TALISMAN MINING LIMITED

==> picture [95 x 91] intentionally omitted <==

ABN 71 079 536 495

Financial report for the half-year ended

31 December 2017

Talisman Mining Limited Half-Year Report 31 December 2017

Corporate Directory

Board of Directors

Mr Jeremy Kirkwood Non-Executive Chairman Mr Daniel Madden Managing Director Mr Alan Senior Non-Executive Director Mr Brian Dawes Non-Executive Director Ms Karen Gadsby Non-Executive Director

Company Secretaries

Mr Shaun Vokes Mr Alexander Neuling

Registered and Principal Office

Ground Floor, 6 Centro Avenue Subiaco, Western Australia 6008 Tel: +61 8 9380 4230 Fax: +61 8 9382 8200 Website: www.talismanmining.com.au

Auditors

HLB Mann Judd Level 4, 130 Stirling Street Perth, Western Australia 6000 Tel: +61 8 9227 7500

Share Registry

Link Market Services Level 4, 152 St George Terrace Perth, WA 6000 Tel: 1300 554 474

Securities Exchange Listing

Australian Securities Exchange Limited Level 40, Central Park 152-158 St Georges Terrace Perth, Western Australia 6000 ASX code: TLM

Talisman Mining Limited Half-Year Report 31 December 2017

Page Review of Operations .................................................................................................................................... 4 Competent Person’s Statement ..................................................................................................................... 9 Directors’ Report .......................................................................................................................................... 10 Auditor’s Independence Declaration............................................................................................................ 11 Condensed Consolidated Statement of Comprehensive Income ............................................................... 12 Condensed Consolidated Statement of Financial Position ......................................................................... 13 Condensed Consolidated Statement of Changes in Equity ........................................................................ 14 Condensed Consolidated Statement of Cash Flows ................................................................................... 15 Notes to the Condensed Consolidated Financial Statements ..................................................................... 16 Directors’ Declaration .................................................................................................................................. 25 Independent Auditor’s Review Report ......................................................................................................... 26

Talisman Mining Limited Half-Year Report 31 December 2017

Review of Operations

Doolgunna Copper-Gold Project (Joint Venture with Sandfire Resources NL)

Joint Venture

The Company and Sandfire formed a 30%:70% Joint Venture (with Sandfire acting as Joint Venture Manager) over the Company’s Doolgunna Projects in December 2015, following Sandfire’s sole funded expenditure of $15 million on the Doolgunna Projects. A Mining Joint Venture Agreement ( MJVA ) and an Exploration Joint Venture Agreement ( EJVA ) have also been executed between Talisman and Sandfire for the Joint Venture (collectively Joint Venture Agreements). The EJVA covers the ongoing exploration activities of the Springfield Joint Venture on the Joint Venture tenements and outlines the rights and obligations of the Joint Venture parties. The MJVA establishes the rights and obligations of the Joint Venture parties related to activities associated with the development, mining and ultimate decommissioning of mineral discoveries. The development and mining of the Monty Copper-Gold Project ( Monty ) will operate under the terms of this MJVA.

Joint Venture expenditure is now funded jointly by the Group and Sandfire on a 30%:70% basis in accordance with the Joint Venture Agreements. Talisman contributed $8.1 million to the Joint Venture during the half year ending December 2017 for its share of both ongoing exploration and Monty development expenditure.

Monty Development

On 4 July 2017, the Western Australian Department of Mines, Industry Regulation and Safety ( DMIRS ) (formerly Department of Mines and Petroleum) advised the Joint Venture that it had approved the Mining Proposal and Mine Closure Plan for Monty facilitating the commencement of on-ground earthworks.

Site works have continued steadily throughout the half year with most of the bulk earthworks and civil works (including the boxcut, haul road, water pipeline and central facilities) completed by the end of the half year (Figure 1). Additionally, underground mine development has progressed well with both the portal (Figure 2) and the ventilation shaft completed, and the decline advancing to 346 metres at 31 December 2017.

==> picture [395 x 275] intentionally omitted <==

Figure 1: Monty Project: surface infrastructure layout and progress, December 2017

Page 4 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

==> picture [421 x 282] intentionally omitted <==

Figure 2: Monty Project: completed mine portal, December 2017

Monty Financing

During the half year Talisman secured a project finance facility ( PFF ) with Taurus Mining Finance Fund for US$20 million to fund 100% of Talisman’s share of Monty pre-production capital.

The first funding notice under the PFF provided for a drawdown of US$8 million to cover Talisman’s share of development expenditure from 1 July 2017 to 31 December 2017. These funds were received by Talisman in November 2017. A second drawdown of US$3.5M for the period 1 January to 31 March 2018 was submitted and received in January 2018.

Exploration Activities

Work at Springfield during the half year ended 31 December 2017 focused on testing newly interpreted target horizons at Monty NE, Monty East, Homer South and geochemical anomalies identified within the Southern Volcanics trend. Drilling however was delayed due to diamond drill rig availability and air-core drill rig scheduling. As a result, the majority of diamond and air-core drilling scheduled to be completed by December 2017 have been carried forward into the first quarter of 2018.

RC drilling activities completed during the half-year comprised six exploration holes (TLRC0069, TLRC0070, TLRC0071, TLRC0072, TLRC0073 and TLRC0074) (Figure 3), and four RC pre-collars (TLDD0116, TLDD0117A, TLDD0118 and TLDD0119) (Figure 4) for the proposed deeper diamond drill holes at Monty NE and along the Monty trend.

Diamond drilling activities completed during the half-year included TLDD0118 at one of the interpreted targets. TLDD0118 was drilled to a depth of 814 metres and intersected sedimentary rock sequences that were interpreted to represent the Monty host sequence, however Talisman was advised by the Joint Venture Manager that no visible mineralisation was logged. Additionally, Talisman was also advised by the Joint Venture Manager that a subsequent DHEM survey of the drill hole did not identify any anomalous responses.

Page 5 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

==> picture [448 x 309] intentionally omitted <==

Figure 3: Springfield exploration RC drill collar location plan for the period ending 30 December 2017.

==> picture [452 x 258] intentionally omitted <==

Figure 4: Springfield – Monty Region RC pre-collar location plan for the period ending 31 December 2017.

Page 6 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Sinclair Nickel Project (TLM 100%)

Talisman continued to advance the Sinclair Nickel Project (“Sinclair”) throughout the half year ended 31 December 2017, through cost effective staged exploration focused on priority target areas. Aircore drilling was completed at the Delphi, Mt Clifford, Schmitz Well South and Sturt Meadows prospects. This work was aimed at providing geological and geochemical information in areas with little to no historic exploration.

A total of 117 holes for 7,071 metres were completed across the four prospect areas. The interpreted ultramafic sequence was intersected in all of the drilling, however no significant assays were returned with the exception of the Schmitz Well South prospect.

At Schmitz Well South, moderate to high magnesian ultramafic rocks were successfully intersected in all six drill traverses completed, confirming the continuity of the fertile Sinclair ultramafic trend.

Oxide material after disseminated and stringer nickel sulphides was logged within the ultramafic rock sequence in two holes to the north along strike from previously intersected cloud sulphides. Anomalous results intersected in hole SNAC0096 included very high copper values and elevated platinum & palladium values (which are indicative of komatiite hosted, magmatic nickel sulphide mineralisation). Assays returned with nickel intercepts included:

SNAC0083[1] : 1m @ 0.68% Ni from 27m.
SNAC0096[1] : 5m @ 0.50% Ni from 50m; and
4m @ 1.30% Ni from 57m.

A short RC drilling campaign of four holes (SNRC027, SNRC028, SNRC029 and SNRC030) for 880 metres, was completed at Schmitz Well South to follow up the successful aircore drilling campaign. Whilst the holes intersected a thick sequence of high-magnesian ultramafic rocks including localised visible disseminated sulphide mineralisation that Talisman interprets to represent a fertile sequence with the potential to host nickel sulphide mineralisation, no significant results were returned.

One RC drill hole (SNRC0031) for 243 metres was completed at the Delphi North prospect to help further understand the interpreted massive and disseminated nickel sulphide mineralisation in the vicinity of high conductance electromagnetic (EM) conductors identified from previous drilling. The hole intersected the lower edge of previously modelled EM conductors and encountered massive and disseminated nickel sulphide mineralisation on the basal contact. Assays returned:

SNRC031[2] : 2m @ 1.95% Ni from 198m down-hole
including: 1m @ 2.97% Ni from 199m down-hole.

Lachlan Copper Gold Project

Talisman continued to evaluate and review potential new project opportunities that are complementary to existing projects and skill sets. As part of these activities, Talisman secured a considerable land package through pegging of new tenements, joint ventures and purchase agreements in the Cobar/ Mineral Hill region of NSW. This region is a richly mineralised district that hosts a number of base and precious metal mines including the CSA mine, Tritton, and Hera/Nymagee. The region contains highly prospective geology that has produced many long-life, high-grade mineral discoveries.

The Lachlan Copper-Gold Project comprises a total of 16 tenements covering an area of 2,808km[2 ] in the Cambelego-Mineral Rift Sequence, which is highly prospective for sulphide-rich deposits associated with major structures (“Cobar-style”); Volcanic Associated Massive Sulphide (“VAMS”) base metal deposits; and high and intermediate sulphidation epithermal gold deposits (Figure 5).

1 Refer to TLM ASX announcement “Sinclair Exploration Update” dated 23 August 2017, for full details including JORC tables.

2 Refer to TLM ASX announcement “Sinclair Exploration Update” dated 16 November 2017, for full details including JORC tables.

Page 7 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

==> picture [348 x 476] intentionally omitted <==

Figure 5: Lachlan Copper-Gold Project tenure and simplified Geology.

Talisman completed a review of the historical exploration undertaken within the tenements and identified a number of areas that show evidence of base and precious metals endowment. These areas have had very little modern exploration completed to date and it is considered that there is significant potential for the discovery of substantial base metals and gold mineralisation.

Future Developments

Doolgunna Projects Joint Venture

Work associated with Monty development will continue throughout 2018 and currently remains on schedule for first ore production in the fourth quarter of the 2018 calendar year.

Further on-ground exploration activities will focus initially on completing the diamond drilling of the Monty NE and Monty East target areas. In addition to this work, aircore drilling is planned for the Homer and Southern Volcanic trends. In keeping with the systematic exploration approach adopted by the Joint

Page 8 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Venture, once this work is complete, all data will be assessed prior to the planning of additional exploration drilling.

Sinclair Nickel Project

Talisman will continue to evaluate the potential of the Delphi North prospect to host economic nickel sulphide mineralisation and to develop exploration programs across the wider Sinclair Nickel Project as part of its staged, cost effective exploration strategy. In addition, the Company continued an ongoing process to review and evaluate options for the commercialisation of the Sinclair Nickel Project.

Lachlan Copper-Gold Project

Talisman will continue with landholder negotiations and securing the required regulatory approvals prior to the commencement of on-ground drilling activities to test a number of compelling drill-ready targets located on its Lachlan Fold Belt tenure.

The Company intends to complete detailed surface geophysical surveys over the structures known to host gold and copper mineralisation in the region, as well as a first-pass systematic shallow auger geochemical sampling program to clarify and better define the anomalies identified in the historical sampling. This work is scheduled for the first quarter of the 2018 calendar year.

Monty Mineral Resource – as at 31 December 2017[3]

*Type*	Mineral Resource Category	Tonnes	Copper (%)	Contained Copper (t)	Gold (g/t)	Contained Gold (oz)
Massive Sulphide	Indicated	754,000	12.0	91,000	2.1	51,000
	Inferred	9,000	20.7	2,000	2.7	1,000
	Total	763,000	12.1	92,000	2.1	52,000
Halo	Indicated	287,000	2.2	6,000	0.3	3,000
	Inferred	-	-	-	-	-
	Total	287,000	2.2	6,000	0.3	3,000
Total	Indicated	1,041,000	9.3	97,000	1.6	54,000
	Inferred	9,000	20.7	2,000	2.7	1,000
	Total	1,050,000	9.4	99,000	1.6	55,000

Note: Mineral Resource is based on a 1.0% Cu cut-off grade

Calculations have been rounded to the nearest 1,000t, 0.1% Cu grade and 1,000t Cu metal, 0.1g/t Au grade and 1,000oz Au metal. Differences may occur due to rounding.

The above table is reported as of 31 March 2016. The Company’s half year end was 31 December 2017. Talisman is not aware of any material changes between those dates likely to affect the above table.

Competent Person’s Statement

Information in this half year financial report that relates to Exploration Results and Exploration Targets is based on information completed by Mr Anthony Greenaway, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Greenaway is a full-time employee of Talisman Mining Ltd and has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activities undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australian Code for Reporting of Mineral Resources and Ore Reserves”. Mr Greenaway consents to the inclusion in this report of the matters based on information in the form and context in which it appears.

No new information that is considered material is included in this report. All information relating to exploration results has been previously released to the market and is appropriately referenced in this report. JORC tables are not considered necessary to accompany this report.

3 Refer to TLM ASX announcement “Maiden JORC Mineral resource for High-Grade Monty Deposit” dated 13 April 2016, for full details including JORC tables

Page 9 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Directors’ Report

The Directors of Talisman Mining Limited (the Company) submit the financial report of the consolidated entity (referred to hereafter as the Group) for the half-year ended 31 December 2017. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

Directors

The names of Directors who held office during or since the end of the half year and until the date of this report are noted below. Directors were in office for this entire period unless otherwise stated.

Mr Jeremy Kirkwood Non-Executive Chairman Mr Daniel Madden Managing Director Mr Alan Senior Non-Executive Director Mr Brian Dawes Non-Executive Director Ms Karen Gadsby Non-Executive Director

Principal Activities

The principal activity of the Company during the course of the financial half-year was exploration for, and development of, base and precious metals, including copper, copper-gold, gold and nickel.

Financial Performance and Financial Position

During the half-year the Group reported a loss after tax of $3.608 million (half-year to 31 December 2016: loss after tax $4.904 million).

As at 31 December 2017 the Group had net assets of $18.291 million (30 June 2017: $21.615 million) including $12.145 million of cash and cash equivalents (30 June 2017: $11.595 million). Cash and cash equivalents held by the Group as at 31 December 2017, included restricted cash of $6.401 million (30 June 2017: $0.587 million) of which $2.401 million is associated with exploration and mining activities on the Doolgunna Copper-Gold Project Joint Venture and $4 million is maintained in an Equity Reserve Account as part of the Monty project finance facility.

Rounding Off of Amounts

The Company has applied the relief available to it in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and accordingly certain amounts included in this half-year report have been rounded off to the nearest $1,000 (where rounding is applicable), The Company is an entity to which the legislative instrument applies.

Auditor’s Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the Company with an Independence Declaration in relation to the review of the interim financial report. This Independence Declaration is set out on the following page and forms part of this Directors’ Report for the half-year ended 31 December 2017.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001.

………………………………………………..

Daniel Madden Managing Director 14 March 2018

Page 10 of 27

==> picture [177 x 74] intentionally omitted <==

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the consolidated financial report of Talisman Mining Limited for the half-year ended 31 December 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of:

a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
b) any applicable code of professional conduct in relation to the review.

Perth, Western Australia 14 March 2018

==> picture [168 x 56] intentionally omitted <==

L Di Giallonardo Partner

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533

Email: [email protected] | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers

Page 11 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Condensed Consolidated Statement of Comprehensive Income For the Half-Year Ended 31 December 2017

	Note	31 Dec 17	31 Dec 16
		$ `000\|$`000
Continuing operations

Other income 114 230

Employee benefits expense 2 (839) (930)
Exploration expenditure expensed as incurred 5 (1,797) (3,114)
Care and maintenance expense (269) (388)
Occupancy expenses 2 (57) (62)
Finance costs 7 (160) -
Administrative expenses (437) (487)
Unwinding of discount on provisions (126) (124)
Depreciationand amortisationexpense (37) (29)
Loss before income tax expense (3,608) (4,904)
Income tax benefit - -
Loss after tax from continuing operations (3,608) (4,904)

Net loss for the period (3,608) (4,904)
Other comprehensive income for the period, net of tax - -
Total comprehensive loss for theperiod (3,608) (4,904)

Loss per share:
Basic loss per share (cents per share) (1.94) (2.64)
Diluted loss per share (cents per share) n/a n/a

The accompanying notes form part of these financial statements.

Page 12 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Condensed Consolidated Statement of Financial Position

As at 31 December 2017

	Note	31 Dec 17	30 Jun 17
		$ `000\|$`000
Assets
Current Assets
Cash and cash equivalents 12,145 11,595
Trade and other receivables 385 222
Total Current Assets 12,530 11,817

Non-Current Assets
Receivables 58 58
Other financial assets 9 121 121
Property, plant and equipment 2,729 2,755
Asset under construction 3 5,449 150
Intangible assets 33 41
Mine properties and development 6 5,084 2,098
Deferred exploration and evaluation expenditure 4 14,000 14,000
Total Non-Current Assets 27,474 19,223
Total Assets 40,004 31,040

Liabilities
Current Liabilities
Trade and other payables 2,128 845
Employee benefits 206 44
Total Current Liabilities 2,334 889

Non-Current Liabilities
Provisions 9,839 8,536
Borrowings 7 9,540 -
Total Non-Current Liabilities 19,379 8,536
Total Liabilities 21,713 9,425

Net Assets 18,291 21,615

Equity
Issued capital 8 60,882 60,882
Reserves 1,460 1,307
Accumulated losses (44,051) (40,574)
Total Equity 18,291 21,615

The accompanying notes form part of these financial statements.

Page 13 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Condensed Consolidated Statement of Changes in Equity

For the Half-Year Ended 31 December 2017

	Issued Capital	Accumulated Losses	Asset Revaluation Reserve
	$ `000\|$`000	$ `000\|$`000	$ `000

Balance at 1 July 2016 60,882 (32,026) 14 395 29,265
Loss for the period - (4,904) - - (4,904)
Total comprehensive income/(loss) for the period - (4,904) - - (4,904)
Recognition of share-based payments - - - 539 539
Unlisted options lapsing - 116 - (116) -
Balance at 31 December 2016 60,882 (36,814) 14 818 24,900


Balance at 1 July 2017 60,882 (40,574) 14 1,293 21,615
Loss for the period - (3,608) - - (3,608)
Total comprehensive income/(loss) for the period - (3,608) - - (3,608)
Recognition of share-based payments - - - 284 284
Unlisted optionslapsed - 131 - (131) -
Balance at 31 December 2017 60,882 (44,051) 14 1,446 18,291

The accompanying notes form part of these financial statements.

Page 14 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Condensed Consolidated Statement of Cash Flows

For the Half-Year Ended 31 December 2017

	31 Dec 17	31 Dec 16
	$ `000\|$`000
	inflows/(outflows)
Cash flows from operating activities
Payments to suppliers and employees (1,859) (1,634)
Payments for exploration and evaluation (1,953) (2,779)
Interest received 59 285
Net cash used in operating activities (3,753) (4,128)

Cash flows from investing activities
Payments for mine properties and development (3,650) (24)
Payments for property, plant and equipment (1,575) (630)
Net cashusedin investing activities (5,225) (654)

Cash flows from financing activities
Proceeds from borrowings 10,187 -
Transaction costs relating to borrowings (659) -
Net cash provided by financing activities 9,528 -

Net increase /(decrease) in cash held 550 (4,782)
Cash and cash equivalents at the beginning of the period 11,595 20,244
Cash and cash equivalents at the end of theperiod 12,145 15,462

The accompanying notes form part of these financial statements.

