RAREX LIMITED — Interim / Quarterly Report 2016

Mar 14, 2016

CLANCY EXPLORATION LIMITED

ABN: 65 105 578 756 AND CONTROLLED ENTITY

HALF YEAR ENDED 31 DECEMBER 2015

CLANCY EXPLORATION LIMITED

CORPORATE DIRECTORY

DIRECTORS

LAWYERS

Mr Gordon Barnes Managing Director

Mr Nathan Featherby Non-Executive Director

Mr Evan Cranston Non-Executive Director

COMPANY SECRETARY

Mr Rowan Caren

CHIEF FINANCIAL OFFICER

Ms Kellie Pickering

PRINCIPAL PLACE OF BUSINESS

3 Corporation Place Orange New South Wales 2800

Holborn Lenhoff Massey 3rd Floor, Irwin Chambers 16 Irwin Street Perth 6000 Western Australia

AUDITOR

Ernst & Young Ernst & Young Centre 680 George Street Sydney New South Wales 2000

SHARE REGISTRY

Security Transfer Registrar 770 Canning Highway Applecross WA 6153 Australia

Telephone: +61 8 9315 2333 Facsimile: +61 8 9315 2233

Telephone: (02) 6361 1285 Facsimile: (02) 6361 1202 Website: www.clancyexploration.com

REGISTERED OFFICE

3 Corporation Place Orange New South Wales 2800

ASX CODE : CLY

CLANCY EXPLORATION LIMITED

TABLE OF CONTENTS

DIRECTORS’ REPORT ................................................................................................................................................. 1 AUDITORS’ INDEPENDENCE DECLARATION ........................................................................................................ 2 STATEMENT OF COMPREHENSIVE INCOME ......................................................................................................... 3 STATEMENT OF FINANCIAL POSITION ................................................................................................................... 4 STATEMENT OF CHANGES IN EQUITY .................................................................................................................... 5 STATEMENT OF CASH FLOWS ................................................................................................................................. 6 NOTES TO THE FINANCIAL STATEMENTS ............................................................................................................. 7 DIRECTORS’ DECLARATION ................................................................................................................................... 13 AUDITORS’ REPORT ................................................................................................................................................ 14

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

DIRECTORS’ REPORT

FOR THE HALF YEAR ENDED 31 DECEMBER 2015

The Board of Directors has pleasure in presenting its report on the consolidated entity for the half-year ended 31 December 2015.

1. DIRECTORS

The names of the Company’s directors in office during the half-year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated.

Mr Gordon Barnes Mr Nathan Featherby Mr Evan Cranston Dr Michael Etheridge (resigned 26 November 2015)

2. REVIEW OF OPERATIONS

During the half year, the Company continued to explore its portfolio of exploration projects in New South Wales, directly and through joint venture partners. In order to reduce corporate costs a number of employees of the Company had their employment contracts terminated in December 2015. The majority of future employee costs will be incurred on a contract basis, to ensure the costs incurred match the activity in the business.

3. FINANCIAL RESULTS

The loss of the Company for the period ending 31 December 2015 was $937,107 (Six months to 31 December 2014: loss of $580,348). During the half year, total expenses amounted to $954,244 (Six months to 31 December 2014: $750,693).

Unrestricted cash and cash equivalents amounted to $736,557 as at 31 December 2015 (at 30 June 2015: $1,231,434).

4. AUDITORS’ INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

The auditors’ independence declaration is set out on page 2 and forms part of the Directors’ Report for the half year ended 31 December 2015.

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

On behalf of the directors.

==> picture [69 x 74] intentionally omitted <==

G BARNES Managing Director

Signed in Orange this 15[th] day of March 2016.

1

Ernst & Young Tel: +61 2 9248 5555 680 George Street Fax: +61 2 9248 5959 Sydney NSW 2000 Australia ey.com/au GPO Box 2646 Sydney NSW 2001

==> picture [61 x 47] intentionally omitted <==

Auditor’s Independence Declaration to the Directors of Clancy Exploration Limited

As lead auditor for the review of Clancy Exploration Limited for the half-year ended 31 December 2015, I declare to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 relation to the review ; and

• b) no contraventions of any applicable code of professional conduct in relation to the review.

