Australian Mines : Half Year Report for Period ended 31 December 2018

CONSOLIDATED INTERIM FINANCIAL REPORT HALF YEAR ENDED 31 DECEMBER 2018

CONTENTS

DIRECTORS' REPORT 1

AUDITOR'S INDEPENDENCE DECLARATION 4

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 5

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 6

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 7

CONSOLIDATED STATEMENT OF CASH FLOWS 8

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL REPORT 9

DIRECTORS' DECLARATION 19

INDEPENDENT AUDITOR'S REVIEW REPORT 20

The Directors present their report together with the Consolidated Interim Financial Report of Australian Mines Limited ("the Company" or "Australian Mines") and its controlled entities ("the Group" or "AUZ") for the six months ended 31 December 2018.

DIRECTORS

The Directors of the Company at any time during or since the end of the interim period are:

Michael Ramsden - Chairman, Non-Executive Director

Benjamin Bell - Managing Director

Mick Elias - Non-Executive Director

Dominic Marinelli - Non-Executive Director

Oliver Carton - Company Secretary

REVIEW OF EVENTS

Highlights

The six months to 31 December 2018 was a period of significant progress for Australian Mines as it advanced its 100%-owned Sconi Cobalt-Nickel-Scandium Project towards a Final Investment Decision through the release of Bankable Feasibility Study on the Project in November 2018 as well as subsequent update in the Sconi Mineral Resource Estimate.

SCONI COBALT-NICKEL-SCANDIUM PROJECT

Australian Mines continued to build momentum with pre-development work in the reporting period, as the Company prepares to transition its flagship Sconi Project from the study phase through the project financing stage, with full-scale development to follow.

The Company continued productive commercial-in-confidence discussions with Korean-headquartered SK Innovation, along with negotiations with potential debt funding providers.

Australian Mines' Sconi Project is expected to be one of the most competitive cobalt-producing nickel projects in the world, according to an independent Market Study1 by CRU International.

Australian Mines achieved Prescribed Project status for the Sconi Project2 in January 2019, which will assist in the streamlining of any remaining development approvals, while the Company also moved to acquire freehold land3 in Greenvale in a first step towards delivering on its promise of employing local, living local and buying local.

A Resource expansion drilling program was completed at Sconi in the second half of 2018, which was designed to drill out under-explored and extensional areas of the mineralisation as well as further testing the overall extent of mineralisation. This drilling program returned high-grade intersections of cobalt and nickel mineralisation4, significantly boosting the scale of mineral endowment within the Company's tenement package.

With the publishing of a Bankable Feasibility Study (BFS) on Sconi in November 20185, Australian Mines demonstrated the strong commercial case for the development of a central 2 million tonne per annum processing plant to be fed by open pit mining operations at Sconi.

1Australian Mines Limited, Study places Sconi as low-cost cobalt and nickel producer, released 12 February 2019 2Australian Mines Limited, Queensland Government provides Sconi Prescribed Project status, released 25 January 2019 3Australian Mines Limited, Land acquisition reinforces AUZ's commitment to Sconi, released 22 January 2019 4Australian Mines Limited, Growth potential of Sconi Cobalt-Nickel Project continues, released 21 January 2019 5Australian Mines Limited, BFS supports strong commercial case for developing Sconi, released 20 November 2018

Key financial metrics modelled in the BFS included: $512 million average annual revenue; $295 million average annual EBITDA; and a 5.2-year payback period. Detailed modelling of the proposed development also indicated 500 jobs would be created during the construction phase at Sconi followed by 300 full time positions once the operation reached steady-state.

Australian Mines continues to operate its demonstration-size processing plant in Perth,Western Australia, where it set a benchmark in July 2018 with the largest sample of cobalt sulphate and nickel sulphate exported from Australia, which was produced from the plant using Sconi ore1.

OTHER PROJECTS AND CORPORATE ACTIVITY

Australian Mines' project portfolio includes the Flemington Cobalt-Nickel-Scandium Project in central New South Wales, where the Company completed the acquisition of 100% interest in the Project in December 20182.This dominant landholding in the prospective Flemington-Sunrise (Fifield) region of NSW provides an opportunity to significantly increase the current Mineral Resource at Flemington over the coming quarters by a targeted drilling program.

The process to spin-out and list Australian Mines' previous gold and copper assets in Western Australia on the ASX was successfully implemented3 in the period, with official quotation of Norwest Minerals Limited's ordinary fully paid shares commencing on 29 November 2018 (ASX Code: NWM).The Company is currently the largest shareholder in Norwest, holding 18 million NWM shares, which equates to a 28.63% stake that is escrowed for 24 months to 27 November 2020.

REVIEW OF OPERATIONS

The Group made a loss for the six months ended 31 December 2018 of $5,561,253. This compares with a loss of $1,539,319 for the six months ended 31 December 2017.

A comparison of the consolidated financial performance is included in the table below.

FINANCIALS	Six months ended 31 December 2018 $000	Six months ended 31 December 2017 $000
Revenue from operating activities	-	-
Net loss	(5,561)	(1,539)
Cash and cash equivalents	587	16,078

1Australian Mines, AUZ to export largest sample of battery-grade material from Australia, released 2 July 2018 2Jervois Mining Limited, NSW government approval to transfer Flemington to AUZ, released 6 December 2018 3Australian Mines Limited, Norwest Minerals Spin-off and listing implemented, released 29 November 2018

LEAD AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration required under Section 307C of the Corporation's Act 2001 is set out on page 4 and forms part of the director's report for the six months ended 31 December 2018.

Signed in accordance with a resolution of Directors

Benjamin Bell

Managing Director Perth

Dated: 13 March, 2019