European Metals Holdings Regulatory News (EMH)

European Metals Holdings Limited

Keith Coughlan, Chief Executive Officer

Julia Beckett, Company Secretary

Tel: +61 (0) 419 996 333

Email: keith@europeanmet.com

Tel: +61 (0) 6141 3504

Email: julia@europeanmet.com

Beaumont Cornish (Nomad & Broker)

Michael Cornish

Roland Cornish

Tel: +44 (0) 20 7628 3396

Directors

Mr David Reeves

Mr Keith Coughlan

Dr Pavel Reichl

Mr Kiran Morzaria

Company Secretary

Ms Julia Beckett

Non-Executive Director Chairman

Managing Director and Chief Executive Officer

Non-Executive Director

Non-Executive Director

Registered Office in Australia

Suite 12, Level 1

11 Ventnor Avenue

West Perth WA 6005

Telephone +61 8 6141 3500

Facsimile +61 8 6141 3599

Email www.europeanmet.com

Nominated Advisor & Broker

Michael Cornish and Roland Cornish

Beaumont Cornish

2nd Floor, Bowman House

29 Wilson Street

LONDON EC2M 2SJ

UNITED KINGDOM

Registered Office in Czech Republic

Jaselska 193/10, Veveri602 00 BrnoCzech RepublicTel: +420 732 671 666

Registered Address and Place of Incorporation - BVI

Rawlinson & Hunter

Woodbourne Hall

PO Box 3162

Road Town

Tortola VG1 110

British Virgin Islands

Share Register - Australia

Computershare Investor Services Limited

Level 11

172 St Georges Terrace

Perth WA 6000

Telephone 1300 850 505 (within Australia)

Telephone +61 3 9415 4000 (outside Australia)

Facsimile 1800 783 447 (within Australia)

Facsimile +61 3 9473 2555 (outside Australia)

UK Depository

Computershare Investor Services plc

The Pavilions

Bridgewater Road

BRISTOL BS99 6ZZ

UNITED KINGDOM

Auditor

Stantons International Audit and Consulting Pty Ltd

Level 2, 1 Walker Avenue

West Perth WA 6005

Telephone +61 8 9481 3188

Facsimile +61 8 9321 1204

Reporting Accountants (UK)

Chapman Davis LLP

2 Chapel Court

LONDON SE1 1HH

UNITED KINGDOM

Securities Exchange Listing - Australia

ASX Limited

Level 40, Central Park

152-158 St Georges Terrace

PERTH WA 6000

ASX Code: EMH

Securities Exchange Listing - United Kingdom

London Stock Exchange plc

10 Paternoster Square

LONDON EC4M 7LS

UNITED KINGDOM

AIM Code: EMH

Directors' Report

3

Auditor's Independence Declaration

15

Consolidated Statement of Profit or Loss and Other Comprehensive Income

16

Consolidated Statement of Financial Position

17

Consolidated Statement of Changes in Equity

18

Consolidated Statement of Cash Flows

19

Notes to the Financial Statements

20

Directors' Declaration

45

Independent Audit Report to the members of European Metals Holdings Limited

46

Corporate Governance Statement

48

Additional Information

57

Tenement Schedule

58

Mr David Reeves

Non-Executive Chairman

Appointed 6 March 2014

Mr Keith Coughlan

Managing Director

Appointed 6 September 2013

Dr Pavel Reichl

Non-Executive Director

Appointed 6 March 2014

Mr Kiran Morzaria

Non-Executive Director

Appointed 10 December 2015

· The Company's securities were admitted to trading on the London Stock Exchange AIM Market ("AIM") on 10 December 2015.

· Mr Kiran Morzaria joined the Board of the Company as a Non-Executive Director. Mr Morzaria is the CEO of AIM listed Rare Earth Minerals and a Non-Executive Director of AIM and TSX listed Bacanora Minerals.

· Mr Pavel Reichl stepped away from an Executive Director role with the Company on 31 August 2015 and remains as a Non-Executive Director.

· A bulk sample of 1.5 tonnes was collected and processed in Germany resulting in approximately 420kg of high grade lithium concentrate being produced and shipped to Australia. The concentrate has been used for testing various available technologies for the production of lithium carbonate. The bulk of the concentrate will be used for a bench scale continuous feed mini plant test.

· The Company embarked on a 5,000 m drill program in September 2015 which ran through into the New Year. The drill program was planned to target the area outlined in the Company's positive Scoping Study concluded earlier in the year. The aims of the drill program were to convert a significant portion of the lithium and tin inferred resource used in the Scoping Study to the indicated category, and to provide additional material for further test work.

· The Company is very pleased with the results of the drill program as they reinforce the extent and consistency of the lithium and tin mineralisation at Cinovec. The results of the drilling included intercepts of up to 194m width with higher grade intervals.

· The Company completed a detailed geological model which has identified shallow, higher grade lithium zones. This geological model will be used, along with recent drill results to update the current mineral resource model and allow the company to investigate targeting these areas in the early years of development. This is likely to allow for the conversion of a greater part of the Cinovec resource from Inferred to Indicated category under JORC guidelines, and for initial mine planning and scheduling as the Company progresses the project along the development curve.

· On 31 March 2016, the Company withdrew from the non-binding memorandum of understanding ("MOU") with Lithium Australia in relation to the Cinovec project due to failure to reach satisfactory commercial terms for the joint venture anticipated to be the outcome of the MOU.

· A Scoping Study conducted by specialist independent consultants indicates the deposit could be amenable to bulk underground mining. Metallurgical testwork has produced both battery grade lithium carbonate and high grade tin concentrate at excellent recoveries with the Scoping Study revealing a potential production cost of approximately $1,500 per tonne of lithium carbonate excluding tin and tungsten credits. Cinovec is centrally located for European end-users and is well serviced by infrastructure, with a sealed road adjacent to the deposit, rail lines located 5 km north and 8 km south of the deposit and an active 22 kV transmission line running to the historic mine. As the deposit lies in an active mining region, it has strong community support.

· On 2 May 2016, the Company entered into a licensing agreement with Lepidico Limited for its proprietary L-Max technology. Lepidico has granted the Company an option to acquire a licence to use the L-Max technology for the Cinovec project in Czech Republic for consideration of $20,000 in cash. The option will be valid for 12 months, and can be renewed for a further 12 months by payment of an additional option fee of $25,000.

The material terms of the option agreement with Lepidico are:

· In early June 2016 the Company commenced a new drill programme targeting the higher grade, shallower lithium zones in the north and west of the Cinovec deposit. This is a 7,500 metre programme that is aimed at converting a significant portion of the currently inferred resource for lithium and tin into the indicated category. The programme will also provide significant material for further metallurgical test work.

· On 13 August 2015, the Company issued 9,410,578 CDI at an issue price of $0.08 per CDI to raise $752,846. The tranche 2 placement was approved by the shareholders at the General Meeting held on 31 July 2015.

· On 17 August 2015, the Company issued 496,725 CDI in lieu of payment of outstanding 2015 director and consultancy fees amounting to $30,000 and 3,750,000 options exercisable at 16.6 cents on or before 17 August 2020 which approved by the shareholders at the General Meeting held on 31 July 2015.

· The Company issued 2,000,000 options exercisable at 20 cents on or before 19 October 2016.

· On 19 October 2015, the Company issued 2,00,000 CDI at an issue price of $0.18 per CDI to raise $360,000 and

· On 18 March 2016, the Company issued 13 million CDI at an issue price of $0.135 per CDI to raise $1,755,000 and 1 million warrants in consideration for Beaumont Cornish acting as Nominated advisor. The placement has been made to sophisticated investors and will be used to further develop Company's 100% owned Cinovec Lithium and Tin Project in the Czech Republic.

· From 20 April 2016 to 30 June 2016, 21,365,364 listed options which expired on 30 June 2016 were exercised and the Company received a total of $2,136,536. These funds will be utilized to assist with the completion of the pre-feasibility study on the Cinovec lithium/tin deposit.

David Reeves

Non-Executive Chairman - Appointed 6 March 2014

Qualifications

Mining Engineer

Experience

Mr Reeves is a qualified mining engineer with 25 years' experience in Africa and Australia. Mr Reeves holds a First Class Honours Degree in Mining Engineering from the University of New South Wales, a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia and a First Class Mine Managers Certificate of Competency.

Interest in CDIs and Options

3,720,244 CDIs

1,000,000 Options, 16.6 cents, exp 17 August 2020

Special Responsibilities

Member of all the Committees

Directorships held in other listed entities

Managing Director of Keras Resources Plc (AIM)

Keith Coughlan

Managing Director (CEO) - Appointed 6 September 2013

Qualifications

BA

Experience

Mr Coughlan has over 26 years' experience in stockbroking and funds management. He has been largely involved in the funding and promoting of resource companies listed on ASX, AIM and TSX. He has advised various companies on the identification and acquisition of resource projects and was previously employed by one of Australia's then largest funds management organizations.

Interest in CDIs and Options

8,500,000 CDIs

2,000,000 Options, 16.6 cents, exp 17 August 2020

Special Responsibilities

Member of all the Committees

Directorships held in other listed entities

Non-Executive Chairman of Talga Resources Limited

Pavel Reichl

Non-Executive Director - Appointed 6 March 2014

Qualifications

PhD from University of Montana

Experience

Dr Reichl has over 15 years' experience in precious, base and PGE metals exploration and production and has a PhD from University of Montana. He was formerly Business Unit Manager of a Canadian listed minerals exploration company responsible for Europe and Central Asia. Dr Reichl was the former head of the Newmont acquisition program in Eastern Europe and exploration manager for Kyrgyzstan and Uzbekistan. He is fluent in English, Czech and Russian.

Interest in CDIs and Options

2,778,672 CDIs

750,000 Options, 16.6 cents, exp 17 August 2020

Special Responsibilities

Member of all the Committees

Directorships held in other listed entities

Nil

Kiran Morzaria

Non-Executive Director - Appointed 10 December 2015

Qualifications

Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School

Experience

Mr Morzaria has extensive experience in the mineral resource industry working in both operational and management roles. He spent the first four years of his career in exploration, mining and civil engineering before obtaining his MBA. Mr Morzaria has served as a director of a number of public companies in both an executive and non-executive capacity. 

Interest in CDIs and Options

Mr Morzaria is a director and chief executive of Rare Earth Minerals plc which owns 19,860,756 CDIs. Mr Morzaria has no direct interest in CDIs.

Special Responsibilities

Nil

Directorships held in other listed entities

Chief Executive Officer and Director of Rare Earth Minerals plc

Non-Executive Director of Bacanora Minerals Limited

Directors' Meetings

Name

Number attended

Number eligible to attend

David Reeves

4

4

Keith Coughlan

4

4

Pavel Reichl

4

4

Kiran Morzaria

4

3

Expiry date

Exercise Price

Number under option

17 August 2020

16.6 cents

3,750,000

19 October 2016

20 cents

2,000,000

Expiry date

Exercise Price

Number under option

11 November 2018

14 cents

1,000,000

2016

Group Key Management Personnel

Short-term benefits

Post-

employment

benefits

Long-term benefits

Equity-settled share-based payments

Total

% of remuneration as share based payments

Salary, fees and leave

Profit share and bonuses

Non-monetary

Other1

Super-annuation

Other

Equity

Options2

Directors:

$

$

$

$

$

$

$

$

$

David Reeves

36,000

-

-

60,000

-

-

-

103,146

199,146

52%

Keith Coughlan

200,000

-

-

-

19,000

-

-

206,292

425,292

49%

Pavel Reichl

43,508

-

-

50,157

-

-

-

77,360

171,025

45%

Kiran Morzania3

13,355

-

-

-

-

-

-

-

13,355

-

292,863

-

-

110,157

19,000

-

-

386,798

808,818

-

2015

Group Key Management Personnel

Short-term benefits

Post-

employment

benefits

Long-term benefits

Equity-settled share-based payments

Total

% of remuneration as share based payments

Salary, fees and leave

Profit share and bonuses

Non-monetary

Other4

Super-annuation

Other

Equity

Options

Directors:

$

$

$

$

$

$

$

$

$

David Reeves

24,000

-

-

40,000

-

-

-

-

64,000

-

Keith Coughlan

200,000

-

-

-

19,000

-

-

-

219,000

-

Pavel Reichl

83,000

-

-

-

-

-

-

-

83,000

-

Robert Timmins*

-

-

-

-

-

-

-

-

-

-

Colin Ikin*

-

-

-

-

-

-

-

-

-

-

David Porter*

-

-

-

-

-

-

-

-

-

-

307,000

-

-

40,000

19,000

-

-

-

366,000

30 June 2016

Grant Details

Exercised

Lapsed

Grant Date

No.

Value5

No.

Value

No.

Value

Balance at End of Year

$

$

$

No.

Value

Group KMP

$

David Reeves

31 July 2015

1,000,000

103,146

-

-

-

-

1,000,000

103,146

Keith Coughlan

31 July 2015

2,000,000

206,292

-

-

-

-

2,000,000

206,292

Pavel Reichl

31 July 2015

750,000

77,360

-

-

-

-

750,000

77,360

Kiran Morzania

-

-

-

-

-

-

-

-

-

3,750,000

386,798

-

-

-

-

3,750,000

386,798

David Reeves

658,372

1,000,000

658,372

-

1,000,000

1,000,000

-

Keith Coughlan

4,000,000

2,000,000

4,000,000

-

2,000,000

2,000,000

-

Pavel Reichl

-

750,000

-

-

750,000

750,000

-

Kiran Morzaria

-

-

-

-

-

-

-

Total

4,658,372

3,750,000

4,658,372

-

3,750,000

3,750,000

-

David Reeves

-

-

-

658,372

658,372

658,372

-

Keith Coughlan

-

-

-

4,000,000

4,000,000

4,000,000

-

Pavel Reichl

-

-

-

-

-

-

-

Robert Timmins

500,000

-

-

-

500,000

500,000

-

Colin Ikin

-

-

-

-

-

-

-

David Porter

500,000

-

-

-

500,000

500,000

-

Total

1,000,000

-

-

4,658,372

5,658,372

5,658,372

-

2016

Name

Balance at Start of year

Granted as remuneration during the year

Issued on exercise of options

Other Changes during the year

Balance at end of year

David Reeves

Indirect

2,565,147

-

658,372

496,7258

3,720,244

Keith Coughlan

Indirect

4,500,000

-

4,000,000

-

8,500,000

Pavel Reichl

2,778,672

-

-

-

2,778,672

Kiran Morzaria9

-

-

-

-

-

Indirect

-

-

-

19,860,756

19,860,756

Total

9,843,819

-

4,658,372

20,357,481

34,859,672

2015

Name

Balance at Start of year

Granted as remuneration during the year

Issued on exercise of options

Other Changes during the year10

Balance at end of year11

David Reeves

Indirect

1,364,124

-

-

1,201,023

2,565,147

Keith Coughlan

Indirect

500,000

-

-

4,000,000

4,500,000

Pavel Reichl

1,984,766

-

-

793,906

2,778,672

Robert Timmins

-

-

-

-

-

Colin Ikin

225,000

-

-

-

225,000

Indirect

3,868,580

-

-

-

3,868,580

David Porter

Indirect

110,000

-

-

-

110,000

Total

8,052,470

-

-

5,994,929

14,047,399

30 June 2015/2016

Grant Details

Exercised

Lapsed

Grant Date

No.

Value

No.

Value

No.

Value

Balance at End of Year

$

$

$

No.

Value

Group KMP

$

David Reeves

20 Feb 2014

542,651

-

-

-

(542,651)

-

-

-

Keith Coughlan

-

-

-

-

-

-

-

-

-

Pavel Reichl

20 Feb 2014

793,906

-

-

-

(793,906)

-

-

-

Kiran Morzaria

-

-

-

-

-

-

-

-

-

-

-

-

(1,336,557)

-

-

-

Class B Performance Shares

(i) $7,500,000 less the value of the CDIs issued on conversion of the A Class Performance Shares calculated at a deemed issue price of $0.30 per CDI; divided by,

(ii) the greater of $0.30 and the volume weighted average price of CDIs as calculated over the 5 ASX trading days prior to the date the DFS (as defined below) is provided to the Company, and

subject to the definitive feasibility study commissioned by the board of the Company in respect of the Permits (DFS) and prepared by a reputable independent third party engaged by the board of the Company being provided to the Company on or before that date which is 2 years after the date of issue of the B Class Performance Shares (Milestone). For clarity, the DFS must be:

(i) of a standard suitable to be submitted to a financial institution as the basis for lending of funds for the development and operation of mining activities contemplated in the study;

(ii) capable of supporting a decision to mine on the permits; and

(iii) completed to an accuracy of +/- 15% with respect to operating and capital costs and display a net present value of not less than US$100,000,000 using a discount rate of 10% and a tin price of no less than 90% of the average closing cash price of tin as published by the London Stock Exchange for the 6 months immediately preceding completing of the study.

Entity

Nature of transactions

Key Management Personnel

Total Transactions

Payable Balance

2016

$

2015

$

2016

$

2015

$

-

Sub-underwriting fee

Keith Coughlan

-

7,144

-

-

-

Sub-underwriting fee

David Reeves

-

799

-

-

-

Reimbursement

David Reeves

5,615

-

-

-

Wilgus Investments Pty Ltd

Rental

David Reeves

31,000

-

-

-

Note

30 June 2016

30 June 2015

$

$

Revenue - interest income

12,647

6,917

Other income

140,236

21,516

Professional fees

(405,248)

(270,257)

Audit fees

6

(29,911)

(26,025)

Directors' fees

(49,355)

-

Share based payments

16

(557,246)

-

Employees' benefits

(219,100)

(219,000)

Travel and accommodation

(27,717)

(29,551)

Office rent

(59,005)

(16,396)

Insurance expense

(11,372)

(20,329)

Impairment expense

(56)

-

Share registry expense

(325,307)

(51,114)

Depreciation expense

(942)

(2,333)

Other expenses

(59,261)

(60,300)

Loss before income tax

(1,591,637)

(666,872)

Income tax expense

3

-

-

Loss for the year

(1,591,637)

(666,872)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss - exchange differences on translating foreign operations

(37,900)

(2,258)

Other comprehensive (loss)/income for the year, net of tax

(37,900)

(2,258)

Total comprehensive loss for the year

(1,629,537)

(669,130)

Net Loss attributable to:

members of the parent entity

(1,591,637)

(666,872)

(1,591,637)

(666,872)

Total Comprehensive loss attributable to:

members of the parent entity

(1,629,537)

(669,130)

(1,629,537)

(669,130)

Basic and diluted loss per CDI (cents)

7

(1.78)

(1.25)

CURRENT ASSETS

Cash and cash equivalents

8

3,134,661

889,208

Other receivables

9

94,591

28,703

Other assets

10

79,915

32,918

TOTAL CURRENT ASSETS

3,309,167

950,829

NON-CURRENT ASSETS

Property, plant and equipment

-

488

Exploration and evaluation expenditure

11

4,940,613

3,414,934

Intangible assets

2,599

3,398

TOTAL NON-CURRENT ASSETS

4,943,212

3,418,820

TOTAL ASSETS

8,252,379

4,369,649

CURRENT LIABILITIES

Trade and other payables

12

293,890

201,536

Other liabilities

13

-

23,291

TOTAL CURRENT LIABILITIES

293,890

224,827

TOTAL LIABILITIES

293,890

224,827

NET ASSETS

7,958,489

4,144,822

EQUITY

Issued capital

14

11,674,141

6,788,183

Reserves

15

644,547

222,761

Accumulated losses

(4,360,199)

(2,866,122)

TOTAL EQUITY

7,958,489

4,144,822

Issued Capital

Option Reserve

Foreign Currency Translation Reserve

Accumulated

Losses

Total

$

$

$

$

$

Balance at 1 July 2014

5,002,296

97,560

127,459

(2,199,250)

3,028,065

Loss attributable to members of the Company

-

-

-

(666,872)

(666,872)

Other comprehensive loss

-

-

(2,258)

-

(2,258)

Total comprehensive loss for the year

-

-

(2,258)

(666,872)

(669,130)

Transactions with owners, recognised directly in equity

CDIs issued during the year, net of costs

1,755,857

-

-

-

1,755,857

Share based payments

30,030

-

-

-

30,030

Balance at 30 June 2015

6,788,183

97,560

125,201

(2,866,122)

4,144,822

Balance at 1 July 2015

6,788,183

97,560

125,201

(2,866,122)

4,144,822

Loss attributable to members of the Company

-

-

-

(1,591,637)

(1,591,637)

Other comprehensive loss

-

-

(37,900)

-

(37,900)

Total comprehensive loss for the year

-

-

(37,900)

(1,591,637)

(1,629,537)

Transactions with owners, recognised directly in equity

CDIs issued during the year, net of costs

4,855,958

-

-

-

4,855,958

Options lapsed

-

(97,560)

-

97,560

-

Equity based payments

30,000

557,246

-

-

587,246

Balance at 30 June 2016

11,674,141

557,246

87,301

(4,360,199)

7,958,489

CASH FLOWS FROM OPERATING ACTIVITIES

Payments to suppliers and employees

(1,072,664)

(712,182)

Interest received

12,647

6,917

Interest paid

(23)

-

UK listing cost

(242,392)

-

R&D Rebate

128,024

-

Receipts for services

-

21,516

Net cash (used in) operating activities

17

(1,174,408)

(683,749)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for exploration and evaluation expenditure

(1,507,146)

(567,136)

Net cash (used in)/ from investing activities

(1,507,146)

(567,136)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of CDIs

5,004,382

1,844,307

Capital raising costs paid

(77,375)

(82,829)

Net cash from financing activities

4,927,007

1,761,478

Net increase in cash and cash equivalents

2,245,453

510,593

Cash and cash equivalents at the beginning of the financial year

889,208

378,615

Cash and cash equivalents at the end of financial year

3,134,661

889,208

(a)

Basis of preparation

These consolidated financial statements and notes represent those of European Metals Holdings Limited ("the Company") and Controlled Entities (the "Consolidated Group" or "Group"). The separate financial statements of the parent entity, European Metals Holdings Limited, have not been presented within this financial report as is permitted by Corporations Act 2001.

The financial statements are general purpose financial statements, which have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Boards (AASB) and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

The accounting policies detailed below have been adopted in the preparation of the financial report. Except for cash flow information, the

nted unless otherwise stated. retations and complies with other requirements of the law.

financial statements have been prepared on an accrual basis and are based on historical cost, modified, where applicable, by the measurement at fair values of selected non-current assets, financial assets and financial liabilities.

The Group is a listed public company, incorporated in the British Virgin Islands and registered in Australia.

(i)

Accounting policies

The Group has consistently applied the following accounting policies to all periods presented in the financial statements. The Group has considered the implications of new and amended Accounting Standards applicable for annual reporting periods beginning after 1 January 2015 but determined that their application to the financial statements is either not relevant or not material.

(ii)

Statement of Compliance

The financial report was authorised for issue on 30 September 2016.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in the financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB.

(iii)

Critical accounting estimates and judgements

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted.

Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

Recognition of deferred tax assets

Deferred tax assets relating to temporary differences and unused tax losses have not been recognised as the Directors are of the opinion that it is not probable that future taxable profit will be available against which the benefits of the deferred tax assets can be utilised.

(b)

Income Tax

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

 (c)

Impairment of assets

At the end of each reporting period the Group assesses whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount in which case the impairment loss is treated as a revaluation decrease.

(c)

Impairment of assets

An assessment is also made at each reporting period as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(d)

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the Statement of Financial Position.

(e)

Revenue

Interest

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

(f)

Goods and Services Tax (GST)

Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST.

Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(g)

Trade and other receivables

Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally due for settlement within 30 days. Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Group in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Group.

The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short-term discounting is not applied in determining the allowance.

The amount of the impairment loss is recognised in the profit and loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the profit and loss.

(h)

Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

(i)

Government Grants

An unconditional government grant is recognised in profit or loss as other income when the grant becomes receivable. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same period in which the expenses are recognised.

Research and development tax incentives are recognised in the statement of profit or loss when received or when the amount to be received can be reliably estimated.

(j)

Employee Benefits

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Provision is made for the liability due to employee benefits arising from services rendered by employees to the reporting date. Employee benefits expected to be settled within one year together with benefits arising out of wages and salaries, sick leave and annual leave which will be settled after one year, have been measured at their nominal amount. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Contributions made to defined employee superannuation funds are charged as expenses when incurred.

 (k)

Exploration and Evaluation Assets

Exploration and evaluation costs, including costs of acquiring licenses, are capitalised as exploration and evaluation assets on an area of interest basis. Costs of acquiring licences which are pending the approval of the relevant regulatory authorities as at the date of reporting are capitalised as exploration and evaluation cost if in the opinion of the Directors it is virtually certain the Group will be granted the licences.

Exploration and evaluation assets are only recognised if the rights of tenure to the area of interest are current and either:

(a) The expenditures are expected to be recouped through successful development and exploitation of the area of interest, or

(b) Activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are assessed for impairment when:

(i) Sufficient data exists to determine technical feasibility and commercial viability, and

(ii) Facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see impairment accounting policy in Note 1(c). For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which exploration activity relates. The cash generating unit shall not be larger than the area of interest.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and equipment.

(l)

Financial Instruments

Initial recognition and measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the Group becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Financial assets at fair value through profit and loss

Financial assets are classified at "fair value through profit or loss" when they are held for trading for the purpose of short term profit taking, derivatives not held for hedging purposes, or when the are designated as such to avoid an accounting mismatch or to enable performance evaluation where a Group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount being included in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. All other loans and receivables are classified as non-current assets.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments and it is the Group's intention to hold these investments to maturity. Such assets are recognised initially at fair value plus any directly attributable transaction costs. They are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses.

Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. All other investments are classified as current assets.

If during the period the Group sold or reclassified more than an insignificant amount of the held-to-maturity investments before maturity, the entire held-to-maturity investments category would be tainted and reclassified as available-for-sale.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items, are recognised as a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit and loss. Available-for-sale financial assets are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. All other available-for-sale financial assets are classified as current assets.

Financial liabilities

Non-derivative financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest rate method.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm's length transactions, reference to similar instruments and option pricing models.

Derecognition

Financial assets are derecognised where the contractual rights to cash flow expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

(m)

Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months.

(n)

Earnings Per CDI

Basic earnings per CDI

Basic earnings per CDI is determined by dividing the profit or loss attributable to ordinary shareholders of the Company, by the weighted average number of CDIs outstanding during the period, adjusted for bonus elements in CDIs issued during the period.

Diluted earnings per CDI

Diluted earnings per CDI adjusts the figure used in the determination of basic earnings per CDI to take into account the after income tax effect of interest and other financial costs associated with dilutive potential CDIs and the weighted average number of CDIs assumed to have been issued for no consideration in relation to dilutive potential CDIs, which comprise convertible notes and CDI options granted.

(o)

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in income in the period in which they are incurred.

(p)

Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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, when appropriate, the risks specific to the liability.

(q)

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. Operating segments' results are reviewed by the Group's Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(r)

CDI based payments

The grant date fair value of CDI-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do not meet the related service and non-market performance conditions at the vesting date. For CDI-based payment awards with non-vesting conditions, the grant date fair value of the CDI-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

(s)

Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group's entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity's functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in Profit or Loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in other comprehensive income; otherwise the exchange difference is recognised in Profit or Loss.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group's presentation currency are translated as follows:

- Assets and liabilities are translated at year end exchange rates prevailing at the end of the reporting period;

- Income and expenses are translated at average exchange rates for the period; and

- Retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations recognised in the other comprehensive income and included in the foreign currency translation reserve in the Statement of Financial Position. These differences are reclassified into Profit or Loss in the period in which the operation is disposed.

(t)

Issued capital

CDIs are classified as equity. Incremental costs directly attributable to the issue of new CDIs or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new CDIs or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration.

(u)

Principles of Consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent European Metals Holdings Limited and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent 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. A list of the subsidiaries is provided in Note 20.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as "non-controlling interests". The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary's net assets on liquidation at either fair value or at the non-controlling interests' proportionate share of the subsidiary's net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income.

(a) Income tax expense

-

-

Current tax

-

-

Deferred tax

-

-

Deferred income tax expense included in income tax expense comprises:

-

-

(Increase) in deferred tax assets

-

-

Increase in deferred tax liabilities

-

-

 (b) Reconciliation of income tax expense to prima facie tax payable

Net loss before tax

(1,591,637)

(666,872)

Prima facie tax on operating loss at 30% (2015: 30%)

(477,491)

(200,062)

Add / (Less): Non-deductible items

-Impairments

-

-

-Legal fees

94,201

-Share-based payments

167,174

-

-Other

14,805

10,981

Current year tax loss not recognised

201,311

189,081

Income tax attributable to operating loss

-

-

The applicable weighted average effective tax rates are as follows:

Nil%

Nil%

Balance of franking account at year end

Nil

Nil

a. Deferred tax assets

Tax losses

290,477

270,033

Capital raising costs

21,032

12,127

Unrecognised deferred tax asset

311,509

285,160

Set-off deferred tax liabilities

-

-

Net deferred tax assets

311,509

285,160

Deferred tax liabilities

Exploration expenditure

-

-

-

-

Set-off deferred tax assets

-

-

Net deferred tax liabilities

-

-

Tax losses

Unused tax losses for which no deferred tax asset has been recognised

968,254

910,111

2016

$

2015

$

Short-term benefits

292,863

307,000

Post-employment benefits

19,000

19,000

Equity settled

386,798

-

Other payments

110,157

40,000

808,818

366,000

Entity

Nature of transactions

Key Management Personnel

Total Transactions

Payable Balance

2016

$

2015

$

2016

$

2015

$

-

Sub-underwriting fee

Keith Coughlan

-

7,144

-

-

-

Sub-underwriting fee

David Reeves

-

799

-

-

-

Reimbursement

David Reeves

5,615

-

-

-

Wilgus Investments Pty Ltd

Rental

David Reeves

31,000

-

-

-

NOTE 6: AUDITOR'S REMUNERATION

2016

$

2015

$

Details of the amounts paid to the auditor of the Group, Stantons International Audit and Consulting Pty Ltd for audit and non-audit services provided during the year are set out below:

Auditor's services

Audit and review of financial report

29,911

26,025

NOTE 7: BASIC AND DILUTED LOSS PER CDI

2016

2015

Basic and diluted loss per CDI (cents)

(1.78)

(1.25)

Loss attributable to members of European Metals Holdings Limited

(1,591,637)

(666,872)

Weighted average number of CDI outstanding during the year

89,471,195

53,143,446

The Group is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, CDI capital in respect of potential CDIs would lead to diluted earnings per CDI that shows an inferior view of the earnings per CDI. For this reason, the diluted losses per CDI for the year ended 30 June 2016 are the same as basic loss per CDI.

NOTE 8: CASH AND CASH EQUIVALENTS

2016

$

2015

$

Cash at bank

3,134,661

889,208

Total cash and cash equivalents in the Statement of Cash Flows

3,134,661

889,208

NOTE 9: OTHER RECEIVABLES

2016

$

2015

$

CURRENT

GST and VAT Receivable

40,107

28,329

Other receivables

54,484

374

94,591

28,703

NOTE 10: OTHER ASSETS

2016

$

2015

$

Current

Prepayments

79,915

32,918

79,915

32,918

NOTE 11: EXPLORATION AND EVALUATION EXPENDITURE

2016

$

2015

$

Exploration at cost

Balance at the beginning of the year

3,414,934

2,814,798

Acquisition of tenements

-

-

Exploration of tenements

1,502,819

599,746

Foreign exchange movement

22,860

390

4,940,613

3,414,934

NOTE 12: TRADE AND OTHER PAYABLES

2016

$

2015

$

CURRENT

Trade payables

225,842

180,975

Accrued expenses

68,048

20,561

293,890

201,536

Payables are normally due for payment within 30 days.

CURRENT

Loan from Cominco Resources

-

23,291

-

23,291