TALGA GROUP LTD — Interim / Quarterly Report 2018

Mar 15, 2018

==> picture [58 x 9] intentionally omitted <==

==> picture [139 x 61] intentionally omitted <==

TALGA RESOURCES LTD AND CONTROLLED ENTITIES ABN 32 138 405 419

INTERIM REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

TALGA RESOURCES LTD CONTENTS PAGE FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

	Page
Corporate Directory	3
Directors' Report	4
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 Changes in Equity	10
Consolidated Statement of Cash Flows	11
Condensed Notes to the Financial Statements	12
Directors' Declaration	19
Independent Auditor Review Report	20

TALGA RESOURCES LTD CORPORATE DIRECTORY FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

DIRECTORS

Terry Stinson (Chairman) Mark Thompson (Managing Director) Grant Mooney (Non-Executive Director) Stephen Lowe (Non-Executive Director) Ola Morkved Rinnan (Non-Executive Director)

COMPANY SECRETARY

Dean Scarparolo

REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS

Suite 3, First Floor 2 Richardson Street WEST PERTH Western Australia 6005 Phone: +618 9481 6667 Facsimile: +618 9322 1935

SECURITIES EXCHANGE LISTING

The Company is listed on Australian Securities Exchange Limited

Home Exchange: Perth ASX Codes: TLG (Shares) TLGOA (Listed Options)

SHARE REGISTRY

Security Transfer Australia Pty Ltd 770 Canning Highway APPLECROSS WA 6153 Telephone: (08) 9315 2333 Facsimile: (08) 9315 2233

AUDITORS

Stantons International Level 2 1 Walker Avenue WEST PERTH WA 6005

EMAIL & WEBSITE

Email: admin@talgaresources.com Website: www.talgaresources.com

ABN

32 138 405 419

Page 3

TALGA RESOURCES LTD DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 17

The Directors present their report on Talga Resources Ltd for the half-year ended 31 December 2017.

BOARD OF DIRECTORS

The names of the Talga Resources Ltd (“Company”) directors in office during or since the end of the half-year period are as follows. Directors were in office for this entire period unless otherwise noted.

Directors	Position
TerryStinson	Non-Executive Chairman
Mark Thompson	ManagingDirector
Grant Mooney	Non-Executive Director
Stephen Lowe	Non-Executive Director
Ola Morkved Rinnan1	Non-Executive Director

1 Appointed 7 August 2017.

REVIEW OF OPERATIONS

There were further significant commercial, mineral and product research and development advances made during the period, placing the Company in a strong position as we start 2018. Along with its international partners and alliances, Talga is developing a vertically integrated European-based graphite and graphene business encompassing R&D, sales and marketing, application technology and a high volume material supply and processing chain. Highlights include:

Product Development

Continuing with the strategy to create value-added graphene products in addition to raw graphene and graphite materials;

• Successful tests of Talga-developed graphene enhanced epoxy resin for coatings market;

• Tests confirm significant improvements in coating corrosion performance, tensile strength and abrasion resistance;

• Positive results from new Talga-developed Li-ion battery anode using exfoliated micrographite successfully cycled for >1,200 hours at Warwick Manufacturing Group, UK;

• Talga graphic anode material shows 20% improved battery capacity and efficiency over conventional spherical graphite.

Commercial Development

Global industry commercialization, government support and academic achievements;

• New Li-ion battery commercial development partnership was secured with the battery specialist Recruit R&D (part of Japanese conglomerate, Recruit Group);

• Execution of a non- binding memorandum of understanding (“MOU”) with Heidelberg Cement AG – a world leader in concrete products, to jointly explore business opportunities associated with Talga’s graphite and graphene based materials in concrete applications.

• Commenced advanced battery materials joint development projects with key industry partners for European and Asian EV markets;

• UK Government awarded Talga & consortia partners including Jaguar, Land Rover and Johnson Matthey three battery R&D grants totaling A$5.1 million for the group under the Faraday Challenge program; and

• Talga graphene product and production process developments are on track and continue with the scale up of the German test facility.

Mining Project Development & Exploration

While advancement in graphite and graphene materials are the key Talga driver, the Company continued to maintain all its mineral assets and provides value opportunities through ongoing exploration. In particular, the Company’s base metal deposits in Sweden have significant potential as

Page 4

TALGA RESOURCES LTD DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 17

a future supply of cobalt for the fast growing Li-ion battery market. Developments during the period included;

• Positive cobalt, copper and gold recovery metallurgical results from the Company’s 100% owned Kiskama iron oxide copper-gold deposit (“IOCG”);

• Confirmation and extension of high grade cobalt results from Talga’s 100%-owned base metals Ahmavuoma project from re-assaying historic diamond drillcore which extended the known mineralization and increased prospectivity and potential;

• Further strategic and highly prospective copper-gold-silver-molybdenum Aitik East project

• exploration licences were granted;

• Statutory work activities and studies continued as part of the long term feasibility and permitting

• for the Vittangi graphite project;

• Talga has retained approximately 5,000 tons of its previously mined graphite in ore blocks stored

• at strategic locations in Germany and Sweden; and

• Talga extended an option and sale agreement over its remaining Australian gold asset, the Bullfinch gold project. Talga will retain a 1% net smelter royalty on production and the Option is due to be exercised in March 2018. Non-refundable option and extension fees of $105,000 have been received to date.

Corporate

• In line with the Company’s growth and initiatives underway to expand the European management team, the following appointments occurred;

• European based Non-Executive Board member, Mr Ola Rinnan;

• Talga promoted its Project Manager, Mr Martin Phillips to Chief Operating Officer; and

• Shares held in Canadian-listed Novo Resources Corp (TSX-V: NVO) (as a result of the sale of Talga’s Pilbara gold projects in 2016), were sold for around $2M during the period.

POST THE PERIOD

Planned 2018 key activities as follows:

• Accelerated graphene commercialisation process through expansion of European operations and creation of UK based sales and marketing unit;

• Increased focus on battery materials with the support of joint UK funding programs and partnerships;

• Commissioning of the expanded Phase 3 graphene test facility in Germany including graphene production capacity increase and performance optimisation;

• Participation in key battery, composites and construction materials expositions and conferences in Europe, USA and others;

• Continuing mine permitting activities and feasibility studies for the Vittangi graphite project; and

• Further development of the cobalt bearing and copper-gold projects Kiskama, Ahmavuoma, Lautakoski and Aitik East so as to best realise maximum value from these assets.

Key developments thus far in 2018 have included:

• The execution of a non-binding memorandum of understanding (“MOU”) with Robert Bosch GmbH (“Bosch”) – a German based multinational engineering and electronics company, to commence preparatory work regarding a development project in the field of utilising graphene in the synthesis of macroscopic structures;

• Binding commercial and supply agreement signed with UK based Haydale Limited for the production, marketing and sales of graphene transparent conductive ink products for industrial applications in Asia;

• Appointed leading UK-based graphene technology and program manager, Dr Anna Motta to head up the Company's global graphene product research and development; and

• Programs commenced to identify and evaluate development options for Talga’s 100% owned cobalt-rich copper-gold projects including metallurgical testwork, modern evaluation of historic drillholes, resource potential and divestment options..

Page 5

TALGA RESOURCES LTD DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 17

FINANCIAL PERFORMANCE AND FINANCIAL POSITION

The financial results of the Company for the half-year ended 31 December 2017 are:

	31 December 2017	30 June 2017
Cash and cash equivalents ($)	13,992,897	16,340,409
Net assets($)	15,890,911	18,184,197
	31 December 2017	31 December 2016
Income($)	1,914,541	168,174
Loss per share (cents per share)	(1.5)	(2.6)
Dividend($)	-	-

DIVIDENDS

No dividend has been paid during or is recommended for the half-year ended 31 December 2017.

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration for the half-year ended 31 December 2017 has been received and immediately follows the Directors’ Report.

This report has been made in accordance with a resolution of the Board of Directors.

==> picture [114 x 73] intentionally omitted <==

Mark Thompson Managing Director Perth, Western Australia 16 March 2018

Page 6

Stantons International Audit and Consulting Pty Ltd trading as

PO Box 1908 West Perth WA 6872 Australia

Chartered Accountants and Consultants

==> picture [176 x 22] intentionally omitted <==

Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204

ABN: 84 144 581 519 www.stantons.com.au

16 March 2018

Board of Directors Talga Resources Ltd Suite 3, First Floor 2 Richardson Street WEST PERTH WA 6005

Dear Sirs

RE: TALGA RESOURCES LTD

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Talga Resources Ltd.

As Audit Director for the review of the financial statements of Talga Resources Ltd for the period ended 31 December 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

• Yours faithfully

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

==> picture [247 x 60] intentionally omitted <==

Martin Michalik Director

==> picture [199 x 26] intentionally omitted <==

Page 7

Liability limited by a scheme approved under Professional Standards Legislation

TALGA RESOURCES LTD CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2017
Note Revenues from ordinary activities Gain on sale of Investments Sale of Assets Other Income Expenses Exploration and evaluation expenditure Operations - test facility & product development Operations - trial mining Sweden Employee benefits expenses and directors fees Exploitation costs Sweden Administration expenses Depreciation expense Investment revaluations 4 Share based payments 8 FX gain / (loss) realised Other expenses (Loss) before income tax expense Income tax expense Net (loss) attributable to members of the parent entity Other comprehensive income / (loss): Items that will not be reclassified to profit or loss Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations 8 Total period other comprehensive (loss)/income Total comprehensive (loss) for the period Total comprehensive (loss) attributable to members of the parent entity Basic loss per share (cents per share) 3 Diluted loss per share (cents per share) 3	31 December 2017 31 December 2016 $ $
	126,511 108,498 1,507,441 - 105,000 - 175,589 59,676 (731,819) (640,956) (2,111,101) (1,082,359) (30,042) (1,323,704) (871,834) (740,509) (325,806) (116,213) (599,095) (684,061) (127,221) (63,109) 529,192 (121,000) (745,703) (175,432) (1,090) - - (788)
	(3,099,978) (4,779,957) - -
	(3,099,978) (4,779,957)
	- - - - 53,965 (20,053)
	53,965 (20,053)
	(3,046,013) (4,800,010)
	(3,046,013) (4,800,010)
	(1.5) (2.6) (1.5) (2.6)

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

Page 8

TALGA RESOURCES LTD CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

Note Current Assets Cash and cash equivalents Trade and other receivables Other financial assets 4 Total Current Assets Non-Current Assets Other receivables Plant and equipment 6 Exploration and evaluation expenditure Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Provisions TOTAL LIABILITIES NET ASSETS Equity Issued capital 7 Reserves 8 Accumulated losses TOTAL EQUITY	31 December 2017 30 June 2017 $ $
	13,992,897 16,340,409 199,812 155,389 678,492 629,000
	14,871,201 17,124,798
	120,738 130,350 1,468,829 1,245,756 438,422 425,232
	2,027,989 1,801,338
	16,899,190 18,926,136
	705,703 551,508 302,576 190,431
	1,008,279 741,939
	15,890,911 18,184,197
	44,569,236 44,562,212 6,751,135 5,951,467 (35,429,460) (32,329,482)
	15,890,911 18,184,197

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

Page 9

TALGA RESOURCES LTD CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

At 1 July 2016 Comprehensive income: Loss after income tax for the period Other comprehensive loss for the period Total comprehensive (loss) for the period Transactions with owners in their capacity as owners: Issue of listed share options Capital raising costs Share based compensation At 31 December 2016 At 1 July 2017 Comprehensive income: Loss after income tax for the period Other comprehensive income for the period Total comprehensive (loss) for the period Transactions with owners in their capacity as owners: Issue of listed share options Capital raising costs Share based compensation At 31 December 2017	Issued Capital $ Accumulated Losses $ Reserves $ Total $
	32,923,846 (23,770,150) 4,416,402 13,570,098
	- (4,779,957) -(4,779,957) - - (20,053) (20,053)
	- (4,779,957) (20,053) (4,800,010) 898,412 - - 898,412 (37,307) - - (37,307) - - 175,432 175,432
	33,784,951 (28,550,107) 4,571,781 9,806,625
	Issued Capital $ Accumulated Losses $ Reserves $ Total $
	44,562,212 (32,329,482) 5,951,467 18,184,197
	- (3,099,978) - (3,099,978) - - 53,965 53,965
	- (3,099,978) 53,965 (3,046,013) 7,024 - - 7,024 - - - - - - 745,703 745,703
	44,569,236 (35,429,460) 6,751,135 15,890,911

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

Page 10

TALGA RESOURCES LTD CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

Cash Flows from Operating Activities Receipts from customers Payments for exploration evaluation and exploitation Payment for mining Payments to suppliers, contractors and employees German operations & UK operations including R&D Interest received Proceeds from options for sale of tenements Net cash outflows from operating activities Cash Flows from Investing Activities Purchase of plant and equipment Proceeds other - sale of invesments Proceeds other - grants Net cash inflows/(outflows) from investing activities Cash Flows from Financing Activities Proceeds from issue of securities Payment for costs of issue of securities Net cash inflows/(outflows) from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period	31 December 2017 31 December 2016 $ $
	3,649 - (1,006,412) (831,818) (34,686) (1,224,398) (1,523,534) (1,458,773) (1,877,804) (1,069,758) 124,314 108,498 105,000 -
	(4,209,473) (4,476,249)
	(307,793) (326,044) 1,987,141 - 175,589 59,676
	1,854,937 (266,368)
	7,024 898,412 - (99,408)
	7,024 799,004
	(2,347,512) (3,943,613) 16,340,409 11,763,678
	13,992,897 7,820,065

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

Page 11

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

1. CORPORATE INFORMATION

The financial report for the parent Talga Resources Ltd and its Controlled Entities, (The “Group”) for the halfyear ended 31 December 2017 was authorised for issue in accordance with a resolution of the directors on 16 March 2018. Talga Resources Ltd is a limited company incorporated in Australia and its shares are publicly traded on the Australian Securities Exchange.

The nature of the operations and principal activities of the Company are described on page 4 to 6 of the Directors Report.

2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance and basis of accounting

The half-year financial report is a general purpose financial statement, which has been prepared in accordance with the requirements of the Corporations Act 2001, applicable Accounting Standards including AASB 134 “Interim Financial Reporting” and other mandatory professional reporting requirements.

The half-year financial report has been prepared on a historical cost basis, except where applicable for financial assets that have been measured at fair value. For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period. All amounts are presented in Australian dollars.

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 Talga Resources Ltd as at 30 June 2017.

It is also recommended that the half-year financial report be considered together with any public announcements made by Talga Resources Ltd during the half-year ended 31 December 2017 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Company's 2017 annual financial report for the financial year ended 30 June 2017, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

New and Revised Accounting Requirements Applicable to the Current Half-Year Reporting Period

The Company has adopted all of the new and revised Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current reporting period. The application of the new and revised Accounting Standards and Interpretations do not have a material impact on the Group.

3. LOSS PER SHARE

Net loss after income tax attributable to members of the Group Weighted average number of shares on issue during the financial period used in the calculation of basic loss per share	31 December 2017 $ 31 December 2016 $
	(3,099,978) (4,779,957) Number Number 202,416,203 181,855,075

This calculation does not include shares under option that could potentially dilute basic earnings per share in the future as the Group has incurred a loss for the period.

Page 12

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

4. OTHER FINANCIAL ASSETS

	31 December	30 June
	2017	2017
	$	$
Share investments
Balance at the start of the period	629,000	-
Acquisitions *	-	750,000
Sales	(479,700)	-
Revaluations	529,192	(121,000)
	678,492	629,000
* $750,000 represents the carrying amount of acquisition costs relating to Talga’s Australian Pilbara
gold assets subject to the the sale agreement with	Beatons (See Note 5). Beatons	offered Talga
765,115 shares in the TSX Venture listed Canadian Parent, Novo Resources Corp,		in lieu of the
AUD$750,000 cash transaction payable. Talga will also be due a 1.5% net smelter royalty.

5. ASSETS CLASSIFIED AS HELD FOR SALE

ASSETS CLASSIFIED AS HELD FOR SALE
Opening balance Movements for the period	31 December 2017 $ 30 June 2017 $
	- 750,000 - (750,000)
	- -

6. PLANT AND EQUIPMENT

PLANT AND EQUIPMENT
Plant and equipment at cost Less: accumulated depreciation Total plant and equipment Balance at the beginning of the financial year Additions Disposals/write offs Depreciation expense Effect of foreign currency exchange differences Balance at the end of the financial year	31 December 2017 $ 30 June 2017 $
	1,910,720 1,574,501 (441,891) (328,745)
	1,468,829 1,245,756
	1,245,756 776,748 314,003 607,483 - - (127,221) (146,846) 36,291 8,371
	1,468,829 1,245,756

7. ISSUED CAPITAL

(a) Issued and Fully Paid

Fully Paid Ordinary Shares	31 December 2017 Number 31 December 2017 $ 30 June 2017 Number 30 June 2017 $
	202,424,369 44,569,236 202,408,760 44,562,212

Page 13

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

7. ISSUED CAPITAL (Continued)

(b) Movement Reconcilation

) Movement Reconcilation
			Issue
			Price
ORDINARY SHARES	Date	Quantity	$	$
Balance 30 June 2017		202,408,760		44,562,212
Issue of shares on exercise of listed options 21/09/2017		13,859	$0.45	6,236
Issue of shares on exercise of listed options 09/10/2017		500	$0.45	225
Issue of shares on exercise of listed options 13/12/2017		1,250	$0.45	563
Less transaction costs				-
Balance 31 December 2017		202,424,369		44,569,236

8. RESERVES

RESERVES	RESERVES
LISTED OPTION RESERVE Date Quantity Issue Price $ $
Balance 30 June 2017 44,879,397 861,105
Issue of listed options - - Exercise of listed options 21/09/2017 (13,859) Exercise of listed options 09/10/2017 (500) Exercise of listed options 13/12/2017 (1,250)
Less transaction costs -
Balance 31 December 2017 44,863,788 861,105
UNLISTED OPTION RESERVE Balance at the start of the financial year Share based payment options issued during the period Balance at the end of the period	31 December 2017 $ 30 June 2017 $
	5,320,986 4,648,113 745,703 672,873
	6,066,689 5,320,986

The option reserve records funds received for options issued and items recognised as expenses on valuation of share options issued. The option reserve is also used to recognise the fair value of Management Incentive Plan Shares issued with an attaching limited recourse employee loan which for accounting purposes are treated as options.

Page 14

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

The following share based payment options were issued during the half year:

• Series 1 – 1,500,000 options granted 14/8/17 (issued 14/8/17)

• Series 2 – Tranche A 650,000 options granted 14/8/17 (issued 14/8/17)

• Series 2 – Tranche B 650,000 options granted 14/8/17 (issued 14/8/17)

	Series 1	Series 2	Series 2
		A(i)	B(ii)
Grant date share price	$0.71	$0.71	$0.71
Exercise price	$1.02	N/A	N/A
Barrier price	N/A	$0.988	$1.235
Expected share price volatility	70%	15%	15%
Option life	3 years	3 years	3 years
Risk free interest rate	1.94%	1.94%	1.94%
Valuation per option	$0.234	$0.114	$0.019

(i) The Tranche A Options will vest when the Company achieves a $200 million market capitalisation for a period of 60 consecutive days.

(ii) The Tranche A Options will vest when the Company achieves a $250 million market capitalisation for a period of 60 consecutive days.

FOREIGN CURRENCY RESERVE Balance at the beginning of the period Movement during the period Balance at the end of the period Total Reserves	31 December 2017 $ 30 June 2017 $
	(230,624) (231,711) 53,965 1,087
	(176,659) (230,624)
	6,751,135 5,951,467

9. SEGMENT INFORMATION

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The term ‘chief operating decision maker’ identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. The Company’s Board is the chief operating decision maker as it relates to segment reporting.

The Group operates in four operating and geographical segments, being graphite exploration and development in Sweden, gold exploration and evaluation in Australia and graphite/graphene research and development in Germany and the United Kingdom. This is the basis on which internal reports are provided to the Directors for assessing performance and determining the allocation of resources within the Group.

Page 15

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

9 SEGMENT INFORMATION (Continued)

(i) SEGMENT PERFORMANCE

Sweden Germany UK Australia $ $ $ $ Half-year ended 31 December 2017 Revenues from ordinary activities - - - 2,197 Other income 612 120,940 54,862 1,735,930 Total segment revenue 612 120,940 54,862 1,738,127 Segment expense (including write offs) (999,717) (1,560,703) (671,345) (1,782,754) Reconciliation of segment result to net loss before tax Segment Result Unallocated items: Net loss before tax from continuing operations	Sweden Germany UK Australia	Total
	$ $ $ $ - - - 2,197 612 120,940 54,862 1,735,930	$ 2,197 1,912,344
	612 120,940 54,862 1,738,127	1,914,541
	(999,717) (1,560,703) (671,345) (1,782,754)	(5,014,519)
		(3,099,978) - (3,099,978)

Sweden Germany UK Australia $ $ $ $ Half-year ended 31 December 2016 Revenues from ordinary activities - - - 108,498 Other income - 37,676 - 22,000 Total segment revenue - 37,676 - 130,498 Segment expense (including write offs) (2,122,725) (1,137,108) (1,951) (64,637) Reconciliation of segment result to net loss before tax Unallocated items: - Administration expenses - Depreciation expense - Director fees and employee benefits expenses - Loss on trading investments - Foreign exchange gain - Share based payments Net loss before tax from continuing operations	Sweden Germany UK Australia	Total
	$ $ $ $ - - - 108,498 - 37,676 - 22,000	$ 108,498 59,676
	- 37,676 - 130,498	168,174
	(2,122,725) (1,137,108) (1,951) (64,637)	(3,326,421)
		(583,642) (7,960) (740,509) (121,000) 6,833 (175,432)
		(4,779,957)

Page 16

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

9 SEGMENT INFORMATION (Continued)

(ii) SEGMENT ASSETS

(ii) SEGMENT ASSETS
As At 31 Dec 2017 Segment assets as at 1 July 2017 Segment asset period increases/(decreases): - Cash and cash equivalents - Exploration and evaluation expenditure - Plant and equipment - Assets held for sale/investments - Other	Sweden Germany UK Australia Total
	$ $ $ $ $ 551,121 1,513,824 223,572 16,637,619 18,926,136 156,882 (142,624) (142,481) (2,219,289) (2,347,512) 13,190 - - - 13,190 6,620 174,608 46,327 (4,482) 223,073 - - - 49,492 49,492 44,029 22,504 1,552 (33,274) 34,811
	771,842 1,568,312 128,970 14,430,066 16,899,190

Reconciliation of segment assets to total assets

Total assets from 16,899,190 continuing operations

As at 30 June 2017 Segment assets as at 1 July 2016 Segment asset increases/(decreases) for the year: - Cash and cash equivalents - Assets held for sale - Plant and equipment - Exploration and evaluation expenditure - Other	Sweden Germany UK Australia Total
	$ $ $ $ $ 633,410 1,010,475 - 12,504,741 14,148,626 2,545 157,520 182,192 4,234,474 4,576,731 - - - (121,000) (121,000) (793) 456,525 19,111 (5,835) 469,008 (75,422) - - - (75,422) (8,619) (110,696) 22,269 25,239 (71,807) 551,121 1,513,824 223,572 16,637,619 18,926,136

Reconciliation of segment assets to total assets

Total assets from continuing operations

18,926,136

Page 17

TALGA RESOURCES LTD CONDENSED NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

9 SEGMENT INFORMATION (Continued)

(iii) SEGMENT LIABILITIES As At 31 December 2017 Segment liabilities as at 31 December 2017 Reconciliation of segment liabilities to total liabilities Total liabilities from continuing operations As At 30 June 2017 Segment liabilities as at 30 June 2017 Reconciliation of segment liabilities to total liabilities Total liabilities from continuing operations	Sweden Germany UK Australia	Total
	$ $ $ $ 230,780 380,283 92,856 304,360 Sweden Germany UK Australia	$ 1,008,279
		1,008,279
		Total
	$ $ $ $ 130,310 138,663 71,273 401,693	$ 741,939 -
		741,939

10. SUBSEQUENT EVENTS

Other than as disclosed below, there has not been any other matter or circumstance occurring subsequent to the end of the period that has significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods:

• As announced on 17 January 2018, Talga and Haydale Limited (a global technologies and materials group that facilitates the integration of graphene and other nanomaterials into the next generation of commercial technologies and industrial materials) entered into a binding agreement for the supply of Talga graphite and graphene materials for Haydale’s conductive ink products being sold into Asia;

• As announced on 11 February 2018, Talga appointed leading UK-based graphene technology and program manager Dr Anna Motta to head up global graphene product research and development;

• As announced on 5 February 2018 Talga executed a non-binding memorandum of understanding with Robert Bosch GmbH– a German based multinational engineering and electronics company, to commence preparatory work regarding a development project in the field of utilising graphene in the synthesis of macroscopic structures.

11. CONTINGENT ASSETS AND LIABILITIES

There were no contingent assets or contingent liabilities as at 31 December 2017 other than penalties levied by the Sweden tax authority emanating from claims for previous exploration and development expenditure. The Company has received independent taxation advice and believes that it is not liable for these penalties and will continue together with its advisors to resolve the Swedish tax authoritiy’s treatment of such claims and if any resulting penalties are due and payable.

Page 18

TALGA RESOURCES LTD DIRECTORS’ DECLARATION FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

In accordance with a resolution of the directors of Talga Resources Ltd, I state that:

In the opinion of the directors:

• (a) the financial statements and notes of the Company are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the financial position as at 31 December 2017 and of the performance for the half-year ended on that date of the Consolidated entity; and

• (ii) complying with Accounting Standards 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

==> picture [98 x 62] intentionally omitted <==

Mark Thompson Managing Director Perth, Western Australia 16 March 2018

Page 19

Stantons International Audit and Consulting Pty Ltd trading as

PO Box 1908 West Perth WA 6872 Australia

Chartered Accountants and Consultants

==> picture [181 x 24] intentionally omitted <==

Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204

ABN: 84 144 581 519 www.stantons.com.au

INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF TALGA RESOURCES LTD

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Talga Resources Ltd, which comprises the consolidated statement of financial position as at 31 December 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the half-year ended on that date, condensed notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration for Talga Resources Ltd (the consolidated entity). The consolidated entity comprises both Talga Resources Ltd (the Company) and the entities it controlled during the half year.

Directors’ Responsibility for the Half-Year Financial Report

The directors of Talga Resources Ltd are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 and for such internal control as the directors determine is 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 half year 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 2017 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Talga Resources Ltd, 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.

Whilst we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our review was not designed to provide assurance on internal controls.

Our review did not involve an analysis of the prudence of business decisions made by the directors or management.

==> picture [199 x 26] intentionally omitted <==

Liability limited by a scheme approved under Professional Standards Legislation

Page 20

==> picture [114 x 15] intentionally omitted <==

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , has been provided to the directors of Talga Resources Ltd on 16 March 2018.

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 Talga Resources Ltd 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 2017 and of its performance for the half-year ended on that date; and

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

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

==> picture [308 x 78] intentionally omitted <==

Martin Michalik Director

West Perth, Western Australia 16 March 2018

Page 21