EQ RESOURCES LIMITED - Interim / Quarterly Report 2019

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ACN: 115 009 106 (ASX CODE: SEI)

Half Year Financial Report

31 DECEMBER 2018

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CORPORATE DIRECTORY

DIRECTORS

Russell H. Krause Roland W. Nice Stephen Layton

Executive Chairman Non-executive Director Non-executive Director

COMPANY SECRETARY

Adrien M. Wing (Appointed 1 February 2019) David W. Clark (Ceased 31 January 2019)

Registered Office

Level 17, 500 Collins Street

Melbourne VIC 3000

Telephone: +61 (0)3 9614 0600 Website: www.specialitymetalsintl.com.au Email: [email protected]

SHARE REGISTRY

Computershare Investor Services Pty Limited

Yarra Falls 452 Johnston Street Abbotsford VIC 3067

Telephone (within Australia): 1300 850 505 Telephone (internationally): +61 (0)3 9415 4000

AUDITORS

Nexia Melbourne Audit Pty Ltd Level 12, 31 Queen Street Melbourne VIC 3000 Telephone: +61 (0)3 8613 8888 Facsimile: +61 (0)3 8613 8800

BANKERS

Commonwealth Bank of Australia

STOCK EXCHANGE LISTING

Listed on the Australian Securities Exchange (ASX) ASX Code: SEI

ACN: 115 009 106

TABLE OF CONTENTS

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CONTENTS ....................................................................................................................................................................... 1 DIRECTORS’ REPORT .................................................................................................................................................... 2 REVIEW OF OPERATIONS ............................................................................................................................................. 3 AUDITOR’S INDEPENDENCE DECLARATION .............................................................................................................. 7 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ........................... 8 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................................... 9 CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................................... 10 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ......................................................................................... 11 NOTES TO THE HALF YEAR FINANCIAL STATEMENTS ........................................................................................... 12 DIRECTORS’ DECLARATION ........................................................................................................................................ 17 INDEPENDENT AUDITOR’S REVIEW REPORT ........................................................................................................... 18

DIRECTORS’ REPORT

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Your Directors submit their Report for the half year ended 31 December 2018.

DIRECTORS

The names of the Company’s Directors in office during the half year and at the date of this Report are as follows: Russell H. Krause Executive Chairman Roland W. Nice Non-executive Director Stephen Layton Non-executive Director

REVIEW & RESULTS OF OPERATIONS

The net result of operations after applicable income tax expense for the half year ended 31 December 2018 was a loss of $749,339 (2017 Half Year Loss - $815,137).

REVIEW OF OPERATIONS

Information on the operations and financial position of the Group, its business strategies and prospects for future financial years is detailed in the Review of Operations section of this Report.

FINANCIAL

The Company’s cash position as at 31 December 2018 was $454,138 (30 June 2018: $602,675).

SUBSEQUENT EVENTS

No event has occurred subsequent to 31 December 2018 requiring disclosure in, or amendment to, these financial statements apart from:

The appointment of Adrien Wing as Company Secretary on 1 February 2019 following David Clark ceasing that role on 31 January 2019; and
The Company announcing on 28 February 2019 that Cronimet Holding GmbH’s due diligence on the Mt Carbine Tungsten Project (“Project”) is nearing completion and the contractual arrangements associated with their participation in the staged development of this Project is in the process of being finalised.

NDENCE DECLARATION

The Auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is attached to this Report.

Signed at Melbourne this 13[th] day of March 2019 in accordance with a resolution of Directors.

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Executive Chairman

R H Krause

REVIEW OF OPERATIONS

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2018 ended on an extremely positively note for Speciality Metals International Limited (“Speciality Metals” or “the Company”) with the Company entering into advanced negotiations with Cronimet Holding GmbH for their conditional participation in the staged development of the Company’s Mt Carbine Tungsten Project and to also enable the purchase of the Mt Carbine Quarry and Mining Leases ML 4867 and ML 4919.

Both parties are committed to finalising these arrangements within the shortest possible timeframe and are aiming to be in production by the end of the first half of 2019. In line with the Company’s staged development approach, Speciality Metals will also pursue the necessary permitting and approvals for its Open Pit Hard Rock Project. The Board would also like to thank shareholders for their patience.

The Board are excited to have the opportunity to partner with one of the world’s leading mining and raw material supply companies and looks forward to working closely with Cronimet in realising the value of its world-class Mt Carbine Tungsten Project.

Despite a large amount of the Board’s time being dedicated to the Company’s Mt Carbine Tungsten Project they have not lost sight of the Company’s other exploration concessions within Chile and New South Wales, Australia. The Board has also been actively working on the development of a comprehensive exploration program for all its tenement holdings which should be finalised during the first half of 2019.

DEVELOPMENT & EXPLORATION ACTIVITIES

MT CARBINE QUARRY & MINING LEASES

FINANCING ARRANGEMENTS

The Company was pleased to announce on 24 December 2018 that it was in advanced negotiations with Cronimet Holding GmbH for a conditional participation for the staged development of its Mt Carbine Tungsten Project and to enable the purchase of the Mt Carbine Quarry and Mining Leases, ML4867 and ML 4919, by the Company through alternative financial instruments.

The key terms of the conditional participation contained in a letter of intent along with those of the Sale and Purchase Agreement with Mt Carbine Quarries Pty Ltd are as follows:

(b) Cash Advance: CRONIMET will provide a cash advance of US$3.5 million (~AUD$4.9 million) by way of an off-take agreement defining the delivery of tungsten concentrate from the Mt Carbine Tungsten Project.

The Tailings Retreatment Plant will be recommissioned, and production will commence from the ~12 million tonnes of stockpiled material. CRONIMET will provide the technical expertise and assist with the refurbishment of the existing Tailings Retreatment Plant as well as sourcing the plant required to commence production from the stockpiled material. Subject to further due diligence, the Tailings and Stockpile projects may be undertaken by a newly formed joint venture company where it is intended that Speciality Metals and CRONIMET will each hold a 50% stake. Speciality Metals will also be entitled to receive a 2.5% royalty on the gross revenue of the newly formed joint venture company.

It is anticipated that production lead times will be minimal as both projects are fully permitted.

(c) Equity Component: The Company is also in advanced discussions with CRONIMET and institutional investor(s) on share placement opportunities. The proceeds from this share placement, together with the Cash Advance, will be used to complete the purchase of the Mt Carbine Quarry and Mining Leases, ML 4867 and ML 4919, under the terms and conditions disclosed below.
(d) Offtake: CRONIMET will secure the right to all offtake from the Mt Carbine Tungsten Project, including that from the Open Pit, on commercial terms yet to be agreed.
(e) Conditions Precedent: The cash advance is conditional upon the successful completion of test work on the tailings material and stockpiled crushed rock which has already been initiated and is expected to be completed within January 2019, further due diligence works by CRONIMET and shareholder approvals from either Party, if any should become necessary.
(f) Expected Completion Date: Subject to a favourable outcome as per (e), the Parties will use reasonable endeavours to enter into appropriate agreements within February 2019.

- Sale & Purchase Agreement Mt Carbine Quarries Pty Ltd

Letter of Intent – Cronimet Holding GmbH

(a) Counterparty: Cronimet Holding GmbH (“CRONIMET”) is the counterparty to the letter of intent and forms part of the Cronimet Group (“Group”) which was founded in 1982 as a raw materials service provider and trader in Karlsruhe, Germany. The Group has grown organically since then to become a diversified commodity group with over 5,200 employees and activities in over 50 countries. CRONIMET operates a global supply chain for stainless steel, specialty steel raw materials and other strategic minerals, while it has significant expertise in the recovery of high-quality raw materials through latest technology and production methods.
(a) Agreement Counterparty: Mt Carbine Quarries Pty Ltd (MCQ) is the Sale and Purchase Agreement counterparty. MCQ is a major supplier and trading partner of the Company and has been since 2008. In September 2008, the Company signed a Sub-lease Agreement with MCQ whereby the Company obtained the right to mine and produce tungsten (and any other metals) from the lease deposit with the intention that the Company and MCQ work together to optimise extraction of metal and production of construction and road aggregate. The initial 2008 agreement covered two granted Mining Leases, ML 4867 and 4919, totalling approximately 366.39 ha.

REVIEW OF OPERATIONS

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(b) Asset Purchase Description: The conditional Sale and Purchase Agreement is for the purchase and 100% ownership of the Mt Carbine Quarry, as a going-concern including all plant and equipment, along with Mining Leases ML 4867 and ML 4919. The business of Mt Carbine Quarry is to crush rock from the mine waste stockpile and make different grades of road metal and construction material. The quarry will provide the Company with an invaluable source of cash flow from the existing quarry business and the associated quarry infrastructure will also be of significant benefit in the development of the Company’s future mining operations. Ownership of the Mining Leases is also integral to the successful development of the Company’s Mt Carbine Tungsten Project.
(c) Conditions Precedent: Completion of the Sale and Purchase Agreement is conditional on the Company obtaining finance to complete the transaction. If finance is not obtained the Company and MCQ will be released from their respective obligations under the Sale and Purchase Agreement. The Company has undertaken to use its best endeavours to ensure that the condition precedent is satisfied and using debt as the principle source of funding, to minimise the transaction’s dilutionary impact upon existing shareholders.
(d) Purchase Consideration: Total consideration for the acquisition is AUD$8,000,000. A deposit of AUD$130,000 has been paid.

As announced on 28 February 2019 CRONIMET’s due diligence on the Mt Carbine Tungsten Project (“Project”) is nearing completion with the contractual arrangements associated with their participation in the staged development of this Project in the process of being finalised. Speciality Metals also received confirmation from CRONIMET that the crushing, tabling and assay results for the test work carried out on the tailings material and stockpiled crushed rock have been finalised and the results are in the process of being interpreted by their technical team. Some additional ultra-fine recovery test work is planned for the coming two weeks which will complete this segment of CRONIMET’s due diligence.

In anticipation of the completion of the financing arrangements detailed in the ASX announcement dated 24 December 2018, Speciality Metals has now commenced work on the refurbishment of the Mt Carbine Retreatment Plant and has engaged an electrician as well as the services of one of the Company’s former Plant Manager’s to assist CRONIMET’s Process Engineer and Metallurgist with their on-site assessment. The on-site assessment is being completed to support a later redesign of the Retreatment Plant, in order to accommodate the latest reclaim technology.

COMPETENTPERSONS’STATEMENT

The information in this Report that relates to Exploration Results and Mineral Resources and Ore Reserves is based on information compiled by Dr Andrew White, who is a Fellow of the Australian Institute of Geoscientists and a consultant to Carbine. Dr White has sufficient experience relevant to the style of mineralisation, mining and processing the type of deposit under consideration 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”. Dr White consents to the inclusion of the matters based on his information in the form and context in which it appears.

GOLD

CROW MOUNTAIN (NSW EL 6648)

The Crow Mountain tenement covers part of the Great Serpentine Belt in the western New England province of north eastern NSW. Shallow marine sediments of late Devonian age on the western side of the tenement are separated from much older deep marine sediments and intrusive rocks on the eastern side of the tenement by a major north-south trending structure, the Peel Fault. The Fault is well known for the belt of serpentinite, formed by alteration of pre-existing ultra-mafic intrusives exposed for several hundred kilometres along the Fault.

In the Crow Mountain tenement there is a large number of historical shallow gold workings dating from the 1860’s. Records indicate that most of the historical workings were dug to extract gold from small, discontinuous quartz veins. Recent mapping by Speciality Metals’ precursor companies showed that the serpentinite along the Peel Fault bifurcates in the Crow Mountain tenement and the majority of workings are between the two belts of serpentinite.

Several models of potential foci for gold mineralisation have been proposed for the Crow Mountain occurrences, but until now no satisfactory explanation or prediction of where economic gold might occur has been achieved.

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Magnesite Hill Gold Prospect Icon 2010 Drill Hole locations

As announced in the September 2018 Quarterly Activities Report the Company has been reviewing all data and collecting some new data in order to derive a cogent model for the gold mineralisation in the tenement.

The Company’s predecessor Icon Resources Ltd carried out geophysical and geochemical surveys concentrating mostly in the area of historical workings. In addition to the geochemical and geophysical data, surface mapping had shown that extensive hydrothermal alteration of the serpentinite to form a distinctive rock called listwanite had taken place along the Fault. The close resemblance of the features defining the geophysics, geochemistry and alteration in the Crow Mountain tenement to those of the Californian Motherlode, where gold is closely associated with listwanite alteration, led Icon Resources to drill three diamond core holes in mid-2010 at Magnesite Hill.

REVIEW OF OPERATIONS

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The holes were sited to test for gold mineralisation associated with a large IP chargeability anomaly coincident with surface geochemically anomalous gold, arsenic and antimony found in soil sampling, and a belt of listwanite.

The holes were collared in serpentinite on the eastern side of the Peel Fault and drilled through the fault into Devonian sediments on the western side of the fault. Each hole passed through zones of intense listwanite alteration, but also intersected intensely altered quartz monzodiorite dykes, mostly intruded into the Peel Fault zone itself. The Peel Fault was shown to be a zone up to 20m true width of intensely sheared, carbonaceous fault gouge, containing bleached fragments of the rocks adjacent to the fault.

Highly anomalous gold was intersected in each hole, with the best gold grades being found in metasediments in ICK002 (14m at 1.00g/t from 137m, including 2m at 3.69g/t from 139m), and in the altered dykes in ICK001(8m at 1.27g/t from 140m including 5m at 1.6g/t from 140m).

DRILL HOLE	From (m)	To (m)	Interval (m)	Au g/t
ICK001	76.3	78.45	2.15	1.85
	117.4	172	54.6	0.45
Including:	140	148	8	1.27

ICK002	113.4	119.4	6	0.67
	137	151	14	1.00
Including	139	141	2	3.69

ICK003	113.6	117	3.4	1.23

Magnesite Hill anomalous gold intercepts (extracted from Icon Resources June 2010 Quarterly Report)

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Magnesite Hill Gold Prospect – Drilling targeting gold soil geochemical anomalies

Speciality Metals’ has recently undertaken a comprehensive review of the Magnesite Hill geological, geochemical and geophysical data and completed preliminary re-sampling of selected drill core from the 2010 Icon program to better define the lithologies hosting the gold mineralisation and the suite of associated pathfinder elements to further develop the exploration model.

The re-sampling indicates that the highest gold grades are associated with intensely sheared carbonaceous fault gouge intruded by strongly altered quartz monzodiorite dykes. This zone separates the variably altered ultramafic rocks from the sedimentary sequence to the west and represents the local expression of the crustal-scale Peel Fault structure. Gold is spatially associated with the dykes which intrude both the graphitic (fault) material and listwanite altered ultramafics but it is unclear if all mineralisation / alteration is genetically related to the intrusive event. The preliminary multi-element sampling confirms an elevated arsenic-antimony signature with some anomalous W + Mo associated with gold within the fault zone.

The fact that the gold mineralisation is strongest in carbonaceous fault gouge adjacent to altered late intrusive dykes has now focused future exploration on sampling this zone with the aim of determining potential resources.

Away from the Fault, in the zone between the two belts of serpentinite where most historical workings occur, and where most previous exploration was focused, there is a significant body of geochemical data from extensive surface sampling of rock chips, soils and waste dumps.

Analysis of this data indicates that in this zone, there appears to be no statistically significant relationship between gold values and the pathfinder elements and that gold is the only reliable geochemical indicator of mineralisation.

The Company plans to complete extensions and infilling of the existing soil geochemical coverage to delineate targets both within the major fault zone and related splay structures for follow-up drilling.

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Interval assaying 8m at 1.27g/t Au from 140m in hole ICK001, showing carbonaceous gouge (dark grey) intruded by altered quartz monzodiorite dykes (light grey). It is now thought that most of the gold in this interval is in the carbonaceous gouge and this will be confirmed by further sampling.

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Interval assaying 3.69g/t Au from 138.5m to 140.65m in the dark grey/black carbonaceous fault gouge adjacent to altered monzodiorite in Icon drill hole ICK 002.

REVIEW OF OPERATIONS

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The above image shows IP chargeability at 100m below surface in part of Crow Mountain EL6648. The yellow (low) to dark red (high) represents chargeability implied to be due to the presence of conducting minerals in the subsurface. Sulphide mineral grains disseminated in listwanite may be causing the chargeability response.

PANAMA HAT (NSW EL 8024)

The Company holds 100% of EL8024, Panama Hat, 20km south east of Broken Hill in NSW. This licence covers 80% of the historical gold workings in the Broken Hill district, mainly small-scale workings dating from the Depression years of 1930-32. The workings are distributed along an arcuate north to north east trending linear zone (Figure 1 above). Considerable previous exploration has been carried out by various companies in the licence area since 1980, but sampling and mapping by Speciality Metals indicates that the geological setting of the gold was not understood, nor were the prospects in the licence adequately tested.

The Company’s mapping indicates that the gold is hosted in pyrite (iron sulphide) bearing, subvertical quartz veins that strike right angles to the arcuate trend of old workings. This structural interpretation was found to be confirmed by NSW Geological Survey mapping but was not tested by previous explorers. As previously announced, sampling by Speciality Metals has determined that the near surface is likely to be intensely leached of gold, however sampling of waste dumps associated with deeper historical workings has identified gold values locally of bonanza grade (up to83g/t Au).

Speciality Metals plans to drill a number of shallow RC holes to test the potential for oxide gold at open pit depths and has permitted 20 holes to enable this testing to commence.

DEVELOPMENT & EXPLORATION ACTIVITIES

CHILE

The Board have been working closely with the Company’s Chilean consultants during the last half of 2019 to develop an exploration program for its exploration concessions which the Company anticipates should be finalised during the first quarter of 2019.

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Summary map of Northern Chile, showing location of Salars de Miraje, Bellavista & Pintados

CORPORATE

CHANGE OF COMPANY SECRETARY

The Board announced on 31 January 2019 the appointment of Mr Adrien Wing as Company Secretary for the Company, effective from 1 February 2019.

Mr Wing is a certified practicing accountant. He previously practiced in the audit and corporate advisory divisions of a chartered accounting firm before working with a number of public companies listed on the ASX as a corporate and accounting consultant and Company Secretary.

The Board also advised that Mr David Clark would cease in his role as Company Secretary effective from 31 January 2019. The Board thanked Mr Clark for his dedication and service since his appointment to the role of Company Secretary in July 2014 and wished him every success in his future endeavours.

AUDITOR’S INDEPENDENCE DECLARATION

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Half-year ended 31 December 2018

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31 Dec 2017
$ 13,935
(132,527)
(243,120)
(487)
(104,676)
(79,563)
(176,802)
(68,174)
(14,197)
(9,526)|
|---|---|---|
|Note
REVENUE
2
Administration expenses
Consultant expenses
Depreciation expense
Development and testwork costs
Employee benefits expense
Exploration expenditure
Loss on revaluation of financial assets
Occupancy costs
Other expenses
LOSS BEFORE INCOME TAX EXPENSE
Income tax expense
NET LOSS FOR THE HALF YEAR ATTRIBUTABLE TO
MEMBERS OF THE PARENT ENTITY
Other comprehensive income
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE
HALF YEAR ATTRIBUTABLE TO MEMBERS OF THE
PARENT ENTITY
Basic loss per share (cents)
Diluted loss per share (cents)|31 Dec 2018
$
15,522
(131,974)
(160,700)
(871)
(51,604)
(187,824)
(172,111)
(4,382)
(17,422)
(37,973)
(749,339)
-
(749,339)
-
(749,339)
(0.14)
(0.14)||
|||(815,137)
-|
|||(815,137)|
|||-|
|||(815,137)|
|||(0.17)
(0.17)|

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2018

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Note CURRENT ASSETS Cash and cash equivalents Trade and other receivables 3 Financial assets 4 Prepayments TOTAL CURRENT ASSETS NON-CURRENT ASSETS Receivables Plant and equipment Deferred exploration and evaluation expenditure 5 Financial assets 4 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Payables Employee benefits 6 TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Employee benefits 6 TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 7 Share-based payments reserve Accumulated losses TOTAL EQUITY	31 Dec 2018 $ 454,138 19,420 130,000 137,159 740,717 772,021 5,625 596,066 1,933 1,375,645 2,116,362 81,167 22,551	30 Jun 2018 $ 602,675 23,989 800,000 64,865
		1,491,529
		771,521 3,861 596,066 6,317
		1,377,765
		2,869,294
		164,582 26,129
	103,718	190,711
	6,643 6,643 110,361 2,006,001 3,553,567 86,675 (1,634,241) 2,006,001	6,147
		6,147
		196,858
		2,672,436
		3,553,567 437,615 (1,318,746)
		2,672,436

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

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CONSOLIDATED STATEMENT OF CASH FLOWS

Half-year ended 31 December 2018

CASH FLOWS FROM OPERATING ACTIVITIES Payment to suppliers and employees Interest received NET CASH FLOWS (USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Payments for the purchase of plant and equipment Payments for Tenement Security Deposits Payment for Non Refundable Security Deposit Release of Refundable Security Deposit NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH HELD Add opening cash brought forward CLOSING CASH CARRIED FORWARD	31 Dec 2018 $ (829,345) 13,943 (815,402) (2,635) (500) - 670,000 666,865 - - (148,537) 602,675	31 Dec 2017 $ (619,773) 16,056
		(603,717)
		- - (30,000) -
		(30,000) 47,746
		47,746
		(585,971) 1,048,000
	454,138	462,029

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

Half-year ended 31 December 2018

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED AT 1 JULY 2017 Loss for the period Other comprehensive income Total comprehensive loss Transactions with owners in their capacity as owners: Shares issued during the half year Options lapsed unexercised Total transactions with owners in their capacity as owners AT 31 DECEMBER 2017 AT 1 JULY 2018 Loss for the period Other comprehensive income Total comprehensive loss Transactions with owners in their capacity as owners: Reduction of Reserve following prior period lapse of Options Performance rights expense Total transactions with owners in their capacity as owners AT 31 DECEMBER 2018	Attributable to shareholders of Speciality Metals International Ltd	Attributable to shareholders of Speciality Metals International Ltd
	Issued Capital $ Accumulated Losses $ Reserves $ 1,797,341 - 574,160 - (815,137) - - - -	Total Equity $ 2,371,501 (815,137) -
	- (815,137) -	(815,137)
	73,734 - - - 140,316 (140,316)	73,734 -
	73,734 140,316 (140,316)	73,734
	1,871,075 (674,821) 433,844	1,630,098
	3,553,567 (1,318,746) 437,615 - (749,339) - - - -	2,672,436 (749,339) -
	- (749,339) -	(749,339)
	- 433,844 (433,844) - - 82,904	- 82,904
	- - -	-
	3,553,567 (1,634,241) 86,675	2,006,001

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

NOTES TO THE HALF YEAR FINANCIAL STATEMENTS

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1. BASIS OF PREPARATION OF THE HALFYEAR FINANCIAL REPORT

The Half Year Financial Report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Company as the full financial report.

The Half Year Financial Report should be read in conjunction with the Annual Financial Report of Speciality Metals International Limited as at 30 June 2018.

It is also recommended that the Half Year Financial Report be considered together with any public announcements made by Speciality Metals International Limited during the half year ended 31 December 2018 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

(a) Going Concern Basis for Preparation of Financial Statements

These financial statements have been prepared on the going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business.

As disclosed in the financial statements, the Consolidated Entity incurred a net loss of $749,339 and net operating cash outflows of $148,537 for the period ended 31 December 2018. As at 31 December 2018 the Consolidated Entity had cash reserves of $454,138.

The ability of the Consolidated Entity to continue as a going concern is principally dependent upon one or more of the following:

the ability of the Company to raise additional capital in the future; and
the successful exploration and subsequent exploitation of the Consolidated Entity’s tenements.

These conditions give rise to material uncertainty which may cast significant doubt over the Consolidated Entity’s ability to continue as a going concern.

The Directors believe that the going concern basis of preparation is appropriate due to the following reasons:

To date the Consolidated Entity has funded its activities through the issuance of equity securities, and it is expected that the Consolidated Entity will be able to fund its future activities through further issuances of equity securities; and
The Directors believe there is sufficient cash available for the Consolidated Entity to continue operating.

Should the Consolidated Entity be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements.

(b) Statement of Compliance

These interim financial statements for the half year reporting period ended 31 December 2018 have been prepared in accordance with Australian Accounting Standard 134 Interim Financial Reporting and the Corporations Act 2001.

The Half Year Financial Report has been prepared on a historical cost basis and held for trading financial assets have been measured at fair value through profit or loss.

For the purpose of preparing the Half Year Financial Report, the half year has been treated as a discrete reporting period.

(c) Significant Accounting Policies

The half year financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2018

NOTES TO THE HALF YEAR FINANCIAL STATEMENTS

NOTES TO THEHALFYEARFINANCIALS	TATEMENTS
		**P A G E

2. REVENUE
Interest received Diesel fuel rebates (Loss) Profit on Disposal of Non Current Asset	31 December 2018 $ 13,404 2,119 - 15,522
3. TRADE AND OTHER RECEIVABLES
Interest receivable GST receivable	31 December 2018	30 June 2018
	$ 2,539 16,881 19,420	$ 3,078 20,911 23,989


4. FINANCIAL ASSETS
Current Non refundable deposit for purchase of Mt Carbine Quarries1 Refundable deposit for purchase of Mt Carbine Quarries1 Total current Non current Other: - Shares in listed companies: Force Commodities Ltd (4CE) Total non current	31 December 2018	30 June 2018
	$ 130,000 - 130,000 1,933 1,933	$ 130,000 670,000
		800,000 6,317
		6,317

1 On 18 April 2018, the Company executed a Sale and Purchase Agreement (SPA) with Mt Carbine Quarries Pty Ltd (MCQ) for the acquisition of the Mt Carbine Quarry, as a going-concern including all plant and equipment, along with Mining Leases ML 4867 and ML 4919. $670,000 of the total deposit paid was subsequently released to Speciality Metals International Limited during the second half of 2018.

NOTES TO THE HALF YEAR FINANCIAL STATEMENTS

P A G E | 14

5. DEFERRED EXPLORATION AND EVALUATION EXPENDITURE 31 December 2018 30 June 2018 $ $ Costs brought forward 596,066 596,066 Costs incurred during the period - - Exploration and evaluation expenditure written down - - Costs carried forward 596,066 596,066 Exploration expenditure costs carried forward are made up of: Expenditure on joint venture areas - - Expenditure on non-joint venture areas 596,066 596,066 Costs carried forward 596,066 596,066 Recoverability of the carrying amount of deferred exploration and evaluation expenditure is dependent on the successful development and commercial exploitation or sale of the areas of interest. Management reassess the carrying value of the Group’s tenements at each half year, or at a period other than that, should there be an indication of impairment. 6. EMPLOYEE BENEFITS 31 December 2018 30 June 2018 $ $ Current Annual and long service leave provision 22,551 26,129 22,551 26,129 Non-Current Annual and long service leave provision 6,643 6,147 6,643 6,147 7. ISSUED CAPITAL 31 December 2018 30 June 2018 Share capital $ $ 554,876,418 (30 June 2018: 554,876,418) ordinary shares 3,553,567 3,553,567 3,553,567 3,553,567 (a) Movements in ordinary share capital Number of shares $ 1 July 2018 brought forward 554,876,418 3,553,567 Balance as at 31 December 2018 554,876,418 3,553,567	30 June 2018 $ 596,066 - -	30 June 2018 $ 596,066 - -
	596,066
	- 596,066
	596,066

31 December 2018 $ 22,551 22,551 6,643 6,643
	26,129
	6,147
	6,147
	30 June 2018 $ 3,553,567 3,553,567 $ 3,553,567 3,553,567

31 December 2018 $ 3,553,567 3,553,567 Number of shares 554,876,418 554,876,418
		3,553,567
		$ 3,553,567 3,553,567

NOTES TO THE HALF YEAR FINANCIAL STATEMENTS

P A G E | 15

	Number of
(b) Unlisted Options and Performance	Performance Vesting
Rights	Issue Date Rights conditions Maturity
Performance Rights
1 July 2018 brought forward	22-06-18 25,000,000 ** 22-06-20
Balance as at 31 December 2018	25,000,000
** Performance Rights were granted to	Directors as remuneration approved by shareholders at the 2018
General Meeting held on 22 June 2018.	The key terms of the performance rights, in accordance with the
terms approved by shareholders, are as follows:
Type of Performance Right:	Each Right entitles the Holder to 1 fully paid ordinary share in
	Speciality Metals International Limited (SEI) upon exercise.
Expiry Date:	22 June 2020 (2 years after the issue date)
Vesting:	The Rights vest upon satisfaction of the following conditions:
	(a) the Company completes the acquisition of the Mt Carbine
	Quarry and associated mining leases; or
	(b) the Company share price on ASX trades on at least 3
	consecutive business days above $0.05.

** Performance Rights were granted to Directors as remuneration approved by shareholders at the 2018 General Meeting held on 22 June 2018. The key terms of the performance rights, in accordance with the terms approved by shareholders, are as follows:

No options or performance rights were granted to Directors or key employees during the half year ended 31 December 2018. No options or performance rights lapsed during the reporting period without exercise.

8. CONTINGENT ASSETS AND LIABILITIES

The Group has provided guarantees totaling $771,921 in respect of mining tenements and environmental bonds. These guarantees in respect of mining tenements are secured against deposits with the relative State Department of Mines. The Company does not expect to incur any material liability in respect of the guarantees.

On 18 April 2018, the Company executed a Sale and Purchase Agreement (SPA) with Mt Carbine Quarries Pty Ltd (MCQ) for the acquisition of the Mt Carbine Quarry, as a going-concern including all plant and equipment, along with Mining Leases ML 4867 and ML 4919. The purchase is subject to due diligence, financing and Board approval. As at the date of these financial statements, the purchase had not yet been finalised, pending the outcome of the aforementioned conditions. Should all conditions be met, the Company will be required to pay the purchase price and purchase the Quarry and Mining Leases. In addition, should all conditions be met, and the purchase be made, the Company will likely be required to pay additional guarantees in respect of mining tenements and environmental bonds. At the date of these financial statements the amounts in respect of the additional guarantees were not known.

9. SEGMENT INFORMATION

During the half-year the Company operated principally in one business segment being mineral exploration, mining evaluation and development and in two (2) geographical segments being Australia and Chile. For the half-year to 31 December 2018, there is no revenue from either segment and no assets are recorded for the Chilean segment.

NOTES TO THE HALF YEAR FINANCIAL STATEMENTS

P A G E | 16

10. SUBSEQUENT EVENTS

No event has occurred subsequent to 31 December 2018 requiring disclosure in or amendment to, these financial statements, apart from:

The appointment of Adrien Wing as Company Secretary on 1 February 2019 following David Clark ceasing that role on 31 January 2019; and
The Company announcing on 28 February 2019 that Cronimet Holding GmbH’s due diligence on the Mt Carbine Tungsten Project (“Project”) is nearing completion and that the contractual arrangements associated with their participation in the staged development of this Project is in the process of being finalised.

DIRECTORS’ DECLARATION

P A G E | 17

In accordance with a resolution of the Directors of Speciality Metals International Limited, I state that:

In the opinion of the Directors:

a) the financial statements and notes of the Company:
i) give a true and fair view of the Company’s financial position as at 31 December 2018 and the performance for the half-year ended on that date; and
ii) comply with Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations Regulations 2001; and
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

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R H KRAUSE Executive Chairman

Melbourne, 13 March 2019

INDEPENDENT AUDITOR’S REVIEW REPORT

P A G E | 18

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INDEPENDENT AUDITOR’S REVIEW REPORT

P A G E | 19

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SPECIALITY METALS INTERNATIONAL LIMITED

ACN 115 009 106

ASX CODE: SEI

REGISTERED OFFICE

Level 17, 500 Collins Street, Melbourne VIC 3000

Tel +61 3 9614 0600

PRINCIPAL PLACE OF BUSINESS

6888 Mulligan Highway, Mt Carbine QLD 4872; Tel: +61 7 4094 3072 Fax: +61 7 4094 3036

Email: [email protected] Website: www.specialitymetalsintl.com.au

AI assistant

EQ RESOURCES LIMITED — Interim / Quarterly Report 2019

64867_rns_2019-03-12_f892e3cc-01e1-45f0-9a6f-934a0dc45c35.pdf

Half Year Financial Report

CORPORATE DIRECTORY

DIRECTORS

COMPANY SECRETARY

Registered Office

SHARE REGISTRY

AUDITORS

BANKERS

STOCK EXCHANGE LISTING

DIRECTORS

REVIEW & RESULTS OF OPERATIONS

REVIEW OF OPERATIONS

FINANCIAL

SUBSEQUENT EVENTS

NDENCE DECLARATION

DEVELOPMENT & EXPLORATION ACTIVITIES

MT CARBINE QUARRY & MINING LEASES

FINANCING ARRANGEMENTS

- Sale & Purchase Agreement Mt Carbine Quarries Pty Ltd

Letter of Intent – Cronimet Holding GmbH

COMPETENTPERSONS’STATEMENT

GOLD

CROW MOUNTAIN (NSW EL 6648)

PANAMA HAT (NSW EL 8024)

DEVELOPMENT & EXPLORATION ACTIVITIES

CHILE

CORPORATE

CHANGE OF COMPANY SECRETARY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

1. BASIS OF PREPARATION OF THE HALFYEAR FINANCIAL REPORT

(a) Going Concern Basis for Preparation of Financial Statements

(b) Statement of Compliance

(c) Significant Accounting Policies

8. CONTINGENT ASSETS AND LIABILITIES

9. SEGMENT INFORMATION

10. SUBSEQUENT EVENTS

SPECIALITY METALS INTERNATIONAL LIMITED

ASX CODE: SEI

REGISTERED OFFICE

PRINCIPAL PLACE OF BUSINESS

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EQ RESOURCES LIMITED Interim / Quarterly Report 2019