TURNSTONE RESOURCES LTD — Interim / Quarterly Report 2019

Mar 14, 2019

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Davenport Resources Limited ABN 64 153 414 852

Half-year Financial Report - 31 December 2018

Davenport Resources Limited Contents 31 December 2018

	Page
Directors’ report	3
Auditor’s independence declaration	7
Statement of profit or loss and other comprehensive income	8
Statement of financial position	9
Statement of changes in equity	10
Statement of cash flows	11
Notes to the financial statements	12
Directors' declaration	17
Independent auditor's review report to the members of Davenport Resources Limited	18

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Davenport Resources Limited Directors' report 31 December 2018

The directors present their report, together with the financial statements, of the Company for the half-year ended 31 December 2018.

Directors

The following persons were directors of Davenport Resources Limited during the whole of the financial period and up to the date of this report, unless otherwise stated:

Mr Patrick McManus Dr Chris Gilchrist Mr Chris Bain (resigned 31 December 2018) Mr Rory Luff Mr Reinout Koopmans (appointed 01 January 2019)

Principal activities

During the financial period the principal continuing activities of the Company consisted of investment in and development of mineral exploration assets.

Results of Operations

Total comprehensive loss for the six months ended December 2018 was $890,895 (2017: $563,448).

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Davenport Resources Limited Directors' report 31 December 2018

Review of Operations

The six months period to 31 December 2018 saw the Company continue to evaluate an extensive suite of potential potash projects within its mining and exploration licence areas spread across a total of 650 square kilometres in Thüringia, Germany. Davenport owns 3 perpetual mining licences and 2 exploration licences. (Figure 1)

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Figure 1: Map of South Harz potash basin showing Davenport’s assets.

Using historic data from drillholes sunk by the former East German state potash mining company, some of which were drilled as recently as the 1980’s, two out of the three perpetual licence areas owned by Davenport were confirmed in 2018 by consultants Micon International Co. Limited (“Micon”) as Inferred Resources under the Joint Ore Reserves Committee Code (JORC 2012). The Inferred Resource for the Ebeleben minng licence area was announced in April 2018 and described in the previous half-yearly report. The Inferred Resources for the Southern (Mühlhausen-Keula) and Northern (Nohra-Elende) parts of the overall Mühlhausen-Nohra licence area were announced in October 2018 and November 2018 respectively, bringing the total Inferred resources held by the company to over 3.4 billion tonnes containing 10.5% K2O (Table 1).

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Davenport Resources Limited Directors' report 31 December 2018

Seam	Tonnage (Mt)	K2O (%)	K2O (Mt)
Sylvinite	324.0	15.6	50.4
Carnallitite	252.6	7.5	18.9
Total Ebeleben	576.6	12.1	69.3
Sylvinite	834.3	12.1	100.7
Carnallitite	295.8	8.2	24.2
Total Mühlhausen-Keula	1,130.1	11.1	124.9
Sylvinite	101	14.19	14
Carnallitite	1,597	9.41	150
Total Nohra-Elende	1,698	9.69	165
Total Davenport JORC Inferred Resources to Date	3,404.7	10.5	358.8

Table 1: Total JORC 2012 Inferred Resource to 31 December 2018 held by Davenport.

During the reporting period, the Company purchased the results of historic potash drilling in the Küllstedt exploration licence area, bringing the total number of drillholes data available to Davenport to over 200. As a result of this, the Company expects to convert a large portion of the Küllstedt area to an Inferred resource under JORC 2012 during the first quarter of 2019. An exploration target for the central portion of the Mühlhausen area is also anticipated for announcement in early 2019. This area had insufficient drill spacing to be included in the Nohra-Elende resource.

No other exploration activities were conducted in the Küllstedt or Grafentonna areas during the reporting period.

Other activities

Davenport continues to work with London-based Bacchus Capital Advisers (ASX announcement 6[th] September 2018) for the provision of strategic, financial and corporate advisory services.

Davenport has appointed Perth-based IR advisors Chapter One Limited to assist in the marketing of Davenport Resources to an Australian and European investor audience. Under their guidance, an extensive marketing roadshow was conducted in the major Australian cities during November.

Davenport was also represented at the Mines and Money conference in London during late November where the MD, Dr Chris Gilchrist, delivered the company’s presentation on two occasions to receptive audiences. Davenport also staffed a booth at the accompanying trade show which was very well attended and attracted a high level of investor interest, all of which is currently being followed up.

Matters subsequent to the end of the financial period

No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Company's operations, the results of those operations, or the Company's state of affairs in future financial years.

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Davenport Resources Limited Directors' report 31 December 2018

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.

This report is signed in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.

On behalf of the directors:

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______ Chris Gilchrist Director

15 March 2019 Perth

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Davenport Resources Limited Statement of profit or loss and other comprehensive income For the half-year ended 31 December 2018

Note Revenue from continuing operations 3 Expenses Administration, legal and corporate expenses Director remuneration and consulting Salaries and related expenses Doubtful debts expense Foreign exchange gain/(loss) Occupancy costs Loss before income tax expense from continuing operations Income tax expense Loss after income tax expense for the half-year Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign exchange translation reserve Other comprehensive loss for the year, net of tax Total comprehensive loss for the half-year Basic loss per share (cents per share) 6 Diluted loss per share (cents per share) 6		Consolidated 31/12/18 31/12/17 $ $ 20,874 64,492 (584,854) (310,811) (257,719) (132,372) (123,728) (157,323) - (4,228) (25,177) (15,471) (25,472) (72,540) (996,076) (628,253) - - (996,076) (628,253) 105,181 105,181 64,805 64,805	Consolidated 31/12/18 31/12/17 $ $ 20,874 64,492 (584,854) (310,811) (257,719) (132,372) (123,728) (157,323) - (4,228) (25,177) (15,471) (25,472) (72,540) (996,076) (628,253) - - (996,076) (628,253) 105,181 105,181 64,805 64,805
		(890,895) (0.71) (0.71)	(563,448) (0.85) (0.85)

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

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Davenport Resources Limited Statement of financial position As at 31 December 2018

Note Assets Current assets Cash and cash equivalents Trade and other receivables Funds held in trust – share application proceeds before costs Other assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment Exploration and evaluation 4 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 5 Share application funds Provisions Total current liabilities Total liabilities Net assets Equity Issued capital 7 Reserves Accumulated losses Total equity	Consolidated 31/12/18 30/06/18 $ $ 1,785,176 721,862 54,654 148,775 - 1,840,769 34,695 30,810
	1,874,525 2,742,216
	46,298 66,855 1,395 2,516 2,933,093 2,706,033
	2,980,786 2,775,404
	4,855,311 5,517,620
	209,428 292,641 - 1,840,769 5,581 62,000
	215,009 2,195,410
	215,009 2,195,410
	4,640,302 3,322,210
	9,735,491 7,526,504 318,507 213,326 (5,413,696) (4,417,620)
	4,640,302 3,322,210

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

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Davenport Resources Limited Statement of changes in equity As at 31 December 2018

Consolidated Balance at 1 July 2018 Loss after income tax expense for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income/(loss) for the half-year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Balance at 31 December 2018 Consolidated Balance at 1 July 2017 Loss after income tax expense for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Balance at 31 December 2017	Contributed Equity $ 7,526,504 - - - 2,208,987 9,735,491 Contributed $ 7,446,504 - - - 33,000 7,479,504	Performance Rights Reserves $ 84,911 - - - - 84,911 Performance Rights Reserves $ - - - - - -	Currency Translation Reserves $ 128,415 - 105,181 105,181 - 233,596 Currency Translation Reserves $ (783) - 64,805 64,805 - 64,022	Accumulated losses $ (4,417,620) (996,076) - (996,076) - (5,413,696) Accumulated losses $ (2,998,748) (628,253) - (628,253) - (3,627,001)	TotalEquity $ 3,322,210 (996,076) 105,181
					(890,895) 2,208,987
					4,640,302
					TotalEquity $ 4,446,973 (628,253) 64,805
					(563,448) 33,000
					3,916,525

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

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Davenport Resources Limited Statement of cash flows For the half-year ended 31 December 2018

Cash flows from operating activities Interest received Receipts from customers Other receipts Payments to suppliers and employees Net cash (used in)/provided by operating activities Cash flows from investing activities Payments for exploration and evaluation Purchase of plant and equipment Payment for other financial assets Net cash provided by/(used in) investing activities Cash flows from financing activities Proceeds from issue of shares Payments for capital raising costs Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of foreign exchange cash movements Cash and cash equivalents at the end of the period	Consolidated Half-year ended 2018 2017 $ $ 6,109 18,099 9,922 34,561 50,680 - (993,319) (539,385) (926,608) (486,725) (227,060) (1,413,050) - (3,252) - (6,116) (227,060) (1,422,418) 2,410,519 - (198,956) - 2,211,563 - 1,057,895 (1,909,143) 721,862 4,318,245 5,419 27,611 1,785,176 2,436,713	Consolidated Half-year ended 2018 2017 $ $ 6,109 18,099 9,922 34,561 50,680 - (993,319) (539,385) (926,608) (486,725) (227,060) (1,413,050) - (3,252) - (6,116) (227,060) (1,422,418) 2,410,519 - (198,956) - 2,211,563 - 1,057,895 (1,909,143) 721,862 4,318,245 5,419 27,611 1,785,176 2,436,713
		(486,725)
		(1,413,050) (3,252) (6,116)
		(1,422,418)
		- -
		-
		(1,909,143) 4,318,245 27,611
		2,436,713

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

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Davenport Resources Limited Notes to the financial statements 31 December 2018

Note 1. Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2018 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the Davenport Resources Limited financial report for the year ended 30 June 2018.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New, revised or amending Accounting Standards and Interpretations adopted

The Company has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

The Company applied AASB 15 Revenue from contracts with customers (AASB 15) and AASB 9 Financial instruments (AASB9) for the first time from 1 July 2018. The nature and effect of these changes as a result of the adoption of these new standards are described below. Other than the changes described below, the accounting policies adopted are consistent with those of the previous financial year. Several other amendments and interpretations applied for the fist time in the current period, but did not have an impact on the financial statements of the Company and, hence, have not been disclosed. The Company has not early adopted any standards, interpretations or amendments that have been issued but not yet effective.

AASB 15 Revenue from contracts with customers

The Company adopted AASB 15 from 1 July 2018, however, there was no impact on adoption as the Company does not recognise any income other than interest income which is excluded from the scope of AASB 15.

AASB 9 Financial instruments

The Company adopted AASB 9 from 1 July 2018, however, the impact of adoption was not material.

Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. No significant impact on the accounting policies of the Company is expected from the adoption of these Accounting Standards and Interpretations.

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Davenport Resources Limited Notes to the financial statements 31 December 2018

Going concern

For the half-year ended 31 December 2018, the consolidated entity incurred a total comprehensive loss of $890,895(2017: $563,448) and incurred cash outflows from operations of $926,608 ($2017: $486,725). As at 31 December 2018, the consolidated entity had accumulated losses of $5,413,696 (2017: $3,627,001).

Directors are aware that additional capital would be required to meet operational costs and to advance the exploration projects. Having carefully assessed the uncertainties relating to the likelihood of securing additional funding and the consolidated entity’s ability to effectively manage its operations and working capital requirements, the directors believe that the consolidated entity will continue to operate as a going concern and that it is appropriate to prepare the financial statements on a going concern basis which assumes the realisation of assets and the extinguishment of liabilities in the normal course of business.

The half-year financial report does not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 2. Segment reporting

The Consolidated entity has based its operating segment on the internal reports that are reviewed and used by the executive management team (“Chief Operating Decision Makers”) in assessing performance and in determining the allocation of resources.

The Consolidated entity currently does not have production and is only involved in exploration. As a consequence activities in the operating segment are identified by management based on the manner in which resources are allocated, the nature of the resources provided and the identity of manager and country of expenditure. Information is reviewed on a whole of entity basis.

Based on these criteria, the Consolidated entity only has one operating segment, being exploration, and the segment operations and results are reported internally based on the accounting policies as described in note 1 for the computation of the Consolidated entity’s results presented in this set of financial statements.

Note 3. Revenue

From continuing operations: Interest Other revenue Revenue from continuing operations	31/12/18 $ 11,222 9,652 20,874	31/12/17 $ 17,900 46,592
		64,492

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Davenport Resources Limited Notes to the financial statements 31 December 2018

Note 4. Non-current assets - exploration and evaluation

Exploration and evaluation – at cost	31/12/18 30/06/18 $ $ 2,933,093 2,706,033

Reconciliations

Reconciliations of the written down values at the beginning and end of the current financial half-year are set out below:

Balance at beginning of financial period Additions Balance at end of financial period	31/12/18 30/06/18 $ $ 2,706,033 254,332 227,060 2,451,701
	2,933,093 2,706,033

Exploration programs in each area of interest continue but have not reached a stage which permits a reasonable assessment of economically recoverable reserves. The ultimate recoupment of these costs is dependent on the successful development and exploration of the respective areas of interest for which additional capital will be needed.

Note 5. Trade and Other Payables

ote 5. Trade and Other Payables
Final instalment and legal costs associated with purchase of mineral licences in the South Harz project Other	31/12/18 $ - 209,428 209,428	31/12/17 $ 738,493 320,673
		1,059,166

Note 6. Loss per Share

	31/12/18	31/12/17
	$	$
(a) Loss used in the calculation of loss per share	(996,076)	(628,253)
	Number of Shares
(b) Weighted average number of ordinary shares outstanding during the
reporting period used in calculation of basic and diluted loss per share:	140,461,610	74,248,102

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Davenport Resources Limited Notes to the financial statements 31 December 2018

Note 7. Equity – Issued Capital

Movements in ordinary share capital Ordinary shares - fully paid Details Balance Shares issued – initial placement Shares issued – share purchase plan Shares issued – second placement Equity raising costs Balance	Consolidated Consolidated 31/12/18 30/06/18 31/12/18 30/06/18 Shares Shares $ $ 143,137,413 108,701,449 9,735,491 7,526,504 Date No of shares $ 01 Jul 2018 108,701,449 7,526,504 5 Jul 2018 26,496,700 1,854,769 27 Jul 2018 4,085,693 286,000 11 Sep 2018 3,853,571 269,750 - - (201,532) 31 Dec 2018 143,137,413 9,735,491	Consolidated Consolidated 31/12/18 30/06/18 31/12/18 30/06/18 Shares Shares $ $ 143,137,413 108,701,449 9,735,491 7,526,504 Date No of shares $ 01 Jul 2018 108,701,449 7,526,504 5 Jul 2018 26,496,700 1,854,769 27 Jul 2018 4,085,693 286,000 11 Sep 2018 3,853,571 269,750 - - (201,532) 31 Dec 2018 143,137,413 9,735,491
		$ 7,526,504 1,854,769 286,000 269,750 (201,532) 9,735,491

Performance Shares

On 3 April 2018, the Company has converted 33,854,167 first milestone shares to 33,854,167 fully paid ordinary shares for nil consideration upon satisfying certain milestone conditions.

On 26 April 2018, the Company has cancelled 33,854,167 second milestone shares and this cancellation has been approved by shareholders at general meeting held on 10 April 2018.

Details of the milestone performance conditions are below;

Milestone 1

The Milestones for the first performance shares are as follows:

The announcement to ASX by Davenport within four (4) years after 9 January 2017 of the first JORC Code compliant inferred resources of one of the following:

• (a) 250 million tonnes of potash at or above 11.0% K2O by content, or

• (b) 150 million tonnes of potash at or above 12.0% K2O by content, or

• (c) 100 million tonnes of potash at or above 13.0% K2O by content, or

• (d) 75 million tonnes of potash at or above 15.0% K2O by content, or

• (e) 50 million tonnes of potash at or above 18.0% K2O by content.

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Davenport Resources Limited Notes to the financial statements 31 December 2018

Milestone 2

The Milestone for the second performance shares are as follows:

The announcement to ASX by Davenport within five (5) years after 9 January 2017 of satisfaction of all mining approvals and utility contracts required to construct and operate a minimum 500,000 tonnes per annum potash mine on the South Harz Project (including all government approvals, water and energy contracts necessary to operate the mine).

“South Harz Project” means the mineral exploration project targeting potash in central Germany including the Küllstedt and Gräfentonna exploration licences and all ground within 50 kilometres of the Küllstedt and Gräfentonna tenements.

Note 8. Contingent Liabilities

The consolidated group does not have any contingent liabilities outstanding at 31 December 2018 (30 June 2018: $104,212).

The lease expired during the reporting period and was not renewed. The Company settled with the landlord the Company’s make good obligations for $56,418, with the guarantee for the rental bond subsequently released.

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Davenport Resources Limited Directors’ declaration 31 December 2018

In the directors' opinion:

• the attached financial statements and notes thereto comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes thereto give a true and fair view of the consolidated entity's financial position as at 31 December 2018 and of its performance for the financial half-year ended on that date; 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.

Signed in accordance with a resolution of directors made pursuant to section 303(5) of the Corporations Act 2001.

On behalf of the directors

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Chris Gilchrist Director

15 March 2019 Perth

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