Page 15 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Notes to the Condensed Consolidated Financial Statements

For the Half-Year Ended 31 December 2017

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These half-year consolidated financial statements are general purpose financial statements prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134 ‘Interim Financial Reporting’, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

The half-year financial report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the Group as in the full financial report.

It is recommended that this half-year financial report be read in conjunction with the annual financial report for the year ended 30 June 2017 and any public announcements made by the Company and its subsidiaries during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

Basis of preparation

The half-year financial report has been prepared on a historical cost basis, except for the revaluation of certain financial instruments to fair value. Cost is based on the fair value of the consideration given in exchange for assets.

The Company is domiciled in Australia and all amounts are presented in Australian dollars, unless otherwise noted and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under ASIC Legislative Instrument 2016/91. The Company is an entity to which the class order applies.

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

Accounting policies and methods of computation

The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

Adoption of new and revised standards

Standards and Interpretations applicable to 31 December 2017

In the half-year ended 31 December 2017, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period.

As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and, therefore, no material change is necessary to Group accounting policies.

Standards and interpretations in issue not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2017 reporting periods. Those which may have a significant impact on the Group are set out below. The Group does not plan to adopt these standards early.

AASB 9 Financial Instruments (2014)

AASB 9 (2014), published in December 2014, replaces the existing guidance AASB 9 (2009), AASB 9 (2010) and AASB 139 Financial Instruments: Recognition and Measurement and is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The new standard results in changes to accounting policies for financial assets and liabilities covering classification and measurement, hedge accounting and impairment. The Group has assessed these changes and determined that based on the current financial assets and liabilities held at reporting date, the Group will need to reconsider its accounting policies surrounding impairment recognition. The new impairment requirements for financial assets are based on a forward looking 'expected loss model' (rather than the current 'incurred loss model').

Page 16 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

The Group does not expect a significant effect on the financial statements resulting from the change of this standard however the Group is in the process of evaluating the impact of the new financial instrument standard. The changes in the Group's accounting policies from the adoption of AASB 9 will be applied from 1 July 2018 onwards.

AASB 15 Revenue from Contracts with Customers

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised, including in respect of multiple element arrangements. It replaces existing revenue recognition guidance, AASB 111 Construction Contracts, AASB 118 Revenue and AASB 1004 Contributions. AASB 15 is effective from annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The core principle of AASB 15 is that it requires identification of discrete performance obligations within a transaction and associated transaction price allocation to these obligations. Revenue is recognised upon satisfaction of these performance obligations, which occur when control of goods or services is transferred, rather than on transfer of risks and rewards. Revenue received for a contract that includes a variable amount is subject to revised conditions for recognition, whereby it must be highly probable that no significant reversal of the variable component may occur when the uncertainties around its measurement are removed.

Whilst the new revenue standard would not have a material impact on existing revenue streams, the Group has commenced the process of evaluating the potential impact of the new standard on future revenue streams and will first apply AASB 15 in the financial year beginning 1 July 2018.

AASB 16 Leases

AASB 16 replaces the current AASB 117 Leases standard. AASB 16 removes the classification of leases as either operating leases or finance leases, for the lessee, effectively treating all leases as finance leases. Most leases will be capitalised on the balance sheet by recognising a 'right-of-use' asset and a lease liability for the present value obligation. This will result in an increase in the recognised assets and liabilities in the statement of financial position as well as a change in expense recognition, with interest and deprecation replacing operating lease expense.

Lessor accounting remains similar to current practice, i.e. lessors continue to classify leases as finance and operating leases.

AASB 16 is effective from annual reporting periods beginning on or after 1 January 2019, with early adoption permitted for entities that also adopt AASB 15.

This standard will primarily affect the accounting for the Group's operating lease. As at 31 December 2017, the Group has $246,979 of non-cancellable operating lease commitments, predominantly relating to a property lease. The Group is considering the available options to account for this transition but the Group expects a change in reported earnings before interest, tax, depreciation and amortisation (EBITDA) and increase in lease assets and liabilities recognition. This will be dependent on the lease arrangements in place when the new standard is effective. The Group has commenced the process of evaluating the impact of the new lease standard.

No other new standards, amendments to standards and interpretations are expected to affect the Group's consolidated financial statements.

Significant accounting judgments and key estimates

The preparation of interim financial reports requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

In preparing this interim report, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report for the year ended 31 December 2017.

Statement of compliance

The interim financial statements were authorised for issue on 14 March 2018.

The interim financial statements comply with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the interim financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

Going concern

The interim financial statements have has been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlements of liabilities in the ordinary course of business.

The Directors are confident of accessing funds necessary to meet the Group’s obligations as and when they fall due, and consider the adoption of the going concern basis to be appropriate in the preparation of these interim financial statements.

Page 17 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

2. EXPENSES

	31 Dec 17	31 Dec 16
	$ `000\|$`000
Loss for the year includes the following expenses:
Operating lease rental expense 57 62
Other employee benefits 555 391
Non-cash share based payment expenses 284 539

3. ASSET UNDER CONSTRUCTION

Asset under construction expenditure relates to project infrastructure for the Monty Cu-Au Project; being surface infrastructure and related surface and underground plant and equipment.

	31 Dec 17	30-Jun-17
	$ `000\|$`000
Balance at the beginning of the period 150 -
Additions 5,299 150
5,449 150

4. DEFERRED EXPLORATION AND EVALUATION EXPENDITURE

	31 Dec 17	30-Jun-17
	$ `000\|$`000
Costs carried forward in respect of areas of interest in the following phases:
Exploration and evaluation phase – at cost
Balance at beginning of period 14,000 14,545
Transferred to mine development - (545)
14,000 14,000

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on the successful development and commercial exploitation or sale of the respective areas.

5. EXPLORATION EXPENDITURE EXPENSED AS INCURRED

	Life to date project expenditure expensed	Project Expenditure expensed in the period	Life to date project expenditure expensed
	31 Dec 17		31 Dec 16
	$ `000\|$`000	$ `000\|$`000
Sinclair 5,325 1,150 5,748 1,972
Springfield 27,076 454 25,677 1,142
Halloween West JV 587 - 591 -
Other Exploration Expenses 283 193 4 -
33,271 1,797 32,020 3,114

Page 18 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

6. MINE PROPERTIES AND DEVELOPMENT

Mine properties represent the accumulation of all exploration, evaluation and development expenditure incurred in respect of areas of interest in which mining has commenced or in the process of commencing. When further development expenditure is incurred in respect of mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

Amortisation is provided on a unit of production basis (other than restoration and rehabilitation expenditure detailed below) which results in a write-off of the cost proportional to the depletion of the proven and probable mineral reserves.

Before the reclassification of Monty capitalised expenditure from exploration and evaluation expenditure to development expenditure, the Company assessed the future economic benefits to be received from Monty using the principles in AASB 136 Impairment of Assets .

The recoverable amount estimation was based on the estimated value in use and was determined at the cashgenerating unit level. The cash generating unit consists of the operating assets associated with the Monty project in Australia, which comprises mine properties and development ($5.084 million) and assets under construction ($5.449 million).

The recoverable amount of Monty has been determined based on the value in use calculation using cash flow projections based on the financial budgets approved by senior management covering a 4-year period. The discount rate applied to cash flow projections is 8.0% real.

The net carrying value of each area of interest is reviewed regularly and to the extent to which this value exceeds its recoverable amount, the excess is either fully provided against or written off in the financial year in which this is determined.

The Group provides for environmental restoration and rehabilitation at each project site which includes any costs to dismantle and remove certain items of plant and equipment. The cost of an item includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs when an item is acquired or as a consequence of having used the item during that period. This asset is depreciated on the basis of the current estimate of the useful life of the asset.

In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets an entity is also required to recognise as a provision the best estimate of the present value of expenditure required to settle the obligation. The present value of estimated future cash flows is measured using a current market discount rate.

	31 Dec 17	30 Jun 17
	$ `000\|$`000
Balance at the beginning of period	2,098 -
Transfer from exploration and evaluation expenditure	- 545
Additions	1,811 1,553
Provision for restoration and rehabilitation capitalised	1,175 -
Balance at the end of period	5,084 2,098

Page 19 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

7. BORROWINGS

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Summary of borrowing arrangements

On 27 October 2017, the Group entered into a secured Project Financing Facility (PFF) with Taurus Mining Finance Fund (Taurus) for US$20M. The PFF is guaranteed by the parent company and secured by the Group’s interest in the Monty project and is subject to a fixed interest rate of 6.75% p.a. The PFF matures on 30 September 2020. The PFF also includes a royalty of 2.25% on the Groups gross payable copper and gold metal-in-ore sales receipts from Monty. The obligation to pay the royalty ceases once the Group has received revenue from Monty sales containing 29,700 tonnes of copper and 16,500 ounces of gold which is equivalent to the Groups 30% share of contained copper and gold metal in the current Monty Mineral Resource.

Under the terms of the PFF, the Group is subject to certain financing covenants including debt coverage ratios and distribution restrictions. There have been no events of review of default under the PFF during the half-year.

	31 Dec 17	30 Jun 17
In United States Dollars	US $ `000\|US $`000
Total Facility
Bank Loan 20,000 -
20,000 -
Facility used at balance date
Bank Loan 8,000 -
8,000 -
Facility unused at balance date
Bank loans 12,000 -
12,000 -
Total facilities
Facilities used at balance date 8,000 -
Facility unused at balance date 12,000 -

	31 Dec 17	30 Jun 17
Movement during the period	$ `000\|$`000
Borrowings balance at the beginning of period - -
Drawdown of loan facility 10,298 -
Less
Transaction costs 758 -
Borrowings balance at the end of period 9,540 -

	31 Dec 17	30 Jun 17
Finance costs	$ `000\|$`000
Interest expense 92 - Commitment fee 68 -

Total Finance costs 160 -

Page 20 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

8. ISSUED CAPITAL

	31 Dec 17	30 Jun 17
	$	$
Ordinary shares
Issued and fully paid	60,881,617	60,881,617

	31 Dec 17	31 Dec 17	30 Jun 17	30 Jun 17
	Number	$	Number	$
Movements in ordinary shares on issue
Opening Balance	185,699,879	60,881,617	185,699,879	60,881,617
Closing Balance	185,699,879	60,881,617	185,699,879	60,881,617

Fully paid ordinary shares carry one vote per share and carry the right to dividend

	Half-year ended 31 Dec 17	Half-year ended 31 Dec 17	Year ended 30 Jun 17	Year ended 30 Jun 17
	Number	$	Number	$
Movements in options over ordinary shares on issue
Opening Balance 9,705,000 1,292,836 5,650,000 395,389
Director's and employees remuneration - 287,865 8,775,000 1,252,411
Unlisted options lapsing (1,250,000) (130,875) (2,750,000) (116,445)
Unlisted options cancelled - - (1,150,000) (146,185)
Unlisted options forfeited (30,000) (3,692) (820,000) (92,334)
Closing Balance 8,425,000 1,446,134 9,705,000 1,292,836

Share options are exercisable on a 1:1 basis at various exercise prices. The options expire between 31 March 2018 and 31 October 2021.

9. FINANCIAL INSTRUMENTS

This note provides information about how the Group determines fair values of various financial assets and liabilities.

Fair values

The carrying value of financial assets and financial liabilities are considered to approximate their fair values. In particular, the fair value of cash, trade and other receivables and payments is considered to approximate their carrying amount due to their short-term maturity.

Fair value hierarchy

All financial instruments for which fair value is recognised or disclosed are categorised within the following fair value measurement hierarchy:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The following table presents the Group’s assets and liabilities measured and recognised at fair value at 31 December 2017 and 30 June 2017.

||Level 1
$ 000**|**Level 2**<br>**$000|Level 3
$ 000**|**Total**<br>**$000|
|---|---|---|---|---|
||||||
|31 December 2017|||||
|Assets|||||
|Available-for-sale financial assets
121
-
-
121|||||
|30 June 2017|||||
|Assets|||||
|Available-for-salefinancialassets
121
-
-
121|||||

Page 21 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

10. SEGMENT REPORTING

Segment Information

Talisman management has determined the operating segments based on the reports reviewed by the Board for strategic decision making. The Group operates in one geographical segment, being Australia and has identified the following operating segments: Monty Operation and Regional Exploration.

The Monty Operation represents the Group’s 30% joint venture interest in the Monty Copper-Gold Project ( Monty ). Sandfire Resources NL ( Sandfire ) is the manager of Monty and holds the remaining 70% interest. Work programs and budgets are provided by Sandfire and are considered for approval by the Company’s Board.

The Group’s General Manager Geology is responsible for budgets and expenditures relating to the Group’s Regional Exploration activities. Regional Exploration activities do not normally derive any income. Should a project generated by Regional Exploration activities commence generating income or lead to the development of a mining operation, that operation would then be disaggregated from Regional Exploration and become reportable in a different segment.

Segment Results

	Continuing Operations	Continuing Operations
	Monty Operation $ `000\|Regional<br>Exploration<br>Activities<br>$`000	Unallocated items $ `000\|Consolidated<br>$`000

31 December 2017
Segment revenue 13 - 101 114
Segment profit before income tax expense 13 (1,797) (1,824) (3,608)
Segment assets 14,740 16,756 8,507 40,004
Segment liabilities (12,284) (8,844) (585) (21,713)
31 December 2016
Segment revenue - - 230 230
Segment profit before income tax expense - (3,114) (1,790) (4,904)
Segment assets - 18,334 15,655 33,989
Segment liabilities - (8,761) (328) (9,089)

11. JOINT OPERATION

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interests in a joint operation:

its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the relevant standards and interpretations applicable to the particular assets, liabilities, revenues and expenses.

When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group’s consolidated financial statements only to the extent of the other parties’ interests in the joint operation.

When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party.

Page 22 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

have also been executed between Talisman and Sandfire for the Joint Venture (collectively Joint Venture Agreements). The EJVA covers the ongoing exploration activities of the Springfield Joint Venture on the Joint Venture tenements and outlines the rights and obligations of the Joint Venture parties. The MJVA establishes the rights and obligations of the Joint Venture parties related to activities associated with the development, mining and ultimate decommissioning of mineral discoveries. The development and mining of Monty will operate under the terms of this MJVA.

Joint venture expenditure is now funded jointly by the Group and Sandfire on a 30%:70% basis in accordance with the Joint Venture Agreements. Following the delineation of the Monty maiden JORC 2012 Indicated and Inferred Mineral Resource of 1.05 million tonnes grading 9.4% copper and 1.6g/t gold[1] in April 2016, the Joint Venture commenced a feasibility study on an underground mining operation to extract high-grade ore via conventional stoping techniques. A Mining Lease Application (MLA) for Monty was submitted in July 2016 and was granted on 30 March 2017. The detailed Monty feasibility study concluded development of the deposit is both technically and financially viable. Full details of the feasibility study and its key agreements can be found in the announcement and presentation released to the Australian Securities Exchange on 6 April 2017.

As a result of the Joint Venture Agreements, the Group’s interest in the Halloween West Joint Venture was reduced to 18.8% (2015: 62.9%). The Halloween West Joint Venture was originally formed in 2012 when the Company reached agreement with Chrysalis Resources Ltd (“Chrysalis”) to farm into the Halloween West Copper-Gold Project. In October 2014 Sandfire acquired the interest held by Chrysalis and subsequently farmed-into the Halloween West Project concurred with the Doolgunna Projects. Sandfire acts as the Joint Venture Manager of the Halloween West Joint Venture.

The Group is entitled to a proportionate share of the income received and bears a proportionate share of the joint operation’s expenses.

Joint Operation	31 Dec 17	30 Jun 17
	Beneficial Interest	Beneficial Interest
Doolgunna Sandfire Resources 30% 30%
Halloween West Sandfire Resources 19% 19%

The Group’s interests in the assets/liabilities and income/expenditure employed in the above Joint Venture operations are detailed below. The amounts are included in the financial statements under their respective asset categories.

	31 Dec 17	30 Jun 17
	$’000	$’000
Statement of Financial Position

Assets
Current assets 8,360 2,315
Non-current assets 34,909 7,293
Total assets 43,269 9,608

Liabilities
Current liabilities 5,496 1,761
Non-current liabilities 3,917 -
Total liabilities 9,413 1,761

Net assets 33,856 7,847

	Half-year ended 31 Dec 17	Half-year ended 31 Dec 16
	$’000	$’000
Statement of Comprehensive Income

Revenue 50 -

Explorationand evaluation 1,110 909
Total comprehensive loss 1,060 909


Reconciliation of summarised financial information to the carrying amount of the interest in associate
	31 Dec 17	30 Jun 17
	$’000	$’000
Net assets of the associate 33,856 7,847
Carrying value of the Group's interest in associate 10,157 2,354

1 For details relating to the Monty JORC Mineral Resource see Sandfire Resources NL ASX announcement dated 13 April 2016, available on the Sandfire and ASX websites.

Page 23 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

The Joint Venture has no contingent liabilities with the exception that in order to maintain the current right of tenure to exploration tenements, the Joint Venture is required to perform exploration work to meet the minimum expenditure requirements specified by various State governments and the capital commitments required for Monty project construction. These obligations are not provided for in the financial report and are payable as follows:

	31 Dec 17	30 Jun 17
	$`000\|$`000
*Exploration expenditure*
Within one year 588 588
After one year but not more than five years 1,194 1,407
Greaterthan five years 2,504 2,587
4,286 4,582

	31 Dec 17	30 Jun 17
	$`000\|$`000
*Capital Commitment*
Within one year 11,184 -
After one year but not more than five years - -
Greater than five years - -
11,184 -

12. CONTINGENT LIABILITIES

Consideration for the acquisition of the Sinclair Nickel Project includes a deferred payment of $2 million triggered by production recommencing within 6 years of transaction completion, being the 3 February 2021.

In the opinion of the Directors, there are no other contingent liabilities or assets as at 31 December 2017 and no other contingent liabilities or assets were incurred in the interval between the period end and the date of this report.

13. EVENTS SUBSEQUENT TO REPORTING DATE

No other matters or circumstances have arisen since the end of the half year which significantly affect or may significantly affect the operations of the Group, the results of those operations, or the state of affairs in future years.

Page 24 of 27

Talisman Mining Limited Half-Year Report 31 December 2017

Directors’ Declaration

In the opinion of the directors of Talisman Mining Limited (‘the Company’):

The attached financial statements and notes thereto are in accordance with the Corporations Act 2001 including:
a. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
b. giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance for the half-year then ended; and
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 signed in accordance with a resolution of the Board of Directors made pursuant to s.303(5) of the Corporations Act 2001.

……………………………………… Daniel Madden Managing Director 14 March 2018

Page 25 of 27

==> picture [176 x 74] intentionally omitted <==

INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Talisman Mining Limited

Report on the Condensed Half-Year Financial Report

Conclusion

We have reviewed the accompanying financial report of Talisman Mining Limited (“the company”) which comprises the condensed consolidated statement of financial position as at 31 December 2017, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the halfyear ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes, and the directors’ declaration, for the Group comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

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 Talisman Mining Limited is not in accordance with the Corporations Act 2001 including:

(a) giving a true and fair view of the Group’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 the Corporations Regulations 2001 .

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 control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and 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 Group’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 the company,

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: [email protected] | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers

Page 26 of 27

==> picture [176 x 61] intentionally omitted <==

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 .

==> picture [166 x 35] intentionally omitted <==

HLB Mann Judd Chartered Accountants

L Di Giallonardo Partner

Perth, Western Australia 14 March 2018

Page 27 of 27

AI assistant

TALISMAN MINING LIMITED — Interim / Quarterly Report 2018

65926_rns_2018-03-14_7eb29b9a-69f8-4957-9291-b0fcf6bfada6.pdf