==> picture [120 x 55] intentionally omitted <==

Ernst & Young

==> picture [92 x 46] intentionally omitted <==

Ryan Fisk Partner 15 March 2016

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2015

Income Notes Other Income 3 Total Income Expenses Employee benefits expense Consulting and outsourced services expense Self-funded exploration expenditure Net recovery / (expenditure funded by) joint venture partners Computer related costs Travel expense Occupancy costs Insurance expense Depreciation, amortisation and impairment expense 4 Impairment of exploration asset 6 Other expenses Total expenses Loss from continuing operations before income tax expense Income tax expense Loss from continuing operations after income tax expense Other comprehensive income Total comprehensive loss attributable to owners of the parent Loss per share - basic and diluted	Consolidated 6 months to 31 December 2015 6 months to 31 December 2014 $ $ 17,137 170,345
	17,137 170,345 (388,738) (452,497) (110,869) (102,637) (71,750) (112,924) (343,124) 224,182 (680) (436) (5,765) (17,757) (4,272) (4,359) (13,083) (12,232) (5,235) (5,273) - (250,000) (10,728) (16,760)
	(954,244) (750,693)
	(937,107) (580,348) - -
	(937,107) (580,348) - -
	(937,107) (580,348)
	(0.4) cents (0.3) cents

The above Statement of Comprehensive Income is to be read in conjunction with the accompanying notes, on pages 7-12.

3

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF FINANCIAL POSITION

FOR THE HALF YEAR ENDED 31 DECEMBER 2015

Notes ASSETS Current Assets Cash and cash equivalents 5 Restricted cash asset 5 Trade and other receivables Prepaid exploration expenditure Total Current Assets Non-current Assets Plant and equipment Intangible assets Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 8 Provisions 9 Unearned revenue Exploration expenditure reimbursed in advance Total Current Liabilities Non-current Liabilities Provisions Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 10 Reserves Accumulated losses TOTAL EQUITY	Consolidated 31 December 2015 30 June 2015 $ $ 736,557 1,231,434 210,000 210,000 93,305 101,206 18,211 19,821
	1,058,073 1,562,461
	29,881 34,758 262 995
	30,143 35,753
	1,088,216 1,598,214
	479,824 114,778 94,331 59,121 455 3,171 222,564 174,645
	797,174 351,715
	- 18,350
	- 18,350
	797,174 370,065
	291,042 1,228,149
	15,207,200 15,207,200 1,665,605 1,665,605 (16,581,763) (15,644,656)
	291,042 1,228,149

The above Statement of Financial Position is to be read in conjunction with the accompanying notes on pages 7 – 12.

4

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2015

CONSOLIDATED Notes	Ordinary Shares $ Options Reserve $ (Accumulated Losses) $ Total Equity $
At 1 July 2015 Total comprehensive income for the period, net of tax At 31 December 2015	15,207,200 1,665,605 (15,644,656) 1,228,149 - - (937,107) (937,107)
	15,207,200 1,665,605 (16,581,763) 291,042
At 1 July 2014 Total comprehensive income for the period, net of tax Issue of share capital At 30 June 2015	14,457,200 1,665,605 (14,689,210) 1,433,595 - - (955,446) (955,446) 750,000 750,000
	15,207,200 1,665,605 (15,644,656) 1,228,149

The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes on pages 7-12.

5

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 31 DECEMBER 2015

Notes CASH FLOWS USED IN OPERATING ACTIVITIES Management Fee Received Reimbursement of Exploration Expenses Payments to suppliers and employees Interest received NET CASH FLOWS USED IN OPERATING ACTIVITIES CASH FLOWS USED IN INVESTING ACTIVITIES Purchase of plant and equipment Prepayment on acquisition of tenements Refund of prepayment on acquisition of tenements 6 Proceeds from sale of fixed assets NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issue Costs of share issue NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD 5	Consolidated 6 months ended 31 December 2015 6 months ended 31 December 2014 $ $ 6,165 83,455 336,107 1,056,834 (845,566) (1,925,326) 8,417 17,962
	(494,877) (767,075)
	- - - - - 150,000 - 60,455
	- 210,455
	- - - -
	- -
	(494,877) (556,620) 1,231,434 1,295,092
	736,557 738,472

The above Statement of Cash Flows is to be read in conjunction with the accompanying notes on pages 7 to 12.

6

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

1. CORPORATE INFORMATION

The consolidated financial report of Clancy Exploration Limited (“the Company”) for the half-year ended 31 December 2015 was authorised for issue in accordance with a resolution of the directors on 15 March 2015.

Clancy Exploration is a company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. The principal activities during the year of the entities within the consolidated entity were mineral exploration and development.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The half-year financial report does not include all the 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 consolidated entity as the full financial report, and should be read in conjunction with the annual Financial Report of Clancy Exploration Limited for the year ended 30 June 2015.

It is also recommended that the half-year financial report be considered together with any public announcements made by Clancy Exploration Limited and its controlled entities (‘the Group’) during the half-year ended 30 June 2015 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 .

(a) Basis of Preparation

The half-year consolidated financial report has been prepared in accordance with AASB 134 “Interim Financial Reporting”. The half-year financial report has been prepared on a historical cost basis, except for the revaluation of financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars.

For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.

This report presents financials for the six month period to 31 December 2015, with comparatives for the six month period to 31 December 2014.

Going Concern

For the six months ended 31 December 2015, the consolidated entity has incurred a net loss after income tax of $937,107 (six months ended 31 December 2014: $580,348), and experienced net cash outflows from operations of $494,877 (six months ended 31 December 2014: $767,075), and net cash inflows from investing activities of $nil (six months ended 31 December 2014: inflow of $210,455). As at 31 December 2015, the consolidated entity had cash and cash equivalents of $736,557 (at 30 June 2015: $1,231,434).

The ability of the Company and the consolidated entity to continue as a going concern is principally dependent upon:

• Raising additional capital to fund exploration and provide additional working capital.

• Joint venture partners continuing to expend funds and pay management fees on the Company’s projects; and/or

• Reduction of planned expenditures

These conditions indicate a material uncertainty that may cast significant doubt about the Company and the consolidated entity’s ability to continue as a going concern.

The directors have prepared a cash flow forecast for the period ending 31 March 2016 which indicates that the current cash resources may not meet expected cash outgoings without additional capital. The directors anticipate that these requirements will be met through a combination of some or all of the following:

• Further capital raisings.

• Joint venture partners continuing to expend funds and pay management fees on the Company’s projects;

• Reduction of planned expenditures; and/or

7

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

· Releasing restricted cash as tenements are farmed out or relinquished Additionally, whilst not desirable, certain planned capital expenditures can be deferred to the extent necessary to match the availability of the funding or the Directors may seek to farm-out additional tenements.

The directors are satisfied that they will achieve the matters set out above and therefore the going concern basis of preparation is appropriate. The financial report has therefore been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

Should the Company and the consolidated entity be unable to achieve the initiatives referred to above, there is a material uncertainty whether the Company and the consolidated entity will be able to continue as a going concern and, therefore, whether they will realise their assets and discharge their liabilities in the normal course of business and at the amounts stated in the financial report.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts, nor to the amounts and classification of liabilities that might be necessary should the Company and the consolidated entity not continue as a going concern.

(b) Changes in accounting policies

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 30 June 2015.

The Group has adopted all mandatory new and amended standards and interpretations applicable for the current period. The adoption of these standards and interpretations had no material impact on these financial statements or on the financial position or performance of the Group.

The Group has not elected to early adopt any other new standards or amendments that are issued but not yet effective. Certain amounts in the comparative financial statements have been reclassified to conform to the current period presentation.

(c) Basis of consolidation

The half-year consolidated financial statements comprise the financial statements of Clancy Exploration Limited and its controlled subsidiary.

(d) Segment Reporting

A geographical segment is a distinguishable component of the entity that is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments. The Company operates in a single business segment, in one geographical location. The operations of the consolidated entity consist of gold and copper exploration and development, within Australia. Accordingly, no segment information is presented in this half-year financial report.

(e) New Standards and Interpretations

In the half year ended 31 December 2015, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group’s operations and effective for annual reporting periods commencing on or after 1 July 2015. It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to accounting policies.

8

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

Consolidated 6 months ended 31 December 2015 6 months ended 31 December 2014 Notes $ $ 3. OTHER INCOME Management fees 8,720 117,270 Interest received 8,417 18,460 Profit on sale of motor vehicles - 34,615 17,137 170,345 Two vehicles owned by the Company were sold during the six months ending 31 December 2014. Details of the sale are provided below: $ Original cost of motor vehicles 117,280 Accumulated depreciation at date of disposal (91,440) Written down value 25,840 Proceeds on sale 60,455 Profit on sale of motor vehicles 34,615 Consolidated 6 months ended 31 December 2015 6 months ended 31 December 2014 $ $ 4. EXPENSES Depreciation, amortisation and impairment included in Statement of Consolidated Income Depreciation of plant & equipment 4,502 4,538 Amortisation of software/leasehold improvements 733 735 5,235 5,273	Consolidated 6 months ended 31 December 2015 6 months ended 31 December 2014 Notes $ $ 3. OTHER INCOME Management fees 8,720 117,270 Interest received 8,417 18,460 Profit on sale of motor vehicles - 34,615 17,137 170,345 Two vehicles owned by the Company were sold during the six months ending 31 December 2014. Details of the sale are provided below: $ Original cost of motor vehicles 117,280 Accumulated depreciation at date of disposal (91,440) Written down value 25,840 Proceeds on sale 60,455 Profit on sale of motor vehicles 34,615 Consolidated 6 months ended 31 December 2015 6 months ended 31 December 2014 $ $ 4. EXPENSES Depreciation, amortisation and impairment included in Statement of Consolidated Income Depreciation of plant & equipment 4,502 4,538 Amortisation of software/leasehold improvements 733 735 5,235 5,273	Consolidated 6 months ended 31 December 2015 6 months ended 31 December 2014 $ $ 8,720 117,270 8,417 18,460 - 34,615
		17,137 170,345
		5,235 5,273

9

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

Consolidated

5. CASH AND CASH EQUIVALENTS Cash at bank Short term bank deposits	31 December 2015 30 June 2015 $ $ 736,557 1,231,434 - -
	736,557 1,231,434

In addition, as at 31 December 2015 the Company has $210,000 in restricted cash (30 June 2015: $210,000) which is included as a current asset in the Statement of Financial Position, held at Westpac Banking Corporation. This has been established as security in respect of a $160,000 bank guarantee facility provided in turn for exploration licence security purposes, and a $50,000 corporate credit card facility.

6. EXPLORATION ASSET

Exploration asset at 1 July 2014 Impairment due to transaction not proceeding Prepaid deposit refunded Exploration asset at 31 December 2014	$ 400,000 (250,000) (150,000)
	-

The exploration asset related to 2 deposits paid on the Arunta Base Metals transaction in Northern Territory that was abandoned during the previous financial year. The deposit of $150,000 was refundable but as the transaction did not proceed, the $250,000 portion was not refundable and has been impaired through the profit and loss account in the six months to 31 December 2014.

7. FINANCIAL ASSETS

For all financial instruments held as at 31 December 2015, the carrying value approximates fair value.

8. TRADE AND OTHER PAYABLES

		Consolidated
	31	December 2015	30 June 2015
		$	$
Trade and other payables		479,824	114,778

The majority of the trade payables balance relates to approximately $386,000 payable to High Power Exploration Inc. (‘HPX’) in respect of drilling carried out at the Trundle copper-gold project in NSW.

10

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

9. PROVISIONS

Consolidated

Provision for annual leave Provision for long service leave	31 December 2015 30 June 2015 $ $ 33,238 28,910 61,093 30,211
	94,331 59,121

A number of employees of the Company had their employment contracts terminated in December 2015 in an effort to reduce corporate costs. As a result, all provisions were moved to current and were recalculated to reflect the required settlement obligations.

Consolidated

					31 December 2015	30 June 2015
				Notes	$	$
10.	CONTRIBUTED EQUITY
	Ordinary shares				15,207,200	15,207,200
	Fully paid ordinary shares	carry one vote	per	share and carry	the right to dividends.
		6	months ended			6 months ended 30
		31	December 2015			June 2015
	Movement in ordinary shares on issue	Number of shares		$	Number of shares	$
	As at beginning of period:	256,254,392		15,207,200	206,254,392	14,457,200
	Shares issued		-	-	50,000,000	750,000
	As at end of the period:	256,254,392		15,207,200	256,254,392	15,207,200

11

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

11. COMMITMENTS AND CONTINGENCIES

The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below:

) Exploration Expenditure Commitments: Under 11 (30 June 2015: 12) New South Wales (“NSW”) Government and 2 (30 June 2015: 3) Tasmanian Government exploration licences Payable - not later than one year - later than one year and not later than five years	Consolidated 31 December 2015 30 June 2015 $ $ 374,195 281,107 158,956 237,603
	533,151 518,710

(a) Exploration Expenditure Commitments:

(b) Operating Lease Commitments

The Company has operating lease commitments in respect of its office and core shed together with a photocopier, as follows:

Payable - not later than one year - later than one year and not later than five years	63,666 84,072 5,916 27,750
	69,582 111,822

12. EVENTS AFTER THE BALANCE SHEET DATE

On 19 February 2016, the company announced that it had received notice from High Powered Exploration (‘HPX’ via its nominee Macquarie Holdings No.2 Pty Limited) advising of its withdrawal from the Trundle Farm-In arrangement.

HPX were to fund $1,000,000 on exploration over 12 months to earn in an initial 51% of the Trundle project with a minimum spend of $750,000 for Phase 1. HPX have met the minimum spending requirement but have not yet earned an interest in the project. As a result, ownership of the Trundle project will revert 100% to Clancy.

During the quarter ended 31 March 2016, the company entered into a farm-in agreement with Alkane Resources Limited (‘Alkane’; ASK: ALK) over the Orange East project whereby Alkane can earn a 60% interest by spending $500,000 on exploration over three years. Alkane can earn a further 20% interest (80% total) by spending an additional $500,000 on exploration over the subsequent two years. Alkane will manage the exploration program.

12

CLANCY EXPLORATION LIMITED AND CONTROLLED ENTITY

DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Clancy Exploration Limited, I state that:

In the opinion of the Directors:

• (a) the financial statement and notes set out on pages 3 to 12 are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

• (ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 including compliance with Accounting Standards; 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,

==> picture [68 x 74] intentionally omitted <==

G Barnes Managing Director

Signed in Orange this 15[th] day of March 2016

13

680 George Street Tel: +61 2 9248 5555 Sydney NSW 2000 Australia Fax: +61 2 9248 5959 GPO Box 2646 Sydney NSW 2001 ey.com/au

==> picture [71 x 81] intentionally omitted <==

To the members of Clancy Exploration Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Clancy Exploration Limited, which comprises the statement of financial position as at 31 December 2015, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors’ Responsibility for the Half- Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and its performance for the halfyear ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Clancy Exploration Limited and the entities it controlled during the 31 December 2015, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report.

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

Page 2

==> picture [71 x 81] intentionally omitted <==

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Clancy Exploration Limited is not in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

• b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2 in the financial report which describes the principal conditions relating to the possibility of additional funding being required by the consolidated entity. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business.

==> picture [132 x 59] intentionally omitted <==

Ernst & Young

==> picture [127 x 55] intentionally omitted <==

Ryan Fisk Partner Sydney 15 March 2016

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation