TITANIUM SANDS LIMITED — Interim / Quarterly Report 2019

Mar 12, 2019

==> picture [389 x 127] intentionally omitted <==

ABN 65 009 131 533

Interim Financial Report for the Half Year Ended 31 December 2018

1

Titanium Sands Limited

Contents

	Page
Corporate information	2
Directors’ report	3
Consolidated statement of profit or loss and other comprehensive income	7
Consolidated statement of financial position	8
Consolidated statement of changes in equity	9
Consolidated statement of cash flows	10
Notes to the consolidated financial statements	11
Directors’ declaration	16
Independent auditor’s report on review of interim financial report	17
Auditor’s independence declaration	19

2

Titanium Sands Limited

Corporate Information

Directors	Mr James Searle
	Mr Jason Ferris
	Mr Lee Christensen
Company Secretary	Mr David McEntaggart
Registered Office	Level 11, 216 St Georges Terrace
	PERTH WA 6000
	Telephone: (08) 9481 0389
	Facsimile: (08) 9463 6103
Share Registry	Computershare Investor Services Pty Limited
	Reserve Bank Building
	Level 2, 45 St Georges Terrace
	PERTH WA 6000
Place of Incorporation	Western Australia
Principal Place of Business	Level 11, 216 St Georges Terrace
	PERTH WA 6000
	Telephone: (08) 9481 0389
	Facsimile: (08) 9463 6103
Auditors	BDO Audit (WA) Pty Ltd
	38 Station Street
	Subiaco WA 6008
Bankers	National Australia Bank
	100 St Georges Terrace
	PERTH WA 6000
Stock Exchange	ASX Limited
	Central Park
	152 - 158 St Georges Terrace
	PERTH WA 6000
ASX Code	TSL

3

Titanium Sands Limited

Directors Report For the half year ended 31 December 2018

The directors of Titanium Sands Limited (“the Company”) and its wholly owned subsidiaries (together referred hereafter as “the Group” or “the Consolidated Entity”) submit herewith the interim financial report for the half year ended 31 December 2018. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Directors

The directors of the Company at any time during or since the end of the half year are: Mr James Searle Mr Jason Ferris Mr Lee Christensen

Company Secretary

Mr David McEntaggart (appointed 1 February 2019)

Principal Activities

The current principal activity and key focus for the Group during the period is mineral exploration.

Operating Results

The net loss of the Company for the half year ended 31 December 2018 was $408,072 (2017: $16,033).

Review of Operations during and subsequent to the end of the Period

Corporate

Following re-compliance with Chapters 1 & 2 of the ASX Listing Rules, the Company recommenced trading on the ASX on 18 December 2018. This followed the successful conclusion of a $6 million fundraising under the Company’s prospectus. This enabled the Company to complete the acquisition Srinel Holdings Ltd (“Srinel”). Srinel holds five exploration licences covering 166km2 that constitute the Mannar Island Heavy Mineral Sands Project in Sri Lanka.

Funds raised will enable the Company to accelerate exploration, resource and reserve drilling at Mannar and to commence a scoping study for the potential development of the ilmenite-leucoxene deposit.

Sri Lankan Mineral Sands Project

During the period, the Company was in the process of completing mineralogical and other analyses of drilling samples on its Mannar Island Project in Sri Lanka (refer to Figure 1) leading to an updated resource statement. This work was completed by independent resource consultants GeoActiv (Pty) Ltd of Johannesburg, South Africa and subsequent to the end of the period the Company was pleased to announce an updated Inferred mineral resource at its Mannar Island Project in Sri Lanka of 53.08 million tonnes at 6.67% heavy minerals[1] . The contained valuable heavy mineral resource has increased to nearly 300% of the previous resource statement reported to the ASX on 22 April 2015[2] . Correspondingly the resource tonnage has increased to 500% of the previously reported tonnage.

The heavy mineral suite is dominated by ilmenite and leucoxene with minor but valuable rutile and zircon components. Contained within the resource are two higher grade zones, Domain 0 (10.33Mt @11.86%THM) and Domain 2 (9.85Mt @ 9.06%THM, Figure 1 and Table 1). Resource drilling to date has only been down to the water table which in the interior of Mannar Island occurs at a depth of 1 to 3m below the land surface. The heavy mineral sequences are exposed at surface and there is essentially no significant overburden on the resource.

The mineralization defined by the drilling results to date (located outside the known resource along the coast) extends for a strike of 12km and has a cross strike width of up to 3km. It is up to 6m thick and averages around 1.5m. There is essentially no overburden and the mineralisation extends continuously down to the limit of the drilling at the water table. Drilling to date on the Mannar Project only extends down to the water table, the exploration potential for deeper mineralisation remains untested.

Plans are underway to recommence drilling by the end of the March 2019 with the aim of producing a further resource update in mid-2019. This drilling will address:

• Lateral and below the water table extensions to the existing resources.

• Infill drilling on the existing resources.

• Test new target areas on the tenure.

Work has also commenced on a scoping study that will address all aspects of the project. It is anticipated that this will take up to 12 months to complete. Metallurgical test work components of the scoping study have begun. The Company looks forward to informing the market of progress with the scoping study components as they are completed.

4

Titanium Sands Limited

Directors Report For the half year ended 31 December 2018

==> picture [376 x 440] intentionally omitted <==

Figure 1 Resource domains. Note Domain 0 represents the previously reported 2015 JORC resource[2] , Domains 1, 2 and 3 represents the additional resources reported here. The new high grade zone is represented by Domain 2.

5

Titanium Sands Limited

Directors Report For the half year ended 31 December 2018

Table 1: Block model inferred mineral resource at a 2% total heavy mineral cut off.

Domain	Licence	Vol (Mm3)	Tonnes (M)	THM %	Silt %	Oversize %	Ilm %	Leu %	Rut %	Zir %
0	EL180	2.23	3.91	11.81	1.87	11.68	6.11	0.87	0.16	0.24
	EL182	3.27	5.73	11.82	2.21	6.55	6.06	0.78	0.27	0.29
	EL370	0.17	0.30	15.80	2.96	11.10	8.83	1.08	0.24	0.35
	EL371	0.23	0.40	10.05	2.07	1.03	4.73	0.94	0.26	0.21
	Sub Total	5.91	10.33	11.86	2.10	8.41	6.11	0.83	0.23	0.27
1	EL182	5.07	8.92	5.16	1.88	9.76	2.45	0.45	0.12	0.13
	EL370E	1.43	2.52	3.01	0.55	3.80	1.29	0.24	0.07	0.05
	EL370W	11.35	19.98	4.16	0.56	1.50	1.86	0.35	0.10	0.09
	Sub Total	17.85	31.42	4.35	0.93	4.03	1.98	0.37	0.11	0.10
2	EL180	0.15	0.25	3.62	0.50	8.11	1.20	0.18	0.04	0.03
	EL181	1.60	2.78	12.81	0.63	24.08	6.45	0.96	0.16	0.25
	EL182	0.001	0.001	5.36	1.22	10.34	2.63	0.99	0.09	0.15
	EL370E	3.92	6.82	7.74	0.87	20.85	3.58	1.17	0.12	0.17
	Sub Total	5.66	9.85	9.06	0.80	21.43	4.32	1.08	0.13	0.19
3	EL370W	0.85	1.48	3.55	0.40	0.65	1.66	0.31	0.09	0.08
	Sub Total	0.85	1.48	3.55	0.40	0.65	1.66	0.31	0.09	0.08
Total		30.27	53.08	6.66	1.12	8.02	3.21	0.59	0.14	0.15

Note: Domain 0 in the table represents the inferred mineral resources previously reported in full to the ASX on the 22 April 2015[2] . For this updated resource statement additional mineralogical information enabled minor refinements of the mineral components of the THM%.

1 Refer to ASX announcement 11 February 2019 “Titanium Sands Triples Heavy Mineral Sands JORC Resource”

2 An initial JORC inferred mineral resource of 10.3 Mt with total heavy mineral (THM) of 11.7% compiled by independent consultants was reported in full to the ASX on 22 April 2015. This resource was based on a historical drill hole data base of 785 auger drill holes and from the 115 holes drilled in early 2015. The drilling and the defined resource envelope was largely confined to within 150m of the Mannar Island shoreline.

These announcements are available to view on the Company’s website www.titaniumsands.com.au

The Company confirms that it is not aware of any new information or data that materially affect the information included in the relevant market announcements and, in the case of estimates of Mineral Resources that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Persons’ findings are presented have not been materially modified from the relevant original market announcements.

Competent Persons Statements

Except where indicated, exploration results above have been reviewed and compiled by James Searle BSc (hons), PhD, a Competent Person who is a Member of the Australian Institute of Mining and Metallurgy, with over 37 years of experience in metallic and energy minerals exploration and development, and as such has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Searle is the Managing Director of Titanium Sands Limited and consents to the inclusion of this technical information in the format and context in which it appears.

6

Titanium Sands Limited

Directors Report For the half year ended 31 December 2018

Events Subsequent to the Reporting Date

On 1 February 2019, Ms Nicki Farley resigned as Company Secretary and Mr David McEntaggart was appointed Company Secretary.

On 11 February 2019 the Group announced an updated Inferred Mineral Resource at its Mannar Island Project in Sri Lanka to 53.08 million tonnes at 6.67% Total Heavy Minerals. The increase in Resource satisfied the performance milestone on the Class A Performance Shares resulting in the issue of 66,666,667 fully paid ordinary shares in the Company.

There are no other events subsequent to the end of the period that would have had a material effect on the Group’s financial statements as at 31 December 2018.

Dividends

No dividends have been paid or declared by the Company to members during the half year ended 31 December 2018.

Auditor’s Independence Declaration

The auditor’s independence declaration is included within this financial report and forms part of the directors’ report for the half year ended 31 December 2018.

Dated at Perth on 13 March 2019.

Signed in accordance with a resolution of the directors.

==> picture [62 x 38] intentionally omitted <==

James Searle Director

Titanium Sands Limited

7

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 31 December 2018

Note Administrative expenses Audit expenses Exploration and Geological Consultancy Fees Director fees Share based payment expense Impairment of loan receivable Debt forgiven 2 Results from operating activities Finance income Finance expenses Net finance (expenses) (Loss) before income tax Income tax expense (Loss) for the period Other comprehensive income Items that may be reclassified to profit and loss Exchange differences on translation of foreign operations Other comprehensive income for the period Total comprehensive (loss) for the period (Loss) per share Basic and diluted (loss) per share (cents)	31 Dec 2018 $ 31 Dec 2017 $ (288,309) (190,338) (16,503) (9,610) - (36,000) - (84,000) (93,546) - (65,000) - 60,000 307,029
	(403,358) (12,919)
	2 314 (4,716) (3,428)
	(4,714) (3,114)
	(408,072) (16,033) - -
	(408,072) (16,033)
	(2,189) -
	(2,189) -
	(410,261) (16,033)
	(0.19) (0.003)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the notes to the financial statements.

8

Titanium Sands Limited

Consolidated Statement of Financial Position

As at 31 December 2018

Note Current Assets Cash and cash equivalents Restricted cash Other receivables Total current assets Non-current assets Exploration and evaluation expenditure 3 Investment in Srinel Projects Loan receivables Total non-current assets Total assets Current Liabilities Trade and other payables 4 Borrowings 4 Total current liabilities Total liabilities Net assets/(liabilities) Equity Issued capital 5 Share based payment reserve 5 Foreign exchange translation reserve Accumulated losses Total equity	31 Dec 2018 $ 30 Jun 2018 $ 4,615,250 17,715 - 542,984 66,120 73,933
	4,681,370 634,632
	3,769,676 - - 599,149 - 65,000
	3,769,676 664,149
	8,451,046 1,298,781
	(385,625) (1,357,655) - (102,287)
	(385,625) (1,459,942)
	(385,625) (1,459,942)
	8,065,421 (161,161)
	10,769,831 3,559,868 1,573,334 146,454 (2,189) - (4,275,555) (3,867,483)
	8,065,421 (161,161)

The above Consolidated Statement of Financial Position is to be read in conjunction with the notes to the financial statements.

9

Titanium Sands Limited

Consolidated Statement of Changes in Equity

For the six months ended 31 December 2018

Balance as at 1 July 2017 Loss for the period Total comprehensive loss for the period Shares issued Share issue costs Balance as at 31 December 2017 Balance as at 1 July 2018 Loss for the period Foreign currency translation Total comprehensive loss for the period Shares issued Share issue costs Share based payments Balance as at 31 December 2018	Share Share Based Payment Foreign Exchange Translation Accumulated Capital $ Reserve $ Reserve $ Losses $ 3,259,868 - - (3,457,672)	Total Equity $ (197,804)
	- - - (16,033)	(16,033)
	- - - (16,033)	(16,033)
	300,000 - - -	300,000
	- - - -	-
	3,559,868 - - (3,473,705)	86,163
	3,559,868 146,454 - (3,867,483)	(161,161)
	- - - (408,072) - - (2,189) -	(408,072) (2,189)
	- - (2,189) (408,072)	(410,261)
	7,921,334 - - - (711,371) - - - - 1,426,880 - -	7,921,334 (711,371) 1,426,880
	10,769,831 1,573,334 (2,189) (4,275,555)	8,065,421

The above Consolidated Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.

10

Titanium Sands Limited

Consolidated Statement of Cash Flows

For the six months ended 31 December 2018

	Note	31 Dec 2018	31 Dec 2017
		$	$
Cash flows from operating activities
Cash paid to suppliers and employees		(961,640)	(195,242)
Interest received		2	314
Interest paid		(15,003)	(182)
Net cash used in operating activities		(976,641)	(195,110)
Cash flows from investing activities
Payments for exploration assets	3	(182,571)	-
Cash on acquisition of subsidiary	3	232	-
Net cash used in investing activities`		(182,339)	-
Cash flows from financing activities
Proceeds from issue of shares (net of costs)		5,756,515	300,000
Net cash received from financing activities		5,756,515	300,000
Net increase in cash and cash equivalents		4,597,535	104,890
Cash and cash equivalents at 1 July		17,715	3,948
Cash and cash equivalents at 31 December		4,615,250	108,838

The above Consolidated Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.

11

Titanium Sands Limited

Notes to the consolidated financial statements For the half year ended 31 December 2018

1. Reporting Entity

Titanium Sands Limited is a company domiciled in Australia. The interim financial report of the Group is as at and for the half year ended 31 December 2018.

Statement of compliance

The interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001. Selected explanatory notes are included to explain events and transactions that are significant to gain an understanding of the changes in the financial position and performance of the Group since the last annual financial report as at and for the year ended 30 June 2018.

The interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the annual financial report of the Company as at and for the year ended 30 June 2018.

The interim financial report is approved by the Board of Directors on 13 March 2019.

Estimates

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

In preparing these interim financial statements, the significant judgements 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 annual financial statements as at and for the year ended 30 June 2018 with the addition of the following:

Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to the environmental restoration obligations) and changes to commodity prices.

Given the stage of exploration of the Group, it is not possible to reliably estimate future cash flows. The carrying value of mineral properties is reviewed and assessed with reference to comparative transactions, the status of existing joint venture arrangements, market volatility and the significant changes in valuations for all mineral assets as a result of the recent significant discounting of equity markets. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

Acquisition of Srinel Holdings Limited

In determining the fair value of the purchase consideration for the acquisition of Srinel Holdings Limited, the Directors assessed the probability of achieving the respective milestones for the Class A, Class B and Class C Performance Shares at the date of issue and the reporting date. It was determined that there was a 100% probability of achieving the milestone for the Class A Performance Shares and nil likelihood of achieving the Class B and Class C milestone. The likelihood of achieving these non-market vesting conditions will be reassessed by the Directors at each reporting date.

Significant accounting policies

The accounting policies applied by the Group in this interim financial report are the same as those applied by the Company in its annual financial report as at and for the year ended 30 June 2018, with the addition of the following:

Principles of consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent, Titanium Sands Limited and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

12

Titanium Sands Limited

Notes to the consolidated financial statements For the half year ended 31 December 2018

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income.

Asset acquisition

Where an acquisition does not meet the definition of a business combination the transaction is accounted for as an asset acquisition. The consideration transferred for the acquisition of an asset comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs with regards to the acquisition are capitalised. Identifiable assets acquired and liabilities assumed in the acquisition are measured at their fair value at the acquisition date.

Where settlement of any part of cash consideration is deferred and/or contingent, the probability of making these future payments are assessed as at acquisition date and measured accordingly. The amounts of payable in the future are discounted to their present value as at the date of exchange. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

New and amended standards adopted by the entity

AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers became applicable for the current reporting period and the Group has changed its accounting policies as a result of the adoption of these standards. The impact of the adoption of these standards and the new accounting policies has not had a material impact on the amounts presented in the Group’s financial statements.

Segment reporting

The Group operates in one reportable segment, being mineral exploration in Sri Lanka. The Board of Directors review internal management reports on a regular basis that is consistent with the information provided in the statement of profit or loss and other comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required because the information as presented is what is used by the Board to make strategic decisions.

2. Debt Forgiven

During the half year ended 31 December 2018, the Directors agreed to forgive a portion of their fees owing as at 30 June 2018, which resulted in a total of $60,000 in debts forgiven. During the half year ending 31 December 2017, the majority of creditors agreed to forgive a portion of the amount owing to them by the Company, which resulted in a total of $307,029 in debts forgiven.

13

Titanium Sands Limited

Notes to the consolidated financial statements For the half year ended 31 December 2018

3. Exploration and evaluation expenditure Exploration and evaluation assets Balance at the beginning of period Acquisition of Srinel Holdings Limited tenements1 Exploration costs capitalised Impairment of exploration costs Foreign currency translation Balance at the end of reporting period	31 December 2018 $ - 3,767,719 - - 1,957 3,769,676	30 June 2018 $ - - - - -
		-

The ultimate recoupment of balances carried forward in relation to areas of interest still in the exploration or valuation phase is dependent on successful development, and commercial exploitation, or alternatively sale of the respective areas. The Group conducts impairment testing on an annual basis when indicators of impairment are present at the reporting date.

1 The exploration and evaluation assets include an amount of $3,767,719 being the identifiable exploration assets acquired upon the acquisition of Srinel Holdings Limited’s Sri Lankan tenements, refer below:

Purchase consideration: 58,095,239 Ordinary shares – Vendor consideration 66,666,667 Class A Performance shares – Vendor consideration 13,371,450 Ordinary shares – Vendor reimbursement Vendor consideration – transfer from Investments Vendor cash reimbursement Identifiable assets/(liabilities) acquired: Cash Exploration tenements Trade and other payables	$ 1,161,905 1,333,334 267,429 599,148 182,571
	3,544,387
	232 3,767,719 (223,564)
	3,544,387

The Company also issued 33,333,333 Class B Performance Shares and 133,333,333 Class C Performance Shares to the vendors of Srinel Holdings Limited that will convert into ordinary shares on satisfaction of specified performance milestones. As at 31 December 2018 the probability of achieving these non-market vesting conditions is deemed to be 0% and therefore the fair value is deemed nil. The probability of achieving these vesting conditions will be reassessed at each reporting period.

4. Trade and other payables

Current Trade payables Accrued expenses Subscription monies received Borrowings1 Balance	31 Dec 2018 $ 30 Jun 2018 $ 258,625 528,770 127,000 280,886 - 548,000 - 102,287
	385,625 1,459,942

[1] The conversion of the loans occurred during the period upon the Company acquiring Srinel Holdings Limited and being readmitted to the ASX. The principal amount owing of $92,000 was repaid through the issue of ordinary shares with interest owing being repaid in cash.

14

Titanium Sands Limited

Notes to the consolidated financial statements For the half year ended 31 December 2018

5. Capital and Reserves

pital and Reserves
a) Share capital Fully paid ordinary shares On issue at 1 July 2017 Placement – 14 July 20171 Share consolidation2 On issue at 30 June 2018 On issue at 1 July 2018 Placement – 12 December 20183 Vendor issue – 12 December 20184 Cash reimbursement shares – 12 December 20185 Loan conversion – 12 December 20186 Facilitation issue – 12 December 20187 Share issue costs On issue at 31 December 2018	Number $ 474,893,655 3,259,868 42,857,142 300,000 (345,168,015) -
	172,582,782 3,559,868
	172,582,782 3,559,868 300,000,000 6,000,000 58,095,239 1,161,905 13,371,450 267,429 4,600,000 92,000 20,000,000 400,000 - (711,371)
	568,649,471 10,769,831

1 The Company raised $300,000 through a sophisticated investor placement. 42,857,142 fully paid ordinary shares were issued at $0.007 per share.

2 On 31 January 2018 a 1:3 share consolidation was affected.

3 The Company completed the public offer to raise $6,000,000 through the issue of 300,000,000 shares at $0.02 per share.

4 The Company issued 58,095,239 shares to acquire Srinel Holdings Limited at a deemed fair value of $0.02 per share.

5 The Company issued 13,371,450 shares to the vendor of Srinel Holdings Limited in lieu of cash consideration at a deemed fair value of $0.02 per share.

6 The Company issued 4,600,000 shares in satisfaction of loan amounts owing at a deemed fair value of $0.02 per share.

7 The Company issued 20,000,000 shares to facilitators of the transaction at a deemed fair value of $0.02 per share.

b) Movement in share based payment reserve On issue at 1 July 2017 Share based payment – Director options1 On issue at 30 June 2018 On issue at 1 July 2018 Share based payment – Director options1 Share based payment – Class A Performance Shares2 On issue at 31 December 2018	$ - 146,454
	146,454
	146,454 93,546 1,333,334
	1,573,334

1 Options were approved by shareholders at the 2017 Annual General Meeting and issued to Directors on 12 December 2018 upon the Company’s re-quotation. The options were valued during the 30 June 2018 reporting period, vested on 30 October 2018 and remain unexercised at 31 December 2018.

2 The Company issued 66,666,667 Class A Performance Shares during the period with a fair value of $0.02 per share. On 19 February 2019 the performance milestone attaching to the Performance Shares was met and were converted into fully paid ordinary shares. The Company also issued 33,333,333 Class B Performance Shares and 133,333,333 Class C Performance Shares to the vendors of Srinel Holdings Limited that will convert into ordinary shares on satisfaction of specified performance milestones. These Class B and Class C Performance Shares were issued at $0.02 per share with the probability of achieving these non-market vesting conditions deemed to be 0% and therefore the fair value is deemed nil. The probability of achieving these vesting conditions will be reassessed at each reporting period.

15

Titanium Sands Limited

Notes to the consolidated financial statements For the half year ended 31 December 2018

c) Outstanding Share Options & Performance Shares

As at 31 December 2018 the Company had the following	share options outstanding:
Details	Type	Number
Options exercisable at $0.05 expiring 18 January 2021	Unlisted options	30,000,000
Options exercisable at $0.021 expiring 25 January 2021	Unlisted options	14,285,714
Class A Performance Shares	Unlisted performance shares	66,666,667
Class B Performance Shares	Unlisted performance shares	33,333,333
Class C Performance Shares	Unlisted performance shares	133,333,333

6. Commitments and Contingent Liabilities

The Class B and Class C Performance Shares issued during the period (refer to Note 5(c)) will potential convert to ordinary equity based on the achievement of milestones arising from the acquisition of Srinel as disclosed in Note 3.

