ELEMENT 25 LIMITED — Regulatory Filings 2017

Feb 26, 2017

ABN 46 119 711 929 INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2016

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Annual Report for the year ended 30 June 2016 and any public announcements made by Montezuma Mining Company Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

31 DECEMBER 2016

Contents	Page
DIRECTORS' REPORT	3
AUDITOR'S INDEPENDENCE DECLARATION	4
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	7
CONSOLIDATED STATEMENT OF CASH FLOWS	8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	9
DIRECTORS' DECLARATION	13
INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS	14

31 DECEMBER 2016

DIRECTORS' REPORT

Your directors submit their report on the consolidated entity consisting of Montezuma Mining Company Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2016.

DIRECTORS

The names of the directors who held office during or since the end of the half-year are:

Seamus Cornelius

Justin Brown

John Ribbons

REVIEW AND RESULTS OF OPERATIONS

A summary of revenues and loss after tax for the half-year is set out below:

		2016
	Revenues	Results
	\$	\$
Consolidated entity	1,146,678	(197,759)

During the period ending 31 December 2016 the Company successfully raised \$2,210,000 from the issue of 13,000,000 fully paid ordinary shares at 17 cents per share.

In addition, the Company continued to explore its 100% owned Yamarna Project area during the period. Drilling was completed at the Jatz, Le Snak and Salada prospects following a regional integrated structural review using the available aeromagnetic, gravity and drilling datasets. The favourable geology was associated with significant gold anomalism in places and further confirmed the kilometre scale Jatz trend.

AUDITOR'S INDEPENDENCE DECLARATION

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4.

This report is made in accordance with a resolution of directors.

Justin Brown Executive Director Perth, 27 February 2017

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2016

	Half-year
	2016	2015
	\$	\$
REVENUE AND OTHER INCOME
Interest received	56,370	77,490
Net gain on sale of mining interests	840,000	-
Fair value gains on financial assets	250,308	-
Other income	-	5,202
EXPENDITURE
Depreciation expense	(11,190)	(18,894)
Salaries and employee benefits expense	(56,060)	(59,000)
Exploration expenditure	(939,588)	(979,353)
Secretarial and share registry expenses	(98,235)	(74,265)
Administration expenses	(156,183)	(187,873)
Fair value losses on financial assets	-	(642,252)
Share-based payments expense	(82,566)	(276,710)
LOSS BEFORE INCOME TAX	(197,144)	(2,155,655)
Income tax expense	-	-
LOSS FOR THE HALF-YEAR AFTER TAX	(197,144)	(2,155,655)
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations	(615)	(15,234)
Other comprehensive income for the period, net of tax	(615)	(15,234)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF MONTEZUMA MINING
COMPANY LIMITED	(197,759)	(2,170,889)
Basic and diluted loss per share (cents)	(0.2)	(3.1)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016

	Notes	31 December	30 June
		2016	2016
		\$	\$
CURRENT ASSETS
Cash and cash equivalents		4,629,101	3,692,673
Trade and other receivables		90,684	154,891
Financial assets at fair value through profit or loss	3	5,535,275	4,499,127
TOTAL CURRENT ASSETS		10,255,060	8,346,691
NON-CURRENT ASSETS
Plant and equipment		5,601	16,791
TOTAL NON-CURRENT ASSSETS		5,601	16,791
TOTAL ASSETS		10,260,661	8,363,482
CURRENT LIABILITIES
Trade and other payables		215,379	287,907
TOTAL CURRENT LIABILITIES		215,379	287,907
TOTAL LIABILITIES		215,379	287,907
NET ASSETS		10,045,282	8,075,575
EQUITY
Issued capital	4	14,351,850	12,353,350
Reserves		3,410,995	3,242,644
Accumulated losses		(7,717,563)	(7,520,419)
TOTAL EQUITY		10,045,282	8,075,575

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

31 DECEMBER 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2016

	Contributed Equity	Share-based Payments Reserve	Foreign Currency Translation Reserve	Accumulated Losses	Total
	\$	\$	\$	\$	\$
BALANCE AT 1 JULY 2015	12,353,350	2,971,802	(7,146)	(6,486,080)	8,831,926
Loss for the period	-	-	-	(2,155,655)	(2,155,655)
OTHER COMPREHENSIVE INCOME
Exchange differences on translation of foreign operations	-	-	(15,234)	-	(15,234)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD	-	-	(15,234)	(2,155,655)	(2,170,889)
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS
Employee and contractor share options	-	276,710	-	-	276,710
BALANCE AT 31 DECEMBER 2015	12,353,350	3,248,512	(22,380)	(8,641,735)	6,937,747
BALANCE AT 1 JULY 2016	12,353,350	3,265,162	(22,518)	(7,520,419)	8,075,575
Loss for the period	-	-	-	(197,144)	(197,144)
OTHER COMPREHENSIVE INCOME
Exchange differences on translation of foreign operations	-	-	(615)	-	(615)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD	-	-	(615)	(197,144)	(197,759)
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS
Shares issued during the period	2,210,000	-	-	-	2,210,000
Share issue transaction costs	(211,500)	-	-	-	(211,500)
Employee, contractor and supplier share options	-	168,966	-	-	168,966
BALANCE AT 31 DECEMBER 2016	14,351,850	3,434,128	(23,133)	(7,717,563)	10,045,282

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

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2016

	Half-year
	2016	2015
	\$	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Expenditure on mining interests	(976,034)	(782,312)
Payments to suppliers and employees	(328,600)	(363,323)
Other income received	50,000	-
Interest received	53,007	86,615
Proceeds from sale of financial assets at fair value through profit or loss	54,160	178,513
Payments for financial assets at fair value through profit or loss	-	(87,568)
Net cash used in operating activities	(1,147,467)	(968,075)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares	2,210,000	-
Payments for share issue transaction costs	(125,100)	-
Net cash inflow from financing activities	2,084,900	-
Net increase/(decrease) in cash and cash equivalents	937,433	(968,075)
Cash and cash equivalents at the beginning of the half-year	3,692,673	6,674,413
Effects of exchange rate changes on cash and cash equivalents	(1,005)	2,416
CASH AND CASH EQUIVALENTS AT THE END OF THE HALF-YEAR	4,629,101	5,708,754

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT

This condensed consolidated interim financial report for the half-year reporting period ended 31 December 2016 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2016 and any public announcements made by Montezuma Mining Company Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period unless otherwise stated.

New and amended standards adopted by the Group

The Group has adopted all the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are relevant to their operations and effective for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group during the interim reporting period.

Impact of standards issued but not yet applied by the Group

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the half-year ended 31 December 2016. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.

Critical accounting estimates and judgements

The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. In preparing this half-year financial report, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial report for the year ended 30 June 2016.

31 DECEMBER 2016

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2: SEGMENT INFORMATION

For management purposes, following the incorporation of Cordier Mines SAS (refer note 5), the Group has identified two reportable segments based on georaphic location, being exploration activities undertaken in Australia and Europe. These segments include activities associated with the determination and assessment of the existence of commercial economic reserves, from the Group's mineral assets in the respective geographic locations.

Segment performance is evaluated based on the operating profit and loss and cash flows and is measured in accordance with the Group's accounting policies.

	Australia		Europe		Total
		Half-year		Half-year	Half-year
	2016	2015	2016	2015	2016	2015
	\$	\$	\$	\$	\$	\$
Segment revenue	840,000(1)	-	-	-	840,000	-
Reconciliation of segment revenue to total revenue:
Interest revenue					56,370	77,490
Fair value gains on financial assets					250,308	-
Other income					-	5,202
Total revenue and other income					1,146,678	82,692
Segment results	(70,463)	(943,721)	(29,125)	(35,632)	(99,588)	(979,353)
Reconciliation of segment result to net loss before tax:
Fair value losses on financial assets					-	(642,252)
Other corporate and administration					(97,556)	(534,050)
Net loss before tax						(197,144) (2,155,655)
	31 Dec 2016	30 June 2016	31 Dec 2016	30 June 2016	31 Dec 2016	30 June 2016
	\$	\$	\$	\$	\$	\$
Segment operating assets	-	-	-	-	-	-
Reconciliation of segment operating assets to total assets:
Other corporate and administration assets					10,260,661	7,334,494
Total assets					10,260,661	7,334,494

(1) During October 2016, the Group completed the sale of exploration licence E15/1447 to Lefroy Exploration Limited ("LEX"). In consideration for the sale, Montezuma was issued 4.2 million fully paid ordinary shares in LEX at a deemed value of \$0.20 per share.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3: AVAILABLE-FOR-SALE FINANCIAL ASSETS

	31 December
	2016	30 June 2016
	\$	\$
Australian listed equity securities	5,535,275	4,499,127

The market value of all equity investments represent the fair value based on quoted prices on active markets (ASX) as at the reporting date without any deduction for transaction costs. These investments are classified as Level 1 financial instruments. There have been no transfers between levels of the fair value hierarchy used in measuring the fair value of these financial instruments, or changes in its classification as a result of a change in the purpose or use of these assets.

Due to their short-term nature, the carrying amount of current receivables and current payables is assumed to approximate their fair value.

NOTE 4: EQUITY SECURITIES ISSUED

	2016 Shares	2016 \$	2015 Shares	2015 \$
As at 1 July	70,464,350	12,353,350	70,464,350	12,353,350
Issues of ordinary shares during the half-year
Issued for cash at \$0.17 per share	13,000,000	2,210,000	-	-
Share issue costs	-	(211,500)	-	-
As at 31 December	83,464,350	14,351,850	70,464,350	12,353,350

	Number of options
	2016	2015
As at 1 July	18,320,000	18,745,000
Movement of options during the half-year
Issued, exercisable at 20 cents, on or before 24 November 2021(1)	2,000,000	-
Issued, exercisable at 22 cents, on or before 2 December 2019(1)	200,000	-
Issued, exercisable at 27.5 cents, on or before 15 September 2017(1)	-	500,000
Issued, exercisable at 30 cents, on or before 2 December 2019(1)	200,000	-
Issued, exercisable at 30 cents, on or before 22 August 2020(2)	2,000,000	-
Issued, exercisable at 32 cents, on or before 22 October 2018(1)	-	250,000
Issued, exercisable at 35 cents, on or before 20 November 2018(1)	-	200,000
Issued, exercisable at 35 cents, on or before 20 November 2020(1)	-	2,200,000
Expired on 30 July 2016, exercisable at 20 cents	(1,020,000)	-
Expired on 30 July 2016, exercisable at 30 cents	(1,000,000)	-
Expired on 30 November 2016, exercisable at 32.5 cents	(3,000,000)	-
Expired on 21 October 2015, exercisable at 41 cents	-	(325,000)
Expired on 30 November 2015, exercisable at 65 cents	-	(1,000,000)
Expired on 30 November 2015, exercisable at 80 cents	-	(1,500,000)
As at 31 December	17,700,000	19,070,000

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4: EQUITY SECURITIES ISSUED (continued)

(1) The weighted average fair value of employee and consultant options granted during the halfyear was 3.7 cents (2015: 8.8 cents), for a total value of \$82,566 (2015: \$276,710) included within share-based payments expense. The fair values were calculated by using the Black-Scholes European Option Pricing Model applying the following weighted average inputs:

	2016	2015
Weighted average exercise price (cents)	21.0	33.6
Weighted average life of the option (years)	4.6	4.2
Weighted average underlying share price (cents)	12.5	25.7
Weighted average expected share price volatility	50.0%	50.0%
Weighted average risk free interest rate	2.4%	2.2%

(2) The fair value of options granted as part consideration for capital raising fees during the halfyear was 4.3 cents (2015: N/A), for a total value of \$86,400 (2015: N/A) included within share issue costs as part of contributed equity. The fair value was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs:

	2016	2015
Exercise price (cents)	30.0	-
Life of the option (years)	4.0	-
Underlying share price (cents)	17.0	-
Expected share price volatility	50.0%	-
Risk free interest rate	1.8%	-

NOTE 5: CONTINGENCIES

There has been no change in contingent liabilities or contingent assets since the last annual reporting date.

NOTE 6: SUBSEQUENT EVENTS

No matter or circumstance has arisen since 31 December 2016, which has significantly affected, or may significantly affect the operations of the Group, the result of those operations, or the state of affairs of the Group in subsequent financial years.

DIRECTORS' DECLARATION

In the directors' opinion:

• 1. the financial statements and notes set out on pages 5 to 12 are in accordance with the Corporations Act 2001, including:
• (a) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
• (b) giving a true and fair view of the consolidated entity's financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and
• 1. there are reasonable grounds to believe that Montezuma Mining Company Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Justin Brown Executive Director Perth, 27 February 2017