FOCUS MINERALS LTD — Interim / Quarterly Report 2018

Sep 11, 2018

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Focus Minerals Limited

ABN 56 005 470 799

Interim Financial Report for the half year ended 30 June 2018

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Table of Contents

Corporate Information ...................................................................................................................................................... 3 Directors’ Report ............................................................................................................................................................... 4 Auditor’s Independence Declaration ............................................................................................................................... 6 Interim Financial Report ................................................................................................................................................... 7 Notes to the Consolidated Interim Financial Report .................................................................................................... 11 Directors’ Declaration ..................................................................................................................................................... 17 Independent Auditor’s Review Report .......................................................................................................................... 18

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Corporate Information

ABN 56 005 470 799

Directors

Dianfei Pei Zhaoya Wang Gerry Fahey Zaiqian Zhang

Chairman - Non-Executive, Non-Independent Director – Executive Director - Independent Director - Executive

Company Secretary

Zaiqian Zhang

Registered and Head Office Level 2 159 Adelaide Terrace East Perth WA 6004

PO Box 3233 East Perth WA 6892

Tel: +61 (0) 8 9215 7888 Fax: +61 (0) 8 9215 7889

Share Registry

Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace Perth WA 6000

Auditor

PricewaterhouseCoopers 125 St Georges Terrace Perth WA 6000

Banks

National Australia Bank 100 St Georges Terrace Perth WA 6000

Stock Exchange Listing

Australian Securities Exchange (ASX) ASX Symbol: FML

Bank of China Perth Branch Ground Floor, 179 St Georges Terrace Perth WA 6000

Industrial and Commercial Bank of China Level 20, St Martins Tower 44 St Georges Terrace Perth WA 6000

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Directors’ Report

The Directors of Focus Minerals Limited (“Focus”) are pleased to present the Interim Financial Report for the half year ended 30 June 2018.

Directors

Dianfei Pei Chairman - Non-Executive, Non-Independent Zhaoya Wang Director – Non-Executive, Non-Independent[1] Gerry Fahey Director - Independent Peter Hepburn-Brown Director - Independent[2] Zaiqian Zhang Director - Executive

Directors were in office for the whole of the half year and up to the dates of this report, unless otherwise indicated.

Review of Operations

Highlights

During the six month period ended June 30 2018, Focus Minerals Ltd (“Focus”, “FML” or the “Company”) completed:

• Maiden Mineral Resource for the Karridale Deposit – announced to the ASX on 23 February 2018

• Extensional Drilling at Bonnie Vale Deposit – announced to the ASX 27 April 2018

• Mineral Resource Update for the Bonnie Vale Deposit - announced to the ASX on 30 May 2018

• $6m exploration budget approved for the Laverton Project to EOY 2018 – announced to the ASX 30 May 2018

• Start of RC Exploration Drilling in Laverton on 28 June 2018

Coolgardie Gold Project

A four hole diamond drilling program at Bonnie Vale was concluded on 21 April 2018. Three holes were completed through to the target Quarry Lode Structure and a 4[th] hole was abandoned due to deviation. The Three holes testing the quarry lode reported the following intersections using a 0.5 g/t Au lower cut off:

• BONCD080 1.78m @ 7.03 g/t Au from 519.92m

• BONCD081 1.00m @ 1.07 g/t Au from 506.83m

• BONCD082 1.10m @ 1.68 g/t Au from 509.75m

The three new holes and five other previously completed holes were used to update and expand the Bonnie Vale Mineral Resource as reported above 2 g.t cut off on 30 May 2018:

• Indicated Resource: 519Kt @ 9.1 g/t Au for 152,000 contained ounces

• • Inferred Resource 420Kt @ 3.9 g/t Au for 52,500 contained ounces

• Total Resource 939Kt @ 6.8 g/t Au for 205,000 contained ounces

Laverton Gold Project

On 23 February, Focus announced to the ASX the Maiden Mineral Resource for the Karridale Project located 30km SE of Laverton Town. The Maiden Mineral Resource reported above 0.6 g/t Au comprises:

• Indicated Resource: 2.7Mt @ 1.5 g/t Au for 135,000 contained ounces

• Inferred Resource: 10.0Mt @ 1.3 g/t Au for 403,000 contained ounces

• • Total Resource: 12.7Mt @ 1.3 g/t Au for 538,000 contained ounces

On 30 May, the company announced the budget for Laverton exploration programmes for the remainder of 2018. The company is committed to spend about $6m for the 6 months ending 31 December 2018. The primary targets comprise of Karridale-Burtville, Sickle-Ida H, Wedge and Beasley Creek. In addition, the company will conduct geophysics activities at Lake Carey in the lead up to exploration drilling.

1 Zhaoya Wang received his work visa on 19 July 2018 and became CEO and Executive Director of the Company.

2 Peter Hepburn-Brown passed away on 03 September 2018.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Personnel and drilling contractors mobilised to Laverton on 27 June 2018 and RC drilling began at Karridale on the 28 June 2018 . One RC hole to 139m was completed and another started in the remainder of June 2018.

Geophysical gravity and passive seismic surveying commenced at Lake Carey on 19 June 2018 and was partially completed on 22 June 2018. The program is ongoing pending further dry out of the lake survey area.

Corporate

For the six-month period ended 30 June 2018, Focus incurred a loss of $2.276 million (6 months ended 30 June 2017: $2.429 million).

As at 30 June 2018, the Company has net assets of $93.551 million (31 December 2017: $95.826 million) and a cash balance of $50.852 million (31 December 2017: $52.475 million).[3]

Auditor’s Independence Declaration

The declaration required under Section 307C of the Corporations Act 2001 is set out on Page 6.

Rounding of Amounts

The Company is of a kind referred to in ASIC Legislative Instrument 2016/191 , issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

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

Dianfei Pei Chairman of the Board 11 September 2018 Jinan, Shandong, China

3 Including cash and cash equivalents, short-term deposit and restricted cash.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Auditor’s Independence Declaration

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 30 JUNE 2018

FOR THE HALF YEAR ENDED 30 JUNE 2018
	Consolidated
	6 months to	6 months to
	30 June	30 June
Notes	2018	2017
	$’000	$’000
Revenue from continuing operations 3(a)	627	857
Other Income 3(b)	1	65
Employee expenses	(514)	(673)
Depreciation and Amortisation Expenses	(337)	(394)
Finance Costs	(410)	(467)
Loss on disposal of tenements and plant and equipment	-	(379)
Care and Maintenance Costs	(862)	(860)
Corporate and Other Expenses	(781)	(578)
Loss Before Income Tax	(2,276)	(2,429)
Income Tax Expense	-	-
Loss After Income Tax for the Period	(2,276)	(2,429)
Other Comprehensive Income for the Period, Net of Tax	-	-
Total Comprehensive Loss for the Period	(2,276)	(2,429)
Total Comprehensive Loss Attributable to:
Owners of the Parent	(2,276)	(2,429)
Total Comprehensive Loss for the Period	(2,276)	(2,429)
Earnings per Share
Basic Loss per Share (Cents Per Share) 4	(1.25)	(1.33)
Diluted Loss per Share (Cents Per Share) 4	(1.25)	(1.33)

The accompanying notes form part of these financial statements.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018

AS AT 30 JUNE 2018
	Consolidated
	30 June 31 December
Notes	2018 2017
	$’000 $’000
Assets
Current Assets
Cash and Cash Equivalents 5	8,128 2,870
Short-term deposit 5	26,621 33,511
Trade and Other Receivables	266 1,308
Total Current Assets	35,015 37,689
Non-Current Assets
Restricted Cash 5	16,103 16,094
Inventories	1,293 1,293
Plant and Equipment	1,416 1,712
Exploration and Evaluation Assets 6	68,342 66,830
Total Non-Current Assets	87,154 85,929
Total Assets	122,169 123,618
Liabilities
Current Liabilities
Trade and Other Payables	713 172
Prepaid Income	1,533 1,500
Provisions	90 150
Total Current Liabilities	2,336 1,822
Non-Current Liabilities
Provisions	26,282 25,970
Total Non-Current Liabilities	26,282 25,970
Total Liabilities	28,618 27,792
Net Assets	93,551 95,826
Equity
Issued Capital 7(a)	427,167 427,167
Reserves	(7,178) (7,178)
Accumulated Losses	(326,438) (324,163)
Total Equity	93,551 95,826

The accompanying notes form part of these financial statements

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 30 JUNE 2018

	FOR THE HALF YEAR ENDED 30 JUNE 2018
		Issued Capital Accumulated Losses Reserves Total
		$’000 $’000 $’000 $’000
	Balance as at 31 December 2017	427,167 (324,163) (7,178) 95,826
	Total Comprehensive Loss for the period	- (2,338) - (2,338)
	Balance as at 30 June 2018	427,167 (326,501) (7,178) 93,488
	Balance as at 31 December 2016	427,167 (319,356) (7,178) 100,633
	Total Comprehensive Loss for the period	- (2,429) - (2,429)
	Balance as at 30 June 2017	427,167 (321,785) (7,178) 98,204

The accompanying notes form part of these financial statements.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 30 JUNE 2018

