2015 ANNUAL REPORT A

Annual Report

2015

Flinders Mines Limited

ABN 46 091 118 044

CONTENTS

Highlights 1 Chairman's Report 2 Projects 3 Exploration 4

Tenement Schedule 8

Financial Report 9

Directors' Report 10

Auditor's Independence Declaration 21

Corporate Governance Statement 22

Consolidated statement of profit or loss and other

comprehensive income 23

Consolidated statement of

financial position 24

Consolidated statement of

changes in equity 25

Consolidated statement of

cash flows 26

Notes to the consolidated

financial statements 27

Directors' Declaration 50

Independent Auditor's Report 51

ASX Additional Information 54

Competent Persons

CORPORATE DIRECTORY

Directors

Robert M Kennedy (Chairman)

Ian Gordon (Managing Director)

Kevin J Malaxos

(Non-executive Director)

Ewan J Vickery (Non-executive Director)

Nicholas J Smart

(Alternate for Mr Kennedy)

Company Secretary

Justin Nelson

Registered and Principal Office

Level 1, 135 Fullarton Road Rose Park, South Australia 5067 Telephone +61 8 8132 7950

Facsimile +61 8 8132 7999

Solicitor

DMAW Lawyers

Level 3, 80 King William Street Adelaide, South Australia 5000 Telephone +61 8 8210 2222

Facsimile +61 8 8210 2233

Share Registry

Computershare Investor Services Level 5, 115 Grenfell Street Adelaide, South Australia 5000 Telephone +61 8 8236 2300

Facsimile +61 8 8236 2305

Auditor

Grant Thornton Australia Level 1, 67 Greenhill Road Wayville, South Australia 5034

Banker

National Australia Bank

Level 1, 161-167 Glynburn Road Firle, South Australia 5070

Stock Exchange Listing Australia Securities Exchange Flinders Mines Limited shares are

listed on the Australian Securities

Exchange.

ASX code - FMS

Website

www.flindersmines.com

The website includes information about the Company, its strategies,

The information in this report that relates to Exploration Targets, Exploration Results, or Mineral Resources is based on information compiled by Dr Graeme McDonald who is a member of the Australian Institute of Mining and Metallurgy and a full-time employee of Flinders Mines Limited. Dr McDonald has sufficient experience that is relevant to the

styles of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of

the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Dr McDonald consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Disclaimer

This report may include forward-looking statements. These forward-looking statements are based on management's expectations and beliefs concerning future events as of the time of the release of this document. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, some of which are outside the control of Flinders Mines Limited, that could cause actual results to differ materially from such statements. Flinders Mines Limited makes no undertaking to subsequently update or revise the forward-looking statements made in this report to reflect events or circumstances after the date of this report.

projects, reports and ASX announcements.

Front and back cover photo:

Blackjack Hills looking west-southwest.

FLINDERS MINES LIMITED

Highlights

PILBARA IRON ORE PROJECT

• Completion of infill RC and Diamond drilling at PIOP to move the majority of resources into the Indicated and Measured

  
  

  Port Hedland

  
  

  Darwin

  
  

  Norther N territory

  
  

  Townsville

  JORC category.

  Pilbara Iron Ore Project

  Alice Springs

  
  

  Quee Nsl a Nd

• Finalisation of Metallurgical testwork to determine the

  Tom Price

  
  

  Mt Magnet

  
  

  Wester N australia

  a ustralia

  
  

  south

  australia

  
  

  Brisbane

  appropriate processing method

  for PIOP ore.

  
  

• New BID drilling identified

  Geraldton

  
  

  Perth

  Canegrass Project

  
  

  Adelaide

  
  

  Ne W south Wales

  
  

  Canberra

  
  

  Sydney

  additional areas of high grade BID mineralisation within the PIOP area.

• The application for and granting of ancillary titles required for PIOP infrastructure including

  
  

  CORPORATE

  500km

  Victoria

  Melbourne

  
  

  tasma Nia

  Hobart

  roads, camp and airstrip.

  
  

• Significant progress in gaining additional environmental approvals for a 25Mtpa project, with EPA approval now received.

• Completion of a capital raising in November 2014 to raise

  approximately $5.3 million

  
  

• Finalisation of an agreement with Todd Corporation to sell the PIOP via an Option to Purchase which was rejected by shareholders on 24 September 2015.

Delta prospect looking north-west.

2015 ANNUAL REPORT 1

Chairman's Report

Dear fellow shareholders,

The 2015 financial year has been a testing time for the resources industry, but particularly for the iron ore business.

The price of iron ore almost halved from US$100 per tonne to US$55 per tonne for 62% grade ores and continues to fluctuate daily.

This sustained change in pricing has had a significant effect on the

profitability of many smaller Australian iron ore producers, most of which have reported significant losses. These effects have also flowed through to prospective iron ore developers like Flinders Mines Limited.

Capital markets are not prepared to support new iron ore developments in the current pricing environment, no matter the merits of the project.

Against this market sentiment, Flinders has been well supported in its activities over the past year by its major shareholder, Todd Corporation, which has provided the majority of funding towards completing the drilling and other testwork required at our wholly owned Pilbara Iron Ore Project (PIOP) in Western Australia. Without that support, the majority of the now one billion tonne plus PIOP resource would still be in a formative state.

Your Company now has an iron ore resource that is understood and well drilled to Indicated and Measured status. However, the market is not prepared to support iron ore projects until commodity prices start to rise again.

In light of this, your Directors entered into an agreement with Todd Corporation in May 2015, to sell the PIOP via an option, where Flinders Mines receives a number of significant cash payments until Todd elects to exercise the option.

This agreement was rejected by our shareholders on 24 September, 2015.

In respect to the future of the PIOP, your Directors now intend to examine any further opportunities within the existing Alliance Agreement with Todd and failing that, other alternatives for development of the project.

The Alliance Agreement,signed in February 2014 and remaining in effect until 31 December this year regardless of the 24 September shareholder vote outcome, provides for ongoing feasibility studies aimed at providing Flinders with access for its PIOP ore to Todd-backed transport and port export infrastructure on the WA coast.

Your Company will need to continue work at the PIOP in order to retain the project and is planning to ensure that the PIOP tenements are kept in good standing until an improvement in iron ore prices can deliver a development solution.

I sincerely thank those shareholders who supported the share purchase plan in November 2014 and the staff and Directors of Flinders for their efforts during a most challenging year.

Robert Kennedy

Chairman

2 FLINDERS MINES LIMITED