In the opinion of the directors, there were no other significant changes in commitments or contingent liabilities during the period ended 31 December 2018.

7. Related party transactions

During the period the Company completed the acquisition of Srinel Holdings Limited in which the vendor, Cuprum Holdings Limited is controlled by Jason Ferris’s father in law, Robert Nelson. The Company notes that Robert Nelson became a related party of the Company when Jason Ferris became a Director on 31 July 2014, which is subsequent to when the Option Agreement which formed the basis of the acquisition, was entered.

During the period Woodchester Capital Pty Ltd, a Company in which Jason Ferris is a Director received $194,575 (ex GST), being a 5% Placement Fee for funds raised pursuant to the Prospectus. The Placement Fee was at an arms length basis and on the same terms as similar amounts paid to unrelated parties.

In the opinion of the directors, there were no other significant related party transactions during the period ended 31 December 2018.

8. Interest in Controlled Entities

The consolidated financial statements incorporate the assets, liabilities and the results of the following subsidiary in accordance with the accounting policy described in note 1:

Controlled entities	Country of	Percentage	Percentage
	incorporation	owned	owned
		31 December 2018	30 June 2018
Srinel Holdings Limited1	Mauritius	100%	-
Kilsythe Investments (Pvt) Ltd1	Sri Lanka	100%	-
Kilsythe Exploration (Pvt) Ltd1	Sri Lanka	100%	-
Singha Lanka Investments (Pvt) Ltd1	Sri Lanka	100%	-
Hammersmith Ceylon (Pvt) Ltd1	Sri Lanka	100%	-
Applex Ceylon (Pvt) Ltd1	Sri Lanka	100%	-

1 Subsidiary entered the Group on 12 December 2018

9. Events Subsequent to the Reporting Date

On 1 February 2019, Ms Nicki Farley resigned as Company Secretary and Mr David McEntaggart was appointed Company Secretary.

On 11 February 2019 the Group announced an updated Inferred Mineral Resource at its Mannar Island Project in Sri Lanka to 53.08 million tonnes at 6.67% Total Heavy Minerals. The increase in Resource satisfied the performance milestone on the Class A Performance Shares resulting in the issue of 66,666,667 fully paid ordinary shares in the Company.

There are no other events subsequent to the end of the period that would have a material effect on the Group’s financial statements at 31 December 2018.

16

Titanium Sands Limited

Directors Declaration

The Directors of Titanium Sands Limited declare that:

• a) the interim financial statements and notes thereto are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the financial position of the Group as at 31 December 2018 and of its performance for the six month period ended on that date; and

• (ii) comply with Accounting Standards AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and

• b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

Dated at Perth on 13 March 2019.

Signed in accordance with a resolution of the directors:

==> picture [63 x 39] intentionally omitted <==

James Searle Director

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au

==> picture [77 x 30] intentionally omitted <==

INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Titanium Sands Limited

Report on the Half-Year Financial Report

Conclusion

We have reviewed the half-year financial report of Titanium Sands Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the halfyear then ended, and notes comprising a statement of accounting policies and other explanatory information, and the directors’ declaration.

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 the Group is not in accordance with the Corporations Act 2001 including:

• (i) Giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its financial performance for the half-year ended on that date; and

• (ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

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 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 2018 and its financial 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 Group, 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.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees

==> picture [77 x 30] 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, which has been given to the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor’s review report.

BDO Audit (WA) Pty Ltd

==> picture [64 x 77] intentionally omitted <==

Dean Just

Director

Perth, 13 March 2019

Tel: +61 8 6382 4600 38 Station Street Fax: +61 8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

==> picture [77 x 30] intentionally omitted <==

DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF TITANIUM SANDS LIMITED

As lead auditor for the review of Titanium Sands Limited for the half-year ended 31 December 2018, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

2. No contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Titanium Sands Limited and the entities it controlled during the period.

==> picture [73 x 59] intentionally omitted <==

Dean Just

Director

BDO Audit (WA) Pty Ltd

Perth, 13 March 2019

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees