Caeneus Minerals Ltd‌

ACN 082 593 235

and its controlled entity

Annual report for the financial year ended 30 June 2015

Corporate directory

Board of Directors

Mr Keith Bowker Non-Executive Director

Mr Antony Sage Non-Executive Director

Mr Michael Nottas Non-Executive Director

Company Secretary

Mr Keith Bowker

Registered and Principal Office

Suite 1, 56 Kings Park Road

West Perth, Western Australia 6005 Tel: +61 8 9481 0544

Fax: +61 8 9481 0655

Postal Address

PO Box 964

West Perth, Western Australia 6872

Website

Website: www.caeneus.com.au

Auditors

Stantons International Level 2, 1 Walker Avenue

West Perth, Western Australia 6005

Share Registry

Advanced Share Registry Ltd 110 Stirling Highway

Nedlands, Western Australia 6009 Tel: +61 8 9389 8033

Fax: +61 8 9262 3723

Stock Exchange

Australian Securities Exchange Limited Level 40, Central Park

Directorships of other listed companies

Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are as follows:

Name Company Period of directorship

Keith Bowker Vortex Pipes Limited 2012-2013

Antony Sage Cape Lambert Resources Limited Cauldron Energy Limited

Fe Ltd

Global Strategic Metals NL Kupang Resources Limited International Goldfields Limited

International Petroleum Limited (NSX) African Petroleum Corporation Ltd (NSX)

Since 2000

Since 2009

Since 2009

Since 2012

Since 2012

2009-2013

2006-2013

2007-2013

Directorsí shareholdings

The following table sets out each directorís relevant interest in shares and options in shares of the Company or a related body corporate as at the date of this report:

Directors

Fully paid ordinary shares

Number

Share options

Number

Keith Bowker 14,692,191 14,692,191

Antony Sage 35,000,000 -

Michael Nottas - -

There has not been any movement in the directorsí shareholdings or options holdings since the start of the financial year until the date of this report except for the exercise of 10,000,000 options by Antony Sage (refer to the remuneration report on page 12 for further details).

Share options granted to directors and senior management

No options over ordinary shares or shares in the Company were granted as remuneration to the Companyís directors or any of its employees during the current year (2014: nil).

Company Secretary

Mr Keith Bowker held the position of company secretary of Caeneus Minerals Ltd at the end of the financial year. Mr Bowker is a founding director of Somerville Advisory Group, a company specialising in providing company secretarial, corporate governance and corporate advisory services.

Dividends

No dividends have been paid or declared since the start of the financial year and the directors have not recommended the payment of a dividend in respect of the financial year.

Shares under option or issued on exercise of options

Details of unissued shares or interests under option as at the date of this report are:

Issuing entity Grant date Number ofshares

under option

Class of shares

Exercise price of

Expiry date of

options

1. Options issued by the then Matrix Metals Limited pursuant to a Prospectus dated 13 December 2011.

2. Options issued in consideration for the acquisition of Caeneus Minerals Pty Ltd (ASX announcement dated 24 December 2013).

   The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company or of any other body corporate or registered scheme.

   There have been no options granted over unissued shares or interests or interest of any controlled entity within the Group during or since the end of the reporting period.

   
   

   Shares issued on the exercise of options

   20,500,000 shares were issued during or since the end of the financial year as a result of exercise of options (2014: 10,000,000).

   
   

   Indemnification of officers and auditors

   During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above), the company secretary, Mr Keith Bowker, and all executive officers of the Company and of any related body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

   
   

   The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.

   
   

   Directorsí meetings

   No meetings of the board of directors were held during or since the end of the financial year. The directors maintained frequent communications and as such, all important issues and decisions were authorised and resolved via circular resolutions.

   
   

   Proceedings on behalf of the Company

   No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

   
   

   Non-audit services

   The auditors did not perform any non-audit services during the financial year.

   
   

   Auditorís independence declaration

   The auditorís independence declaration is included on page 15 of this annual report.

   Operating and financial review

   Principal activities

   Caeneus Minerals Ltd is an Australian-based mineral exploration and development company established for the purpose of acquiring a portfolio of highly prospective exploration projects or near term development projects in Australia.

   
   

   Operating results

   The consolidated loss of the Group for the financial year, after providing for income tax, amounted to

   $1,422,717 (2014: $3,034,797). The consolidated loss resulted primarily from a non-cash impairment of exploration and evaluation expenditure of $860,405. Further discussion on the Groupís operations is provided below:

   
   

   Review of operations

   
   

   Sale of Wee MacGregor Project

   On 17 July 2014, the Company announced that it had reached an agreement with private entity Mining International Pty Ltd (Mining International) (ACN 148 214 608) to transfer 100% of the Companyís interests in the Wee MacGregor Project in Queensland. Mining International is a wholly owned subsidiary of Cape Lambert Resources Ltd (ASX: CFE). The disposal of these assets was part of the Companyís ongoing strategy of rationalising less prospective non-core assets to help reduce administrative costs and accelerate further exploration and realisation of the Companyís core assets such as the Supernova and Mt Davis Projects.

   
   

   Acquisition of contractual rights to mine at Silver Swan

   On 21 May 2015, after several months of negotiations, the Company announced that it has entered into a binding agreement (ìAgreementî) with Poseidon Nickel Limited (ìPoseidonî) (ASX: POS) to acquire the contractual rights (ìAcquisitionî) to mine the Silver Swan underground nickel mine which has been on care and maintenance since February 2009, located 55km north-east of Kalgoorlie in Western Australia.

   Under the Agreement, Caeneus Minerals Ltd will acquire a beneficial interest in tenement ML 27/200, which contains the Silver Swan underground nickel mine and has been granted a right to mine, remove and sell nickel ore above a grade of 2% Ni as well as to undertake exploration for nickel from the existing underground decline below a depth of 100m. Poseidon will also grant Caeneus a licence to enter the tenements and the right to utilise existing surface infrastructure and access tenements to facilitate underground mining operations.

   The Agreement remains subject to satisfaction of conditions precedent including completion of due diligence (now completed) and shareholder and all necessary regulatory approval.

   The consideration payable by Caeneus to Poseidon for the Acquisition is:

   • a deposit of $150,000 plus GST being settled via the issue of 10,714,286 fully paid ordinary shares in the Company at a deemed issue price of $0.014 each plus cash of $15,000 being the GST component. The shares were issued on 22 May 2015 and the $15,000 was paid on the same day.

   • a completion payment of $1,350,000 plus GST on or before 14 September 2015; and

   • reimbursement of care and maintenance costs from 1 April 2015 to 14 September 2015 estimated at $1.5m and continuing thereafter.

     
     

     On 11 September 2015, the Company terminated the Agreement as it was unsuccessful in raising the required funds to complete the transaction. On 14 September 2015, Poseidon acknowledged the termination of the Agreement via a letter to the Company detailing a total amount of $947,352 outstanding representing care and maintenance costs. Poseidon indicated in the letter that it has the rights to be reimbursed these costs by either a cash payment or an issue of shares in the Company at its

     election. Representatives from the Company and Poseidon are currently into negotiations and are discussing the liability of these outstanding costs as well as their repayment. The directors of the Company believe that these costs are not payable as the binding agreement was terminated before completion occurred.

     
     

     Issue of convertible notes

     On 11 August 2015, the Company raised $150,000 via the issue of 150,000 convertible notes at $1.00 each. The funds raised from these convertible notes were used for working capital purposes.

     Projects

     Supernova Project

     The Supernova Project is located on tenement E69/3066 approximately 125km east of the gold mining centre of Norseman in Western Australia (refer Figure 1). The Project is situated within the Proterozoic Albany-Fraser Mobile Belt (Belt) on the south-east margin of the Yilgarn Craton. The Belt hosts the Fraser Complex which is a series of layered mafic intrusions where recently a new nickel province has emerged following the discovery of the Nova-Bollinger deposits by Sirius Resources Ltd.

     
     

     Figure 1: Location of Supernova Project

     
     

     The Project is surrounded by explorers with ground within the layered gabbro units of the Fraser Complex, with local Prospects showing elevated copper, nickel, cobalt and PGEís from soil sampling and drilling. Nearby companies with notable results include Enterprise Metals Ltd, Sheffield Resources Ltd, Matsa Resources Ltd and Sirius Resources Ltd just 23km NNE of the Supernova Project.