			Consolidated
			6 months to 6 months to
			30 June 30 June
			2018 2017
			’$000 ’$000
Cash Flows from Operating Activities
Payments to Suppliers and Employees (Including GST)			(1,686) (1,447)
Royalties Paid			(5) -
Other Income			1 68
Interest Received			1,474 1,192
Bank charges			(67) (67)
Net Cash Outflow from Operating Activities			(283) (254)
Cash Flows from Investing Activities
Acquisition of Plant and Equipment			(41) -
Sale of financial assets			- 52
Decrease in short-term deposits			6,924 4,500
Exploration Expenditure			(1,342) (5,710)
Net Cash (Outflow)/Inflow from Investing Activities			5,541 (1,158)
Cash flows from Financing Activities
Net payback from Performance Bonds			- 10
Net Cash Inflow from Financing Activities			- 10
Net Increase in Cash and Cash Equivalents			5,258 (1,402)
Cash and Cash Equivalents at the Beginning of the Period			2,870 3,332
Cash and Cash Equivalents at the Ending of the Period	5		8,128 1,930

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The accompanying notes form part of these financial statements.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Notes to the Consolidated Interim Financial Report for the Half Year Ended 30 June 2018

Note 1: Basis of preparation of half-year report

The interim financial report of Focus Minerals Limited (“the Company”), together with its consolidated controlled entities (“the Group”) for the half-year reporting period ended 30 June 2018 has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

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 31 December 2017 and any public announcements made by Focus Minerals 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 previous financial year and corresponding interim reporting period, unless otherwise noted below.

• (a) New and amended standards adopted by the Group

A number of new or amended standards became applicable for the current reporting period, however, the Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.

(b) Impacts of standards issued but not yet applied by the Group

Certain new accounting standards and interpretations have been published that are not mandatory for the current reporting period and have not been early adopted by the group. The company's assessment of the impact of these new standards and interpretations is set out below.

• (i) AASB 16 Leases (1 January 2019)

• AASB 16 provides a new lessee accounting model which requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. AASB 16 contains disclosure requirements for lessees. The company assessed the impact is not likely to be material to future reporting periods.

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Note 2: Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Interim Chief Executive Officer.

All of Focus Minerals Limited’s subsidiaries are wholly owned. The Group has three reportable segments, as described below, which are the Group’s strategic business units. The business units are managed separately as they require differing processes and skills. The Chief Executive Officer reviews internal management reports on a monthly basis.

Segment Financial Information for the six months ended 30 June 2018 is presented below:

Revenue from continuing operations Other Income Employee expenses Depreciation and Amortisation Expenses Finance Costs Care and Maintenance Costs Corporate and Other Expenses SEGMENT LOSS BEFORE TAX Income tax SEGMENT LOSS Current Assets Non-Current Assets - Restricted Cash - Plant and Equipment - Inventory - Exploration and Evaluation Assets TOTAL ASSETS Current Liabilities Non-Current Liabilities TOTAL LIABILITIES NET ASSETS Capital Expenditures	6 months to 30 June 6 months to 30 June 6 months to 30 June 6 months to 30 June 2018 2018 2018 2018 Coolgardie Laverton Corporate Consolidated $’000 $’000 $’000 $’000
	- - 627 627 - - 1 1 (52) - (462) (514) (335) - (2) (337) (138) (204) (68) (410) (373) (489) - (862) - - (781) (781)
	(898) (693) (685) (2,276) - - - -
	(898) (693) (685) (2,276)
	102 74 34,839 35,015 84 24 15,995 16,103 1,394 5 17 1,416 1,293 - - 1,293 43,685 24,657 - 68,342
	46,558 24,760 50,851 122,169 (1,704) (457) (175) (2,336) (10,579) (15,629) (74) (26,282)
	(12,283) (16,086) (249) (28,618)
	34,275 8,674 51,100 93,551
	746 767 - 1,512

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Segment Financial Information for the six months ended 30 June 2017 is presented below:

Revenue from continuing operations Other Income Employee expenses Depreciation and Amortisation Expenses Finance Costs Loss on disposal of tenements and plant and equipment Care and Maintenance Costs Corporate and Other Expenses SEGMENT LOSS BEFORE TAX Income tax SEGMENT LOSS Current Assets Non-Current Assets - Restricted Cash - Plant and Equipment - Inventory - Exploration and Evaluation Assets TOTAL ASSETS Current Liabilities Non-Current Liabilities TOTAL LIABILITIES NET ASSETS Capital Expenditures	6 months to 30 June 6 months to 30 June 6 months to 30 June 6 months to 30 June 2017 2017 2017 2017 Coolgardie Laverton Corporate Consolidated $’000 $’000 $’000 $’000
	1 - 856 857 51 - 14 65 (45) - (628) (673) (390) - (4) (394) (180) (220) (67) (467) - (379) - (379) (335) (525) - (860) - - (578) (578)
	(898) (1,124) (407) (2,429) - - - -
	(898) (1,124) (407) (2,429)
	382 887 42,464 43,733 84 15 15,995 16,094 2,028 - 9 2,037 1,293 - - 1,293 41,860 23,822 - 65,682
	45,647 24,724 58,468 128,839 (2,125) (1,438) (410) (3,973) (10,996) (15,503) (163) (26,662)
	(13,121) (16,941) (573) (30,635)
	32,526 7,783 57,895 98,204
	3,673 2,540 - 6,213

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Note 3: Revenue and Other Income

(a) Revenue from continuing operations Interest income Total revenue from continuing operations (b) Other income Sundry income Total Other income		Consolidated 6 months to 30 June 6 months to 30 June 2018 $’000 2017 $’000
		627 857
		627 857
		1 65
		1 65
Note 4: Earnings per Share
Basic earnings per share: Total Basic EPS Diluted earnings per share Total Diluted EPS Basic Earnings per share The earnings used in the calculation of basic earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Diluted Earnings per share The earnings used in the calculation of diluted earnings per share Weighted average number of ordinary shares for the purposes of diluted earnings per share	Consolidated 6 months to 30 June 6 months to 30 June 2018 Centsper Share 2017 Centsper Share
	(1.25) (1.33) (1.25) (1.33)
	‘$000 ‘$000 (2,276) (2,429) 182,748,565 182,748,565
	‘$000 ‘$000 (2,276) (2,429)
	182,748,565 182,748,565

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Note 5: Cash and Cash Equivalents, Short Term Deposits and Restricted Cash

Cash and cash equivalents Short term deposits Non- current – restricted cash	Consolidated As at 30 June As at 31 December 2018 $’000 2017 $’000
	8,128 2,870 26,621 33,511
	34,749 36,381
	16,103 16,094

Cash at bank earns interest at floating rates based on daily deposit rates.

Cash deposits are made for varying periods up to three months, depending on the immediate cash requirements of the Group, and earn interest at the respective commercial short-term deposit rates which is recognised as cash and cash equivalents

Short-term deposits are made longer than three months but shorter than one year.

Performance bonds have been issued by a bank on behalf of the Group in respect of Western Australian mining tenements. The Group has indemnified the bank against any loss arising from the performance bonds and the indemnity is secured against cash deposits. Those are recognised as restricted cash.

Note 6: Exploration and Evaluation Assets

Exploration and Evaluation Expenditure: At Cost Less: Accumulated Impairment Net Book Value Movement Summary: Carrying amount at beginning of the period plus – exploration expenditure less – write off of tenements allowed to lapse or dropped Carrying amount at end of period	Consolidated 6 months to 30 June As at 31 December 2018 $’000 2017 $’000
	177,182 175,670 (108,840) (108,840)
	68,342 66,830
	66,830 1,512 - 68,342

The value of the Group’s interest in exploration expenditure is dependent upon:

• the continuance of the Group’s rights to tenure of the areas of interest;

• the results of future exploration;

• the recoupment of costs through successful development and exploitation of the areas of interest, or alternatively, by their sale; and

• no significant changes in laws and regulations that greatly impact the Group’s ability to maintain tenure.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Note 7: Issued Capital and Reserves

Authorised Capital

The Company does not have an Authorised Capital and there is no par value for ordinary shares.

(a) Ordinary shares

a) Ordinary shares
		As at		As at
		30 June 2018	31 December 2017
	No. of shares	$’000	No. of shares	$’000
Issued capital	182,748,565	427,167	182,748,565	427,167

Share Issue Details

There were no shares issued during the half year period (6 months ended 30 June 2017: Nil).

Voting Entitlements

At each shareholder’s meeting each ordinary share is entitled to one vote on the calling of a poll, otherwise each shareholder is entitled to one vote on a show of hands.

(b) Dividends

No dividends have been paid or provided for during the 6 months ended 30 June 2018 (6 months ending 30 June 2017: Nil).

Note 8: Contingent Liability

There are no contingent liabilities as at 30 June 2018 (2017: Nil).

Note 9: Significant Events After Balance Date

On 19 July 2018, Mr Zhaoya Wang assumed his duty as the Chief Executive Officer of the Company, following the grant of his work visa. Mr Wang is also an Executive Director of the Company.

On 03 September 2018, Mr Peter Hepburn-Brown, Independent Director of the Company, passed away.

Other than the aforementioned, there are no events that have arisen after balance date that have 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 the future financial periods.

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Directors’ Declaration

The directors of the Company declare that:

1. The financial statements and notes, as set out on pages 7 to 16 are in accordance with the Corporations Act 2001 , including:

2. a. Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

3. b. Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the half year ended on that date.

4. 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.

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

Dianfei Pei Chairman of the Board 11 September 2018 Jinan, Shandong, China

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

Independent Auditor’s Review Report

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Focus Minerals Ltd – Financial Report for the half year ended 30 June 2018

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