Carbine Tungsten Limited

ABN: 77 115 009 106 (ASX: CNQ)

2016 Annual Report

Directors

Russell H. Krause Non-executive Chairman

Andrew J. Morgan CEO & Managing Director

Roland W. Nice Non-executive Director

Company Secretary

David Clark

Registered Office Level 2, Victory Tower 420 Collins Street

Melbourne VIC 3000

Telephone: +61 (0)3 8687 2176

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

Share Register

Computershare Investor Services Pty Ltd Yarra Falls

452 Johnston Street

Abbotsford VIC 3067

Telephone (within Australia): 1300 850 505

Telephone (internationally): +61 (0)3 9415 4000

Auditors

BDO Audit (NTH QLD) Pty Ltd Level 1, 15 Lake Street Cairns Corporate Tower Cairns QLD 4870

Telephone: +61 (0)7 4046 0000

Facsimile: +61 (0)7 4051 3484

Stock Exchange Listing

Listed on the Australian Securities Exchange (ASX) ASX Code: CNQ

ABN: 77 115 009 106

CONTENTS 1

CHAIRMAN'S REPORT 2

REVIEW OF OPERATIONS 3

TENEMENT SCHEDULE 8

MINERAL RESOURCES AND ORE RESERVES STATEMENT 9

DIRECTORS' REPORT 17

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 27

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 28

CONSOLIDATED STATEMENT OF CASH FLOWS 29

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31

DIRECTORS' DECLARATION 54

AUDITOR'S INDEPENDENCE DECLARATION 55

INDEPENDENT AUDITOR'S REPORT 56

SHAREHOLDER INFORMATION 58

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Dear Fellow Shareholders,

It is again that time of the year where your Board, the Board of Carbine Tungsten Limited ("Carbine or "the Company") formally advises you of the progress, significant events, difficulties and achievements that the Company has delivered during the year. This past year has not been one of the Company's best years. Your Company has suffered share price declines largely due to the longer than anticipated downturn in the tungsten price. As you may recall from last year, we believed the short-term held the potential for further price weakness in APT prices but the medium to longer-term outlook remained positive. Whilst we still hold this view the price decline was more aggressive than anticipated and the price recovery somewhat slower. The APT price saw a low of US$150 per MTU and a subsequent price recovery of some 25% from that low. We still expect to see further upside in the APT price over the medium-term. The tungsten price downturn has highlighted the risk to your Company of being a single commodity play.

Last year we also foreshadowed the implementation of economising measures necessary to maintain the financial stability of your Company. To this end we have further reduced staff numbers, closed the Cairns office, minimised all site activities and relocated the corporate headquarters to Melbourne to reduce travel costs.

Your Company has also embarked on a process of diversification in order to combat its reliance on a single commodity revenue stream. Within our existing exploration leases, as well as tungsten assets, we have copper and tin exploration targets along with other minerals. Your Company has also developed extensive and valuable knowledge in various mineral recovery processes as a consequence of its extensive ongoing Research and Development program. I would refer you to our recent ASX announcements concerning the development and involvement of Carbine in an exciting, new mineral processing technology. Please be aware this technology is not confined to just tungsten but covers other precious and semi-precious metals, base metals and other various elements. We anticipate this process recovery technology will significantly add to shareholder value over the course of its development, implementation and commercialisation. Your Company has also kept its tungsten exploration costs to a minimum whilst meeting its lease requirements. However, we deferred our drilling program plans as we could see little current advantage in expanding what is an already significant JORC inferred tungsten resource given the current unfavourable tungsten price. We will however, continue with our exploration activities with a view to expanding and diversifying our mineral resources to diversify the current asset base from being purely tungsten focused.

As outlined at last year's AGM, your Company declared its intention to pursue the purchase of the Mt Carbine Quarry. To this end we commenced a due diligence program; however to-date this program remains incomplete due to the inability or lack of desire on behalf of the Quarry owner to provide proper information in relation to this business. We will persist in our efforts to complete this transaction however shareholders must realise we can only advance this matter to the extent to which we are provided with the relevant information.

Carbine has also minimised all activities at the Mt Carbine mine site. In this regard we have requested the Mining Lease Holder to contact DEHP with a modified Plan of Operations and requested that application be made to the Queensland Government Department for a rental reduction for the use of this site.

In spite of the difficult environment in which your Company finds itself, your Board is working diligently to conserve and minimise its finances whilst improving and diversifying on its business prospects to achieve an outcome for all shareholders which will deliver an uplift in shareholder value over the next twelve months.

Yours truly,

Russell Krause Chairman

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