     
     

     Very little exploration has previously been carried out on tenement E69/3066, with only a small dimension stone quarry present in the middle of the lease. This quarry was mining ìblack graniteî from a doleritic intrusive mafic reminiscent of nickeliferrous host rocks occurring at nearby local prospects. Recent field work conducted by Caeneus Minerals Ltd included a geochemical soils program targeting magmatic nickel sulphides. The east-west program comprised 150 samples with 100m spacing over 400m spaced lines. Samples were submitted to Quantum Analytical Laboratories in Welshpool, Western Australia for multi element analysis. Results revealed a multi-element soil anomaly centred over the area of the quarry where intrusive mafic rocks outcrop. The program identified a positive area some 2km long and 300m wide with coincident Ni, Cu, Cr and Co that warrants additional investigation.

     Further work programs will include more detailed infill soil sampling and rock-chip sampling followed with a combination of detailed magnetic, gravity and electromagnetic surveying to delineate subsurface primary sulphide mineralisation and provide more discrete targets for drilling.

     
     

     Mt Davis Project

     The Mt Davis Project near Leonora in Western Australia comprises eight (8) contiguous prospecting licences totalling 1287ha, formerly held by Jupiter Mines Ltd and then Bligh Resources Ltd (refer to Figure 2).

     
     

     Figure 2: Mt Davis tenements

     
     

     The Leonora area has a long and rich gold mining history and the geology for the Mt Davis tenements has gold mineralisation associated with pyritic quartz veins in sheared mafic volcanics. The tenements are situated approximately 6km southeast of the Tarmoola Gold Mine that has produced over 3M oz of gold. The leases run parallel to the northwest to southeast trending mafic units that host the Tarmoola Deposit. P37/7803 surrounds (but does not include) the historic Grattan Well mining centre.

     
     

     The western sector of the Mt Davis area is underlain by a north-northwest trending sequence of metamorphosed high magnesium basalts, dolerite-gabbro intrusives and ultramafic lenses, which occupy areas of low relief often covered by superficial alluvium and soil. Over the eastern sector of the property, high relief ridges formed of steep easterly dipping banded chert and jaspilite are enclosed by less resistant strongly foliated volcaniclastic metasediments, inter-layered by felsic volcanics and minor mafic and ultramafic flows.

     
     

     The regionally significant Mt George fault structure is interpreted to run through the property in a north-northwest direction and to mark the contact zone between mafic and ultramafic volcanic and intrusive rocks to the west and metasediments, banded chert horizons and felsic volcanic sequences to the east. This major shear zone manifests itself as a series of parallel shears; the southwest shear running through the small Grattan Well open-cut is called the Grattan Well shear, the central is referred to as the Clifford shear, while the easterly is known as the Mt George fault structure and is associated with gold mineralisation at Mt Davis.

     Subsequent events

     On 28 July 2015, the Company announced that Poseidon Nickel Limited (ìPoseidonî) (ASX: POS) has agreed to extend the completion date for its acquisition of the contractual rights to mine at Silver Swan nickel mine (ìCompletion Dateî) from 1 August 2015 to 14 September 2015 (ìrevised Completion Dateî). In consideration for Poseidon agreeing to extend the Completion Date, Poseidon may elect to be either:

   • reimbursed the care and maintenance costs for the period 1 August 2015 to the revised Completion Date in the sum of $300,000 in cash; or

   • issued the number of fully paid ordinary shares in Caeneus which when multiplied by the lower of the actual price of the capital raising being undertaken and the 5 day VWAP for shares prior to the revised Completion Date will equal $300,000.

     On 11 August 2015, the Company announced it has raised $150,000 via the issue of 150,000 convertible notes at $1.00 each.

     On 11 September 2015, the Company announced that it had terminated the binding agreement with Poseidon Nickel Limited in relation to the Companyís acquisition of contractual rights to mine the Silver Swan underground nickel mine. The Company was unsuccessful in raising the required funds to complete the transaction. On 14 September 2015, Poseidon acknowledged the termination of the binding agreement via a letter to the Company detailing a total amount of $947,352 outstanding representing care and maintenance costs. Poseidon indicated in the letter that it has rights to be reimbursed these costs by either a cash payment or an issue of shares in the Company at its election. Representatives from the Company and Poseidon are currently into negotiations and are discussing the liability of these outstanding costs as well as their repayment. The directors of the Company believe that these costs are not payable as the binding agreement was terminated before completion occurred.

     Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

     
     

     Future developments, prospects and business strategies

     Disclosure of detailed information on likely developments in the operations of the Group and the expected results of operations have not been included in this annual financial report because the directors believe it would likely to result in unreasonable prejudice to the Group. The Group will continue with the process of identifying and assessing new investments opportunities and assets for acquisition for its future growth prospects with a focus on nickel and base metals.

     
     

     Environmental regulations

     The Groupís operations are not subject to significant environmental regulation under the Australian Commonwealth or State law.

     
     

     Corporate governance

     The directors support and adhere to the principles of corporate governance, recognising the need for the highest standard of corporate behaviour and accountability. The Companyís Corporate Governance Statement and its compliance with ASX guidelines can be found on the Companyís website at www.caeneus.com.au. The policies and compliance as stated were in place for the whole year and are current as at the date of this report.

     Remuneration report (audited)

     This remuneration report, which forms part of the directorsí report, sets out information about the remuneration of Caeneus Minerals Ltdís key management personnel for the financial year ended 30 June 2015. The term ëkey management personnelí refers to those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. The prescribed details for each person covered by this report are detailed below under the following headings:

     
     

   • key management personnel

   • remuneration policy

   • relationship between the remuneration policy and Group performance

   • remuneration of key management personnel

   • key terms of employment contracts.

Key management personnel

The directors and other key management personnel of the Group during or since the end of the financial year were:

Non-executive directors Position

Mr Keith Bowker Non-executive director

Mr Antony Sage Non-executive director

Mr Michael Nottas Non-executive director

Mr Jefferey Hamilton (resigned 17 July 2014) Non-executive director

Except as noted, the named persons held their current position for the whole of the financial year and since the end of the financial year.

Remuneration policy

Caeneusís remuneration policy, which is set out below, is designed to promote superior performance and long term commitment to the Group.

As at the date of this report, the Group has three (3) non-executive directors. As set out below, total remuneration costs for the 2015 financial year were $197,386 up from $89,582 for the previous financial year.

Non-executive director remuneration

Non-executive directors are remunerated by way of fees, in the form of cash, non-cash benefits, and do not normally participate in schemes designed for the remuneration of executives.

Shareholder approval must be obtained in relation to the overall limit set for the non-executive directorsí fees. The maximum aggregate remuneration approved by shareholders for non-executive directors is $300,000 per annum. The directors set the individual non-executive director fees within the limit approved by shareholders.

Executive director remuneration

Executive directors receive a base remuneration which is market related, and may be entitled to performance based remuneration, which is determined on an annual basis.

Overall remuneration policies are subject to the discretion of the board and can be changed to reflect competitive and business conditions where it is in the interests of the Group and shareholders to do so. Executive remuneration and other terms of employment are reviewed annually by the board having regard to the performance, relevant comparative information and expert advice.

The boardís remuneration policy reflects its obligation to align executive remuneration with shareholder interests and to retain appropriately qualified executive talent for the benefit of the Group. The main principles are:

1. remuneration reflects the competitive market in which the Group operates;

2. individual remuneration should be linked to performance criteria if appropriate; and

3. executives should be rewarded for both financial and non-financial performance. The total remuneration of executives consists of the following:

1. salary ñ executives receive a fixed sum payable monthly in cash;

2. cash at risk component ñ executives may participate in share and option schemes generally made in accordance with thresholds set in plans approved by shareholders if deemed appropriate. However, the board considers it appropriate to issue shares and options to executives outside of approved schemes in exceptional circumstances; and

3. other benefits ñ executives may, if deemed appropriate by the board, be provided with a fully expensed mobile phone and other forms of remuneration.

The board has not formally engaged the services of a remuneration consultant to provide recommendations when setting the remuneration received by directors or other key management personnel during the financial year.

Relationship between the remuneration policy and Group performance

The board considers that at this time, evaluation of the Groupís financial performance using generally accepted measures such as profitability, total shareholder return or per company comparison are not relevant as the Group is at an early stage in the implementation of a corporate strategy that includes the identification and acquisition of new business opportunities as outlined in the directorsí report.

The table below sets out summary information about the Groupís earnings and movements in shareholder wealth for the five years to 30 June 2015: