the end of the year and their location:

State	Tenement Name	Tenement ID	Location	Interest	Holder	Comments
QLD	Mt Veteran	ML 4349	Mt Garnet	89.48%	MGTM	Granted
QLD	Summer Hills	ML 20547	Mt Garnet	89.48%	MGTM	Granted
QLD	Heads or Tails	ML 20655	Mt Garnet	89.48%	MGTM	Granted
QLD	Valetta	ML 20066	Mt Garnet	100%	MGS	Granted
QLD	Nymbool	EPM 16948	Mt Garnet	89.48%	MGTM	Granted
QLD	Nanyetta	EPM 25433	Mt Garnet	89.48%	MGTM	Granted
QLD	Nymbool	EPM 25347	Mt Garnet	89.48%	MGTM	Granted
	Extended
QLD	Nymbool West	EPM 25690	Mt Garnet	89.48%	MGTM	Granted
QLD	FuzzyHill	EPM 25716	Mt Garnet	89.48%	MGTM	Granted
QLD	Pyramid	EPM 12887	Drummond	89.48%	MGTM	Granted
			Basin
QLD	Pyramid 3	EPM 19554	Drummond	89.48%	MGTM	Granted
			Basin
QLD	Pyramid 2	EPM 25154	Drummond	100%	MGS	Granted
			Basin
QLD	Yarrol	EPM 8402	Monto	89.48%	MGTM	Granted
QLD	Mt Steadman	EPM 12834	Gayndah	89.48%	MGTM	Granted
QLD	Gooroolba	EPM 15426	Gayndah	89.48%	MGTM	Granted

Abbreviations
EPMA	Exploration Permit for Minerals Application
EPM	Exploration Permitfor Minerals
MLA	MiningLease Application
ML	MiningLease
MGS	MGT Resources Limited
MGTM	MGT MiningLimited,an unlisted Australianpublic company
QLD	Queensland,Australia

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

DIRECTORS’ REPORT

The Directors of MGT Resources Limited submit herewith the annual financial report of the company for the financial year ended 30 June 2016. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

DIRECTORS

The names of the Directors in office at any time during or since the end of the financial year are:

Name	Particulars
Jonathan Back	Executive Chairman, appointed 1 February 2010, Director appointed 4
	September 2008
Gary Kuo	ExecutiveDirector, appointed7January2011
Christopher Chen	Executive Director,appointed 8 April 2015
Li Hai Jun	Non-Executive Director,appointed 14 April 2009
Wenshan Zhang	Non-Executive Director,appointed 8 April 2015

PRINCIPAL ACTIVITIES

The principal activities of the company and its consolidated entities during the financial year included exploration and evaluation activities. There were no significant changes in the nature of the principal activities during the year.

DIVIDENDS

There were no dividends paid or declared by the consolidated entity during the financial year.

REVIEW OF OPERATIONS

A complete operating review can be found in Operations Report pages 5 to 18.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

On 26 November 2015, Auskong International Mining Investment Co., Limited was issued 24,000,000 ordinary shares in MGT Resources Limited upon the exercise of $1,200,000 unquoted share options at 5 cents per option.

On 29 March 2016, MGT Resources Limited announced that it had issued Auskong International Mining Investment Co., Limited with one unsecured Converting Note with an aggregate face value of $2,000,000 subject to shareholder and regulatory approval. On 30 March 2016, the $2,000,000 invested in MGT Resources Limited was used to purchase 16,949,176 fully paid ordinary shares in Cauldron Energy Limited with 20,000,000 attaching unlisted options exercisable at $0.138 each on or before 31 December 2016.

On 9 June 2016, Auskong International Mining Investment Co., Limited converted their $1,500,000 Convertible note into 50,000,000 ordinary shares in MGT Resources Limited.

On 30 June 2016, following the general meeting of shareholders, MGT Resources Limited issued 60,606,061 ordinary shares in MGT Resources Limited to Auskong International Mining Investment Co., Limited on the conversion of the $2,000,000 Converting Note issued to Auskong International Mining Investment Co., Limited as announced on 29 March 2016.

Cauldron Energy Limited holds uranium assets and the investment marks the commencement of a new strategy of investment in uranium mining assets.

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

On 19 April 2016, MGT Resources Limited announced that the Dalcouth mineral resource tonnage had increased by 385% to 495,000t @ 0.31% Sn with the JORC confidence level increasing from Inferred level to 80% now being classified as Measured Resource, with the remainder now classified as Indicated Resource.

On 3 June 2016, MGT Resources Limited announced that the following formal agreements, which are subject to shareholder approval had been signed:

Termination Deed with Cloud Adventurer Limited of the $3,000,000 Unsecured Convertible Note Deed dated 9 July 2013 and the First Addendum dated 19 December 2014, expiring 19 August 2016.
Termination Deed with Marvel Network Limited of the $3,000,000 Unsecured Convertible Note Deed dated 9 July 2013 and the First Addendum dated 19 December 2014, expiring 19 August 2016.
Preference Share Agreement with Cloud Adventurer Limited for the issue of $3,000,000 Preference Shares.
Preference Share Agreement with Marvel Network Limited for the issue of $3,000,000 Preference Shares.
Option Deed with Cloud Adventurer Limited for the issue of 36,363,636 unlisted share options exercisable at $0.001 on or before the 5[th] anniversary following the date of issue.
Option Deed with Marvel Network Limited for the issue of 36,363,636 unlisted share options exercisable at $0.001 on or before the 5[th] anniversary following the date of issue.

The final Preference Share Agreements above are conditional on the receipt of further funding of $1,500,000 from Joseph Capital (Hong Kong) Limited. On 19 July 2016, Joseph Capital (Hong Kong) Limited participated in a placement of shares for $1,000,000 at $0.033 per share.

In the first quarter of the financial year, MGT Mining Limited, subsidiary of MGT Resources Limited, completed a drilling program at the Pyramid project. In the third quarter MGT Mining Limited conducted an upgrade of the Dalcouth Resource Estimate and an infill soil and rock chip sampling program at Mt Steadman.

EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Additional share issuance

On 19 July 2016, Joseph Capital (Hong Kong) Limited completed the placement of $1,000,000 and were issued with 30,303,030 ordinary shares at $0.033 per share.

Additional convertible note issued

On 14 September 2016, MGT Resources Limited entered into an agreement with Joseph Capital (Hong Kong) Limited to issue one unsecured convertible note (‘Note’) with an aggregate face value of $500,000. The Note will automatically convert into 15,151,515 fully paid ordinary shares at $0.033 per share on the date that MGT Resources Limited announces on the Australian Stock Exchagne the completion of the 30% acquisition of the Manyingee Mining Leases from Paladin Energy Limited (as detailed in the announcement to the Australian Stock Exchange on 21 July 2016). The Note bears simple interest of 6% per annum payable quarterly in arrears.

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

The Note is redeembable by Joseph Capital (Hong Kong) Limited if no conversion occurs withint 12 months after the date of issue.

Joint venture agreement for uranium mining

On 20 July 2016 MGT Resources Limited entered into a binding term sheet with Paladin Energy Limited (ASX:PDN) over Manyingee Mining Leases (M08/86, M08/87, M08/88) in North Western Australia.

On closing of the transaction, MGT Resources Limited will acquire a 30% initial interest in Manyingee for US$10 million cash and will form a Joint Venture over the project with Paladin Energy Limited (Manyingee JV).

MGT Resources Limited will then have an option to acquire an additional 45% of Manyingee JV from Paladin Energy Limited for US$20 million cash, exercisable for 12 months following Manyingee JV’s preparation of a plan to conduct a field leach trial for uranium extraction by in-situ recovery method.

Under the terms of the agreement, MGT Resources Limited will issue Paladin Energy Limited options to subscribe for new shares equivalent to 5% of MGT Resources Limited’s shares outstanding for a period of 12 months from closing of the transaction at A$0.06 per share; and options to subscribe for new shares equivalent to 5% of MGT Resources Limited’s shares outstanding for a period of 24 months from closing of the transaction at A$0.08 per share.

Paladin Energy Limited will issue to MGT Resources Limited options to subscribe for new shares equivalent to 2% of Paladin Energy Limited’s shares outstanding for a period of 12 months from closing of the transaction at A$0.35 per share; and options to subscribe for new shares equivalent to 2% of Paladin Energy Limited’s shares outstanding for a period of 24 months from closing of the transaction at A$0.45 per share.

The transaction is conditional on definitive documentation, regulatory approval, financing and a vote of MGT Resources Limited shareholders.

Establishment of a wholly owned subsidiary

On 2 September 2016, MGT Energy Pty Ltd was registered as a wholly owned subsidiary of MGT Resources Limited. The joint venture with Paladin Energy Limited over Manyingee assets will take place with MGT Energy Pty Ltd. MGT Resources Limited and MGT Energy Pty Ltd will form a tax consolidated group (see Note 28).

Debt restructuring on maturing convertible notes

On 2 August 2016, Cloud Adventurer Limited and Marvel Network Limited extended the maturity date on the Convertible Notes (see Note 13) to 16 September 2016.

On 15 September 2016, Armstong Industries HK Limited agreed to extend the maturity of the convertible note of $1,500,000 from 11 November 2016 to the earlier of 11 November 2017 and 14 days after the date that the Company is in receipt of the funds from the successful capital raising required for the Company to purchase 30% of the Manyingee Mining Leases from Paladin Energy Limited and working capital in the amount of at least US$11.5 million. The interest rate on the Armstrong Industries HK Limited convertible note will remain at 8% in respect of the period up to and including 11 November 2016 and will increase to 15% in respect of the period on and from 12 November 2016.

On 16 September 2016 following the general meeting of shareholders on 16 September 2016, $3,000,000 Convertible Notes owing to Cloud Adventurer Limited were converted to $3,000,000 Preference Shares.

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

On 16 September 2016 following the general meeting of shareholders on 16 September 2016, $3,000,000 Convertible Notes owing to Marvel Network Limited were converted to $3,000,000 Preference Shares.

Holders of preference shares rank equally with the holders of ordinary share in respect of dividends. On a return of capital on liquidation, preference shareholders have the right to be paid in priority to any return of assets in respect of any other class of shares.

Preference shareholders have the right to convert all or some of the preference shares into ordinary shares at any time up to the final conversion date being 16 September 2021, on a one for one basis.

MGT Resources Limited may, at its sole discretion, elect to redeem the preference shares by payment of a redemption amount equal to $0.033 per preference share, at any time prior to the final conversion date on 16 September 2021.

MGT Resources Limited has the right to convert all of the preference shares into ordinary shares at any time after the fifth anniversary of the issue of the preference shares, being any time after 16 September 2021.

On 16 September 2016, $18,411 of final interest payments were made to Cloud Adventurer Limited and $18,411 of final interest payments were made to Marvel Network Limited, representing interest owing on the Convertible Notes from the sixth payment of interest to the 16 September 2016 when the Convertible Notes were converted into preference shares.

On 16 September 2016, Cloud Adventurer Limited were issued with 36,363,637 unquoted options and Marvel Network Limited were issued with 36,363,637 unquoted options, all at nil consideration, exercisable at $0.001 each, into one ordinary share per option, on or before 16 September 2021, as approved by shareholders at a general meeting on 16 September 2016.

One fifth of options will vest cumulatively each year in the following matter:1/5 of the options vested on 16 September 2016 and are exercisable from that date up until and including 16 September 2021.

(a) A further 1/5 of the options vest on 16 September 2017 and are exercisable from that date up until and including 16 September 2021.
(b) A further 1/5 of the options vest on 16 September 2018 and are exercisable from that date up until and including 16 September 2021.
(c) A further 1/5 of the options vest on 16 September 2019 and are exercisable from that date up until and including 16 September 2021.
(d) A further 1/5 of the options vest on 16 September 2020 and are exercisable from that date up until and including 16 September 2021.

There has not been any other matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

LIKELY FUTURE DEVELOPMENTS

Disclosure of information regarding the likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information has not been disclosed in this report.

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DIRECTORS’ REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

ENVIRONMENTAL REGULATIONS

The operations and proposed activities of the consolidated entity are subject to laws and regulations concerning the environment. As with most exploration projects and mining operations, the consolidated entity’s activities are expected to have an impact on the environment. It is the consolidated entity’s intention to conduct its activities to the required standard of environmental obligation, including compliance with all applicable environmental laws. Mining operations may have previously been conducted on some of the Company’s project areas and old workings including tailings dumps may remain from these operations. There may be a liability to rehabilitate these areas, details in relation to the abandonment and restoration obligation are included in Note 1 (o) of the Notes to the financial statements.

INDEMNIFICATION OF OFFICERS AND AUDITORS

The company has insured all the Directors of MGT Resources and its controlled entities against liabilities incurred while performing duties as Directors or Officers to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount the amount of the premium paid. The consolidated entity has not indemnified its auditor.

INFORMATION ON DIRECTORS AND SENIOR MANAGEMENT:

Mr Jonathan Paul Back (LLB, BCL) – Executive Chairman

Mr Jonathan Back is a qualified solicitor in England and Wales. Prior to working as a lawyer, Jonathan graduated from Oxford University and was awarded the Vinerian Scholarship for the best performance in the Bachelor of Civil Laws degree.

Jonathan has over 18 years of experience in law and finance internationally, having spent significant periods in Europe, Hong Kong and Australia.

Jonathan first worked as a lawyer for the leading UK firm Linklaters for 4 years, specialising in large project finance transactions. This included the acquisition of the Gladstone Power Station in Queensland by a consortium expanding the Boyne Island aluminium smelter. Jonathan then worked for Schroders in the UK and in Hong Kong where he also focused on large infrastructure and energy projects including large power station projects in Portugal and the UK as well as port and energy projects across Australia and Asia.

Following this Jonathan worked with Goldman Sachs in Hong Kong focusing on raising equity capital for telecoms and technology companies. Jonathan was then recruited by JPMorgan to join their equity team in Hong Kong, which he ran until 2007. During this time he worked on numerous transactions across different industries.

Mr Gary Kuo – Executive Director and Managing Director

With more than 10 years’ experience in international import & exporting, Mr Gary Kuo has extensive experience in commodities trading, international business development and strategic alliance planning.

Having bases in both Australia and China, Gary specialises in dealing with corporations in the mining & producing sector. Gary works closely with his wide network of corporate and governmental contacts in countries such as China, Taiwan, Hong Kong, Singapore, Malaysia and Indonesia.

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

Mr Christopher Chen – Executive Director and Chief Operating Officer

Mr Christopher Chen has a M.A in Administration from Central Queensland University. He worked for Otis Elevator Company, Tianjin, China, as Project Coordinator in 2002 and was sent to Egypt to work for Electricity de France (EDF) on their Suez Canal and the Port Said Power Plants. He returned to Australia in 2006 and was working as Business Banking Associate for Commonwealth Bank Australia (CBA). Chris left CBA in 2009 and has been involved in commodity trading and Financial Services to small and medium size companies in the resource sector and is now based in Beijing, China.

Mr Li Hai Jun – Non- Executive Director

Mr Li Hai Jun holds a Bachelor of Mechanical Engineering degree from the Beijing Architecture Engineering University, China. He has worked for one of the biggest state owned companies which have imported plant and equipment for more than 280 projects for the nation in the iron & steel sector and other industrial sectors. Since 1989 Hai Jun has worked for a subsidiary company under Thyssen in Germany and then moved to Singapore to work as the Managing Director of Golden Mall Enterprise until 1999.

Hai Jun has rich experience in connecting foreign companies with Chinese enterprises and has been involved in more than 30 big projects with success. At present Hai Jun is the Managing Director of Unico Development Limited in Beijing providing consulting services to clients globally. In recent years Hai Jun has assisted Australian resources companies in establishing relationship with customers in China leading to a number of successful projects.

Dr Wenshan Zhang – Non- Executive Director

Dr Wenshan Zhang holds a Post-Doctoral Degree in Geological Science from the Institute of Geological Science and Environmental Engineering, Central South University (CSU), Hunan Province, China. He has conducted Post-Doctoral Research in Metallurgical Engineering and Geological Engineering at CSU. He is presently a Professor of Geology and Mineral Exploration at CSU.

Prior to this, Dr Zhang was President of Donia Resources Co., Limited, Beijing, China where he was responsible for exploration of overseas operations in Canada, Laos and Ethiopia from 2010-2013. From 2005 to 2009 he was Senior Geologist and Manager of the Business Development Department, Vale, Shanghai, China where he was responsible for technical support of iron ore and coal projects. He has also worked as a Senior Geologist for Anglo American Group, Beijing, China from 2002-2005 evaluating Ni-Cu sulphide mineral projects and other base metals.

Ms Jacqueline Butler – Chief Financial Officer and Company Secretary

Ms Jacqueline Butler qualified as a Chartered Accountant with the Institute of Chartered Accountant, England and Wales (ICAEW) whilst working and training at Arthur Andersen in London. Prior to that Jacqueline graduated from the University of Exeter, UK with a Bachelor of Arts in Economics and Geography.

Jacqueline has worked within the UK and Europe in various financial roles before coming to Australia in 2005. Prior to joining MGT, Jacqueline was an Associate Director at Chartered Accounting firm, Azure Group Pty Ltd, in Sydney where she acted as CFO for a variety of clients including those in the resource sector.

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DIRECTORS’ REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

DIRECTORS’ MEETINGS

The following table sets out the number of directors’ meetings held during the financial year and the number of meetings attended by each director (while they were a director).

Directors	Directors’ meetings	Attended
	eligible to attend
Jonathan Paul Back	9	9
Gary Kuo	9	9
Hai Jun Li	9	7
Wenshan Zhang	9	9
Christopher Chen	9	9

REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL

Information about the remuneration of directors and key management personnel are set out in the following tables.

Details of key management personnel

The directors and other members of key management personnel of the Group during the year were:

Name	Position	Date
Jonathan Back	Executive Chairman	Appointed 1 February 2010
	Non-Executive Director	Appointed 4 September 2008
Gary Kuo	Executive Director	Appointed 7 January 2011
	Managing Director	Appointed 1 February 2016
Christopher Chen	Executive Director	Appointed 1 February 2016
	Chief Operating Officer	Appointed 1 February 2016
	Non-Executive Director	Appointed 8 April 2015
Hai Jun Li	Non-Executive Director	Appointed 14 April 2009
Wenshan Zhang	Non-Executive Director	Appointed 8 April 2015
Jacqueline Butler	Chief Financial Officer	Appointed 1 August 2011
	Company Secretary	Appointed 14 August 2014

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

DIRECTORS’ REPORT

(a) Key management personnel compensation

2016 Executive Directors Jonathan Back (i) Gary Kuo Christopher Chen (iv) Non-Executive Directors Hai Jun Li (ii) Wenshan Zhang (iii) Other key management personnel Jacqueline Butler (v) Total	Short- term employee benefit Post- employment benefit Long- term benefits Share- based payments
	Cash salary and fees Superannuation Termination benefit Long Service Leave Options Total $ $ $ $ $ $
	144,000 - - - - 144,000 110,400 9,120 - - - 119,520 64,667 3,800 - - - 68,467
	319,067 12,920 - - - 331,987
	32,000 - - - - 32,000 35,000 - - - - 35,000
	67,000 - - - - 67,000
	173,223 16,456 - - 4,221 193,900
	173,223 16,456 - - 4,221 193,900
	559,290 29,376 - - 4,221 592,887

(i) Of the $144,000 in fees earned by Jonathan Back, $24,000 remain accrued as at 30 June 2016.
(ii) Of the $32,000 in fees earned by Hai Jun Li, $5,333 remain accrued as at 30 June 2016.
(iii) Of the $35,000 in fees earned by Wenshan Zhang, $8,750 remain accrued as at 30 June 2016.
(iv) Christopher Chen became Chief Operating Officer and an employee on 1 February 2016. Prior to that he earnt fees as a Non-Executive Director. Superannuation only applies to his wages earnt from 1 Februrary 2016 onwards.
(v) Share based payment of $4,221 relates to Options granted in 2013 which vested on 17 December 2015.

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

DIRECTORS’ REPORT

2015 Executive Directors Jonathan Back Gary Kuo Non-Executive Directors Robert Vagnoni (i) Hai Jun Li Wenshan Zhang (ii) Christopher Chen (iii) Other key management personnel Dohn Taylor (iv) Jacqueline Butler (vi) Alexander Moody’(v) Total	Short-term employee benefit Post- employment benefit Long- term benefits Share- based payments
	Cash salary and fees Superannuati on Termination benefit Long Service Leave Options Total $ $ $ $ $ $
	80,000 - - - - 80,000 134,400 11,400 - - - 145,800
	214,400 11,400 - - - 225,800
	8,750 - - - - 8,750 14,250 - - - - 14,250 8,750 - - - - 8,750 8,000 - - - - 8,000
	39,750 - - - - 39,750
	33,468 1,644 20,769 - - 55,881 198,816 18,888 - - - 217,704 11,000 - - - - 11,000
	243,284 20,532 20,769 - - 284,585
	497,434 31,932 20,769 - - 550,135

(i) Robert Vagnoni resigned on 8 April 2015.
(ii) Wenshan Zhang was appointed on 8 April 2015.
(iii) Christopher Chen was appointed on 8 April 2015.
(iv) Dohn Taylor resigned on 12 July 2014.
(v) Alexander Moody resigned as Company Secretary on 14 August 2014.
(vi) Jacqueline Butler was appointed Company Secretary on 14 August 2014 also retaining her role as Chief Financial Officer.

(b) Executive Contracts

Remuneration arrangements for Key Management Personnel are formalised in employment agreements or service contracts. The key terms of the executive’s agreements/contracts are:

Name	Contract duration	Notice period	Notice period from the
		from Company	employee/contractor
Executive Directors
Jonathan Back	Rolling service contract	1 month	1 month
Gary Kuo	Ongoing employment contract	1 month	1 month
Christopher Chen	Ongoingemployment contract	1 month	1 month
Non-Executive Directors
Hai Jun Li	No fixed term	N/A	N/A
Wenshan Zhang	No fixed term	N/A	N/A
Other key management personnel
Jacqueline Butler	Ongoingemployment contract	1 month	1 month

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DIRECTORS’ REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

(c) Share-based compensation

(i) Issue of shares

There were no shares issued as part of compensation during the year ended 30 June 2016.

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DIRECTORS’ REPORT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

(ii) Issue of option

There were no options issued during the year ended 30 June 2016. All remaining options granted to directors and key management personnel in the previous years and their status are set out below:

previous years and their status are set out below:
Financial year Number of options granted Grant date Fair value per option at grant date Exercise price Expiry date Vesting date	Number of options
	Vested during the year Exercised during the year Lapsed during the year
Executive Directors Jonathan Back 2014 3,500,000 7 Nov 2013 $0.0288 $0.15 7 Nov 2016 7 Nov 2013 Gary Kuo 2014 2,500,000 7 Nov 2013 $0.0288 $0.15 7 Nov 2016 7 Nov 2013	- - - - - -
Non-Executive Directors Li Hai Jun 2014 400,000 7 Nov 2013 $0.0288 $0.15 7 Nov 2016 7 Nov 2013 Robert Vagnoni* 2014 400,000 7 Nov 2013 $0.0288 $0.15 7 Nov 2016 7 Nov 2013 Wenshan Zhang 2014 N/A N/A N/A N/A N/A N/A Christopher Chen 2014 N/A N/A N/A N/A N/A N/A	- - - - - - N/A N/A N/A N/A N/A N/A
Other key management personnel Jacqueline Butler 2014 400,000 17 Dec 2013 $0.0288 $0.15 17 Dec 2016 17 Dec 2015	400,000 - -
‘* Robert Vagnoni resigned as a Non-Executive Director on 8 April 2015.

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

DIRECTORS’ REPORT

No ordinary shares of MGT Resources Limited were issued during the year end 30 June 2016 on the exercise of options granted under the MGT Resources Limited Employee Option Plan. No further shares have been issued since that date.

The movement during the reporing period in the number of options over ordinary shares in the Company held, is shown below:

2016	Balance at	Granted/	Expired	Balance at	Vested and	Unvested
	the start of	Exercised	No.	the end of	exercisable	No.
	the year	No.		the year	No.
	No.			No.
Executive Directors
Jonathan Back	3,500,000	-	-	3,500,000	3,500,000	-
Gary Kuo	2,500,000	-	-	2,500,000	2,500,000	-
Christopher Chen	-	-	-	-	-	-
Non-Executive
Directors
Li Hai Jun	400,000	-	-	400,000	400,000	-
Wenshan Zhang	-	-	-	-	-	-
Other key
management
personnel
Jacqueline Butler	400,000	-	-	400,000	400,000	-
2015	Balance at	Granted	Expired	Balance at	Vested and	Unvested
	the start of	No.	No.	the end of	exercisable	No.
	the year			the year	No.
	No.			No.
Executive Directors
Jonathan Back	4,250,000	-	(750,000)	3,500,000	3,500,000	-
Gary Kuo	3,250,000	-	(750,000)	2,500,000	2,500,000	-
Non-Executive
Directors
Li Hai Jun	650,000	-	(250,000)	400,000	400,000	-
Robert Vagnoni	1,850,000	-	(1,450,000)	400,000	400,000	-
Wenshan Zhang	-	-	-	-	-	-
Christopher Chen	-	-	-	-	-	-
Other key
management
personnel
Jacqueline Butler	550,000	-	(150,000)	400,000	-	400,000
Alexander Moody	150,000	-	(150,000)	-	-	-

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FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

DIRECTORS’ REPORT

(d) Key management personnel equity holdings

Fully paid ordinary shares of MGT Resources Ltd

2016	Balance at	Received	Granted as	Net other	Balance at
	the start of	during the	compensation	change	the end of
	the year	year on	No.	No.	the year
	No.	exercise of			No.
		options
		No.
Executive Directors
Jonathan Back (Direct)	66,029,727	-	-	(1,000,000)	65,029,727
Jonathan Back (Indirect)	300,000	-	-	-	300,000
Gary Kuo (Direct)	50,000	-	-	-	50,000
Gary Kuo (Indirect)	19,553,000	-	-	(1,675,000)	17,878,000
Christopher Chen(Direct)	-	-	-	3,570,000	3,570,000
Non-Executive Directors
Li Hai Jun (Direct)	19,400,000	-	-	(19,400,000)	-
Li Hai Jun (Indirect)	30,000	-	-	18,200,000	18,230,000
Wenshan Zhang	-	-	-	-	-
Other key management
personnel
Jacqueline Butler	-	-	-	-	-

2015	Balance at	Received	Granted as	Net other	Balance at
	the start of	during the	compensation	change	the end of
	the year	year on	No.	No.	the year
	No.	exercise of			No.
		options
		No.
Executive Directors
Jonathan Back (Direct)	79,029,727	-	-	(13,000,000)	66,029,727
Jonathan Back (Indirect)	300,000	-	-	-	300,000
Gary Kuo (Direct)	50,000	-	-	-	50,000
GaryKuo (Indirect)	27,208,000	-	-	(7,655,000)	19,553,000
Non-Executive Directors
Li Hai Jun (Direct)	22,800,000	-	-	(3,400,000)	19,400,000
Li Hai Jun (Indirect)	30,000	-	-	-	30,000
Robert Vagnoni	8,443,000	-	-	-	8,443,000
Christopher Chen	-	-	-	-	-
WenshangZhang	-	-	-	-	-
Other key management
personnel
Dohn Taylor	50,000	-	-	(50,000)	-
Jacqueline Butler	-	-	-	-	-
Alexander Moody (Direct)	301,111	-	-	-	301,111
Alexander Moody (Indirect)	11,875	-	-	(10,000)	1,875

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DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

TRADING IN THE COMPANY’S SECURITIES BY DIRECTORS, OFFICERS AND STAFF

Upon listing on the ASX, the Board adopted a share trading policy which applies to all directors, officers and employees of MGT and its subsidiary companies. The policy was set up in order to avoid ‘insider trading.’ The trading policy restricts employees, directors and officers from trading in MGT securities during certain ‘prohibited periods.’ A full copy of the policy can be found at www.mgt.net.au.

NON-AUDIT SERVICES

During the year, $11,750 (2015: $10,500 exc GST) of fees were earned by the auditors for non-audit services in relation to taxation compliance.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity or intervene in any proceedings to which the consolidated entity is a party for the purpose of taking responsibility on behalf of the consolidated entity for all or any part of these proceedings. The consolidated entity was not party to any such proceedings during the year.

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration is included on page 32 of the financial report.

This directors’ report has been made and signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the Directors

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Gary Kuo Executive Director Dated: 28 September 2016

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Auditor’s Independence Declaration

In accordance with section 307C of the Corporations Act 2001, I declare that, to the best of my knowledge and belief, during the year ended 30 June 2016 there has been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of MGT Recourses Limited and its controlled entities during the year.

MAZARS RISK & ASSURANCE PTY LIMITED

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Rose Megale Director

Dated in Sydney this 28th day of September 2016

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MAZARS RISK & ASSURANCE PTY LIMITED. ABN: 39 151 805 275 LEVEL 12, 90 ARTHUR STREET, NORTH SYDNEY NSW 2060 PO BOX 1994, NORTH SYDNEY NSW 2059 TEL: +61 2 9922 1166 - FAX: +61 2 9922 2044 EMAIL: [email protected]

LIABILITY LIMITED BY A SCHEME, APPROVED UNDER THE PROFESSIONAL STANDARDS LEGISLATION

MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 June 2016

Revenue Cost of sales Gross loss Investment income Other gains and losses Off-take agreement termination fee Employee benefits expense Depreciation and amortisation expense Impairment losses Interest expense Administration expense Assets written off Other expenses Loss before tax Income tax expense/(benefit) Loss for the period Loss for the year is attributable to: Owners of the parent Non-controlling interest Loss per share Basis (cents per share) Diluted (cents per share)	Note 3 4 5 11,10 6 7 19 19	Consolidated 2016 $ - - - 12,412 (270,930) -	Consolidated 2015 $
			- -
			- 31,835 10,958 (750,000) (561,365) (274,580) (5,237,828) (817,556) (350,855) (59,653) (684,789)
		(444,756)
		(226,846) (2,392,463) (943,998) (262,695) - (635,859) (5,165,135) - (5,165,135) (4,837,334) (327,801) (5,165,135) (1.41) (1.07)
			(8,693,833) -
			(8,693,833)
			(7,985,489) (708,344)
			(8,693,833)
			(2.67) (2.38)

The above consolidated income statement should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 June 2016

Loss for the period Other comprehensive income/(loss) Items that may be reclassified to profit and loss Changes in the fair value of available-for-sale financial assets Total comprehensive loss for the period Total comprehensive loss for the year is attributable to: Owners of the parent Non-controlling interest	Consolidated 2016 $ (5,165,135) (512,787) (5,677,922) (5,349,970) (327,952) (5,677,922)	Consolidated 2015 $
		(8,693,833) 1,132
		(8,692,701)
		(7,984,477) (708,224)
		(8,692,701)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 June 2016

Current assets Cash and cash equivalents Other receivables Other financial asset Total current assets Non-current assets Other financial assets Exploration and evaluation expenditure Plant & equipment Total non-current assets Total assets Total liabilities Trade and other payables Unsecured Borrowings Secured Borrowings Provisions Total current liabilities Non-current liabilities Unsecured borrowings Secured borrowings Provisions Total non-current liabilities Total liabilities Net assets/(liabilities) Equity Issued capital Reserves Retained earnings/(losses) Non-controlling interest Total equity	Note 22(a) 8 9 9 10 11 12 13 14 15 13 14 15 16(a) 17 18	Consolidated 2016 $ 149,060 56,339 78,000 283,399 1,120,254 1,831,345 1,539,550 4,491,149 4,774,548 549,544 7,487,596 1,500,000 100,114 9,637,254 - - 114,509 114,509 9,751,763 (4,977,215) 19,095,000 (119,242) (23,341,252) (611,721) (4,977,215)	Consolidated 2015 $
			1,491,062 85,232 -
			1,576,294 3,042 3,628,820 1,782,702
			5,414,564
			6,990,858
			523,605 1,325,883 - 107,913
			1,957,401
			7,419,778 1,500,000 111,395
			9,031,173
			10,988,574
			(3,997,716)
			14,408,953 608,428 (18,731,328) (283,769)
			(3,997,716)

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 June 2016

Consolidated

Balance at 1 July 2015 (Loss) for the period Issue of ordinary shares Capital raising costs Other comprehensive income Share options vesting Share options converted Contributions of equity, net of transaction costs and tax Equity derivative converted Transactions with non- controlling interest Balance at 30 June 2016 Balance at 1 July 2014 (Loss) for the period Issue of ordinary shares Other comprehensive income Share options issued Share options expired Contributions of equity, net of transaction costs and tax Equity derivative issued Equity derivative expired Transactions with non- controlling interest Balance at 30 June 2015		Fully paid ordinary shares Retained earnings/ (losses) Reserves Non-controlling interest Total $ $ $ $ $
		14,408,953 (18,731,328) 608,428 (283,769) (3,997,716) - (4,837,334) - (327,801) (5,165,135) 4,700,000 - - - 4,700,000 (13,953) - - - (13,953) - - (512,636) (151) (512,787) - - 12,377 - 12,377 - 43,200 (43,200) - - - 184,211 (184,211) - - - (1) - - (1)
		19,095,000 (23,341,252) (119,242) (611,721) (4,977,215)
		Fully paid ordinary shares Retained earnings Reserves Non-controlling interest Total $ $ $ $ $
		12,917,947 (11,216,725) 850,921 424,425 2,976,568 - (7,985,489) - (708,344) (8,693,833) 1,500,000 - - - 1,500,000 - - 1,012 120 1,132 - - 43,200 - 43,200 - 432,947 (432,947) - - (8,994) - - - (8,994) - - 184,211 - 184,211 - 37,969 (37,969) - - - (30) - 30 -
		14,408,953 (18,731,328) 608,428 (283,769) (3,997,716)

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 June 2016

Cash flows from operating activities Payments to suppliers and employees Interest received Other income Termination of off-take agreement Net cash used in operating activities Cash flows from investing activities Payment for investment in other financial assets Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payments for exploration costs Net cash used in investing activities Cash flows from financing activities Proceeds from issues of equity securities Proceeds from borrowings Capital raising cost Repayment of borrowings Interest paid Net cash provided by financing activities Net (decrease)/increase in cash and cash equivalents Cash at the beginning of the financial year Cash at the end of the financial year	Note 5 22(b) 9 22(a)	Consolidated 2016 $ (1,410,578) 10,877 - - (1,399,701) (2,000,000) (9,577) 46,319 (560,856) (2,524,114) 1,200,000 2,000,000 (13,953) - (604,234) 2,581,813 (1,342,002) 1,491,062 149,060	Consolidated 2015 $
			(1,309,485) 27,997 2,858 (750,000)
			(2,028,630)

			- (890) 11,050 (1,084,471)
			(1,074,311)
			1,500,000 3,000,000 - (1,500,000) (724,451)
			2,275,549
			(827,392) 2,318,454
			1,491,062

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

1. Summary of significant accounting policies

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the group comply with international financial reporting standards.

These financial statements are for the consolidated entity consisting of MGT Resources Limited (the Company) and its subsidiaries (the Group).

(a) Basis of preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

Going concern

The financial statements are prepared on a going concern basis, which contemplates the continuation of normal business activity and the realisation of assets and liabilities in the normal course of business.

As at 30 June 2016 the consolidated entity incurred a net loss after tax of $5,165,135 and cash outflows from operating and investing activities of $3,923,815. In addition net current liabilities amounted to $9,353,855 and net liabilities were $4,977,215 as at 30 June 2016. The secured loan of $1,500,000 owing by MGT Mining Limited, subsidiary of the Company, to Taimetco International Co., Limited is due for repayment on 31 March 2017.

The ability of the Group to continue as a going concern and to pay their debts as and when they fall due is dependent on the Group’s ability to raise additional funds through either debt financing, capital raising arrangements, re-financing options or asset sales.

Whilst undertaking this strategic research, the Group will be operating on a restrained scale similar to many smaller ASX listed exploration companies in the current climate of lower commodity prices. If necessary, the Group will look to divest some of the Group’s assets via sale.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The Group has a solid history of obtaining support from investors, including in very difficult financial markets. During the period to 30 June 2016, the Directors successfully negotiated a reorganisation of the $6,000,000 of convertible loans owing in August 2016 to Cloud Adventurer Limited and Marvel Network Limited into preference shares and options. The conversion of the $6,000,000 convertible notes into preference shares and options took place following shareholder approval on 16 Septebmer 2016 (see Note 28). Going forward the Group has a strong expectation of raising capital to fund strategic projects and of being able to successfully continue to restructure its debt.

The Group strongly believes that given its demonstrated ability to raise capital in the past and its ability to restructure its debt, that it will continue to raise capital as well as implement debt restructuring steps in order to continue as a going concern.

Having regard to the above, the Directors have a reasonable expectation that the entity will have adequate resources to continue operating for the foreseeable future. For this reason they continue to adopt the going concern basis in preparation of the accounts.

The Group may be unable to realise its assets or discharge its liabilities in the normal course of the business and at the amounts stated in the financial report should the Group not continue as a going concern.

Critical accounting estimates and judgements

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are:

Estimated useful lives of assets

The estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ warranties. In addition, the condition of assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

Impairment of mine infrastructure and capitalised exploration expenditure

The Group continues to monitor the mine infrastructure and capitalised exploration expenditure for indicators of impairment by comparing the assets' carrying value to their estimated fair values. The fair values are determined by independent professional valuers using recognised valuation techniques, including the yield method and the discounted cash flow method. The determination of the fair values require the use of estimates such as future cash flows from the assets and discount rates applicable to those assets. The estimates are based on local market conditions existing as at the reporting date. Refer to Notes 10 and 11.

Provision for repair and maintenance

A provision has been recognised for repair and maintenance work required to the tailings storage facility at the Mount Garnet site in order to comply with environmental laws. The provision has been based on management’s best estimate. Once work commences, the timing and extent of work required may result in actual expenditure differing from the amounts currently provided. Refer to Note 15.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Allowance for amounts due from subsidiary

The provision policy for doubtful debts of the Group is based on the ageing analysis and management’s continuous evaluation of the recoverability of the outstanding receivables. In assessing the ultimate realization of these receivables, management considers, among other factors, the creditworthiness and the past collection history of the subsidiary. If the financial conditions of the subsidiary were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Fair value of convertible notes

Convertible notes are measured at fair value at the initial recognition. Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the measurement date. In respect of the liability component of convertible bonds, the market rate of interest is determined with reference to similar liabilities that do not have a conversion option.

Fair value of financial instruments

Where the fair values of financial instruments recorded on the statement of financial position cannot be derived from active markets, they are determined using valuation techniques, including the discounted cash flow model. The inputs to these models are derived from observable market data where possible, but where this is not feasible, a degree of judgment is required in establishing the fair values. The judgments include considerations of liquidity and model inputs regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The valuation of financial instruments is described in more details in Note 9.

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of MGT Resources Limited (‘’company’’ or ‘’parent entity’’) as at 30 June 2016 and entities controlled by the company for the year then ended. MGT Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. Disposals to non-controlling interests result in gains and losses for the Group that are recorded in the statement of comprehensive income. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and statement of financial position respectively. Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company.

(c) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Interest income

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

(d) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

(e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a maturity of three months or less at the date of acquisition.

(f) Financial assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the company financial statements.

Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are nonderivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.

Loans and receivables

Trade receivables, loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets.

Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Loans and receivables are subsequently carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.

Impairment of financial assets

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

Assets carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period. If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

(g) Financial liabilities

Compound instruments

The component parts of compound instruments (convertible notes) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Management and the Directors have assessed the terms and conditions of the convertible notes and have determined the conversion options are equity derivatives.

Conversion options that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity instrument.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date (Refer to Note 13).

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to share capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

(h) Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, which the effect of any changes recognised on a prospective basis.

The following useful lives are used in the calculation of depreciation:

Office equipment 3 – 10 years - Mine infrastructure 20 years - Motor Vehicle 5 – 8 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Refer to Note 1(j))

(i) Leases

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Finance leased assets are amortised on a straight-line basis over the estimated useful life of the asset. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

(j) Impairment of tangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

(k) Exploration and evaluation of assets

Exploration and evaluation expenditure in relation to each separate area of interest are recognised as an exploration asset in the year in which they are incurred where the following conditions are satisfied:

(i) The rights to tenure of the area of interest are current; and
(ii) At least one of the following conditions is also met:
(a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and
(b) Exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the areas of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include acquisition rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource. General and administrative costs are allocated to, and included in, the cost of an exploration and evaluation asset, but only to the extent that those costs can be related directly to operational activities in the area of interest to which the exploration and evaluation asset relates. (Refer to Note 1(j)).

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation of asset may exceed its recoverable amount.

(l) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(m) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(n) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

(o) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Site Restoration

A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of exploration and development activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The Group records the estimated cost of legal and constructive obligations to restore operating locations in the period in which the obligation is incurred. The nature of restoration activities includes dismantling and removing structures, dismantling operating facilities, closure of plant and restoration, reclamation and revegetation of affected areas.

Additional disturbances or changes in rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability when incurred.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The provision for future restoration costs is the best estimate of the expenditure required to settle the restoration obligation at the reporting date based on current legal and other requirements and technology. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related mining assets. The carrying amount capitalised is amortised over the life of the related asset.

(p) Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

Termination benefit

A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

(q) Share-based payments arrangements

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 25.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.

(r) Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

If the entity reacquires its own equity instruments, for example as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

(s) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

(i) Where the amount of GST incurred is not recoverable from the taxation authority. It is recognised as part of the cost of acquisition of an asset or as part of an item of expense. Or
(ii) For receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

All cash outflows in respect of GST, including payments to suppliers and employees, payments for exploration and evaluation, property, plant and equipment, and payments for exploration inventory are included in payments to suppliers and employees from operation activities.

All cash inflows in respect of GST, including receipts from customers and receipts of GST paid by the company and subsequently refunded by taxation authorities are included in receipts from customers from operating activities.

All cash flows from investing activities and from financing activities are net of GST as all associated GST cash flows are included in operating activities.

(t) New accounting standards and interpretations

In the current year, the Group has applied a number of new and revised AASBs issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2015, and therefore are relevant for the current year end.

AASB 2015-3 ‘Amendments to	This amendment completes the withdrawal of references to
Australian Accounting	AASB 1031 in all Australian Accounting Standards and
Standards arising from the	Interpretations, allowing that Standard to effectively be
Withdrawal of AASB 1031	withdrawn.
Materiality’
AASB 2015-4 ‘Amendments to	The amendments to AASB 128 align the relief available in
Australian Accounting	AASB 10 and AASB 128 in respect of the financial reporting
Standards – Financial	requirements for Australian groups with a foreign parent. The
Reporting Requirements for	amendments require that the ultimate Australian entity shall
Australian Groups with a	apply the equity method in accounting for interests in associates
Foreign Parent’	and joint ventures if either the entity or the group is a reporting
	entity, or both the entity and group are reporting entities.

The application of these amendments does not have any material impact on the disclosures or the amounts recognised in the Group's consolidated financial statements.

There are no other new and revised Standards and Interpretations adopted in these financial statements affecting the reporting results or financial position.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

(u) New accounting standards and interpretations issued but not yet effective

At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective.

Standard/Interpretation	Effective for annual	Expected to be
	reporting periods	initially applied in the
	beginning on or after	financial year ending
AASB 9 ‘Financial Instruments’, and	1 January 2018	30 June 2019
therelevant amending standards
AASB 15 ‘Revenue from Contracts with	1 January 2018	30 June 2019
Customers’, AASB 2014-5
‘Amendments to Australian Accounting
Standards arising from AASB 15’,
AASB 2015-8 ‘Amendments to
Australian Accounting Standards –
Effective date of AASB 15’
AASB 16 ‘Leases’	1 January 2019	30 June 2020
AASB 2014-3 ‘Amendments to	1 January 2016	30 June 2017
Australian Accounting Standards –
Accounting for Acquisitions of Interests
in Joint Operations’
AASB 2014-4 ‘Amendments to	1 January 2016	30 June 2017
Australian Accounting Standards –
Clarification of Acceptable Methods of
DepreciationandAmortisation’
AASB 2014-9 ‘Amendments to	1 January 2016	30 June 2017
Australian Accounting Standards –
Equity Method in Separate Financial
Statements’
AASB 2014-10 ‘Amendments to	1 January 2018	30 June 2019
Australian Accounting Standards –
Sale or Contribution of Assets between
an Investor and its Associate or Joint
Venture’, AASB 2015-10 ‘Amendments
to Australian Accounting Standards –
Effective Date of Amendments to
AASB 10 and AASB 128’ 1 January
2018 30 June2019AASB
AASB 2015-1 ‘Amendments to	1 January 2016	30 June 2017
Australian Accounting Standards –
Annual Improvements to Australian
Accounting Standards 2012-2014
Cycle’
AASB 2015-2 ‘Amendments to	1 January 2016	30 June 2017
Australian Accounting Standards –
Disclosure Initiative:
Amendments toAASB 101’
AASB 2016-1 ‘Amendments to	1 January 2017	30 June 2018
Australian Accounting Standards –
Recognition of Deferred Tax Assets for
Unrealised Losses’
AASB 2016-2 ‘Amendments to	1 January 2017	30 June 2018
Australian Accounting Standards –
Disclosure Initiative: Amendments to
AASB 107’

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The new standards, interpretations and amendments are not expected to have a significant impact on the financial statements.

2. Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk, credit risk, currency risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effect on the financial performance of the Group.

The Group hold the following financial instruments:

Financial assets Cash and cash equivalents Other receivables Fair-value-through profit or loss financial asset Available-for-sale financial asset Financial liabilities Trade and other payable Interest bearing liabilities	Consolidated Consolidated 2016 $ 2015 $
	149,060 1,491,062 56,339 85,232 78,000 - 1,120,254 3,042
	1,403,653 1,579,336
	Consolidated Consolidated 2016 $ 2015 $
	549,544 523,605 8,987,596 10,245,661
	9,537,140 10,769,266

(a) Market risk

i. Foreign exchange risk Group sensitivity – foreign exchange risk

The consolidated entity has no foreign currency exposure risk as at reporting date.

ii. Price risk

The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the balance sheet either as available-for-sale or at fair value through profit or loss. The Group is not exposed to commodity price risk as at reporting date.

The majority of the group’s equity investments are publicly traded on the Australian Stock Exchange.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

iii Interest rate risk

The Group’s exposure to interest rate risk is summarised in the table below:

	Weighted average effective interest rate	Non interest bearing	Floating interest	Fixed interest rate	Total
	2016 %	2016 $	2016 $	2016 $	2016 $
Financial assets
Bank	3.67%	9,988	62,940	76,132	149,060
Financial liabilities
Borrowings	15.4%	-	-	8,987,596	8,987,596

	Weighted average effective interest rate	Non interest bearing	Floating interest	Fixed interest rate	Total
	2015 %	2015 $	2015 $	2015 $	2015 $
Financial assets
Bank	2.14%	58,923	356,007	1,076,132	1,491,062
Financial liabilities
Borrowings	11.26%	1,325,883	-	8,919,778	10,245,661

Group sensitivity – interest rate risk

The following sensitivity analysis has been based on the interest rate risk exposures in existence at 30 June 2016, had the variable interest rate on cash balances increased by 100 basis points and decreased by 50 basis points. The effect is calculated on year end balances and the impact on pretax loss is outlined below.

Consolidated	30 June 2016 $	30 June 2015 $
+ 1%(100 basispoints)	1,391	14,321
-0.5 %(50 basispoints)	(695)	(7,161)

(b) Credit risk

Credit risk is managed on a group basis and reviewed regularly. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, including outstanding receivables and committed transactions.

As at 30 June 2016 there were no trade receivable balances.

Credit risk from balances with banks and financial institutions is regularly monitored and reviewed by The Board. No material exposure is considered to exist as the Group’s policy is to invest its cash and cash equivalents with financial institutions having a credit rating of at least AAA.

Cash at bank and short-term bank deposits	Consolidated 2016 $ 149,060	Consolidated 2015 $
		1,491,062

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

(c) Foreign currency risk

During the period and prior period, the Group was not exposed to any foreign currency risk.

(d) Liquidity risk

Liquidity risk arises from the possibility that there will be sufficient funds available to make payment as and when required. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows.

The Group is party to convertible note agreements that expire in the first quarter of the 2017 financial year. The ability of the Group to continue as a going concern and to pay their debts as and when they fall due is dependent on the consolidated entity’s ability to raise additional funds through either debt financing or capital raising arrangements. The Directors are actively pursuing all options in relation to raising funds in order to continue as a going concern.

Maturities of financial liabilities

The tables below analyses the Group’s and the parent entity’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

30 June 2016	Less than 6 months $	6-12 months $	Between 1 & 2 years $	Between 2 & 5 years $	Over 5 years $	Total $
Non interest bearing
Trade and otherpayables	75,687	-	-	-	-	75,687
Fixed rate
Insurance Funding	9,282	-	-	-	-	9,282
Borrowings	-	8,987,596	-	-	-	8,987,596

30 June 2015	Less than 6 months $	6-12 months $	Between 1 & 2 years $	Between 2 & 5 years $	Over 5 years $	Total $
Non interest bearing
Trade and otherpayables	506,478	-	-	-	-	506,478
Fixed rate
Insurance Funding	17,127	-	-	-	-	17,127
Borrowings	-	1,325,883	8,919,778	-	-	10,245,661

(e) Fair value of financial instruments

The directors have determined the fair value of its available-for-sale equity securities held using quoted prices on an active market. The fair value of available-for-sale equity securities is therefore classified as Level 1 under the accounting standards.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The fair value of convertible notes is classified as Level 3 under the accounting standards due to there being one or more unobservable inputs (see Note 13).

3. Investment income Interest revenue 4. Other gains and losses Loss for the year has been arrived at after crediting the following gains and losses: Fuel tax rebate Gain/(loss) on disposal of property, plant & equipment Net loss arising on financial asset classified as fair value through profit or loss	Consolidated 2016 $ 12,412 12,412 Consolidated 2016 $ 635 20,435 (292,000) (270,930)	Consolidated 2015 $
		31,835
		31,835
		Consolidated 2015 $
		2,858 8,100 -
		10,958

On 30 March 2016, MGT Resources Limited, purchased 16,949,176 shares and 20,000,000 options in Cauldron Energy Limited (ASX:CXU) for $2,000,000. MGT Resources Limited entered into a converting note worth $2,000,000 with Auskong International Mining Investment Co., Limited to purchase the Cauldron Energy Limited shares and options. The Auskong International Mining Investment Co. Limited converting note converted into 60,606,061 shares in MGT Resources Limited following shareholder approval on 30 June 2016. A fair value adjustment was made of $292,000 to recognise the loss in fair value of Cauldron Energy Limited options between their initial recognition on 30 March 2016 and 30 June 2016.

5. Off-take agreement termination fee Settlement sum	Consolidated 2016 $ - -	Consolidated 2015 $
		750,000
		750,000

On 6 February 2015, MGT Resources Limited entered into a deed of termination with Taimetco International Co., Limited of its existing off-take agreement between MGT Resources Limited and Taimetco International Co., Limited. MGT Resources Limited agreed to pay a settlement sum to Taimetco International Co., Limited of $750,000. Taimetco International Co., Limited agreed that MGT Resources Limited pay the settlement sum amount of $750,000 to MGT Mining Limited as an advance under the $1,500,000 secured loan agreement between Taimetco International Co., Limited and MGT Mining Limited (see Note 14).

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

		Consolidated	Consolidated
		2016	2015
6.	Other expenses	$	$
	Vehicle and freight costs	12,858	23,656
	Repairs and maintenance costs	-	110,886
	(See Note 15 (iii))
	Travel expense	38,142	38,683
	Legal and professional expense	219,497	274,698
	Insurance	65,760	87,318
	Directors fees	229,661	119,749
	Other expenses	69,941	29,799
		635,859	684,789
		Consolidated	Consolidated
		2016	2015
		$	$
7.	Income taxes
	Tax expense/(income) comprises:
	Current tax expense/(income) in respect of
	the current year	-	-
(a)	The prima facie income tax expense on pre-tax accounting profit from operations reconciles to
	the income tax expense in the financial statements	as follows:
	Loss before income tax	(5,165,135)	(8,693,833)
	Income tax expense calculated at 30%	(1,549,540)	(2,608,150)
	Effect of amounts that are not deductible
	(taxable) in determining taxable profit:
	Non-deductible/(taxable) items	827,229	91,089
		(722,311)	(2,517,061)
	Tax losses and temporary difference not
	recognised	722,311	2,517,061
		-	-
(b)	Unused tax losses for which no deferred tax
	assets has been recognised	26,686,084	24,278,380
	Potential tax benefit at 30%	8,005,825	7,283,514
		Consolidated	Consolidated
		2016	2015
		$	$
8.	Trade and other receivables
	Current
	Prepayments and deposits	23,334	37,039
	Other receivables	1,535	4,175
	GST refund	19,970	32,518
	Rental bond	11,500	11,500
		56,339	85,232

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

9.	Other financial assets Fair Value through profit or loss financial asset: Current Share Options (i)	Consolidated 2016 $ 78,000 78,000	Consolidated 2015 $
			-
			-

9. Other financial assets

(i) MGT Resources Limited holds 20,000,000 unlisted free attaching options in Cauldron Energy Limited (ASX:CXU) which are exercisable at $0.138 per option, on or before 31 December 2016. Cauldron Energy Limited is a company involved in uranium exploration.

The options were valued using the Black-Scholes pricing model. The key assumptions applied are set out below:

Volatility 91% Risk free rate 1.99% Exercise price $0.138

	Available for sale investments carried at fair value: Non-Current Quoted shares	1,120,254 1,120,254	3,042
			3,042

(ii) The non-current other financial assets include $1,118,646 representing the fair value of 16,949,176 fully paid ordinary shares in Cauldron Energy Limited (ASX:CXU) acquired on 30 March 2016.

10. Exploration and evaluation expenditure Balance at the beginning of the year Tenement Impairment Reclassification of make-good assets to property, plant & equipment Release of prior period Native Title accruals Expenditure incurred during the year Balance at the end of the year	Consolidated 2016 $ 3,628,820 (2,392,463) - - 594,988 1,831,345	Consolidated 2015 $
		8,278,021 (5,121,643) (60,133) (551,898) 1,084,473
		3,628,820

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The ultimate recoverability of exploration and evaluation expenditure is dependent upon the successful development and exploitation of the area of interest, or alternatively, by its sale.

During October 2014 an independent valuation of the tin and gold properties were carried out by Veronica Webster Pty Ltd as a requirement of the Independent Expert Report produced by Nexia Court Financial Solutions Pty Ltd to report on the fairness and reasonableness of the Auskong International Mining Investment Co., Limited proposed investment set out in the Notice of Meeting to shareholders dated 15 January 2015.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The Mount Garnet Tin project was valued by referring to a modified discounted-cash-flow-rate-ofreturn to obtain a net present value for the mining project. The gold resources and exploration projects were valued by ‘Expected Value’ methods and the ‘Multiples of exploration expenditure’ method. The tin and gold valuations, prepared by Veronica Webster Pty Ltd were updated in August 2015, which led to an impairment of $5,121,643 in the year to 30 June 2015.

During February 2016, Veronica Webster Pty Ltd updated their August 2015 independent valuation of the tin and gold properties to provide MGT Resources Limited with a valuation effective 30 June 2016.

The following assumptions were used in preparing the modified discounted cash flow rate of return to obtain a net present value for the tin properties:

Mined grade – 0.50% Sn
Tin price – Potential project economies were examined at a range of tin prices from US$15,000 to US$25,000.
A$/US$ exchange rate of 0.70
Mine Life – 10 years at 250,000 tonnes per annum, assuming ongoing exploration to support future ore supply
Pre-start capital of $7,200,000 primarily to upgrade the plant to 250,000 tonnes per annum and to construct a new tailings dam
Exploration costs of $3,000,000 ahead of commencement of production, thereafter $1,000,000 per annum for the life of the operation
Environmental costs to obtain requisite environmental approvals of $750,000 over 18 months
Mining strip ratio of 6:1
Mining costs of $26/tonne of ore mined
Processing cost of $25/tonne milled
Smelter return of 82% (includes charge for impurities)
Plant recovery of 70%
Tin concentrate grade of 55%
Discount rate of 20%
Tax rate of 30%

In the opinion of Veronica Webster Pty Ltd, the current market would pay a range between nil and $1,750,000 for the tin properties on the valuation date, with a preferred value of $1,000,000. The Board determined the most appropriate fair value of the tin assets within the range, to be $1,000,000 after taking into account recent third party interest in the project. The value falls within level 3 of the fair value hierarchy due to one or more significant inputs being not based on observable market data.

In In the opinion of Veronica Webster Pty Ltd, the current market would pay a range between $350,000 and $1,350,000 for the gold properties on the valuation date, with a preferred value of $850,000. The Board determined the most appropriate fair value of the gold assets within the range, to be $800,000. The value falls within level 3 of the fair value hierarchy due to one or more significant inputs being not based on observable market data. The review led to the recognition of an impairment loss of $2,392,463 in the statement of profit or loss in the year to 30 June 2016.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

11. Plant and equipment

At 30 June 2016 Cost Accumulated depreciation Net book value Year ended 30 June 2016 Balance at the beginning of the financial year: Additions Disposals Depreciation expense Balance at the end of the financial year At 30 June 2015 Cost Accumulated depreciation Net book value Year ended 30 June 2015 Balance at the beginning of the financial year: Additions Disposals Written off Reclassification from Exploration Impairment loss recognised in profit and loss Depreciation expense Balance at the end of the financial year	Office equipment $ Mine infrastructure $ Motor vehicle $ Total $ 528,846 3,845,477 285,790 4,660,113 (435,631) (2,420,408) (264,524) (3,120,563)
	93,215 1,425,069 21,266 1,539,550
	129,836 1,582,129 70,737 1,782,702 9,578 - - 9,578 - - (25,884) (25,884) (46,199) (157,060) (23,587) (226,846)
	93,215 1,425,069 21,266 1,539,550
	Office equipment $ Mine infrastructure $ Motor vehicle $ Total $ 519,269 3,845,477 311,674 4,676,420 (389,433) (2,263,348) (240,937) (2,893,718)
	129,836 1,582,129 70,737 1,782,702
	228,890 1,800,284 107,528 2,136,702 890 - - 890 (2,971) - - (2,971) (21,287) - - (21,287) - 60,133 - 60,133 - (116,185) - (116,185) (75,686) (162,103) (36,791) (274,580)
	129,836 1,582,129 70,737 1,782,702

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

11.1 Impairment loss

The Group’s mine infrastructure is stated at its recoverable amounts, being the fair value less cost for sale (not expected to be material) at the date of revaluation. This is due to the fact that the infrastructure has been idle during the current year and the two preceding years. The fair value measurements of the Group’s mine infrastructure as at 30 June 2015 were performed by Andrew Nock Pty Limited, independent valuers not related to the Group and determined to be $1,542,820. During the year, a third party expressed interest for the purchase of the mine infrastructure and tin assets for a consideration that is greater than the assets’ carrying amount as at 30 June 2016. For this reason, the Group believes that the carrying value of the mine infrastructure is fully recoverable in the event of sale.

The value falls within level 3 of the fair value hierarchy due to one or more significant inputs being not based on observable market data. The valuation is based on the assumption that the mill plant is operational. Andrew Nock Pty Limited are members of the Auctioneers and Valuers Association of the Institute of Australia.

Impairment losses recognised for the mine infrastructure amounted to $Nil (2015:$116,186).

The fair value of the mine infrastructure was determined based on the depreciated replacement cost approach with reference to unobservable inputs in the table below:

Valuation technique	Significant	Range of	Relationship to fair
	unobservable inputs	unobservable inputs	value
	Consumed economic	Depreciation	Greater consumption of
	benefit/obsolescence	rate/useful life	economic benefit or
	of asset		increased
			obsolescence lowers
Depreciated			fair value
replacement cost
	Estimate of current	Replacement cost	Higher replacement
	replacement costs,	component of	cost increases fair
	reliance upon historic	depreciated	value
	cost	replacement cost
		Consolidated	Consolidated
		2016	2015
		$	$
12. Trade and other payables
Trade and other payables		84,970	212,105
Accrued expenses		464,574	311,500
		549,544	523,605

On 30 January 2015, MGT Mining Limited signed a Deed of Variation to the Ancillary Agreement for Mining Lease 20547 and 20655 dated 23 September 2011 between the Bar Barrum People #3 and Bar Barrum People #4 and MGT Mining Limited. See Directors Report ‘Significant Changes in State of Affairs’.

On 6 February 2015, MGT Mining Limited paid the Native Title parties a sum of $66,228 in settlement of all outstanding claims that the Native Title Parties might have had against MGT Mining Limited in relation to the monetary payments that would otherwise have been payable by MGT Mining Limited to the Native Title Parties. As a result of this amendment, MGT Mining Limited released the previously accrued amount of $551,898 as at 31 December 2014.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

13.	Unsecured borrowings Current Convertible note (i) Convertible note (ii) Convertible note (iii) Convertible note (iv) Non-current Convertible note (i) Convertible note (iii) Convertible note (iv)	Consolidated 2016 $ 1,494,986 - 2,996,305 2,996,305 7,487,596 - - - -	Consolidated 2015 $
			- 1,325,883 - -
			1,325,883
			1,481,604 2,969,087 2,969,087
			7,419,778

(i) The parent entity MGT Resources Limited issued convertible notes to Armstrong Industries HK Limited on 11 November 2011 with a principal sum of $1,500,000 and a term of 2 years. Interest on the convertible notes is payable at the rate of 8% per annum. The convertible note was extended on 11 November 2013 and rolled into a new convertible note for a further term of 3 years.

On 15 September 2016, Armstong Industries HK Limited agreed to extend the maturity of the convertible note of $1,500,000 from 11 November 2016 to the earlier of 11 November 2017 and 14 days after the date that the Company is in receipt of the funds from the successful capital raising required for the Company to purchase 30% of the Manyingee Mining Leases from Paladin Energy Limited (Refer to note 28) and working capital in the amount of at least US$11.5 million. The interest rate on the Armstrong Industries HK Limited convertible note will remain at 8% in respect of the period up to and including 11 November 2016 and will increase to 15% in respect of the period on and from 12 November 2016.

(ii) On 10 June 2015, the parent entity MGT Resources Limited issued unsecured convertible notes to Auskong International Mining Investment Co., Limited, with a principal sum of $1,500,000 and a nil interest rate. The Notes were converted into 50,000,000 ordinary shares in MGT Resources Limited on 9 June 2016.
(iii) The parent entity, MGT Resources Limited issued convertible notes to Cloud Adventurer Limited on 19 August 2013 with a principal sum of $3,000,000 and a term of 3 years. Interest on the convertible note is payable at the rate of 8% per annum. The convertible notes may be redeemed or, if the share price is 11 cents per share or more at maturity, must be converted into 27,272,727 ordinary shares in the parent entity.
(iv) The parent entity, MGT Resources Limited issued convertible notes to Marvel Network Limited on 19 August 2013 with a principal sum of $3,000,000 and a term of 3 years. Interest on the convertible note is payable at the rate of 8% per annum. The convertible notes may be redeemed or, if the share price is 11 cents per share or more at maturity, must be converted into 27,272,727 ordinary shares in the parent entity.

MGT Resources Limited entered into a debt restructuring agreement wth Cloud Adventurer Limited and Marvel Network Limited which includes (a) extension of the maturity of the loan from 18 August 2016 to 16 September 2016 and (b) conversion of the convertible notes to preference shares and options. Refer to Note 28.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The net proceeds received from the issue of the convertible notes have been split between the financial liability element and an equity component, representing the residual attributable to the option to convert the financial liability into equity of MGT Resources Limited. The following table is a summary of the information for all the convertible notes issued by MGT Resources Limited.

Convertible note (i) Convertible note (ii) Convertible note (iii) Convertible note (iv) $ $ $ $ Armstrong Auskong Cloud Marvel Proceeds of issue 1,500,000 1,500,000 3,000,000 3,000,000 Equity component – value of conversion rights (37,969) (184,211) (75,939) (75,939) Liability component at the date of issue 1,462,031 1,315,789 2,924,061 2,924,061 Interest expense (a) 332,955 184,211 672,244 672,244 Interest paid (b) (300,000) - (600,000) (600,000) Total 1,494,986 1,500,000 2,996,305 2,996,305 Converted into ordinary shares - (1,500,000) - - 1,494,986 - 2,996,305 2,996,305 Current liability Non-current liability	Convertible note (i) Convertible note (ii) Convertible note (iii) Convertible note (iv) $ $ $ $ Armstrong Auskong Cloud Marvel	Total $
	1,500,000 1,500,000 3,000,000 3,000,000 (37,969) (184,211) (75,939) (75,939)	9,000,000 (374,058)
	1,462,031 1,315,789 2,924,061 2,924,061	8,625,942
	332,955 184,211 672,244 672,244 (300,000) - (600,000) (600,000)	1,861,654 (1,500,000)
	1,494,986 1,500,000 2,996,305 2,996,305 - (1,500,000) - -	8,987,596 (1,500,000)
	1,494,986 - 2,996,305 2,996,305	7,487,596
		7,487,596 -
		7,487,596

(a) This represents the effective interest throughout the term of the notes. (b) This represents the nominal interest of 8% throughout the term of the notes. Interest paid is $600,000 (2015: $720,000)

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

13.1 Fair value measurement of the Group’s borrowings

The initial fair value of the liability portion of the convertible notes issued to Auskong International Mining Investment Co. Limited, was determined using an estimated market interest rate of 14% which was determined to an estimate of the benchmark rate for a similar organisation.

The initial fair value of the liability portion of the convertible notes issued to Armstrong Industries HK Limited, Cloud Adventurer Limited and Marvel Network Limited, in previous periods was determined using an estimated market interest rate of 9% which was determined to be an estimate of the benchmark rate for a similar organization at that time.

The liability is subsequently recognised on an amortised cost basis until extinguished on conversion or maturity of the convertible notes. The difference between the principal and the present value component was taken to equity as an equity derivative and not subsequently remeasured.

The fair value of current and non-current convertible notes are based on discounted cash flows using the 14% rate and the 9% rate described above. Convertible notes are classified as level 3 (If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3) fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

14. Secured borrowings Current Secured loan Non-current Secured loan	Consolidated 2016 $ 1,500,000 1,500,000 - -	Consolidated 2015 $
		-
		-
		1,500,000
		1,500,000

On 6 February 2015, MGT Mining Limited signed a secured loan agreement with Taimetco International Co., Limited for $1,500,000 with a term of 2 years at an interest rate of 6.5% per annum. Interest accrues and is payable on the earlier of the day on which the principal outstanding is paid in full and the termination date.

On 30 March 2015, Taimetco International Co., Limited advanced monies of $750,000 to MGT Mining Limited under the $1,500,000 secured loan agreement signed on 6 February 2015. On 31 March 2015, MGT Resources Limited paid the settlement sum of $750,000 to MGT Mining Limited to terminate the off-take agreement between MGT Resources Limited and Taimetco International Co., Limited (see Note 5) bringing the total amount owing by MGT Mining Limited to Taimetco International Co., Limited under the secured loan agreement to $1,500,000.

MGT Mining Limited has granted Taimetco International Co., Limited security over all of MGT Mining Limited’s present and after-acquired tin assets, rights, interests and undertakings.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

As part of the security arrangement, MGT Mining Limited has registered mortgages with the Queensland Government over the following tenements:

ML 20547 Summer Hill
ML 4349 Mt Veteran
EPM 16948 Nymbool
EPM 25433 Nanyetta
EPM 25690 Nymbool West
EPM 25716 Fuzzy Hill
EPM 25347 Nymbool Extended

15.	Provisions Current Employee benefits (i) Repair & maintenance (iii) Non–current Employee benefits (i) Mine rehabilitation and restoration (ii) Disclosed in the financial statements as: Current provisions Non-current provisions	Consolidated 2016 $ 22,488 77,626 100,114 38,377 76,132 114,509 100,114 114,509 214,623	Consolidated 2015 $
			7,913 100,000
			107,913 35,263 76,132
			111,395 107,913 111,395
			219,308

(i) Employee benefits

Represents annual leave and long service leave.

(ii) Mine rehabilitation and restoration

The Group recognises that it has an obligation to restore its mine sites to their original condition at the end of the life of the mine. Mine rehabilitation costs are provided for and based on estimated future expenditure when the liability is incurred. Although the ultimate cost to be incurred is uncertain, the Group has estimated it using current restoration standards and techniques.

The Group has re-assessed the liability as at 30 June 2016 and concluded that the amounts still represents the best estimated amount.

(iii) Repair and maintenance of tailings storage facility

A provision has been made for the repair and maintenance of the tailings storage facility in order to ensure that it is compliant with environmental laws. As at 30 June 2015, management estimated the repair cost at $100,000 of which $22,373 were incurred during the year. Management is aware that the repairs made represent a short term solution only, hence the remainder of the provision is retained in the books due to the anticipated repairs and maintenance that need to be performed subsequent to year-end. Management believes that the provision as at 30 June 2016 is sufficient to cover potential costs until a more permanent solution is agreed upon.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

16. Issued capital (a)Share capital 452,763,101 fully paid ordinary shares (2015: 318,157,040) Capital raising costs (b)Movements in ordinary share capital Opening balance February 2015 issue of shares November 2015 conversion of options (i) June 2016 conversion of convertible notes (ii) June 2016 issue of shares (iii) Total	Consolidated 2016 $ 19,846,142 (751,142) 19,095,000 No. of shares Issue price 318,157,040 - 0.050 24,000,000 0.050 50,000,000 0.030 60,606,061 0.033 452,763,101	Consolidated 2015 $
		15,146,142 (737,189)
		14,408,953
		No. of shares 288,157,040 30,000,000 - - -
		318,157,040

(i) On 24 November 2015, Auskong International Mining Investment Co., Limited converted its $1,200,000 convertible note into 24,000,000 fully paid ordinary shares.
(ii) On 10 June 2016, Auskong International Mining Investment Co., Limited converted its $1,500,000 convertible note into 50,000,000 fully paid ordinary shares.
(iii) On 30 June 2016, Auskong International Mining Investment Co., Limited converted its $2,000,000 converting note into 60,606,061 fully paid ordinary shares.

Capital risk management

The group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘borrowings’ and ‘trade and other payables’ as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position (including non –controlling interests) plus net debt.

Whilst the group strategy remains to maintain a lower gearing ratio, tight financial markets did not assist with raising debt free capital and in order to continue to carry out strategic objectives, convertible notes were entered into. The group has subsequently restructured part of the debt by converting $6,000,000 of convertible notes into preference shares and options (refer to note 28).

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

The gearing ratios at 30 June 2016 and 30 June 2015 were as follows:

Total borrowings Less: Cash and cash equivalents Net debt Total equity Total capital Net debt to equity ratio 17. Reserves (a) Revaluation reserves Balance at beginning of financial year Revaluation increments/(decrements) Balance at end of financial year	Consolidated 2016 $ 9,537,140 (149,060) 9,388,080 (4,977,215) 4,410,865 213% Consolidated 2016 $ (8,708) (512,636) (521,344)	Consolidated 2015 $
		10,769,266 (1,491,062)
		9,278,204 (3,997,716)
		5,280,488 176% Consolidated 2015 $
		(9,720) 1,012
		(8,708)

On 30 March 2016, MGT Resources Limited, purchased 16,949,176 shares and 20,000,000 options in Cauldron Energy Limited (ASX:CXU) for $2,000,000. MGT Resources Limited entered into a converting note worth $2,000,000 with Auskong International Mining Investment Co., Limited to purchase the Cauldron Energy Limited shares and options. The Auskong International Mining Investment Co., Limited converting note converted into 60,606,061 shares in MGT Resources Limited following shareholder approval on 30 June 2016. An adjustment was made of $511,354 to recognise the loss in fair value of Cauldron Energy Limited shares between their initial recognition on 30 March 2016 and 30 June 2016.

(b) Share option reserves

Balance at beginning of financial year Options expired during the year Share options vested during the year Shares options issued (i) Share options exercised (i) Balance at end of financial year	243,078 - 12,377 - (43,200) 212,255	632,825 (432,947) - 43,200 -
		243,078

(i) Share options exercised

On 17 February 2015, Auskong International Mining Investment Co., Limited was issued with 24,000,000 unquoted options at nil consideration, exercisable at 5 cents each, into one ordinary share per option, on or before 31 December 2015, as approved by shareholders at a general meeting on 17 February 2015. On 26 November 2015, Auskong International Mining Investment Co., Limited converted its 24,000,000 unquoted options exercisable at 5 cents each, into one ordinary share per option.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

(c) Equity derivative Balance at beginning of financial year Equity derivative derecognised on expiry of convertible note Equity derivative created on issue of convertible loan Balance at end of financial year Balance at end of financial year 18. Retained earnings Balance at beginning of financial year Transfer to retained earnings Transactions with non-controlling interest Net loss attributable to members of the parent entity Balance at end of financial year 19. Earnings per share Basis earning per share Diluted earnings per share Basis earning per share The earning and weighted average number of ordinary shares used in the calculation of basis earning per share are as follows: Net loss Earning used in the calculation of basic EPS from continuing operations Weighted average number of ordinary shares for the purpose of basic earnings per share Diluted earnings per share The earning and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: Net loss Earning used in the calculation of diluted EPS from continuing operations Weighted average number of ordinary shares for the purpose of diluted earnings per share	Consolidated 2016 $ 374,058 (184,211) - 189,847 (119,242) Consolidated 2016 $ (18,731,328) 227,410 - (4,837,334) (23,341,252) Cents per share (1.41) (1.07) $ (4,837,334) (4,837,334) No. 343,623,340 $ (3,995,069) (3,995,069) No. 375,113,653		Consolidated 2015 $
			227,816 (37,969) 184,211
			374,058
			608,428
			Consolidated 2015 $
			(11,216,725) 470,916 (30) (7,985,489)
			(18,731,328)
			Cents per share (2.67) (2.38) $ (7,985,489)
			(7,985,489) No. 299,088,545 $ (7,196,693)
			(7,196,693) No. 301,828,271

Options attached to converting financial instruments were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

20. Commitments

(a) Future exploration

MGT Mining Limited has certain uncontracted obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations.

The uncontracted commitments to be undertaken are as follows:

No later than 1 year Later than 1 year and not later than 5 years Later than five years	Consolidated 2016 $ 383,931 1,595,801 - 1,979,732	Consolidated 2015 $
		493,773 1,311,668 -
		1,805,441

To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the minimum expenditure requirements are not met, MGT Mining Limited has the option to negotiate new terms or relinquish the tenements. MGT Mining Limited also has the ability to meet expenditure requirements by joint venture or farm-in agreements.

21. Subsidiaries

Details of the Group’s subsidiaries at the end of the reporting period are as follows:

		Proportion of ownership	Proportion of ownership
		interest and voting power held by the Group
	Country of	2016	2015
Name of subsidiary	incorporation	%	%
MGT Mining Limited	Australia	89.48%	89.48%
Garimperos Pty Limited (i)	Australia	100.00%	100.00%

(i) Garimperos Pty Limited is 100% owned by MGT Mining Limited.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

21.1 Non-controlling interests (NCI)

Set out below is summarised financial information for MGT Mining Limited that has non-controlling interests that are material to the group. The amounts disclosed for MGT Mining Limited are before inter-company eliminations.

MGT Mining Limited Summarised balance sheet Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets/(liabilities) MGT Mining Limited (continued) Accumulated NCI Summarised statement of comprehensive income Loss for the year Other comprehensive income Total comprehensive income Loss allocated to NCI Summarised cash flows Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net increase/(decrease) in cash and cash equivalents	2016 $ 119,263 3,348,035 3,367,298 9,197,503 76,132 9,273,635 (5,806,337) 2016 $ (611,721) (3,555,073) (1,433) (3,556,506) (327,801) (391,475) (456,253) 825,000 (22,728)	2015 $
		175,026 5,221,458
		5,396,484
		6,186,270 1,576,132
		7,762,402
		(2,365,918)
		2015 $
		(283,769) (6,733,303) 1,132
		(6,732,171)
		(708,344) (207,605) (1,005,680) 1,220,000
		6,716

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

22. Notes to the cash flow statement

(a) Reconciliation of cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents included cash on hand and in bank. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

Cash and cash equivalents	Consolidated 2016 $ 149,060 149,060	Consolidated 2015 $
		1,491,062
		1,491,062

(b) Reconciliation of loss for the period to net cash flows from operating activities

Loss for the year Interest expense Non-cash flow items Gain on disposal of property, plant and equipment Accrued interest expenses Impairment loss Assets written off Fair value loss Depreciation expense Issue of share options Movement in provision for employee benefits Vesting of share options Difference arising in equity Interest adjustment on borrowings (Increase)/decrease in other current assets Increase/(decrease) in trade and other payables Increase/(decrease) in Provisions Net cash from operating activities	Consolidated 2016 $ (5,165,135) 604,234 (20,435) (1,535) 2,392,463 - 292,000 226,846 - 17,690 12,377 - 339,764 30,428 (106,023) (22,375) (1,399,701)	Consolidated 2015 $
		(8,693,833) 724,451 - (3,838) 5,237,828 59,653 - 274,580 43,200 - - 29,689 46,280 49,618 141,290 62,452
		(2,028,630)

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

23. Parent entity disclosure

(a) Financial position Assets Current assets Less provision for bad debt (Intercompany) Non-current assets Less provision for impairment of MGT Mining Ltd Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued equity Retained earnings Reserves Total equity (b) Financial performance Management fee income Loss for the year Bad debt provision (Intercompany) Impairment of investment in MGT Mining Ltd Fair value loss Termination of off-take agreement - Taimetco Total comprehensive income		2016 $ 7,586,156 (7,422,020) 12,729,417 (10,140,588) 2,752,965 7,861,772 38,377 7,900,149 19,095,000 (24,132,932) (109,252) (5,147,184) 2016 $ 240,000 (1,558,062) (1,614,017) (1,740,505) (292,000) - (4,964,584)		2015 $
				7,209,272 (5,808,004) 11,663,320 (8,400,083)
				4,664,505
				1,579,134 7,455,041
				9,034,175
				14,408,952 (19,395,758) 617,136
				(4,369,670)
				2015 $ 240,000 (1,450,529) (5,808,004) (8,400,083) - (750,000) (16,168,616)

The parent entity did not have any contingent liabilities during the current or prior periods.

(d) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

The parent entity has not entered into any guarantees in relation to the the debts of its subsidiaries.

24. Auditors remuneration Audit services Audit and review of financial reports Non-audit services Total auditor’s remuneration	Consolidated 2016 $ 60,269 11,750 72,019	Consolidated 2015 $
		54,265 10,500
		64,765

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

25. Share-based payments

(a) Employee share option plan

The Group has an ownership-based compensation scheme for executives and senior employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, executives and senior employees may be granted options to purchase ordinary shares at various exercise prices.

Each employee share option converts into one ordinary share of MGT Resources Ltd on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

The following share-based payment arrangements were in existence during the current and prior reporting periods:

Option	Grant date	Expiry date	Exercise	Fair value at	Vesting date
series			price	grant date
			$	$
A	17 Oct 2011	17 Oct 2014	0.30	0.1109	Vests at the date of grant
B	25 Nov 2011	25 Nov 2014	0.20	0.1262	Vests at the date of grant
C	25 Nov 2011	25 Nov 2014	0.30	0.1102	Vests at the date of grant
D	7 Nov 2013	7 Nov 2016	0.15	0.0288	Vests at the date of grant
E	17 Dec 2013	17 Dec 2016	0.15	0.0288	Vests 17 Dec 2015
					provided the eligible
					recipient is employed by
					the group on that date

(b) Movements in share options during the year

The following reconciles the share options outstanding at the beginning and end of the year:

Balance at beginning of year Granted during the year Exercised during the year Expired or cancelled during the year Balance at end of the year Exercisable at end of year	2016	2015
	No. of options Weighted average exercise price $ 7,850,000 0.1500 - - - - - - 7,850,000 0.1500 7,850,000	No. of options Weighted average exercise price $ 11,675,000 0.1879 - - - - (3,825,000) 0.2657 7,850,000 0.1500 6,800,000

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

26. Key management personnel compensation

The aggregate compensation made to directors and key management personnel of the company and the Group is set out below:

and the Group is set out below:
Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment	Consolidated 2016 $ 559,290 29,376 - - 4,221 592,887	Consolidated 2015 $
		497,434 31,932 - 20,769 -
		550,135

27. Related party transactions

Jonathan Back, provided services to MGT Resources Limited in his capacity as Executive Chairman and Managing Director through his company, Ocean Central Limited for a total value of $144,000 during the period to 30 June 2016 (2015: $80,000 exc GST). Of the $144,000 in fees earned during the period to 30 June 2016, $24,000 remain accrued as at 30 June 2016.

On 30 June 2016, Jonathan Back extended a $55,000 line of credit to MGT Resources Limited until the earlier of 15 July 2016 and the receipt of $1,000,000 in funding under the Joseph Capital (Hong Kong) Limited placement agreement. The line of credit was further extended on 15 July 2016 to the earlier of 22 July 2016 and the receipt of $1,000,000 in funding under the Joseph Capital (Hong Kong) Limited placement agreement. The facilities were unsecured and with no interest (or other costs) payable by MGT Resources Limited in respect of the facilities. The lines of credit were not drawn down before they expired on 19 July 2016 when placement funding of $1,000,000 from Joseph Capital (Hong Kong) Limited were received.

Gary Kuo, provided employment services to MGT Resources Limited in his capacity as Executive Director and Managing Director. Refer to Key management personnel compensation note in the Directors report for a breakdown of remuneration earned.

On 30 June 2016, Gary Kuo extended a $55,000 line of credit to MGT Resources Limited until the earlier of 15 July 2016 and the receipt of $1,000,000 in funding under the Joseph Capital (Hong Kong) Limited placement agreement. The line of credit was further extended on 15 July 2016 to the earlier of 22 July 2016 and the receipt of $1,000,000 in funding under the Joseph Capital (Hong Kong) Limited placement agreement. The facilities were unsecured and with no interest (or other costs) payable by MGT Resources Limited in respect of the facilities. The lines of credit were not drawn down before they expired on 19 July 2016 when placement funding of $1,000,000 from Joseph Capital (Hong Kong) Limited were received.

Li Hai Jun, provided services to MGT Resources Limited in his capacity as Non-Executive Director through his nominated entity, Parkridge Capital Inc. for a total value of $32,000 during the period to 30 June 2016 (2015: $14,250 exc GST). Of the $32,000 in fees earned during the period to 30 June 2016, $5,333 remain accrued as at 30 June 2016.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Christopher Chen provided service to MGT Resources Limited in his capacity as Non-Executive Director of $18,667 through his nominated company Beijing Cui Yu Tong Bao Zhu Bao Dian during the period to 30 June 2016 (2015: $8,000). Christopher Chen became Chief Operating Officer and an employee on 1 February 2016. Refer to Key management personnel compensation note in the Directors report for a breakdown of remuneration earned.

On 30 June 2016, Christopher Chen extended a $55,000 line of credit to MGT Resources Limited until the earlier of 15 July 2016 and the receipt of $1,000,000 in funding under the Joseph Capital (Hong Kong) Limited placement agreement. The line of credit was further extended on 15 July 2016 to the earlier of 22 July 2016 and the receipt of $1,000,000 in funding under the Joseph Capital (Hong Kong) Limited placement agreement. The facilities were unsecured and with no interest (or other costs) payable by MGT Resources Limited in respect of the facilities. The lines of credit were not drawn down before they expired on 19 July 2016 when placement funding of $1,000,000 from Joseph Capital (Hong Kong) Limited were received.

Wenshan Zhang provided service to MGT Resources Limited in his capacity as Non-Executive Director of $35,000 through his nominated company Beijing Cui Yu Tong Bao Zhu Bao Dian during the period to 30 June 2016 (2015: $8,750). Of the $35,000 in fees earned during the period to 30 June 2016, $8,750 remain accrued as at 30 June 2016.

Jacqueline Butler, provided employment services to MGT Resources Limited in her capacity as Chief Financial Officer and Company Secretary. Refer to Key management personnel compensation note in the Directors report for a breakdown of remuneration earned.

MGT Resources Limited provides key management personnel services to MGT Mining Limited, the 89.48% subsidiary of MGT Resources Limited for a total value of $240,000 during the period to 30 June 2016 (2015:$240,000 exc GST).

Auskong International Mining Investment Co., Limited is a substantial shareholder of MGT Resources Limited holding 194,606,061 ordinary shares in MGT Resources Ltd, representing a 42.98% shareholding.

28. Events occurring after the reporting period

Additional share issuance

On 19 July 2016, Joseph Capital (Hong Kong) Limited completed the placement of $1,000,000 and were issued with 30,303,030 ordinary shares at $0.033 per share.

Additional convertible note issued

The Note is redeembable by Joseph Capital (Hong Kong) Limited if no conversion occurs withint 12 months after the date of issue.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

Joint venture agreement for uranium mining

On 20 July 2016 MGT Resources Limited entered into a binding term sheet with Paladin Energy Limited (ASX:PDN) over Manyingee Mining Leases (M08/86, M08/87, M08/88) in North Western Australia.

The transaction is conditional on definitive documentation, regulatory approval, financing and a vote of MGT Resources Limited shareholders.

Establishment of a wholly owned subsidiary

Debt restructuring on maturing convertible notes

On 2 August 2016, Cloud Adventurer Limited and Marvel Network Limited extended the maturity date on the Convertible Notes (see Note 13) to 16 September 2016.

On 16 September 2016 following the general meeting of shareholders on 16 September 2016, $3,000,000 Convertible Notes owing to Cloud Adventurer Limited were converted to $3,000,000 Preference Shares.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 June 2016

On 16 September 2016 following the general meeting of shareholders on 16 September 2016, $3,000,000 Convertible Notes owing to Marvel Network Limited were converted to $3,000,000 Preference Shares.

One fifth of options will vest cumulatively each year in the following matter:

(e) 1/5 of the options vested on 16 September 2016 and are exercisable from that date up until and including 16 September 2021.
(f) A further 1/5 of the options vest on 16 September 2017 and are exercisable from that date up until and including 16 September 2021.
(g) A further 1/5 of the options vest on 16 September 2018 and are exercisable from that date up until and including 16 September 2021.
(h) A further 1/5 of the options vest on 16 September 2019 and are exercisable from that date up until and including 16 September 2021.
(i) A further 1/5 of the options vest on 16 September 2020 and are exercisable from that date up until and including 16 September 2021.

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MGT RESOURCES LIMITED AND ITS CONTROLLED ENTITIES DIRECTOR’S DECLARATION FOR THE YEAR ENDED 30 June 2016

The directors declare that:

(a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
(b) In the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and the consolidated entity;
(c) In the directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and
(d) The directors’ have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

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Gary Kuo Executive Director Dated: 28 September 2016

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Independent Auditor’s Report to the members of MGT Resources Limited

Report on the Financial Report

We have audited the accompanying financial report of MGT Resources Limited (the Company) and its controlled entities (the Group) which comprises the consolidated statement of financial position as at 30 June 2016, and the consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year ended 30 June 2016.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretation) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the consolidated financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with independence requirements of the Corporations Act 2001 .

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LIABILITY LIMITED BY A SCHEME, APPROVED UNDER THE PROFESSIONAL STANDARDS LEGISLATION

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Independent Auditor’s Report to the members of MGT Resources Limited (Cont’d)

Auditor’s Opinion

In our opinion the financial report of MGT Resources Limited and its controlled entities, is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Material uncertainty regarding continuation as a going concern

We draw attention to Note 1(a) to the financial statements which describe the uncertainty related to going concern. The Group has realised a net loss before tax of $5,165,135 during the year ended 30 June 2016. The Group also had net liabilities of $4,977,215 and net current liabilities of $9,353,855 as at 30 June 2016. The ability of the Group to continue as a going concern is dependent upon the Group’s ability to raise additional funds through either debt financing, capital raising arrangements, re-financing options or asset sales. Should the group fail to raise sufficient funds a material uncertainty exists which may cast significant doubt as to the Group’s ability to continue as a going concern and therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business, and at the amounts stated in the financial report.

Report on the Remuneration Report

We have audited the Remuneration Report of MGT Resources Limited for the year ended 30 June 2016 set out in page 25 to page 31 in the 2016 Annual Report. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of MGT Resources Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001 .

MAZARS RISK & ASSURANCE PTY LIMITED

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Rose Megale Director Dated in Sydney this 28th day of September 2016

ADDITIONAL STOCK EXCHANGE INFORMATION

The shareholder information set out below was applicable as at 28 September 2016.

A. Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	Class of equity security Ordinary shares Redeemable preference shares Convertible notes Shares Options 2 - - - 9 - - - 51 - - - 221 2 - - 134 9 2 2
	417 11 2 2

B. Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

	Ordinary
	Shares
Name	Number	Percenta
	held	ge of
		issued
		shares
AUSKONG INTERNATIONAL MINING INVESTMENT CO.LIMITED	194,606,061	40.29%
JONATHAN PAUL BACK	65,029,727	13.46%
JOSEPH CAPITAL (HONG KONG) LIMITED	30,303,030	6.27%
PARKRIDGE CAPITAL INC	18,200,000	3.77%
KUOKAI PTY LTD	17,738,000	3.67%
ARMSTRONG INDUSTRIES HK LTD	16,125,000	3.34%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	13,647,764	2.83%
ALAN KAI-YUAN CHENG	8,352,500	1.73%
MR KOKI INOMATA	6,700,000	1.39%
WILLIAM RICHARD PIRIE	4,200,000	0.87%
MR DAVID HARPER	4,000,000	0.83%
MR CHRISTOPHER CHEN	3,570,000	0.74%
TSUMO H.K. CO. LIMITED	3,500,000	0.72%
MS LISA HUANG	3,364,000	0.70%
JASON RALPH COX	3,200,000	0.66%
MR SING FUNG STEVE NGAN	3,200,000	0.66%
ERIDITUS PTY LTD	3,000,000	0.62%
ROBERT HOWE +	2,920,000	0.60%
MR CLIVE JAMES MCKERR + MRS SARAH JAYNE SANDRA	2,900,000	0.60%
MCKERR
CARY CHEN	2,802,500	0.58%

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ADDITIONAL STOCK EXCHANGE INFORMATION

C. Substantial Shareholders

The names of shareholders with relevant interests of 5% or more (of the voting power of those shares) are listed below:

	Ordinary
	Shares
Name	Number	Percentage of
	held	issued shares
AUSKONG INTERNATIONAL MINING INVESTMENT CO., LIMITED	194,606,061	40.29%
JONATHAN PAUL BACK (Direct and Indirect)	65,329,727	13.5%
JOSEPH CAPITAL (HONG KONG) LIMITED	30,303,030	6.27%

D. Unquoted Securities (Options)

	Unlisted Options
	Number of Holders	Number on Issue
		(28 September 2016)
Options over ordinary shares issued	11	80,577,274

E. Schedule of Mineral Tenements

Schedule of tenements as at 30[th] June 2016:

State	Tenement Name	Tenement ID	Location	Interest	Holder	Comments
QLD	Mt Veteran	ML 4349	Mt Garnet	89.48%	MGTM	Granted
QLD	Summer Hills	ML 20547	Mt Garnet	89.48%	MGTM	Granted
QLD	Heads or Tails	ML 20655	Mt Garnet	89.48%	MGTM	Granted
QLD	Valetta	ML 20066	Mt Garnet	100%	MGS	Granted
QLD	Nymbool	EPM 16948	Mt Garnet	89.48%	MGTM	Granted
QLD	Nanyetta	EPM 25433	Mt Garnet	89.48%	MGTM	Granted
QLD	Nymbool Extended	EPM 25347	Mt Garnet	89.48%	MGTM	Granted
QLD	Nymbool West	EPM 25690	Mt Garnet	89.48%	MGTM	Granted
QLD	Fuzzy Hill	EPM 25716	Mt Garnet	89.48%	MGTM	Granted
QLD	Pyramid	EPM 12887	Drummond	89.48%	MGTM	Granted
			Basin
QLD	Pyramid 3	EPM 19554	Drummond	89.48%	MGTM	Granted
			Basin
QLD	Pyramid 2	EPM 25154	Drummond	100%	MGS	Granted
			Basin
QLD	Yarrol	EPM 8402	Monto	89.48%	MGTM	Granted
QLD	Mt Steadman	EPM 12834	Gayndah	89.48%	MGTM	Granted
QLD	Gooroolba	EPM 15426	Gayndah	89.48%	MGTM	Granted

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AI assistant

AVIRA RESOURCES LTD — Annual Report 2016

64473_rns_2016-09-27_8077074c-53f1-416f-a4b9-5f1afc39988d.pdf

CORPORATE DIRECTORY 2016

DIRECTORS

SHARE REGISTRY

COMPANY SECRETARY

BANKERS

NOTICE OF ANNUAL GENERAL MEETING

SOLICITORS TO THE COMPANY

PRINCIPAL REGISTERED OFFICE

AUDITORS

STOCK EXCHANGE LISTING

CORPORATE GOVERNANCE STATEMENT

CONTENTS

CONTENTS

CHAIRMAN’S LETTER

Dear Shareholders,

OPERATIONS REPORT

1. MOUNT GARNET TIN PROJECT

89.48% owned by MGT

1.1 SUMMER HILLS (ML 20547)

Dalcouth resource update increases tonnage by 385%

Dalcouth Mineral Resource Summary (0.1% Sn lower cut off)

OPERATIONS REPORT

OPERATIONS REPORT

Improved geological model of Dalcouth

OPERATIONS REPORT

OPERATIONS REPORT

Next Steps for Mt Garnet

OPERATIONS REPORT

OPERATIONS REPORT

Next steps for Pyramid

3. THE SOUTHERN QUEENSLAND PROJECT (EPM8402, EPM12834 and EPM15426)

OPERATIONS REPORT

4. CORPORATE

Annual general meeting

General meeting

Funding

Uranium strategy

5. CHANGES IN CAPITAL STRUCTURE

Issue of shares

Options exercised

OPERATIONS REPORT

6. ANNUAL RESOURCES STATEMENT

OPERATIONS REPORT

Review of the material changes

Summary of Governance Arrangements and Internal Controls

Competent Person Statements

DIRECTORS’ REPORT

DIRECTORS

PRINCIPAL ACTIVITIES

DIVIDENDS

REVIEW OF OPERATIONS

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Additional share issuance

Additional convertible note issued

Joint venture agreement for uranium mining

Debt restructuring on maturing convertible notes

LIKELY FUTURE DEVELOPMENTS

ENVIRONMENTAL REGULATIONS

INDEMNIFICATION OF OFFICERS AND AUDITORS

INFORMATION ON DIRECTORS AND SENIOR MANAGEMENT:

Mr Jonathan Paul Back (LLB, BCL) – Executive Chairman

Mr Gary Kuo – Executive Director and Managing Director

Mr Christopher Chen – Executive Director and Chief Operating Officer

Mr Li Hai Jun – Non- Executive Director

Dr Wenshan Zhang – Non- Executive Director

Ms Jacqueline Butler – Chief Financial Officer and Company Secretary

DIRECTORS’ MEETINGS

REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL

Details of key management personnel

DIRECTORS’ REPORT

(a) Key management personnel compensation

DIRECTORS’ REPORT

(b) Executive Contracts

(c) Share-based compensation

(i) Issue of shares

DIRECTORS’ REPORT

AVIRA RESOURCES LTD Annual Report 2016