Marmota Energy Limited

Consolidated Entity

ABN 38 119 270 816

Consolidated Financial Statements for the year ended 30 June 2016

CORPORATE DIRECTORY

Marmota Energy Limited

ABN 38 119 270 816

Incorporated in SA

Registered Office

Unit 6, 79-81 Brighton Road

Glenelg SA 5045

Telephone: (08) 8294 0899

Facsimile: (08) 8376 8633

Email: [email protected]

Share Registrar

Link Market Services Limited Locked Bag A14

Sydney South NSW 1235 Telephone: +61 1300 554 474

Facsimile: +61 2 9287 0303

Email: [email protected] Website: www.linkmarketservices.com.au

Auditor

Grant Thornton Chartered Accountants 67 Greenhill Road

Wayville SA 5034

Directors' Report

The Directors present their report on Marmota Energy Limited - consolidated entity ('Group') for the year ended 30 June 2016 and the auditor's report thereon.

Directors

The Directors of Marmota Energy Limited ('the Company') at any time during or since the end of the financial year are as set out below. Details of Directors' qualifications, experience and special responsibilities are as follows:

Dr Colin Rose Non-Executive Chairman

PhD (Economics)

Experience and expertise

Dr Rose has been non-executive Chairman of Marmota Energy since 1 May 2015. Dr Colin Rose holds a PhD in Economics from the University of Sydney. He is a long-term fundamentals investor in the mining and exploration sector, with particular exposure to gold and copper. He has extensive business experience as the founder and director of a technology company whose software is used in over 55 countries. He has been invited to speak to the Reserve Bank of Australia, the Bank of England, the National Bureau of Economic Research (USA), and the London School of Economics (Financial Markets Group).

Responsibilities

Special responsibilities included membership of the Audit, Governance and Remuneration Committee.

Interests in Shares and Options (as at 20 September 2016): 55,424,805 ordinary shares

Mr Peter Thompson Non-Executive Director

BSc Hons (Geology), MSc (Mineral Exploration and Mining Geology)

Experience and expertise

Mr Thompson has been a Board member since 26 May 2015. He is a Geologist with significant industry experience in both Exploration and Mining roles. Educated at Trinity College Dublin (BSc Hons - Geology) and Leicester University (MSc - Mineral Exploration and Mining Geology), he has worked in exploration for gold, copper, nickel and platinoids, and in open pit and underground gold mines. Over a career of 27 years, Mr Thompson has worked for BCD Resources NL as CEO, at St Barbara Mines Limited as General Manager Exploration, as well as holding senior exploration and project development roles with Jubilee Mines NL, Anaconda Nickel Ltd and Western Mining Corporation. At St Barbara Mines, Mr Thompson's responsibility included managing a team of 22 geoscientists. In addition to being responsible for the discovery of several nickel and gold deposits, he has extensive mining and corporate development experience.

Responsibilities

Special responsibilities included Chair of the Audit, Governance and Remuneration Committee.

Current and former directorships in the last 3 years

Mr Thompson was CEO and Managing Director of Central Asia Resources NL (ASX:CVR) from 4 July 2014 to 8 February 2016 and a Non Executive Director from that time until 5 September 2016. He is the CEO and Managing Director of Capricorn Metals Ltd (ASX: CMM) since 3 February 2016.

Interests in Shares and Options (as at 20 September 2016): 1,700,000 ordinary shares

Directors (continued)

Mr Lindsay David Hale Williams Managing Director and Company Secretary

LLB, BComm, MAICD

Experience and expertise

Mr Williams has been Managing Director since 9 September 2014 and Company Secretary since 1 July 2015. Mr Williams has held the position of Managing Director of a number of ASX listed and unlisted companies in various sectors and brings 20 years of experience in the energy and resource industry. This has included minerals companies in exploration, production, developing new mines and reviewing commerciality of existing operations. Energy sector experience has ranged from operation and expansion of gas transport infrastructure, buying and selling gas, exploration and production of oil and gas. He has demonstrated ability to develop and implement major strategic directional changes including capital raisings, acquisitions and mergers, cost and labour reductions. Mr Williams was previously Chairman of Lithex Resources Limited (ASX:LTX), a graphite and nickel explorer, and President of Heathgate Resources Pty Ltd, the owner and operator of the Beverley uranium mine in South Australia.

Responsibilities

Mr Williams is also the Company Secretary with effect from 1 July 2015.

Current and former directorships in the last 3 years

Mr Williams was Chairman of Lithex Resources Limited (during 2013) and of Plus Connect Limited (from 2013 to 2014). He is currently the Federal Secretary and a Director of the Petroleum Exploration Society of Australia Limited (director since 2014) and a Director of Endeavour Discoveries Limited from 24 August 2016 and Wilgena Resources Limited from 9 September 2016.

Interests in Shares and Options (as at 20 September 2016): nil

Directors' meetings

The number of Directors' meetings and number of meetings attended by each of the Directors of the Company (including committees of Directors) during the financial year were as follows:

Directors' Meetings

Audit, Governance and Remuneration Committee

Meetings

Number Eligible

to attend Number attended

Number Eligible

to attend Number attended

Director

Dr Colin Rose 10 10 3 3

Peter Thompson 10 10 3 3

David Williams 10 10 - -

Company Secretary

From 1 July 2015, the Managing Director of the Company, Mr Williams, has also held the position of Company Secretary in addition to his role as Managing Director.

Principal activities

The Group's principal activity is minerals exploration.

Review and results of operations

During the Financial Year, Marmota focused its exploration efforts on its highly prospective gold tenements in the Gawler Craton Basin. On the copper side, the company produced its first Exploration Target at Marmota's Champion prospect at West Melton, reported in accordance with the JORC Code (2012). The Company's uranium interests in the Junction Dam uranium project are currently on the backburner.

Corporate

Major cost saving measures were implemented which led to savings estimated to be around $700,000 per annum when compared to the year to June 2015. Nearly $1,500,000 in capital was raised (before costs) through a combination of a Share Purchase Plan (which was doubly oversubscribed), placements (including a $250,000 placement to Yandal Investments, the investment vehicle of Mr Mark Creasy, and a placement of over $525,000 to Southern Cross Capital) and the exercise of listed and unlisted options. Marmota is very pleased to have participated in the new Exploration Development Incentive (EDI) scheme under which Marmota distributed

$170,000 of EDI Taxation Credits back to our shareholders. Marmota expects to participate in the EDI scheme again in the forthcoming year, for the benefit of our shareholders.

Gawler Craton Gold Project

In July, Marmota launched an aggressive gold exploration program across its prime tenement holdings around the Challenger gold mine. Marmota has adopted the same calcrete sampling methodology that was used to find Challenger -- to highlight areas of gold anomalism with the potential for Challenger-style gold mineralisation. At the same time, Marmota has significantly consolidated and expanded its dominant holding position in the region - a process which culminated in Marmota assuming 100% ownership and control of the Aurora Tank gold tenement shortly after the end of the Financial Year. This has enabled Marmota to also focus on Aurora Tanks' gold potentiality and commence a new drilling program at Aurora Tank in September 2016.

Targets of the first half of the Financial Year produced disappointing results. In the second half of the year, a new geological team commenced. Dr Kevin Wills joined the team as Chief Consulting Geologist and has led a reboot of the exploration strategy in this region. A Taskforce approach has been adopted whereby the team will methodically and systematically work through the tenements, refining areas of gold anomalism and drill test targets.

On 4 November 2015, Marmota made a formal open offer of $2 million for the Challenger Gold Mine, owned by Kingsgate Consolidated Limited (ASX: KCN). The terms of the offer are identical (as disclosed) to the offer made by WPG Resources Limited (ASX: WPG), but at twice the price. Kingsgate did not accept the offer, noting that the offer was unfunded (as indeed was the WPG offer). On 7 December 2015, Marmota entered into a binding Heads of Agreement with Asymmetric Investment Management Pty Ltd (a WA based hedge fund) to effect that Marmota's

$2m offer for the Challenger Gold Mine (and related assets) was fully funded. Marmota also announced underground mining specialists, Byrnecut Australia Pty Ltd, as preferred contract operator to operate the mine, contingent on Marmota's bid being successful. Marmota did not receive a reply from Kingsgate to same. Kingsgate announced that they agreed to sell Challenger to WPG, at half the price offered by Marmota, in the March 2016 Quarter and that sale was subsequently concluded.

Melton Copper Project (Copper Coast)

With the strong focus on the Gawler Craton Gold Project, limited opportunities were presented during the period to undertake activities on the Melton Copper Project. However, in April 2016, Marmota undertook a drilling program to test 4 target areas outside the Champion prospect to test for additional copper mineralisation in areas surrounding the Champion prospect, on the West Melton tenement. Whilst the drilling results provided useful information regarding the geology in the area, it did not produce any Champion look-alikes. In June, a complete review of all the data regarding the Champion Copper Prospect, in particular the 2014 drilling results, led to Marmota producing its first Exploration Target of Marmota's Champion prospect at West Melton, reported in accordance with the JORC Code (2012). The outcome of this review is quite exciting with the overall Exploration Target derived as from 1 to 4 million tonnes at a grade between 1.0% and 1.5% copper*. It is worth noting that the Exploration Target has eight open intersections in the areas drilled and only includes secondary mineralisation close to the surface; intersected sulphides have not been included in the estimate.