PILBARA MINERALS LIMITED ANNUAL REPORT … · PILBARA MINERALS LIMITED ANNUAL REPORT 2016 For...

2016ANNUAL REPORT

ACN 112 425 788

WWW.PILBARAMINERALS.COM.AU

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CONTENTS

WHO IS PILBARA MINERALS? 1

HIGHLIGHTS OF 2015/16 2

FOCUS FOR THE YEAR AHEAD 2

HERITAGE, HEALTH, SAFETY AND THE ENVIRONMENT

3

CHAIRMAN’S REPORT 4

MANAGING DIRECTOR’S REPORT

5

THE LITHIUM STORY 6

PILGANGOORA LITHIUM-TANTALUM PROJECT

8

ORE RESERVES AND MINERAL RESOURCES

18

PILGANGOORA PROJECT METHODOLOGY AND DELIVERY

20

OTHER PROJECTS 22

ABBREVIATIONS AND DEFINITIONS

23

CORPORATE GOVERNANCE 23

FINANCIAL STATEMENTS 24

ADDITIONAL SHAREHOLDER INFORMATION

74

CORPORATE DIRECTORY Inside back cover

DIRECTORSAnthony Kiernan Chairman Ken Brinsden Managing Director and CEO Robert Adamson Non-ExecutiveDirector Steve Scudamore Non-ExecutiveDirector Neil Biddle Non-ExecutiveDirector John Young ExecutiveDirector

COMPANY SECRETARYAlex Eastwood

REGISTERED OFFICE IN AUSTRALIA130StirlingHighway NorthFremantleWA6159Tel: +61893366267 Fax: +61894335121Website: www.pilbaraminerals.com.au

ACN AND ABNACN: 112 425 788 ABN: 95112425788

ASX CODEPLS

CORPORATE DIRECTORY

SHARE REGISTERAdvanced Share Registry Services 110StirlingHighway NedlandsWA6009Tel: +61893898033

SOLICITORSDLA Piper Level31,152-158StGeorgesTerrace PerthWA6000,Australia

BANKERSCommonwealth Bank of Australia 380AScarboroughBeachRoad InnalooWA6018

AUDITORSKPMG 235StGeorgesTerrace PerthWA6000

DATE OF ANNUAL GENERAL MEETING10amonThursday,24November2016

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PILBARA MINERALS ANNUAL REPORT 2016 1

WHO IS PILBARA MINERALS?

PILBARA MINERALS IS AN EMERGING LITHIUM AND TANTALUM PRODUCER FOCUSED ON THE DEVELOPMENT OF ITS 100%-OWNED PILGANGOORA LITHIUM-TANTALUM PROJECT, LOCATED APPROXIMATELY 130 KILOMETRES (BY ROAD) FROM THE WORLD RENOWNED PORT OF PORT HEDLAND IN THE PILBARA REGION OF WESTERN AUSTRALIA.

Pilgangoora has been confirmed as the second largest spodumene (lithium pyroxene) and tantalite project in the world and is set to be developed into one of the world’s largest lithium mines, also producing tantalite as a valuable by-product.

Pilbara Minerals' aim is to fast-track Pilgangoora towards production to capitalise on the widely anticipated shortfall of lithium in global markets over the next decade, with the project on track to commence production by the end of 2017.

The size, quality and anticipated low operating cost of production at the Pilgangoora Project also provides Pilbara Minerals with an exceptional opportunity to pursue growth opportunities in downstream lithium markets. With all of this in mind, Pilgangoora is aptly described as the world’s leading lithium development project.

The supply/demand fundamentals for lithium put this highly sought-after metal in a league of its own compared with other commodities.

Demand is predicted to grow at an annualised rate of more than 12% and this could be set to accelerate further as its widespread use in conventional industries such as ceramics, glass, batteries and pharmaceuticals gets overrun by growing consumption in rechargeable batteries for portable electronic devices and the electrification of the transport industry.

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2 PILBARA MINERALS ANNUAL REPORT 2016

HIGHLIGHTSOF 2015/16

SIGNIFICANT GROWTH in the Pilgangoora lithium and tantalum resource which clearly establishes the Pilgangoora Project as the world’s leading lithium development project.

PUBLISHED THE PREFEASIBILITY STUDY and significant progress on the definitive feasibility study.

ON THE BACK OF THE PREFEASIBILITY STUDY, the Company raised A$100 million to further de-risk Pilgangoora’s development.

GREW THE COMPANY’S LITHIUM MARKETING PRESENCE in China and globally through many MOUs and culminating in the Company’s first offtake agreement with General Lithium Corporation.

RELATIONSHIP WITH GENERAL LITHIUM CORPORATION GROWS into the possible establishment of a joint venture project to consider the development of an offshore (ex-China) chemical conversion facility, drawing on General Lithium Corporation’s technology, designs and operating capability.

FURTHER CAPACITY DEVELOPED at the Pilbara Board and executive team, in preparation for the Company’s move towards construction and production.

GROWTH OF THE LITHIUM ION SUPPLY CHAIN both in China and throughout the rest of the world, as lithium ion becomes the dominant battery technology.

COMPLETION OF THE PILGANGOORA PROJECT DEFINITIVE FEASIBILITY STUDY

FINALISE FINANCING OF THE PILGANGOORA PROJECT CONSTRUCTION COSTS

AWARD OF MAJOR CONSTRUCTION CONTRACT(S)

AWARD OF MINING CONTRACT

COMMENCEMENT OF PROJECT CONSTRUCTION

COMMENCEMENT OF MINING

JOINT VENTURE CHEMICAL PLANT SCOPING STUDY COMPLETION AND PROGRESS OF FEASIBILITY STUDY

FOCUS FOR THE

YEAR AHEAD

RC DRILLING WESTERN PEGMATITE

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HERITAGE, HEALTH,SAFETY AND THEENVIRONMENT

PILBARA MINERALS IS ACTIVELY ENGAGED WITH THE TRADITIONAL OWNERS IN THE AREA WITHIN WHICH IT OPERATES. PILBARA UNDERSTANDS AND SUPPORTS ABORIGINAL PEOPLE, AND THEIR CONNECTION WITH THEIR TRADITIONAL LANDS.

In support of these links, Pilbara Minerals recognises its responsibility to work with traditional owners to understand, maintain and where possible grow relationships that enhance both connection to the land and maintenance of their heritage. Pilbara Minerals seeks to ensure the Traditional Aboriginal Owners are meaningfully engaged through employment and enterprise development opportunities arising from the Company’s projects. Pilbara Minerals will constantly review opportunities to effectively engage local Aboriginal employees and contractors at the Pilgangoora Project. The Company also encourages its business partners and contractors to engage in this strategy by supporting employment, training and the development of business opportunities for local Aboriginal peoples.

Pilbara Minerals’ intent in the development of the Company, its projects and the capability of its people is to ensure that safety comes first in all its activities. Pilbara Minerals’ strategy for health and safety is built on the four pillars of great leadership, engaged employees, risk management focus and systems that support safe work as a priority.

Pilbara Minerals works closely with its contracting partners and the Safety Management Plans in use to manage safety of all activities on site for both the Company and its contractors. Integral to providing a safe working environment is to ensure Pilbara Minerals is tracking and reporting safety performance and reviewing incidents so as to continuously improve and reduce the risk of injury to its workforce. As a large portion of the workforce at the Company’s operations are contractors, Pilbara Minerals works very closely with its contracting partners and their workforce to enshrine a shared culture of working safely. Any incidents involving contractors are investigated with Pilbara Minerals involvement and included in all of the Company’s safety reporting and shared outcomes.

Pilbara Minerals’ Lost Time Injury (LTI) frequency rate for the period 2015/16 was zero.

Pilbara Minerals is committed to operating in an environmentally responsible manner through industry best-practice and key stakeholder involvement.

Since the commencement of the Pilgangoora Project, Pilbara Minerals has embraced its expanded environmental responsibility and continue to meet or exceed its statutory requirements over its tenure. The risks associated with environmental incidents are taken into account as part of the Company’s normal course of business and are managed through risk assessments, introduction of preventative measures, ongoing review and monitoring and, where necessary, effective and efficient mitigation actions. Pilbara Minerals recognises the value for both itself and key stakeholders in supporting compliance of best environmental practice for achieving and maintaining its licence to operate.

During the year, Pilbara Minerals has obtained the necessary approvals to maintain the ongoing exploration development, as well as undertaking environmental and social baseline studies, for the compilation of its Pilgangoora Project Environmental Impact Assessment.

Rehabilitation of our exploration activities is progressive and effective, in line with our ongoing commitment and tenure conditions.

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DEAR SHAREHOLDERS

Since joining the Board and being appointed Chairman of Pilbara Minerals in July 2016, I have had the opportunity to witness the key reasons and attributes which have made your Company one of the standout performers of Australia’s junior mining sector over the past 18 months.

These include a world-class resource asset in a premier mining jurisdiction, an exceptional team of people, a strong balance sheet and a clear vision to become a leading global producer of a commodity which is currently experiencing transformational growth.

It’s important to acknowledge the drive and vision of Pilbara’s founding directors, Neil Biddle, John Young and former Chairman, Tony Leibowitz, who set the Company on its current growth trajectory through the acquisition and rapid drill-out of the Pilgangoora Project. This has established the Project as one of the world’s pre-eminent lithium development projects.

Importantly, they also recognised the opportunity in the lithium sector well before much of the recent market hype, embarking on an aggressive resource development program which has seen Pilbara Minerals complete near 80,000 metres of resource drilling at Pilgangoora in just under two years.

This has led to the Company delivering successive resource upgrades, establishing a world-class resource and reserve inventory, completing a highly positive Prefeasibility Study, raising over $120 million and commencing a Definitive Feasibility Study which, at the time of writing, was nearing completion.

This Study will consider a 2 million tonne-a-year base case with a 35-year mine life, with the option of significant expansion in the future given the scale of the Pilgangoora deposit.

The grade and scale of the Pilgangoora deposit, combined with the presence of a significant tantalum by-product credit further offsetting production costs, puts this project in a league of its own – ensuring that it will be a low-cost producer of spodumene concentrates for many decades to come.

Our timetable sees us targeting construction at Pilgangoora by the end of calendar 2016 and moving rapidly through the project build phase next year to begin commissioning during the fourth quarter of 2017.

While this is an aggressive timetable, the team which has been assembled by Managing Director, Ken Brinsden, gives great confidence this goal will be achieved. Ken himself spent the past seven years overseeing the development and operation of several Pilbara iron ore mines for Atlas Iron.

One of the keys to Pilbara’s future lies in the strength of the relationships and partnerships it has forged quickly within the lithium industry. This is a relatively complex and unique industry – and one that is currently undergoing an almost breathtaking level of change, especially in China.

Particular attention is drawn to the importance of our relationship with General Lithium Corporation, a leading Chinese producer of lithium carbonate and hydroxide products and a key supplier of lithium products to the fast growing lithium-battery industry of China.

This relationship – which comprises a binding offtake agreement, a proposed $17.75 million investment into Pilbara Minerals, and an agreement to evaluate a possible future joint venture for offshore downstream processing – is a valuable asset for our Company, and one that I am confident will deliver significant value into the Company in the future.

As I write this report, the Pilbara team continues to finalise the Definitive Feasibility Study, address further offtake agreements, finalise a Native Title Mining Agreement, progress permitting and approvals and engage with a group of shortlisted contractors under an Early Contractor Involvement (ECI) model for the process plant.

I would like to conclude by thanking Ken Brinsden and the Pilbara Minerals team for their extraordinary efforts during the year, Tony Leibowitz for his previous stewardship and to thank our shareholders for their continued support.

Pilbara Minerals has a great future ahead of it, and I look forward to sharing that with you.

TONY KIERNAN Chairman

CHAIRMAN’SREPORT


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The hard work of the Pilbara Minerals team has delivered a huge resource, based on the amazing geology present at Pilgangoora and its prospectivity for lithium and tantalum. In parallel, further technical work contributing to the Project’s feasibility works has included substantial studies in geology, mining, metallurgy and processing, and environmental and heritage studies to progress the Project’s approvals.

All this work culminated in the delivery of a robust prefeasibility study and substantial progress in the definitive feasibility study during the year. The Company is on track to commence construction of the Pilgangoora Project late this calendar year, leading to mining commencement and project commissioning during 2017.

The strength of the Pilgangoora Project’s prefeasibility study provided an opportunity to further de-risk the project development through a significant capital raising. In April 2016, the Company raised A$100 million from both existing and new institutional shareholders plus participation from existing shareholders through a share purchase plan. The raising was incredibly well supported and demonstrates the support for the continued development of the Project. Monies raised have facilitated the further development of the Project including early works, continued exploration, further technical programs and will also contribute to the Project’s final fundraising.

2015/16 was a year of transition for Pilbara Minerals. A period in which the organisation would grow from being a raw exploration company to one positioned for future growth. To this end, both the executive and Board have grown to include significant corporate, mining, development and production experience.

This team’s deep experience in Pilbara development and production is ready to deliver a great mine that is likely to become, for many decades, an important part of the lithium raw material supply base for global markets.

Thank you to shareholders for your continued support, and may 2016/17 present many opportunities for the exciting growth of the Company.

KEN BRINSDEN Managing Director

MANAGING DIRECTOR’SREPORT

PILBARA MINERALS HAS HAD A FORMATIVE YEAR, WITHIN WHICH A HUGE PLATFORM FOR SUCCESS HAS BEEN DEVELOPED THROUGH THE PROGRESS OF THE PILGANGOORA PROJECT TOWARDS DEVELOPMENT AND PRODUCTION.


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LITHIUM IS A SOFT SILVERY-WHITE METAL (CHEMICAL SYMBOL – Li) WHICH IS HIGHLY REACTIVE AND DOES NOT OCCUR IN NATURE IN ITS ELEMENTAL FORM. IN NATURE IT OCCURS AS COMPOUNDS WITHIN HARD ROCK – OR “SPODUMENE” – DEPOSITS (SUCH AS PILBARA MINERALS’ PILGANGOORA PROJECT) AND IN SALT BRINES.

Lithium and its chemical compounds have a variety of industrial applications resulting in a wide range of chemical and technical uses. These include heat-resistant glass and ceramics, lithium grease lubricants, flux additives for iron, steel and aluminium production, lithium batteries and lithium-ion batteries.

The supply/demand fundamentals for lithium put this highly sought-after metal in a league of its own compared with other commodities. Demand is predicted to grow at an annualised rate of more than 12% and this could be set to accelerate further as its widespread use in conventional industries (such as ceramics, glass, batteries and pharmaceuticals) is overrun by growing consumption in rechargeable batteries for portable electronic devices, hybrid and electric vehicles, and off-grid power storage.

Many industry participants believe that the accelerating uptake of electric vehicles and static power storage will soon reach a tipping point into mainstream adoption, driven by:

□ The rapidly falling cost of electric vehicles (several models in the US$30-35k range are scheduled for release in 2017);

□ The huge number of new electric vehicle models currently in development by car manufacturers;

□ A rapidly growing list of government policies, tax breaks and incentives for electric vehicles and static storage driven by environmental considerations and the need to reduce carbon emissions; and

□ Complementary applications for static storage in renewable energies like solar and wind power, which have the potential to make these power sources viable as base-load power (previously one of the key impediments for renewable energy applications).

Goldman Sachs predicts that, for every 1% rise in electric vehicle market share, lithium demand rises by 70,000 tonnes annually. The bank predicts that the lithium market could triple in size by 2025 – based only on electric vehicle demand.

THE LITHIUMSTORY

“ Along with growth in other clean energy vehicles, stationary power and consumer applications, we estimate the global lithium market could more than triple to ~530kmt in 2025, with more than half of this growth driven by electronic vehicles.”GOLDMAN SACHS GLOBAL INVESTMENT RESEARCH – APRIL 2016

STATIONARY STORAGE

E-BUS/TRUCKS

BEV (BATTERY ELECTRIC VEHICLES)

PHEV (PLUG-IN HYBRID ELECTRIC VEHICLES)

HEV (HYBRID ELECTRIC VEHICLES)

E-SCOOTERS/MOTORCYCLES

E-BIKES

POWER TOOLS

NOTEBOOKS

TABLETS

SMARTPHONES

NON ENERGY

600

500

400

300

200

100

0

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

LCE

DEM

AND

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T

Source: Goldman Sachs Global Investment Research

LITHIUM DEMAND FORECAST 2014-2025

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Significant new supply of lithium-ion batteries is scheduled for 2017 onwards – with Tesla Motors, LG Chem and Foxconn Technology Group all planning lithium-ion battery mega-factories. This is in addition to new plants and expansions by battery majors such as Samsung SDI.

Most analysts believe that the forecast dramatic growth in the lithium market globally is still in its early stages. Many end-users will require a long-term supply of the metal, with Tesla’s Gigafactory in Nevada representing only one element in a much bigger story.

Pilgangoora spodumene concentrates meet the metallurgical specifications of the entire range of lithium products and Pilbara Minerals currently has binding offtake agreements or MOUs in place accounting for more than 100% of the projected lithium oxide production from Pilgangoora.

“While there is significant expansion proposed to support electric vehicle and power storage solutions through the Western world – and that is well understood by the industry analysts – I believe many of them are under-estimating the gathering momentum in China as the battery technology gets replicated and adopted for the mass production of buses, cars and bicycles, as well as for off-grid battery-storage solutions linked to renewable energy. This will drive a similar surge in demand for the lithia raw materials required to produce lithium-ion batteries.”PILBARA MINERALS MANAGING DIRECTOR & CEO, KEN BRINSDEN

WHAT IF I TOLD YOU… LITHIUM IS THE NEW GASOLINE

“(LITHIUM’S) UNIQUE PROPERTIES IDEALLY POSITION IT FOR PORTABLE ENERGY STORAGE APPLICATIONS THAT WILL BE A KEY ENABLER OF THE ELECTRIC CAR REVOLUTION AND REPLACE GASOLINE AS THE PRIMARY SOURCE OF TRANSPORTATION FUEL.”

GOLDMAN SACHS GLOBAL INVESTMENT RESEARCH – DECEMBER 2015

ELECTRIC VEHICLES: DRIVING DEMAND FOR LITHIUM

TESLA SERIES 3 to be released in 2017 with a retail price of US$36,000 - 400,000 orders already in place.

CHINESE CAR MANUFACTURERS targeting sub-$20K electric vehicles by 2017.

MERCEDES BENZ releasing 12 new models of electric vehicles in 2017.

BMW i3 SERIES due for release in 2017 in direct competition with Tesla Series 3.

AUDI AND VOLKSWAGEN also entering the electric vehicle market in 2017-2018.

30 MILLION ELECTRONIC BIKES produced annually in China, which are gradually converting to lithium-ion batteries.

TOYOTA WILL CEASE USING LEAD ACID BATTERIES from 2017 with 100% adoption of lithium-ion batteries in all models.

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PILBARA MINERALS’ PILGANGOORA PROJECT HAS BEEN RIGHTLY TAGGED AS THE WORLD’S LEADING LITHIUM DEVELOPMENT PROJECT.

Its scale, Pilbara location, high lithia grade, tantalum by-product stream and fantastic recovery characteristics ensure that it will be a very low cost operation. Add to that the continued exploration potential at the site and it seems Pilgangoora will be an important part of the global lithium raw material solution for many decades to come.

The Company continues to progress the Project’s development as quickly as it can, with an aggressive development timeline targeting construction commencement this calendar year.

PILGANGOORALITHIUM-TANTALUMPROJECT

PERTH

FIGURE 1: PILGANGOORA PROJECT – LOCATION PLAN

EXPLORATION AND GEOLOGYThe Pilgangoora Lithium-Tantalum Project is located approximately 130 kilometres (by road) south-southeast of Port Hedland in the Pilbara Mineral Field of Western Australia. The Project comprises six tenements, including three Exploration Licences (E45/2232, E45/2241 and E45/3560) and three Mining Leases (M45/78, M45/333 and M45/511) covering an area of 49 square kilometres (Figure 1). Pilgangoora has had several phases of tin-tantalite alluvial and eluvial placer mining which have occurred intermittently from 1947 until 1992.F

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FIGURE 2: PILGANGOORA PROJECT – SOLID GEOLOGY AND DRILLHOLE SUMMARY

FIGURE 3: CENTRAL AREA CROSS SECTION – 7669900mN

GEOLOGYThe Project lies within the North Pilbara Craton, one of the world’s major lithium-tantalum provinces. The prospective Pilgangoora pegmatites are located within the East Strelley greenstone belt approximately 30 kilometres east of Wodgina. Mineralisation is hosted within the fractionated pegmatite suite which comprises a network of interconnected sheets and dykes some of which are over 70 metres thick and up to 800 metres long. Overall, the pegmatite suite extends over 7 kilometres within the Company’s Pilgangoora Project area.

Three principal pegmatite groups or domains are identified in the centre of the Project area – Eastern, Western and Central. Two outlying pegmatite groups, Monster and Southern, are also identified, which have strike lengths of up to 350 and 500 metres, respectively.

Drilling has shown that the pegmatite occur as dykes dipping to the east at 20-60° (Figure 3) striking parallel to sub-parallel to the dominant north-northwest trending basalt and ultramafic host rock lithologies.

The Pilgangoora pegmatite deposit is the second largest hard rock lithium deposit in the world after the giant Greenbushes pegmatite of southwest Western Australia. Pilbara pegmatites have also been major sources of beryllium and emerald, and minor sources of tungsten, caesium and rare earth elements.

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EXPLORATIONDuring the year, Pilbara Minerals has completed several phases of reverse circulation (RC) and diamond drilling which resulted in a major resource upgrade and the definition of the Company’s inaugural reserve. Since acquiring the Project, Pilbara Minerals has completed 73,751 metres of RC drilling and 5,394 metres of diamond drilling (Figure 4).

Drilling has returned multiple thick, high-grade intersections beyond the previously defined resource boundaries. Some of these intersections include:

□ 69 metres @ 1.97% Li2O from 115 metres (PLS457)

□ 51 metres @ 1.71% Li2O from 122 metres (PLS458)

□ 43 metres @ 2.02% Li2O and 127 ppm Ta2O5 from 77 metres (PLS568)

□ 32 metres @ 1.66% Li2O and 147 ppm Ta2O5 from 187 metres (PLS649)

□ 58 metres @ 1.69% Li2O from 131 metres (PLS459).

The Company’s exploration program was expanded in April 2016 due to the exploration success achieved to the north of the proposed Central Pit area with up to six drill rigs operating during this period. This expanded program not only increased and upgraded the Inferred and Indicated components of the resource to expand the Ore Reserve, but also substantially increased the global resource.

In addition, a significant amount of metallurgical testwork, engineering, environmental and other associated studies were undertaken during the reporting year. This information, together with the July 2016 resource model, will be used as the basis for the Definitive Feasibility Study (DFS), with the significant conversion of Inferred material into the Indicated category and Indicated to Measured expanding the current Ore Reserve being offered in the DFS. The revised Ore Reserve will in turn underpin the associated financial model for the Project.

FIGURE 4: PILGANGOORA PROJECT – RC COLLAR LOCATIONS WITHIN LICENCES E45/2232 AND M45/333 SHOWING 2016 RESOURCE DRILLING

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DEFINITIVE FEASIBILITY STUDYThe DFS on the Pilgangoora Project commenced in January 2016, is now well advanced and remains on schedule for completion within the September 2016 quarter. Key work streams which have now been completed include:

□ The delivery of an updated JORC 2012 Mineral Resource and Ore Reserve following the completion of the expanded 28,400 metres Phase 3 resource infill and extensional drill programs.

□ All environmental, heritage surveys and geotechnical studies are complete and all reports received with no issues to be addressed.

□ A draft Native Title Agreement has been prepared by the Njamal Trustees, and the State Deed prepared by the Department of Mines and Petroleum (DMP) for M45/1256 has been supplied for inclusion into the agreement. Negotiations are progressing as expected.

□ Mining Plus Pty Ltd has commenced their mining study based on the new Mineral Resource. Pit optimisations and design have been completed to allow an updated reserve to be calculated. A number of mining and drill and blast contractors have participated in a tender process based on current mining schedules for the first five years of operations. Once the DFS is completed with a new mine schedule, the mining contracts will be re-tendered on a shortlist from the previous participants.

□ DFS metallurgical testwork programs are now largely complete, with expected improved recoveries derived from this testwork forming the basis of the DFS economic model.

To support its fast-track development strategy, the Pilbara Minerals development team has been working to ensure that the appropriate infrastructure, site access, statutory approvals, process water supply and logistics support are in place at Pilgangoora to allow construction to commence as soon as funding for the Project has been sourced.

FIGURE 5: PILGANGOORA PROJECT – SITE LAYOUT

FIGURE 6: A STILL OF THE PILGANGOORA CENTRAL PIT AND INFRASTRUCTURE LAYOUT

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MININGThe Mining Study is a major component within the DFS, and as contemplated by the Prefeasibility Study (PFS), conventional open pit mining will be undertaken using a 100 tonne mining fleet. Phase 1 of the Project is to process 2 million tonnes (Mt) of ore per annum with the mining strip ratio over the first five years being 2.87:1 (waste:ore tonnes). The PFS delivered a Maiden Ore Reserve of 29.5 Mt @ 1.31% Li2O and 134 ppm Ta2O5, underpinning an initial 15-year mine life from a total Mineral Resource of 80.2 Mt @ 1.26% Li2O.

With the downturn in the mining industry over the past few years, very competitive mining rates can now be achieved. After completion of the PFS, Pilbara Minerals conducted a tender process with a shortlist of six mining contractors and two drill and blast contractors. The tender was based on an expanded pit incorporating Inferred material into the mine plan encompassing the Eastern, Central and Western resources. The objective for this was to receive competitive real costs for completion of the DFS, and to identify and shortlist contractors to participate in a re-tender for a five-year mining contract.

In the June 2016 quarter, Pilbara Minerals completed a Phase 2 drilling program totalling 28,400 metres, from which a 60% improvement in the new Mineral Resource was announced in July 2016, increasing to 128.6 Mt @ 1.22% Li2O and 138 ppm Ta2O5. Within the total Mineral Resource, the Measured and Indicated Resource categories increased 134% to 83.6 Mt @ 1.27% Li2O and 135 ppm Ta2O5. In August 2016, the Company increased the Pilgangoora Ore Reserve by 136% to 69.8 Mt @ 1.26% Li2O and 132 ppm Ta2O5.

The DFS is being undertaken assuming a 2 Mt per annum (Mtpa) mining rate, but with a significant increase in resources, a potential mine expansion will be assessed in due course.

FIGURE 7: PREFEASIBILITY STUDY PIT

FIGURE 8: CROSS SECTION SHOWING CENTRAL AND WESTERN DOMAINS

METALLURGY AND PROCESS DESIGNThe comprehensive metallurgical testwork program is well advanced in order to develop the flowsheet to produce both a chemical and technical grade spodumene concentrate. Underpinning the PFS program was diamond core drilled in late 2015 with master composites produced representing the three major ore domains, that being Eastern, Central and Western. The Phase 1 program undertaken was:

□ Heavy media separation (HMS) process testing to establish the different density operating parameters producing a coarse spodumene concentrate

□ Comminution data and optimisation of grind size

□ High-pressure grinding rolls (HPGR) operating conditions

□ Flotation operating parameters to produce both a technical and chemical grade spodumene concentrate

□ QEM-Scan mineralogical investigation on the different ore domains.

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The flowsheet developed from this program incorporated three stages of HMS which produced a coarse rejects component, a chemical grade HMS spodumene concentrate, and with the fine fraction reporting to the gravity and flotation circuit to produce a fine spodumene flotation concentrate and tantalum concentrate.

Planning for the DFS Phase 2 program was completed (based on Phase 1 results) with the program commencing at the end of April 2016. The following work was undertaken:

□ Geochemical kinetic testwork on mine waste, coarse HMS rejects, float tailings

□ HMS and flotation spatial variability testwork

□ Tantalum gravity testwork

□ Locked cycle flotation testing □ Generating samples for physical testing (i.e. settling, tailings beach angles, geochemical)

□ Additional mineralogy.

For Phase 2, additional PQ diamond drilling was undertaken in the March 2016 quarter totalling 740 metres to generate sufficient sample (+5 tonnes) from the three ore domains to undertake variability testing representing the first five years of mine life. In addition to Phase 2, a Pilot Plant program will also be undertaken with planning well advanced. This program is designed to provide final validation of the flowsheet design and to generate spodumene concentrate samples for marketing purposes.

The Phase 2 program is nearing completion, with the subsequent testwork showing that three stages of HMS will now be reduced to two stages, eliminating the coarse rejects from the flowsheet. This material will now report to the gravity and flotation circuits increasing the overall lithia and tantalum recoveries.

The process design is now well advanced with flowsheets being reviewed and finalised. The Process Plant is being designed with a 4 Mtpa capacity primary jaw crusher being installed upfront, with the downstream secondary crushing, spodumene and tantalum recovery circuits being designed at 2 Mtpa capacity. This will allow potential processing plant expansion to be undertaken expeditiously with replication of the recovery circuits at the appropriate time.

FIGURE 9: PROCESS FLOW DIAGRAM

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PRODUCT, MARKETING AND OFFTAKEThe Pilgangoora lithium-tantalum orebody is unique and second only to the Greenbushes orebody, based on the potential to produce a low iron spodumene (Technical Grade) that is required by the glass and ceramic industries worldwide. In Western Australia, except for Greenbushes, other lithium deposits cannot produce such a low iron grade as the iron is entrenched within the crystal structure and cannot be separated. The Project’s high iron spodumene is likely to be used only in the conversion to a lithium chemical like lithium carbonate (LC) or lithium hydroxide (LiOH). The converters of this high iron grade are all based in China.

Pilbara Minerals received strong interest from various glass and ceramics buyers in Europe, North America, China and Japan. Non-binding Memorandums of Understanding (MOUs) were signed in mid-2015 with reputable trading companies that have more than two decades of experience in marketing and distribution of spodumene in their respective regions. These trading companies have access to all the potential buyers within their regions. Pilbara Minerals will potentially become the second largest producer and supplier of Technical Grade spodumene worldwide.

Pilbara Minerals also received an excellent response from the Chinese converters, and non-binding MOUs were signed for 100% of the nominal plant capacity. The first of these MOUs was then converted into a firm Sales Offtake Agreement with General Lithium Corporation (GLC), one of the largest producers and suppliers of Battery Grade lithium carbonate in China, subject to certain conditions precedent including a right of first refusal over the spodumene concentrate held by Global Advanced Metals Wodgina Pty Ltd (subsequently assigned to Mineral Resources Ltd). GLC will consume approximately 40% of the Company’s high iron spodumene production.

Pilbara Minerals has also ventured into downstream processing and plans to establish a lithium chemical plant as a joint venture with GLC in the Australasian region. In addition, GLC will invest and own up to 5% of Pilbara Minerals. These agreements with GLC ensure the long-term viability and success of the project and have the potential to consume all of the volume of high iron spodumene it produces.

In addition to the Offtake Agreement with GLC, Pilbara Minerals is negotiating with several other Chinese converters in order to further diversify its sales arrangements. These negotiations are well advanced and expected to be announced by the time the DFS is completed. The demand for spodumene is robust, and Pilbara Minerals is confident that it will be able to secure firm Offtake Agreements for much of its proposed production capacity, while maintaining some flexibility for its own corporate objectives.

The Pilgangoora Project will be producing tantalum concentrates as a by-product. In addition to Global Advanced Metals Pty Ltd, several global processors of tantalite have indicated interest in the tantalum concentrate, and Pilbara Minerals is in negotiations with these potential processors.

In the history of the lithium industry, FY2015/16 saw a new benchmark with record lithium carbonate spot prices reaching the levels of +US$20,000/tonne from its normal range of US$4,000 to US$6,000/tonne. The increased demand from the electric vehicle (buses) sector in China and the shortage of spodumene supply and lithium carbonate from brines spurred the prices never before seen in the industry. The increased sales of electric vehicles aided by the subsidies offered in China, Europe and USA are expected to maintain a healthy growth for the next five years.

FIGURE 10: CHINA ELECTRIC VEHICLE SALES ESTIMATESSource: Deutsche Bank estimates, MIIT

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FIGURE 11: LITHIUM DEMAND ESTIMATES FOR CHINA ELECTRIC VEHICLE BATTERYSource: Deutsche Bank estimates, MIIT

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Source: www.hitachi.com/environment/showcase/solution/mobility/lithiumion

ADVANCES IN LITHIUM BATTERY TECHNOLOGY

FIGURE 12: GLOBAL LITHIUM DEMAND ESTIMATESSource: Deutsche Bank estimates, USGS

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According to an analyst’s report (prepared in February 2016), China electric vehicle sales are forecast to grow at a compound annual growth rate (CAGR) of 27% in the coming five years to reach the government target of five million vehicles on road by 2020.

A similar growth profile has recently been forecast by a well-regarded market analyst in their latest Lithium Report 2016 (Figure 13). The same analyst has forecast the Lithium Carbonate Battery Grade Price (Figure 14).

The nominal price of Lithium Carbonate Battery Grade is forecast to increase from US$7,500 to US$10,300/tonne by 2025.

In March 2016, Tesla unveiled their Model 3 vehicle and announced pre-bookings by payment of only US$1,000 and deliveries from Q4 2017. The Model 3 can reach 345 kilometres in one charge. According to Electrek website (www.electrek.co/2016/06/07/tesla-model-3-reservation-queue-number), Tesla has already received pre-orders for 400,000 cars by June 2016. In addition to Tesla, all major auto makers are soon to release their own electric vehicles in the market, e.g. Toyota, Nissan, BMW, GM, Ford, etc.

Analysts believe lithium battery costs are expected to drop as large scale lithium battery manufacturing plants are installed in coming years, mainly in China, except US based Tesla’s “Gigafactory”. The economies of scale are expected to bring the battery costs down to as low as US$100-200/kwh.

The next 10-year period, to 2025, is expected to see an exponential growth in demand for lithium batteries from various sectors like electric vehicles, e-bikes, energy storage solutions, mobile phones, tablets, drones, power tools, etc. Pilbara Minerals’ entry into the market in 2018 is well-timed to meet the demand. With its aim to go downstream in lithium chemical manufacturing with an existing and well established Chinese producer, GLC, the Company is well poised to become the second largest lithium hard rock mining project worldwide.

FIGURE 13: WORLD FORECAST DEMAND FOR LITHIUM BY FIRST USE (t LCE)Source: Roskill estimates

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FIGURE 14: AVERAGE ANNUAL PRICE FORECAST FOR BATTERY-GRADE LITHIUM CARBONATE, 2000-2025 (US$/t CIF)Source: Global Trade Atlas

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FIGURE 15: LITHIUM-ION BATTERY COSTS FALLING, GM FORECASTS US$145/KWH BY 2017Source: BMI, General Motors

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MINERAL RESOURCESPilbara Minerals released two resource upgrades during the reporting year, the most recent in July 2016.

The updated 2012 JORC compliant Mineral Resource for the Project incorporates all historical data, as well as all drilling data acquired through a number of exploration campaigns completed from 2014 to June 2016.

The estimation was carried out by independent resource consultancy, Trepanier Pty Ltd, resulting in the estimation of Measured, Indicated and Inferred Resources. The updated resource comprises 128.6 Mt @ 1.22% Li2O (spodumene) and 138 ppm Ta2O5 containing 1.57 Mt of lithium oxide and 39 million pounds (Mlb) of Ta2O5 (Table 1).

TABLE 1: PILGANGOORA PROJECT – MINERAL RESOURCE ESTIMATE

Category Mt Li2O (%)

Ta2O5 (ppm)

Li2O (t)

Ta2O5 (Mlb)

Measured 18.0 1.36 150 245,000 5.9Indicated 65.6 1.24 131 812,000 19.0Inferred 45.0 1.15 144 515,000 14.2Total 128.6 1.22 138 1,572,000 39.2

The new resource estimate confirms Pilgangoora’s status as the world’s leading lithium development project, with the grade, scale and quality to underpin a low-cost, long-life operation with outstanding technical and financial attributes.

ORE RESERVESDuring August 2016 the Company updated its Ore Reserves for its 100%-owned Pilgangoora Lithium-Tantalum Project in Western Australia’s Pilbara region to 69.8 Mt @ 1.26% Li2O, which is more than double the maiden Ore Reserve announced in the March 2016 Prefeasibility Study (29.5 Mt @ 1.3% Li2O and 134 ppm Ta2O5) (refer Table 2).

The overall Pilgangoora Ore Reserve now comprises 883,000 tonnes of contained lithium oxide and 20.3 Mlb of contained tantalite.

The updated Ore Reserves will be used as the foundation for the Definitive Feasibility Study (DFS), which is on track for completion in the September 2016 quarter. The DFS is being undertaken on the basis of developing a standalone operation at Pilgangoora with an annualised ore throughput rate of 2 Mtpa.

The study consisted of an initial conversion of the mineral resource model to a mining model, then the completion of both open pit optimisation and mine shape optimisation using the mining models, with finally the development of engineered open pit designs and then mines scheduling and costing.

Key parameters used as part of the pit optimisation process included (but are not limited to):

□ Assumed average of 2 Mt of ore processing per annum □ A selling price of US$460/tonne for Battery Grade Concentrate, at 6% Li2O, as provided by Pilbara Minerals

□ Mining costs derived from submissions received from mining contractors who priced the previously completed Prefeasibility Study

□ Processing costs as per the 2 Mtpa rate from Como Engineering.

The JORC Ore Reserve for the final pit design is shown in Table 2 below. In addition, the strip ratio for the JORC Ore Reserve pit design’s strip ratio is 4.1. It is reasonable to assume the JORC pit design is economically mineable.

TABLE 2: PILGANGOORA PROJECT – JORC ORE RESERVE ESTIMATE

Category Tonnage (Mt)

Li2O (%)

Ta2O5 (ppm)

Fe2O3 (%)

Li2O (t)

Ta2O5 (Mlb)

Proved 17.5 1.31 1.43 0.94 230,000 5.5Probable 52.3 1.25 128 1.07 653,000 14.8Total 69.8 1.26 132 1.04 883,000 20.3

This Ore Reserve is the economically mineable part of the Measured and Indicated Resource. It includes mining dilution and allowance for losses in mining. Appropriate assessments and studies have been carried out and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

ORE RESERVESAND MINERAL RESOURCES

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EASTERN PEGMATITE - POLISHED HAND SPECIMEN SHOWING LILAC AND GREY TABULAR SPODUMENE (FIELD OF VIEW 5cm)

Pilbara Minerals ensures that the Mineral Resource and Ore Reserve estimates quoted are subject to governance arrangements and internal controls at both a site level and at the corporate level. Mineral Resources and Ore Reserves are estimated in accordance with the 2012 JORC Code, using industry standard techniques and internal guidelines for the estimation and reporting of Ore Reserves and Mineral Resources. The Mineral Resources and Ore Reserves statements included in the Annual Report were reviewed by suitably qualified Competent Persons prior to their inclusion.

COMPETENT PERSON STATEMENTSThe information in this report that relates to Exploration Results is based on and fairly represents information and supporting documentation compiled by Mr John Young (Executive and Technical Director of Pilbara Minerals Limited). Mr Young is a shareholder of Pilbara Minerals Limited. Mr Young is a Competent Person and a member of the Australasian Institute of Mining and Metallurgy. Mr Young has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken 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’. Mr Young consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

The information in this report that relates to Mineral Resources is based on and fairly represents information and supporting documentation compiled by Mr Lauritz Barnes (Consultant with Trepanier Pty Ltd) and Mr John Young (Executive and Technical Director of Pilbara Minerals Limited). Mr Young is a shareholder of Pilbara Minerals Limited. Mr Barnes and Mr Young are members of the Australasian Institute of Mining and Metallurgy.

Mr Barnes and Mr Young have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as Competent Persons as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Barnes and Mr Young have approved the Mineral Resources statement as a whole and consent to the inclusion in this report of the matters based on their information in the form and context in which it appears.

The information in this report that relates to Ore Reserves is based on and fairly represents information and supporting documentation compiled by Mr David Billington who is employed by Mining Plus, is a Competent Person and a member of the Australasian Institute of Mining and Metallurgy. Mr Billington has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken 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’. Mr Billington has approved the Ore Reserves statement as a whole and consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

FORWARD LOOKING STATEMENTSThis Annual Report may contain some references to forecasts, estimates, assumptions and other forward-looking statements. Although the Company believes that its expectations, estimates and forecast outcomes are based on reasonable assumptions, it can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the business, which could cause actual results to differ materially from those expressed herein. Investors should make and rely upon their own enquiries before deciding to acquire or deal in the Company’s securities.

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PILGANGOORA PROJECTMETHODOLOGY AND DELIVERY

Pilbara Minerals has developed an execution approach to the Project through works undertaken during the course of the DFS, delivering facility scope which will include:

□ Mine run of mine, waste dumps and mine facilities

□ Workshops and contractor facilities □ Central power station and fuel storage facilities

□ Processing plant □ Tailings storage facility □ On-site laboratory and sampling □ 300-room accommodation camp and adjacent airstrip

□ Non-process buildings and associated infrastructure

□ Upgraded access road and intersection to site from the Great Northern Highway.

PROJECT MANAGEMENT CONSULTANTIn delivering the Project, Pilbara Minerals will adopt a strategy that has the project scope (as presented through the DFS) managed and delivered through the services of a project management consultant (PMC) group who will be integrated into the Owner’s team for the duration of the project. The PMC will not only bring a technical capability to the Project through appointed experienced people, but will also provide tailored governance solutions commensurate with the requirements of the Project.

An organisational model as to how this structure will be arranged is provided in Figure 16 below.

PROCUREMENT AND CONTRACTING STRATEGYIn addressing the overall project scope, delivery targets and risk profiles, specific works will be “packaged” and engaged across a number of commercial styles, including (but not necessarily limited to):

□ Engineer, Procure and Construct (EPC)

□ Design and Construct (D&C) □ Supply Only □ Construct Only □ Build, Own, Operate (BOO) □ Service Agreements □ Consultancy Agreements.

These head agreements have been developed by Pilbara Minerals through the course of the DFS and will be managed and administered by the appointed PMC.

Operational readiness will be key in the overall contract and procurement approach, and scopes are (or will be) drafted with this in mind.

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FIGURE 16: PROJECT ORGANISATION MODEL

Vertical areas on work packages

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PROCESS PLANT (ECI/EPC)As the organisational model has identified in Figure 16, a number of EPC style packages will be adopted for this project. One of the major packages that will lend itself to such an approach is the Process Plant facility. It is envisaged that this package will constitute approximately 50% of the project capital value, and includes equipment which will be critical path. Those “long lead” items that have been identified through the DFS work will have supply orders placed preceding the appointment of the EPC in order to maintain the delivery schedule.

Preceding the appointment of the EPC Contractor, the Company will undertake a competitive Early Contractor Involvement (ECI) approach, in which both technical and commercial aspects of the package will be developed.

OPERATIONAL PHILOSOPHYFor the most part, the supply chain will be fully contracted, with the exception of the Process Plant, which is intended to be fully operated and maintained by Pilbara Minerals. In summary:

□ Mining – Contractor operated

□ Processing – Pilbara Minerals operated

□ Haulage, product storage and port delivery – Contractor operated

□ Camp services – Contractor operated

□ Power station – Contractor operated

□ Access road maintenance – Contractor maintained

□ Laboratory services – Contractor operated.

PROJECT TIMELINEOverall, the schedule for delivery of the Project is aggressive, with major construction occurring throughout the course of 2017 in order to achieve a plant commissioning milestone in December 2017. As such, strategy will be to pursue opportunities where feasible that take advantage of existing “fit for purpose” plant and equipment.

An overall timeline of delivery outlining key activities through to commissioning and production is provided in Figure 17 below.

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Plant ECI Plant EPC Award & Construction

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FIGURE 17: PROJECT DELIVERY TIMELINE

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TABBA TABBA TANTALUM PROJECT (PLS 100%)

During 2015, Pilbara Minerals progressed the development of the Tabba Tabba Tantalum Project, located approximately 75 kilometres southeast of Port Hedland in Western Australia’s Pilbara region. Tabba Tabba is an advanced, high quality tantalum deposit which Pilbara Minerals was developing under a joint venture with Nagrom Pty Ltd. Late in 2015, Pilbara Minerals acquired 100% of the Tabba Tabba Tantalum Project.

TABBA TABBA OPERATIONS Preparations for the start of commercial production at Tabba Tabba were well advanced during the September 2015 quarter, with a number of key operational activities underway on site and major contracts awarded for crushing, drill and blast, equipment hire and earthworks and survey controls and earthworks completed for major infrastructure sites, including for the processing plant.

Construction of the 120,000 tpa processing facility was completed during November 2015 and the wet commissioning commenced during December 2015.

During the commissioning phase, the Pilbara Minerals operational team identified areas of the plant that required modification and rectification in order to allow it to run at optimal (design) levels. These included the ball mill and the coarse recovery section of the plant, namely the primary and secondary jigs. While the repairs and modifications were not considered to be major, they prevented the plant from achieving design throughput and achieving a representative recovery rate during commissioning.

Accordingly, in early January 2016 Pilbara Minerals decided to suspend commissioning to allow an engineering assessment to be undertaken. The engineering review determined that further expenditure would be required to modify the existing processing plant before the commissioning process could be finalised. This, combined with existing tantalum market conditions, meant that the operation was suspended indefinitely in April 2016.

As a by-product of the Pilgangoora mine, the economics of the production of tantalum concentrate at Pilgangoora are vastly superior to Tabba Tabba. Accordingly, Pilbara Minerals will continue to focus its resources and management time on advancing the Pilgangoora Project towards production as rapidly as possible.

WEST PILBARA TENEMENTSExploration over the Company’s West Pilbara tenements included field reconnaissance and rock sampling programs. Pilbara Minerals also completed a shallow reconnaissance RC drilling program over a gold and base metals target on E45/2241. Follow-up exploration is planned on these tenements.

OTHER PROJECTS

AERIAL VIEW OF THE TABBA TABBA TANTALUM PROJECT

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CORPORATEGOVERNANCE

ZEBRA FINCH AT PILGANGOORA

The Board of Directors of Pilbara Minerals Limited is responsible for the corporate governance of the Company. The Board is committed to achieving and demonstrating the highest standard of corporate governance applied in a manner that is appropriate to the Company’s circumstances.

The Company has taken note of the Corporate Governance Principles and Recommendations 3rd Edition, which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective on or after 1 July 2014.

The Company’s Corporate Governance Statement is available on the Company’s website www.pilbaraminerals.com.au

The Company’s Corporate Governance Policies are available at www.pilbaraminerals.com.au/corporate-governance


ABBREVIATIONSBOO Build, Own, OperateCAGR compound annual growth rateD&C Design and ConstructDFS Definitive Feasibility StudyDMP Department of Mines and PetroleumECI Early Contractor InvolvementEPC Engineer, Procure and ConstructFe2O3 iron oxideGLC General Lithium CorporationHMS heavy media separationHPGR high-pressure grinding rollsLC lithium carbonateLi2O lithium oxideLiOH lithium hydroxideMlb million poundsMOU Memorandum of UnderstandingMt million tonnesMtpa million tonnes per annumPFS Prefeasibility StudyPMC project management consultantppm parts per millionRC reverse circulationt tonnestpa tonnes per annumTa2O5 tantalite

DEFINITIONSMineral Resources

Is a concentration or occurrence of material of intrinsic economic interest in or on the earth’s crust in such a form, quantity and quality that there are reasonable prospects for eventual economic extraction. The location, quality, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.

Ore Reserves

Is the economically mineable part of a Measured and/or Indicated Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out that demonstrate at the time of reporting that extraction could be reasonably justified.

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DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2016

25

The Directors present their report together with the consolidated financial statements of the Group comprising of Pilbara Minerals Limited (“the Company”) and its subsidiaries for the financial year ended 30 June 2016 and the auditor’s report thereon.

DIRECTORS The Directors of the Company at any time during or since the end of the financial year are: Name, qualifications and independence status Experience, special responsibilities and other directorships

Mr Anthony Kiernan LLB

Chairman and Independent Non‐Executive Director Appointed 1 July 2016

Mr Anthony (Tony) Kiernan is a highly experienced public company director and former solicitor who has extensive experience in the management and operation of listed public companies. Mr Kiernan is a member of the Audit and Risk Committee and Chairman of the Remuneration Committee. Mr Kiernan is Chairman of the Fiona Wood Foundation which focuses on research into burn injuries.

Other current directorships: Mr Kiernan is a director of the following entities, which are listed on the Australian Securities Exchange: • Chalice Gold Mines Limited (since 2007) – Chairman • BC Iron Limited (since 2006) – Chairman • Danakali Limited (since 2013) • Venturex Resources Limited (since 2010) – Chairman.

Former directorships in the last three years: Mr Kiernan was a director of Liontown Resources Ltd and Uranium Equities Ltd in the last three years, both being listed on ASX. Mr Kiernan resigned from both companies in November 2013.

Mr Ken Brinsden BEng (Mining) MAusIMM MAICD

Chief Executive Officer and Managing Director Appointed 4 May 2016

Mr Brinsden is a mining engineer with over 20 years’ experience in surface and underground mining operations. Since graduation from the Western Australian School of Mines, Mr Brinsden has worked for major mining companies including WMC Resources Limited, Normandy Mining Ltd, Central Norseman Gold Corporation, Iluka Resources Limited, Gold Fields Limited and more recently Atlas Iron Limited. Mr Brinsden joined Atlas Iron Limited in May 2006 as Operations Manager and held the roles of Chief Operating Officer and Chief Development Officer before being appointed as its Managing Director in 2012. Mr Brinsden was appointed as Chief Executive Officer of the Company in January 2016 with his appointment to the Board as Managing Director effective from 4 May 2016.

Other current directorships: None.

Former directorships in the last three years: Atlas Iron Limited (22 February 2012 to 27 April 2016).

Mr Robert Adamson BSc, MSc (Hons), MAusIMM, CP (Geo), MAIMVA (CMV), MMICA

Independent Non‐Executive Director Appointed 1 July 2010

Mr Robert (Bob) Adamson’s professional career spans some 49 years. The first 25 years of which he was employed with several international mining houses, in managerial and board positions with listed exploration and mining companies in Australia and overseas. Mr Adamson has been an independent mineral industry consultant since 1993. He has an extensive background in mineral exploration and mining for gold, base metals, diamonds and semi‐precious stones, principally in Australia, southern Africa, New Zealand, South Korea, Canada and the Philippines. Mr Adamson is a member of the Audit and Risk Committee and Remuneration Committee.

Other current directorships: Mr Adamson is not currently a director of any other public listed company.

Former directorships in the last three years: None.

FINANCIAL STATEMENTS

DIRECTORS' REPORT 25

LEAD AUDITOR'S INDEPENDENCE DECLARATION 41


DIRECTORS' DECLARATION 71

INDEPENDENT AUDITOR'S REPORT 72

RC DRILLING AT THE MONSTER PROSPECT

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25

The Directors present their report together with the consolidated financial statements of the Group comprising of Pilbara Minerals Limited (“the Company”) and its subsidiaries for the financial year ended 30 June 2016 and the auditor’s report thereon.

DIRECTORS The Directors of the Company at any time during or since the end of the financial year are: Name, qualifications and independence status Experience, special responsibilities and other directorships

Mr Anthony Kiernan LLB

Chairman and Independent Non‐Executive Director Appointed 1 July 2016

Mr Anthony (Tony) Kiernan is a highly experienced public company director and former solicitor who has extensive experience in the management and operation of listed public companies. Mr Kiernan is a member of the Audit and Risk Committee and Chairman of the Remuneration Committee. Mr Kiernan is Chairman of the Fiona Wood Foundation which focuses on research into burn injuries.

Other current directorships: Mr Kiernan is a director of the following entities, which are listed on the Australian Securities Exchange: • Chalice Gold Mines Limited (since 2007) – Chairman • BC Iron Limited (since 2006) – Chairman • Danakali Limited (since 2013) • Venturex Resources Limited (since 2010) – Chairman.

Former directorships in the last three years: Mr Kiernan was a director of Liontown Resources Ltd and Uranium Equities Ltd in the last three years, both being listed on ASX. Mr Kiernan resigned from both companies in November 2013.

Mr Ken Brinsden BEng (Mining) MAusIMM MAICD

Chief Executive Officer and Managing Director Appointed 4 May 2016

Mr Brinsden is a mining engineer with over 20 years’ experience in surface and underground mining operations. Since graduation from the Western Australian School of Mines, Mr Brinsden has worked for major mining companies including WMC Resources Limited, Normandy Mining Ltd, Central Norseman Gold Corporation, Iluka Resources Limited, Gold Fields Limited and more recently Atlas Iron Limited. Mr Brinsden joined Atlas Iron Limited in May 2006 as Operations Manager and held the roles of Chief Operating Officer and Chief Development Officer before being appointed as its Managing Director in 2012. Mr Brinsden was appointed as Chief Executive Officer of the Company in January 2016 with his appointment to the Board as Managing Director effective from 4 May 2016.


Former directorships in the last three years: Atlas Iron Limited (22 February 2012 to 27 April 2016).

Mr Robert Adamson BSc, MSc (Hons), MAusIMM, CP (Geo), MAIMVA (CMV), MMICA


Mr Robert (Bob) Adamson’s professional career spans some 49 years. The first 25 years of which he was employed with several international mining houses, in managerial and board positions with listed exploration and mining companies in Australia and overseas. Mr Adamson has been an independent mineral industry consultant since 1993. He has an extensive background in mineral exploration and mining for gold, base metals, diamonds and semi‐precious stones, principally in Australia, southern Africa, New Zealand, South Korea, Canada and the Philippines. Mr Adamson is a member of the Audit and Risk Committee and Remuneration Committee.

Other current directorships: Mr Adamson is not currently a director of any other public listed company.


DIRECTORS' REPORTFOR THE YEAR ENDED 30 JUNE 2016

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26

Name, qualifications and independence status Experience, special responsibilities and other directorships

Mr Steve Scudamore FCA, MA (Oxon), FAICD, SF Fin


Mr Steve Scudamore is a chartered accountant with a Master of Arts from Oxford University, a Fellow of the Institute of Chartered Accountants, England, Wales and Australia (FCA), a Fellow of the Institute of Company Directors (FAICD) and a Senior Fellow of the Financial Services Institute of Australia (SF Fin). Mr Scudamore’s career includes 28 years as a partner at international accounting and financial services firm KPMG, where he served as a member of KPMG’s Global Energy and Natural Resources Group, a Member of the KPMG Australian Corporate Finance Executive and Board, and Chairman of Partners in Western Australia. Mr Scudamore is Chairman of the Audit and Risk Committee and is a member of the Remuneration Committee. Mr Scudamore also currently serves as chairman of MDA Insurance Pty Ltd, and holds board positions on industry, government and community boards, including as a Trustee of the Western Australian Museum, Chairman of Amana Living Incorporated (formerly Anglican Homes) and a member of Council at Curtin University. Mr Scudamore is also a senior advisor to Lazard Australia.

Other current directorships: Mr Scudamore currently serves as a non‐executive director on the board of Altona Mining Limited (since 2013).

Former directorships in the last three years: Aquila Resources Limited (10 December 2012 to 7 June 2016).

Mr Neil Biddle BAppSc (Geology), MAusIMM

Executive Director 30 May 2013 to 19 August 2016

Non‐Executive Director Effective 20 August 2016

Mr Neil Biddle is a geologist and Corporate Member of the Australasian Institute of Mining and Metallurgy. He has over 30 years professional and management experience in the exploration and mining industry and since 1987 has served on the Board of several ASX listed companies. Mr Biddle was Managing Director of TNG Ltd from 1998 to 2007, Border Gold NL from 1994 to 1998, and Consolidated Victorian Mines from 1991 to 1994.

Other current directorships: Mr Biddle is not currently a director of any other public listed company.

Former directorships in the last three years: Arunta Resources Ltd (4 April 2013 to 8 April 2015).

Mr John Young BAppSc (Geology), Grad Dip – Technology Management, MAusIMM

Executive Director Appointed 4 September 2015

Mr John Young is a highly experienced geologist having been engaged on exploration and production projects encompassing gold, uranium and specialty metals. From 2002 to 2006, Mr Young was Exploration Manager for Haddington Resources Limited and was responsible for resource exploration and resource definition for their Bald Hill Tantalum mine. Mr Young’s corporate experience has included appointments as CEO of Marenica Energy Limited and CEO and director of Thor Mining PLC. Mr Young has been responsible for exploration and evaluation for both the Pilgangoora and Tabba Tabba projects since their acquisition by the Company.

Other current directorships: Mosman Oil & Gas Limited.


Effective 1 July 2016, Mr Anthony Leibowitz retired as Non‐Executive Chairman of the Company. Mr Leibowitz has more than 30 years of corporate finance, investment banking and broad commercial experience. He has a strong track record in capital raisings, mergers and acquisitions, business restructuring and corporate governance and was previously a global partner at PricewaterhouseCoopers based in Perth and Sydney for 12 years.

COMPANY SECRETARY Mr Alex Eastwood, LLB (Hons), B.Ec, GAICD

Mr Eastwood was appointed to the position of Company Secretary on 1 September 2016. Mr Eastwood has more than 20 years’ experience as a commercial lawyer, company secretary and corporate finance executive. Mr Eastwood has previously held partnerships with two international law firms, and has extensive experience as an executive director in the corporate finance area. Mr Eastwood has also held a number of senior corporate positions with ASX‐listed companies including as General Counsel and Company Secretary with Gryphon Minerals and General Counsel with Imdex Limited.


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Mr Alan Boys, B. Com, CA

Mr Boys held the position of Company Secretary from 23 October 2014 until his date of resignation on 31 August 2016. Mr Boys is a Chartered Accountant whom initially spent some 17 years in professional accounting services firms, retiring from public practice as a partner of PricewaterhouseCoopers at the end of 1998. For the past 18 years, Mr Boys has been involved in providing financial advisory, investment banking services, and accounting and secretarial services to ASX listed and unlisted public companies. Mr Boys will act as an alternate Director for Mr Neil Biddle from 20 August 2016 until 30 September 2016.


Former directorships in the past three years: None.

DIRECTORS’ MEETINGS The number of directors’ meetings and number of meetings attended by each director of the Company during the financial year are:

Director Board Meetings Attended Held

Mr Tony Leibowitz* 10 10 Mr Robert Adamson 9 10 Mr Ken Brinsden 2 2 Mr Neil Biddle 10 10 Mr John Young 8 8

* Mr Leibowitz retired as a director effective 1 July 2016. Mr Anthony Kiernan was appointed as a director and Chairman on 1 July 2016.

Mr Steve Scudamore was appointed as a director on 18 July 2016.

During the year the full board acted in the capacity of both the Audit and Risk Committee and Remuneration Committee. Subsequent to year end, the Company established a separate Audit and Risk Committee and reconstituted the Remuneration Committee. Both committees consist solely of non‐executive directors.

PRINCIPAL ACTIVITIES The principal activities of the Group during the year were the exploration, development and mining of mineral resources. There were no significant changes in the nature of the activities of the Group during the year.

OBJECTIVES

The Group’s objectives are to:

Develop and mine the world class lithium‐tantalum deposit at the 100% owned Pilgangoora Project (“Project”) located in the Pilbara region of Western Australia;

Continue to conduct exploration activities at the Project to improve the existing resource and reserve;

Conduct exploration activities to hopefully discover new economic mineral deposits; and

Consider participation in downstream chemical processing opportunities to leverage the quality of the Project.

In order to meet these objectives, the following targets have been set for the 2017 financial year and beyond:

Complete the Project’s definitive feasibility study in the first quarter of the 2017 financial year;

Finance the construction and commissioning of the Project;

Target Project construction to commence in the second quarter of the 2017 financial year and commissioning in the second quarter of the 2018 financial year;

Finalise offtake agreements with the Company’s prospective customer base that will underpin the Project’s production profile of chemical spodumene concentrate; and

Develop partnerships with key lithium chemicals industry groups to participate in downstream chemical processing opportunities by the third quarter of the 2017 financial year.

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OPERATING AND FINANCIAL REVIEW

REVIEW OF OPERATIONS

During the year, the Company continued the exploration and development of its Pilgangoora Lithium‐Tantalum Project located in the Pilbara region of Western Australia.

The Pilgangoora Lithium‐Tantalum Project was subject to an extensive and successful exploration program during the period. In March 2016, the Company produced a Prefeasibility Study (“PFS”) which confirmed the technical and financial viability of a standalone 2 million tonnes per annum (“Mtpa”) mining and on‐site processing operation. The Company is progressing to a Definitive Feasibility Study (“DFS”) which is expected to be completed during the first quarter of the 2017 financial year.

Operations at the Tabba Tabba Tantalum Project were temporarily suspended in January 2016 due to the processing plant requiring modification and rectification works. In April 2016 operations at the Tabba Tabba Tantalum Project were suspended due to the cost of certain rectification works and the prevailing tantalum market conditions.

REVIEW OF PRINCIPAL BUSINESS

PILGANGOORA LITHIUM‐TANTALUM PROJECT

The Pilgangoora Lithium‐Tantalum Project is located 120 kilometres southeast of Port Hedland in Western Australia. It is 100% owned by the Company. Since acquiring Pilgangoora in mid‐2014, the Company has made significant progress in identifying and increasing the size of the resource as well as assessing and developing a greater understanding of the metallurgy of the deposit. The Pilgangoora Project now represents the second largest spodumene (lithium‐mineral) deposit globally.

During the period, the Company completed the PFS on the Pilgangoora Lithium‐Tantalum Project. The PFS confirmed the technical and financial viability of a 2 Mtpa standalone mining and processing operation over an initial 15‐year mine life based on an initial maiden Ore Reserve of 29.5 Mt @ 1.31% Li2O, 134 ppm Ta2O5 and 1.18% Fe2O3.

Key financial outcomes included:

Project net present value (“NPV”) of A$407 million (10% discount rate, post‐tax) and internal rate of return (“IRR”) of 44% (PFS Reserve basis);

Project capital estimate of A$184 million (+/‐25%); and

Outstanding life‐of‐mine operating cash costs of US$205/tonne of spodumene concentrate FOB (net of by‐product credits).

The Company is currently undertaking a DFS which is expected to be completed in the September 2016 quarter.

In February 2016, the Company confirmed the significant scale of the Pilgangoora Mineral Resource, with the release of an Indicated and Inferred Resource of 80.2 Mt grading 1.26% Li2O (containing 1,008,000 tonnes of lithium oxide), including 42.3 Mt grading 195 ppm Ta2O5 (containing 18.2 million pounds (“Mlb”) of tantalum oxide).

Subsequently, following a successful drilling program the Company released an updated Mineral Resource in July 2016 with an upgraded Indicated and Inferred Resource of 128.6 Mt grading 1.22% Li2O containing 1.57 Mt of lithium oxide and 39 Mlb of Ta2O5, as follows: Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Li2O (t) Ta2O5 (Mlb) Measured 18.0 1.36 150 245,000 5.9 Indicated 65.6 1.24 131 812,000 19.0 Inferred 45.0 1.15 144 515,000 14.2 Total 128.6 1.22 138 1,572,000 39.2

MiningPlus Pty Ltd completed an independent review of the February 2016 Mineral Resource, for the purpose of optimisation studies to estimate project Ore Reserves, and found no material flaws in the resource model. The following Ore Reserve was released in March 2016: Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (t) Ta2O5 (Mlb) Proven ‐ ‐ ‐ ‐ ‐ ‐ ‐ Probable 29.5 1.31 134 1.15 273,000 1,856 4.09 Total 29.5 1.31 134 1.15 273,000 1,856 4.09


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In August 2016, the Company announced a further increase to the Pilgangoora Lithium‐Tantalum Project ore reserves following the drilling program undertaken as part of the Definitive Feasibility Study, as follows: Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (Mlb) Proven 17.5 1.31 143 0.94 230,000 5.5 Probable 52.3 1.25 128 1.07 653,000 14.8 Total 69.8 1.26 132 1.04 883,000 20.3

Further information regarding the Project can be found in the Annual Report under the heading titled Pilgangoora Lithium‐Tantalum Project.

TABBA TABBA TANTALUM PROJECT

In 2014, the Company entered into the incorporated joint venture Tabba Tabba Tantalum Pty Ltd (“TTT”) with Valdrew Nominees Pty Ltd (“Valdrew”) to jointly evaluate, develop and mine the Tabba Tabba Tantalum Project located some 75 kilometres by road from Port Hedland, Western Australia.

The tenements are owned by Global Advanced Metals Wodgina Pty Ltd (“GAM”) and the mining and processing is to be undertaken by TTT pursuant to an agreement with GAM, who has an offtake agreement for the project’s tantalite concentrate.

On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to acquire the remaining 50% interest in the Tabba Tabba Tantalum Project. The acquisition increased the Company’s interest in the Tabba Tabba Tantalum Project to 100%.

The purchase consideration for Valdrew’s 50% shareholding in TTT was $2,000,000 cash on settlement. Additionally, all loans and advances as well as any amounts due to Valdrew in respect of past goods and services were released in full and not enforceable against TTT.

Subject to delivery of tantalite concentrate to GAM in accordance with the Minerals and Processing Agreement, a further $1,300,000 was payable by TTT to Valdrew. In addition, Valdrew was entitled to receive up to 20,000,000 unlisted options over ordinary shares in the Company in the event certain milestones were achieved. Each unlisted option was to have a term of two years and an exercise price calculated as the five‐trading day volume weighted average price (“VWAP”) prior to the issue date of the options.

Operations at the Tabba Tabba Tantalum Project were suspended in January 2016 following issues with the commissioning process. The Company completed an independent engineering and project review of the site in April 2016. The engineering review determined that further expenditure was required to modify the existing processing plant before the commissioning process could be finalised. This combined with existing weak tantalum market conditions meant that the operation was suspended indefinitely. As a result, none of the milestones were achieved and accordingly no unlisted options in the Company will be issued to Valdrew.

WEST PILBARA JOINT VENTURE

In April 2013, the Company entered into a farm‐in and joint venture agreement with Fox Resources Limited (“Fox”) over six tenements comprising its West Pilbara project. To date, Fox has farmed in to the extent of 55% of the joint venture, however Fox is currently suspended from the ASX and no exploration activities were undertaken during the period.

REVIEW OF FINANCIAL CONDITIONS

The consolidated loss for the year ended 30 June 2016 was $55.61 million (restated 2015 loss: $6.62 million). Excluding the following non‐cash items, the consolidated entity achieved an unaudited operating loss of $15.90 million (restated 2015 loss: $2.80 million):

non‐cash impairment charges related to the closure of the Tabba Tabba Project ($12.14 million);

non‐cash share‐based payment expenses following the issue of options to directors, employees, consultants, service providers and convertible noteholders to preserve cash ($26.56 million);

non‐cash depreciation charges related to corporate assets ($0.05 million);

non‐cash net financing costs ($1.77 million); and

non‐cash gain on equity investment ($0.81 million).

The operating loss of $15.90 million includes exploration and evaluation costs of $10.56 million incurred mainly on the Pilgangoora Project, following a change in accounting policy to expense exploration and evaluation costs as incurred.


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OPERATING AND FINANCIAL REVIEW

REVIEW OF OPERATIONS

During the year, the Company continued the exploration and development of its Pilgangoora Lithium‐Tantalum Project located in the Pilbara region of Western Australia.

The Pilgangoora Lithium‐Tantalum Project was subject to an extensive and successful exploration program during the period. In March 2016, the Company produced a Prefeasibility Study (“PFS”) which confirmed the technical and financial viability of a standalone 2 million tonnes per annum (“Mtpa”) mining and on‐site processing operation. The Company is progressing to a Definitive Feasibility Study (“DFS”) which is expected to be completed during the first quarter of the 2017 financial year.

Operations at the Tabba Tabba Tantalum Project were temporarily suspended in January 2016 due to the processing plant requiring modification and rectification works. In April 2016 operations at the Tabba Tabba Tantalum Project were suspended due to the cost of certain rectification works and the prevailing tantalum market conditions.

REVIEW OF PRINCIPAL BUSINESS

PILGANGOORA LITHIUM‐TANTALUM PROJECT

The Pilgangoora Lithium‐Tantalum Project is located 120 kilometres southeast of Port Hedland in Western Australia. It is 100% owned by the Company. Since acquiring Pilgangoora in mid‐2014, the Company has made significant progress in identifying and increasing the size of the resource as well as assessing and developing a greater understanding of the metallurgy of the deposit. The Pilgangoora Project now represents the second largest spodumene (lithium‐mineral) deposit globally.

During the period, the Company completed the PFS on the Pilgangoora Lithium‐Tantalum Project. The PFS confirmed the technical and financial viability of a 2 Mtpa standalone mining and processing operation over an initial 15‐year mine life based on an initial maiden Ore Reserve of 29.5 Mt @ 1.31% Li2O, 134 ppm Ta2O5 and 1.18% Fe2O3.

Key financial outcomes included:

Project net present value (“NPV”) of A$407 million (10% discount rate, post‐tax) and internal rate of return (“IRR”) of 44% (PFS Reserve basis);

Project capital estimate of A$184 million (+/‐25%); and

Outstanding life‐of‐mine operating cash costs of US$205/tonne of spodumene concentrate FOB (net of by‐product credits).

The Company is currently undertaking a DFS which is expected to be completed in the September 2016 quarter.

In February 2016, the Company confirmed the significant scale of the Pilgangoora Mineral Resource, with the release of an Indicated and Inferred Resource of 80.2 Mt grading 1.26% Li2O (containing 1,008,000 tonnes of lithium oxide), including 42.3 Mt grading 195 ppm Ta2O5 (containing 18.2 million pounds (“Mlb”) of tantalum oxide).

Subsequently, following a successful drilling program the Company released an updated Mineral Resource in July 2016 with an upgraded Indicated and Inferred Resource of 128.6 Mt grading 1.22% Li2O containing 1.57 Mt of lithium oxide and 39 Mlb of Ta2O5, as follows: Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Li2O (t) Ta2O5 (Mlb) Measured 18.0 1.36 150 245,000 5.9 Indicated 65.6 1.24 131 812,000 19.0 Inferred 45.0 1.15 144 515,000 14.2 Total 128.6 1.22 138 1,572,000 39.2

MiningPlus Pty Ltd completed an independent review of the February 2016 Mineral Resource, for the purpose of optimisation studies to estimate project Ore Reserves, and found no material flaws in the resource model. The following Ore Reserve was released in March 2016: Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (t) Ta2O5 (Mlb) Proven ‐ ‐ ‐ ‐ ‐ ‐ ‐ Probable 29.5 1.31 134 1.15 273,000 1,856 4.09 Total 29.5 1.31 134 1.15 273,000 1,856 4.09


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In August 2016, the Company announced a further increase to the Pilgangoora Lithium‐Tantalum Project ore reserves following the drilling program undertaken as part of the Definitive Feasibility Study, as follows: Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (Mlb) Proven 17.5 1.31 143 0.94 230,000 5.5 Probable 52.3 1.25 128 1.07 653,000 14.8 Total 69.8 1.26 132 1.04 883,000 20.3

Further information regarding the Project can be found in the Annual Report under the heading titled Pilgangoora Lithium‐Tantalum Project.

TABBA TABBA TANTALUM PROJECT


The tenements are owned by Global Advanced Metals Wodgina Pty Ltd (“GAM”) and the mining and processing is to be undertaken by TTT pursuant to an agreement with GAM, who has an offtake agreement for the project’s tantalite concentrate.

On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to acquire the remaining 50% interest in the Tabba Tabba Tantalum Project. The acquisition increased the Company’s interest in the Tabba Tabba Tantalum Project to 100%.

The purchase consideration for Valdrew’s 50% shareholding in TTT was $2,000,000 cash on settlement. Additionally, all loans and advances as well as any amounts due to Valdrew in respect of past goods and services were released in full and not enforceable against TTT.

Subject to delivery of tantalite concentrate to GAM in accordance with the Minerals and Processing Agreement, a further $1,300,000 was payable by TTT to Valdrew. In addition, Valdrew was entitled to receive up to 20,000,000 unlisted options over ordinary shares in the Company in the event certain milestones were achieved. Each unlisted option was to have a term of two years and an exercise price calculated as the five‐trading day volume weighted average price (“VWAP”) prior to the issue date of the options.

Operations at the Tabba Tabba Tantalum Project were suspended in January 2016 following issues with the commissioning process. The Company completed an independent engineering and project review of the site in April 2016. The engineering review determined that further expenditure was required to modify the existing processing plant before the commissioning process could be finalised. This combined with existing weak tantalum market conditions meant that the operation was suspended indefinitely. As a result, none of the milestones were achieved and accordingly no unlisted options in the Company will be issued to Valdrew.

WEST PILBARA JOINT VENTURE

In April 2013, the Company entered into a farm‐in and joint venture agreement with Fox Resources Limited (“Fox”) over six tenements comprising its West Pilbara project. To date, Fox has farmed in to the extent of 55% of the joint venture, however Fox is currently suspended from the ASX and no exploration activities were undertaken during the period.

REVIEW OF FINANCIAL CONDITIONS

The consolidated loss for the year ended 30 June 2016 was $55.61 million (restated 2015 loss: $6.62 million). Excluding the following non‐cash items, the consolidated entity achieved an unaudited operating loss of $15.90 million (restated 2015 loss: $2.80 million):

non‐cash impairment charges related to the closure of the Tabba Tabba Project ($12.14 million);

non‐cash share‐based payment expenses following the issue of options to directors, employees, consultants, service providers and convertible noteholders to preserve cash ($26.56 million);

non‐cash depreciation charges related to corporate assets ($0.05 million);

non‐cash net financing costs ($1.77 million); and

non‐cash gain on equity investment ($0.81 million).

The operating loss of $15.90 million includes exploration and evaluation costs of $10.56 million incurred mainly on the Pilgangoora Project, following a change in accounting policy to expense exploration and evaluation costs as incurred.


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SHARE PLACEMENTS AND ISSUES

During the financial year, the Company raised the following amounts of capital before costs: Date Number of shares Price per share ($) Amount raised ($’000) 23 July 2015 22,727,274(i) $0.11 2,500 24 November 2015 52,173,913 $0.23 12,000 14 April 2016 142,000,000 $0.38 53,960 26 May 2016 39,609,256 $0.38 15,051 30 May 2016 81,684,208 $0.38 31,040

(i) Three attaching unlisted options were issued for every four shares issued with a strike price of $0.15 per option and a term of two years from date of issue (17,045,455 options)

CONVERTIBLE NOTES

On 2 September 2015, the Company issued 4,000,000 unlisted secured convertible notes with a face value of $4 million. The convertible notes had a maturity date of 2 March 2017, a coupon rate of 15% per annum and could be converted at a price equal to 80% of the Company’s five‐day weighted average share price preceding conversion. Unlisted non‐transferable options totalling 50,000,000 with an exercise price of $0.05 and an expiry date of 2 March 2017 were also issued in conjunction with the convertible notes. By 21 April 2016, all unlisted secured convertible notes issued on 2 September 2015 were converted to equity following the issue of 12.3 million ordinary shares at an average conversion price of $0.33 per share. During the year, unlisted secured convertible notes from an issue made on 24 March 2014 were converted to equity following the issue of 1.7 million ordinary shares at an average conversion price of $0.11 per share. Of the 1.7 million ordinary shares issued, 0.3 million were issued for consideration for accrued interest owing on the convertible notes being converted to ordinary shares. The remaining unlisted secured convertible notes expired on 25 September 2015 which resulted in the repayment of notes with a face value of $13,550 and accrued interest. During the year, unlisted secured convertible notes from an issue made on 30 May 2014 were converted to equity following the issue of 7.6 million ordinary shares at an average conversion price of $0.11 per share. Of the 7.6 million ordinary shares issued, 1.6 million were issued as consideration for accrued interest owing on the convertible notes being converted to ordinary shares. The remaining unlisted secured convertible notes expired on 30 November 2015 which resulted in the repayment of notes with a face value of $161,450 and accrued interest. By 19 April 2016, convertible notes that were issued by the Company on 22 June 2015 with a face value of $1,700,000 were converted to equity at a price equal to 80% of the Company’s five‐day weighted average share price preceding conversion. As a result, 6.9 million ordinary shares were issued at an average conversion price of $0.25 per share.

OPTIONS ISSUED

During the financial year, the Company issued the following options:

Options Grant date Exercise price Expiry date Vested Options unexercised at 30 June 2016 29,500,000 28/08/2015 $0.10 22/03/2017 29,500,000 8,000,000 56,400,000 28/08/2015 $0.05 02/03/2017 56,400,000 4,937,500 17,045,455 30/11/2015 $0.15 01/12/2017 17,045,455 3,268,181 5,000,000 30/11/2015 $0.10 22/03/2017 5,000,000 5,000,000 23,000,000 18/04/2016 $0.40 16/05/2018 23,000,000 23,000,000 1,000,000 18/04/2016 $0.40 16/05/2018 1,000,000 1,000,000 2,000,000 18/04/2016 $0.65 16/05/2018 2,000,000 2,000,000 15,000,000 18/04/2016 $0.40 16/05/2019 ‐(i) 15,000,000 800,000 06/05/2016 $0.40 16/05/2018 ‐(ii) 800,000 13,500,000 06/05/2016 $0.40 16/05/2018 13,500,000 13,500,000 16,500,000 06/05/2016 $0.40 16/05/2019 ‐(i) 16,500,000 5,000,000 11/05/2016 $0.65 16/05/2018 5,000,000 5,000,000 6,000,000 22/06/2016 $0.63 22/06/2019 ‐(i) 6,000,000

(i) The vesting conditions attaching to these options are: 33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; 33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable to

the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; 33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works and mine

establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during production runs, at a saleable product specification; and

A continuing employment service condition at the time each milestone is achieved. (ii) The vesting condition attaching to these options is six months of continuous employment service.

During the period, a total of $8.10 million was raised following the exercise of 122,793,103 unlisted options over ordinary shares.


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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review, except as already noted in this Directors’ Report.

DIVIDENDS The Directors recommend that no dividend be declared or paid.

EVENTS SUBSEQUENT TO REPORTING DATE On 4 July 2016, the Company announced it had signed a binding offtake agreement with leading Chinese lithium chemicals company, General Lithium Corporation (“GLC”) for the supply of 140,000 tonnes per annum (“tpa”) of 6% chemical‐grade spodumene concentrate from Q1 2018 for an initial six‐year period, with the option to extend for a further four years. The offtake pricing mechanism will be based on the price of lithium carbonate, so that the Company shares in the pricing outcomes derived from carbonate deliveries to higher volume contracts with cathode makers in China.

As part of the Offtake Agreement with GLC, a binding Memorandum of Understanding (“MOU”) was signed to enable the Company and GLC to participate in the evaluation and development of a future offshore spodumene conversion plant, to process spodumene concentrates from the Pilgangoora Project. In the event a positive decision is made to proceed with the development, GLC will provide technology, technical expertise and intellectual property, and will build and operate the lithium chemicals production facility through an incorporated joint venture with the Company. Pilbara is expected to have a 50% share of the equity in the proposed Joint Venture.

A binding Equity Subscription Agreement was also executed with GLC as part of the above, whereby GLC has agreed to invest A$17.75 million in the Company via a 3% placement at 50c per share, with settlement to occur after the conditions precedent to the Offtake Agreement terms have been satisfied. A further 2% placement is proposed (for a total stake of 5% in Pilbara Minerals), once a formal investment decision has been made to proceed with the development of the lithium chemicals facility.

The Offtake Agreement is subject to various conditions precedent, including the waiver or non‐exercise of the right of first refusal to the spodumene concentrates held by Mineral Resources Limited under the terms of the Pilgangoora Asset Sale Agreement.

On 11 July 2016, the Company announced a further substantial increase in the Pilgangoora Lithium‐Tantalum Project’s Mineral Resource. The resource upgrade resulted in:

A 60% increase in the total Measured, Indicated and Inferred Resource to 128.6 Mt grading 1.22% Li2O (spodumene) and 138 ppm Ta2O5 and 0.63% Fe2O3, containing 1.57 Mt of lithium oxide and 39 Mlb of Ta2O5;

A 134% increase in the total Measured and Indicated Resource, available for conversion to Ore Reserves, to 83.6 Mt grading 1.27% Li2O (spodumene), 135 ppm Ta2O5 and 0.58% Fe2O3, containing 1.06 Mt of lithium oxide and 24.9 Mlb of Ta2O5;

After applying a cut‐off of 1% Li2O to the total Mineral Resource of 128.6 Mt, the Inferred and Indicated Lithium Resource components amount to 91 Mt @ 1.43% Li2O, containing 1.3 Mt of lithium oxide.

In August 2016, the Company announced a substantial increase in the Ore Reserves for the Pilgangoora Lithium‐Tantalum Project to 69.8 Mt @ 1.26% Li2O which will aid in the completion of a Definitive Feasibility Study (“DFS”). The updated Ore Reserves are more than double the maiden ore reserve announced in the March 2016 Pre‐Feasibility Study (29.5 Mt @ 1.3% Li2O and 134 ppm Ta2O5). The overall Pilgangoora Ore Reserve now comprises 883,000 tonnes of contained lithium oxide and 20.3 Mlb of contained tantalite.

LIKELY DEVELOPMENTS The Group will continue to develop the Pilgangoora Lithium‐Tantalum Project with a view to commissioning and operating the same. This will require completion of a positive DFS, and the raising of sufficient capital to fund the development, construction and commissioning of the Project.


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SHARE PLACEMENTS AND ISSUES

During the financial year, the Company raised the following amounts of capital before costs: Date Number of shares Price per share ($) Amount raised ($’000) 23 July 2015 22,727,274(i) $0.11 2,500 24 November 2015 52,173,913 $0.23 12,000 14 April 2016 142,000,000 $0.38 53,960 26 May 2016 39,609,256 $0.38 15,051 30 May 2016 81,684,208 $0.38 31,040

(i) Three attaching unlisted options were issued for every four shares issued with a strike price of $0.15 per option and a term of two years from date of issue (17,045,455 options)

CONVERTIBLE NOTES

On 2 September 2015, the Company issued 4,000,000 unlisted secured convertible notes with a face value of $4 million. The convertible notes had a maturity date of 2 March 2017, a coupon rate of 15% per annum and could be converted at a price equal to 80% of the Company’s five‐day weighted average share price preceding conversion. Unlisted non‐transferable options totalling 50,000,000 with an exercise price of $0.05 and an expiry date of 2 March 2017 were also issued in conjunction with the convertible notes. By 21 April 2016, all unlisted secured convertible notes issued on 2 September 2015 were converted to equity following the issue of 12.3 million ordinary shares at an average conversion price of $0.33 per share. During the year, unlisted secured convertible notes from an issue made on 24 March 2014 were converted to equity following the issue of 1.7 million ordinary shares at an average conversion price of $0.11 per share. Of the 1.7 million ordinary shares issued, 0.3 million were issued for consideration for accrued interest owing on the convertible notes being converted to ordinary shares. The remaining unlisted secured convertible notes expired on 25 September 2015 which resulted in the repayment of notes with a face value of $13,550 and accrued interest. During the year, unlisted secured convertible notes from an issue made on 30 May 2014 were converted to equity following the issue of 7.6 million ordinary shares at an average conversion price of $0.11 per share. Of the 7.6 million ordinary shares issued, 1.6 million were issued as consideration for accrued interest owing on the convertible notes being converted to ordinary shares. The remaining unlisted secured convertible notes expired on 30 November 2015 which resulted in the repayment of notes with a face value of $161,450 and accrued interest. By 19 April 2016, convertible notes that were issued by the Company on 22 June 2015 with a face value of $1,700,000 were converted to equity at a price equal to 80% of the Company’s five‐day weighted average share price preceding conversion. As a result, 6.9 million ordinary shares were issued at an average conversion price of $0.25 per share.

OPTIONS ISSUED

During the financial year, the Company issued the following options:

Options Grant date Exercise price Expiry date Vested Options unexercised at 30 June 2016 29,500,000 28/08/2015 $0.10 22/03/2017 29,500,000 8,000,000 56,400,000 28/08/2015 $0.05 02/03/2017 56,400,000 4,937,500 17,045,455 30/11/2015 $0.15 01/12/2017 17,045,455 3,268,181 5,000,000 30/11/2015 $0.10 22/03/2017 5,000,000 5,000,000 23,000,000 18/04/2016 $0.40 16/05/2018 23,000,000 23,000,000 1,000,000 18/04/2016 $0.40 16/05/2018 1,000,000 1,000,000 2,000,000 18/04/2016 $0.65 16/05/2018 2,000,000 2,000,000 15,000,000 18/04/2016 $0.40 16/05/2019 ‐(i) 15,000,000 800,000 06/05/2016 $0.40 16/05/2018 ‐(ii) 800,000 13,500,000 06/05/2016 $0.40 16/05/2018 13,500,000 13,500,000 16,500,000 06/05/2016 $0.40 16/05/2019 ‐(i) 16,500,000 5,000,000 11/05/2016 $0.65 16/05/2018 5,000,000 5,000,000 6,000,000 22/06/2016 $0.63 22/06/2019 ‐(i) 6,000,000

(i) The vesting conditions attaching to these options are: 33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; 33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable to

the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; 33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works and mine


A continuing employment service condition at the time each milestone is achieved. (ii) The vesting condition attaching to these options is six months of continuous employment service.

During the period, a total of $8.10 million was raised following the exercise of 122,793,103 unlisted options over ordinary shares.


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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review, except as already noted in this Directors’ Report.

DIVIDENDS The Directors recommend that no dividend be declared or paid.

EVENTS SUBSEQUENT TO REPORTING DATE On 4 July 2016, the Company announced it had signed a binding offtake agreement with leading Chinese lithium chemicals company, General Lithium Corporation (“GLC”) for the supply of 140,000 tonnes per annum (“tpa”) of 6% chemical‐grade spodumene concentrate from Q1 2018 for an initial six‐year period, with the option to extend for a further four years. The offtake pricing mechanism will be based on the price of lithium carbonate, so that the Company shares in the pricing outcomes derived from carbonate deliveries to higher volume contracts with cathode makers in China.

As part of the Offtake Agreement with GLC, a binding Memorandum of Understanding (“MOU”) was signed to enable the Company and GLC to participate in the evaluation and development of a future offshore spodumene conversion plant, to process spodumene concentrates from the Pilgangoora Project. In the event a positive decision is made to proceed with the development, GLC will provide technology, technical expertise and intellectual property, and will build and operate the lithium chemicals production facility through an incorporated joint venture with the Company. Pilbara is expected to have a 50% share of the equity in the proposed Joint Venture.

A binding Equity Subscription Agreement was also executed with GLC as part of the above, whereby GLC has agreed to invest A$17.75 million in the Company via a 3% placement at 50c per share, with settlement to occur after the conditions precedent to the Offtake Agreement terms have been satisfied. A further 2% placement is proposed (for a total stake of 5% in Pilbara Minerals), once a formal investment decision has been made to proceed with the development of the lithium chemicals facility.

The Offtake Agreement is subject to various conditions precedent, including the waiver or non‐exercise of the right of first refusal to the spodumene concentrates held by Mineral Resources Limited under the terms of the Pilgangoora Asset Sale Agreement.

On 11 July 2016, the Company announced a further substantial increase in the Pilgangoora Lithium‐Tantalum Project’s Mineral Resource. The resource upgrade resulted in:

A 60% increase in the total Measured, Indicated and Inferred Resource to 128.6 Mt grading 1.22% Li2O (spodumene) and 138 ppm Ta2O5 and 0.63% Fe2O3, containing 1.57 Mt of lithium oxide and 39 Mlb of Ta2O5;

A 134% increase in the total Measured and Indicated Resource, available for conversion to Ore Reserves, to 83.6 Mt grading 1.27% Li2O (spodumene), 135 ppm Ta2O5 and 0.58% Fe2O3, containing 1.06 Mt of lithium oxide and 24.9 Mlb of Ta2O5;

After applying a cut‐off of 1% Li2O to the total Mineral Resource of 128.6 Mt, the Inferred and Indicated Lithium Resource components amount to 91 Mt @ 1.43% Li2O, containing 1.3 Mt of lithium oxide.

In August 2016, the Company announced a substantial increase in the Ore Reserves for the Pilgangoora Lithium‐Tantalum Project to 69.8 Mt @ 1.26% Li2O which will aid in the completion of a Definitive Feasibility Study (“DFS”). The updated Ore Reserves are more than double the maiden ore reserve announced in the March 2016 Pre‐Feasibility Study (29.5 Mt @ 1.3% Li2O and 134 ppm Ta2O5). The overall Pilgangoora Ore Reserve now comprises 883,000 tonnes of contained lithium oxide and 20.3 Mlb of contained tantalite.

LIKELY DEVELOPMENTS The Group will continue to develop the Pilgangoora Lithium‐Tantalum Project with a view to commissioning and operating the same. This will require completion of a positive DFS, and the raising of sufficient capital to fund the development, construction and commissioning of the Project.


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ENVIRONMENTAL REGULATION The Group’s operations are subject to significant environmental regulation under both Commonwealth and State legislation in relation to its mining, development and exploration activities. The Group is committed to achieving a high standard of environmental performance. Compliance with the requirements of environmental regulations and with specific requirements of site environmental licences was substantially achieved across all operations with no known instance of non‐compliance noted. Based on the results of enquiries made, the Directors are not aware of any significant breaches during the period covered by this report.

INTERESTS The relevant interest of each director in the shares, rights or options over such instruments issued by the companies within the Group and other related bodies corporate, as notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

Director Pilbara Minerals Limited Ordinary shares Options over ordinary shares

Mr Robert Adamson 3,937,851 4,000,000 Mr Neil Biddle 36,221,930 8,000,000 Mr Ken Brinsden 869,565 15,000,000(i) Mr Anthony Kiernan 75,000 ‐ Mr Steve Scudamore ‐ ‐ Mr John Young 16,158,316 10,000,000 Mr Alan Boys 1,877,504 6,900,000

(i) Vesting conditions attached to these options are set out in footnote (b) to the “Share Options” table below

SHARE OPTIONS At the date of this report unissued shares of the Group under option are: Expiry date Exercise price Number of options 21 December 2016 $0.05 1,250,000 2 March 2017 $0.05 4,625,000 22 March 2017 $0.10 11,000,000 25 March 2017 $0.03 4,166,665 1 December 2017 $0.15 3,268,181 16 May 2018 $0.40 37,500,000 16 May 2018a $0.40 800,000 16 May 2018 $0.65 7,000,000 16 May 2019b $0.40 31,500,000

a The vesting condition requires an employee to provide six months of continuous service from the date of grant. b Vesting conditions applying to these unlisted options include:

Delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board (33.33% vest); The funding required to develop the Pilgangoora Project has been raised or procured based on parameters acceptable to the Board of Pilbara

Minerals and a “decision to mine” has been made by the Board in respect of the Pilgangoora Project (further 33.33% vest); The Pilgangoora Project mine development and plant construction is largely complete (both for civil works and mine establishment) and the

process plan has achieved a nominal 85% of its design throughput capacity during production runs, at a saleable product specification (final 33.33% vest).

Unless stated, there are no other vesting conditions on options on issue.


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INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has agreed to indemnify the following current and past directors of the Company, Mr R. Adamson, Mr N. Biddle, Mr K. Brinsden, Mr T. Leibowitz, Mr A. Kiernan, Mr S. Scudamore and Mr J. Young against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company has also agreed to indemnify the current Directors of its controlled entities for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

Under the terms of the insurance policy entered into in April 2016, the Company has agreed to indemnify certain senior executives for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position in the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The policy stipulates that the Company will meet the full amount of any such liabilities, including legal fees.

INSURANCE PREMIUMS

Since the end of the previous financial year the Company has paid insurance premiums of $93,885 in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for current directors and officers, including senior executives of the Company and directors, senior executives and secretaries of its controlled entities. The insurance premiums relate to:

costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and

other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

NON‐AUDIT SERVICES Somes Cooke audited the Group up until their resignation on 10 June 2016. Somes Cook did not provide any non‐audit services during this period. The Directors resolved to appoint KPMG as the interim auditor of the Group, with their appointment to be confirmed at the next Annual General Meeting. KPMG did not provide any non‐audit services from 10 June 2016 up to year end.

LEAD AUDITOR’S INDEPENDENCE DECLARATION The Lead Auditor’s Independence Declaration is set out on page 41 and forms part of the Directors’ Report for the financial year ended 30 June 2016.

ROUNDING OF AMOUNTS The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with the Instrument, amounts in the consolidated financial statements and the Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

REMUNERATION REPORT – AUDITED This Remuneration Report for the year ended 30 June 2016 outlines the director and executive remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (Cth) (“Act”) and its regulations. The Remuneration Report details the remuneration arrangements for Key Management Personnel (“KMP”) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise).


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ENVIRONMENTAL REGULATION The Group’s operations are subject to significant environmental regulation under both Commonwealth and State legislation in relation to its mining, development and exploration activities. The Group is committed to achieving a high standard of environmental performance. Compliance with the requirements of environmental regulations and with specific requirements of site environmental licences was substantially achieved across all operations with no known instance of non‐compliance noted. Based on the results of enquiries made, the Directors are not aware of any significant breaches during the period covered by this report.

INTERESTS The relevant interest of each director in the shares, rights or options over such instruments issued by the companies within the Group and other related bodies corporate, as notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

Director Pilbara Minerals Limited Ordinary shares Options over ordinary shares

Mr Robert Adamson 3,937,851 4,000,000 Mr Neil Biddle 36,221,930 8,000,000 Mr Ken Brinsden 869,565 15,000,000(i) Mr Anthony Kiernan 75,000 ‐ Mr Steve Scudamore ‐ ‐ Mr John Young 16,158,316 10,000,000 Mr Alan Boys 1,877,504 6,900,000

(i) Vesting conditions attached to these options are set out in footnote (b) to the “Share Options” table below

SHARE OPTIONS At the date of this report unissued shares of the Group under option are: Expiry date Exercise price Number of options 21 December 2016 $0.05 1,250,000 2 March 2017 $0.05 4,625,000 22 March 2017 $0.10 11,000,000 25 March 2017 $0.03 4,166,665 1 December 2017 $0.15 3,268,181 16 May 2018 $0.40 37,500,000 16 May 2018a $0.40 800,000 16 May 2018 $0.65 7,000,000 16 May 2019b $0.40 31,500,000

a The vesting condition requires an employee to provide six months of continuous service from the date of grant. b Vesting conditions applying to these unlisted options include:

Delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board (33.33% vest); The funding required to develop the Pilgangoora Project has been raised or procured based on parameters acceptable to the Board of Pilbara

Minerals and a “decision to mine” has been made by the Board in respect of the Pilgangoora Project (further 33.33% vest); The Pilgangoora Project mine development and plant construction is largely complete (both for civil works and mine establishment) and the

process plan has achieved a nominal 85% of its design throughput capacity during production runs, at a saleable product specification (final 33.33% vest).



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INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has agreed to indemnify the following current and past directors of the Company, Mr R. Adamson, Mr N. Biddle, Mr K. Brinsden, Mr T. Leibowitz, Mr A. Kiernan, Mr S. Scudamore and Mr J. Young against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company has also agreed to indemnify the current Directors of its controlled entities for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

Under the terms of the insurance policy entered into in April 2016, the Company has agreed to indemnify certain senior executives for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position in the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The policy stipulates that the Company will meet the full amount of any such liabilities, including legal fees.

INSURANCE PREMIUMS

Since the end of the previous financial year the Company has paid insurance premiums of $93,885 in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for current directors and officers, including senior executives of the Company and directors, senior executives and secretaries of its controlled entities. The insurance premiums relate to:

costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and

other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

NON‐AUDIT SERVICES Somes Cooke audited the Group up until their resignation on 10 June 2016. Somes Cook did not provide any non‐audit services during this period. The Directors resolved to appoint KPMG as the interim auditor of the Group, with their appointment to be confirmed at the next Annual General Meeting. KPMG did not provide any non‐audit services from 10 June 2016 up to year end.

LEAD AUDITOR’S INDEPENDENCE DECLARATION The Lead Auditor’s Independence Declaration is set out on page 41 and forms part of the Directors’ Report for the financial year ended 30 June 2016.

ROUNDING OF AMOUNTS The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with the Instrument, amounts in the consolidated financial statements and the Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

REMUNERATION REPORT – AUDITED This Remuneration Report for the year ended 30 June 2016 outlines the director and executive remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 (Cth) (“Act”) and its regulations. The Remuneration Report details the remuneration arrangements for Key Management Personnel (“KMP”) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise).


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PRINCIPLES OF COMPENSATION – AUDITED

The nature and amount of remuneration for an executive and non‐executive director depends on the nature of the role and market rates for the position, which are determined with the assistance of external advisors (where necessary), surveys and reports, taking into account the experience and qualifications of each individual. The Board ensures that the remuneration paid to KMP is competitive and reasonable. Fees and payments to the Non‐Executive Directors reflect the demands made, and the responsibilities placed on the Non‐Executive Directors. Non‐Executive director fees and payments are reviewed annually by the Board.

The following were KMP of the Group during the financial year and unless otherwise indicated were KMP for the entire financial year: Non‐Executive Directors Executive Directors Executives Mr Tony Leibowitz1 Mr Robert Adamson

Mr Ken Brinsden2 Mr Neil Biddle Mr John Young3

Mr Alan Boys4 Mr Brian Lynn5

1 Mr Leibowitz resigned as Chairman of the Board on 1 July 2016. 2 Mr Brinsden was appointed Chief Executive Officer on 18 January 2016. Mr Brinsden was appointed to the board as Managing Director on 4 May 2016. 3 Mr Young was appointed to the Board on 4 September 2015. 4 Mr Boys resigned as Chief Financial Officer on 21 June 2016 but acted in the capacity of Company Secretary for the entire financial year. 5 Mr Lynn was appointed Chief Financial Officer on 22 June 2016.

The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate for the results delivered. The remuneration framework aligns executive reward with the achievement of strategic and operational objectives and the creation of value for shareholders. The Board ensures that the executive reward framework satisfies the following key criteria in line with appropriate corporate governance practices:

attract, retain, motivate and reward executives; reward executives for Company and individual performance against pre‐determined targets/benchmarks; link rewards with the strategic goals and performance of the Company; provide competitive remuneration arrangements by market standards; align executive interests with those of the Company’s shareholders; and comply with applicable legal requirements and appropriate standards of governance.

The Company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy for the organisation. Executive remuneration packages may comprise a mix of the following:

Fixed remuneration comprising base salary and employer superannuation contributions. Salaries are reviewed on an annual basis to ensure competitive remuneration is paid to executives with reference to their role, responsibility, experience and performance. Salaries are reviewed on an annual basis and are based on external surveys and reports that provide market rates.

Short‐term incentives (“STIs”) comprising cash bonuses and equity base schemes. The STIs are structured to provide remuneration for the achievement of individual and Company performance targets linked to the Company’s strategic objectives.

Long‐term incentives (“LTIs”) comprising participation in equity based schemes. The LTIs provide remuneration for the achievement of corporate objective linked to the long‐term growth of the Company.

The STIs and LTIs are all at risk.

The Company has gone through a significant recent transition and is currently finalising a definitive feasibility study to advance the Pilgangoora Project from an exploration project towards development, construction and ultimately production. During the past 12 months the Company chose to preserve cash for its successful exploration activities by granting fully vested unlisted options over ordinary shares as part of its remuneration framework. To recognise the recent changes in the Company’s circumstances the Directors recently resolved to reconstitute the Remuneration Committee with non‐executive directors and tasked the committee with, amongst other things, formulating a new remuneration policy and framework which is appropriate for the Company’s current activities and aligned with best practise in the market place. It is expected that a new remuneration policy and framework will be adopted which will result in significant changes to the Company’s approach towards executive and non‐executive remuneration which will take effect during the course of the 2017 financial year.


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One of the main objectives of the new remuneration framework will be to attract and retain key executives at a vital stage in the Company’s development and to ensure that all executive remuneration is directly and transparently linked with strategy and performance. This will include aligning STIs and LTIs with achievement of the Company’s short‐term and long‐term strategic objectives and longer term shareholder return. Other key objectives of the new remuneration framework may include: to ensure all equity based instruments issued to executives are performance based in accordance with recommended

corporate governance practices; to ensure effective benchmarking of total annual remuneration for executives. In this regard, the Company may seek

external advice on market practices for a clearly defined peer group of similar companies to ensure remuneration is fair and competitive including fixed remuneration as well as STIs and LTIs;

to reward individual and group objectives thus promoting a balance of individual performance and teamwork across the executive management team;

preserve cash where necessary for exploration and project development; subject to shareholder approval, increasing the pool of directors’ fees available to non‐executive directors to encourage

new appointments to the Board to improve its diversity; and to promote independence and impartial decision making across the non‐executive directors.

During the year, 75,000,000 unlisted options over ordinary shares in the Company were granted to directors and executives, including 69,000,000 unlisted options over ordinary shares being issued to Directors following receipt of shareholder approval.

Of the 75,000,000 unlisted options noted above, 15,000,000 were issued to Mr Ken Brinsden (Managing Director) and 6,000,000 were granted to Mr Brian Lynn (Chief Financial Officer) with the following vesting conditions linked to important milestones associated with the Pilgangoora Project: Delivery of a final definitive feasibility study to a standard acceptable to the Board (33.3%); Adequate funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable

to the Board and a “decision to mine” determined by the Board (33.3%); and Completion of the mine development and plant construction at the Pilgangoora Project and the process plant achieving a

nominal 85% of its design capacity at a saleable product specification (33.3%).

The remaining 54,000,000 unlisted options were not subject to any vesting conditions. The Company considered that the issue of these 54,000,000 unlisted options to Directors’ conserved cash in the short term and acted as an incentive to grow the share price of the Company in the long term. This effectively linked Directors’ performance to the share value and therefore to the interests of all shareholders. For this reason, there were no performance conditions prior to the grant or exercise of the options. The grant of the options to Messrs Biddle and Leibowitz also reflected the significant contribution made by them in raising capital for the Company over the past 12 months.

a) ASSESSING PERFORMANCE AND CLAWBACK OF REMUNERATION

The Board is responsible for assessing performance against key performance indicators (“KPIs”) and determining the STI and LTI components to be paid based upon reports from management, market conditions and Company performance.

In the event of serious misconduct or a material misstatement in the Company’s financial statements, the Board may cancel or defer performance‐based remuneration and may also clawback performance‐based remuneration paid in previous financial years.

b) CONSEQUENCES OF PERFORMANCE ON SHAREHOLDER WEALTH

Executive remuneration is aimed at aligning the strategic and business objectives with the creation of shareholder wealth. The table below shows measures of the Group’s financial performance over the last five years as required by the Corporations Act 2001. However, these are not necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to KMP. As a consequence, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration awarded.

2016 2015 2014 2013 2012 Profit/(loss) for the year attributable to owners of Pilbara Minerals Limited ($’000) (55,607) (6,620)* (3,187) (1,156) (2,081)

Basic earnings/(loss) per share (cents) (6.76) (1.12)* (1.15) (1.63) (3.75)

Dividend payments ($’000) ‐ ‐ ‐ ‐ ‐

30 June share price ($) 0.62 0.11 0.02 0.01 0.01

Increase/(decrease) in share price % 463.6 452.6 58.3 (14.3) (54.8) * Restated for the change in exploration and evaluation accounting policy


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c) SERVICE CONTRACTS The remuneration and other terms of employment for the Managing Director and other KMP are formalised in employment contracts, as set out below. Mr Brinsden, Managing Director and Chief Executive Officer (“CEO”), has an employment agreement dated 2 December 2015 with the Company and was appointed as Managing Director on 4 May 2016. Mr Brinsden commenced employment on 18 January 2016 and continues unless terminated. Termination of the employment agreement by the CEO requires 12 weeks’ written notice within the first 12 months of service. After 12 months of service, the CEO is required to give 16 weeks’ written notice of termination. The Company must give the CEO 12 weeks written notice of termination within the first 12 months of employment for termination without cause and 12 months’ written notice of termination on completion of 12 months of service. Upon termination, the CEO is entitled to receive from the Company all payments owed to him under the employment agreement up to and including the date of termination and any payments due to him pursuant to any relevant legislation by way of accrued annual leave and long service leave. The agreement specifies duties and obligations to be fulfilled as CEO and provides for an annual review of base remuneration taking into account performance. Mr Brinsden’s remuneration includes a salary of $350,000 per annum inclusive of superannuation. The CEO did not receive an increase to base salary during the reporting period and no monetary bonus has been awarded. Mr Biddle, Executive Director, receives remuneration from the Company in the form of director’s fees and consulting fees for corporate advisory and consulting services, both of which are paid to his related party Hatched Creek Pty Ltd (“Hatched Creek”). No formal contract exists between the Company and Hatched Creek for the corporate advisory consulting services provided by Mr Biddle on commercial terms. The arrangement can be terminated without notice. Mr Young, Executive Director, is remunerated by the Company for director’s fees and consulting fees, both of which were paid through his related party Metallon Resources Pty Ltd (“Metallon”). A service agreement dated 29 August 2014 between Metallon and the Company specifies the services that are required to be performed and provides for an annual review of base remuneration. The notice of termination is three months by either party. Mr Boys, Company Secretary, is an employee of the Dubois Group Pty Ltd (“Dubois Group”), with which the Company has an agreement in place to provide the services of Mr Boys and other staff to undertake accounting and company secretarial duties for the Group. The contract with the Dubois Group provides the terms of services and has a notice of termination period of three months by either party. Mr Lynn, Chief Financial Officer (“CFO”), has an employment agreement dated 22 June 2016 with the Company. The agreement specifies duties and obligations to be fulfilled and provides for an annual review of base remuneration taking into account performance. Mr Lynn is remunerated a salary of $240,000 per annum inclusive of superannuation. Termination of the employment agreement by the CFO requires 12 weeks written notice within the first 12 months of service. After 12 months of service, the CFO is required to give 16 weeks written notice of termination and the Company is required to give 12 months’ written notice of termination. The Company must give the CFO 12 weeks written’ notice of termination within the first 12 months of employment for termination without cause. Upon termination, the CFO is entitled to receive from the Company all payments owed to him under the employment agreement up to and including the date of termination and any payments due to him pursuant to any relevant legislation by way of accrued annual leave and long service leave.

d) NON EXECUTIVE The maximum annual aggregate directors’ fee pool limit is $400,000 and was approved by shareholders at the annual general meeting on 30 November 2015.

From 1 September 2015 From 1 July 2015 to 31 August 2015 Base fees (annual) Non‐Executive Chairman 96,000 36,000 Other Non‐Executive directors 60,000 36,000

Fees are reviewed annually by the Board taking into account comparable roles and market data. The current base fees were reviewed with effect from 1 September 2015.

e) EXECUTIVE REMUNERATION FRAMEWORK AND PERFORMANCE PAY OUTCOMES

The Group’s executive KMP total remuneration structure provides for:

Fixed remuneration; Short‐term, performance linked equity remuneration (STI); and Long‐term, performance linked equity remuneration (LTI).

During the period, the CEO received 8.3% of his remuneration as fixed, 91.7% of his remuneration as LTI. During the period, the CFO received 12.3% of his remuneration as fixed, 87.7% of his remuneration as LTI. During the period, all other KMP received 9.2% of their remuneration as fixed and 90.8% of their remuneration as STI.


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DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION – AUDITED

Details of the remuneration of the Directors and the KMP of the Group are set out in the following tables.

Short term Post‐employment

benefits Share‐based payments

Total Equity options Salary and fees

Consulting fees

Superannuation benefits Vested Performance

related Non‐Executive Directors

Tony Leibowitz1 2016 86,000 215,200 ‐ 3,008,088 ‐ 3,309,288 2015 36,000 138,000 ‐ ‐ ‐ 174,000

Robert Adamson 2016 56,000 ‐ ‐ 752,022 ‐ 808,022 2015 36,000 ‐ ‐ ‐ ‐ 36,000

Executive Directors

Ken Brinsden 2016 150,507 ‐ 10,264 ‐ 1,786,291 1,947,062 2015 ‐ ‐ ‐ ‐ ‐ ‐

Neil Biddle 2016 56,000 281,500 ‐ 3,008,088 ‐ 3,345,588 2015 36,000 240,420 ‐ ‐ ‐ 276,420

John Young2 2016 56,000 180,000 ‐ 2,366,920 ‐ 2,602,920 2015 ‐ 168,400 ‐ ‐ ‐ 168,400

Other KMP

Alan Boys3 2016 ‐ 216,000 ‐ 2,254,893 ‐ 2,470,893 2015 ‐ 77,750 ‐ ‐ ‐ 77,750

Brian Lynn4 2016 7,969 ‐ 757 ‐ 62,382 71,108 2015 ‐ ‐ ‐ ‐ ‐ ‐

Total Directors’ and KMP remuneration

2016 412,476 892,700 11,021 11,390,011 1,848,673 14,554,881 2015 108,000 624,570 ‐ ‐ ‐ 732,570

1 Mr Leibowitz retired as Chairman of the Board and Non‐Executive Director on 1 July 2016. 2 Mr Young was not a Director of the Company in 2015 but was a KMP. In September 2015, Mr Young became an Executive Director of the Company. 3 Mr Boys resigned as CFO on 21 June 2016 but acted in the capacity of Company Secretary for the entire financial year. 4 Mr Lynn was appointed CFO on 22 June 2016.

Mr Leibowitz did not have a formal contract for director services as at the completion of the 30 June 2016 financial year. The Company remunerated Kalonda Pty Ltd for the director services that were provided by Mr Leibowitz. Mr Leibowitz was paid director’s fees under the terms agreed to by a directors’ resolution.

Additionally, Mr Leibowitz provided corporate advisory services to the Company on terms agreed by the Board. The Company remunerated Floreat Investments Pty Ltd for Mr Leibowitz’s corporate advisory services, provision of office accommodation and secretarial services.

DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION – UNAUDITED

The statutory remuneration disclosures detailed above for the year ended 30 June 2016 were significantly impacted by non‐cash values ascribed in accordance with Australian Accounting Standards to unlisted share options issued during the year to directors and KMP.

To comply with Australian Accounting Standards, the unlisted share options were valued at the date of grant using the Black Scholes valuation methodology (refer below). These valuations were significantly impacted by the fact that the Company’s share price at the time the options were granted was higher than the option exercise price. Each option’s exercise price was largely based on the Company’s share price at the time that the Director’s approved each option. As the majority of options issued required shareholder approval, there was a significant passage of time between the date the Directors approved the terms of the options (including their exercise price) and the date the options were actually granted once shareholder approval was received. During this passage of time the Company’s share price experienced significant growth resulting in the share price at the time of grant being significantly higher than the exercise price allocated to the options by the Directors.

This resulted in a much higher non‐cash value being attributed to each option when compared to a valuation that utilised the Company’s share price at the time the share options were approved by the Directors and the exercise price established.


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Set out below are non‐statutory details of the Directors and KMP remuneration for the year ended 30 June 2016, whereby the non‐cash values ascribed to share options issued during the year (to comply with Australian Accounting Standards) have been replaced with the market value of the share options at the time the Directors approved their issue, to arrive at an Adjusted Remuneration Total.

Total T. Leibowitz

R. Adamson

K. Brinsden

N. Biddle

J. Young

A. Boys

B. Lynn

Total Statutory Remuneration 14,554,881 3,309,288 808,022 1,947,062 3,345,588 2,602,920 2,470,893 71,108 Less: Non‐cash accounting value of share options (13,238,684) (3,008,088) (752,022) (1,786,291) (3,008,088) (2,366,920) (2,254,893) (62,382) Add: Market value of share options on approval by Directors 885,000 160,000 40,000 ‐ 160,000 450,000 75,000 ‐ Adjusted Remuneration Total 2,201,197 461,200 96,000 160,771 497,500 686,000 291,000 8,726

The market value of share options above was calculated as the difference between the Company’s share price on the date the Director’s approved the issue of the share options and the exercise price of the options. Where the Company’s share price was below the exercise price, a nil market value was assigned to an option.

This table demonstrates that the Directors and KMP will benefit when the Company’s share price exceeds the exercise price of the options issued, which aligns the interests of the Directors and KMP with those of the Company’s shareholders. The realised value of options exercised by Directors and KMP during the year is set out in the table titled “Analysis of Movements in Equity Instruments – Audited” contained within the Remuneration Report.

EQUITY INSTRUMENTS – AUDITED

All options refer to unlisted options over ordinary shares in Pilbara Minerals Limited, which are exercisable on a one‐for‐one basis. During the year the Company established an Employee Share Option Plan which was approved by shareholders on 18 April 2016.

All options issued as compensation to directors and KMP’s are non‐cash in nature. They are valued using the Black Scholes option valuation methodology which calculates an implied value for each option based on the Company’s share price volatility, the risk free rate of return, the life of the option, the Company’s share price at the grant date and the option exercise price.

OPTIONS OVER EQUITY INSTRUMENTS GRANTED AS COMPENSATION INSTRUMENTS – AUDITED

Details on unlisted options over ordinary shares in the Company that were granted as compensation to each KMP during the reporting period and details on unlisted options that vested during the reporting period are as follows:

No. of options granted during

2016 Grant date

Fair value per option at grant date

Exercise price per option Expiry date

No. of options vested during

2016

Tony Leibowitz 8,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 8,000,000 8,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 8,000,000

Robert Adamson 2,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 2,000,000 2,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 2,000,000

Ken Brinsden 15,000,000** 18/04/2016 $0.381 $0.400 16/05/2019 ‐

Neil Biddle 8,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 8,000,000 8,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 8,000,000

John Young 5,000,000* 30/11/2015 $0.159 $0.100 22/03/2017 5,000,000 5,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 5,000,000

Alan Boys 3,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 3,000,000 5,000,000* 06/05/2016 $0.414 $0.400 16/05/2018 5,000,000

Brian Lynn 6,000,000** 22/06/2016 $0.315 $0.626 22/06/2019 ‐

* Unlisted options issued without vesting conditions expire on the earliest of their expiry date or at the Board’s discretion.


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** Unlisted options were issued with the following vesting conditions: 33.33% vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; 33.33% vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable to the

Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; 33.33% vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works and mine


A continuing employment service condition at the time each milestone is achieved.

EXERCISE OF OPTIONS GRANTED AS COMPENSATION INSTRUMENTS – AUDITED

During the reporting period, the following ordinary shares were issued on the exercise of unlisted options previously granted as compensation. No. of shares Amount paid per share Tony Leibowitz 4,000,000 $0.10 Neil Biddle 8,000,000 $0.10 Alan Boys 900,000 $0.10

There are no amounts unpaid on any ordinary shares issued as a result of the exercise of unlisted options during the 2016 financial year.

DETAILS OF EQUITY INCENTIVES AFFECTING CURRENT AND FUTURE REMUNERATION – AUDITED

Details of vesting profiles of the unlisted options held by each KMP of the Group as at 30 June 2016 are detailed below.

Instrument Grant date % vested in year

% forfeited in year (A)

Financial year in which grant vests

Tony Leibowitz Options 7,100,000 18/04/2016 100% 0% 2016

Robert Adamson Options 2,000,000 28/08/2015 100% 0% 2016 Options 2,000,000 18/04/2016 100% 0% 2016

Ken Brinsden Options 15,000,000 18/04/2016 0% 0% 2017 and 2018 Neil Biddle Options 8,000,000 18/04/2016 100% 0% 2016

John Young Options 5,000,000 30/11/2015 100% 0% 2016 Options 5,000,000 18/04/2016 100% 0% 2016

Alan Boys Options 2,100,000 28/08/2015 100% 0% 2016 Options 5,000,000 06/05/2016 100% 0% 2016

Brian Lynn Options 6,000,000 22/06/2016 0% 0% 2017 and 2018 (A) The percentage forfeited in the year represents the reduction from the maximum number of instruments available to vest due to performance

criteria not being achieved

ANALYSIS OF MOVEMENTS IN EQUITY INSTRUMENTS – AUDITED

The value of unlisted options over ordinary shares in the Company granted and exercised by each KMP during the reporting period is detailed below. Granted in year (A) Value of options exercised in year (B) Tony Leibowitz $3,008,088 $1,140,000 Robert Adamson $752,022 ‐ Ken Brinsden $5,721,750 ‐ Neil Biddle $3,008,088 $2,280,000 John Young $2,366,920 ‐ Alan Boys $2,254,893 $358,500 Brian Lynn $1,890,600 ‐

(A) The value of options granted during the year is the fair value of the unlisted options calculated at grant date. The total value of the unlisted options granted is included in the table above. This amount is allocated to remuneration over the applicable vesting period.

(B) The value of unlisted options exercised during the year is calculated as the market price of shares of the Company as at close of trading on the date the unlisted options were exercised less the price paid to exercise the unlisted option.


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UNLISTED OPTIONS OVER EQUITY INSTRUMENTS – AUDITED

The movement during the reporting period, by number of unlisted options over ordinary shares in Pilbara Minerals Limited held, directly, indirectly or beneficially, by each KMP, including their related parties, is as follows: Held at

1 July 2015 Granted as

compensation Options

acquired (A) Exercised/ transferred

Held at 30 June 2016

Vested during the year

Tony Leibowitz 1,666,666 16,000,000 2,500,000 (13,066,666)* 7,100,000 18,500,000 Robert Adamson ‐ 4,000,000 ‐ ‐ 4,000,000 4,000,000 Ken Brinsden ‐ 15,000,000 ‐ ‐ 15,000,000 ‐ Neil Biddle 3,333,333 16,000,000 ‐ (11,333,333) 8,000,000 16,000,000 John Young ‐ 10,000,000 ‐ ‐ 10,000,000 10,000,000 Alan Boys ‐ 8,000,000 625,000 (1,212,500) 7,412,500 8,625,000 Brian Lynn ‐ 6,000,000 ‐ ‐ 6,000,000 ‐

(A) Includes options granted as free‐attaching options with convertible notes acquired. * During the year, Mr Leibowitz received 16,000,000 unlisted options as part of his compensation as a director of the Company. A condition of the

options issued were that Mr Leibowitz could assign the options to a nominee of his choice. Mr Leibowitz nominated unrelated third parties to receive 4,900,000 options from these issues.

KEY MANAGEMENT PERSONAL TRANSACTIONS – AUDITED

MOVEMENTS IN SHARES

The movement during the reporting period in the number of ordinary shares in Pilbara Minerals Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

Held at 1 July 2015 Received on exercise of options Other changes1 Held at 30 June 2016 Tony Leibowitz 21,727,168 8,166,666 (4,474,565) 25,419,269 Robert Adamson 3,937,851 ‐ ‐ 3,937,851 Ken Brinsden ‐ ‐ 869,565 869,565 Neil Biddle 32,938,597 11,333,333 (8,050,000) 36,221,930 John Young 20,158,356 ‐ (4,000,040) 16,158,316 Alan Boys 1,250,000 1,212,500 (897,496) 1,565,004 Brian Lynn ‐ ‐ ‐ ‐

1 Other changes represent shares that were purchased or sold during the year

This Directors’ Report is made out in accordance with a resolution of the directors.

Anthony Kiernan Chairman

Dated this 7th day of September 2016


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UNLISTED OPTIONS OVER EQUITY INSTRUMENTS – AUDITED

The movement during the reporting period, by number of unlisted options over ordinary shares in Pilbara Minerals Limited held, directly, indirectly or beneficially, by each KMP, including their related parties, is as follows: Held at

1 July 2015 Granted as

compensation Options

acquired (A) Exercised/ transferred

Held at 30 June 2016

Vested during the year

Tony Leibowitz 1,666,666 16,000,000 2,500,000 (13,066,666)* 7,100,000 18,500,000 Robert Adamson ‐ 4,000,000 ‐ ‐ 4,000,000 4,000,000 Ken Brinsden ‐ 15,000,000 ‐ ‐ 15,000,000 ‐ Neil Biddle 3,333,333 16,000,000 ‐ (11,333,333) 8,000,000 16,000,000 John Young ‐ 10,000,000 ‐ ‐ 10,000,000 10,000,000 Alan Boys ‐ 8,000,000 625,000 (1,212,500) 7,412,500 8,625,000 Brian Lynn ‐ 6,000,000 ‐ ‐ 6,000,000 ‐

(A) Includes options granted as free‐attaching options with convertible notes acquired. * During the year, Mr Leibowitz received 16,000,000 unlisted options as part of his compensation as a director of the Company. A condition of the

options issued were that Mr Leibowitz could assign the options to a nominee of his choice. Mr Leibowitz nominated unrelated third parties to receive 4,900,000 options from these issues.

KEY MANAGEMENT PERSONAL TRANSACTIONS – AUDITED

MOVEMENTS IN SHARES

The movement during the reporting period in the number of ordinary shares in Pilbara Minerals Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

Held at 1 July 2015 Received on exercise of options Other changes1 Held at 30 June 2016 Tony Leibowitz 21,727,168 8,166,666 (4,474,565) 25,419,269 Robert Adamson 3,937,851 ‐ ‐ 3,937,851 Ken Brinsden ‐ ‐ 869,565 869,565 Neil Biddle 32,938,597 11,333,333 (8,050,000) 36,221,930 John Young 20,158,356 ‐ (4,000,040) 16,158,316 Alan Boys 1,250,000 1,212,500 (897,496) 1,565,004 Brian Lynn ‐ ‐ ‐ ‐

1 Other changes represent shares that were purchased or sold during the year

This Directors’ Report is made out in accordance with a resolution of the directors.

Anthony Kiernan Chairman

Dated this 7th day of September 2016

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Pilbara Minerals Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016 there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG R Gambitta Partner

Perth

7 September 2016

LEAD AUDITOR'S INDEPENDENCE DECLARATIONF

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2016

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

42

Notes 2016 $’000

2015 Restated

$’000

Other income Other income 4 28 Expenses General and administration (4,728) (951) Exploration costs expensed 2.1.3 (10,556) (1,482) Depreciation and amortisation expense (51) (21) Impairment expense 2.1.1 (12,136) (1,605) Gain on equity investment 3.4 812 ‐ Share based payment expense 2.1.2 (26,562) (1,955) Other expenses ‐ (397)

Operating profit/(loss) (53,217) (6,383) Finance income 149 45 Finance costs (2,350) (334)

Net financing costs 2.2 (2,201) (289)

Loss before income tax expense (55,418) (6,672) Income tax expense 2.5 (189) 52

Net loss for the period (55,607) (6,620)

Total comprehensive income/(loss) for the period (55,607) (6,620)

Basic and diluted loss per share for the period (cents per share) 2.6 (6.76) (1.12)

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. The Statement of Profit or Loss for the year ended 30 June 2015 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016

43

Notes 2016 $’000

2015 Restated

$’000

2014 Restated

$’000

Assets Current assets Cash and cash equivalents 4.1 100,040 3,216 1,095 Trade and other receivables 4.2 1,545 919 337 Inventories 46 ‐ ‐ Loans receivable ‐ 1,627 ‐ Total current assets 101,631 5,762 1,432

Non‐current assets Property, plant and equipment 3.2 833 77 4 Deferred exploration and evaluation expenditure 3.1 263 263 2,635 Investments accounted for using the equity method 3.4 ‐ 1,200 ‐ Other financial assets 6 6 206 Total non‐current assets 1,102 1,546 2,845

TOTAL ASSETS 102,733 7,308 4,277

Liabilities Current liabilities Trade and other payables 4.3 2,952 743 220 Share application money received in advance ‐ 1 725 Provisions 4.3 1,004 41 ‐ Borrowings 5.2 137 2,622 1,386 Total current liabilities 4,093 3,407 2,331

Non‐current liabilities Borrowings 5.2 209 ‐ ‐ Total non‐current liabilities 209 ‐ ‐

TOTAL LIABILITIES 4,302 3,407 2,331

NET ASSETS 98,431 3,901 1,946

Equity Issued capital 5.1 146,476 22,526 16,099 Reserves 5.1 21,731 1,257 163 Retained earnings (69,776) (19,882) (14,316)

TOTAL EQUITY 98,431 3,901 1,946

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. The Statement of Financial Position at 30 June 2015 and 1 July 2014 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information. F

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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2016

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

42

Notes 2016 $’000

2015 Restated

$’000

Other income Other income 4 28 Expenses General and administration (4,728) (951) Exploration costs expensed 2.1.3 (10,556) (1,482) Depreciation and amortisation expense (51) (21) Impairment expense 2.1.1 (12,136) (1,605) Gain on equity investment 3.4 812 ‐ Share based payment expense 2.1.2 (26,562) (1,955) Other expenses ‐ (397)

Operating profit/(loss) (53,217) (6,383) Finance income 149 45 Finance costs (2,350) (334)

Net financing costs 2.2 (2,201) (289)

Loss before income tax expense (55,418) (6,672) Income tax expense 2.5 (189) 52

Net loss for the period (55,607) (6,620)

Total comprehensive income/(loss) for the period (55,607) (6,620)

Basic and diluted loss per share for the period (cents per share) 2.6 (6.76) (1.12)

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. The Statement of Profit or Loss for the year ended 30 June 2015 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016

43

Notes 2016 $’000

2015 Restated

$’000

2014 Restated

$’000

Assets Current assets Cash and cash equivalents 4.1 100,040 3,216 1,095 Trade and other receivables 4.2 1,545 919 337 Inventories 46 ‐ ‐ Loans receivable ‐ 1,627 ‐ Total current assets 101,631 5,762 1,432

Non‐current assets Property, plant and equipment 3.2 833 77 4 Deferred exploration and evaluation expenditure 3.1 263 263 2,635 Investments accounted for using the equity method 3.4 ‐ 1,200 ‐ Other financial assets 6 6 206 Total non‐current assets 1,102 1,546 2,845

TOTAL ASSETS 102,733 7,308 4,277

Liabilities Current liabilities Trade and other payables 4.3 2,952 743 220 Share application money received in advance ‐ 1 725 Provisions 4.3 1,004 41 ‐ Borrowings 5.2 137 2,622 1,386 Total current liabilities 4,093 3,407 2,331

Non‐current liabilities Borrowings 5.2 209 ‐ ‐ Total non‐current liabilities 209 ‐ ‐

TOTAL LIABILITIES 4,302 3,407 2,331

NET ASSETS 98,431 3,901 1,946

Equity Issued capital 5.1 146,476 22,526 16,099 Reserves 5.1 21,731 1,257 163 Retained earnings (69,776) (19,882) (14,316)

TOTAL EQUITY 98,431 3,901 1,946

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. The Statement of Financial Position at 30 June 2015 and 1 July 2014 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information. F

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2016CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

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Notes

Issued capital

Restated $’000

Share‐based payment reserve Restated

$’000

Foreign currency reserve $’000

Accumulated losses

Restated $’000

Total equity $’000

Balance at 1 July 2014 16,099 231 (68) (14,316) 1,946 Loss for the period ‐ ‐ ‐ (6,620) (6,620)

Total comprehensive income/(loss) for the period

‐ ‐ ‐ (6,620) (6,620)

Issue of ordinary shares 6,681 ‐ ‐ ‐ 6,681 Share issue costs (254) ‐ ‐ ‐ (254) Issue of options ‐ 2,148 ‐ ‐ 2,148 Transfer on conversion of options

‐ (1,054) ‐ 1,054 ‐

Balance at 30 June 2015 22,526 1,325 (68) (19,882) 3,901

Balance at 1 July 2015 22,526 1,325 (68) (19,882) 3,901 Loss for the period ‐ ‐ ‐ (55,607) (55,607)


(55,607) (55,607)

Issue of ordinary shares 5.1 114,551 ‐ ‐ ‐ 114,551 Share issue costs 5.1 (7,021) ‐ ‐ ‐ (7,021) Conversion of convertible notes 8,319 ‐ ‐ ‐ 8,319 Option conversions 8,101 ‐ ‐ ‐ 8,101 Issue of options 5.1 ‐ 26,187 ‐ ‐ 26,187 Transfer on conversion of options

5.1 ‐ (5,713) ‐ 5,713 ‐

Balance at 30 June 2016 146,476 21,799 (68) (69,776) 98,431

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. Equity and reserves at 30 June 2015 and 1 July 2014 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016

45

Notes 2016 $’000

2015 Restated

$’000

Cash flows from operating activities Cash paid to suppliers and employees (4,818) (1,552) Payments for exploration and evaluation expenditure (9,702) (465) Interest received 149 45 Income tax paid (189) ‐ Other receipts ‐ 23

Net cash outflow from operating activities 4.1 (14,560) (1,949) Cash flows from investing activities Payments for property, plant and equipment (4,626) (94) Cash acquired 251 ‐ Payments for security deposit ‐ (5) Additional interests acquired in associates and joint ventures (2,000) (1,000) Loan to related party (1,224) (1,627)

Net cash outflow from investing activities (7,599) (2,726) Cash flows from financing activities Proceeds from the issue of shares 122,721 5,156 Capital raising costs (7,021) (60) Proceeds from borrowings 4,000 1,700 Repayment of borrowing costs (143) ‐ Interest paid (574) ‐

Net cash inflow from financing activities 118,983 6,796 Net increase in cash held 96,824 2,121 Cash and cash equivalents at the beginning of the period 3,216 1,095

Cash and cash equivalents at the end of the period 4.1 100,040 3,216

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. The Statement of Cash Flows for the year ended 30 June 2015 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information.

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CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

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Notes

Issued capital

Restated $’000

Share‐based payment reserve Restated

$’000

Foreign currency reserve $’000

Accumulated losses

Restated $’000

Total equity $’000

Balance at 1 July 2014 16,099 231 (68) (14,316) 1,946 Loss for the period ‐ ‐ ‐ (6,620) (6,620)


‐ ‐ ‐ (6,620) (6,620)

Issue of ordinary shares 6,681 ‐ ‐ ‐ 6,681 Share issue costs (254) ‐ ‐ ‐ (254) Issue of options ‐ 2,148 ‐ ‐ 2,148 Transfer on conversion of options

‐ (1,054) ‐ 1,054 ‐

Balance at 30 June 2015 22,526 1,325 (68) (19,882) 3,901

Balance at 1 July 2015 22,526 1,325 (68) (19,882) 3,901 Loss for the period ‐ ‐ ‐ (55,607) (55,607)


(55,607) (55,607)

Issue of ordinary shares 5.1 114,551 ‐ ‐ ‐ 114,551 Share issue costs 5.1 (7,021) ‐ ‐ ‐ (7,021) Conversion of convertible notes 8,319 ‐ ‐ ‐ 8,319 Option conversions 8,101 ‐ ‐ ‐ 8,101 Issue of options 5.1 ‐ 26,187 ‐ ‐ 26,187 Transfer on conversion of options

5.1 ‐ (5,713) ‐ 5,713 ‐

Balance at 30 June 2016 146,476 21,799 (68) (69,776) 98,431

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. Equity and reserves at 30 June 2015 and 1 July 2014 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016

45

Notes 2016 $’000

2015 Restated

$’000

Cash flows from operating activities Cash paid to suppliers and employees (4,818) (1,552) Payments for exploration and evaluation expenditure (9,702) (465) Interest received 149 45 Income tax paid (189) ‐ Other receipts ‐ 23

Net cash outflow from operating activities 4.1 (14,560) (1,949) Cash flows from investing activities Payments for property, plant and equipment (4,626) (94) Cash acquired 251 ‐ Payments for security deposit ‐ (5) Additional interests acquired in associates and joint ventures (2,000) (1,000) Loan to related party (1,224) (1,627)

Net cash outflow from investing activities (7,599) (2,726) Cash flows from financing activities Proceeds from the issue of shares 122,721 5,156 Capital raising costs (7,021) (60) Proceeds from borrowings 4,000 1,700 Repayment of borrowing costs (143) ‐ Interest paid (574) ‐

Net cash inflow from financing activities 118,983 6,796 Net increase in cash held 96,824 2,121 Cash and cash equivalents at the beginning of the period 3,216 1,095

Cash and cash equivalents at the end of the period 4.1 100,040 3,216

The notes on pages 46 to 70 are an integral part of these consolidated financial statements. The Statement of Cash Flows for the year ended 30 June 2015 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further information.

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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

46

NOTE 1 – BASIS OF PREPARATION In preparing the 2016 financial statements, Pilbara Minerals Limited (“the Company”) has made a number of changes in structure, layout and wording in order to make the financial statements less complex and more relevant for shareholders and other users. The Company has grouped notes into sections under six key categories:

1. Basis of preparation 2. Results for the year 3. Assets and liabilities supporting exploration and evaluation activities 4. Working capital disclosures 5. Equity and funding 6. Other disclosures

Significant accounting policies specific to one note are included within that note and where possible, wording has been simplified to provide clearer commentary on the financial report of the Group. Accounting policies that are determined to be non‐significant are not included in the financial statements.

1.1 REPORTING ENTITY

Pilbara Minerals Limited is a listed public company incorporated and domiciled in Australia.

The Company’s registered office is at 130 Stirling Highway, North Fremantle WA 6159. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the “Group”).

The Group is a for‐profit entity and is primarily involved in the exploration for and development of minerals.

1.2 BASIS OF ACCOUNTING

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (“AAS”) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”). They were authorised for issue by the Board of Directors on 7 September 2016.

1.3 BASIS OF CONSOLIDATION

1.3.1 BUSINESS COMBINATIONS

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre‐existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

1.3.2 SUBSIDIARIES

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

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1.3.3 INTERESTS IN EQUITY‐ACCOUNTED INVESTEES

The Group’s interests in equity‐accounted investees comprise interests in associates and joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity‐accounted investees, until the date on which significant influence or joint control ceases.

1.3.4 TRANSACTIONS ELIMINATED ON CONSOLIDATION

Intra‐group balances and transactions, and any unrealised income and expenses arising from intra‐group transactions, are eliminated. Unrealised gains arising from transactions with equity‐accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

1.4 FUNCTIONAL AND PRESENTATIONAL CURRENCY

These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise stated in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.

1.5 USE OF JUDGMENTS AND ESTIMATES

In preparing these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Judgements and estimates which are material to the financial report are found in the following sections:

Share‐based payments (refer to Note 2.1.2) Property, plant and equipment (carrying value and impairment charges) (refer to Note 2.1.1).

1.6 MEASUREMENT OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non‐financial assets and liabilities.

A financial asset measured at amortised cost is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Refer to Note 2.1.1 for policies on non‐financial assets.

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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016


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NOTE 1 – BASIS OF PREPARATION In preparing the 2016 financial statements, Pilbara Minerals Limited (“the Company”) has made a number of changes in structure, layout and wording in order to make the financial statements less complex and more relevant for shareholders and other users. The Company has grouped notes into sections under six key categories:

1. Basis of preparation 2. Results for the year 3. Assets and liabilities supporting exploration and evaluation activities 4. Working capital disclosures 5. Equity and funding 6. Other disclosures

Significant accounting policies specific to one note are included within that note and where possible, wording has been simplified to provide clearer commentary on the financial report of the Group. Accounting policies that are determined to be non‐significant are not included in the financial statements.

1.1 REPORTING ENTITY

Pilbara Minerals Limited is a listed public company incorporated and domiciled in Australia.

The Company’s registered office is at 130 Stirling Highway, North Fremantle WA 6159. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the “Group”).

The Group is a for‐profit entity and is primarily involved in the exploration for and development of minerals.

1.2 BASIS OF ACCOUNTING

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (“AAS”) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”). They were authorised for issue by the Board of Directors on 7 September 2016.

1.3 BASIS OF CONSOLIDATION

1.3.1 BUSINESS COMBINATIONS

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre‐existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

1.3.2 SUBSIDIARIES

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.


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1.3.3 INTERESTS IN EQUITY‐ACCOUNTED INVESTEES

The Group’s interests in equity‐accounted investees comprise interests in associates and joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity‐accounted investees, until the date on which significant influence or joint control ceases.

1.3.4 TRANSACTIONS ELIMINATED ON CONSOLIDATION

Intra‐group balances and transactions, and any unrealised income and expenses arising from intra‐group transactions, are eliminated. Unrealised gains arising from transactions with equity‐accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

1.4 FUNCTIONAL AND PRESENTATIONAL CURRENCY

These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise stated in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.

1.5 USE OF JUDGMENTS AND ESTIMATES

In preparing these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Judgements and estimates which are material to the financial report are found in the following sections:

Share‐based payments (refer to Note 2.1.2) Property, plant and equipment (carrying value and impairment charges) (refer to Note 2.1.1).

1.6 MEASUREMENT OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non‐financial assets and liabilities.

A financial asset measured at amortised cost is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Refer to Note 2.1.1 for policies on non‐financial assets.

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NOTE 2 – RESULTS FOR THE YEAR

2.1 EXPENSES

Expenses incurred by the Group are the main drivers of the results for the year.

2.1.1 IMPAIRMENT EXPENSE

ACCOUNTING POLICY

Non‐financial assets At each reporting date, the Group reviews the carrying amounts of its non‐financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

The impairment expense recognised within the Statement of Profit or Loss relates to the Tabba Tabba Tantalum Project and can be broken down as follows:

2016 $’000

2015 Restated

$’000

Impairment – property, plant and equipment 4,449 ‐ Impairment – mine development 7,660 ‐ 12,109 ‐ Impairment – exploration and evaluation expenditure ‐ 1,605 Reversal of liability (1,300) ‐ Impairment – goodwill 1,327 ‐ 12,136 1,605

In 2014, the Company entered into a joint venture with Valdrew Nominees Pty Ltd to jointly evaluate, develop and mine the Tabba Tabba Tantalum Project. The Tabba Tabba Tantalum Project was held via an incorporated joint venture Tabba Tabba Tantalum Pty Ltd (formerly Nagrom Mining Pty Ltd) (“TTT”), which was initially owned 50% by Valdrew Nominees Pty Ltd and 50% by Pilbara Minerals Limited. The project is subject to a mining and offtake agreement with the tenement owner Global Advanced Metals (Wodgina) Pty Ltd, a subsidiary of major international specialty metals group Global Advanced Metals (“GAM”).

On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to acquire the remaining 50% interest in the Tabba Tabba Tantalum Project for a cash consideration of $2 million plus contingent consideration of $1.3 million in the event TTT deliver tantalum concentrate to GAM pursuant to the offtake agreement. Additionally, Valdrew released TTT from any loans, advances or claims in respect of past purchases due from TTT. The Company also agreed to issue to Valdrew up to 20,000,000 unlisted incentive options, each with a term of two years, with the exercise price being the five‐trading day VWAP prior to the issue date. The issue of the options was dependent upon the successful commissioning of the processing plant and production of Ta2O5 concentrate, which did not occur.


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In January 2016, the operations at the Tabba Tabba Tantalum Project were suspended following plant commissioning problems. A subsequent engineering review determined that significant expenditure would be required to modify the existing plant before the commissioning process could be finalised. The impact of this when combined with existing tantalum market conditions meant that the Tabba Tabba Tantalum Project was suspended indefinitely.

The Company commissioned an independent assessment by third party engineers to value the TTT property, plant and equipment assets (owned and under hire purchase) as well as received offers for the sale of the TTT assets. Based on this information, the Company has valued these assets at $0.5 million. Accordingly, a $4.4 million impairment charge on TTT plant and equipment was recognised.

As part of the mining and offtake agreement with GAM; GAM retained the ownership and rights to the tenements of the Tabba Tabba Tantalum Project. As a result of the decision to suspend operations indefinitely, the Company expects to return all mineral rights back to GAM for no consideration and accordingly all capitalised project development costs ($7.66 million) have been impaired to nil.

As part of the acquisition of TTT assets, Pilbara Minerals Limited recognised a goodwill intangible asset of $1.3 million. Following an assessment of the carrying value of the goodwill it was determined that the balance should be impaired to nil.

As noted above, a $1.3 million liability was raised to recognise a future payment to Valdrew upon the delivery of concentrate to GAM when the Company purchased the remaining 50% interest in the Tabba Tabba Tantalum Project in September 2015. To date this provision has not been satisfied and will not be satisfied in the future. Accordingly, the $1.3 million liability was reversed to the Statement of Profit or Loss.

2.1.2 SHARE‐BASED PAYMENT EXPENSE

ACCOUNTING POLICY

Share‐based payment arrangements The grant‐date fair value of equity‐settled share‐based payment arrangements granted to holders of equity based instruments (including employees) are generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non‐market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non‐market performance conditions at the vesting date. For share‐based payment awards with non‐vesting conditions, the grant‐date fair value of the share‐based payment is measured to reflect such conditions and there is no true‐up for differences between expected and actual outcomes. In determining the fair value of share based payments granted, a key estimate and judgement is the volatility input assumed within the option pricing model. The Company uses historical volatility of the Company to determine an appropriate level of volatility expected, commensurate with the expected option life.

The share‐based payment expense included within the Statement of Profit or Loss can be broken down as follows:

2016 $’000

2015 $’000

Share options expense 26,562 1,955

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The following table shows total options granted (or deemed to be granted) during the year ended 30 June 2016 and the value attributed to each option granted, by holder:

Holder No. of options

Exercise price Expiry Value

($/option) Value ($’000)

Value expensed

Directors 18,000,000 $0.10 22/03/2017 $0.0614 1,105 1,105 5,000,000 $0.10 22/03/2017 $0.1588 794 794

23,000,000 $0.40 16/05/2018 $0.3146 7,236 7,236 15,000,000 $0.40 16/05/2019 $0.3815 5,722 1,786

KMP 3,000,000 $0.10 22/03/2017 $0.0614 185 185 5,000,000 $0.40 16/05/2018 $0.4142 2,071 2,071 6,000,000 $0.63 22/06/2019 $0.3151 1,891 62

Subtotal – Directors/KMP 75,000,000 19,004 13,239

Employee/Contractors 4,500,000 $0.10 22/03/2017 $0.0614 277 277 9,300,000 $0.40 16/05/2018 $0.4142 3,852 3,793

16,500,000 $0.40 16/05/2019 $0.4851 8,004 2,099 Service provider 4,000,000 $0.10 22/03/2017 $0.0614 246 246

1,000,000 $0.40 16/05/2018 $0.3142 314 314 2,000,000 $0.65 16/05/2018 $0.2370 474 474 5,000,000 $0.65 16/05/2018 $0.4495 2,247 2,247

Convertible noteholders 56,400,000 $0.05 02/03/2017 $0.0620 3,498 3,498 Options attached to share placement 17,045,455 $0.15 01/12/2017 ‐ ‐ ‐

Subtotal 190,745,455 37,916 26,187 Related share‐based payment expenses ‐ ‐ 375

TOTAL 190,745,455 37,916 26,562

All options issued to Directors were approved by shareholders at General Meetings held in August 2015, November 2015 and April 2016.

The classes of the options on issue as at 30 June 2016 are as follows:

Options issued Expiry date Exercise price No. of options not yet exercised 23,150,000 21 December 2016 $0.05 1,250,000 56,400,000 2 March 2017 $0.05 4,937,500 34,500,000 22 March 2017 $0.10 13,000,000 50,000,000 25 March 2017 $0.03 4,166,665 17,045,455 1 December 2017 $0.15 3,268,181 37,500,000 16 May 2018 $0.40 37,500,000 800,000 a 16 May 2018 $0.40 800,000 7,000,000 16 May 2018 $0.65 7,000,000 31,500,000 b 16 May 2019 $0.40 31,500,000 6,000,000 22 June 2019 $0.63 6,000,000

a The vesting conditions attached to this set of options are based on an employee providing six months of continuous service to the Company.

b The vesting conditions attached to these unlisted options were: 33.33% vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; 33.33% vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable

to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; 33.33% vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works and

mine establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during production runs, at a saleable product specification; and

a continuing employment service condition at the time each milestone is achieved.



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The number and weighted average exercise prices of unlisted share options are as follows:

2016 2015 Weighted average exercise price No. of options Weighted average

exercise price No. of options

Outstanding at 1 July $0.036 41,469,994 $0.030 49,999,991 Exercised during the period $0.066 (122,793,103) $0.037 (31,679,997) Granted during the period $0.236 190,745,455 $0.050 23,150,000 Outstanding at 30 June $0.351 109,422,346 $0.036 41,469,994 Exercisable at 30 June 71,122,346 41,469,994

2.1.3 EXPLORATION AND EVALUATION EXPENDITURE

The consolidated financial statements have been prepared incorporating retrospective application of a voluntary change in accounting policy relating to exploration and evaluation expenditure. The new accounting policy was adopted on 30 June 2016 and has been applied retrospectively. The Directors believe that the change in accounting policy will provide more relevant and reliable information to users of the consolidated financial statements. Both the previous and the new accounting policy are compliant with AASB 6: Exploration for and Evaluation of Mineral Resources.

The impact of the change in accounting policy on the Consolidated Statement of Profit or Loss, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow is included in Section 2.1.4.

ACCOUNTING POLICY

The Company previously accounted for exploration and evaluation expenditure relating to an area of interest by carrying forward that expenditure where no impairment trigger exists. The Company now accounts for exploration and evaluation activities by applying the following policy. Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource. Accordingly, exploration and evaluation expenditures are those expenditures incurred in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Accounting for exploration and evaluation expenditures is assessed separately for each “area of interest”. Each “area of interest” is an individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has been proved to contain such a deposit. Exploration and evaluation costs are written off in the year they are incurred, apart from acquisition costs which are carried forward where right of tenure of the area of interest is current, and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Where an area of interest is abandoned, or the Directors decide that it is not commercially viable, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs are written off to the extent that they will not be recoverable in the future.

2016 $’000

2015 Restated

$’000

Costs expensed in relation to areas of interest in the exploration and evaluation phase (10,556) (1,482)

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2.1.4 VOLUNTARY CHANGE OF ACCOUNTING POLICY

a) Exploration expense

The impact on the consolidated financial statements from incorporating retrospective application of a voluntary change in the exploration and evaluation expenditure accounting policy is as follows:

30 June 2015 ($‘000) 30 June 2014 ($’000)

Previous policy

Increase/ (decrease) Restated

Previous policy


Consolidated statement of financial position (extract)

Exploration and evaluation expenditure

1,806 (1,543) 263 3,070 (435) 2,635

Net assets 5,444 (1,543) 3,901 2,381 (435) 1,946 Accumulated losses (18,339)* (1,543) (19,882) (13,881) (435) (14,316) Total equity 5,444 (1,543) 3,901 2,381 (435) 1,946 Consolidated statement of profit or loss and comprehensive income (extract)

Impairment expense (1,980) 375 (1,605) Exploration costs expensed ‐ (1,482) (1,482) Loss for the year (5,513) (1,107) (6,620) Loss per share Basic and diluted (cents per share) (0.94) (0.18) (1.12)

30 June 2015 ($’000)

Previous policy


Consolidated statement of cash flows (extract) Payments for exploration and evaluation expenditure ‐ (465) (465) Net cash used in operating activities (1,483) (465) (1,948)

Payments for exploration and evaluation expenditure (465) 465 ‐ Net cash used in investing activities (3,191) 465 (2,726)

* Includes impact of change in accounting policy for share based payments. Refer to Note 2.1.4(b).

b) Share‐based payment reserve

Prior to the current year, the Company transferred the fair value of options exercised in contributed equity. The Company has changed accounting policy to now transfer the fair value of options exercised in the year against accumulated losses. The impact in this change in accounting policy is to decrease contributed equity by $1,054,160 and decrease accumulated losses by the same amount in the 2015 financial year.


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2.2 NET FINANCING COSTS

ACCOUNTING POLICY

The Group’s finance income and finance costs include: interest income; interest expense; and dividend income. Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group’s right to receive payment is established.

Net financing costs can be analysed as follows:

2016 $’000

2015 $’000

Interest income on bank deposits 149 45

Finance income 149 45 Interest expense – convertible notes (refer to Note 5.2.2) (2,318) (334) Interest expense – hire purchase assets (27) ‐ Net foreign exchange loss (5) ‐

Finance costs (2,350) (334)

Net finance costs recognised in profit or loss (2,201) (289)

2.3 OPERATING SEGMENTS

For management purposes the Group has one operating segment, being mineral exploration and evaluation in Australia. Segment results that are reported to the Group’s chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets and head office expenses.

2.3.1 INFORMATION ABOUT REPORTING SEGMENTS

Mineral exploration and evaluation 2016 $’000

2015 $’000

For the year ended 30 June Reportable segment costs expensed (22,692) (1,482) Reportable segment (loss) before income tax (22,692) (1,482) Reportable segment assets 763 263 Reportable segment liabilities 3,470 42

Reconciliation of reportable segment loss and assets

Loss Total loss for reportable segments (22,692) (1,482) Unallocated amounts: corporate expenses (30,714) (4,849) Net finance costs (2,201) (289) Loss before income tax (55,607) (6,620)

Asset Total assets for reportable segments 763 263 Assets for corporate segment 101,970 7,045 102,733 7,308

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2.1.4 VOLUNTARY CHANGE OF ACCOUNTING POLICY

a) Exploration expense

The impact on the consolidated financial statements from incorporating retrospective application of a voluntary change in the exploration and evaluation expenditure accounting policy is as follows:

30 June 2015 ($‘000) 30 June 2014 ($’000)

Previous policy


Previous policy


Consolidated statement of financial position (extract)

Exploration and evaluation expenditure

1,806 (1,543) 263 3,070 (435) 2,635

Net assets 5,444 (1,543) 3,901 2,381 (435) 1,946 Accumulated losses (18,339)* (1,543) (19,882) (13,881) (435) (14,316) Total equity 5,444 (1,543) 3,901 2,381 (435) 1,946 Consolidated statement of profit or loss and comprehensive income (extract)

Impairment expense (1,980) 375 (1,605) Exploration costs expensed ‐ (1,482) (1,482) Loss for the year (5,513) (1,107) (6,620) Loss per share Basic and diluted (cents per share) (0.94) (0.18) (1.12)

30 June 2015 ($’000)

Previous policy


Consolidated statement of cash flows (extract) Payments for exploration and evaluation expenditure ‐ (465) (465) Net cash used in operating activities (1,483) (465) (1,948)

Payments for exploration and evaluation expenditure (465) 465 ‐ Net cash used in investing activities (3,191) 465 (2,726)

* Includes impact of change in accounting policy for share based payments. Refer to Note 2.1.4(b).

b) Share‐based payment reserve

Prior to the current year, the Company transferred the fair value of options exercised in contributed equity. The Company has changed accounting policy to now transfer the fair value of options exercised in the year against accumulated losses. The impact in this change in accounting policy is to decrease contributed equity by $1,054,160 and decrease accumulated losses by the same amount in the 2015 financial year.


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2.2 NET FINANCING COSTS

ACCOUNTING POLICY

The Group’s finance income and finance costs include: interest income; interest expense; and dividend income. Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group’s right to receive payment is established.

Net financing costs can be analysed as follows:

2016 $’000

2015 $’000

Interest income on bank deposits 149 45

Finance income 149 45 Interest expense – convertible notes (refer to Note 5.2.2) (2,318) (334) Interest expense – hire purchase assets (27) ‐ Net foreign exchange loss (5) ‐

Finance costs (2,350) (334)

Net finance costs recognised in profit or loss (2,201) (289)

2.3 OPERATING SEGMENTS

For management purposes the Group has one operating segment, being mineral exploration and evaluation in Australia. Segment results that are reported to the Group’s chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets and head office expenses.

2.3.1 INFORMATION ABOUT REPORTING SEGMENTS

Mineral exploration and evaluation 2016 $’000

2015 $’000

For the year ended 30 June Reportable segment costs expensed (22,692) (1,482) Reportable segment (loss) before income tax (22,692) (1,482) Reportable segment assets 763 263 Reportable segment liabilities 3,470 42

Reconciliation of reportable segment loss and assets

Loss Total loss for reportable segments (22,692) (1,482) Unallocated amounts: corporate expenses (30,714) (4,849) Net finance costs (2,201) (289) Loss before income tax (55,607) (6,620)

Asset Total assets for reportable segments 763 263 Assets for corporate segment 101,970 7,045 102,733 7,308

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2.4 PERSONNEL EXPENSES

ACCOUNTING POLICY

Short‐term employee benefits Short‐term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. For share‐based payment awards with non‐vesting conditions, the grant‐date fair value of the share‐based payment is measured to reflect such conditions and there is no true‐up for differences between expected and actual outcomes.

Defined contribution plans Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Other long‐term employee benefits The Group’s net obligation in respect of long‐term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re‐measurements are recognised in profit or loss in the period in which they arise.

Termination benefits Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.

The table below sets out personnel costs expensed during the year:

2016 $’000

2015 $’000

Wages and salaries 841 171 Superannuation expense 110 6 Increase/(decrease) in liability for annual leave 42 ‐ 993 177

2.5 INCOME TAX EXPENSES

ACCOUNTING POLICY

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.

Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination

and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the

Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.


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Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption. Deferred tax assets and liabilities are offset only if certain criteria are met.

2.5.1 INCOME TAX EXPENSE 2016

$’000 2015 $’000

Current income tax expense (189) (52)

2.5.2 RECONCILIATION OF EFFECT TAX RATES

2016 $’000

2015 Restated $’000

Loss before tax from continuing operations (55,418) (6,672)

Tax using the Company’s domestic tax rate of 30% (2015: 30%) (16,625) (2,002) Research and development tax offset ‐ (52) Subsidiary tax liability (189) ‐

Tax effect of: Non‐deductible expenses Share based payment expense 7,969 ‐ Gain on equity investment (244) ‐ Financing costs 523 ‐ Other 30 692

Tax losses not recognised 4,316 1,310 Temporary differences not brought to account 4,031 ‐ Income tax expense reported in the consolidated statement of profit or loss (189) (52)

Potential deferred tax assets have not been recognised at 30 June 2016 for deductible temporary differences and tax losses because it is not probable that future taxable profit will be available against which the Company can use the benefits. The deferred tax losses not recognised at 30 June 2016 have a tax effected value of $6.4 million (2015: $2.1 million).

2.6 EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share

2016 $’000

2015 Restated

$’000

Net loss attributable to ordinary shareholders (55,607) (6,620) Issued ordinary shares at 1 July 658,579 330,297 Effect of shares issued 164,403 258,953 Weighted average number of ordinary shares at 30 June 822,982 589,250

Basic and diluted loss per share (cents)* (6.76) (1.12) * Due to the fact that the Company made a loss, potential ordinary shares from the exercise of options have been excluded due to their

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NOTE 3 – ASSETS AND LIABILITIES SUPPORTING EXPLORATION AND EVALUATION This section focuses on the exploration and evaluation assets which form the core of the Group’s business, including those assets and liabilities that support the ongoing exploration and evaluation as well as commitments existing at the year end.

3.1 EXPLORATION AND EVALUATION EXPENDITURE

ACCOUNTING POLICY

Refer to Note 2.1.3 for the Company’s exploration and evaluation expenditure policy.

3.1.1 EXPLORATION AND EVALUATION ASSETS

2016 $’000

2015 Restated

$’000 Costs carried forward in relation to areas of interest in the exploration and evaluation phase 263 263

Reconciliations: Exploration and evaluation phase Carrying amount at the beginning of the year 263 2,635 Acquisitions ‐ 233 Transfer to equity accounted investments ‐ (1,000) Impairment ‐ (1,605) Carrying amount at the end of the year 263 263

3.1.2 EXPLORATION LICENCE EXPENDITURE COMMITMENTS

The Company has minimum exploration commitments as follows:

2016 $’000

2015 $’000

Within one year 125 233 Later than one year but less than five years 260 931 Greater than five years 557 ‐

3.2 PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICY

Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as a separate item of property, plant and equipment.

Depreciation Depreciation is calculated to write off the cost of items of property plant and equipment less their estimated residual value using either the straight line or units of production methods over either the estimated useful life or the estimated resource. Depreciation is recognised in profit or loss. Land is not depreciated. The estimated useful lives of property, plant and equipment for current and comparative periods are as follows: • Office equipment 2 to 10 years • Plant and equipment 5 years • Motor vehicles 5 years Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted appropriately.


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Property, plant and equipment

$’000

Hire purchase equipment

$’000

Mine properties $’000

Mine rehabilitation

$’000 Total $’000

Cost Balance at 1 July 2014 13 ‐ ‐ ‐ 13 Additions 94 ‐ ‐ ‐ 94 Disposals ‐ ‐ ‐ ‐ ‐ Balance at 30 June 2015 107 ‐ ‐ ‐ 107 Balance at 1 July 2015 107 ‐ ‐ ‐ 107 Acquisitions through business combinations

4,153 696 2,491 ‐ 7,340

Additions 208 ‐ 4,418 908 5,534 Transfers ‐ ‐ ‐ 42 42 Balance at 30 June 2016 4,468 696 6,909 950 13,023

Accumulated depreciation and impairment losses

Balance at 1 July 2014 (9) ‐ ‐ ‐ (9) Depreciation (21) ‐ ‐ ‐ (21) Impairment loss ‐ ‐ ‐ ‐ ‐ Disposals ‐ ‐ ‐ ‐ ‐ Balance at 30 June 2015 (30) ‐ ‐ ‐ (30) Balance at 1 July 2015 (30) ‐ ‐ ‐ (30) Depreciation (51) ‐ ‐ ‐ (51) Impairment loss (3,928) (521) (6,909) (751) (12,109) Balance at 30 June 2016 (4,009) (521) (6,909) (751) (12,190)

Carrying amounts At 1 July 2014 4 ‐ ‐ ‐ 4 At 30 June 2015 77 ‐ ‐ ‐ 77 At 30 June 2016 459 175 ‐ 199 833

3.3 INTANGIBLE ASSETS AND GOODWILL

ACCOUNTING POLICY

Recognition and measurement Goodwill Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

3.3.1 GOODWILL

2016 $’000

2015 $’000

Balance at 1 July ‐ ‐ Additions 1,327 ‐ Impairment (1,327) ‐ Balance at 30 June ‐ ‐

Goodwill arose on the acquisition of 50% of the Tabba Tabba Tantalum Project in September 2015. The goodwill was subsequently written down to nil following the suspension of operations at the Tabba Tabba Tantalum Project in January 2016. See Note 3.4 for further details.

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3.4 BUSINESS COMBINATIONS

2016 $’000

2015 $’000

Investment in equity accounted associate ‐ 1,200


The tenements are owned by Global Advanced Metals Wodgina Pty Ltd (“GAM”) and the mining and processing is undertaken by TTT pursuant to an agreement with GAM, who has an offtake agreement for the project’s tantalite concentrate. On 25 September 2015, the Group acquired the remaining 50% of the issued shares in Tabba Tabba Tantalum Pty Ltd (formerly Nagrom Mining Pty Ltd) for a consideration of $2,000,000.

The acquisition of 50% of the Tabba Tabba Project for $2 million valued the 50% investment already held by the Company at $2 million. The Company carried the original 50% investment at a cost of $1.2 million at the date of acquisition. The Company recognised a loss of $12,000 against the investment which was the Company’s share of the joint venture’s loss between 1 July 2015 and the date of acquisition. Therefore, a gain on the revaluation on the investment of $0.81 million was recognised as follows:

$’000

Carrying value of investment before the acquisition 1,200 Share of loss (12) Carrying value of investment 1,188 Fair value of investment on acquisition 2,000 Gain on revaluation of investment 812

Details of the purchase consideration, the net assets acquired and goodwill are as follows:

Fair value at acquisition

date $’000

Cash and cash equivalents 251 Trade and other receivables 1,016 Inventories 46 Property, plant and equipment 7,340 Trade and other payables (5,526) Borrowings (454) 2,673 Goodwill arising on acquisition 1,327 Total value of acquisition 4,000

In January 2016, the operations at the TTT Project were suspended following plant commissioning problems. A subsequent engineering review determined that significant expenditure would be required to modify the existing plant before the commissioning process could be finalised. The impact of this, when combined with existing tantalum market conditions meant that the TTT Project was suspended indefinitely. As a consequence, goodwill arising on acquisition was impaired to nil.


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NOTE 4 – WORKING CAPITAL

4.1 CASH AND CASH EQUIVALENTS

ACCOUNTING POLICY

Cash and cash equivalents comprise cash balances and call deposits with a maturity of less than or equal to six months from the date of acquisition. The carrying value of cash and cash equivalents is considered to approximate fair value.

4.1.1 CASH AND CASH EQUIVALENTS

2016 $’000

2015 $’000

Bank balances 6,019 3,216 Call deposits 94,021 ‐ Cash and cash equivalents in the statement of financial position 100,040 3,216

4.1.2 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

2016 $’000

2015 $’000

Cash flows from operating activities

Loss for the period (55,607) (6,620)

Adjustments for: ‐ Depreciation 51 21 ‐ Finance costs 2,350 334 ‐ Impairment expense 12,136 1,605 ‐ Share based payment expense 26,562 1,955 ‐ Gain on equity investment (812) ‐

Operating loss before changes in working capital and provisions (15,320) (2,705)

Change in trade and other receivables (620) (224) Change in trade payables and employee benefits 1,380 980

Net cash used in operating activities (14,560) (1,949)

4.2 TRADE AND OTHER RECEIVABLES

ACCOUNTING POLICY

Trade and other receivables are recognised initially at fair value which is usually the value of the invoice sent to the counter‐party and subsequently at the amounts considered recoverable. Where there is evidence that the receivable is not recoverable, it is impaired with a corresponding charge to the profit or loss statement.

2016 $’000

2015 $’000

Current Trade debtors ‐ 757 Goods and services tax receivable 671 52 Security deposits 759 5 Other receivables 115 105 1,545 919

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4.3 TRADE AND OTHER PAYABLES AND PROVISIONS

ACCOUNTING POLICY

Trade payables These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually payable within 30 days’ net of recognition. Trade payables are recognised initially at the value of the invoice received from a supplier.

Provisions Provisions are determined by discounting the expected future cash flows at a pre‐tax rate that reflects current market assessments of the time value of money, and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Site restoration In accordance with the applicable legal requirements, a provision for site restoration in respect of returning the land to its original state is recognised when the land is disturbed.

2016 $’000

2015 $’000

Current – Trade and other payables Trade payables 2,093 458 Accruals 802 284 Other payables 57 1 2,952 743 Current – Provisions Mine rehabilitation provision 962 41 Annual leave provision 42 ‐ 1,004 41

NOTE 5 – EQUITY AND FUNDING

5.1 CAPITAL AND RESERVES

ACCOUNTING POLICY

Ordinary shares are classified as equity. Costs directly attributable to the issue of new ordinary shares are recognised as a deduction from equity, net of any tax effects.

5.1.1 ORDINARY SHARES

2016 ‘000

2015 ‘000

Fully paid ordinary shares 1,148,051 658,579 Total share capital on issue at 30 June 1,148,051 658,579

Movements in ordinary shares on issue: On issue at 1 July 658,579 330,297

Shares issued during the period

Issued for cash 338,195 280,753 Issued for services provided ‐ 1,614 Exercise of share options 122,793 31,680 Conversion of convertible notes including accrued interest 28,484 14,235 On issue at 30 June 1,148,051 658,579


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2016 $’000

2015 Restated

$’000

Ordinary shares 146,476 22,526 Total share capital on issue at 30 June 146,476 22,526



Issued for cash 114,551 4,721 Issued for services provided ‐ 117 Exercise of share options 8,101 1,159 Conversion of convertible notes and accrued interest 8,319 684 Share issue costs (7,021) (254) At reporting date 146,476 22,526

Terms and conditions of ordinary shares

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors with respect to any proceeds of liquidations.

5.1.2 RESERVES

2016 $’000

2015 Restated

$’000

Share‐based payment reserve 21,799 1,325 Foreign currency reserve (68) (68) 21,731 1,257

Share‐based payment reserve

2016 $’000

2015 $’000

Share‐based payment reserve 21,799 1,325

Movements in share‐based payment reserve: Balance at 1 July 1,325 230 Share based payment expense following issue of options 26,187 1,955 Financing transaction costs ‐ 194 Options exercised and transferred to accumulated losses (5,713) (1,054) Balance at reporting date 21,799 1,325

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4.3 TRADE AND OTHER PAYABLES AND PROVISIONS

ACCOUNTING POLICY

Trade payables These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually payable within 30 days’ net of recognition. Trade payables are recognised initially at the value of the invoice received from a supplier.

Provisions Provisions are determined by discounting the expected future cash flows at a pre‐tax rate that reflects current market assessments of the time value of money, and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Site restoration In accordance with the applicable legal requirements, a provision for site restoration in respect of returning the land to its original state is recognised when the land is disturbed.

2016 $’000

2015 $’000

Current – Trade and other payables Trade payables 2,093 458 Accruals 802 284 Other payables 57 1 2,952 743 Current – Provisions Mine rehabilitation provision 962 41 Annual leave provision 42 ‐ 1,004 41

NOTE 5 – EQUITY AND FUNDING

5.1 CAPITAL AND RESERVES

ACCOUNTING POLICY

Ordinary shares are classified as equity. Costs directly attributable to the issue of new ordinary shares are recognised as a deduction from equity, net of any tax effects.

5.1.1 ORDINARY SHARES

2016 ‘000

2015 ‘000

Fully paid ordinary shares 1,148,051 658,579 Total share capital on issue at 30 June 1,148,051 658,579



Issued for cash 338,195 280,753 Issued for services provided ‐ 1,614 Exercise of share options 122,793 31,680 Conversion of convertible notes including accrued interest 28,484 14,235 On issue at 30 June 1,148,051 658,579


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2016 $’000

2015 Restated

$’000

Ordinary shares 146,476 22,526 Total share capital on issue at 30 June 146,476 22,526



Issued for cash 114,551 4,721 Issued for services provided ‐ 117 Exercise of share options 8,101 1,159 Conversion of convertible notes and accrued interest 8,319 684 Share issue costs (7,021) (254) At reporting date 146,476 22,526

Terms and conditions of ordinary shares

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors with respect to any proceeds of liquidations.

5.1.2 RESERVES

2016 $’000

2015 Restated

$’000

Share‐based payment reserve 21,799 1,325 Foreign currency reserve (68) (68) 21,731 1,257

Share‐based payment reserve

2016 $’000

2015 $’000

Share‐based payment reserve 21,799 1,325

Movements in share‐based payment reserve: Balance at 1 July 1,325 230 Share based payment expense following issue of options 26,187 1,955 Financing transaction costs ‐ 194 Options exercised and transferred to accumulated losses (5,713) (1,054) Balance at reporting date 21,799 1,325

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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2016NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

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The share‐based payment reserve is used to record the fair value of the options issued. Options issued to directors, consultants and employees during the year and their associated value impact on the share based payment reserve are as follows:

Option Grant date Share price on date of grant Exercise price Expiry date Valuation (cents

per option) 29,500,000 28/08/2015 $0.11 $0.10 22/03/2017 6.14 56,400,000 28/08/2015 $0.11 $0.05 02/03/2017 6.20 5,000,000 30/11/2015 $0.24 $0.10 22/03/2017 15.88 23,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.46 1,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.42 2,000,000 18/04/2016 $0.58 $0.65 16/05/2018 23.70 15,000,000* 18/04/2016 $0.58 $0.40 16/05/2019 38.15 800,000** 06/05/2016 $0.70 $0.40 16/05/2018 41.42 13,500,000 06/05/2016 $0.70 $0.40 16/05/2018 41.42 16,500,000* 06/05/2016 $0.70 $0.40 16/05/2019 48.51 5,000,000 11/05/2016 $0.87 $0.65 16/05/2018 44.95 6,000,000* 22/06/2016*** $0.57 $0.63 22/06/2019 31.51

* The vesting conditions attaching to these options are: 33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; 33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters

acceptable to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; 33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works

and mine establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during production runs, at a saleable product specification; and

A continuing employment service condition at the time each milestone is achieved. ** The vesting condition attaching to these options is six months of continuous employment service. *** The options granted on 22 June 2016 were not issued to the recipient in the reporting period due to the exercise price being the June

2016 quarter VWAP. The options will be issued subsequent to year end.

All option valuations during the period were performed by an independent third party valuer. The Black Scholes option valuation methodology was used to value the options. Inputs to the option valuation model included the Company’s share price volatility, risk free rates, option life, and the option exercise price. Option volatility was calculated using the share price movement of the Company over the past 12 months up until the date the options were granted.

The key inputs used in the measurement of the fair values at grant date of the equity‐settled share based payment plans were as follows: 2016

Expected volatility (weighted average) 102.4% Expected life (weighted average) 2.0 years Risk free interest rate (based on government bonds) (weighted average) 1.8%

5.2 LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information about the Group’s exposure to interest rate risk, see Section 6.2.

2016 $’000

2015 $’000

Current Hire purchase liability 137 ‐ Convertible note – debt liability ‐ 2,622 Total borrowings – current 137 2,622

Non‐current Hire purchase liability 209 ‐ Total borrowings – non‐current 209 ‐


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5.2.1 TERMS AND REPAYMENT SCHEDULE

The terms and conditions of outstanding loans are as follows:

Currency Nominal interest rate

Year of maturity

2016 2015 Face value $’000

Carrying amount $’000

Face value $’000


2014 Convertible notes AUD 20% 2015 ‐ ‐ 1,500 832 2015 Convertible notes AUD 15% 2016 ‐ ‐ 1,700 1,790 2016 Convertible note AUD 15% 2017 ‐ ‐ ‐ ‐ Hire purchase AUD 6.5% 2019 346 346 ‐ ‐

Total interest‐bearing liabilities 346 346 3,200 2,622

5.2.2 CONVERTIBLE NOTE LIABILITY

ACCOUNTING POLICY

The liability component of a convertible note is recognised initially at its fair value. Subsequent to initial recognition, the liability component of the convertible note is measured at amortised cost using the effective interest method.

On 11 June 2015, the Company entered into an agreement with a group of sophisticated investors to issue convertible notes with free attaching options over fully paid ordinary shares of the Company for cash consideration of $4,000,000, subject to shareholder approval. Approval from shareholders was received at an Extraordinary General Meeting held on 28 August 2015.

The 4,000,000 convertible notes were issued with a face value of $1.00 per note, a maturity date of 2 March 2017 and accrued interest at a rate of 15% per annum. The notes were convertible at a 20% discount to the five‐day VWAP of the Company’s share price on conversion date and were secured against the rights over the Pilgangoora tenements. The convertible notes were classified as a financial liability in its entirety.

50,000,000 free attaching options were issued to convertible noteholders with the related convertible notes. A further 6,400,000 unlisted options were issued as consideration for capital raising fees associated with the issue of the convertible notes. The options were issued with no vesting conditions, were exercisable at $0.05 per option and had a term of 18 months. The issue of these options is considered to be a share based payment expense and their cost of $3.5 million has been treated as such.

Movements in convertible notes during the year are shown as follows:

2016 $’000

2015 $’000

Carrying amount of liability at the beginning of the period 2,622 1,386

Interest expense 1,745 ‐ Termination of notes (175) ‐ Issue of notes 4,000 1,700 Conversion to equity (8,192) (464) Carrying amount of liability at the end of the period ‐ 2,622

The fair value of the convertible notes on issue during the year was equivalent to their face value. As the notes can be converted after six months at a 20% discount to the five‐day share price VWAP at the time of conversion, the fair value of the notes has been accreted to reflect this additional value over the six‐month period. The interest expense of $2,318,000 included in the profit or loss includes $1,745,000 accretion in value and $573,000 interest paid in cash (levied at the coupon rate of 15%).

5.3 CAPITAL MANAGEMENT

Capital consists of ordinary share capital, retained earnings, reserves and net debt. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern so as to maintain a strong capital base sufficient to maintain future exploration and development activities.

There were no changes to the Group’s approach to capital management during the year.

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The share‐based payment reserve is used to record the fair value of the options issued. Options issued to directors, consultants and employees during the year and their associated value impact on the share based payment reserve are as follows:

Option Grant date Share price on date of grant Exercise price Expiry date Valuation (cents

per option) 29,500,000 28/08/2015 $0.11 $0.10 22/03/2017 6.14 56,400,000 28/08/2015 $0.11 $0.05 02/03/2017 6.20 5,000,000 30/11/2015 $0.24 $0.10 22/03/2017 15.88 23,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.46 1,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.42 2,000,000 18/04/2016 $0.58 $0.65 16/05/2018 23.70 15,000,000* 18/04/2016 $0.58 $0.40 16/05/2019 38.15 800,000** 06/05/2016 $0.70 $0.40 16/05/2018 41.42 13,500,000 06/05/2016 $0.70 $0.40 16/05/2018 41.42 16,500,000* 06/05/2016 $0.70 $0.40 16/05/2019 48.51 5,000,000 11/05/2016 $0.87 $0.65 16/05/2018 44.95 6,000,000* 22/06/2016*** $0.57 $0.63 22/06/2019 31.51

* The vesting conditions attaching to these options are: 33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; 33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters

acceptable to the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; 33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works

and mine establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during production runs, at a saleable product specification; and

A continuing employment service condition at the time each milestone is achieved. ** The vesting condition attaching to these options is six months of continuous employment service. *** The options granted on 22 June 2016 were not issued to the recipient in the reporting period due to the exercise price being the June

2016 quarter VWAP. The options will be issued subsequent to year end.

All option valuations during the period were performed by an independent third party valuer. The Black Scholes option valuation methodology was used to value the options. Inputs to the option valuation model included the Company’s share price volatility, risk free rates, option life, and the option exercise price. Option volatility was calculated using the share price movement of the Company over the past 12 months up until the date the options were granted.

The key inputs used in the measurement of the fair values at grant date of the equity‐settled share based payment plans were as follows: 2016

Expected volatility (weighted average) 102.4% Expected life (weighted average) 2.0 years Risk free interest rate (based on government bonds) (weighted average) 1.8%

5.2 LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For more information about the Group’s exposure to interest rate risk, see Section 6.2.

2016 $’000

2015 $’000

Current Hire purchase liability 137 ‐ Convertible note – debt liability ‐ 2,622 Total borrowings – current 137 2,622

Non‐current Hire purchase liability 209 ‐ Total borrowings – non‐current 209 ‐


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5.2.1 TERMS AND REPAYMENT SCHEDULE

The terms and conditions of outstanding loans are as follows:

Currency Nominal interest rate

Year of maturity

2016 2015 Face value $’000


Face value $’000


2014 Convertible notes AUD 20% 2015 ‐ ‐ 1,500 832 2015 Convertible notes AUD 15% 2016 ‐ ‐ 1,700 1,790 2016 Convertible note AUD 15% 2017 ‐ ‐ ‐ ‐ Hire purchase AUD 6.5% 2019 346 346 ‐ ‐

Total interest‐bearing liabilities 346 346 3,200 2,622

5.2.2 CONVERTIBLE NOTE LIABILITY

ACCOUNTING POLICY

The liability component of a convertible note is recognised initially at its fair value. Subsequent to initial recognition, the liability component of the convertible note is measured at amortised cost using the effective interest method.

On 11 June 2015, the Company entered into an agreement with a group of sophisticated investors to issue convertible notes with free attaching options over fully paid ordinary shares of the Company for cash consideration of $4,000,000, subject to shareholder approval. Approval from shareholders was received at an Extraordinary General Meeting held on 28 August 2015.

The 4,000,000 convertible notes were issued with a face value of $1.00 per note, a maturity date of 2 March 2017 and accrued interest at a rate of 15% per annum. The notes were convertible at a 20% discount to the five‐day VWAP of the Company’s share price on conversion date and were secured against the rights over the Pilgangoora tenements. The convertible notes were classified as a financial liability in its entirety.

50,000,000 free attaching options were issued to convertible noteholders with the related convertible notes. A further 6,400,000 unlisted options were issued as consideration for capital raising fees associated with the issue of the convertible notes. The options were issued with no vesting conditions, were exercisable at $0.05 per option and had a term of 18 months. The issue of these options is considered to be a share based payment expense and their cost of $3.5 million has been treated as such.

Movements in convertible notes during the year are shown as follows:

2016 $’000

2015 $’000

Carrying amount of liability at the beginning of the period 2,622 1,386

Interest expense 1,745 ‐ Termination of notes (175) ‐ Issue of notes 4,000 1,700 Conversion to equity (8,192) (464) Carrying amount of liability at the end of the period ‐ 2,622

The fair value of the convertible notes on issue during the year was equivalent to their face value. As the notes can be converted after six months at a 20% discount to the five‐day share price VWAP at the time of conversion, the fair value of the notes has been accreted to reflect this additional value over the six‐month period. The interest expense of $2,318,000 included in the profit or loss includes $1,745,000 accretion in value and $573,000 interest paid in cash (levied at the coupon rate of 15%).

5.3 CAPITAL MANAGEMENT

Capital consists of ordinary share capital, retained earnings, reserves and net debt. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern so as to maintain a strong capital base sufficient to maintain future exploration and development activities.

There were no changes to the Group’s approach to capital management during the year.

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NOTE 6 – OTHER DISCLOSURES

6.1 FINANCIAL RISK MANAGEMENT

ACCOUNTING POLICY

The Group classifies non‐derivative financial assets into the following categories: • financial assets at fair value through profit or loss, • held‐to‐maturity financial assets, • loans and receivables, and • available‐for‐sale financial assets. The Group classifies non‐derivative financial liabilities into the following categories: • financial liabilities at fair value through profit or loss, and • other financial liabilities.

Non‐derivative financial assets and financial liabilities – Recognition and de‐recognition The Group initially recognises loans and receivables and debt securities issued on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date when the entity becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group de‐recognises a financial liability when its contractual obligations are discharged or cancelled, or expire. Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Non‐derivative financial assets – Measurement Financial assets at fair value through profit or loss A financial asset is classified at fair value through profit or loss if it is classified as held for‐trading or is designated as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, are recognised in profit or loss. Held‐to‐maturity financial assets These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Loans and receivables These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Available‐for‐sale financial assets These assets are initially measured at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on debt instruments, are recognised in other comprehensive income and accumulated in the fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

Non‐derivative financial liabilities – Measurement A financial liability is classified as at fair value through profit or loss if it is classified as held‐for‐trading or is designated as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value and changes therein, including any interest expense, are recognised in profit or loss. Other non‐derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.


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Set out below are details of the Group’s financial assets and liabilities at the end of the reporting period.

2016 $’000

2015 $’000

Financial assets Cash and cash equivalents 100,040 3,216 Trade and other receivables 1,545 919 Loans receivable ‐ 1,627 Other financial assets 6 6

Total financial assets 101,591 5,768

Financial liabilities Trade and other payables 2,952 743 Borrowings 346 2,622

Total financial liabilities 3,298 3,365

6.1.1 OVERVIEW

The Group has exposure to the following risks from their use of financial instruments:

Credit risk Liquidity risk

The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to meet all of its financial commitments and maintain the capacity to fund the exploration, evaluation and development of the Pilgangoora Project and ancillary exploration activities.

The principal financial instruments as at the reporting date include cash, receivables, payables and loan and finance agreements.

Set out below is information about exposures to the above risks, the objectives, policies and processes for measuring and managing risk, and the management of capital.

6.1.2 CREDIT RISK

Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s cash at bank and term deposits.

The carrying amount of financial assets represents the maximum credit exposure.

The Group limits its exposure to credit risk by only transacting with high credit quality financial institutions. During the year the Group maintained all cash and cash equivalents balances with banks and financial institutions holding a AA‐ rating based on S&P Global ratings.

6.1.3 LIQUIDITY RISK

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group also manages liquidity risk by producing cash flow forecasts to ensure that there is a clear and up‐to‐date view of the short to medium term funding requirements and the possible sources of those funds. The Group aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities.

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The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements:


Total $’000

Six months or less $’000

Six to twelve months $’000

One to two years $’000

Two to five years $’000

30 June 2016

Non‐derivative financial liabilities

Hire purchase 346 373 77 77 155 64 Trade payables 2,093 2,093 2,093 ‐ ‐ ‐ 2,439 2,466 2,170 77 155 64

30 June 2015 Non‐derivative financial liabilities

Convertible notes 2,622 2,675 975 ‐ 1,700 ‐ Trade payables 458 458 458 ‐ ‐ ‐ 3,080 3,133 1,433 ‐ 1,700 ‐

6.1.4 FAIR VALUES

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position, are as follows:

Level

Carrying amount Fair value 2016 $’000

2015 $’000

2016 $’000

2015 $’000

Financial assets and liabilities measured at fair value Convertible note Level 2 ‐ 2,622 ‐ 2,675

Fair value hierarchy:

Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – the fair values are measured using in puts (other than quoted prices) that are observable for the asset or liability either directly or indirectly; or

Level 3 – the fair values are measured using inputs for the asset or liability that are not based on observable market data.

Cash and cash equivalents, other receivables, trade creditors, other creditors and accruals have been excluded from the above analysis as their fair values are equal to their carrying values.

6.2 RELATED PARTIES

6.2.1 PARENT AND ULTIMATE CONTROLLING PARTY

The ultimate controlling party of the Group is Pilbara Minerals Limited.

6.2.2 KEY MANAGEMENT PERSONNEL

The following people were considered as key management personnel during the financial year:

Position Appointed Resigned Tony Leibowitz Non‐executive Chairman 11 June 2013 Robert Adamson Non‐executive Director 1 July 2010 Ken Brinsden Managing Director 18 January 2016 Neil Biddle Executive Director 30 May 2013 John Young Executive Director 4 September 2015 Alan Boys Company Secretary and Chief Financial Officer 23 October 2014 21 June 2016 as CFO Brian Lynn Chief Financial Officer 22 June 2016


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Key management personnel compensation comprised the following:

2016

$ 2015

$

Short term employee benefits 1,305,176 732,570 Post‐employment benefits 11,021 ‐ Share‐based payments (non‐cash) 13,238,684 ‐ 14,554,881 732,570

Compensation of the Group’s key management personnel includes salaries, and contributions to a post‐employment defined contribution plan. Information regarding individual directors and executive’s compensation and some equity instruments are disclosed as required by s300A of the Corporations Act and Corporations Regulations 2M.3.03 are provided in the Remuneration Report section of the Directors’ Report.

6.2.3 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL RELATED PARTIES

During the year the Group transacted with related parties of key management personnel.

Tony Leibowitz is a director and shareholder of the following related party entities which transacted with the Company during the year:

Entity Services provided 2016 2015 Kalonda Pty Ltd Director services $86,000 $75,881 Floreat Investments Pty Ltd Corporate advisory services $215,200 $47,155 Leibowitz and Sons Pty Ltd Corporate advisory services ‐ $39,586

During the year, the Company paid Kalonda Pty Ltd $13,200 for the provision of office accommodation for Mr Leibowitz.

On 2 September 2015, Kalonda Pty Ltd subscribed to convertible notes with a face value of $200,000. On 19 April 2016, Kalonda Pty Ltd pursuant to the terms of the convertible note deed converted the principal into 425,435 ordinary shares in the Company.

Neil Biddle is a director and shareholder of the following related party entity which transacted with the Company during the year:

Entity Services provided 2016 2015 Hatched Creek Pty Ltd Director and corporate advisory services $337,500 $276,420

Robert Adamson is a director and shareholder of the following related party entity which transacted with the Company during the year:

Entity Services provided 2016 2015 Robert G Adamson Consultants Director services $56,000 $36,000

John Young is a director and shareholder of the following related party entity which transacted with the Company during the year:

Entity Services provided 2016 2015 Metallon Resources Pty Ltd Director and geological advisory services $236,000 $168,400

Alan Boys is a director and shareholder of the following related party entity which transacted with the Company during the year:

Entity Services provided 2016 2015 Dubois Group Pty Ltd Accounting and secretarial services $216,000 $77,750

On 2 September 2015, Starchaser Nominees Pty Ltd, a related entity to Mr Alan Boys, subscribed to convertible notes with a face value of $50,000. On 24 March 2016, Starchaser Nominees Pty Ltd pursuant to the terms of the convertible note deed converted the principal into 167,504 ordinary shares in the Company.

All transactions with key management personnel related party entities were on commercial terms.

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Up until the Group’s purchase of the remaining 50% interest in the incorporated joint venture Tabba Tabba Tantalum Pty Ltd in September 2015, it was a related party of the Group. Valdrew Nominees Pty Ltd, the 50% joint holder of Tabba Tabba Tantalum Pty Ltd, was also a related party of the Group in accordance with AASB 124 for the year ended 30 June 2016.

Up until the date of acquisition, the Group invoiced Tabba Tantalum Pty Ltd an amount of $1,223,345 (2015: $427,974) for services and as at 28 September 2015 had trade receivables due from Tabba Tabba Tantalum Pty Ltd of $754,322 (2015: $754,322) and an outstanding loan advance due to it of $2,850,389 (2015: $1,627,045).

Up until the date of acquisition, the Group purchased goods and services from Valdrew Nominees Pty Ltd totalling $212,684 (2015: $215,280) and had trade payables as at 28 September 2015 of $42,349 (2015: $84,500). During the year, the Group purchased its 50% interest in Tabba Tabba Tantalum Pty Ltd from Valdrew Nominees Pty Ltd for the sum of $2,000,000 (2015: $1,200,000).

6.3 GROUP ENTITIES

6.3.1 PARENT ENTITY

Pilbara Minerals Limited.

6.3.2 SIGNIFICANT SUBSIDIARIES

Country of incorporation 2016 2015 Tabba Tabba Tantalum Pty Ltd Australia 100% 50% Sturt Resources Ltd Australia 100% 100% Sturt Resources PNG Ltd Papua New Guinea 100% 100% Star 15 Limited Papua New Guinea 100% 100% New Global Limited Papua New Guinea 100% 100% Pilbara Lithium Pty Ltd Australia 100% ‐

6.4 JOINT ARRANGEMENTS

On 25 September 2015, the Company increased its interest in Tabba Tabba Tantalum Pty Ltd (formerly Nagrom Mining Pty Ltd) from 50% to 100%. Refer to Note 3.4 for additional details.

6.5 PARENT ENTITY DISCLOSURES

As at, and throughout the financial year ending 30 June 2016 the parent company of the Group was Pilbara Minerals Limited.

2016 $’000

2015 $’000

Results of the parent entity Loss for the period (55,697) (6,620) Other comprehensive income/(loss) ‐ ‐ Total comprehensive loss for the period (55,697) (6,620)

Financial position of the parent entity at year end Current assets 100,796 5,762 Total assets 101,393 7,308 Current liabilities 3,058 3,407 Total liabilities 3,058 3,407

Total equity of the parent comprising of: Share capital 146,476 22,526 Share‐based payment reserve 21,799 1,325 Accumulated losses (69,940) (19,950) Total equity 98,335 3,901


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6.6 SUBSEQUENT EVENTS

On 4 July 2016, the Company announced it had signed a binding offtake agreement with leading Chinese lithium chemicals company, General Lithium Corporation (“GLC”) for the supply of 140,000 tonnes per annum of 6% chemical‐grade spodumene concentrate from Q1 2018 for an initial six‐year period, with the option to extend for a further four years. The offtake pricing mechanism is to be based on the price of Lithium Carbonate, so that the Company shares in the pricing outcomes derived from carbonate deliveries to higher volume contracts with cathode makers in China.

In addition, a binding Memorandum of Understanding was also executed with GLC to participate in the evaluation and development of a future offshore spodumene conversion plant, to process spodumene concentrates from the Pilgangoora Project whereby GLC will provide technology, technical expertise and intellectual property, and will build and operate the lithium chemicals production facility through an incorporated joint venture with the Company. Pilbara is expected to have a 50% share of the equity in the proposed Joint Venture.

A binding Equity Subscription Agreement was also executed with GLC whereby they have agreed to invest A$17.75 million in the Company via a 3% placement at 50c per share; with settlement to occur after the conditions precedent to the Offtake Agreement terms have been satisfied. A further 2% placement is proposed (for a total stake of 5% in Pilbara Minerals), once a formal investment decision has been made to proceed with the development of the lithium chemicals facility.

The offtake agreement is subject to various conditions precedent, including the waiver or non‐exercise of the right of first refusal to the spodumene concentrates held by Global Advanced Metals Wodgina Pty Ltd (subsequently assigned to Mineral Resources Ltd) under the terms of the Pilgangoora Asset Sale Agreement.

6.7 AUDITORS’ REMUNERATION

Somes Cooke audited the Group up until their resignation on 10 June 2016. The Directors resolved to appoint KPMG, as the interim auditor of the Group with their appointment to be confirmed at the next Annual General Meeting.

2016

$ 2015

$

Audit services – KPMG 30,000 ‐ Audit services – Somes Cooke 10,000 29,000

Services other than statutory audit – KPMG ‐ ‐ Services other than statutory audit – Somes Cooke ‐ ‐

Total auditor’s remuneration – KPMG 30,000 ‐ Total auditor’s remuneration – Somes Cooke 10,000 29,000

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6.8 STANDARDS ISSUED BUT NOT YET EFFECTIVE

A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2015 and earlier application is permitted; however, the Group has not early applied the following new or amended standards in preparing these consolidated financial statements.

New or amended standards Summary of the requirements Possible impact on consolidated

financial statements

IFRS 9 Financial Instruments

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and de‐recognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction contracts, and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.


AASB 16 Leases The key feature of AASB 16 (for lease accounting) are as follows: • Lessees are required to recognise assets and liabilities for

all leases with a term of more than 12 months, unless the underlying asset is of low value.

• A lessee measures right‐of‐use assets similarly to other non‐financial assets and lease liabilities similar to other financial liabilities.

• Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non‐cancellable lease payments (including inflation‐linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.

• AASB 16 contains disclosure requirements for lessees. AASB 16 is effective for annual reporting periods beginning on 1 January 2019, with early adoption permitted.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of AASB 16.

DIRECTORS’ DECLARATION

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1. In the opinion of the Directors of Pilbara Minerals Limited (“the Company”):

a) the consolidated financial statements and notes set out on pages 42 to 70 and the Remuneration Report contained within the Directors’ Report are in accordance with the Corporations Act 2001, including:

i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and

b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

Anthony Kiernan Director 7 September 2016

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DIRECTORS' DECLARATIONNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

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6.8 STANDARDS ISSUED BUT NOT YET EFFECTIVE

A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2015 and earlier application is permitted; however, the Group has not early applied the following new or amended standards in preparing these consolidated financial statements.

New or amended standards Summary of the requirements Possible impact on consolidated

financial statements

IFRS 9 Financial Instruments

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and de‐recognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.


IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction contracts, and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.


AASB 16 Leases The key feature of AASB 16 (for lease accounting) are as follows: • Lessees are required to recognise assets and liabilities for

all leases with a term of more than 12 months, unless the underlying asset is of low value.

• A lessee measures right‐of‐use assets similarly to other non‐financial assets and lease liabilities similar to other financial liabilities.

• Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non‐cancellable lease payments (including inflation‐linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.

• AASB 16 contains disclosure requirements for lessees. AASB 16 is effective for annual reporting periods beginning on 1 January 2019, with early adoption permitted.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of AASB 16.

DIRECTORS’ DECLARATION

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1. In the opinion of the Directors of Pilbara Minerals Limited (“the Company”):

a) the consolidated financial statements and notes set out on pages 42 to 70 and the Remuneration Report contained within the Directors’ Report are in accordance with the Corporations Act 2001, including:

i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and

b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

Anthony Kiernan Director 7 September 2016

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INDEPENDENT AUDITOR'S REPORT

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Independent auditor’s report to the members of Pilbara Minerals Limited

Report on the financial report We have audited the accompanying financial report of Pilbara Minerals Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2016, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1.1 to 6.8 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 1.2, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. F

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INDEPENDENT AUDITOR'S REPORT

Auditor’s opinion In our opinion:

(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.2.

Other Matter

The consolidated financial statements of the Company as at and for the year ended 30 June 2015 were audited by another auditor who expressed an unmodified opinion on those statements on 30 September 2015.

Report on the remuneration report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the remuneration report of Pilbara Minerals Limited for the year ended 30 June 2016, complies with Section 300A of the Corporations Act 2001.

KPMG

R Gambitta Partner

7 September 2016

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ADDITIONAL SHAREHOLDER INFORMATIONAS AT 21 SEPTEMBER 2016ADDITIONAL SHAREHOLDER INFORMATION AS AT 21 SEPTEMBER 2016

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In accordance with Listing Rule 4.10 the following information is provided.

CORPORATE GOVERNANCE STATEMENT The Company’s Corporate Governance Statement is available on the Company’s website at: http://www.pilbaraminerals.com.au

SHAREHOLDERS

SUBSTANTIAL SHAREHOLDERS The Company has the following substantial shareholders as at 21 September 2016:

Regal Funds Management Limited – 57,820,952 ordinary shares

UBS Group AG – 57,916,741 ordinary shares

NUMBER OF HOLDERS IN EACH CLASS OF EQUITY SECURITIES AND THE VOTING RIGHTS ATTACHED (as at 21 September 2016)

Ordinary Shares

There are 11,285 holders of ordinary shares. Each shareholder is entitled to one vote per share.

In accordance with the Company’s Constitution, on a show of hands every member present in person or by proxy or attorney or duly authorised representative has one vote for every fully paid ordinary share held.

Options

There are 52 holders of unlisted options. There are no voting rights attaching to the options.

A total of 109,943,182 options are on issue. The 109,943,182 options, if exercised, will convert into 109,943,182 ordinary shares.

The options have the following exercise prices and expiry dates: No. of holders

No. of options

Vested/ Unvested

Exercise price Expiry date

1 1,250,000 Vested $0.05 22/12/2016 2 4,625,000 Vested $0.03 2/3/2017 8 11,000,000 Vested $0.10 22/3/2017 5 3,268,182 Vested $0.15 1/12/2017 20 37,500,000 Vested $0.40 16/5/2018 2 800,000 Unvested $0.40 16/5/2018 9 31,500,000 Unvested $0.40 16/5/2019 2 7,000,000 Vested $0.65 16/5/2018 3 13,000,000 Unvested $0.626 6/9/2019

DISTRIBUTION SCHEDULE OF THE NUMBER OF HOLDERS IN EACH CLASS OF EQUITY SECURITY AT 21 SEPTEMBER 2016

Ordinary Shares Unlisted Options expiry date 22/12/2016, strike price $0.05

Spread of holdings Holders Units Percentage of issued capital

Spread of holdings Holders Units Percentage of options on issue

1 to 1,000 817 599,298 0.05 1 to 1,000 ‐ ‐ ‐ 1,001 to 5,000 3,061 8,827,474 0.77 1,001 to 5,000 ‐ ‐ ‐ 5,001 to 10,000 1,874 15,322,749 1.33 5,001 to 10,000 ‐ ‐ ‐ 10,001 to 100,000 4,283 148,618,755 12.92 10,001 to 100,000 ‐ ‐ ‐ 100,001 and over 1,250 976,995,067 84.93 100,001 and over 1 1,250,000 100.00 Total 11,285 1,150,363,343 100.00 Total 1 1,250,000 100.00

Unlisted Options expiry date 2/3/2017, strike price $0.05 Unlisted Options expiry date 22/3/2017, strike price $0.10



1 to 1,000 ‐ ‐ ‐ 1 to 1,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐ 5,001 to 10,000 ‐ ‐ ‐ 5,001 to 10,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐ 100,001 and over 2 4,625,000 100.00 100,001 and over 8 11,000,000 100.00 Total 2 4,625,000 100.00 Total 8 11,000,000 100.00

ADDITIONAL SHAREHOLDER INFORMATION AS AT 21 SEPTEMBER 2016

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MARKETABLE PARCEL There are 529 shareholders with less than a marketable parcel, based on the closing price of $0.505 on 21 September 2016.

TWENTY LARGEST HOLDERS OF EACH CLASS OF QUOTED SECURITY The names of the 20 largest holders of each class of quoted security, the number of equity securities each holds and the percentage of issued capital each holds (as at 21 September 2016) are set out below:

Name of holder Number Percentage 1 JP Morgan Nominees Australia Limited 123,562,965 10.74 2 HSBC Custody Nominees (Australia) Limited 63,229,449 5.49 3 Citicorp Nominees Pty Limited 35,342,254 3.07 4 Biddle Partners Pty Ltd <Biddle Super Fund A/C> 28,221,930 2.45 5 Mr Pasquale Bevilacqua and Mrs Maria Bevilacqua 19,577,364 1.70 6 BNP Paribas Nominees Pty Ltd 15,340,846 1.34 7 National Nominees Limited 13,712,113 1.19 8 Mr Philip Towzell 11,500,000 1.00 9 Wansbone Nominees Pty Ltd <Wansbone Super Fund A/C> 9,315,643 0.81 10 ABN Amro Clearing Sydney Nominees Pty Ltd 9,135,554 0.79 11 Nohuni Pty Ltd <Super Fund A/C> 8,865,643 0.77 12 Mr John Young & Mrs Cheryl Young <Forever Young Family A/C> 8,608,356 0.75 13 Sandhurst Trustees Limited 8,355,030 0.73 14 Church Street Trustees Limited <Matlas A/C> 8,133,538 0.71 15 Biddle Partners Pty Ltd <Biddle Family A/C> 8,000,000 0.69 16 Sydes Holdings Pty Ltd <The Sydes Staff S/F A/C> 7,820,000 0.68 17 Mr Peter Capp <Capp Family A/c> 7,700,000 0.67 18 Mr John Young & Mrs Cheryl Young <Forever Young S/F A/C> 7,550,000 0.66 19 Winders Aus Investments Pty Ltd 7,385,643 0.64 20 Kalonda Pty Ltd <Leibowitz S/F A/C> 7,079,594 0.62 Top Twenty Shareholders 408,435,922 35.50 Total Remaining Shareholders 741,927,421 64.50 Total Shareholders 1,150,363,343 100.00

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ADDITIONAL SHAREHOLDER INFORMATIONAS AT 21 SEPTEMBER 2016


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In accordance with Listing Rule 4.10 the following information is provided.

CORPORATE GOVERNANCE STATEMENT The Company’s Corporate Governance Statement is available on the Company’s website at: http://www.pilbaraminerals.com.au

SHAREHOLDERS

SUBSTANTIAL SHAREHOLDERS The Company has the following substantial shareholders as at 21 September 2016:

Regal Funds Management Limited – 57,820,952 ordinary shares

UBS Group AG – 57,916,741 ordinary shares

NUMBER OF HOLDERS IN EACH CLASS OF EQUITY SECURITIES AND THE VOTING RIGHTS ATTACHED (as at 21 September 2016)

Ordinary Shares

There are 11,285 holders of ordinary shares. Each shareholder is entitled to one vote per share.

In accordance with the Company’s Constitution, on a show of hands every member present in person or by proxy or attorney or duly authorised representative has one vote for every fully paid ordinary share held.

Options

There are 52 holders of unlisted options. There are no voting rights attaching to the options.

A total of 109,943,182 options are on issue. The 109,943,182 options, if exercised, will convert into 109,943,182 ordinary shares.

The options have the following exercise prices and expiry dates: No. of holders

No. of options

Vested/ Unvested

Exercise price Expiry date

1 1,250,000 Vested $0.05 22/12/2016 2 4,625,000 Vested $0.03 2/3/2017 8 11,000,000 Vested $0.10 22/3/2017 5 3,268,182 Vested $0.15 1/12/2017 20 37,500,000 Vested $0.40 16/5/2018 2 800,000 Unvested $0.40 16/5/2018 9 31,500,000 Unvested $0.40 16/5/2019 2 7,000,000 Vested $0.65 16/5/2018 3 13,000,000 Unvested $0.626 6/9/2019

DISTRIBUTION SCHEDULE OF THE NUMBER OF HOLDERS IN EACH CLASS OF EQUITY SECURITY AT 21 SEPTEMBER 2016

Ordinary Shares Unlisted Options expiry date 22/12/2016, strike price $0.05

Spread of holdings Holders Units Percentage of issued capital


1 to 1,000 817 599,298 0.05 1 to 1,000 ‐ ‐ ‐ 1,001 to 5,000 3,061 8,827,474 0.77 1,001 to 5,000 ‐ ‐ ‐ 5,001 to 10,000 1,874 15,322,749 1.33 5,001 to 10,000 ‐ ‐ ‐ 10,001 to 100,000 4,283 148,618,755 12.92 10,001 to 100,000 ‐ ‐ ‐ 100,001 and over 1,250 976,995,067 84.93 100,001 and over 1 1,250,000 100.00 Total 11,285 1,150,363,343 100.00 Total 1 1,250,000 100.00






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MARKETABLE PARCEL There are 529 shareholders with less than a marketable parcel, based on the closing price of $0.505 on 21 September 2016.

TWENTY LARGEST HOLDERS OF EACH CLASS OF QUOTED SECURITY The names of the 20 largest holders of each class of quoted security, the number of equity securities each holds and the percentage of issued capital each holds (as at 21 September 2016) are set out below:

Name of holder Number Percentage 1 JP Morgan Nominees Australia Limited 123,562,965 10.74 2 HSBC Custody Nominees (Australia) Limited 63,229,449 5.49 3 Citicorp Nominees Pty Limited 35,342,254 3.07 4 Biddle Partners Pty Ltd <Biddle Super Fund A/C> 28,221,930 2.45 5 Mr Pasquale Bevilacqua and Mrs Maria Bevilacqua 19,577,364 1.70 6 BNP Paribas Nominees Pty Ltd 15,340,846 1.34 7 National Nominees Limited 13,712,113 1.19 8 Mr Philip Towzell 11,500,000 1.00 9 Wansbone Nominees Pty Ltd <Wansbone Super Fund A/C> 9,315,643 0.81 10 ABN Amro Clearing Sydney Nominees Pty Ltd 9,135,554 0.79 11 Nohuni Pty Ltd <Super Fund A/C> 8,865,643 0.77 12 Mr John Young & Mrs Cheryl Young <Forever Young Family A/C> 8,608,356 0.75 13 Sandhurst Trustees Limited 8,355,030 0.73 14 Church Street Trustees Limited <Matlas A/C> 8,133,538 0.71 15 Biddle Partners Pty Ltd <Biddle Family A/C> 8,000,000 0.69 16 Sydes Holdings Pty Ltd <The Sydes Staff S/F A/C> 7,820,000 0.68 17 Mr Peter Capp <Capp Family A/c> 7,700,000 0.67 18 Mr John Young & Mrs Cheryl Young <Forever Young S/F A/C> 7,550,000 0.66 19 Winders Aus Investments Pty Ltd 7,385,643 0.64 20 Kalonda Pty Ltd <Leibowitz S/F A/C> 7,079,594 0.62 Top Twenty Shareholders 408,435,922 35.50 Total Remaining Shareholders 741,927,421 64.50 Total Shareholders 1,150,363,343 100.00

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HOLDERS OF 20% OR MORE OF UNQUOTED EQUITY SECURITIES The names of holders and number of unquoted equity securities held for each class of unquoted equity securities (but excluding securities held under an employee incentive scheme) where the holding was 20% or more of each class of security as at 21 September 2016 are set out below:

Name Option class % of class Number Exercise price Expiry date Teas Nominees Pty Ltd <The Smith S/F A/C 1,250,000 $0.05 22/12/2016 100.0 Megalith Development Limited 4,000,000 $0.05 2/3/2017 86.5 Mr John Young & Mrs Cheryl Young <Forever Young Family A/C> 5,000,000 $0.05 22/3/2017 45.4 Abbmor Pty Ltd <GD&MA Cleaver S/F A/C> 1,666,666 $0.03 25/3/2017 40.0 Kyong Holding Pty Ltd <Capricorn11 P/L S/F> 1,666,666 $0.03 25/3/2017 40.0 Momentum North Pty Ltd<The Halliley S/F A/C> 1,039,773 $0.15 1/12/2016 31.8 Top Class Holdings Pty Ltd <The Onslow S/F A/C> 1,500,000 $0.15 1/12/2016 45.9 Biddle Partners Pty Ltd <Biddle Family A/C> 8,000,000 $0.40 16/5/2018 20.9 Shellback Pacific Inc. 2,000,000 $0.65 16/5/2018 28.6 Foster Stockbroking Nominees Pty Ltd 5,000,000 $0.65 16/5/2018 71.4

COMPANY SECRETARY The name of the Company Secretary is Alex Eastwood.

ADDRESS AND DETAILS OF THE GROUP’S REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS 130 Stirling Highway, North Fremantle WA 6159 Telephone: +61 8 9336 6267 Fax: +61 8 9433 5121

ADDRESS AND TELEPHONE DETAILS OF THE OFFICE AT WHICH A REGISTRY OF SECURITIES IS KEPT Advanced Share Registry Services 110 Stirling Highway, Nedlands WA 6009 Telephone: +61 8 9389 8033 Website: www.advancedshare.com.au

STOCK EXCHANGE ON WHICH THE COMPANY’S SECURITIES ARE QUOTED The Company’s listed equity securities are quoted on the Australian Securities Exchange – Code: PLS.

RESTRICTED SECURITIES There are no restricted securities on issue at 21 September 2016.

ON‐MARKET BUY‐BACK There is no current on‐market buy‐back of securities.

SCHEDULE OF TENEMENTS A listing of the Group’s tenements as at 21 September 2016 is set out below:

Project Location Tenement Beneficial interest Status Pilgangoora Western Australia E45/2232 100% Granted Pilgangoora Western Australia M45/1256 100% Application Pilgangoora Western Australia L45/388 100% Application Pilgangoora Western Australia L45/396 100% Application Pilgangoora Western Australia L45/402 100% Application Pilgangoora Western Australia L45/403 100% Application Pilgangoora Western Australia L45/411 100% Application Pilgangoora Western Australia L45/412 100% Application Pilgangoora Western Australia L45/413 100% Application Pilgangoora Western Australia L45/414 100% Application Pilgangoora Western Australia M45/511 100% Granted Pilgangoora Western Australia M45/78 100% Granted Pilgangoora Western Australia M45/333 100% Granted Pilgangoora Western Australia E45/2241 100% Granted Pinnacle Hill Western Australia E45/3560 100% Granted Pinga Western Australia E45/4648 100% Application Fox Resources JV Western Australia E47/1093 45% Granted Fox Resources JV Western Australia E47/1094 45% Granted Fox Resources JV Western Australia E47/1813 45% Granted Fox Resources JV Western Australia E47/1814 45% Granted Fox Resources JV Western Australia E47/1815 45% Granted Fox Resources JV Western Australia E47/2261 45% Granted

ADDITIONAL SHAREHOLDER INFORMATIONAS AT 21 SEPTEMBER 2016

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CONTENTS

WHO IS PILBARA MINERALS? 1

HIGHLIGHTS OF 2015/16 2

FOCUS FOR THE YEAR AHEAD 2

HERITAGE, HEALTH, SAFETY AND THE ENVIRONMENT

3

CHAIRMAN’S REPORT 4

MANAGING DIRECTOR’S REPORT

5

THE LITHIUM STORY 6

PILGANGOORA LITHIUM-TANTALUM PROJECT

8

ORE RESERVES AND MINERAL RESOURCES

18

PILGANGOORA PROJECT METHODOLOGY AND DELIVERY

20

OTHER PROJECTS 22


23

CORPORATE GOVERNANCE 23


ADDITIONAL SHAREHOLDER INFORMATION

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CORPORATE DIRECTORY Inside back cover

DIRECTORSAnthony Kiernan Chairman Ken Brinsden Managing Director and CEO Robert Adamson Non-ExecutiveDirector Steve Scudamore Non-ExecutiveDirector Neil Biddle Non-ExecutiveDirector John Young ExecutiveDirector

COMPANY SECRETARYAlex Eastwood

REGISTERED OFFICE IN AUSTRALIA130StirlingHighway NorthFremantleWA6159Tel: +61893366267 Fax: +61894335121Website: www.pilbaraminerals.com.au

ACN AND ABNACN: 112 425 788 ABN: 95112425788

ASX CODEPLS

CORPORATE DIRECTORY

SHARE REGISTERAdvanced Share Registry Services 110StirlingHighway NedlandsWA6009Tel: +61893898033

SOLICITORSDLA Piper Level31,152-158StGeorgesTerrace PerthWA6000,Australia

BANKERSCommonwealth Bank of Australia 380AScarboroughBeachRoad InnalooWA6018

AUDITORSKPMG 235StGeorgesTerrace PerthWA6000

DATE OF ANNUAL GENERAL MEETING10amonThursday,24November2016

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2016ANNUAL REPORT

ACN 112 425 788

WWW.PILBARAMINERALS.COM.AU

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PILBARA MINERALS LIMITED ANNUAL REPORT … · PILBARA MINERALS LIMITED ANNUAL REPORT 2016 For...

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