First Graphite : 11-03-2016: Half Year Account

4f227d30-1951-496d-9a9e-0fa96fd73383.pdf

(Formerly MRL Corporation Limited)

ACN 007 870 760

INTERIM FINANCIAL REPORT

For the Half Year Ended 31 December 2015

Directors Corporate Directory Share Registry

Warwick Grigor (Chairman)

Craig McGuckin (Managing Director)

Peter R. Youd (Executive Director)

Denis Geldard (Non-Executive Director)

Chris Banasik (Non-Executive Director)

Company Secretary

Peter R. Youd

Principal Registered Office in Australia

Suite 3

9 Hampden Road

Nedlands WA 6009

Telephone: [phone]

Facsimile: [phone]

Email: [e-mail] Website: www.firstgraphite.com.au

Stock Exchange Listing

The Company is listed on the Australian Securities Exchange Limited under the trading codes FGR, FGROA and FGROB

Automic Registry Services Level 1, 7 Ventnor Avenue West Perth W.A. 6005

Telephone: [phone]

Facsimile: [phone]

Auditor

BDO Audit (WA) Pty Ltd 38 Station Street

Subiaco WA 6008

Solicitors - Australia Steinepreis Paganin Lawyers and Consultants Level 4,

The Read Buildings 16 Milligan Street

Perth WA 6000

Solicitors - Sri Lanka

Varners

Level 14, West Tower World Trade Centre Echelon Square Colombo 01

Sri Lanka

Bankers

Westpac Banking Corporation Level 6

109 St Georges Terrace Perth WA 6000

Contents

Corporate Directory 2

Directors' Report 4

Auditors Independence Declaration 5

Consolidated Statement of Profit or Loss and Other Comprehensive Income 6

Consolidated Statement of Financial Position 7

Consolidated Statement of Changes in Equity 8

Consolidated Statement of Cash Flows 9

Notes to the Consolidated Financial Statements 10

1. Basis of Preparation of half-year financial statements 10

   Accounting policies 10

2. Segment information. 11

3. Revenue and other income 12

4. Other Current Assets 12

5. Exploration and evaluation expenditure. 12

6. Issued Capital 13

7. Dividends 14

8. Subsequent events after Reporting Date 14

9. Capital Commitments 14

10. Contingent Liabilities and Contingent Assets 14

11. Fair Value measurement of financial instruments 14

12. Share based payments 15

Directors Declaration 16

Independent Auditors Report 17

Additional Securities Information 19

Additional Securities Information 20

Directors' Report

Your Directors present their report on the consolidated entity (referred to hereafter as the "Group") consisting of First Graphite Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2015.

DIRECTORS

The following persons were Directors of First Graphite Limited during the half-year and up to the date of this report:

• Warwick Grigor (appointed 4 December 2015)

  
  

• Craig Robert McGuckin

  
  

• Peter Richard Youd

  
  

• Denis Geldard

  
  

• Chris Banasik

  
  

• Peter Hepburn-Brown (resigned 20 November 2015)

REVIEW AND RESULTS OF OPERATIONS Operating Results

Net operating loss after tax for the half-year ended 31 December 2015 was $2,520,265 (2014: $2,065,621), of which $443,109 (2014: 769,991) were non-cash expenses.

Review of Operations and Changes in State of Affairs

The key areas of activity during the half were:

• Commencement of an extensive research and development program at the University of Adelaide on commercial graphene production.

• Continued development of mine projects at Pandeniya and Aluketiya

• Further exploration drilling at the Company's projects

AUDITORS INDEPENDENCE DECLARATION

A copy of the auditor's independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 5.

Signed in accordance with a resolution of Directors and on behalf of the Directors by:

Craig McGuckin Managing Director Nedlands, 11 March 2016

Tel: [phone]

Fax: [phone]

www.bdo.com.au

38 Station Street

Subiaco, WA 6008

PO Box 700 West Perth WA 6872 Australia

DECLARATION OF INDEPENDENCE BY PHILLIP MURDOCH TO THE DIRECTORS OF FIRST GRAPHITE LIMITED

As lead auditor for the review of First Graphite Limited for the half-year ended 31 December 2015, 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 First Graphite limited and the entities it controlled during the period.

Phillip Murdoch

Director

BDO Audit (WA) Pty Ltd

Perth, 11 March 2016

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

First Graphite Limited Consolidated Financial Report - December 2015 Page 5

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Half-Year Ended 31 December 2015

2015 Half-Year 2014

Revenue from continuing operations

Note

$ $

Other income 3 908 136,566

908 136,566

Exploration and evaluation expenditure	(1,289,825)	(770,781)
Legal expenses	(33,783)	(22,072)
Occupancy expenses	(115,702)	(66,033)
Employee benefit expenses	(9,826)	(2,918)
Depreciation and amortisation	(13,519)	(5,771)
Share based payment expense	12	(405,079)	(764,220)
Other expenses from ordinary activities	(653,439) (570,392)
(Loss) from continuing operations before tax
expense	(2,520,265) (2,065,621)
Income tax benefit/(expense) (Loss) after tax from continuing operations	- - (2,520,265) (2,065,621)

Other comprehensive income

Items which may be reclassified to the profit or loss

Foreign currency translation difference on foreign

operations (119,980) 21,734

Total comprehensive loss for the period

attributable to the owners of First Graphite Limited (2,640,245) (2,043,887)

Basic (loss) per share (cents per share)	(1.15)	(1.29)
Diluted (loss) per share (cents per share)	(1.15)	(1.29)

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

Consolidated Statement of Financial Position As at 31 December 2015

Note	31 30 December June 2015 2015
$ $
Current Assets
Cash and cash equivalents	3,135,303 1,055,093
Trade and other receivables	59,472 36,172
Other current assets	4	42,466 32,339
Total Current Assets	3,237,241 1,123,604
Non-Current Assets
Exploration and evaluation assets	5	1,868,934 1,910,640
Property, plant and equipment	261,554 61,556
Total Non-Current Assets	2,130,488 1,972,196
Total Assets	5,367,729 3,095,800
Current Liabilities
Trade and other payables	678,076 484,782
Total Current Liabilities	678,076 484,782
Total Liabilities	678,076 484,782
Net Assets	4,689,653 2,611,018
Equity Issued capital	6	65,057,796 60,743,995
Reserves	3,448,157 3,163,058
Accumulated losses	(63,816,300) (61,296,035)
Total Equity	4,689,653 2,611,018

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

Consolidated Statement of Changes in Equity For Half-Year Ended 31 December 2015

Issued capital	Share based	Translation reserve	Accumulated	Total equity
payments reserve	losses

As at 1 July 2015	60,743,995	2,848,053	315,005	(61,296,035)	2,611,018
Profit/(loss) for the period	-	-	-	(2,520,265)	(2,520,265)
Other comprehensive income	-	-	(119,980)	-	(119,980)
Total comprehensive income for the period Transactions with owners in their capacity as owners Share placement during the period	4,578,791	- -	(119,980) -	(2,520,265) -	(2,640,245) 4,578,791
Share placement to employee	-	-	-	-	-
Share issue costs	(264,990)	-	-	-	(264,990)
Issue of options	-	405,079	-	-	405,079
Balance at 31 December 2015	65,057,796	3,253,132	195,025	(63,816,300)	4,689,653

Issued capital	Share based	Translation reserve	Accumulated	Total equity
payments reserve	losses

As at 1 July 2014	58,281,263	2,094,333	112,530	(57,893,088)	2,595,038
Profit/(loss) for the period	-	-	-	(2,065,621)	(2,065,621)
Other comprehensive income	-	-	21,734	-	21,734
Total comprehensive income for the period	-	-	21,734	(2,065,621)	(2,043,887)
Transactions with owners in their capacity as
owners
Share placement during the period	1,598,000	-	-	-	1,598,000
Share placement to employee	10,500	-	-	-	10,500
Share issue costs	(75,768)	-	-	-	(75,768)
Issue of options	-	753,720	-	-	753,720
Balance at 31 December 2014	59,813,995	2,848,053	134,264	(59,958,709)	2,837,603

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

Consolidated Statement of Cash Flows

For the Half-Year Ended 31 December 2015

2015 Half-Year 2014

$ $

Cash flows from operating activities Payments to suppliers and employees	(802,007)	(507,354)
Payments for exploration and evaluation	(1,211,883)	(639,368)
Interest received	5,285	11,108
Net cash outflows from operating activities	(2,008,605)	(1,135,614)
Cash flows from investing activities Payments for property, plant and equipment	(220,610)	(5,433)
Net cash (outflows)/inflows from investing

activities (220,610) (5,433)

Cash flow from financing activities Proceeds from placement of shares	4,578,791	1,148,000
Payment for share issue costs	(264,990)	(75,768)
Net cash inflows from financing activities	4,313,801	1,072,232
Net increase/(decrease) in cash and cash
equivalents	2,084,586	(68,815)
Exchange rate adjustments	(4,376)	82,795
Cash and cash equivalents at beginning of the period	1,055,093	1,230,499
Cash at the end of the period	3,135,303	1,244,479

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

Notes to the Consolidated Financial Statements

1. Basis of Preparation of half-year financial statements

   This consolidated interim financial report for the half-year reporting period ended 31December 2015 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

   
   

   This consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Annual Financial Statements of First Graphite Limited as at 30 June 2015 and any public announcements made by First Graphite Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

   
   

   Accounting policies

   The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except as set out below:

   
   

2. New and amended standards adopted by the group

   A number of new or amended standards became applicable for the current reporting period, however, the group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards. There will be some changes to the disclosures in the 30 June 2015 annual report as a consequence of these amendments.

3. Impact of standards issued but not yet applied by the entity

The consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) which are relevant to its operations and effective for the current reporting period. The adoption of all the new and revised Standards and Interpretations has not resulted in any changes to the consolidated entity's accounting policies and has had no effect on the amounts reported for the current or prior periods.

Notes to the Consolidated Financial Statements




4. Segment information

   
   
5. Identification of reportable segments

   
   

   The Group has identified its operating segments based on the internal reports which are reviewed and used by the Board (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

   The existing operating segments are identified by management based on the manner in which the Group's operations were carried out during the financial year. Discrete financial information about each of these operating businesses is reported to the Board on a monthly basis.

   The reportable segments are based on aggregated operating segments determined by the similarity of the asset base and revenue or income streams, as these are the sources of the Group's major risks and have the most effect on the rates of return. The Group's segment information for the current reporting period is reported based on the following segments:

   Mining and exploration activities

   
   

   The Board has determined the Company has one reportable segment, being mineral exploration and development in Sri Lanka. As the Company is focused on mineral exploration, the Board monitors the Company based on actual verses budgeted exploration expenditure incurred by area of interest.

   Corporate services

   
   

   This segment reflects the overheads associated with maintaining the ASX listed MRL corporate structure, identification of new assets and general management of an ASX listed entity.

   Business Segment Exploration Corporate Service Total

   31

   December

   2015

   31

   December

   2014

   31

   December

   2015

   31

   December

   2014

   31

   December

   2015

   31

   December

   2014

   A$ A$ A$ A$ A$ A$

   
   

   Interest revenue 1,670 5,169 3,615 5,939 5,285 11,108 Foreign exchange

   gain/(loss) 1,545 (1) (5,922) 81,483 (4,377) 81,482

   Operating loss (756,943) (400,896) (1,763,322) (1,664,725) (2,520,265) (2,065,621)

   Depreciation

   expense (12,157) (4,409) (1,362) (1,362) (13,519) (5,771)

   
   

   Business Segment Exploration Corporate Service Total

   31

   December

   2015

   30 June

   2015

   31

   December

   2015

   30 June

   2015

   31

   December

   2015

   30 June

   2015

   A$ A$ A$ A$ A$ A$ Segment assets 247,061 1,541,325 5,120,668 1,554,475 5,367,729 3,095,800

   Segment liabilities 48,300 21,852 629,676 462,931 678,076 484,783

   
   

   
   

   Notes to the Consolidated Financial Statements

   
   

6. Revenue and other income

   
   

   31

   December

   2015

   $

   31

   December

   2014

   $

   Interest revenue 5,285 11,108

   Realisation of foreign currency reserve upon

   deconsolidation of Kumai Group - 43,975 Foreign exchange (loss)/gain (4,377) 81,482

   908 136,565

   
   

7. Other Current Assets

   
   

   
   

   Current

   31 December

   2015

   $

   30 June

   2015

   $

   Security deposits 7,040 7,040

   Prepayments 35,426 25,299

   42,466 32,339

   
   

8. Exploration and evaluation expenditure




31 December

2015

$

30 June

2015

$




Opening balance 1,910,640 1,333,325

Foreign currency translation adjustment (41,706) 127,315 Share based payment for acquisition 31 October

20141 - 450,000

Total exploration and evaluations expenditure 1,868,934 1,910,640







1 In accordance with the second stage of the agreement with The Supreme Group of Sri Lanka for the acquisition of graphite exploration licences, 5,000,000 vendor shares in FGR were issued to the Supreme Group at $0.09 per share.