KANGAROO RESOURCES

LIMITED

ABN 38 120 284 040

INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2015

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CONTENTS

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Directors’ Report ........................................................................................................................... 3

Auditor’s independence declaration .......................................................................................... 6

Consolidated Statement of Comprehensive Income ................................................................ 7

Consolidated Statement of Financial Position .......................................................................... 8

Consolidated Statement of Changes in Equity ......................................................................... 9

Consolidated Statement of Cash Flows ................................................................................... 10

Notes to Consolidated Financial Statements .......................................................................... 11

Directors Declaration ................................................................................................................. 22

Independent Auditor’s Review Report ..................................................................................... 23

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the period ended 31 December 2014 and any public announcements made by Kangaroo Resources Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. Your directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Kangaroo Resources Limited (“The Company”) and the entities it controlled at the end of, or during, the half-year ended 30 June 2015.

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DIRECTORS REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2015

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Directors’ Report Directors The following persons were directors of Kangaroo Resources Limited (KRL) during the half-year and up to the date of this report: Graham Anderson (ceased being a director 19 July 2015) * Ian Ogilvie Russell Neil Trevor Butcher David Low Yi Ngo Leonard Math (resigned 21 May 2015, Re-appointed 5 August 2015) *Graham Anderson passed away on the 19th July 2015 The Company was saddened by the sudden passing of the Chairman Mr Graham Anderson on 19th July 2015. Graham was a cornerstone of the KRL Board and a friend and mentor to many. His guidance, wisdom and enthusiasm will be sadly missed. Review of operations The consolidated comprehensive loss for the Group for the half-year ended 30 June 2015 was $5,619,223 (30 June 2014 loss of $4,191,878).

Pakar Development continues its path towards production with Bayan Resources (BR) commissioning the new 69Km coal haul road and Phase 1 of the new Senyiur port. BR have commenced coal haulage and barging operations through the new infrastructure facilities and reached an annualized 5Mtpa throughput in June 2015. Steady progress continues to be made with the application processes for renewals and upgrading of exploration licenses, production licenses and land access permits relating to the 5 Pakar entities currently held by the Company (Orkida Makmur (OM), Dermaga Energi (DE), Tanur Jaya (TJ), Sumber Api (SA), and Silau Kencana (SK). Commercial agreements to provide KRL with guaranteed access to the new Tabang / Pakar infrastructure facilities are well advanced and are planned to be finalized before the end of 2015 in readiness for initial mining activities at Pakar North (Tiwa Abadi (TA), TJ and DE). The company has also planned for further exploration of both Graha Panca Karsa (GPK) and Pakar North once exploration permits and forestry usage permits are in place. PAKAR COAL PROJECT (TA, TJ, DE, OM, SA, SK, Cahaya Alam (CA), Bara Sejati (BS), & Apira Utama(AU) BR completed construction on the new 69Km haul road connecting the Tabang and Pakar North concessions to the Senyiur port location on the Kedang Kepala River. This road is designed for use by 300 tonne capacity land trains.

BR has also completed work on upgrading (Phase 1) the Senyiur Port which is now functioning at 6Mtpa capacity and loading 7,000 tonne barges. A further 12Mtpa capacity expansion (Phase 2) is already under construction and is due to be commissioned in the last quarter of 2015 giving the Senyiur Port a nominal throughput capacity of 18Mtpa. Further expansion of the Seniur port (Phase 3) is planned beyond the initial 18Mtpa capacity, however timing of this capital project will be dependent on progress in securing further long term coal sales agreements and on optimizing barging logistics on the Kedang Kepala and Mahakam rivers.

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DIRECTORS REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2015

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The new infrastructure facilities are currently being fed with coal from BR’s operational mines at Tabang.

• Coal haulage commenced in March and currently a fleet of Scania 300 tonne capacity road trains are hauling coal from BR’s Tabang mining concessions to the Senyiur Port area. Total BR coal hauled along new haul road at 30 June 2015 was 860,000 tonnes.

• Barging of coal commenced in April. BR’s existing barge loading facilities at Senyiur Port were used for

barging using 7,000 tonne capacity barges on the Kedang Kepala River. Total BR coal barged from Senyiur Port at 30 June 2015 was 780,000 tonnes.

This new road and port infrastructure has been a major capital investment for BR and will service the Tabang and the Pakar North mining concession areas for the next 20 years. Discussions have been ongoing for some time now and the new commercial agreement is close to being finalized to allow the Company guaranteed use of the new road and post infrastructure facilities. This infrastructure boost comes at no capital cost to the Company and will provide a long term, reliable and low cost logistic solution to enable the Company to deliver its coal products into the seaborne market. The primary focus is now on securing final mining (production) and forestry permits for Pakar North projects to enable commencement of the Company’s own mining operations at the earliest possible opportunity. Further mine planning work is also being undertaken to integrate production streams from both Tabang and Pakar mining concession area to ensure optimal use of the new infrastructure facilities. MAMAHAK COAL PROJECT (Mamahak Coal Mining (MCM), Mahakam Energi Lestari (MEL), Mahakam Bara Energi (MBE) & Bara Karsa Lestari (BKL)) River water levels recovered sufficiently in early 2015 to allow barging to recommence at MCM. Remaining coal product stockpiles totaling 68,158 tonnes have now been successfully barged from MCM port to the Balikpapan coal terminal and will be sold by the end of October 2015. With the removal of coal product stockpiles from site, further reductions in site care and maintenance are being implemented to reduce monthly expenditure. MCM geological models were revised based on the results of additional drilling work carried out in 2014 and a new JORC compliant statement of coal resources was released on 20 June 2015. Resumption of mining activity at MCM is dependent on coal markets improving, and being able to establish a more reliable logistics route for coal sales. GRAHA PANCA KARSA COAL PROJECT (GPK) Production Licenses are in place for initial mining areas, and the Company is now awaiting market upturn and additional check drilling program to identify and optimize mineable areas before finalizing start up plans and commencing field operations. The Company is also exploring opportunities for shared use of project infrastructure with neighbouring mining concessions that are already in production. CORPORATE The Company remains attached to the court case between BR and White Energy Company (BCBCS Singapore Pte Ltd) for the purposes of challenging the cost orders that were made against it. The Company continues to look for ways to further reduce its debt, interest charges and other overheads to minimize its borrowing requirements in the lead up to establishing its own production output and revenue streams.

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DIRECTORS REPORT FOR THE HALF-YEAR ENDED 30 JUNE 2015

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Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 6. This report is made in accordance with a resolution of the directors.

Mr Ian Ogilvie Managing Director 11 September, 2015

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PricewaterhouseCoopers, ABN 52 780 433 757Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Auditor’s Independence Declaration

As lead auditor for the review of Kangaroo Resources Limited for the half-year ended 30 June 2015, Ideclare that to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the review; and

b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Kangaroo Resources Limited and the entities it controlled during theperiod.

Ben Gargett PerthPartnerPricewaterhouseCoopers

11 September 2015

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 30 JUNE 2015

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Consolidated Statement of Comprehensive Income

6 months ended 6 months ended

30 June 30 June

2015 2014

Note $ $

Continuing operations

Revenue from continuing operations 66,292 87,111

66,292 87,111

Expenses

Operating expenses 3 (1,574,273) (2,339,100)

Administration expenses 3 (1,071,465) (2,063,972)

Finance costs 3 (1,364,555) (815,444)

Foreign exchange loss (955,136) (355,022)

Total expenses (4,965,429) (5,573,538)

Loss before income tax (4,899,137) (5,486,427)

Income tax benefit/(expense) - -

Loss from continuing operations (4,899,137) (5,486,427)

Other comprehensive loss

Items that may be reclassified into profit or loss

Exchange differences on translating foreign operations (720,086) 1,294,549

Other comprehensive loss for the half-year, net of tax (720,086) 1,294,549

Total comprehensive loss for the half-year (5,619,223) (4,191,878)

Loss for the year is attributable to:

Ow ners of the Company (4,881,205) (5,485,350)

Non-controlling interests (17,932) (1,077)

(4,899,137) (5,486,427)

Total comprehensive loss for the half-year is attributable to:

Ow ners of the Company (5,552,797) (4,225,507)

Non-controlling interests (66,426) 33,629

(5,619,223) (4,191,878)

Loss per share attributable to the ordinary equity holders of the company: Cents Cents

Basic and diluted loss per share from continuing operations (0.14) (0.16)

Consolidated

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.F

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015

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Consolidated Statement of Financial Position 30 June 31 December

2015 2014

Note $ $

Current Assets

Cash & cash equivalents 2,812,152 2,798,619

Trade & other receivables 4 955,532 1,279,181

Deferred barging costs 5 1,338,299 -

Inventory 6 2,683,439 2,948,087

7,789,422 7,025,887

Assets classif ied as held for sale 7 15,189,488 14,172,419

Total Current Assets 22,978,910 21,198,306

Non-Current Assets

Receivables 4 790,586 790,225

Property, plant & equipment 8 1,484,322 1,997,151

Mine properties & development 9 200,909,097 200,909,097

Exploration & evaluation expenditure 10 17,280,881 17,280,881

Available-for-sale f inancial assets 11 52,893,575 52,893,575

Total Non-Current Assets 273,358,461 273,870,929

TOTAL ASSETS 296,337,371 295,069,235

Current Liabilities

Trade & other payables 6,889,133 6,944,561

Borrow ings 12 41,500,926 34,577,954

Total Current Liabilities 48,390,059 41,522,515

Non-Current Liabilities

Provisions 888,710 868,895

Deferred tax liabilities 64,008,938 64,008,938

Total Non-Current Liabilities 64,897,648 64,877,833

TOTAL LIABILITIES 113,287,707 106,400,348

NET ASSETS 183,049,664 188,668,887

EQUITY

Equity attributable to the equity holders of the parent

Issued capital 469,867,326 469,867,326

Reserves 426,847 1,098,439

Accumulated losses (288,822,455) (283,941,250)

Capital & reserves attributable to ow ners of Kangaroo Resources Limited 181,471,718 187,024,515

Non-controlling interest 1,577,946 1,644,372

TOTAL EQUITY 183,049,664 188,668,887

Consolidated

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 30 JUNE 2015

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Consolidated Statement of Changes in Equity Contributed Equity

Accumulated Losses

ReservesAttibutable to

members of KRLNon-controlling

interestTotal Equity

$ $ $ $ $ $

Balance as at 1 January 2015 469,867,326 (283,941,250) 1,098,439 187,024,515 1,644,372 188,668,887

- Loss attributable to members of KRL - (4,881,205) - (4,881,205) (17,932) (4,899,137)

Other comprehens ive loss - - (671,592) (671,592) (48,494) (720,086) Tota l comprehens ive loss attributable to members of KRL - (4,881,205) (671,592) (5,552,797) (66,426) (5,619,223)

Balance as at 30 June 2015 469,867,326 (288,822,455) 426,847 181,471,718 1,577,946 183,049,664

Contributed Equity Accumulated

Losses Reserves

Attibutable to members of KRL

Non-controlling interest

Total Equity

$ $ $ $ $ $

Balance as at 1 January 2014 469,867,326 (146,900,153) 1,081,293 324,048,466 3,007,143 327,055,609

Loss attributable to members of KRL - (5,485,350) - (5,485,350) (1,077) (5,486,427) Other comprehens ive loss - - 1,259,843 1,259,843 34,706 1,294,549 Tota l comprehens ive loss attributable to members of KRL - (5,485,350) 1,259,843 (4,225,507) 33,629 (4,191,878)

Balance as at 30 June 2014 469,867,326 (152,385,503) 2,341,136 319,822,959 3,040,772 322,863,731 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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Consolidated Statement of Cash Flows 6 months ended 6 months ended

30 June 30 June

2015 2014

$ $

Cash flows from operating activities

Payment to suppliers and employees (inclusive of GST and VAT) (3,347,319) (3,943,449)

Interest received 66,241 69,648

Net cash outflow from operating activities (3,281,078) (3,873,801)

Cash flows from investing activities

Payments for exploration and evaluation assets - (42,077)

Proceeds from sale of assets 83,334 -

Net cash inflow (outflow) from investing activities 83,334 (42,077)

Cash flows from financing activities

Proceeds from borrow ings - related parties 2,876,527 3,697,185

Net cash inflow from financing activities 2,876,527 3,697,185

Net decrease in cash and cash equivalents (321,217) (218,693)

Cash and cash equivalents at beginning of f inancial year 2,902,825 2,975,471

Effect of exchange rate on cash held in foreign currencies 230,544 (39,694)

Cash and cash equivalents at end of period 2,812,152 2,717,084

Consolidated

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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Notes to Consolidated Financial Statements 1. Basis of preparation of half-year report

This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2015 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the period ended 31 December 2014 and any public announcements made by Kangaroo Resources Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except as set out below: (a) New and amended standards adopted by the group

A number of new or amended standards became applicable for the current reporting period, however, the group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards. There will be some changes to the disclosures in the 31 December 2014 annual report as a consequence of these amendments.

(b) Impact of standards issued but not yet applied by the group

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods and have not been early adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below. AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It also sets out new rules for hedge accounting. Adoption of this standard is not expected to have a significant impact on the group. The standard is not applicable until 1 January 2018 but is available for early adoption. AASB 9 requires fair value gains and losses on available-for-sale financial assets to be recognised directly in profit or loss, unless they relate to equity investments that are not held for trading, in which case they are recognized as other comprehensive income. The group has not recognized any fair value gains or losses on its available-for-sale financial assets during the period. There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. There will be no impact on the group’s hedge accounting as the group does not currently have any hedge arrangements. The new standards also introduces expanded disclosure requirements and changes in presentation. The group has not yet decided whether to adopt any parts of AASB 9 early.

(c) Going Concern

For the six months ended 30 June 2015, the Company incurred a total comprehensive loss of $5,619,223 (six months ended 30 June 2014: $4,191,878 loss), net cash outflows from operating activities of $3,281,078 (six months ended 30 June 2014: $3,873,801) and has a working capital deficiency of $40,600,637 (31 December 2014: $34,496,628). The group was advanced loans of $2,876,527 by Bayan Resources (BR), the major shareholder of the Company, to fund operating cash flow (30 June 2015: $3,697,185). The Company relies on BR for funding to cover its operating expenditure and to continue development of its projects. As such, the Company is dependent on BR to continue as a going concern. BR has undertaken to provide sufficient financial assistance to the Company as and when it is needed to enable the Company to continue its operations and fulfil all of its financial obligations now and in

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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the future. The undertaking is provided for a minimum period of twelve months from the date of these financial statements. However, a material uncertainty exists regarding BR's ability to provide that support, due to BR having negative working capital at 30 June 2015 arising primarily from an outstanding bank loan which will mature in 2015. Should BR be unable to provide the Company with sufficient funding, the Company would be required to obtain funding from alternative sources, such as the issue of new equity. As a result of these matters, there is a material uncertainty related to events or conditions that may cast significant doubt on whether the Group will continue as a going concern and, therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. The continuing viability of the Group and its ability to continue as a going concern and meet its debts and commitments as and when they fall due are dependent upon BR’ ability to provide sufficient financial assistance to the Company. BR are currently in the final stages of restructuring its loan agreement with its financiers, based on this and in addition to the current plans and ongoing actions of BR regarding its own financial position, the directors believe it is reasonable that the Group will be able to obtain sufficient financial assistance from BR to fund its working capital requirements and to pay its debts as and when they fall due for at least twelve months from the date of these financial statements. As such, the Group’s consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that may result if the Group was unable to continue as a going concern.

2. Segment information

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The segments are consistent with the internal management reporting information that is regularly reviewed by the chief operating decision maker, being the Board of Directors.

The reporting segments are based on aggregated operating segments determined by the similarity of the economic characteristics, the nature of the activities and the regulatory environment in which those segments operate. Prior period segment information has been restated to reflect the current composition of reportable segments.

The Group has one reportable segment based on the operating and exploration assets in Indonesia. Unallocated results, assets and liabilities represent corporate accounts that are not core to the reportable segments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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6 months ended 6 months ended

2015 2014

$ $

(i) Segment performance

Revenue

Segment revenue 66,263 87,082

Segment result (4,345,920) (3,700,928)

Unallocated items

Other corporate revenue 29 29

Other corporate income and expenses (553,246) (1,785,528)

Net loss before tax from continuing operations (4,899,137) (5,486,427)

(ii) Segment assets

Mine properties & development 200,909,097 328,224,137

Exploration & evaluation expenditure 17,280,881 30,811,573

Other assets 25,129,066 22,419,615

Total Segment assets 243,319,044 381,455,325

Reconciliation of segment assets to group assets

Available-for-sale financial assets 52,893,575 79,929,564

Other corporate assets 124,752 368,845

Totals Assets 296,337,371 461,753,734

(iii) Segment liabilities

Total segment liabilities 41,765,211 27,652,423

Reconciliation of segment assets to group assets

Deferred tax liability 64,008,938 104,153,743

Other corporate liabilities 7,513,558 7,083,837

Totals Liabilities 113,287,707 138,890,003

30 June 30 June

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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3. Expenses

Consolidated

6 months ended 6 months ended

30 June 30 June

2015 2014

$ $

(a) Operating Expenses

Employee Costs 222,797 590,057

Depreciation 597,224 822,683

Repairs, maintenance and materials and rental 229,478 77,551

Fuel and Lubricants 111,599 195,666

VAT expensed 20,050 47,420

Reduction in provision for rehabilitation - (741,266)

Other production costs 160,673 635,490

Total production costs 1,341,821 1,627,601

Inventory movement 232,452 711,499

1,574,273 2,339,100

(b) Administration expenses

Consultant expenses 141,128 171,923

Legal Expenses 132,029 1,031,355

Directors fees & employee Costs 436,903 563,015

Travel and accomodation 27,675 18,358

Other administration expenses 333,730 279,321

1,071,465 2,063,972

(c) Finance costs

Interest expense 1,364,555 815,444

1,364,555 815,444

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4. Trade and other receivables

Consolidated

30 June 31 December

2015 2014

$ $

Current

Other receivables 614,181 1,076,404

Prepayments 341,351 202,777

955,532 1,279,181

Non-current

Tenement security bonds 5,000 5,000

Advances and prepayments 785,586 785,225

790,586 790,225 5. Deferred barging costs

Consolidated

30 June 31 December

2015 2014

$ $

Deferred barging costs 1,338,299 -

1,338,299 -

Deferred barging costs of $1,338,299 (31 December 2014: Nil) relate to barging costs deferred at MCM. These costs are recognised as a selling expenses and not production costs. As the sale of coal was not completed as at 30 June 2015, the barging costs have been deferred on the balance sheet and will be recognised as a selling expense once the coal is sold.

6. Inventory

Consolidated

30 June 31 December

2015 2014

$ $

Coal stockpiles - at net realisable value 2,657,524 2,707,537

Other inventory - spare parts fuel etc. 25,915 240,550

2,683,439 2,948,087

Write-downs of inventories to net realisable value recognised as an expense during the six months ended 30 June 2014 amounted to $232,452 (6 months to 30 June 2014: $711,499).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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7. Assets classified as held for sale

Consolidated

30 June 31 December

2015 2014

$ $

Assets classif ied as held for sale 15,189,488 14,172,419

15,189,488 14,172,419

Property, plant and equipment with a fair value of $15,189,488 at 30 June 2015 (31 December 2014: $14,172,419) held by the Company’s subsidiary, Sumber Aset Utama (SAU), are classified as assets held for sale. Detailed discussions have commenced regarding how the assets of both SAU and BR can be utilised to fast track the development of both the company’ and BR’s projects in East Kalimantan. SAU has recorded these items as ‘held for sale’ since 2012 and plans to leverage these assets to obtain a definitive long term tonnage throughput allocation from any new infrastructure facility proposed by BR. Discussions and agreements between the Company and BR are well advanced and are expected to be finalised by the end of 2015.

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8. Property, Plant and Equipment

BuildingsConstruction in

progressHeavy

Equipment

Office furniture, fittings and equipment Total

$ $ $ $ $

Year Ended 31 December 2014

Opening net book amount 22,335 276,585 2,424,407 1,085,856 3,809,183

Additions - - - 55,689 55,689

Disposals / write-off - - (109,197) (494,978) (604,175)

Depreciation charge (2,989) - (1,035,611) (224,946) (1,263,546)

Closing net book amount 19,346 276,585 1,279,599 421,621 1,997,151

Cost or fair value 29,883 276,585 4,659,646 1,269,745 6,235,859

Accumulated depreciation (10,537) - (3,380,047) (848,124) (4,238,708)

Net book amount 19,346 276,585 1,279,599 421,621 1,997,151

BuildingsConstruction in

progressHeavy

Equipment

Office furniture, fittings and equipment Total

$ $ $ $ $

6 months ended 30 June 2015

Opening net book amount 19,346 276,585 1,279,599 421,621 1,997,151

Additions - - - - -

Disposals / write-off - - - - -

Depreciation charge (1,493) - (405,734) (105,602) (512,829)

Closing net book amount 17,853 276,585 873,865 316,019 1,484,322

At 30 June 2015

Cost or fair value 29,883 276,585 4,659,646 1,269,745 6,235,859

Accumulated depreciation (12,030) - (3,785,781) (953,726) (4,751,537)

Net book amount 17,853 276,585 873,865 316,019 1,484,322

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9. Mine Properties and Development

Consolidated

30 June 31 December

2015 2014

$ $

Movements in Mine Properties and Development

Carrying amount at start of period 200,909,097 328,224,137

Impairment (a) - (127,315,040)

200,909,097 200,909,097

Represented by:

Mamahak Group 2,285,714 2,285,714

North Pakar 198,623,383 198,623,383

200,909,097 200,909,097 (a) As at 31 December 2014 Pakar North GCU incorporating TJ and DE was impaired from its carrying value of $320,224,137 to its recoverable amount of $198,623,383 (impairment charge of $121,600,754) which represents its fair value less costs to sell. The recoverable amount was based on discounted cash flow methodology, which is based on estimated quantities of recoverable coal, expected coal, prices, production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plan reflecting management’s expectations of the future. As at 30 June 2015 Management assessed these assets for further impairment by determining recoverable amount based on the same methodology, updated for changes in assumptions and no additional impairment was recorded. As at 31 December 2014 BKL, MEL and MBE were all fully impaired to nil (Impairment charge of $5,714,286). This was based on the potential sale value and management have concluded that as at 30 June 2015 this value is still appropriate.

10. Exploration and Evaluation Expenditure

Consolidated

30 June 31 December

2015 2014

$ $

Costs carried forw ard in respect of areas of interest in exploration phase - at cost

Balance at beginning of the year 17,280,881 30,765,369

Exploration and evaluation expenditure - 198,434

Impairment (a) - (13,682,922)

Carrying amount at end of year 17,280,881 17,280,881 (a) As at 31 December 2014 KRL management made the decision to impair the Exploration and Evaluation assets of OM, SA, SK, DE, TJ, BKL, MEL and MBE (impairment charge of $13,682,922). This was based on the potential sale value and management have concluded that as at 30 June 2015 this value is still appropriate. No impairment was recorded in relation to any other Exploration and Evaluation assets as at 30 June 2015.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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11. Available for Sale Financial Assets Consolidated

30 June 31 December

2015 2014

$ $

Opening Balance 52,893,575 79,929,564

Impairment (a) - (27,035,989)

Closing Balance 52,893,575 52,893,575 On 13 June 2011 shareholders approved the issue of 2,305 million Kangaroo Resources Limited shares to PT Bayan Resources Tbk and other parties related to the acquisition of a 99% interest in the Pakar Thermal Coal Project in East Kalimantan, consisting of ten Indonesian entities. As at the balance date, four of the entities are awaiting government sign-off and conversion to Indonesian PMA companies (a foreign investment company) which will allow the Company to own a direct equity interest. Until these entities have been converted to PMA companies and the direct equity ownership has been transferred to Kangaroo Resources Limited the accounting standards require them to be classified as available-for-sale financial assets. Following the conversion and the transfer of the equity interest in each entity, the above balance will be recognised within mining properties and development and exploration and evaluation expenditure in the Statement of Financial Position. (a) At 31 December 2014 management made the decision to impair the available-for-sale financial assets relating to each of these four entities, TA, CA, BS and AU. TA was impaired from its carrying value of $65,189,664 to its recoverable amount of $46,763,119 (impairment charge of $18,426,545). TA’s fair value was determined based on a range of valuations associated with reasonably possible outcomes, this resulted in a possible range of $35 million to $80 million. A fair value of $46,763,119 was then determined based on a weighted average of those valuations as assessed by management. Valuations include those based on a discounted cash flow model and those based on its potential sale value, which reflects the fact that TA is currently held by BR and due to current Indonesian divestment legislation means that it is unlikely that KRL will ever own TA outright, forcing a sale to realise value. The discounted cash flow incorporates estimated quantities of recoverable coal, expected coal prices (considering current and historical prices, trends and related factors), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans which reflect management's expectations for the future. The key assumptions used in discounted cash flow analysis were the average sales price and the long-term discount rate. The average benchmark sales price of 6,322 GAR coal for 2018 (first year of production) was US$80/t and increased to US$83/t in year 2019. From 2020 onwards this price was increased annually by the inflation rate of 2.5%. A discount rate of 14.6% was applied. As at 30 June 2015 Management has again applied the methodology used at 31 December 2014 updated for changes in key assumptions. This resulted in a possible range of $42 million to $84 million. The main assumption changes as at 30 June 2015 was the average benchmark sales price of 6,322 GAR coal for 2018 (first year of production) was $71/t, $74/t in year 2019, $79/t in year 2020, $82/t in year 2021, $85/t in year 2022, $88/t in year 2023, and $91/t in year 2024. From 2025 onwards this price was increased annually by the inflation rate of 2.5%. The other key assumption change was the AUD/USD exchange rate which moved from $0.82 as at 31 December 2014 to $0.77 as at 30 June 2015. Based on these key assumption changes Management concluded that TA’s carrying value was still appropriate. As at 31 December 2014 CA, BS and AU were impaired from their carrying value of $14,739,900 to $6,130,456 (Impairment charge of $8,609,444). These assets were valued at their potential sale value based on the outlook on the coal market, the increased sovereign risk outlook for Indonesia, overlap, and boundary issues with neighbouring license holders. Management have again reviewed these issues at 30 June 2015 and have concluded that the carrying value of these assets is still appropriate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

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12. Borrowings

Consolidated

30 June

2015

$

Loans from PT Bayan Resources Tbk

Opening Balance 34,577,954

Loan Advanced 2,876,527

Interest charged and capitalised 1,386,913

Foreign exchange revaluation 2,659,532

Closing Balance 41,500,926

13. Related Parties Interest expense totalling $1,364,555 was incurred on BR related loans during the half-year (Half-year ended 30 June 2014: $815,444). The average interest rate for the half-year was 8.74% (2014: 7.10%).

The Company was charged $773,314 by PT Muji Lines, a subsidiary of PT Bayan Resources Tbk, for the provision of barging services (Half-year ended 30 June 2014: Nil).

The Company was charged $151,879 by PT Nirmala Matranusa a related party to PT Bayan Resources Tbk for office rental and associated expenses (Half-year ended 30 June 2014: $49,939).

The Company paid $95,700 (including GST) to GDA for administration, accounting and company sercretarial services (Half-year ended 2014: $99,000). Mr Graham Anderson and Mr Leonard Math’s directors fees were paid to GDA Corporate. Mr Graham Anderson was a director and had a beneficial interest in GDA Corporate. Mr Leonard Math, Ms Sue Symmons and Mr Michael Loh were or are employees of GDA Corporate.

Refer to note 12 for details of balances outstanding to BR and movements in relation to transactions with BR during the half-year. 14. Fair value measurement of financial instruments

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) b) inputs other than quoted prices included within level 1 that are observable for the asset or liability,

either directly (as prices) or indirectly (derived from prices) (level 2), and c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)

(level 3). The Company’s only financial instrument recognised at fair value is the available-for-sale financial asset acquired at fair value as part of a business combination. This is deemed to be a level 3 financial instrument on the basis that some of the inputs used in determining fair value were not based on observable market data. Further information relating to the available-for-sale financial asset is set out in note 11. The group also has a number of financial instruments which are not measured at fair value in the balance sheet. The fair values of these instruments are not materially different to their carrying amounts, since the interest receivable/payable is either close to current market rates or the instruments are short-term in nature.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2015

Page | 21

15. Commitments and Contingencies There were no new capital commitments other than those that existed as at 31 December 2014 that the Group has entered into during the period under review.

16. Dividends No dividend has been paid during the period and no dividend is recommended for the period. 17. Events occurring after the reporting period No matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations, results or the state of affairs of the consolidated entity in future financial years.

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DIRECTORS’ DECLARATION FOR THE HALF-YEAR ENDED 30 JUNE 2015

22 | P a g e

Directors Declaration In the director’s opinion:

(a) the financial statements and notes set out on pages 7 to 21 are in accordance with the Corporations Act 2001, including:

i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory

professional reporting requirements, and

ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the half-year ended on that date, and

(b) there are reasonable grounds to believe that Kangaroo Resources Limited will be able to pay its debts as

and when they become due and payable. This declaration is made in accordance with a resolution of the directors.

Mr Ian Ogilvie Managing Director 11 September 2015

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PricewaterhouseCoopers, ABN 52 780 433 757Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Independent auditor’s review report to the members ofKangaroo Resources Limited

Report on the Half-Year Financial ReportWe have reviewed the accompanying half-year financial report of Kangaroo Resources Limited (theCompany), which comprises the consolidated statement of financial position as at 30 June 2015, theconsolidated statement of comprehensive income, consolidated statement of changes in equity andconsolidated statement of cash flows for the half-year ended on that date, selected explanatory notes andthe directors' declaration for the Kangaroo Resources Limited Group (the consolidated entity). Theconsolidated entity comprises the company and the entities it controlled from time to time during thehalf-year.

Directors' responsibility for the half-year financial reportThe directors of the company are responsible for the preparation of the half-year financial report thatgives a true and fair view in accordance with Australian Accounting Standards (including the AustralianAccounting Interpretations) and the Corporations Act 2001 and for such internal control as the directorsdetermine is necessary to enable the preparation of the half-year financial report that is free frommaterial misstatement whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express a conclusion on the half-year financial report based on our review. Weconducted our review in accordance with Australian Auditing Standard on Review Engagements ASRE2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order tostate whether, on the basis of the procedures described, we have become aware of any matter that makesus believe that the financial report is not in accordance with the Corporations Act 2001 including: givinga true and fair view of the consolidated entity’s financial position as at 30 June 2015 and its performancefor the half-year ended on that date; and complying with Accounting Standard AASB 134 InterimFinancial Reporting and the Corporations Regulations 2001. As the auditor of Kangaroo ResourcesLimited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of theannual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Australian Auditing Standardsand consequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.

IndependenceIn conducting our review, we have complied with the independence requirements of the CorporationsAct 2001.

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ConclusionBased on our review, which is not an audit, we have not become aware of any matter that makes usbelieve that the half-year financial report of Kangaroo Resources Limited is not in accordance with theCorporations Act 2001 including:

a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of itsperformance for the half-year ended on that date;

b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001.

Material Uncertainty Regarding Continuation as a Going ConcernWithout qualifying our conclusion, we draw attention to Note 1 in the half-year financial report, whichindicates that the company incurred a total comprehensive loss of $5,619,223 and net cash outflowsfrom operating activities of $3,281,078 during the half-year ended 30 June 2015 and, as of that date, thecompany had a working capital deficiency of $40,600,637. The company is dependent on the continuingsupport of its majority shareholder, however there is a material uncertainty regarding the ability of themajor shareholder to provide such support. These conditions, along with other matters set forth in Note1, indicate the existence of a material uncertainty that may cast significant doubt about the company’sability to continue as a going concern and therefore, the company may be unable to realise its assets anddischarge its liabilities in the normal course of business and at the amounts stated in the financial report.

PricewaterhouseCoopers

Ben Gargett PerthPartner 11 September 2015

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