2016 Annual Report

PILBARA MINERALS LIMITED PILBARA

ANNUALREPORT 2016 2016 ANNUAL REPORT

ACN 112 425 788

WWW.PILBARAMINERALS.COM.AU CORPORATE DIRECTORY CONTENTS

DIRECTORS SHARE REGISTER Anthony Kiernan Chairman Advanced Share Registry Services Ken Brinsden Managing Director and CEO 110 Stirling Highway WHO IS PILBARA MINERALS? 1 Robert Adamson Non-Executive Director Nedlands WA 6009 Steve Scudamore Non-Executive Director Tel: +61 8 9389 8033 HIGHLIGHTS OF 2015/16 2 Neil Biddle Non-Executive Director John Young Executive Director FOCUS FOR THE YEAR AHEAD 2 SOLICITORS HERITAGE, HEALTH, SAFETY 3 COMPANY SECRETARY DLA Piper AND THE ENVIRONMENT Level 31, 152-158 St Georges Terrace Alex Eastwood Perth WA 6000, Australia CHAIRMAN’S REPORT 4 MANAGING DIRECTOR’S 5 REGISTERED OFFICE IN AUSTRALIA BANKERS REPORT 130 Stirling Highway Commonwealth Bank of Australia North Fremantle WA 6159 380A Scarborough Beach Road THE LITHIUM STORY 6 Tel: +61 8 9336 6267 Innaloo WA 6018 Fax: +61 8 9433 5121 PILGANGOORA 8 Website: www.pilbaraminerals.com.au LITHIUM-TANTALUM PROJECT AUDITORS ORE RESERVES AND 18 KPMG ACN AND ABN 235 St Georges Terrace MINERAL RESOURCES ACN: 112 425 788 Perth WA 6000 PILGANGOORA 20 ABN: 95 112 425 788 PROJECT METHODOLOGY DATE OF ANNUAL GENERAL MEETING AND DELIVERY ASX CODE 10am on Thursday, 24 November 2016 OTHER PROJECTS 22 PLS ABBREVIATIONS 23 AND DEFINITIONS CORPORATE GOVERNANCE 23 FINANCIAL STATEMENTS 24 ADDITIONAL SHAREHOLDER 74 INFORMATION CORPORATE DIRECTORY Inside back cover 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.

PILBARA MINERALS ANNUAL REPORT 2016 1 HIGHLIGHTS OF 2015/16

RC DRILLING WESTERN PEGMATITE

 SIGNIFICANT GROWTH in the Pilgangoora lithium and tantalum resource which clearly establishes the Pilgangoora Project as the world’s leading lithium development project. FOCUS  PUBLISHED THE PREFEASIBILITY STUDY FOR THE and significant progress on the definitive feasibility study. YEAR  ON THE BACK OF THE PREFEASIBILITY STUDY, the Company raised A$100 million to further de-risk AHEAD Pilgangoora’s development.  GREW THE COMPANY’S LITHIUM MARKETING PRESENCE in China and globally through many MOUs  COMPLETION OF THE and culminating in the Company’s first offtake agreement PILGANGOORA PROJECT DEFINITIVE FEASIBILITY STUDY with General Lithium Corporation.  FINALISE FINANCING OF THE  RELATIONSHIP WITH GENERAL LITHIUM PILGANGOORA PROJECT CORPORATION GROWS into the possible CONSTRUCTION COSTS establishment of a joint venture project to consider the  AWARD OF MAJOR development of an offshore (ex-China) chemical conversion CONSTRUCTION CONTRACT(S) facility, drawing on General Lithium Corporation’s technology, designs and operating capability.  AWARD OF MINING CONTRACT  COMMENCEMENT OF PROJECT  FURTHER CAPACITY DEVELOPED at the CONSTRUCTION Pilbara Board and executive team, in preparation for the Company’s move towards construction and production.  COMMENCEMENT OF MINING  GROWTH OF THE LITHIUM ION SUPPLY CHAIN  JOINT VENTURE CHEMICAL PLANT SCOPING STUDY both in China and throughout the rest of the world, as COMPLETION AND PROGRESS lithium ion becomes the dominant battery technology. OF FEASIBILITY STUDY

2 PILBARA MINERALS ANNUAL REPORT 2016 HERITAGE, HEALTH, SAFETY AND THE ENVIRONMENT

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 Pilbara Minerals works closely with its Since the commencement of Minerals recognises its responsibility contracting partners and the Safety the Pilgangoora Project, Pilbara to work with traditional owners to Management Plans in use to manage Minerals has embraced its expanded understand, maintain and where safety of all activities on site for both environmental responsibility possible grow relationships that the Company and its contractors. and continue to meet or exceed enhance both connection to the Integral to providing a safe working its statutory requirements over land and maintenance of their environment is to ensure Pilbara its tenure. The risks associated heritage. Pilbara Minerals seeks to Minerals is tracking and reporting with environmental incidents ensure the Traditional Aboriginal safety performance and reviewing are taken into account as part of Owners are meaningfully engaged incidents so as to continuously the Company’s normal course of through employment and enterprise improve and reduce the risk of injury business and are managed through development opportunities arising to its workforce. As a large portion risk assessments, introduction of from the Company’s projects. Pilbara of the workforce at the Company’s preventative measures, ongoing Minerals will constantly review operations are contractors, Pilbara review and monitoring and, where opportunities to effectively engage Minerals works very closely with necessary, effective and efficient local Aboriginal employees and its contracting partners and their mitigation actions. Pilbara Minerals contractors at the Pilgangoora Project. workforce to enshrine a shared recognises the value for both itself The Company also encourages its culture of working safely. Any and key stakeholders in supporting business partners and contractors to incidents involving contractors are compliance of best environmental engage in this strategy by supporting investigated with Pilbara Minerals practice for achieving and maintaining employment, training and the involvement and included in all of its licence to operate. development of business opportunities the Company’s safety reporting and During the year, Pilbara Minerals has for local Aboriginal peoples. shared outcomes. obtained the necessary approvals Pilbara Minerals’ intent in the Pilbara Minerals’ Lost Time Injury to maintain the ongoing exploration development of the Company, (LTI) frequency rate for the period development, as well as undertaking its projects and the capability of 2015/16 was zero. environmental and social baseline its people is to ensure that safety studies, for the compilation of its Pilbara Minerals is committed to comes first in all its activities. Pilbara Pilgangoora Project Environmental operating in an environmentally Minerals’ strategy for health and Impact Assessment. responsible manner through industry safety is built on the four pillars of best-practice and key stakeholder Rehabilitation of our exploration great leadership, engaged employees, involvement. activities is progressive and effective, risk management focus and systems in line with our ongoing commitment that support safe work as a priority. and tenure conditions.

PILBARA MINERALS ANNUAL REPORT 2016 3 CHAIRMAN’S REPORT

DEAR SHAREHOLDERS

Since joining the Board and being appointed Chairman of While this is an aggressive timetable, the team which has Pilbara Minerals in July 2016, I have had the opportunity been assembled by Managing Director, Ken Brinsden, gives to witness the key reasons and attributes which have made great confidence this goal will be achieved. Ken himself your Company one of the standout performers of Australia’s spent the past seven years overseeing the development and junior mining sector over the past 18 months. operation of several Pilbara iron ore mines for Atlas Iron. These include a world-class resource asset in a premier One of the keys to Pilbara’s future lies in the strength of the mining jurisdiction, an exceptional team of people, a strong relationships and partnerships it has forged quickly within balance sheet and a clear vision to become a leading global the lithium industry. This is a relatively complex and unique producer of a commodity which is currently experiencing industry – and one that is currently undergoing an almost transformational growth. breathtaking level of change, especially in China. It’s important to acknowledge the drive and vision of Particular attention is drawn to the importance of our Pilbara’s founding directors, Neil Biddle, John Young and relationship with General Lithium Corporation, a leading former Chairman, Tony Leibowitz, who set the Company Chinese producer of lithium carbonate and hydroxide on its current growth trajectory through the acquisition products and a key supplier of lithium products to the fast and rapid drill-out of the Pilgangoora Project. This has growing lithium-battery industry of China. established the Project as one of the world’s pre-eminent This relationship – which comprises a binding offtake lithium development projects. agreement, a proposed $17.75 million investment into Pilbara Importantly, they also recognised the opportunity in the Minerals, and an agreement to evaluate a possible future joint lithium sector well before much of the recent market hype, venture for offshore downstream processing – is a valuable embarking on an aggressive resource development program asset for our Company, and one that I am confident will which has seen Pilbara Minerals complete near 80,000 metres deliver significant value into the Company in the future. of resource drilling at Pilgangoora in just under two years. As I write this report, the Pilbara team continues to finalise This has led to the Company delivering successive resource the Definitive Feasibility Study, address further offtake upgrades, establishing a world-class resource and reserve agreements, finalise a Native Title Mining Agreement, inventory, completing a highly positive Prefeasibility Study, progress permitting and approvals and engage with a raising over $120 million and commencing a Definitive group of shortlisted contractors under an Early Contractor Feasibility Study which, at the time of writing, was nearing Involvement (ECI) model for the process plant. completion. I would like to conclude by thanking Ken Brinsden and the This Study will consider a 2 million tonne-a-year base case with Pilbara Minerals team for their extraordinary efforts during a 35-year mine life, with the option of significant expansion in the year, Tony Leibowitz for his previous stewardship and to the future given the scale of the Pilgangoora deposit. thank our shareholders for their continued support. The grade and scale of the Pilgangoora deposit, combined Pilbara Minerals has a great future ahead of it, and I look with the presence of a significant tantalum by-product credit forward to sharing that with you. 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. TONY KIERNAN Chairman

4 PILBARA MINERALS ANNUAL REPORT 2016 MANAGING DIRECTOR’S REPORT

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.

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

PILBARA MINERALS ANNUAL REPORT 2016 5 THE LITHIUM STORY

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 Many industry participants believe Goldman Sachs predicts that, for have a variety of industrial that the accelerating uptake of every 1% rise in electric vehicle applications resulting in a wide range electric vehicles and static power market share, lithium demand rises of chemical and technical uses. These storage will soon reach a tipping point by 70,000 tonnes annually. The bank include heat-resistant glass and into mainstream adoption, driven by: predicts that the lithium market could ceramics, lithium grease lubricants, triple in size by 2025 – based only on □□ The rapidly falling cost of electric flux additives for iron, steel and electric vehicle demand. vehicles (several models in the aluminium production, lithium US$30-35k range are scheduled batteries and lithium-ion batteries. “ Along with growth in other clean for release in 2017); energy vehicles, stationary power The supply/demand fundamentals for □□ The huge number of new electric and consumer applications, lithium put this highly sought-after vehicle models currently in metal in a league of its own compared development by car manufacturers; we estimate the global lithium with other commodities. Demand is market could more than triple □□A rapidly growing list of government predicted to grow at an annualised policies, tax breaks and incentives to ~530kmt in 2025, with more rate of more than 12% and this for electric vehicles and static than half of this growth driven by could be set to accelerate further as storage driven by environmental its widespread use in conventional electronic vehicles.” considerations and the need to industries (such as ceramics, glass, GOLDMAN SACHS GLOBAL reduce carbon emissions; and batteries and pharmaceuticals) is INVESTMENT RESEARCH – APRIL 2016 overrun by growing consumption in □□ Complementary applications rechargeable batteries for portable for static storage in renewable electronic devices, hybrid and electric energies like solar and wind power, vehicles, and off-grid power storage. which have the potential to make these power sources viable as base-load power (previously one of the key impediments for renewable energy applications). LITHIUM DEMAND FORECAST 2014-2025

600 STATIONARY STORAGE E-BUS/TRUCKS 500 BEV (BATTERY ELECTRIC VEHICLES) PHEV (PLUG-IN HYBRID 400 ELECTRIC VEHICLES) HEV (HYBRID ELECTRIC VEHICLES)

300 E-SCOOTERS/MOTORCYCLES E-BIKES

LCE DEMAND, KMT DEMAND, LCE 200 POWER TOOLS NOTEBOOKS

100 TABLETS SMARTPHONES

0 NON ENERGY 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Goldman Sachs Global Investment Research

6 PILBARA MINERALS ANNUAL REPORT 2016 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.

Significant new supply of lithium- “While there is significant expansion proposed to support electric vehicle ion batteries is scheduled for 2017 and power storage solutions through the Western world – and that is well onwards – with Tesla Motors, LG understood by the industry analysts – I believe many of them are under- Chem and Foxconn Technology Group all planning lithium-ion battery estimating the gathering momentum in China as the battery technology gets mega-factories. This is in addition to replicated and adopted for the mass production of buses, cars and bicycles, new plants and expansions by battery as well as for off-grid battery-storage solutions linked to renewable energy. majors such as Samsung SDI. This will drive a similar surge in demand for the lithia raw materials required Most analysts believe that the to produce lithium-ion batteries.” forecast dramatic growth in the PILBARA MINERALS MANAGING DIRECTOR & CEO, KEN BRINSDEN 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. WHAT IF I TOLD YOU… Pilgangoora spodumene concentrates LITHIUM IS THE NEW GASOLINE meet the metallurgical specifications of the entire range of lithium products “(LITHIUM’S) UNIQUE PROPERTIES and Pilbara Minerals currently has IDEALLY POSITION IT FOR PORTABLE binding offtake agreements or MOUs ENERGY STORAGE APPLICATIONS in place accounting for more than THAT WILL BE A KEY ENABLER OF 100% of the projected lithium oxide THE ELECTRIC CAR REVOLUTION AND production from Pilgangoora. REPLACE GASOLINE AS THE PRIMARY SOURCE OF TRANSPORTATION FUEL.”

GOLDMAN SACHS GLOBAL INVESTMENT RESEARCH – DECEMBER 2015

PILBARA MINERALS ANNUAL REPORT 2016 7 PILGANGOORA LITHIUM-TANTALUM PROJECT

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 PERTH 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.

EXPLORATION AND GEOLOGY The 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.

FIGURE 1: PILGANGOORA PROJECT – LOCATION PLAN

8 PILBARA MINERALS ANNUAL REPORT 2016 GEOLOGY The 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.

FIGURE 3: CENTRAL AREA CROSS SECTION – 7669900mN

FIGURE 2: PILGANGOORA PROJECT – SOLID GEOLOGY AND DRILLHOLE SUMMARY

PILBARA MINERALS ANNUAL REPORT 2016 9 EXPLORATION During 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 FIGURE 4: PILGANGOORA PROJECT – RC COLLAR LOCATIONS WITHIN LICENCES metallurgical testwork, engineering, E45/2232 AND M45/333 SHOWING 2016 RESOURCE DRILLING 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.

10 PILBARA MINERALS ANNUAL REPORT 2016 DEFINITIVE FEASIBILITY STUDY The 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 FIGURE 5: PILGANGOORA PROJECT – SITE LAYOUT in place at Pilgangoora to allow construction to commence as soon as funding for the Project has been sourced.

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

PILBARA MINERALS ANNUAL REPORT 2016 11 MINING The Mining Study is a major With the downturn in the mining In the June 2016 quarter, Pilbara component within the DFS, and as industry over the past few years, very Minerals completed a Phase 2 drilling contemplated by the Prefeasibility competitive mining rates can now be program totalling 28,400 metres, from Study (PFS), conventional open pit achieved. After completion of the PFS, which a 60% improvement in the new mining will be undertaken using a Pilbara Minerals conducted a tender Mineral Resource was announced in 100 tonne mining fleet. Phase 1 of process with a shortlist of six mining July 2016, increasing to 128.6 Mt the Project is to process 2 million contractors and two drill and blast @ 1.22% Li2O and 138 ppm Ta2O5. tonnes (Mt) of ore per annum with contractors. The tender was based Within the total Mineral Resource, the mining strip ratio over the first on an expanded pit incorporating the Measured and Indicated Resource five years being 2.87:1 (waste:ore Inferred material into the mine plan categories increased 134% to 83.6 Mt tonnes). The PFS delivered a encompassing the Eastern, Central @ 1.27% Li2O and 135 ppm Ta2O5. In Maiden Ore Reserve of 29.5 Mt @ and Western resources. The objective August 2016, the Company increased

1.31% Li2O and 134 ppm Ta2O5, for this was to receive competitive real the Pilgangoora Ore Reserve by 136% underpinning an initial 15-year mine costs for completion of the DFS, and to 69.8 Mt @ 1.26% Li2O and 132 ppm life from a total Mineral Resource of to identify and shortlist contractors Ta 2O5. 80.2 Mt @ 1.26% Li O. to participate in a re-tender for a five- 2 The DFS is being undertaken year mining contract. 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.

METALLURGY AND PROCESS DESIGN The 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 FIGURE 7: PREFEASIBILITY STUDY PIT 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. FIGURE 8: CROSS SECTION SHOWING CENTRAL AND WESTERN DOMAINS

12 PILBARA MINERALS ANNUAL REPORT 2016 The flowsheet developed from this □□Locked cycle flotation testing The Phase 2 program is nearing program incorporated three stages of □□Generating samples for physical completion, with the subsequent HMS which produced a coarse rejects testing (i.e. settling, tailings beach testwork showing that three stages component, a chemical grade HMS angles, geochemical) of HMS will now be reduced to two spodumene concentrate, and with the stages, eliminating the coarse rejects □□Additional mineralogy. fine fraction reporting to the gravity from the flowsheet. This material and flotation circuit to produce a fine For Phase 2, additional PQ diamond will now report to the gravity and spodumene flotation concentrate and drilling was undertaken in the March flotation circuits increasing the tantalum concentrate. 2016 quarter totalling 740 metres to overall lithia and tantalum recoveries. generate sufficient sample (+5 tonnes) Planning for the DFS Phase 2 program The process design is now well from the three ore domains to was completed (based on Phase 1 advanced with flowsheets being undertake variability testing results) with the program commencing reviewed and finalised. The Process representing the first five years of at the end of April 2016. The Plant is being designed with a mine life. In addition to Phase 2, a Pilot following work was undertaken: 4 Mtpa capacity primary jaw crusher Plant program will also be undertaken being installed upfront, with the □□Geochemical kinetic testwork on with planning well advanced. This downstream secondary crushing, mine waste, coarse HMS rejects, program is designed to provide final spodumene and tantalum recovery float tailings validation of the flowsheet design and circuits being designed at 2 Mtpa to generate spodumene concentrate □□HMS and flotation spatial capacity. This will allow potential samples for marketing purposes. variability testwork processing plant expansion to be □□Tantalum gravity testwork undertaken expeditiously with replication of the recovery circuits at the appropriate time.

FIGURE 9: PROCESS FLOW DIAGRAM

PILBARA MINERALS ANNUAL REPORT 2016 13 PRODUCT, MARKETING AND OFFTAKE The Pilgangoora lithium-tantalum Pilbara Minerals has also ventured The Pilgangoora Project will be orebody is unique and second only to into downstream processing and plans producing tantalum concentrates as the Greenbushes orebody, based on to establish a lithium chemical plant a by-product. In addition to Global the potential to produce a low iron as a joint venture with GLC in the Advanced Metals Pty Ltd, several spodumene (Technical Grade) that Australasian region. In addition, GLC global processors of tantalite have is required by the glass and ceramic will invest and own up to 5% of Pilbara indicated interest in the tantalum industries worldwide. In Western Minerals. These agreements with GLC concentrate, and Pilbara Minerals is Australia, except for Greenbushes, ensure the long-term viability and in negotiations with these potential other lithium deposits cannot produce success of the project and have the processors. such a low iron grade as the iron is potential to consume all of the volume In the history of the lithium industry, entrenched within the crystal structure of high iron spodumene it produces. FY2015/16 saw a new benchmark and cannot be separated. The Project’s In addition to the Offtake Agreement with record lithium carbonate high iron spodumene is likely to be with GLC, Pilbara Minerals is spot prices reaching the levels of used only in the conversion to a negotiating with several other +US$20,000/tonne from its normal lithium chemical like lithium carbonate Chinese converters in order to further range of US$4,000 to US$6,000/ (LC) or lithium hydroxide (LiOH). The diversify its sales arrangements. tonne. The increased demand converters of this high iron grade are These negotiations are well advanced from the electric vehicle (buses) all based in China. and expected to be announced by sector in China and the shortage Pilbara Minerals received strong the time the DFS is completed. The of spodumene supply and lithium interest from various glass and demand for spodumene is robust, carbonate from brines spurred ceramics buyers in Europe, and Pilbara Minerals is confident the prices never before seen in North America, China and Japan. that it will be able to secure firm the industry. The increased sales Non-binding Memorandums of Offtake Agreements for much of its of electric vehicles aided by the Understanding (MOUs) were signed proposed production capacity, while subsidies offered in China, Europe in mid-2015 with reputable trading maintaining some flexibility for its and USA are expected to maintain a companies that have more than two own corporate objectives. healthy growth for the next five years. 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. FIGURE 10: CHINA ELECTRIC VEHICLE SALES ESTIMATES Pilbara Minerals will potentially Source: Deutsche Bank estimates, MIIT become the second largest producer and supplier of Technical Grade 1,400 spodumene worldwide. 1,200 185

Pilbara Minerals also received an 1,000 CAGR=27% 157 excellent response from the Chinese 221 converters, and non-binding MOUs 800 163

K UNITS 600 were signed for 100% of the nominal 1,078 plant capacity. The first of these 158 921 400 701 MOUs was then converted into 537 a firm Sales Offtake Agreement 200 379 379 with General Lithium Corporation 0 (GLC), one of the largest producers 2015 2016E 2017E 2018E 2019E 2020E and suppliers of Battery Grade lithium carbonate in China, subject to certain conditions precedent FIGURE 11: LITHIUM DEMAND ESTIMATES FOR CHINA ELECTRIC VEHICLE BATTERY including a right of first refusal over Source: Deutsche Bank estimates, MIIT the spodumene concentrate held by Global Advanced Metals Wodgina Pty 35 Ltd (subsequently assigned to Mineral 30 Resources Ltd). GLC will consume CAGR=19% approximately 40% of the Company’s 25 high iron spodumene production. 20

kt (LCE) 15

0 2015E 2016E 2017E 2018E 2019E 2020E

14 PILBARA MINERALS ANNUAL REPORT 2016 ADVANCES IN LITHIUM BATTERY TECHNOLOGY

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

4th Generation 5,000 (developing)

4,000 LIthium-ion Battery Roadmap

2nd Generation 3,000 (2005) Wider Use 3rd Generation (2010) Mass-production Power density (kW/kg) density Power 2,000 1st Generation (2000)

1,000 Nickel-metal Hydride Battery

30 40 50 60 70 80 90 Energy Density (Wh/kg)

FIGURE 12: GLOBAL LITHIUM DEMAND ESTIMATES Source: Deutsche Bank estimates, USGS

350

300 CAGR=7~8%

250

200 CAGR=6.3% kt (LCE) 150

100

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E

PILBARA MINERALS ANNUAL REPORT 2016 15 According to an analyst’s report FIGURE 13: WORLD FORECAST DEMAND FOR LITHIUM BY FIRST USE (t LCE) (prepared in February 2016), China Source: Roskill estimates electric vehicle sales are forecast to 500,000 OTHER grow at a compound annual growth ALUMINIUM rate (CAGR) of 27% in the coming 450,000 five years to reach the government PRIMARY BATTERY 400,000 target of five million vehicles on road AIR TREATMENT by 2020. 350,000 POLYMER

A similar growth profile has recently 300,000 METALLURGICAL been forecast by a well-regarded POWDERS market analyst in their latest Lithium 250,000 GLASS Report 2016 (Figure 13). The same 200,000 GREASES analyst has forecast the Lithium Carbonate Battery Grade Price 150,000 GLASS-CERAMICS (Figure 14). CERAMICS 100,000 The nominal price of Lithium RE CHARGEABLE 50,000 BATTERY Carbonate Battery Grade is forecast LOW 0 to increase from US$7,500 to 2010 2011 2012 2013 2014 2015P 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F

US$10,300/tonne by 2025. HIGH In March 2016, Tesla unveiled their Model 3 vehicle and announced pre-bookings by payment of only US$1,000 and deliveries from Q4 FIGURE 14: AVERAGE ANNUAL PRICE FORECAST FOR 2017. The Model 3 can reach 345 BATTERY-GRADE LITHIUM CARBONATE, 2000-2025 (US$/t CIF) kilometres in one charge. According Source: Global Trade Atlas to Electrek website (www.electrek. 14,000 co/2016/06/07/tesla-model-3- BASE reservation-queue-number), Tesla 12,000 HIGH has already received pre-orders BASE for 400,000 cars by June 2016. 10,000 (REAL/INFLATION In addition to Tesla, all major auto ADJUSTED) 8,000 makers are soon to release their own LOW electric vehicles in the market, e.g. 6,000 TREND (REAL-INFLATION Toyota, Nissan, BMW, GM, Ford, etc. 4,000 ADJUSTED TREND Analysts believe lithium battery costs 2,000 are expected to drop as large scale lithium battery manufacturing plants are installed in coming years, mainly 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 in China, except US based Tesla’s “Gigafactory”. The economies of scale Note: Real prices adjusted to constant US dollars using World GDP deflator data are expected to bring the battery from the International Monetary Fund's World Economic Outlook Database. costs down to as low as US$100- 200/kwh. FIGURE 15: LITHIUM-ION BATTERY COSTS FALLING, GM FORECASTS The next 10-year period, to 2025, is US$145/KWH BY 2017 Source: BMI, General Motors expected to see an exponential growth in demand for lithium batteries from 1,400 1300 various sectors like electric vehicles, ACTUAL e-bikes, energy storage solutions, 1,200 1100 GM mobile phones, tablets, drones, power 1,000 900 FORECAST tools, etc. Pilbara Minerals’ entry into the market in 2018 is well-timed to 800 650 meet the demand. With its aim to 600 go downstream in lithium chemical 500 manufacturing with an existing and 400 350 well established Chinese producer, 200 145 GLC, the Company is well poised to 120 100 become the second largest lithium hard rock mining project worldwide. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

16 PILBARA MINERALS ANNUAL REPORT 2016 PILBARA MINERALS ANNUAL REPORT 2016 17 ORE RESERVES AND MINERAL RESOURCES

MINERAL RESOURCES The updated Ore Reserves will be used as the foundation for the Definitive Feasibility Study (DFS), which is on track for Pilbara Minerals released two resource upgrades during the completion in the September 2016 quarter. The DFS is being reporting year, the most recent in July 2016. undertaken on the basis of developing a standalone operation at The updated 2012 JORC compliant Mineral Resource for the Pilgangoora with an annualised ore throughput rate of 2 Mtpa. Project incorporates all historical data, as well as all drilling The study consisted of an initial conversion of the mineral data acquired through a number of exploration campaigns resource model to a mining model, then the completion of completed from 2014 to June 2016. both open pit optimisation and mine shape optimisation using The estimation was carried out by independent resource the mining models, with finally the development of engineered consultancy, Trepanier Pty Ltd, resulting in the estimation of open pit designs and then mines scheduling and costing. Measured, Indicated and Inferred Resources. The updated Key parameters used as part of the pit optimisation process resource comprises 128.6 Mt @ 1.22% Li2O (spodumene) included (but are not limited to): and 138 ppm Ta O containing 1.57 Mt of lithium oxide and 2 5 □□Assumed average of 2 Mt of ore processing per annum 39 million pounds (Mlb) of Ta2O5 (Table 1). □□A selling price of US$460/tonne for Battery Grade TABLE 1: Concentrate, at 6% Li O, as provided by Pilbara Minerals PILGANGOORA PROJECT – MINERAL RESOURCE ESTIMATE 2 □□Mining costs derived from submissions received from Li O Ta O Li O Ta O Category Mt 2 2 5 2 2 5 mining contractors who priced the previously completed (%) (ppm) (t) (Mlb) Prefeasibility Study Measured 18.0 1.36 150 245,000 5.9 □□Processing costs as per the 2 Mtpa rate from Como Indicated 65.6 1.24 131 812,000 19.0 Engineering. Inferred 45.0 1.15 144 515,000 14.2 The JORC Ore Reserve for the final pit design is shown in Total 128.6 1.22 138 1,572,000 39.2 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 The new resource estimate confirms Pilgangoora’s status as assume the JORC pit design is economically mineable. the world’s leading lithium development project, with the grade, scale and quality to underpin a low-cost, long-life TABLE 2: operation with outstanding technical and financial attributes. PILGANGOORA PROJECT – JORC ORE RESERVE ESTIMATE Tonnage Li O Ta O Fe O Li O Ta O Category 2 2 5 2 3 2 2 5 ORE RESERVES (Mt) (%) (ppm) (%) (t) (Mlb) Proved 17.5 1.31 1.43 0.94 230,000 5.5 During August 2016 the Company updated its Ore Reserves Probable 52.3 1.25 128 1.07 653,000 14.8 for its 100%-owned Pilgangoora Lithium-Tantalum Project Total 69.8 1.26 132 1.04 883,000 20.3 in Western Australia’s Pilbara region to 69.8 Mt @ 1.26%

Li2O, which is more than double the maiden Ore Reserve This Ore Reserve is the economically mineable part of announced in the March 2016 Prefeasibility Study (29.5 Mt the Measured and Indicated Resource. It includes mining

@ 1.3% Li2O and 134 ppm Ta2O5) (refer Table 2). dilution and allowance for losses in mining. Appropriate assessments and studies have been carried out and The overall Pilgangoora Ore Reserve now comprises include consideration of and modification by realistically 883,000 tonnes of contained lithium oxide and 20.3 Mlb assumed mining, metallurgical, economic, marketing, legal, of contained tantalite. environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.

18 PILBARA MINERALS ANNUAL REPORT 2016 EASTERN PEGMATITE - POLISHED HAND SPECIMEN SHOWING LILAC AND GREY TABULAR SPODUMENE (FIELD OF VIEW 5cm)

Pilbara Minerals ensures that the Mineral Resource and Mr Barnes and Mr Young have sufficient experience Ore Reserve estimates quoted are subject to governance that is relevant to the style of mineralisation and type arrangements and internal controls at both a site level of deposit under consideration and to the activity being and at the corporate level. Mineral Resources and Ore undertaken to qualify as Competent Persons as defined in Reserves are estimated in accordance with the 2012 the 2012 Edition of the ‘Australasian Code for Reporting JORC Code, using industry standard techniques and of Exploration Results, Mineral Resources and Ore internal guidelines for the estimation and reporting of Ore Reserves’. Mr Barnes and Mr Young have approved the Reserves and Mineral Resources. The Mineral Resources Mineral Resources statement as a whole and consent to and Ore Reserves statements included in the Annual the inclusion in this report of the matters based on their Report were reviewed by suitably qualified Competent information in the form and context in which it appears. Persons prior to their inclusion. The information in this report that relates to Ore COMPETENT PERSON STATEMENTS Reserves is based on and fairly represents information The information in this report that relates to Exploration and supporting documentation compiled by Mr David Results is based on and fairly represents information and Billington who is employed by Mining Plus, is a Competent supporting documentation compiled by Mr John Young Person and a member of the Australasian Institute of (Executive and Technical Director of Pilbara Minerals Mining and Metallurgy. Mr Billington has sufficient Limited). Mr Young is a shareholder of Pilbara Minerals experience that is relevant to the style of mineralisation Limited. Mr Young is a Competent Person and a member and type of deposit under consideration and to the of the Australasian Institute of Mining and Metallurgy. Mr activity being undertaken to qualify as a Competent Young has sufficient experience that is relevant to the style Person as defined in the 2012 Edition of the ‘Australasian of mineralisation and type of deposit under consideration Code for Reporting of Exploration Results, Mineral and to the activity being undertaken to qualify as a Resources and Ore Reserves’. Mr Billington has approved Competent Person as defined in the 2012 Edition of the the Ore Reserves statement as a whole and consents to ‘Australasian Code for Reporting of Exploration Results, the inclusion in this report of the matters based on his Mineral Resources and Ore Reserves’. Mr Young consents information in the form and context in which it appears. to the inclusion in this report of the matters based on his FORWARD LOOKING STATEMENTS information in the form and context in which it appears. This Annual Report may contain some references to The information in this report that relates to Mineral forecasts, estimates, assumptions and other forward- Resources is based on and fairly represents information looking statements. Although the Company believes that and supporting documentation compiled by Mr Lauritz its expectations, estimates and forecast outcomes are Barnes (Consultant with Trepanier Pty Ltd) and Mr John based on reasonable assumptions, it can give no assurance Young (Executive and Technical Director of Pilbara that they will be achieved. They may be affected by a Minerals Limited). Mr Young is a shareholder of Pilbara variety of variables and changes in underlying assumptions Minerals Limited. Mr Barnes and Mr Young are members that are subject to risk factors associated with the nature of the Australasian Institute of Mining and Metallurgy. 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.

PILBARA MINERALS ANNUAL REPORT 2016 19 PILGANGOORA PROJECT METHODOLOGY AND DELIVERY

Pilbara Minerals has developed PROJECT PROCUREMENT an execution approach to MANAGEMENT AND CONTRACTING the Project through works CONSULTANT STRATEGY undertaken during the course In delivering the Project, Pilbara In addressing the overall project scope, of the DFS, delivering facility Minerals will adopt a strategy that delivery targets and risk profiles, specific scope which will include: has the project scope (as presented works will be “packaged” and engaged through the DFS) managed and across a number of commercial styles, □□Mine run of mine, waste dumps delivered through the services of a including (but not necessarily limited to): and mine facilities project management consultant (PMC) □□Engineer, Procure and □□Workshops and contractor facilities group who will be integrated into the Construct (EPC) □□Central power station and fuel Owner’s team for the duration of the storage facilities project. The PMC will not only bring □□Design and Construct (D&C) □□Processing plant a technical capability to the Project □□Supply Only through appointed experienced □□Tailings storage facility □□Construct Only people, but will also provide tailored □□Build, Own, Operate (BOO) □□On-site laboratory and sampling governance solutions commensurate □□300-room accommodation camp with the requirements of the Project. □□Service Agreements and adjacent airstrip □□Consultancy Agreements. An organisational model as to how □□Non-process buildings and this structure will be arranged is These head agreements have been associated infrastructure provided in Figure 16 below. developed by Pilbara Minerals through □□Upgraded access road and the course of the DFS and will be intersection to site from the managed and administered by the Great Northern Highway. 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.

Owner

Project Management Consultant

Project Controls Contracts Construction Supervision

EPC EPC EPC EPC Engineering Vertical areas on Packages Packages Packages Packages Consultants work packages 1 2 3 4 etc

Commissioning

Operations Ramp Up

FIGURE 16: PROJECT ORGANISATION MODEL

20 PILBARA MINERALS ANNUAL REPORT 2016 PROCESS PLANT OPERATIONAL PROJECT TIMELINE (ECI/EPC) PHILOSOPHY Overall, the schedule for delivery of As the organisational model has For the most part, the supply chain will the Project is aggressive, with major identified in Figure 16, a number of be fully contracted, with the exception construction occurring throughout EPC style packages will be adopted of the Process Plant, which is intended the course of 2017 in order to for this project. One of the major to be fully operated and maintained by achieve a plant commissioning packages that will lend itself to such an Pilbara Minerals. In summary: milestone in December 2017. As approach is the Process Plant facility. such, strategy will be to pursue □□Mining It is envisaged that this package will opportunities where feasible that – Contractor operated constitute approximately 50% of the take advantage of existing “fit for project capital value, and includes □□Processing purpose” plant and equipment. equipment which will be critical path. – Pilbara Minerals operated An overall timeline of delivery Those “long lead” items that have been □□Haulage, product storage outlining key activities through to identified through the DFS work will and port delivery commissioning and production is have supply orders placed preceding – Contractor operated provided in Figure 17 below. the appointment of the EPC in order □□ Camp services to maintain the delivery schedule. – Contractor operated Preceding the appointment of the □□Power station EPC Contractor, the Company – Contractor operated will undertake a competitive Early □□Access road maintenance Contractor Involvement (ECI) – Contractor maintained approach, in which both technical □□Laboratory services and commercial aspects of the – Contractor operated. package will be developed.

2016 2017 2018

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 JFMAMJJASONDJFMAMJJASOND JFM

DFS Funding

Regulatory Approvals

Mining Contractor Mining Contractor Mining Contractor Selection Award Mob/Construction Commissioning Procurement (incl. Long Lead)

Plant ECI Plant EPC Award & Construction

Early Works Other Major Construction

FIGURE 17: PROJECT DELIVERY TIMELINE

PILBARA MINERALS ANNUAL REPORT 2016 21 OTHER PROJECTS

AERIAL VIEW OF THE TABBA TABBA TANTALUM PROJECT

TABBA TABBA During the commissioning phase, As a by-product of the Pilgangoora the Pilbara Minerals operational team mine, the economics of the production TANTALUM identified areas of the plant that of tantalum concentrate at Pilgangoora PROJECT (PLS 100%) required modification and rectification are vastly superior to Tabba Tabba. in order to allow it to run at optimal Accordingly, Pilbara Minerals will During 2015, Pilbara Minerals (design) levels. These included the ball continue to focus its resources and progressed the development of mill and the coarse recovery section management time on advancing the Tabba Tabba Tantalum Project, of the plant, namely the primary and the Pilgangoora Project towards located approximately 75 kilometres secondary jigs. While the repairs and production as rapidly as possible. southeast of Port Hedland in Western modifications were not considered to Australia’s Pilbara region. Tabba Tabba be major, they prevented the plant is an advanced, high quality tantalum from achieving design throughput and WEST PILBARA deposit which Pilbara Minerals was achieving a representative recovery developing under a joint venture with TENEMENTS rate during commissioning. Nagrom Pty Ltd. Late in 2015, Pilbara Exploration over the Company’s Minerals acquired 100% of the Tabba Accordingly, in early January West Pilbara tenements included Tabba Tantalum Project. 2016 Pilbara Minerals decided to field reconnaissance and rock suspend commissioning to allow sampling programs. Pilbara TABBA TABBA OPERATIONS an engineering assessment to be Minerals also completed a shallow Preparations for the start of undertaken. The engineering review reconnaissance RC drilling program commercial production at Tabba determined that further expenditure over a gold and base metals target Tabba were well advanced during would be required to modify the on E45/2241. Follow-up exploration the September 2015 quarter, with a existing processing plant before the is planned on these tenements. number of key operational activities commissioning process could be underway on site and major contracts finalised. This, combined with existing awarded for crushing, drill and blast, tantalum market conditions, meant equipment hire and earthworks that the operation was suspended and survey controls and earthworks indefinitely in April 2016. 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.

22 PILBARA MINERALS ANNUAL REPORT 2016 ABBREVIATIONS CORPORATE AND DEFINITIONS GOVERNANCE

ABBREVIATIONS BOO Build, Own, Operate CAGR compound annual growth rate D&C Design and Construct DFS Definitive Feasibility Study DMP Department of Mines and Petroleum ECI Early Contractor Involvement EPC Engineer, Procure and Construct

Fe2O3 iron oxide GLC General Lithium Corporation HMS heavy media separation HPGR high-pressure grinding rolls LC lithium carbonate ZEBRA FINCH AT PILGANGOORA

Li2O lithium oxide LiOH lithium hydroxide Mlb million pounds The Board of Directors of Pilbara Minerals Limited MOU Memorandum of Understanding is responsible for the corporate governance of the Mt million tonnes Company. The Board is committed to achieving and Mtpa million tonnes per annum demonstrating the highest standard of corporate governance applied in a manner that is appropriate to PFS Prefeasibility Study the Company’s circumstances. PMC project management consultant The Company has taken note of the Corporate ppm parts per million Governance Principles and Recommendations 3rd RC reverse circulation Edition, which was released by the ASX Corporate t tonnes Governance Council on 27 March 2014 and became effective on or after 1 July 2014. tpa tonnes per annum Ta O tantalite The Company’s Corporate Governance Statement is 2 5 available on the Company’s website www.pilbaraminerals.com.au DEFINITIONS The Company’s Corporate Governance Policies are available at Mineral Resources www.pilbaraminerals.com.au/corporate-governance 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.

PILBARA MINERALS ANNUAL REPORT 2016 23 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2016

FINANCIAL 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 STATEMENTS thereon.

DIRECTORS

The Directors of the Company at any time during or since the end of the financial year are:

Name, qualifications and Experience, special responsibilities and other directorships independence status Mr Anthony Kiernan Mr Anthony (Tony) Kiernan is a highly experienced public company director and former solicitor LLB 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 Chairman and Independent Non‐ Committee. Executive Director Appointed 1 July 2016 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 RC DRILLING AT THE MONSTER PROSPECT • Danakali Limited (since 2013) • Venturex Resources Limited (since 2010) – Chairman. DIRECTORS' REPORT 25 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 LEAD AUDITOR'S INDEPENDENCE DECLARATION 41 resigned from both companies in November 2013. FINANCIAL STATEMENTS 42 Mr Ken Brinsden Mr Brinsden is a mining engineer with over 20 years’ experience in surface and underground BEng (Mining) MAusIMM MAICD 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 DIRECTORS' DECLARATION 71 Chief Executive Officer and Ltd, Central Norseman Gold Corporation, Iluka Resources Limited, Gold Fields Limited and Managing Director more recently Atlas Iron Limited. INDEPENDENT AUDITOR'S REPORT 72 Appointed 4 May 2016 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 Mr Robert (Bob) Adamson’s professional career spans some 49 years. The first 25 years of BSc, MSc (Hons), MAusIMM, CP which he was employed with several international mining houses, in managerial and board (Geo), MAIMVA (CMV), MMICA 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 Independent Non‐Executive Director 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 Appointed 1 July 2010 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.

24 PILBARA MINERALS ANNUAL REPORT 2016 25 DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

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:

Mr Ken Brinsden Mr Brinsden is a mining engineer with over 20 years’ experience in surface and underground BEng (Mining) MAusIMM MAICD 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 Chief Executive Officer and Ltd, Central Norseman Gold Corporation, Iluka Resources Limited, Gold Fields Limited and Managing Director more recently Atlas Iron Limited. Appointed 4 May 2016 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).

PILBARA MINERALS ANNUAL REPORT 2016 25 DIRECTORS’DIRECTORS' REPORT REPORT DIRECTORS’ REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

Name, qualifications and Experience, special responsibilities and other directorships Mr Alan Boys, B. Com, CA independence status Mr Boys held the position of Company Secretary from 23 October 2014 until his date of resignation on 31 August 2016. Mr Boys Mr Steve Scudamore Mr Steve Scudamore is a chartered accountant with a Master of Arts from Oxford University, is a Chartered Accountant whom initially spent some 17 years in professional accounting services firms, retiring from public FCA, MA (Oxon), FAICD, SF Fin a Fellow of the Institute of Chartered Accountants, England, Wales and Australia (FCA), a practice as a partner of PricewaterhouseCoopers at the end of 1998. For the past 18 years, Mr Boys has been involved in Fellow of the Institute of Company Directors (FAICD) and a Senior Fellow of the Financial Independent Non‐Executive providing financial advisory, investment banking services, and accounting and secretarial services to ASX listed and unlisted public Services Institute of Australia (SF Fin). Director companies. Mr Boys will act as an alternate Director for Mr Neil Biddle from 20 August 2016 until 30 September 2016. Appointed 18 July 2016 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 Other current directorships: None. 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 Former directorships in the past three years: None. 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 DIRECTORS’ MEETINGS positions on industry, government and community boards, including as a Trustee of the Western Australian Museum, Chairman of Amana Living Incorporated (formerly Anglican The number of directors’ meetings and number of meetings attended by each director of the Company during the financial Homes) and a member of Council at Curtin University. Mr Scudamore is also a senior advisor year are: to Lazard Australia. Board Meetings Other current directorships: Mr Scudamore currently serves as a non ‐executive director on Director the board of Altona Mining Limited (since 2013). Attended Held Mr Tony Leibowitz* 10 10 Former directorships in the last three years: Aquila Resources Limited (10 December 2012 to Mr Robert Adamson 9 10 7 June 2016). Mr Ken Brinsden 2 2 Mr Neil Biddle Mr Neil Biddle is a geologist and Corporate Member of the Australasian Institute of Mining and Mr Neil Biddle 10 10 BAppSc (Geology), MAusIMM Metallurgy. He has over 30 years professional and management experience in the exploration Mr John Young 8 8 and mining industry and since 1987 has served on the Board of several ASX listed companies. * Mr Leibowitz retired as a director effective 1 July 2016. Mr Anthony Kiernan was appointed as a director and Chairman on 1 July 2016. Executive Director Mr Biddle was Managing Director of TNG Ltd from 1998 to 2007, Border Gold NL from 1994 30 May 2013 to 19 August 2016 to 1998, and Consolidated Victorian Mines from 1991 to 1994. Mr Steve Scudamore was appointed as a director on 18 July 2016. Non‐Executive Director Other current directorships: Mr Biddle is not currently a director of any other public listed During the year the full board acted in the capacity of both the Audit and Risk Committee and Remuneration Committee. Effective 20 August 2016 company. Subsequent to year end, the Company established a separate Audit and Risk Committee and reconstituted the Remuneration Former directorships in the last three years: Arunta Resources Ltd (4 April 2013 to 8 April 2015). Committee. Both committees consist solely of non‐executive directors.

Mr John Young Mr John Young is a highly experienced geologist having been engaged on exploration and BAppSc (Geology), Grad Dip – production projects encompassing gold, uranium and specialty metals. From 2002 to 2006, Mr PRINCIPAL ACTIVITIES Technology Management, Young was Exploration Manager for Haddington Resources Limited and was responsible for MAusIMM resource exploration and resource definition for their Bald Hill Tantalum mine. Mr Young’s The principal activities of the Group during the year were the exploration, development and mining of mineral resources. Executive Director corporate experience has included appointments as CEO of Marenica Energy Limited and CEO There were no significant changes in the nature of the activities of the Group during the year. and director of Thor Mining PLC. Mr Young has been responsible for exploration and evaluation Appointed 4 September 2015 for both the Pilgangoora and Tabba Tabba projects since their acquisition by the Company. OBJECTIVES Other current directorships: Mosman Oil & Gas Limited. The Group’s objectives are to: Former directorships in the last three years: None.  Develop and mine the world class lithium‐tantalum deposit at the 100% owned Pilgangoora Project (“Project”) located in the Pilbara region of Western Australia; 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  Continue to conduct exploration activities at the Project to improve the existing resource and reserve; capital raisings, mergers and acquisitions, business restructuring and corporate governance and was previously a global partner  Conduct exploration activities to hopefully discover new economic mineral deposits; and at PricewaterhouseCoopers based in Perth and Sydney for 12 years.  Consider participation in downstream chemical processing opportunities to leverage the quality of the Project.

COMPANY SECRETARY 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; Mr Alex Eastwood, LLB (Hons), B.Ec, GAICD  Finance the construction and commissioning of the Project; Mr Eastwood was appointed to the position of Company Secretary on 1 September 2016. Mr Eastwood has more than  Target Project construction to commence in the second quarter of the 2017 financial year and commissioning in the 20 years’ experience as a commercial lawyer, company secretary and corporate finance executive. Mr Eastwood has second quarter of the 2018 financial year; 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  Finalise offtake agreements with the Company’s prospective customer base that will underpin the Project’s production including as General Counsel and Company Secretary with Gryphon Minerals and General Counsel with Imdex Limited. 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.

26 PILBARA MINERALS ANNUAL REPORT 2016 26 27 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

Mr Scudamore also currently serves as chairman of MDA Insurance Pty Ltd, and holds board DIRECTORS’ MEETINGS positions on industry, government and community boards, including as a Trustee of the Western Australian Museum, Chairman of Amana Living Incorporated (formerly Anglican The number of directors’ meetings and number of meetings attended by each director of the Company during the financial Homes) and a member of Council at Curtin University. Mr Scudamore is also a senior advisor year are: to Lazard Australia. Board Meetings Other current directorships: Mr Scudamore currently serves as a non‐executive director on Director the board of Altona Mining Limited (since 2013). Attended Held Mr Tony Leibowitz* 10 10 Former directorships in the last three years: Aquila Resources Limited (10 December 2012 to Mr Robert Adamson 9 10 7 June 2016). Mr Ken Brinsden 2 2 Mr Neil Biddle Mr Neil Biddle is a geologist and Corporate Member of the Australasian Institute of Mining and Mr Neil Biddle 10 10 BAppSc (Geology), MAusIMM Metallurgy. He has over 30 years professional and management experience in the exploration Mr John Young 8 8 and mining industry and since 1987 has served on the Board of several ASX listed companies. * Mr Leibowitz retired as a director effective 1 July 2016. Mr Anthony Kiernan was appointed as a director and Chairman on 1 July 2016. Executive Director Mr Biddle was Managing Director of TNG Ltd from 1998 to 2007, Border Gold NL from 1994 30 May 2013 to 19 August 2016 to 1998, and Consolidated Victorian Mines from 1991 to 1994. Mr Steve Scudamore was appointed as a director on 18 July 2016. Non‐Executive Director Other current directorships: Mr Biddle is not currently a director of any other public listed During the year the full board acted in the capacity of both the Audit and Risk Committee and Remuneration Committee. Effective 20 August 2016 company. Subsequent to year end, the Company established a separate Audit and Risk Committee and reconstituted the Remuneration Former directorships in the last three years: Arunta Resources Ltd (4 April 2013 to 8 April 2015). Committee. Both committees consist solely of non‐executive directors.

26 PILBARA MINERALS ANNUAL REPORT 2016 2727 DIRECTORS’DIRECTORS' REPORT REPORT DIRECTORS’ REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

OPERATING AND FINANCIAL REVIEW 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:

REVIEW OF OPERATIONS Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (Mlb) 5.5 During the year, the Company continued the exploration and development of its Pilgangoora Lithium‐Tantalum Project located Proven 17.5 1.31 143 0.94 230,000 in the Pilbara region of Western Australia. Probable 52.3 1.25 128 1.07 653,000 14.8 Total 69.8 1.26 132 1.04 883,000 20.3 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 Further information regarding the Project can be found in the Annual Report under the heading titled Pilgangoora Lithium‐ a standalone 2 million tonnes per annum (“Mtpa”) mining and on‐site processing operation. The Company is progressing to a Tantalum Project. Definitive Feasibility Study (“DFS”) which is expected to be completed during the first quarter of the 2017 financial year. TABBA TABBA TANTALUM PROJECT 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 In 2014, the Company entered into the incorporated joint venture Tabba Tabba Tantalum Pty Ltd (“TTT”) with Valdrew due to the cost of certain rectification works and the prevailing tantalum market conditions. 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. REVIEW OF PRINCIPAL BUSINESS 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. PILGANGOORA LITHIUM‐TANTALUM PROJECT On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to acquire the remaining The Pilgangoora Lithium‐Tantalum Project is located 120 kilometres southeast of Port Hedland in Western Australia. It is 100% 50% interest in the Tabba Tabba Tantalum Project. The acquisition increased the Company’s interest in the Tabba Tabba owned by the Company. Since acquiring Pilgangoora in mid‐2014, the Company has made significant progress in identifying and Tantalum Project to 100%. 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. 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 During the period, the Company completed the PFS on the Pilgangoora Lithium‐Tantalum Project. The PFS confirmed the enforceable against TTT. 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. 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 Key financial outcomes included: over ordinary shares in the Company in the event certain milestones were achieved. Each unlisted option was to have a term  Project net present value (“NPV”) of A$407 million (10% discount rate, post‐tax) and internal rate of return (“IRR”) of 44% of two years and an exercise price calculated as the five‐trading day volume weighted average price (“VWAP”) prior to the (PFS Reserve basis); issue date of the options.  Project capital estimate of A$184 million (+/‐25%); and Operations at the Tabba Tabba Tantalum Project were suspended in January 2016 following issues with the commissioning  Outstanding life‐of‐mine operating cash costs of US$205/tonne of spodumene concentrate FOB (net of by‐product credits). 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 The Company is currently undertaking a DFS which is expected to be completed in the September 2016 quarter. process could be finalised. This combined with existing weak tantalum market conditions meant that the operation was In February 2016, the Company confirmed the significant scale of the Pilgangoora Mineral Resource, with the release of an suspended indefinitely. As a result, none of the milestones were achieved and accordingly no unlisted options in the Company will be issued to Valdrew. Indicated and Inferred Resource of 280. 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). WEST PILBARA JOINT VENTURE Subsequently, following a successful drilling program the Company released an updated Mineral Resource in July 2016 with In April 2013, the Company entered into a farm‐in and joint venture agreement with Fox Resources Limited (“Fox”) over six an upgraded Indicated and Inferred Resource of 128.6 Mt grading 1.22% Li2O containing 1.57 Mt of lithium oxide and 39 Mlb tenements comprising its West Pilbara project. To date, Fox has farmed in to the extent of 55% of the joint venture, however of Ta2O5, as follows: Fox is currently suspended from the ASX and no exploration activities were undertaken during the period. Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Li2O (t) Ta2O5 (Mlb) Measured 18.0 1.36 150 245,000 5.9 REVIEW OF FINANCIAL CONDITIONS Indicated 65.6 1.24 131 812,000 19.0 Inferred 45.0 1.15 144 515,000 14.2 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: Total 128.6 1.22 138 1,572,000 39.2 $2.80 million): MiningPlus Pty Ltd completed an independent review of the February 2016 Mineral Resource, for the purpose of optimisation  non‐cash impairment charges related to the closure of the Tabba Tabba Project ($12.14 million); studies to estimate project Ore Reserves, and found no material flaws in the resource model. The following Ore Reserve was  non‐cash share‐based payment expenses following the issue of options to directors, employees, consultants, service released in March 2016: providers and convertible noteholders to preserve cash ($26.56 million);

Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (t) Ta2O5 (Mlb)  non‐cash depreciation charges related to corporate assets ($0.05 million); Proven ‐ ‐ ‐ ‐ ‐ ‐ ‐  non‐cash net financing costs ($1.77 million); and Probable 29.5 1.31 134 1.15 273,000 1,856 4.09  non‐cash gain on equity investment ($0.81 million). Total 29.5 1.31 134 1.15 273,000 1,856 4.09 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.

28 PILBARA MINERALS ANNUAL REPORT 2016 28 29 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

REVIEW OF OPERATIONS Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Fe2O3 (%) Li2O (t) Ta2O5 (Mlb) 5.5 During the year, the Company continued the exploration and development of its Pilgangoora Lithium‐Tantalum Project located Proven 17.5 1.31 143 0.94 230,000 in the Pilbara region of Western Australia. Probable 52.3 1.25 128 1.07 653,000 14.8 Total 69.8 1.26 132 1.04 883,000 20.3 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 Further information regarding the Project can be found in the Annual Report under the heading titled Pilgangoora Lithium‐ a standalone 2 million tonnes per annum (“Mtpa”) mining and on‐site processing operation. The Company is progressing to a Tantalum Project. Definitive Feasibility Study (“DFS”) which is expected to be completed during the first quarter of the 2017 financial year. TABBA TABBA TANTALUM PROJECT 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 In 2014, the Company entered into the incorporated joint venture Tabba Tabba Tantalum Pty Ltd (“TTT”) with Valdrew due to the cost of certain rectification works and the prevailing tantalum market conditions. 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. REVIEW OF PRINCIPAL BUSINESS 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. PILGANGOORA LITHIUM‐TANTALUM PROJECT On 25 September 2015, the Company entered into a sale and purchase agreement with Valdrew to acquire the remaining The Pilgangoora Lithium‐Tantalum Project is located 120 kilometres southeast of Port Hedland in Western Australia. It is 100% 50% interest in the Tabba Tabba Tantalum Project. The acquisition increased the Company’s interest in the Tabba Tabba owned by the Company. Since acquiring Pilgangoora in mid‐2014, the Company has made significant progress in identifying and Tantalum Project to 100%. 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. 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 During the period, the Company completed the PFS on the Pilgangoora Lithium‐Tantalum Project. The PFS confirmed the enforceable against TTT. 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. Subject to delivery of tantalite concentrate toM GA 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 Key financial outcomes included: over ordinary shares in the Company in the event certain milestones were achieved. Each unlisted option was to have a term  Project net present value (“NPV”) of A$407 million (10% discount rate, post‐tax) and internal rate of return (“IRR”) of 44% of two years and an exercise price calculated as the five‐trading day volume weighted average price (“VWAP”) prior to the (PFS Reserve basis); issue date of the options.  Project capital estimate of A$184 million (+/‐25%); and Operations at the Tabba Tabba Tantalum Project were suspended in January 2016 following issues with the commissioning  Outstanding life‐of‐mine operating cash costs of US$205/tonne of spodumene concentrate FOB (net of by‐product credits). 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 The Company is currently undertaking a DFS which is expected to be completed in the September 2016 quarter. process could be finalised. This combined with existing weak tantalum market conditions meant that the operation was In February 2016, the Company confirmed the significant scale of the Pilgangoora Mineral Resource, with the release of an suspended indefinitely. As a result, none of the milestones were achieved and accordingly no unlisted options in the Company will be issued to Valdrew. 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). WEST PILBARA JOINT VENTURE Subsequently, following a successful drilling program the Company released an updated Mineral Resource in July 2016 with In April 2013, the Company entered into a farm‐in and joint venture agreement with Fox Resources Limited (“Fox”) over six an upgraded Indicated and Inferred Resource of 128.6 Mt grading 1.22% Li2O containing 1.57 Mt of lithium oxide and 39 Mlb tenements comprising its West Pilbara project. To date, Fox has farmed in to the extent of 55% of the joint venture, however of Ta2O5, as follows: Fox is currently suspended from the ASX and no exploration activities were undertaken during the period. Category Tonnage (Mt) Li2O (%) Ta2O5 (ppm) Li2O (t) Ta2O5 (Mlb) Measured 18.0 1.36 150 245,000 5.9 REVIEW OF FINANCIAL CONDITIONS Indicated 65.6 1.24 131 812,000 19.0 Inferred 45.0 1.15 144 515,000 14.2 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: Total 128.6 1.22 138 1,572,000 39.2 $2.80 million): MiningPlus Pty Ltd completed an independent review of the February 2016 Mineral Resource, for the purpose of optimisation  non‐cash impairment charges related to the closure of the Tabba Tabba Project ($12.14 million); studies to estimate project Ore Reserves, and found no material flaws in the resource model. The following Ore Reserve was  non‐cash share‐based payment expenses following the issue of options to directors, employees, consultants, service released in March 2016: providers and convertible noteholders to preserve cash ($26.56 million);

28 PILBARA MINERALS ANNUAL REPORT 2016 29 DIRECTORS’DIRECTORS' REPORT REPORT DIRECTORS’ REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

SHARE PLACEMENTS AND ISSUES SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the financial year, the Company raised the following amounts of capital before costs: In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the

Date Number of shares Price per share ($) Amount raised ($’000) financial year under review, except as already noted in this Directors’ Report.

(i) 23 July 2015 22,727,274 $0.11 2,500 24 November 2015 52,173,913 $0.23 12,000 DIVIDENDS 14 April 2016 142,000,000 $0.38 53,960 26 May 2016 39,609,256 $0.38 15,051 The Directors recommend that no dividend be declared or paid. 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) EVENTS SUBSEQUENT TO REPORTING DATE

CONVERTIBLE NOTES 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 On 2 September 2015, the Company issued 4,000,000 unlisted secured convertible notes with a face value of $4 million. The spodumene concentrate from Q1 2018 for an initial six‐year period, with the option to extend for a further four years. 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 offtake pricing mechanism will be based on the price of lithium carbonate, so that the Company shares in the pricing outcomes equal to 80% of the Company’s five‐day weighted average share price preceding conversion. Unlisted non‐transferable options derived from carbonate deliveries to higher volume contracts with cathode makers in China. 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 As part of the Offtake Agreement with GLC, a binding Memorandum of Understanding (“MOU”) was signed to enable the equity following the issue of 12.3 million ordinary shares at an average conversion price of $0.33 per share. Company and GLC to participate in the evaluation and development of a future offshore spodumene conversion plant, to During the year, unlisted secured convertible notes from an issue made on 24 March 2014 were converted to equity following process spodumene concentrates from the Pilgangoora Project. In the event a positive decision is made to proceed with the 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 development, GLC will provide technology, technical expertise and intellectual property, and will build and operate the lithium issued, 0.3 million were issued for consideration for accrued interest owing on the convertible notes being converted to chemicals production facility through an incorporated joint venture with the Company. Pilbara is expected to have a 50% ordinary shares. The remaining unlisted secured convertible notes expired on 25 September 2015 which resulted in the share of the equity in the proposed Joint Venture. repayment of notes with a face value of $13,550 and accrued interest. A binding Equity Subscription Agreement was also executed with GLC as part of the above, whereby GLC has agreed to During the year, unlisted secured convertible notes from an issue made on 30 May 2014 were converted to equity following invest A$17.75 million in the Company via a 3% placement at 50c per share, with settlement to occur after the conditions 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 precedent to the Offtake Agreement terms have been satisfied. A further 2% placement is proposed (for a total stake of 5% issued, 1.6 million were issued as consideration for accrued interest owing on the convertible notes being converted to in Pilbara Minerals), once a formal investment decision has been made to proceed with the development of the lithium ordinary shares. The remaining unlisted secured convertible notes expired on 30 November 2015 which resulted in the chemicals facility. 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 The Offtake Agreement is subject to various conditions precedent, including the waiver or non‐exercise of the right of first were converted to equity at a price equal to 80% of the Company’s five‐day weighted average share price preceding refusal to the spodumene concentrates held by Mineral Resources Limited under the terms of the Pilgangoora Asset Sale conversion. As a result, 6.9 million ordinary shares were issued at an average conversion price of $0.25 per share. Agreement.

OPTIONS ISSUED 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: During the financial eyear, th Company issued the following options:  A 60% increase in the total Measured, Indicated and Inferred Resource to 128.6 Mt grading 1.22% Li2O (spodumene) and

Options Grant date Exercise price Expiry date Vested Options unexercised at 30 June 2016 138 ppm Ta2O5 and 0.63% Fe2O3, containing 1.57 Mt of lithium oxide and 39 Mlb of Ta2O5; 29,500,000 28/08/2015 $0.10 22/03/2017 29,500,000 8,000,000  A 134% increase in the total Measured and Indicated Resource, available for conversion to Ore Reserves, to 83.6 Mt grading 56,400,000 28/08/2015 $0.05 02/03/2017 56,400,000 4,937,500 1.27% Li2O (spodumene), 135 ppm Ta2O5 and 0.58% Fe2O3, containing 1.06 Mt of lithium oxide and 24.9 Mlb of Ta2O5; 17,045,455 30/11/2015 $0.15 01/12/2017 17,045,455 3,268,181  After applying a cut‐off of 1% Li2O to the total Mineral Resource of 128.6 Mt, the Inferred and Indicated Lithium Resource 5,000,000 30/11/2015 $0.10 22/03/2017 5,000,000 5,000,000 components amount to 91 Mt @ 1.43% Li2O, containing 1.3 Mt of lithium oxide. 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 In August 2016, the Company announced a substantial increase in the Ore Reserves for the Pilgangoora Lithium‐Tantalum 2,000,000 18/04/2016 $0.65 16/05/2018 2,000,000 2,000,000 Project to 69.8 Mt @ 1.26% Li2O which will aid in the completion of a Definitive Feasibility Study (“DFS”). The updated Ore (i) 15,000,000 18/04/2016 $0.40 16/05/2019 ‐ 15,000,000 Reserves are more than double the maiden ore reserve announced in the March 2016 Pre‐Feasibility Study (29.5 Mt @ 1.3% 800,000 06/05/2016 $0.40 16/05/2018 ‐(ii) 800,000 Li2O and m134 pp Ta2O5). The overall Pilgangoora Ore Reserve now comprises 883,000 tonnes of contained lithium oxide 13,500,000 06/05/2016 $0.40 16/05/2018 13,500,000 13,500,000 (i) and 20.3 Mlb of contained tantalite. 16,500,000 06/05/2016 $0.40 16/05/2019 ‐ 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 LIKELY DEVELOPMENTS (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; The Group will continue to develop the Pilgangoora Lithium‐Tantalum Project with a view to commissioning and operating  33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable to the same. This will require completion of a positive DFS, and the raising of sufficient capital to fund the development, the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; construction and commissioning of the 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.

30 PILBARA MINERALS ANNUAL REPORT 2016 30 31 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

Date Number of shares Price per share ($) Amount raised ($’000) financial year under review, except as already noted in this Directors’ Report.

CONVERTIBLE NOTES 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 On 2 September 2015, the Company issued 4,000,000 unlisted secured convertible notes with a face value of $4 million. The spodumene concentrate from Q1 2018 for an initial six‐year period, with the option to extend for a further four years. 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 offtake pricing mechanism will be based on the price of lithium carbonate, so that the Company shares in the pricing outcomes equal to 80% of the Company’s five‐day weighted average share price preceding conversion. Unlisted non‐transferable options derived from carbonate deliveries to higher volume contracts with cathode makers in China. 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 As part of the Offtake Agreement with GLC, a binding Memorandum of Understanding (“MOU”) was signed to enable the equity following the issue of 12.3 million ordinary shares at an average conversion price of $0.33 per share. Company and GLC to participate in the evaluation and development of a future offshore spodumene conversion plant, to During the year, unlisted secured convertible notes from an issue made on 24 March 2014 were converted to equity following process spodumene concentrates from the Pilgangoora Project. eIn th event a positive decision is made to proceed with the 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 development, GLC will provide technology, technical expertise and intellectual property, and will build and operate the lithium issued, 0.3 million were issued for consideration for accrued interest owing on the convertible notes being converted to chemicals production facility through an incorporated joint venture with the Company. Pilbara is expected to have a 50% ordinary shares. The remaining unlisted secured convertible notes expired on 25 September 2015 which resulted in the share of the equity in the proposed Joint Venture. repayment of notes with a face value of $13,550 and accrued interest. A binding Equity Subscription Agreement was also executed with GLC as part of the above, whereby GLC has agreed to During the year, unlisted secured convertible notes from an issue made on 30 May 2014 were converted to equity following invest A$17.75 million in the Company via a 3% placement at 50c per share, with settlement to occur after the conditions 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 precedent to the Offtake Agreement terms have been satisfied. A further 2% placement is proposed (for a total stake of 5% issued, 1.6 million were issued as consideration for accrued interest owing on the convertible notes being converted to in Pilbara Minerals), once a formal investment decision has been made to proceed with the development of the lithium ordinary shares. The remaining unlisted secured convertible notes expired on 30 November 2015 which resulted in the chemicals facility. 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 The Offtake Agreement is subject to various conditions precedent, including the waiver or non‐exercise of the right of first were converted to equity at a price equal to 80% of the Company’s five‐day weighted average share price preceding refusal to the spodumene concentrates held by Mineral Resources Limited under the terms of the Pilgangoora Asset Sale conversion. As a result, 6.9 million ordinary shares were issued at an average conversion price of $0.25 per share. Agreement.

OPTIONS ISSUED 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 During the financial year, the Company issued the following options:  A 60% increase in the total Measured, Indicated and Inferred Resource to 128.6 Mt grading 1.22% Li2O (spodumene) and

Options Grant date Exercise price Expiry date Vested Options unexercised at 30 June 2016 138 ppm Ta2O5 and 0.63% Fe2O3, containing 1.57 Mt of lithium oxide and 39 Mlb of Ta2O5; 29,500,000 28/08/2015 $0.10 22/03/2017 29,500,000 8,000,000  A 134% increase in the total Measured and Indicated Resource, available for conversion to Ore Reserves, to 83.6 Mt grading 56,400,000 28/08/2015 $0.05 02/03/2017 56,400,000 4,937,500 1.27% Li2O (spodumene), 135 ppm Ta2O5 and 0.58% Fe2O3, containing 1.06 Mt of lithium oxide and 24.9 Mlb of Ta2O5; 17,045,455 30/11/2015 $0.15 01/12/2017 17,045,455 3,268,181  After applying a cut‐off of 1% Li2O to the total Mineral Resource of 128.6 Mt, the Inferred and Indicated Lithium Resource 5,000,000 30/11/2015 $0.10 22/03/2017 5,000,000 5,000,000 components amount to 91 Mt @ 1.43% Li2O, containing 1.3 Mt of lithium oxide. 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 In August 2016, the Company announced a substantial increase in the Ore Reserves for the Pilgangoora Lithium‐Tantalum 2,000,000 18/04/2016 $0.65 16/05/2018 2,000,000 2,000,000 Project to 69.8 Mt @ 1.26% Li2O which will aid in the completion of a Definitive Feasibility Study (“DFS”). The updated Ore (i) 15,000,000 18/04/2016 $0.40 16/05/2019 ‐ 15,000,000 Reserves are more than double the maiden ore reserve announced in the March 2016 Pre‐Feasibility Study (29.5 Mt @ 1.3% 800,000 06/05/2016 $0.40 16/05/2018 ‐(ii) 800,000 Li2O and 134 ppm Ta2O5). The overall Pilgangoora Ore Reserve now comprises 883,000 tonnes of contained lithium oxide 13,500,000 06/05/2016 $0.40 16/05/2018 13,500,000 13,500,000 (i) and 20.3 Mlb of contained tantalite. 16,500,000 06/05/2016 $0.40 16/05/2019 ‐ 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 LIKELY DEVELOPMENTS (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; The Group will continue to develop the Pilgangoora Lithium‐Tantalum Project with a view to commissioning and operating  33.33% will vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable to the same. This will require completion of a positive DFS, and the raising of sufficient capital to fund the development, the Board and a “decision to mine” being made by the Board in respect of the Pilgangoora Project; construction and commissioning of the 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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ENVIRONMENTAL REGULATION INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Group’s operations are subject to significant environmental regulation under both Commonwealth and State legislation The Company has agreed to indemnify the following current and past directors of the Company, Mr R. Adamson, Mr N. Biddle, in relation to its mining, development and exploration activities. The Group is committed to achieving a high standard of Mr K. Brinsden, Mr T. Leibowitz, Mr A. Kiernan, Mr S. Scudamore and Mr J. Young against all liabilities to another person environmental performance. Compliance with the requirements of environmental regulations and with specific requirements (other than the Company or a related body corporate) that may arise from their position as Directors of the Company and its of site environmental licences was substantially achieved across all operations with no known instance of non‐compliance controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates noted. Based on the results of enquiries made, the Directors are not aware of any significant breaches during the period that the Company will meet the full amount of any such liabilities, including costs and expenses. covered by this report. 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 INTERESTS 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 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 Under the terms of the insurance policy entered into in April 2016, the Company has agreed to indemnify certain senior Corporations Act 2001, at the date of this report is as follows: 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 Pilbara Minerals Limited Director faith. The policy stipulates that the Company will meet the full amount of any such liabilities, including legal fees. Ordinary shares Options over ordinary shares Mr Robert Adamson 3,937,851 4,000,000 INSURANCE PREMIUMS Mr Neil Biddle 36,221,930 8,000,000 Mr Ken Brinsden 869,565 15,000,000(i) Since the end of the previous financial year the Company has paid insurance premiums of $93,885 in respect of directors’ Mr Anthony Kiernan 75,000 ‐ and officers’ liability and legal expenses’ insurance contracts, for current directors and officers, including senior executives of Mr Steve Scudamore ‐ ‐ the Company and directors, senior executives and secretaries of its controlled entities. The insurance premiums relate to: Mr John Young 16,158,316 10,000,000  costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever Mr Alan Boys 1,877,504 6,900,000 their outcome; and (i) Vesting conditions attached to these options are set out in footnote (b) to the “Share Options” table below  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.

b 16 May 2019 $0.40 31,500,000 a The vesting condition requires an employee to provide six months of continuous service from the date of grant. ROUNDING OF AMOUNTS b Vesting conditions applying to these unlisted options include: The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and  Delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board (33.33% vest); in accordance with the Instrument, amounts in the consolidated financial statements and the Directors’ Report have been  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); rounded off to the nearest thousand dollars, unless otherwise stated.

 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). REMUNERATION REPORT – AUDITED

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

32 PILBARA MINERALS ANNUAL REPORT 2016 32 33 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

ENVIRONMENTAL REGULATION INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

SHARE OPTIONS NON‐AUDIT SERVICES At the date of this report unissued shares of the Group under option are: Somes Cooke audited the Group up until their resignation on 10 June 2016. Somes Cook did not provide any non‐audit Expiry date Exercise price Number of options services during this period. The Directors resolved to appoint KPMG eas th interim auditor of the Group, with their 21 December 2016 $0.05 1,250,000 appointment to be confirmed at the next Annual General Meeting. KPMG did not provide any non‐audit services from 10 June 2 March 2017 $0.05 4,625,000 2016 up to year end. 22 March 2017 $0.10 11,000,000 25 March 2017 $0.03 4,166,665 1 December 2017 $0.15 3,268,181 LEAD AUDITOR’S INDEPENDENCE DECLARATION 16 May 2018 $0.40 37,500,000 The Lead Auditor’s Independence Declaration is set out on page 41 and forms part of the Directors’ Report for the financial 16 May 2018a $0.40 800,000 year ended 30 June 2016. 16 May 2018 $0.65 7,000,000 b 16 May 2019 $0.40 31,500,000 a The vesting condition requires an employee to provide six months of continuous service from the date of grant. ROUNDING OF AMOUNTS b Vesting conditions applying to these unlisted options include: The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and  Delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board (33.33% vest); in accordance with the Instrument, amounts in the consolidated financial statements and the Directors’ Report have been  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); rounded off to the nearest thousand dollars, unless otherwise stated.

 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). REMUNERATION REPORT – AUDITED

32 PILBARA MINERALS ANNUAL REPORT 2016 33 DIRECTORS’DIRECTORS' REPORT REPORT DIRECTORS’ REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

PRINCIPLES OF COMPENSATION – AUDITED 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 The nature and amount of remuneration for an executive and non‐executive director depends on the nature of the role and performance. This will include aligning STIs and LTIs with achievement of the Company’s short‐term and long‐term strategic market rates for the position, which are determined with the assistance of external advisors (where necessary), surveys and objectives and longer term shareholder return. Other key objectives of the new remuneration framework may include: reports, taking into account the experience and qualifications of each individual. The Board ensures that the remuneration  to ensure all equity based instruments issued to executives are performance based in accordance with recommended paid to KMP is competitive and reasonable. Fees and payments to the Non‐Executive Directors reflect the demands made, corporate governance practices; and the responsibilities placed on the Non‐Executive Directors. Non‐Executive director fees and payments are reviewed  annually by the Board. 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 The following were KMP of the Group during the financial year and unless otherwise indicated were KMP for the entire and competitive including fixed remuneration as well as STIs and LTIs; financial year:  to reward individual and group objectives thus promoting a balance of individual performance and teamwork across the executive management team; Non‐Executive Directors Executive Directors Executives  preserve cash where necessary for exploration and project development; Mr Tony Leibowitz1 Mr Ken Brinsden2 Mr Alan Boys4 Mr Robert Adamson Mr Neil Biddle Mr Brian Lynn5  subject to shareholder approval, increasing the pool of directors’ fees available to non‐executive directors to encourage Mr John Young3 new appointments to the Board to improve its diversity; and 1 Mr Leibowitz resigned as Chairman of the Board on 1 July 2016.  to promote independence and impartial decision making across the non‐executive directors. 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. During the year, 75,000,000 unlisted options over ordinary shares in the Company were granted to directors and executives, 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. including 69,000,000 unlisted options over ordinary shares being issued to Directors following receipt of shareholder approval. 5 Mr Lynn was appointed Chief Financial Officer on 22 June 2016. Of the 75,000,000 unlisted options noted above, 15,000,000 were issued to Mr Ken Brinsden (Managing Director) and The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate 6,000,000 were granted to Mr Brian Lynn (Chief Financial Officer) with the following vesting conditions linked to important for the results delivered. The remuneration framework aligns executive reward with the achievement of strategic and milestones associated with the Pilgangoora Project: operational objectives and the creation of value for shareholders. The Board ensures that the executive reward framework  Delivery of a final definitive feasibility study to a standard acceptable to the Board (33.3%); satisfies the following key criteria in line with appropriate corporate governance practices:  Adequate funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable  attract, retain, motivate and reward executives; to the Board and a “decision to mine” determined by the Board (33.3%); and  reward executives for Company and individual performance against pre‐determined targets/benchmarks;  Completion of the mine development and plant construction at the Pilgangoora Project and the process plant achieving a  link rewards with the strategic goals and performance of the Company; nominal 85% of its design capacity at a saleable product specification (33.3%).  provide competitive remuneration arrangements by market standards;  align executive interests with those of the Company’s shareholders; and The remaining 54,000,000 unlisted options were not subject to any vesting conditions. The Company considered that the  comply with applicable legal requirements and appropriate standards of governance. 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 The Company has structured an executive remuneration framework that is market competitive and complementary to the therefore to the interests of all shareholders. For this reason, there were no performance conditions prior to the grant or reward strategy for the organisation. Executive remuneration packages may comprise a mix of the following: exercise of the options. The grant of the options to Messrs Biddle and Leibowitz also reflected the significant contribution  Fixed remuneration comprising base salary and employer superannuation contributions. Salaries are reviewed on an made by them in raising capital for the Company over the past 12 months. 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 a) ASSESSING PERFORMANCE AND CLAWBACK OF REMUNERATION provide market rates. The Board is responsible for assessing performance against key performance indicators (“KPIs”) and determining the STI  Short‐term incentives (“STIs”) comprising cash bonuses and equity base schemes. The STIs are structured to provide and LTI components to be paid based upon reports from management, market conditions and Company performance. remuneration for the achievement of individual and Company performance targets linked to the Company’s strategic objectives. 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  Long‐term incentives (“LTIs”) comprising participation in equity based schemes. The LTIs provide remuneration for the previous financial years. achievement of corporate objective linked to the long‐term growth of the Company.

The STIs and LTIs are all at risk. 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 Company has gone through a significant recent transition and is currently finalising a definitive feasibility study to advance The table below shows measures of the Group’s financial performance over the last five years as required by the the Pilgangoora Project from an exploration project towards development, construction and ultimately production. During the Corporations Act 2001. However, these are not necessarily consistent with the measures used in determining the variable past 12 months the Company chose to preserve cash for its successful exploration activities by granting fully vested unlisted amounts of remuneration to be awarded to KMP. As a consequence, there may not always be a direct correlation options over ordinary shares as part of its remuneration framework. To recognise the recent changes in the Company’s between the statutory key performance measures and the variable remuneration awarded. 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 2016 2015 2014 2013 2012 for the Company’s current activities and aligned with best practise in the market place. It is expected that a new remuneration Profit/(loss) for the year attributable to owners of policy and framework will be adopted which will result in significant changes to the Company’s approach towards executive (55,607) (6,620)* (3,187) (1,156) (2,081) Pilbara Minerals Limited ($’000) and non‐executive remuneration which will take effect during the course of the 2017 financial year. Basic earnings/(loss) per share (cents) (6.76) (1.12)* (1.15) (1.63) (3.75) Dividend payments ($’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

34 PILBARA MINERALS ANNUAL REPORT 2016 34 35 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

34 PILBARA MINERALS ANNUAL REPORT 2016 35 DIRECTORS’DIRECTORS' REPORT REPORT DIRECTORS’ REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

c) SERVICE CONTRACTS DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION – AUDITED The remuneration and other terms of employment for the Managing Director and other KMP are formalised in employment contracts, as set out below. Details of the remuneration of the Directors and the KMP of the Group are set out in the following tables.

Mr Brinsden, Managing Director and Chief Executive Officer (“CEO”), has an employment agreement dated 2 December Post‐employment Share‐based payments Short term 2015 with the Company and was appointed as Managing Director on 4 May 2016. Mr Brinsden commenced benefits Equity options Total employment on 18 January 2016 and continues unless terminated. Termination of the employment agreement by the Salary Consulting Superannuation Performance Vested CEO requires 12 weeks’ written notice within the first 12 months of service. After 12 months of service, the CEO is and fees fees benefits related required to give 16 weeks’ written notice of termination. The Company must give the CEO 12 weeks written notice of Non‐Executive Directors termination within the first 12 months of employment for termination without cause and 12 months’ written notice of 2016 86,000 215,200 ‐ 3,008,088 ‐ 3,309,288 termination on completion of 12 months of service. Tony Leibowitz1 2015 36,000 138,000 ‐ ‐ ‐ 174,000 Upon termination, the CEO is entitled to receive from the Company all payments owed to him under the employment 2016 56,000 ‐ ‐ 752,022 ‐ 808,022 agreement up to and including the date of termination and any payments due to him pursuant to any relevant legislation Robert Adamson by way of accrued annual leave and long service leave. The agreement specifies duties and obligations to be fulfilled as 2015 36,000 ‐ ‐ ‐ ‐ 36,000 CEO and provides for an annual review of base remuneration taking into account performance. Mr Brinsden’s Executive Directors remuneration includes a salary of $350,000 per annum inclusive of superannuation. The CEO did not receive an increase 2016 150,507 ‐ 10,264 ‐ 1,786,291 1,947,062 to base salary during the reporting period and no monetary bonus has been awarded. Ken Brinsden 2015 ‐ ‐ ‐ ‐ ‐ ‐ Mr Biddle, Executive Director, receives remuneration from the Company in the form of director’s fees and consulting 2016 56,000 281,500 ‐ 3,008,088 ‐ 3,345,588 fees for corporate advisory and consulting services, both of which are paid to his related party Hatched Creek Pty Ltd Neil Biddle 2015 36,000 240,420 ‐ ‐ ‐ 276,420 (“Hatched Creek”). No formal contract exists between the Company and Hatched Creek for the corporate advisory 2016 56,000 180,000 ‐ 2,366,920 ‐ 2,602,920 consulting services provided by Mr Biddle on commercial terms. The arrangement can be terminated without notice. John Young2 Mr Young, Executive Director, is remunerated by the Company for director’s fees and consulting fees, both of which 2015 ‐ 168,400 ‐ ‐ ‐ 168,400 were paid through his related party Metallon Resources Pty Ltd (“Metallon”). A service agreement dated 29 August 2014 Other KMP between Metallon and the Company specifies the services that are required to be performed and provides for an annual 2016 ‐ 216,000 ‐ 2,254,893 ‐ 2,470,893 Alan Boys3 review of base remuneration. The notice of termination is three months by either party. 2015 ‐ 77,750 ‐ ‐ ‐ 77,750 Mr Boys, Company Secretary, is an employee of the Dubois Groupy Pt Ltd (“Dubois Group”), with which the Company 2016 7,969 ‐ 757 ‐ 62,382 71,108 has an agreement in place to provide the services of Mr Boys and other staff to undertake accounting and company Brian Lynn4 2015 ‐ ‐ ‐ ‐ ‐ ‐ 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. Total Directors’ and 2016 412,476 892,700 11,021 11,390,011 1,848,673 14,554,881 KMP remuneration 2015 108,000 624,570 ‐ ‐ ‐ 732,570 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 1 Mr Leibowitz retired as Chairman of the Board and Non‐Executive Director on 1 July 2016. into account performance. Mr Lynn is remunerated a salary of $240,000 per annum inclusive of superannuation. 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. Termination of the employment agreement by the CFO requires 12 weeks written notice within the first 12 months of 4 Mr Lynn was appointed CFO on 22 June 2016. 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 Mr Leibowitz did not have a formal contract for director services as at the completion of the 30 June 2016 financial year. The of termination within the first 12 months of employment for termination without cause. Upon termination, the CFO is Company remunerated Kalonda Pty Ltd for the director services that were provided by Mr Leibowitz. Mr Leibowitz was paid entitled to receive from the Company all payments owed to him under the employment agreement up to and including director’s fees under the terms agreed to by a directors’ resolution. 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. 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 d) NON EXECUTIVE and secretarial services. 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. DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION – UNAUDITED

From 1 September 2015 From 1 July 2015 to 31 August 2015 The statutory remuneration disclosures detailed above for the year ended 30 June 2016 were significantly impacted by non‐ Base fees (annual) cash values ascribed in accordance with Australian Accounting Standards to unlisted share options issued during the year to Non‐Executive Chairman 96,000 36,000 directors and KMP. Other Non‐Executive directors 60,000 36,000 To comply with Australian Accounting Standards, the unlisted share options were valued at the date of grant using the Black Fees are reviewed annually by the Board taking into account comparable roles and market data. The current base fees Scholes valuation methodology (refer below). These valuations were significantly impacted by the fact that the Company’s were reviewed with effect from 1 September 2015. 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 e) EXECUTIVE REMUNERATION FRAMEWORK AND PERFORMANCE PAY OUTCOMES 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 The Group’s executive KMP total remuneration structure provides for: was received. During this passage of time the Company’s share price experienced significant growth resulting in the share  Fixed remuneration; price at the time of grant being significantly higher than the exercise price allocated to the options by the Directors.  Short‐term, performance linked equity remuneration (STI); and This resulted in a much higher non‐cash value being attributed to each option when compared to a valuation that utilised the  Long‐term, performance linked equity remuneration (LTI). Company’s share price at the time the share options were approved by the Directors and the exercise price established. 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.

36 PILBARA MINERALS ANNUAL REPORT 2016 36 37 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

Mr Brinsden, Managing Director and Chief Executive Officer (“CEO”), has an employment agreement dated 2 December Post‐employment Share‐based payments Short term 2015 with the Company and was appointed as Managing Director on 4 May 2016. Mr Brinsden commenced benefits Equity options Total employment on 18 January 2016 and continues unless terminated. Termination of the employment agreement by the Salary Consulting Superannuation Performance Vested CEO requires 12 weeks’ written notice within the first 12 months of service. After 12 months of service, the CEO is and fees fees benefits related required to give 16 weeks’ written notice of termination. The Company must give the CEO 12 weeks written notice of Non‐Executive Directors termination within the first 12 months of employment for termination without cause and 12 months’ written notice of 2016 86,000 215,200 ‐ 3,008,088 ‐ 3,309,288 termination on completion of 12 months of service. Tony Leibowitz1 2015 36,000 138,000 ‐ ‐ ‐ 174,000 Upon termination, the CEO is entitled to receive from the Company all payments owed to him under the employment 2016 56,000 ‐ ‐ 752,022 ‐ 808,022 agreement up to and including the date of termination and any payments due to him pursuant to any relevant legislation Robert Adamson by way of accrued annual leave and long service leave. The agreement specifies duties and obligations to be fulfilled as 2015 36,000 ‐ ‐ ‐ ‐ 36,000 CEO and provides for an annual review of base remuneration taking into account performance. Mr Brinsden’s Executive Directors remuneration includes a salary of $350,000 per annum inclusive of superannuation. The CEO did not receive an increase 2016 150,507 ‐ 10,264 ‐ 1,786,291 1,947,062 to base salary during the reporting period and no monetary bonus has been awarded. Ken Brinsden 2015 ‐ ‐ ‐ ‐ ‐ ‐ Mr Biddle, Executive Director, receives remuneration from the Company in the form of director’s fees and consulting 2016 56,000 281,500 ‐ 3,008,088 ‐ 3,345,588 fees for corporate advisory and consulting services, both of which are paid to his related party Hatched Creek Pty Ltd Neil Biddle 2015 36,000 240,420 ‐ ‐ ‐ 276,420 (“Hatched Creek”). No formal contract exists between the Company and Hatched Creek for the corporate advisory 2016 56,000 180,000 ‐ 2,366,920 ‐ 2,602,920 consulting services provided by Mr Biddle on commercial terms. The arrangement can be terminated without notice. John Young2 Mr Young, Executive Director, is remunerated by the Company for director’s fees and consulting fees, both of which 2015 ‐ 168,400 ‐ ‐ ‐ 168,400 were paid through his related party Metallon Resources Pty Ltd (“Metallon”). A service agreement dated 29 August 2014 Other KMP between Metallon and the Company specifies the services that are required to be performed and provides for an annual 2016 ‐ 216,000 ‐ 2,254,893 ‐ 2,470,893 Alan Boys3 review of base remuneration. The notice of termination is three months by either party. 2015 ‐ 77,750 ‐ ‐ ‐ 77,750 Mr Boys, Company Secretary, is an employee of the Dubois Group Pty Ltd (“Dubois Group”), with which the Company 2016 7,969 ‐ 757 ‐ 62,382 71,108 has an agreement in place to provide the services of Mr Boys and other staff to undertake accounting and company Brian Lynn4 2015 ‐ ‐ ‐ ‐ ‐ ‐ 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. Total Directors’ and 2016 412,476 892,700 11,021 11,390,011 1,848,673 14,554,881 KMP remuneration 2015 108,000 624,570 ‐ ‐ ‐ 732,570 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 1 Mr Leibowitz retired as Chairman of the Board and Non‐Executive Director on 1 July 2016. into account performance. Mr Lynn is remunerated a salary of $240,000 per annum inclusive of superannuation. 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. Termination of the employment agreement by the CFO requires 12 weeks written notice within the first 12 months of 4 Mr Lynn was appointed CFO on 22 June 2016. 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 Mr Leibowitz did not have a formal contract for director services as at the completion of the 30 June 2016 financial year. The of termination within the first 12 months of employment for termination without cause. Upon termination, the CFO is Company remunerated Kalonda Pty Ltd for the director services that were provided by Mr Leibowitz. Mr Leibowitz was paid entitled to receive from the Company all payments owed to him under the employment agreement up to and including director’s fees under the terms agreed to by a directors’ resolution. 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. 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 d) NON EXECUTIVE and secretarial services. 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. DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION – UNAUDITED

36 PILBARA MINERALS ANNUAL REPORT 2016 37 DIRECTORS’DIRECTORS' REPORT REPORT DIRECTORS’ REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

Set out below are non‐statutory details of the Directors and KMP remuneration for the year ended 30 June 2016, whereby ** Unlisted options were issued with the following vesting conditions: the non‐cash values ascribed to share options issued during the year (to comply with Australian Accounting Standards) have  33.33% vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; been replaced with the market value of the share options at the time the Directors approved their issue, to arrive at an  33.33% vest upon the funding required to develop the Pilgangoora Project being raised or procured based on parameters acceptable to the Adjusted Remuneration Total. 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 T. R. K. N. J. A. B. establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during production runs, at a saleable Total Leibowitz Adamson Brinsden Biddle Young Boys Lynn product specification; and  A continuing employment service condition at the time each milestone is achieved. 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 EXERCISE OF OPTIONS GRANTED AS COMPENSATION INSTRUMENTS – AUDITED accounting value of During the reporting period, the following ordinary shares were issued on the exercise of unlisted options previously granted share options (13,238,684) (3,008,088) (752,022) (1,786,291) (3,008,088) (2,366,920) (2,254,893) (62,382) as compensation. Add: Market value of share options on No. of shares Amount paid per share approval by Directors 885,000 160,000 40,000 ‐ 160,000 450,000 75,000 ‐ Tony Leibowitz 4,000,000 $0.10 Adjusted Neil Biddle 8,000,000 $0.10 Remuneration Total 2,201,197 461,200 96,000 160,771 497,500 686,000 291,000 8,726 Alan Boys 900,000 $0.10 The market value of share options above was calculated as the difference between the Company’s share price on the date There are no amounts unpaid on any ordinary shares issued as a result of the exercise of unlisted options during the 2016 the Director’s approved the issue of the share options and the exercise price of the options. Where the Company’s share financial year. 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 DETAILS OF EQUITY INCENTIVES AFFECTING CURRENT AND FUTURE REMUNERATION – of the options issued, which aligns the interests of the Directors and KMP with those of the Company’s shareholders. The AUDITED 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. Details of vesting profiles of the unlisted options held by each KMP of the Group as at 30 June 2016 are detailed below.

% vested in % forfeited Financial year in Instrument Grant date EQUITY INSTRUMENTS – AUDITED year in year (A) which grant vests All options refer to unlisted options over ordinary shares in Pilbara Minerals Limited, which are exercisable on a one‐for‐one Tony Leibowitz Options 7,100,000 18/04/2016 100% 0% 2016 basis. During the year the Company established an Employee Share Option Plan which was approved by shareholders on Options 2,000,000 28/08/2015 100% 0% 2016 Robert Adamson 18 April 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 All options issued as compensation to directors and KMP’s are non‐cash in nature. They are valued using the Black Scholes Neil Biddle Options 8,000,000 18/04/2016 100% 0% 2016 option valuation methodology which calculates an implied value for each option based on the Company’s share price volatility, Options 5,000,000 30/11/2015 100% 0% 2016 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. John Young Options 5,000,000 18/04/2016 100% 0% 2016 Options 2,100,000 28/08/2015 100% 0% 2016 OPTIONS OVER EQUITY INSTRUMENTS GRANTED AS COMPENSATION INSTRUMENTS – Alan Boys Options 5,000,000 06/05/2016 100% 0% 2016 AUDITED Brian Lynn Options 6,000,000 22/06/2016 0% 0% 2017 and 2018 Details on unlisted options over ordinary shares in the Company that were granted as compensation to each KMP during the (A) The percentage forfeited in the year represents the reduction from the maximum number of instruments available to vest due to performance reporting period and details on unlisted options that vested during the reporting period are as follows: criteria not being achieved

No. of options Fair value per No. of options ANALYSIS OF MOVEMENTS IN EQUITY INSTRUMENTS – AUDITED Exercise price granted during Grant date option at Expiry date vested during per option 2016 grant date 2016 The value of unlisted options over ordinary shares in the Company granted and exercised by each KMP during the reporting 8,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 8,000,000 period is detailed below. Tony Leibowitz 8,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 8,000,000 Granted in year (A) Value of options exercised in year (B) 2,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 2,000,000 Robert Adamson Tony Leibowitz $3,008,088 $1,140,000 2,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 2,000,000 Robert Adamson $752,022 ‐ Ken Brinsden 15,000,000** 18/04/2016 $0.381 $0.400 16/05/2019 ‐ Ken Brinsden $5,721,750 ‐ 8,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 8,000,000 Neil Biddle Neil Biddle $3,008,088 $2,280,000 8,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 8,000,000 John Young $2,366,920 ‐ 5,000,000* 30/11/2015 $0.159 $0.100 22/03/2017 5,000,000 Alan Boys $2,254,893 $358,500 John Young 5,000,000* 18/04/2016 $0.315 $0.400 16/05/2018 5,000,000 Brian Lynn $1,890,600 ‐ 3,000,000* 28/08/2015 $0.061 $0.100 22/03/2017 3,000,000 Alan Boys (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 5,000,000* 06/05/2016 $0.414 $0.400 16/05/2018 5,000,000 granted is included in the table above. This amount is allocated to remuneration over the applicable vesting period. Brian Lynn 6,000,000** 22/06/2016 $0.315 $0.626 22/06/2019 ‐ (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. * Unlisted options issued without vesting conditions expire on the earliest of their expiry date or at the Board’s discretion.

38 PILBARA MINERALS ANNUAL REPORT 2016 38 39 DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

38 PILBARA MINERALS ANNUAL REPORT 2016 39 DIRECTORS’DIRECTORS' REPORT REPORT FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016

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 Granted as Options Exercised/ Held at Vested during 1 July 2015 compensation acquired (A) transferred 30 June 2016 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

40 PILBARA MINERALS ANNUAL REPORT 2016 40 DIRECTORS’ REPORT LEAD AUDITOR'S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2016

UNLISTED OPTIONS OVER EQUITY INSTRUMENTS – AUDITED

Held at Granted as Options Exercised/ Held at Vested during 1 July 2015 compensation acquired (A) transferred 30 June 2016 the year Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 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 To: the directors of Pilbara Minerals Limited Ken Brinsden ‐ 15,000,000 ‐ ‐ 15,000,000 ‐ I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year Neil Biddle 3,333,333 16,000,000 ‐ (11,333,333) 8,000,000 16,000,000 ended 30 June 2016 there have been: 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 (i) no contraventions of the auditor independence requirements as set out in the Brian Lynn ‐ 6,000,000 ‐ ‐ 6,000,000 ‐ Corporations Act 2001 in relation to the audit; and (A) Includes options granted as free‐attaching options with convertible notes acquired. (ii) no contraventions of any applicable code of professional conduct in relation to the * 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 audit. 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 KPMG 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 R Gambitta Ken Brinsden ‐ ‐ 869,565 869,565 Neil Biddle 32,938,597 11,333,333 (8,050,000) 36,221,930 Partner John Young 20,158,356 ‐ (4,000,040) 16,158,316 Perth Alan Boys 1,250,000 1,212,500 (897,496) 1,565,004 Brian Lynn ‐ ‐ ‐ ‐ 7 September 2016 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 Liability limited by a scheme approved under (“KPMG International”), a Swiss entity. Professional Standards Legislation.

40 PILBARA MINERALS ANNUAL REPORT 2016 41 CONSOLIDATED STATEMENT STATEMENT OF PROFIT OR OF LOSS PROFIT OR LOSS AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND OTHER COMPREHENSIVE INCOME AS AT 30 JUNE 2016 OTHERFOR THE YEAR COMPREHENSIVE ENDED 30 JUNE 2016 INCOME FOR THE YEAR ENDED 30 JUNE 2016

2015 2015 2014 2016 Restated 2016 Restated Restated Notes $’000 $’000 Notes $’000 $’000 $’000 Other income Assets Other income 4 28 Current assets Cash and cash equivalents 4.1 100,040 3,216 1,095 Expenses Trade and other receivables 4.2 1,545 919 337 Inventories 46 ‐ ‐ General and administration (4,728) (951) Loans receivable ‐ 1,627 ‐ Exploration costs expensed 2.1.3 (10,556) (1,482) Total current assets 101,631 5,762 1,432 Depreciation and amortisation expense (51) (21) Impairment expense 2.1.1 (12,136) (1,605) Non‐current assets Gain on equity investment 3.4 812 ‐ Property, plant and equipment 3.2 833 77 4 Deferred exploration and evaluation expenditure 3.1 263 263 2,635 Share based payment expense 2.1.2 (26,562) (1,955) Investments accounted for using the equity method 3.4 ‐ 1,200 ‐ Other expenses ‐ (397) Other financial assets 6 6 206 Operating profit/(loss) (53,217) (6,383) Total non‐current assets 1,102 1,546 2,845 Finance income 149 45 TOTAL ASSETS 102,733 7,308 4,277 Finance costs (2,350) (334)

Net financing costs 2.2 (2,201) (289) Liabilities Current liabilities Loss before income tax expense (55,418) (6,672) Trade and other payables 4.3 2,952 743 220 Income tax expense 2.5 (189) 52 Share application money received in advance ‐ 1 725 Net loss for the period (55,607) (6,620) Provisions 4.3 1,004 41 ‐ Borrowings 5.2 137 2,622 1,386

Total current liabilities 4,093 3,407 2,331 Total comprehensive income/(loss) for the period (55,607) (6,620) Non‐current liabilities

Borrowings 5.2 209 ‐ ‐ Basic and diluted loss per share for the period (cents per share) 2.6 (6.76) (1.12) Total non‐current liabilities 209 ‐ ‐

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 TOTAL LIABILITIES 4,302 3,407 2,331 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. 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.

42 PILBARA MINERALS ANNUAL REPORT 2016 42 43 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND CONSOLIDATED STATEMENTCONSOLIDATED OF FINANCIAL STATEMENT OF POSITION FINANCIAL POSITION AS AT 30 JUNE 2016 OTHER COMPREHENSIVE INCOME AS AT 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

Total current liabilities 4,093 3,407 2,331 Total comprehensive income/(loss) for the period (55,607) (6,620) Non‐current liabilities

Borrowings 5.2 209 ‐ ‐ Basic and diluted loss per share for the period (cents per share) 2.6 (6.76) (1.12) Total non‐current liabilities 209 ‐ ‐

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

42 PILBARA MINERALS ANNUAL REPORT 2016 43 CONSOLIDATED STATEMENT STATEMENT OF CHANGES OFIN EQUITY CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THETHE YEAR YEAR ENDED ENDED 30 30 JUNE JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

Share‐based 2015 Issued payment Foreign Accumulated 2016 Restated capital reserve currency losses Total Notes $’000 $’000 Restated Restated reserve Restated equity Cash flows from operating activities Notes $’000 $’000 $’000 $’000 $’000 Cash paid to suppliers and employees (4,818) (1,552) Balance at 1 July 2014 16,099 231 (68) (14,316) 1,946 Payments for exploration and evaluation expenditure (9,702) (465) Loss for the period ‐ ‐ ‐ (6,620) (6,620) Interest received 149 45 Total comprehensive ‐ ‐ ‐ (6,620) (6,620) Income tax paid (189) ‐ income/(loss) for the period Other receipts ‐ 23 Issue of ordinary shares 6,681 ‐ ‐ ‐ 6,681 Net cash outflow from operating activities 4.1 (14,560) (1,949) Share issue costs (254) ‐ ‐ ‐ (254)

Issue of options ‐ 2,148 ‐ ‐ 2,148 Cash flows from investing activities Transfer on conversion of ‐ (1,054) ‐ 1,054 ‐ Payments for property, plant and equipment (4,626) (94) options Cash acquired 251 ‐ Balance at 30 June 2015 22,526 1,325 (68) (19,882) 3,901 Payments for security deposit ‐ (5)

Additional interests acquired in associates and joint ventures (2,000) (1,000) Balance at 1 July 2015 22,526 1,325 (68) (19,882) 3,901 Loan to related party (1,224) (1,627) Loss for the period ‐ ‐ ‐ (55,607) (55,607) Net cash outflow from investing activities (7,599) (2,726) Total comprehensive (55,607) (55,607) income/(loss) for the period Issue of ordinary shares 5.1 114,551 ‐ ‐ ‐ 114,551 Cash flows from financing activities Share issue costs 5.1 (7,021) ‐ ‐ ‐ (7,021) Proceeds from the issue of shares 122,721 5,156 Conversion of convertible notes 8,319 ‐ ‐ ‐ 8,319 Capital raising costs (7,021) (60) Option conversions 8,101 ‐ ‐ ‐ 8,101 Proceeds from borrowings 4,000 1,700 Issue of options 5.1 ‐ 26,187 ‐ ‐ 26,187 Repayment of borrowing costs (143) ‐ Transfer on conversion of 5.1 ‐ (5,713) ‐ 5,713 ‐ Interest paid (574) ‐ options Net cash inflow from financing activities 118,983 6,796 Balance at 30 June 2016 146,476 21,799 (68) (69,776) 98,431 Net increase in cash held 96,824 2,121 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 Cash and cash equivalents at the beginning of the period 3,216 1,095 reflects the retrospective application of a change to the accounting policy for exploration and evaluation costs. Refer to Note 2.1.4 for further Cash and cash equivalents at the end of the period 4.1 100,040 3,216 information.

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.

44 PILBARA MINERALS ANNUAL REPORT 2016 44 45 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENTCONSOLIDATED OF CASH FLOWS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

44 PILBARA MINERALS ANNUAL REPORT 2016 45 NOTES TO THETO FINANCIALTHE FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THETHE YEAR YEAR ENDED ENDED 30 30 JUNE JUNE 2016 2016

NOTE 1 – BASIS OF PREPARATION 1.3.3 INTERESTS IN EQUITY‐ACCOUNTED INVESTEES

In preparing the 2016 financial statements, Pilbara Minerals Limited (“the Company”) has made a number of changes in The Group’s interests in equity‐accounted investees comprise interests in associates and joint ventures. Associates structure, layout and wording in order to make the financial statements less complex and more relevant for shareholders and are those entities in which the Group has significant influence, but not control or joint control, over the financial and other users. The Company has grouped notes into sections under six key categories: 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. 1. Basis of preparation 2. Results for the year Interests in associates and joint ventures are accounted for using the equity method. They are initially recognised at 3. Assets and liabilities supporting exploration and evaluation activities cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include 4. Working capital disclosures the Group’s share of the profit or loss and OCI of equity‐accounted investees, until the date on which significant 5. Equity and funding influence or joint control ceases. 6. Other disclosures 1.3.4 TRANSACTIONS ELIMINATED ON CONSOLIDATION 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 Intra‐group balances and transactions, and any unrealised income and expenses arising from intra‐group transactions, non‐significant are not included in the financial statements. 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 1.1 REPORTING ENTITY unrealised gains, but only to the extent that there is no evidence of impairment. Pilbara Minerals Limited is a listed public company incorporated and domiciled in Australia. 1.4 FUNCTIONAL AND PRESENTATIONAL CURRENCY

The Company’s registered office is at 130 Stirling Highway, North Fremantle WA 6159. These consolidated financial These consolidated financial statements are presented in Australian dollars, which is the Company’s functional statements comprise the Company and its subsidiaries (together referred to as the “Group”). 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. The Group is a for‐profit entity and is primarily involved in the exploration for and development of minerals. 1.5 USE OF JUDGMENTS AND ESTIMATES 1.2 BASIS OF ACCOUNTING In preparing these consolidated financial statements, management has made judgments, estimates and assumptions The consolidated financial statements are general purpose financial statements which have been prepared in that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income accordance with Australian Accounting Standards (“AAS”) adopted by the Australian Accounting Standards Board and expense. Actual results may differ from these estimates. (“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 Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised for issue by the Board of Directors on 7 September 2016. prospectively.

1.3 BASIS OF CONSOLIDATION 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) 1.3.1 BUSINESS COMBINATIONS  Property, plant and equipment (carrying value and impairment charges) (refer to Note 2.1.1).

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 1.6 MEASUREMENT OF FAIR VALUES acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. and non‐financial assets and liabilities.

The consideration transferred does not include amounts related to the settlement of pre‐existing relationships. Such A financial asset measured at amortised cost is assessed at each reporting date to determine whether there is objective amounts are generally recognised in profit or loss. 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 Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent flows of that asset that can be estimated reliably. Refer to Note 2.1.1 for policies on non‐financial assets. 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.

46 PILBARA MINERALS ANNUAL REPORT 2016 46 47 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

NOTE 1 – BASIS OF PREPARATION 1.3.3 INTERESTS IN EQUITY‐ACCOUNTED INVESTEES

The Company’s registered office is at 130 Stirling Highway, North Fremantle WA 6159. These consolidated financial These consolidated financial statements are presented in Australian dollars, which is the Company’s functional statements comprise the Company and its subsidiaries (together referred to as the “Group”). 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. The Group is a for‐profit entity and is primarily involved in the exploration for and development of minerals. 1.5 USE OF JUDGMENTS AND ESTIMATES 1.2 FBASIS O ACCOUNTING In preparing these consolidated financial statements, management has made judgments, estimates and assumptions The consolidated financial statements are general purpose financial statements which have been prepared in that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income accordance with Australian Accounting Standards (“AAS”) adopted by the Australian Accounting Standards Board and expense. Actual results may differ from these estimates. (“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 Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised for issue by the Board of Directors on 7 September 2016. prospectively.

1.3.2 SUBSIDIARIES

46 PILBARA MINERALS ANNUAL REPORT 2016 47 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

NOTE 2 – RESULTS FOR THE YEAR 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 2.1 EXPENSES tantalum market conditions meant that the Tabba Tabba Tantalum Project was suspended indefinitely.

Expenses incurred by the Group are the main drivers of the results for the year. 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 2.1.1 IMPAIRMENT EXPENSE 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. ACCOUNTING POLICY Non‐financial assets 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 At each reporting date, the Group reviews the carrying amounts of its non‐financial assets (other than inventories and to return all mineral rights back to GAM for no consideration and accordingly all capitalised project development costs 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. ($7.66 million) have been impaired to nil. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from As part of the acquisition of TTT assets, Pilbara Minerals Limited recognised a goodwill intangible asset of $1.3 million. continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business Following an assessment of the carrying value of the goodwill it was determined that the balance should be impaired combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. to nil. 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 As noted above, a $1.3 million liability was raised to recognise a future payment to Valdrew upon the delivery of reflects current market assessments of the time value of money and the risks specific to the asset or CGU. concentrate to GAM when the Company purchased the remaining 50% interest in the Tabba Tabba Tantalum Project An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. 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. 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. 2.1.2 SHARE‐BASED PAYMENT EXPENSE 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 ACCOUNTING POLICY depreciation or amortisation, if no impairment loss had been recognised. Share‐based payment arrangements The impairment expense recognised within the Statement of Profit or Loss relates to the Tabba Tabba Tantalum Project 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 and can be broken down as follows: the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for 2015 which the related service and non‐market performance conditions are expected to be met, such that the amount ultimately 2016 Restated recognised is based on the number of awards that meet the related service and non‐market performance conditions at $’000 $’000 the vesting date. Impairment – property, plant and equipment 4,449 ‐ For share‐based payment awards with non‐vesting conditions, the grant‐date fair value of the share‐based payment is Impairment – mine development 7,660 ‐ measured to reflect such conditions and there is no true‐up for differences between expected and actual outcomes. 12,109 ‐ In determining the fair value of share based payments granted, a key estimate and judgement is the volatility input assumed Impairment – exploration and evaluation expenditure ‐ 1,605 within the option pricing model. The Company uses historical volatility of the Company to determine an appropriate level Reversal of liability (1,300) ‐ of volatility expected, commensurate with the expected option life. Impairment – goodwill 1,327 ‐ The share‐based payment expense included within the Statement of Profit or Loss can be broken down as follows: 12,136 1,605 2016 2015 In 2014, the Company entered into a joint venture with Valdrew Nominees Pty Ltd to jointly evaluate, develop and $’000 $’000 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 Share options expense 26,562 1,955 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 VWAPr prio 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.

48 PILBARA MINERALS ANNUAL REPORT 2016 48 49 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

Expenses incurred by the Group are the main drivers of the results for the year. 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 2.1.1 IMPAIRMENT EXPENSE 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. ACCOUNTING POLICY Non‐financial assets 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 At each reporting date, the Group reviews the carrying amounts of its non‐financial assets (other than inventories and to return all mineral rights back to GAM for no consideration and accordingly all capitalised project development costs 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. ($7.66 million) have been impaired to nil. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from As part of the acquisition of TTT assets, Pilbara Minerals Limited recognised a goodwill intangible asset of $1.3 million. continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business Following an assessment of the carrying value of the goodwill it was determined that the balance should be impaired combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. to nil. 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 As noted above, a $1.3 million liability was raised to recognise a future payment to Valdrew upon the delivery of reflects current market assessments of the time value of money and the risks specific to the asset or CGU. concentrate to GAM when the Company purchased the remaining 50% interest in the Tabba Tabba Tantalum Project An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. 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. 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. 2.1.2 SHARE‐BASED PAYMENT EXPENSE 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 ACCOUNTING POLICY depreciation or amortisation, if no impairment loss had been recognised. Share‐based payment arrangements The impairment expense recognised within the Statement of Profit or Loss relates to the Tabba Tabba Tantalum Project 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 and can be broken down as follows: the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for 2015 which the related service and non‐market performance conditions are expected to be met, such that the amount ultimately 2016 Restated recognised is based on the number of awards that meet the related service and non‐market performance conditions at $’000 $’000 the vesting date. Impairment – property, plant and equipment 4,449 ‐ For share‐based payment awards with non‐vesting conditions, the grant‐date fair value of the share‐based payment is Impairment – mine development 7,660 ‐ measured to reflect such conditions and there is no true‐up for differences between expected and actual outcomes. 12,109 ‐ In determining the fair value of share based payments granted, a key estimate and judgement is the volatility input assumed Impairment – exploration and evaluation expenditure ‐ 1,605 within the option pricing model. The Company uses historical volatility of the Company to determine an appropriate level Reversal of liability (1,300) ‐ of volatility expected, commensurate with the expected option life. Impairment – goodwill 1,327 ‐ The share‐based payment expense included within the Statement of Profit or Loss can be broken down as follows: 12,136 1,605 2016 2015 In 2014, the Company entered into a joint venture with Valdrew Nominees Pty Ltd to jointly evaluate, develop and $’000 $’000 emine th 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 Share options expense 26,562 1,955 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.

48 PILBARA MINERALS ANNUAL REPORT 2016 49 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

The following table shows total options granted (or deemed to be granted) during the year ended 30 June 2016 and The number and weighted average exercise prices of unlisted share options are as follows: the value attributed to each option granted, by holder: 2016 2015 No. of Exercise Value Value Value Weighted average Weighted average Holder Expiry No. of options No. of options options price ($/option) ($’000) expensed exercise price exercise price Directors 18,000,000 $0.10 22/03/2017 $0.0614 1,105 1,105 Outstanding at 1 July $0.036 41,469,994 $0.030 49,999,991 5,000,000 $0.10 22/03/2017 $0.1588 794 794 Exercised during the period $0.066 (122,793,103) $0.037 (31,679,997) 23,000,000 $0.40 16/05/2018 $0.3146 7,236 7,236 Granted during the period $0.236 190,745,455 $0.050 23,150,000 15,000,000 $0.40 16/05/2019 $0.3815 5,722 1,786 Outstanding at 30 June $0.351 109,422,346 $0.036 41,469,994 KMP 3,000,000 $0.10 22/03/2017 $0.0614 185 185 Exercisable at 30 June 71,122,346 41,469,994 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 2.1.3 EXPLORATION AND EVALUATION EXPENDITURE Subtotal – Directors/KMP 75,000,000 19,004 13,239 The consolidated financial statements have been prepared incorporating retrospective application of a voluntary 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 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 16,500,000 $0.40 16/05/2019 $0.4851 8,004 2,099 policy will provide more relevant and reliable information to users of the consolidated financial statements. Both the Service provider 4,000,000 $0.10 22/03/2017 $0.0614 246 246 previous and the new accounting policy are compliant with AASB 6: Exploration for and Evaluation of Mineral 1,000,000 $0.40 16/05/2018 $0.3142 314 314 Resources. 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 The impact of the change in accounting policy on the Consolidated Statement of Profit or Loss, Consolidated Convertible noteholders 56,400,000 $0.05 02/03/2017 $0.0620 3,498 3,498 Statement of Financial Position and Consolidated Statement of Cash Flow is included in Section 2.1.4.

Options attached to share 17,045,455 $0.15 01/12/2017 ‐ ‐ ‐ ACCOUNTING POLICY placement Subtotal 190,745,455 37,916 26,187 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. Related share‐based ‐ ‐ 375 payment expenses The Company now accounts for exploration and evaluation activities by applying the following policy. TOTAL 190,745,455 37,916 26,562 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 All options issued to Directors were approved by shareholders at General Meetings held in August 2015, November extracting the mineral resource. Accordingly, exploration and evaluation expenditures are those expenditures incurred in 2015 and April 2016. connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. The classes of the options on issue as at 30 June 2016 are as follows: 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 Options issued Expiry date Exercise price No. of options not yet exercised mineral deposit or has been proved to contain such a deposit. 23,150,000 21 December 2016 $0.05 1,250,000 Exploration and evaluation costs are written off in the year they are incurred, apart from acquisition costs which are carried 56,400,000 2 March 2017 $0.05 4,937,500 forward where right of tenure of the area of interest is current, and they are expected to be recouped through sale or 34,500,000 22 March 2017 $0.10 13,000,000 successful development and exploitation of the area of interest, or where exploration and evaluation activities in the area of 50,000,000 25 March 2017 $0.03 4,166,665 interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. 17,045,455 1 December 2017 $0.15 3,268,181 Where an area of interest is abandoned, or the Directors decide that it is not commercially viable, any accumulated 37,500,000 16 May 2018 $0.40 37,500,000 acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is 800,000 a 16 May 2018 $0.40 800,000 also reviewed at the end of each accounting period and accumulated costs are written off to the extent that they will not 7,000,000 16 May 2018 $0.65 7,000,000 be recoverable in the future. 31,500,000 b 16 May 2019 $0.40 31,500,000 6,000,000 22 June 2019 $0.63 6,000,000 2015 2016 Restated a The vesting conditions attached to this set of options are based on an employee providing six months of continuous service to the $’000 $’000 Company. b The vesting conditions attached to these unlisted options were: Costs expensed in relation to areas of interest in the  33.33% vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; exploration and evaluation phase (10,556) (1,482)  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.

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

50 PILBARA MINERALS ANNUAL REPORT 2016 50 51 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

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

50 PILBARA MINERALS ANNUAL REPORT 2016 51 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

2.1.4 VOLUNTARY CHANGE OF ACCOUNTING POLICY 2.2 NET FINANCING COSTS

a) Exploration expense ACCOUNTING POLICY The impact on the consolidated financial statements from incorporating retrospective application of a voluntary The Group’s finance income and finance costs include: change in the exploration and evaluation expenditure accounting policy is as follows:  interest income;

 interest expense; and 30 June 2015 ($‘000) 30 June 2014 ($’000)  dividend income. Previous Increase/ Previous Increase/ policy (decrease) Restated policy (decrease) Restated Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or Consolidated statement of loss on the date on which the Group’s right to receive payment is established. financial position (extract) Net financing costs can be analysed as follows: Exploration and evaluation 1,806 (1,543) 263 3,070 (435) 2,635 2016 2015 expenditure $’000 $’000 Net assets 5,444 (1,543) 3,901 2,381 (435) 1,946 Accumulated losses (18,339)* (1,543) (19,882) (13,881) (435) (14,316) Interest income on bank deposits 149 45 Total equity 5,444 (1,543) 3,901 2,381 (435) 1,946 Finance income 149 45 Consolidated statement of Interest expense – convertible notes (refer to Note 5.2.2) (2,318) (334) profit or loss and Interest expense – hire purchase assets (27) ‐ comprehensive income Net foreign exchange loss (5) ‐ (extract) Finance costs (2,350) (334) Impairment expense (1,980) 375 (1,605) Exploration costs expensed ‐ (1,482) (1,482) Net finance costs recognised in profit or loss (2,201) (289) Loss for the year (5,513) (1,107) (6,620) Loss per share 2.3 OPERATING SEGMENTS Basic and diluted (cents per (0.94) (0.18) (1.12) share) For management purposes the Group has one operating segment, being mineral exploration and evaluation in Australia. Segment results that are reported to the Group’s chief operating decision maker include items directly attributable to 30 June 2015 ($’000) a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate Previous Increase/ assets and head office expenses. policy (decrease) Restated 2.3.1 INFORMATION ABOUT REPORTING SEGMENTS Consolidated statement of cash flows (extract) Mineral exploration and evaluation Payments for exploration and evaluation expenditure ‐ (465) (465) 2016 2015 Net cash used in operating activities (1,483) (465) (1,948) $’000 $’000 For the year ended 30 June Payments for exploration and evaluation expenditure (465) 465 ‐ Reportable segment costs expensed (22,692) (1,482) Net cash used in investing activities (3,191) 465 (2,726) Reportable segment (loss) before income tax (22,692) (1,482) * Includes impact of change in accounting policy for share based payments. Refer to Note 2.1.4(b). Reportable segment assets 763 263 Reportable segment liabilities 3,470 42 b) Share‐based payment reserve

Reconciliation of reportable segment loss and assets 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 Loss accumulated losses. The impact in this change in accounting policy is to decrease contributed equity by Total loss for reportable segments (22,692) (1,482) $1,054,160 and decrease accumulated losses by the same amount in the 2015 financial year. 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

52 PILBARA MINERALS ANNUAL REPORT 2016 52 53 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

2.1.4 VOLUNTARY CHANGE OF ACCOUNTING POLICY 2.2 NET FINANCING COSTS a) Exploration expense ACCOUNTING POLICY The impact on the consolidated financial statements from incorporating retrospective application of a voluntary The Group’s finance income and finance costs include: change in the exploration and evaluation expenditure accounting policy is as follows:  interest income;

52 PILBARA MINERALS ANNUAL REPORT 2016 53 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

2.4 PERSONNEL EXPENSES 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. ACCOUNTING POLICY 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 Short‐term employee benefits carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group Short‐term employee benefits are expensed as the related service is provided. A liability is recognised for the amount has not rebutted this presumption. expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service Deferred tax assets and liabilities are offset only if certain criteria are met. 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. 2.5.1 INCOME TAX EXPENSE 2016 2015 Defined contribution plans $’000 $’000 Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid Current income tax expense (189) (52) 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 2.5.2 RECONCILIATION OF EFFECT TAX RATES The Group’s net obligation in respect of long‐term employee benefits is the amount of future benefit that employees have 2015 earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. 2016 Restated Re‐measurements are recognised in profit or loss in the period in which they arise. $’000 $’000 Termination benefits Loss before tax from continuing operations (55,418) (6,672) Termination ebenefits ar expensed at the earlier of when the Group can no longer withdraw the offer of those benefits Tax using the Company’s domestic tax rate of 30% (2015: 30%) (16,625) (2,002) and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within Research and development tax offset ‐ (52) 12 months of the reporting date, then they are discounted. Subsidiary tax liability (189) ‐

The table below sets out personnel costs expensed during the year: Tax effect of: 2016 2015 Non‐deductible expenses $’000 $’000 Share based payment expense 7,969 ‐ Wages and salaries 841 171 Gain on equity investment (244) ‐ Superannuation expense 110 6 Financing costs 523 ‐ Increase/(decrease) in liability for annual leave 42 ‐ Other 30 692 993 177 Tax slosse not recognised 4,316 1,310 Temporary differences not brought to account 4,031 ‐ 2.5 INCOME TAX EXPENSES Income tax expense reported in the consolidated statement of profit or loss (189) (52)

ACCOUNTING POLICY 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 Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates benefits. The deferred tax losses not recognised at 30 June 2016 have a tax effected value of $6.4 million (2015: to a business combination, or items recognised directly in equity or in OCI. $2.1 million). Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any 2.6 EARNINGS/(LOSS) PER SHARE 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, Basic earnings/(loss) per share if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any 2015 tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met. 2016 Restated $’000 $’000 Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for Net loss attributable to ordinary shareholders (55,607) (6,620) financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: Issued ordinary shares at 1 July 658,579 330,297  temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination Effect of shares issued 164,403 258,953 and that affects neither accounting nor taxable profit or loss; Weighted average number of ordinary shares at 30 June 822,982 589,250  temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Basic and diluted loss per share (cents)* (6.76) (1.12) Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not * Due to the fact that the Company made a loss, potential ordinary shares from the exercise of options have been excluded due to their reverse in the foreseeable future; and anti‐dilutive effect  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.

54 PILBARA MINERALS ANNUAL REPORT 2016 54 55 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

2.4 PERSONNEL EXPENSES 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. ACCOUNTING POLICY 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 Short‐term employee benefits carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group Short‐term employee benefits are expensed as the related service is provided. A liability is recognised for the amount has not rebutted this presumption. expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service Deferred tax assets and liabilities are offset only if certain criteria are met. 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. 2.5.1 INCOME TAX EXPENSE 2016 2015 Defined contribution plans $’000 $’000 Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid Current income tax expense (189) (52) 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 2.5.2 RECONCILIATION OF EFFECT TAX RATES The Group’s net obligation in respect of long‐term employee benefits is the amount of future benefit that employees have 2015 earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. 2016 Restated Re‐measurements are recognised in profit or loss in the period in which they arise. $’000 $’000 Termination benefits Loss before tax from continuing operations (55,418) (6,672) Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits Tax using the Company’s domestic tax rate of 30% (2015: 30%) (16,625) (2,002) and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within Research and development tax offset ‐ (52) 12 months of the reporting date, then they are discounted. Subsidiary tax liability (189) ‐

The table below sets out personnel costs expensed during the year: Tax effect of: 2016 2015 Non‐deductible expenses $’000 $’000 Share based payment expense 7,969 ‐ Wages and salaries 841 171 Gain on equity investment (244) ‐ Superannuation expense 110 6 Financing costs 523 ‐ Increase/(decrease) in liability for annual leave 42 ‐ Other 30 692 993 177 Tax losses not recognised 4,316 1,310 Temporary differences not brought to account 4,031 ‐ 2.5 INCOME TAX EXPENSES Income tax expense reported in the consolidated statement of profit or loss (189) (52)

54 PILBARA MINERALS ANNUAL REPORT 2016 55 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

NOTE 3 – ASSETS AND LIABILITIES SUPPORTING EXPLORATION AND EVALUATION Property, Hire plant and purchase Mine Mine This section focuses on the exploration and evaluation assets which form the core of the Group’s business, including those equipment equipment properties rehabilitation Total assets and liabilities that support the ongoing exploration and evaluation as well as commitments existing at the year end. $’000 $’000 $’000 $’000 $’000 Cost 3.1 EXPLORATION AND EVALUATION EXPENDITURE Balance at 1 July 2014 13 ‐ ‐ ‐ 13 Additions 94 ‐ ‐ ‐ 94 ACCOUNTING POLICY Disposals ‐ ‐ ‐ ‐ ‐ Refer to Note 2.1.3 for the Company’s exploration and evaluation expenditure policy. Balance at 30 June 2015 107 ‐ ‐ ‐ 107 Balance at 1 July 2015 107 ‐ ‐ ‐ 107 3.1.1 EXPLORATION AND EVALUATION ASSETS Acquisitions through business 4,153 696 2,491 ‐ 7,340 2015 combinations 2016 Restated Additions 208 ‐ 4,418 908 5,534 $’000 $’000 Transfers ‐ ‐ ‐ 42 42 Costs carried forward in relation to areas of interest in Balance at 30 June 2016 4,468 696 6,909 950 13,023 the exploration and evaluation phase 263 263 Accumulated depreciation and Reconciliations: Exploration and evaluation phase impairment losses Carrying amount at the beginning of the year 263 2,635 Balance at 1 July 2014 (9) ‐ ‐ ‐ (9) Acquisitions ‐ 233 Depreciation (21) ‐ ‐ ‐ (21) Transfer to equity accounted investments ‐ (1,000) Impairment loss ‐ ‐ ‐ ‐ ‐ Impairment ‐ (1,605) Disposals ‐ ‐ ‐ ‐ ‐ Carrying amount at the end of the year 263 263 Balance at 30 June 2015 (30) ‐ ‐ ‐ (30) Balance at 1 July 2015 (30) ‐ ‐ ‐ (30) 3.1.2 EXPLORATION LICENCE EXPENDITURE COMMITMENTS Depreciation (51) ‐ ‐ ‐ (51) Impairment loss (3,928) (521) (6,909) (751) (12,109) The Company has minimum exploration commitments as follows: 2016 2015 Balance at 30 June 2016 (4,009) (521) (6,909) (751) (12,190) $’000 $’000 Carrying amounts Within one year 125 233 At 1 July 2014 4 ‐ ‐ ‐ 4 Later than one year but less than five years 260 931 At 30 June 2015 77 ‐ ‐ ‐ 77 Greater than five years 557 ‐ At 30 June 2016 459 175 ‐ 199 833

3.2 PROPERTY, PLANT AND EQUIPMENT 3.3 INTANGIBLE ASSETS AND GOODWILL

ACCOUNTING POLICY ACCOUNTING POLICY Recognition and measurement Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated Goodwill impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. When parts of Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. an item of property, plant and equipment have different useful lives, they are accounted for as a separate item of property, plant and equipment. 3.3.1 GOODWILL Depreciation 2016 2015 Depreciation is calculated to write off the cost of items of property plant and equipment less their estimated residual value $’000 $’000 using either the straight line or units of production methods over either the estimated useful life or the estimated resource. Balance at 1 July ‐ ‐ Depreciation is recognised in profit or loss. Land is not depreciated. Additions 1,327 ‐ The estimated useful lives of property, plant and equipment for current and comparative periods are as follows: Impairment (1,327) ‐ • Office equipment 2 to 10 years Balance at 30 June ‐ ‐ • Plant and equipment 5 years • Motor vehicles 5 years Goodwill arose on the acquisition of 50% of the Tabba Tabba Tantalum Project in September 2015. The goodwill was Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted appropriately. 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.

56 PILBARA MINERALS ANNUAL REPORT 2016 56 57 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

3.2 PROPERTY, PLANT AND EQUIPMENT 3.3 INTANGIBLE ASSETS AND GOODWILL

January 2016. See Note 3.4 for further details.

56 PILBARA MINERALS ANNUAL REPORT 2016 57 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

3.4 BUSINESS COMBINATIONS NOTE 4 – WORKING CAPITAL 2016 2015 $’000 $’000 4.1 CASH AND CASH EQUIVALENTS Investment in equity accounted associate ‐ 1,200 ACCOUNTING POLICY In 2014, the Company entered into the incorporated joint venture Tabba Tabba Tantalum Pty Ltd (“TTT”) with Valdrew Cash and cash equivalents comprise cash balances and call deposits with a maturity of less than or equal to six months Nominees Pty Ltd (“Valdrew”) to jointly evaluate, develop and mine the Tabba Tabba Tantalum Project located some from the date of acquisition. The carrying value of cash and cash equivalents is considered to approximate fair value. 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 4.1.1 CASH AND CASH EQUIVALENTS undertaken by TTT pursuant to an agreement with GAM, who has an offtake agreement for the project’s tantalite 2016 2015 concentrate. On 25 September 2015, the Group acquired the remaining 50% of the issued shares in Tabba Tabba $’000 $’000 Tantalum Pty Ltd (formerly Nagrom Mining Pty Ltd) for a consideration of $2,000,000. Bank balances 6,019 3,216 Call deposits 94,021 ‐ 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 Cash and cash equivalents in the statement of financial position 100,040 3,216 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 4.1.2 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES investment of $0.81 million was recognised as follows: 2016 2015 $’000 $’000 $’000 Cash flows from operating activities Carrying value of investment before the acquisition 1,200 Loss for the period (55,607) (6,620) Share of loss (12) Adjustments for: Carrying value of investment 1,188 ‐ Depreciation 51 21 ‐ Finance costs 2,350 334 Fair value of investment on acquisition 2,000 ‐ Impairment expense 12,136 1,605 Gain on revaluation of investment 812 ‐ Share based payment expense 26,562 1,955 ‐ Gain on equity investment (812) ‐ Details of the purchase consideration, the net assets acquired and goodwill are as follows: Fair value at Operating loss before changes in working capital and provisions (15,320) (2,705) acquisition Change in trade and other receivables (620) (224) date $’000 Change in trade payables and employee benefits 1,380 980 Net cash used in operating activities (14,560) (1,949) Cash and cash equivalents 251 Trade and other receivables 1,016 Inventories 46 4.2 TRADE AND OTHER RECEIVABLES Property, plant and equipment 7,340 ACCOUNTING POLICY Trade and other payables (5,526) Borrowings (454) Trade and other receivables are recognised initially at fair value which is usually the value of the invoice sent to the 2,673 counter‐party and subsequently at the amounts considered recoverable. Where there is evidence that the receivable is Goodwill arising on acquisition 1,327 not recoverable, it is impaired with a corresponding charge to the profit or loss statement. Total value of acquisition 4,000 2016 2015 In January 2016, the operations at the TTT Project were suspended following plant commissioning problems. A $’000 $’000 Current subsequent engineering review determined that significant expenditure would be required to modify the existing plant Trade debtors ‐ 757 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 Goods and services tax receivable 671 52 was impaired to nil. Security deposits 759 5 Other receivables 115 105 1,545 919

58 PILBARA MINERALS ANNUAL REPORT 2016 58 59 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

58 PILBARA MINERALS ANNUAL REPORT 2016 59 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

4.3 TRADE AND OTHER PAYABLES AND PROVISIONS 2015 2016 Restated ACCOUNTING POLICY $’000 $’000 Trade payables Ordinary shares 146,476 22,526 These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year Total share capital on issue at 30 June 146,476 22,526 which are unpaid. The amounts are unsecured and are usually payable within 30 days’ net of recognition. Trade payables Movements in ordinary shares on issue: are recognised initially at the value of the invoice received from a supplier. On issue at 1 July 22,526 16,099 Provisions Shares issued during the period 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 Issued for cash 114,551 4,721 as a finance cost. Issued for services provided ‐ 117 Site restoration Exercise of share options 8,101 1,159 In accordance with the applicable legal requirements, a provision for site restoration in respect of returning the land to its Conversion of convertible notes and accrued interest 8,319 684 original state is recognised when the land is disturbed. Share issue costs (7,021) (254) At reporting date 146,476 22,526 2016 2015 $’000 $’000 Terms and conditions of ordinary shares Current – Trade and other payables Trade payables 2,093 458 Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote Accruals 802 284 per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all Other payables 57 1 other shareholders and creditors with respect to any proceeds of liquidations. 2,952 743 5.1.2 RESERVES Current – Provisions 2015 Mine rehabilitation provision 962 41 2016 Restated Annual leave provision 42 ‐ $’000 $’000 1,004 41 Share‐based payment reserve 21,799 1,325 Foreign currency reserve (68) (68) 21,731 1,257 NOTE 5 – EQUITY AND FUNDING Share‐based payment reserve 5.1 CAPITAL AND RESERVES 2016 2015 $’000 $’000 ACCOUNTING POLICY Share‐based payment reserve 21,799 1,325 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. 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 5.1.1 ORDINARY SHARES Financing transaction costs ‐ 194 2016 2015 ‘000 ‘000 Options exercised and transferred to accumulated losses (5,713) (1,054) Balance at reporting date 21,799 1,325 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

60 PILBARA MINERALS ANNUAL REPORT 2016 60 61 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

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

Shares issued during the period

60 PILBARA MINERALS ANNUAL REPORT 2016 61 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

The share‐based payment reserve is used to record the fair value of the options issued. Options issued to directors, 5.2.1 TERMS AND REPAYMENT SCHEDULE consultants and employees during the year and their associated value impact on the share based payment reserve are as follows: The terms and conditions of outstanding loans are as follows:

2016 2015 Share price on Valuation (cents Nominal Option Grant date Exercise price Expiry date Year of Face Carrying Face Carrying date of grant per option) Currency interest maturity value amount value amount rate 29,500,000 28/08/2015 $0.11 $0.10 22/03/2017 6.14 $’000 $’000 $’000 $’000 56,400,000 28/08/2015 $0.11 $0.05 02/03/2017 6.20 2014 Convertible notes AUD 20% 2015 ‐ ‐ 1,500 832 5,000,000 30/11/2015 $0.24 $0.10 22/03/2017 15.88 2015 Convertible notes AUD 15% 2016 ‐ ‐ 1,700 1,790 23,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.46 2016 Convertible note AUD 15% 2017 ‐ ‐ ‐ ‐ 1,000,000 18/04/2016 $0.58 $0.40 16/05/2018 31.42 Hire purchase AUD 6.5% 2019 346 346 ‐ ‐ 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 Total interest‐bearing liabilities 346 346 3,200 2,622 800,000** 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 5.2.2 CONVERTIBLE NOTE LIABILITY 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 ACCOUNTING POLICY 6,000,000* 22/06/2016*** $0.57 $0.63 22/06/2019 31.51 The liability component of a convertible note is recognised initially at its fair value. Subsequent to initial recognition, the * The vesting conditions attaching to these options are: liability component of the convertible note is measured at amortised cost using the effective interest method.  33.33% will vest upon the delivery of a final DFS for the Pilgangoora Project to a standard acceptable to the Board; On 11 June 2015, the Company entered into an agreement with a group of sophisticated investors to issue convertible  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; notes with free attaching options over fully paid ordinary shares of the Company for cash consideration of $4,000,000,  33.33% will vest upon the Pilgangoora Project mine development and plant construction being largely complete (both for civil works subject to shareholder approval. Approval from shareholders was received at an Extraordinary General Meeting held and mine establishment) and the process plant having achieved a nominal 85% of its design throughput capacity during production on 28 August 2015. runs, at a saleable product specification; and  A continuing employment service condition at the time each milestone is achieved. The 4,000,000 convertible notes were issued with a face value of $1.00 per note, a maturity date of 2 March 2017 ** The vesting condition attaching to these options is six months of continuous employment service. 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 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. The convertible notes were classified as a financial liability in its entirety.

All option valuations during the period were performed by an independent third party valuer. The Black Scholes option 50,000,000 free attaching options were issued to convertible noteholders with the related convertible notes. A further valuation methodology was used to value the options. Inputs to the option valuation model included the Company’s 6,400,000 unlisted options were issued as consideration for capital raising fees associated with the issue of the share price volatility, risk free rates, option life, and the option exercise price. Option volatility was calculated using convertible notes. The options were issued with no vesting conditions, were exercisable at $0.05 per option and had the share price movement of the Company over the past 12 months up until the date the options were granted. 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. 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: Movements in convertible notes during the year are shown as follows: 2016 2016 2015 $’000 $’000 Expected volatility (weighted average) 102.4% Expected life (weighted average) 2.0 years Carrying amount of liability at the beginning of the period 2,622 1,386 Risk free interest rate (based on government bonds) (weighted average) 1.8% Interest expense 1,745 ‐ Termination of notes (175) ‐ 5.2 LOANS AND BORROWINGS Issue of notes 4,000 1,700 Conversion to equity (8,192) (464) This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For Carrying amount of liability at the end of the period ‐ 2,622 more information about the Group’s exposure to interest rate risk, see Section 6.2. The fair value of the convertible notes on issue during the year was equivalent to their face value. As the notes can 2016 2015 be converted after six months at a 20% discount to the five‐day share price VWAP at the time of conversion, the fair $’000 $’000 value of the notes has been accreted to reflect this additional value over the six‐month period. The interest expense Current of $2,318,000 included in the profit or loss includes $1,745,000 accretion in value and $573,000 interest paid in cash Hire purchase liability 137 ‐ (levied at the coupon rate of 15%). Convertible note – debt liability ‐ 2,622 Total borrowings – current 137 2,622 5.3 CAPITAL MANAGEMENT Non‐current Hire purchase liability 209 ‐ Capital consists of ordinary share capital, retained earnings, reserves and net debt. The Group’s objectives when Total borrowings – non‐current 209 ‐ 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.

62 PILBARA MINERALS ANNUAL REPORT 2016 62 63 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

All option valuations during the period were performed by an independent third party valuer. The Black Scholes option 50,000,000 free attaching options were issued to convertible noteholders with the related convertible notes. A further valuation methodology was used to value the options. Inputs to the option valuation model included the Company’s 6,400,000 unlisted options were issued as consideration for capital raising fees associated with the issue of the share price volatility, risk free rates, option life, and the option exercise price. Option volatility was calculated using convertible notes. The options were issued with no vesting conditions, were exercisable at $0.05 per option and had the share price movement of the Company over the past 12 months up until the date the options were granted. 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. The key inputs used in the measuremente of th fair values at grant date of the equity‐settled share based payment plans were as follows: Movements in convertible notes during the year are shown as follows: 2016 2016 2015 $’000 $’000 Expected volatility (weighted average) 102.4% Expected life (weighted average) 2.0 years Carrying amount of liability at the beginning of the period 2,622 1,386 Risk free interest rate (based on government bonds) (weighted average) 1.8% Interest expense 1,745 ‐ Termination of notes (175) ‐ 5.2 LOANS AND BORROWINGS Issue of notes 4,000 1,700 Conversion to equity (8,192) (464) This note provides information about the contractual terms of the Group’s interest bearing loans and borrowings. For Carrying amount of liability at the end of the period ‐ 2,622 more information about the Group’s exposure to interest rate risk, see Section 6.2. The fair value of the convertible notes on issue during the year was equivalent to their face value. As the notes can 2016 2015 be converted after six months at a 20% discount to the five‐day share price VWAP at the time of conversion, the fair $’000 $’000 value of the notes has been accreted to reflect this additional value over the six‐month period. The interest expense Current of $2,318,000 included in the profit or loss includes $1,745,000 accretion in value and $573,000 interest paid in cash Hire purchase liability 137 ‐ (levied at the coupon rate of 15%). Convertible note – debt liability ‐ 2,622 Total borrowings – current 137 2,622 5.3 CAPITAL MANAGEMENT Non‐current Hire purchase liability 209 ‐ Capital consists of ordinary share capital, retained earnings, reserves and net debt. The Group’s objectives when Total borrowings – non‐current 209 ‐ 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.

62 PILBARA MINERALS ANNUAL REPORT 2016 63 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

NOTE 6 – OTHER DISCLOSURES Set out below are details of the Group’s financial assets and liabilities at the end of the reporting period.

2016 2015 6.1 FINANCIAL RISK MANAGEMENT $’000 $’000 Financial assets ACCOUNTING POLICY Cash and cash equivalents 100,040 3,216 The Group classifies non‐derivative financial assets into the following categories: Trade and other receivables 1,545 919 Loans receivable ‐ 1,627 • financial assets at fair value through profit or loss, Other financial assets 6 6 • held‐to‐maturity financial assets, • loans and receivables, and Total financial assets 101,591 5,768 • available‐for‐sale financial assets. Financial liabilities The Group classifies non‐derivative financial liabilities into the following categories: Trade and other payables 2,952 743 • financial liabilities at fair value through profit or loss, and Borrowings 346 2,622 • other financial liabilities. Total financial liabilities 3,298 3,365 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 6.1.1 OVERVIEW 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 has exposure to the following risks from their use of financial instruments: The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers  Credit risk the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership  Liquidity risk 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 The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk retained by the Group is recognised as a separate asset or liability. management framework. The Group’s risk management policies are established to identify and analyse the risks faced The Group de‐recognises a financial liability when its contractual obligations are discharged or cancelled, or expire. by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. 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. 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 ofe th Pilgangoora Non‐derivative financial assets – Measurement Project and ancillary exploration activities. 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 The principal financial instruments as at the reporting date include cash, receivables, payables and loan and finance on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at agreements. fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, Set out below is information about exposures to the above risks, the objectives, policies and processes for measuring are recognised in profit or loss. and managing risk, and the management of capital. Held‐to‐maturity financial assets These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial 6.1.2 CREDIT RISK recognition, they are measured at amortised cost using the effective interest method. Loans and receivables Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial obligations, and arises principally from the Group’s cash at bank and term deposits. recognition, they are measured at amortised cost using the effective interest method. The carrying amount of financial assets represents the maximum credit exposure. Available‐for‐sale financial assets These assets are initially measured at fair value, plus any directly attributable transaction costs. Subsequent to initial The Group limits its exposure to credit risk by only transacting with high credit quality financial institutions. During the recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency year the Group maintained all cash and cash equivalents balances with banks and financial institutions holding a AA‐ differences on debt instruments, are recognised in other comprehensive income and accumulated in the fair value reserve. rating based on S&P Global ratings. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Non‐derivative financial liabilities – Measurement 6.1.3 LIQUIDITY RISK 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 Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is 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 to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. effective interest method. 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.

64 PILBARA MINERALS ANNUAL REPORT 2016 64 65 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

NOTE 6 – OTHER DISCLOSURES Set out below are details of the Group’s financial assets and liabilities at the end of the reporting period.

2016 2015 6.1 FINANCIAL RISK MANAGEMENT $’000 $’000 Financial assets ACCOUNTING POLICY Cash and cash equivalents 100,040 3,216 The Group classifies non‐derivative financial assets into the following categories: Trade and other receivables 1,545 919 Loans receivable ‐ 1,627 • financial assets at fair value through profit or loss, Other financial assets 6 6 • held‐to‐maturity financial assets, • loans and receivables, and Total financial assets 101,591 5,768 • available‐for‐sale financial assets. Financial liabilities The Group classifies non‐derivative financial liabilities into the following categories: Trade and other payables 2,952 743 • financial liabilities at fair value through profit or loss, and Borrowings 346 2,622 • other financial liabilities. Total financial liabilities 3,298 3,365 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 6.1.1 OVERVIEW 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 has exposure to the following risks from their use of financial instruments: The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers  Credit risk the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership  Liquidity risk 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 The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk retained by the Group is recognised as a separate asset or liability. management framework. The Group’s risk management policies are established to identify and analyse the risks faced The Group de‐recognises a financial liability when its contractual obligations are discharged or cancelled, or expire. by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management Financial assets and financial liabilities are offset, and the net amount presented in the statement of financial position policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. 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. 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 Non‐derivative financial assets – Measurement Project and ancillary exploration activities. 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 The principal financial instruments as at the reporting date include cash, receivables, payables and loan and finance on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at agreements. fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, Set out below is information about exposures to the above risks, the objectives, policies and processes for measuring are recognised in profit or loss. and managing risk, and the management of capital. Held‐to‐maturity financial assets These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial 6.1.2 CREDIT RISK recognition, they are measured at amortised cost using the effective interest method. Loans and receivables Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial obligations, and arises principally from the Group’s cash at bank and term deposits. recognition, they are measured at amortised cost using the effective interest method. The carrying amount of financial assets represents the maximum credit exposure. Available‐for‐sale financial assets These assets are initially measured at fair value, plus any directly attributable transaction costs. Subsequent to initial The Group limits its exposure to credit risk by only transacting with high credit quality financial institutions. During the recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency year the Group maintained all cash and cash equivalents balances with banks and financial institutions holding a AA‐ differences on debt instruments, are recognised in other comprehensive income and accumulated in the fair value reserve. rating based on S&P Global ratings. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Non‐derivative financial liabilities – Measurement 6.1.3 LIQUIDITY RISK 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 Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is 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 to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. effective interest method. 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.

64 PILBARA MINERALS ANNUAL REPORT 2016 65 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are Key management personnel compensation comprised the following: gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements: 2016 2015 $ $ Carrying Six months Six to twelve One to two Two to five Total amount or less months years years Short term employee benefits 1,305,176 732,570 $’000 $’000 $’000 $’000 $’000 $’000 Post‐employment benefits 11,021 ‐ Share‐based payments (non‐cash) 13,238,684 ‐ 30 June 2016 14,554,881 732,570 Non‐derivative financial liabilities Compensation of the Group’s key management personnel includes salaries, and contributions to a post‐employment Hire purchase 346 373 77 77 155 64 defined contribution plan. Information regarding individual directors and executive’s compensation and some equity Trade payables 2,093 2,093 2,093 ‐ ‐ ‐ instruments are disclosed as required by s300A of the Corporations Act and Corporations Regulations 2M.3.03 are 2,439 2,466 2,170 77 155 64 provided in the Remuneration Report section of the Directors’ Report.

30 June 2015 6.2.3 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL RELATED PARTIES Non‐derivative financial liabilities During the year the Group transacted with related parties of key management personnel. Convertible notes 2,622 2,675 975 ‐ 1,700 ‐ Trade payables 458 458 458 ‐ ‐ ‐ Tony Leibowitz is a director and shareholder of the following related party entities which transacted with the Company during the year: 3,080 3,133 1,433 ‐ 1,700 ‐

Entity Services provided 2016 2015 6.1.4 FAIR VALUES Kalonda Pty Ltd Director services $86,000 $75,881 The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated Floreat Investments Pty Ltd Corporate advisory services $215,200 $47,155 statement of financial position, are as follows: Leibowitz and Sons Pty Ltd Corporate advisory services ‐ $39,586

Carrying amount Fair value During the year, the Company paid Kalonda Pty Ltd $13,200 for the provision of office accommodation for Mr Level 2016 2015 2016 2015 Leibowitz. $’000 $’000 $’000 $’000 On 2 September 2015, Kalonda Pty Ltd subscribed to convertible notes with a face value of $200,000. On 19 April Financial assets and liabilities measured at fair value 2016, Kalonda Pty Ltd pursuant to the terms of the convertible note deed converted the principal into 425,435 Convertible note Level 2 ‐ 2,622 ‐ 2,675 ordinary shares in the Company.

Fair value hierarchy: Neil Biddle is a director and shareholder of the following related party entity which transacted with the Company during the year:  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 Entity Services provided 2016 2015 or liability either directly or indirectly; or Hatched Creek Pty Ltd Director and corporate advisory services $337,500 $276,420  Level 3 – the fair values are measured using inputs for the asset or liability that are not based on observable Robert Adamson is a director and shareholder of the following related party entity which transacted with the Company market data. during the year: Cash and cash equivalents, other receivables, trade creditors, other creditors and accruals have been excluded from Entity Services provided 2016 2015 the above analysis as their fair values are equal to their carrying values. Robert G Adamson Consultants Director services $56,000 $36,000

6.2 RELATED PARTIES John Young is a director and shareholder of the following related party entity which transacted with the Company during the year: 6.2.1 PARENT AND ULTIMATE CONTROLLING PARTY Entity Services provided 2016 2015 The ultimate controlling party of the Group is Pilbara Minerals Limited. Metallon Resources Pty Ltd Director and geological advisory services $236,000 $168,400

6.2.2 KEY MANAGEMENT PERSONNEL Alan Boys is a director and shareholder of the following related party entity which transacted with the Company during the year: The following people were considered as key management personnel during the financial year: Entity Services provided 2016 2015 Position Appointed Resigned Dubois Group Pty Ltd Accounting and secretarial services $216,000 $77,750 Tony Leibowitz Non‐executive Chairman 11 June 2013 Robert Adamson Non‐executive Director 1 July 2010 On 2 September 2015, Starchaser Nominees Pty Ltd, a related entity to Mr Alan Boys, subscribed to convertible notes Ken Brinsden Managing Director 18 January 2016 with a face value of $50,000. On 24 March 2016, Starchaser Nominees Pty Ltd pursuant to the terms of the Neil Biddle Executive Director 30 May 2013 convertible note deed converted the principal into 167,504 ordinary shares in the Company. John Young Executive Director 4 September 2015 Alan Boys Company Secretary and Chief Financial Officer 23 October 2014 21 June 2016 as CFO All transactions with key management personnel related party entities were on commercial terms. Brian Lynn Chief Financial Officer 22 June 2016

66 PILBARA MINERALS ANNUAL REPORT 2016 66 67 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

66 PILBARA MINERALS ANNUAL REPORT 2016 67 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016 FOR THE YEAR ENDED 30 JUNE 2016

Up until the Group’s purchase of the remaining 50% interest in the incorporated joint venture Tabba Tabba Tantalum 6.6 SUBSEQUENT EVENTS 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 On 4 July 2016, the Company announced it had signed a binding offtake agreement with leading Chinese lithium 30 June 2016. 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 Up until the date of acquisition, the Group invoiced Tabba Tantalum Pty Ltd an amount of $1,223,345 (2015: years. The offtake pricing mechanism is to be based on the price of Lithium Carbonate, so that the Company shares $427,974) for services and as at 28 September 2015 had trade receivables due from Tabba Tabba Tantalum Pty Ltd in the pricing outcomes derived from carbonate deliveries to higher volume contracts with cathode makers in China. of $754,322 (2015: $754,322) and an outstanding loan advance due to it of $2,850,389 (2015: $1,627,045). In addition, a binding Memorandum of Understanding was also executed with GLC to participate in the evaluation and Up until the date of acquisition, the Group purchased goods and services from Valdrew Nominees Pty Ltd totalling development of a future offshore spodumene conversion plant, to process spodumene concentrates from the $212,684 (2015: $215,280) and had trade payables as at 28 September 2015 of $42,349 (2015: $84,500). During Pilgangoora Project whereby GLC will provide technology, technical expertise and intellectual property, and will build the year, the Group purchased its 50% interest in Tabba Tabba Tantalum Pty Ltd from Valdrew Nominees Pty Ltd for and operate the lithium chemicals production facility through an incorporated joint venture with the Company. Pilbara the sum of $2,000,000 (2015: $1,200,000). is expected to have a 50% share of the equity in the proposed Joint Venture.

6.3 GROUP ENTITIES 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 6.3.1 PARENT ENTITY of 5% in Pilbara Minerals), once a formal investment decision has been made to proceed with the development of the Pilbara Minerals Limited. lithium chemicals facility. The offtake agreement is subject to various conditions precedent, including the waiver or non‐exercise of the right of 6.3.2 SIGNIFICANT SUBSIDIARIES first refusal to the spodumene concentrates held by Global Advanced Metals Wodgina Pty Ltd (subsequently assigned

Country of incorporation 2016 2015 to Mineral Resources Ltd) under the terms of the Pilgangoora Asset Sale Agreement. Tabba Tabba Tantalum Pty Ltd Australia 100% 50% Sturt Resources Ltd Australia 100% 100% 6.7 AUDITORS’ REMUNERATION Sturt Resources PNG Ltd Papua New Guinea 100% 100% Somes Cooke audited the Group up until their resignation on 10 June 2016. The Directors resolved to appoint KPMG, Star 15 Limited Papua New Guinea 100% 100% as the interim auditor of the Group with their appointment to be confirmed at the next Annual General Meeting. New Global Limited Papua New Guinea 100% 100% Pilbara Lithium Pty Ltd Australia 100% ‐ 2016 2015 $ $ 6.4 JOINT ARRANGEMENTS Audit services – KPMG 30,000 ‐ Audit services – Somes Cooke 10,000 29,000 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. Services other than statutory audit – KPMG ‐ ‐ Services other than statutory audit – Somes Cooke ‐ ‐

6.5 PARENT ENTITY DISCLOSURES Total auditor’s remuneration – KPMG 30,000 ‐ Total auditor’s remuneration – Somes Cooke 10,000 29,000 As at, and throughout the financial year ending 30 June 2016 the parent company of the Group was Pilbara Minerals

Limited. 2016 2015 $’000 $’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

68 PILBARA MINERALS ANNUAL REPORT 2016 68 69 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016 FOR THE YEAR ENDED 30 JUNE 2016

Limited. 2016 2015 $’000 $’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

68 PILBARA MINERALS ANNUAL REPORT 2016 69 NOTES TO TO THE THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS DIRECTORS’ DECLARATION FOR THE THE YEAR YEAR ENDED ENDED 30 JUNE30 JUNE 2016 2016

6.8 STANDARDS ISSUED BUT NOT YET EFFECTIVE 1. In the opinion of the Directors of Pilbara Minerals Limited (“the Company”):

A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2015 a) the consolidated financial statements and notes set out on pages 42 to 70 and the Remuneration Report and earlier application is permitted; however, the Group has not early applied the following new or amended standards contained within the Directors’ Report are in accordance with the Corporations Act 2001, including: in preparing these consolidated financial statements. i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional New or amended Possible impact on consolidated Summary of the requirements reporting requirements; and standards financial statements IFRS 9 Financial IFRS 9, published in July 2014, replaces the existing guidance The Group is assessing the ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its Instruments in IAS 39 Financial Instruments: Recognition and potential impact on its performance for the financial year ended on that date; and Measurement. IFRS 9 includes revised guidance on the consolidated financial statements classification and measurement of financial instruments, a new resulting from the application of b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become expected credit loss model for calculating impairment on IFRS 9. due and payable. financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and de‐recognition of financial instruments from 2. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by IAS 39. section 295A of the Corporations Act 2001. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

IFRS 15 Revenue IFRS 15 establishes a comprehensive framework for The Group is assessing the from Contracts determining whether, how much, and when revenue is potential impact on its with Customers recognised. It replaces existing revenue recognition guidance, consolidated financial statements This declaration is made in accordance with a resolution of the Directors. including IAS 18 Revenue, IAS 11 Construction contracts, and resulting from the application of IFRIC 13 Customer Loyalty Programmes. IFRS 15. 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 The Group is assessing the follows: potential impact on its • Lessees are required to recognise assets and liabilities for consolidated financial statements resulting from the application of all leases with a term of more than 12 months, unless the AASB 16. underlying asset is of low value. Anthony Kiernan • A lessee measures right‐of‐use assets similarly to other Director non‐financial assets and lease liabilities similar to other financial liabilities. 7 September 2016 • 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.

70 PILBARA MINERALS ANNUAL REPORT 2016 70 71 NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION DIRECTORS' DECLARATION FOR THE YEAR ENDED 30 JUNE 2016

6.8 STANDARDS ISSUED BUT NOT YET EFFECTIVE 1. In the opinion of the Directors of Pilbara Minerals Limited (“the Company”):

70 PILBARA MINERALS ANNUAL REPORT 2016 71 INDEPENDENT AUDITOR'S REPORT

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.

72 PILBARA MINERALS ANNUAL REPORT 2016 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

PILBARA MINERALS ANNUAL REPORT 2016 73 ADDITIONAL SHAREHOLDER SHAREHOLDER INFORMATION INFORMATION ADDITIONAL SHAREHOLDER INFORMATION AS AT 21 SEPTEMBER 2016 AS AT 21 21 SEPTEMBER SEPTEMBER 2016 2016

Unlisted Options expiry date 25/3/2017, strike price $0.03 Unlisted Options expiry date 1/12/2017, strike price $0.15 In accordance with Listing Rule 4.10 the following information is provided. Percentage of Percentage of Spread of holdings Holders Units Spread of holdings Holders Units options on issue options on issue CORPORATE GOVERNANCE STATEMENT 1 to 1,000 ‐ ‐ ‐ 1 to 1,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐ The Company’s Corporate Governance Statement is available on the Company’s website at: http://www.pilbaraminerals.com.au 5,001 to 10,000 ‐ ‐ ‐ 5,001 to 10,000 ‐ ‐ ‐

10,001 to 100,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐

SHAREHOLDERS 100,001 and over 3 4,166,665 100.00 100,001 and over 5 3,268,182 100.00 Total 3 4,166,665 100.00 Total 5 3,268,182 100.00 SUBSTANTIAL SHAREHOLDERS Options Unlisted Options expiry date 16/5/2018, strike price $0.40 Unlisted Options expiry date 16/5/2018, strike price $0.65 The Company has the following substantial shareholders as at 21 There are 52 holders of unlisted options. There are no voting Percentage of Percentage of September 2016: rights attaching to the options. Spread of holdings Holders Units Spread of holdings Holders Units options on issue options on issue  Regal Funds Management Limited – 57,820,952 ordinary A total of 109,943,182 options are on issue. The 109,943,182 1 to 1,000 ‐ ‐ ‐ 1 to 1,000 ‐ ‐ ‐ shares options, if exercised, will convert into 109,943,182 ordinary 1,001 to 5,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐  UBS Group AG – 57,916,741 ordinary shares shares. 5,001 to 10,000 ‐ ‐ ‐ 5,001 to 10,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐ The options have the following exercise prices and expiry dates: NUMBER OF HOLDERS IN EACH CLASS OF 100,001 and over 22 38,300,000 100.00 100,001 and over 2 7,000,000 100.00 No. of No. of Vested/ Exercise Total 22 38,300,000 100.00 Total 2 7,000,000 100.00 EQUITY SECURITIES AND THE VOTING RIGHTS Expiry date ATTACHED (as at 21 September 2016) holders options Unvested price 1 1,250,000 Vested $0.05 22/12/2016 Unlisted Options expiry date 16/5/2019, strike price $0.40 Unlisted Options expiry date 6/9/2019, strike price $0.626 2 4,625,000 Vested $0.03 2/3/2017 Ordinary Shares Percentage of Percentage of 8 11,000,000 Vested $0.10 22/3/2017 Spread of holdings Holders Units Spread of holdings Holders Units There are 11,285 holders of ordinary shares. Each shareholder is options on issue options on issue 5 3,268,182 Vested $0.15 1/12/2017 entitled to one vote per share. 1 to 1,000 ‐ ‐ ‐ 1 to 1,000 ‐ ‐ ‐ 20 37,500,000 Vested $0.40 16/5/2018 1,001 to 5,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐ 2 800,000 Unvested $0.40 16/5/2018 In accordance with the Company’s Constitution, on a show of 5,001 to 10,000 ‐ ‐ ‐ 5,001 to 10,000 ‐ ‐ ‐ hands every member present in person or by proxy or attorney 9 31,500,000 Unvested $0.40 16/5/2019 10,001 to 100,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐ or duly authorised representative has one vote for every fully 2 7,000,000 Vested $0.65 16/5/2018 100,001 and over 9 31,500,000 100.00 100,001 and over 3 13,000,000 100.00 paid ordinary share held. 3 13,000,000 Unvested $0.626 6/9/2019 Total 9 31,500,000 100.00 Total 3 13,000,000 100.00

DISTRIBUTION SCHEDULE OF THE NUMBER OF HOLDERS IN EACH CLASS OF EQUITY MARKETABLE PARCEL SECURITY AT 21 SEPTEMBER 2016 There are 529 shareholders with less than a marketable parcel, based on the closing price of $0.505 on 21 September 2016.

Ordinary Shares Unlisted Options expiry date 22/12/2016, strike price $0.05 TWENTY LARGEST HOLDERS OF EACH CLASS OF QUOTED SECURITY Percentage of Percentage of Spread of holdings Holders Units Spread of holdings Holders Units The names of the 20 largest holders of each class of quoted security, the number of equity securities each holds and the percentage issued capital options on issue of issued capital each holds (as at 21 September 2016) are set out below: 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 ‐ ‐ ‐ Name of holder Number Percentage 5,001 to 10,000 1,874 15,322,749 1.33 5,001 to 10,000 ‐ ‐ ‐ 1 JP Morgan Nominees Australia Limited 123,562,965 10.74 10,001 to 100,000 4,283 148,618,755 12.92 10,001 to 100,000 ‐ ‐ ‐ 2 HSBC Custody Nominees (Australia) Limited 63,229,449 5.49 100,001 and over 1,250 976,995,067 84.93 100,001 and over 1 1,250,000 100.00 3 Citicorp Nominees Pty Limited 35,342,254 3.07 Total 11,285 1,150,363,343 100.00 Total 1 1,250,000 100.00 4 Biddle Partners Pty Ltd 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 Unlisted Options expiry date 2/3/2017, strike price $0.05 Unlisted Options expiry date 22/3/2017, strike price $0.10 7 National Nominees Limited 13,712,113 1.19 8 Mr Philip Towzell 11,500,000 1.00 Percentage of Percentage of Spread of holdings Holders Units Spread of holdings Holders Units 9 Wansbone Nominees Pty Ltd 9,315,643 0.81 options on issue options on issue 10 ABN Amro Clearing Sydney Nominees Pty Ltd 9,135,554 0.79 1 to 1,000 ‐ ‐ ‐ 1 to 1,000 ‐ ‐ ‐ 11 Nohuni Pty Ltd 8,865,643 0.77 1,001 to 5,000 ‐ ‐ ‐ 1,001 to 5,000 ‐ ‐ ‐ 12 Mr John Young & Mrs Cheryl Young 8,608,356 0.75 5,001 to 10,000 ‐ ‐ ‐ 5,001 to 10,000 ‐ ‐ ‐ 13 Sandhurst Trustees Limited 8,355,030 0.73 10,001 to 100,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐ 14 Church Street Trustees Limited 8,133,538 0.71 100,001 and over 2 4,625,000 100.00 100,001 and over 8 11,000,000 100.00 15 Biddle Partners Pty Ltd 8,000,000 0.69 Total 2 4,625,000 100.00 Total 8 11,000,000 100.00 16 Sydes Holdings Pty Ltd 7,820,000 0.68 17 Mr Peter Capp 7,700,000 0.67 18 Mr John Young & Mrs Cheryl Young 7,550,000 0.66 19 Winders Aus Investments Pty Ltd 7,385,643 0.64 20 Kalonda Pty Ltd 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

74 PILBARA MINERALS ANNUAL REPORT 2016 74 75 ADDITIONAL SHAREHOLDER INFORMATION ADDITIONAL SHAREHOLDER INFORMATIONADDITIONAL SHAREHOLDER INFORMATION AS AT 21 SEPTEMBER 2016 AS AT 21 SEPTEMBER 2016 AS AT 21 SEPTEMBER 2016

10,001 to 100,000 ‐ ‐ ‐ 10,001 to 100,000 ‐ ‐ ‐

74 PILBARA MINERALS ANNUAL REPORT 2016 75 ADDITIONAL SHAREHOLDER SHAREHOLDER INFORMATION INFORMATION AS ATAT 21 21 SEPTEMBER SEPTEMBER 2016 2016

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:

Option class Name % of class Number Exercise price Expiry date Teas Nominees Pty Ltd 5,000,000 $0.05 22/3/2017 45.4 Abbmor Pty Ltd 1,666,666 $0.03 25/3/2017 40.0 Kyong Holding Pty Ltd 1,666,666 $0.03 25/3/2017 40.0 Momentum North Pty Ltd 1,039,773 $0.15 1/12/2016 31.8 Top Class Holdings Pty Ltd 1,500,000 $0.15 1/12/2016 45.9 Biddle Partners Pty Ltd 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 STOCK EXCHANGE ON WHICH THE The name of the Company Secretary is Alex Eastwood. COMPANY’S SECURITIES ARE QUOTED

ADDRESS AND DETAILS OF THE GROUP’S The Company’s listed equity securities are quoted on the Australian Securities Exchange – Code: PLS. REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS RESTRICTED SECURITIES 130 Stirling Highway, North Fremantle WA 6159 Telephone: +61 8 9336 6267 Fax: +61 8 9433 5121 There are no restricted securities on issue at 21 September 2016.

ADDRESS AND TELEPHONE DETAILS OF THE OFFICE AT WHICH A REGISTRY OF SECURITIES IS KEPT ON‐MARKET BUY‐BACK Advanced Share Registry Services There is no current on‐market buy‐back of 110 Stirling Highway, Nedlands WA 6009 securities. Telephone: +61 8 9389 8033 Website: www.advancedshare.com.au

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

76 PILBARA MINERALS ANNUAL REPORT 2016 76 CORPORATE DIRECTORY CONTENTS

ANNUALREPORT 2016 2016 ANNUAL REPORT

ACN 112 425 788