ABN 34 090 074 785

Full Year Statutory Accounts 30 June 2016

CORPORATE DIRECTORY

DIRECTORS Ian Daymond (Non-Executive Chairman) Christiaan Jordaan (Managing Director) Cobus van Wyk (Non-Executive Director) Frank Petruzzelli (Non-Executive Director)

SECRETARY Robert Marusco

REGISTERED OFFICE Level 3, Suite 5, 9 Bowman Street South Perth, Western Australia, 6151 Telephone: +61 8 9217 2400

Facsimile: +61 8 9217 2401

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

SYDNEY OFFICE Level 10, 20 Martin Place, Sydney, New South Wales 2000

PRETORIA OFFICE Mustang Diamonds (Pty) Ltd Office at Nature Block A3 500 Botterklapper Street

Die Wilgers 0081

MAPUTO OFFICE Mustang Diamonds Limitada Avenida Martires da Machava

Esq, Maputo

SOLICITORS Steinepreis Paganin

Level 4, 16 Milligan Street,

Perth, WA 6000

AUDITORS PricewaterhouseCoopers

Brookfield Place, 125 St Georges Terrace Perth, Western Australia 6000

SHARE REGISTRY Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace

Perth, Western Australia 6000

Phone: 1300 850 505 (within Australia)

+61 3 9415 4000 (outside Australia)

Facsimile: +61 3 9473 2500

AUSTRALIAN SECURITIES EXCHANGE CODE MUS (Ordinary Shares)

MUSTANG RESOURCES LIMITED

CONTENTS

PAGE NUMBER

CHAIRMANS LETTER…….……………………………………………………………………………………………………………………………………………….2 DIRECTORS' REPORT 4

DIRECTORS' DECLARATION 27

AUDITOR'S INDEPENDENCE DECLARATION 28

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 29

STATEMENT OF FINANCIAL POSITION 31

STATEMENT OF CASH FLOWS 32

STATEMENT OF CHANGES IN EQUITY 33

NOTES TO THE FINANCIAL STATEMENTS 34

INDEPENDENT AUDITOR'S REPORT 72

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MUSTANG RESOURCES LIMITED

CHAIRMANS LETTER

Dear valued Shareholder,

It has been a highly productive and transformative year for your Company, Mustang Resources Limited.

Montepuez Ruby Project

Over the course of financial year 2015/16, the Board meticulously continued to assess a number of development pathways in order to extract the maximum value from our Mozambique assets for our Shareholders. As part of this strategy, the Board made the decision to acquire 75% of the issued capital of Montepuez Minerals Pty Limited, which has provided Mustang the opportunity to create significant underlying value from the exciting Montepuez Ruby Project.

Since the acquisition, the Company has focused the majority of its resources towards the development of the Montepuez Ruby Project, which lies adjacent to one of the largest known ruby deposits in the world operated by Gemfields PLC. One of the deciding factors behind the acquisition was that it represented a very compelling opportunity to generate significant near-term value for our shareholders.

After completing a thorough due diligence process over the entire Montepuez Project area, the Board is confident that the Montepuez licenses form part of a much larger geologically unique occurrence, which to date remains largely untouched.

Importantly, the Montepuez Project will provide Mustang's shareholders with exposure to what is a rapidly growing ruby market led by increased demand from the United States, Europe, India, Thailand and China. The global polished ruby market is estimated at circa US$2 billion p.a. (2014), with growth largely driven by the excellent supply and marketing channels established by our neighbour, Gemfields.

To provide some further perspective on the global ruby market, the prices of rubies are estimated to have increased by 63% in the last 8 years, with premium-quality Mozambique alluvial (rough/uncut) rubies selling for over US$680 per carat on average. As the global market evolves, we believe that Mozambique, and in particular the Montepuez region, will play a key role in supplying high-quality rubies on a global scale.

Our exploration team is very encouraged by the recent recovery of 29 high quality rubies across our licenses from reconnaissance exploration activities completed to date. This has strengthened our belief that Montepuez has the potential to mirror the success of the neighbouring Gemfields deposit, by generating near-term cash flows from low-cost, bulk sample mining operations.

Balama Graphite Project

Although Montepuez has become the priority focus for Mustang this year, we still strongly believe that our Balama Graphite Project also has the potential to add considerable value in the near-term. Like Montepuez, Balama is also located in a world-class mining region and is positioned along strike from graphite deposits held by Syrah Resources, Triton Minerals and Metals of Africa. Following the initial drilling program and highly encouraging sample assay results, a resource definition drilling program has been planned for Balama, aimed at delineating a maiden JORC compliant resource during the 2016/17 financial year.

Save River Diamond Project

Having focused on the near-term development of Montepuez and Balama, the Board prudently decided in early 2016 to scale back expenditure and activities at the Save River Diamond Project. Although our exploration team recovered a number of gem- quality diamonds from the project, the Board considered that continuing to deploy precious capital at Save River would only inhibit our ability to unlock substantial value from our ruby and graphite assets.

Appointment of Managing Director

During the year, the Company also moved to strengthen its leadership base by the appointment of Christiaan Jordaan as Managing Director in February 2016. Christiaan is a highly experienced mining executive and has thoroughly committed himself to his tasks, including making many investor presentations and playing a key role in raising essential equity capital. He has been a driving force behind our rapid progress at Montepuez.

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