Sumatra Copper & Gold : 31 December 2016 Annual Financial Statements

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016

SUMATRA COPPER & GOLD PLC | LEVEL 1, 5 ORD STREET, WEST PERTH WA 6005, AUSTRALIA ABN 14 136 694 267

REGISTERED IN ENGLAND AND WALES | 39 PARKSIDE, CAMBRIDGE CB1 1PN UNITED KINGDOM REGISTRATION NUMBER 5777015

DIRECTORS

Stephen Daniel Robinson (Non-Executive Chairman) David Fowler (Managing Director)

Adi Adriansyah Sjoekri (Executive Director)

Jocelyn Severyn de Warrenne Waller (Non-Executive Director) Gavin Arnold Caudle (Non-Executive Director)

Andrew Robb (Non-Executive Director)

COMPANY SECRETARY

Susan Hunter

REGISTERED OFFICE

39 Parkside Cambridge CB1 1PN United Kingdom

AUSTRALIAN OFFICE

Level 1, 5 Ord Street West Perth WA 6005 Australia

Phone: [phone]

BANKERS

HSBC Bank plc 69 Pall Mall

London SW17 5EY United Kingdom

National Australia Bank 1238 Hay Street

West Perth WA 6005 Australia

CHARTERED ACCOUNTANTS AND STATUTORY AUDITORS

BDO LLP

55 Baker Street London W1U 7EU United Kingdom

SHARE REGISTRY

Computershare Investor Services Pty Limited Level 2, 45 St George's Terrace

PERTH WA 6000

Phone: [phone] (within Australia)

Phone: [phone] (outside Australia)

WEBSITE

www.sumatracoppergold.com

STOCK EXCHANGE LISTING

Australian Securities Exchange Share code: SUM

Strategic Report	1
Directors' Report	7
Independent Auditor's Report	10
Consolidated Statement of Comprehensive Income	17
Consolidated Statement of Financial Position	18
Consolidated Statement of Changes in Equity	19
Consolidated Statement of Cash Flows	20
Notes to the Consolidated Financial Statements	21
Parent Financial Statements and Notes to the Financial Statements	52

Strategic Report

The Directors of the Company have pleasure in submitting their report together with the consolidated financial statements of the Group, being Sumatra Copper & Gold plc ('the Company' or 'the Group') and its controlled entities, for the year ended 31 December 2016.

Review of the Business

Sumatra Copper & Gold plc is a gold and silver producer and precious metals explorer in southern Sumatra, Indonesia. The Company's flagship asset is its Tembang gold-silver mine ("Tembang" or "the Project"), currently in production. The Company also has an extensive exploration portfolio with projects ranging from brownfield, near-production opportunities to strategically located green field holdings.

Sumatra Copper & Gold plc listed on the Australian Stock Exchange in 2009 (ASX: SUM).

The Company announced updated Mineral Resources and Ore Reserves in March 2014 and in April 2014 a revised Definitive Feasibility Study ("DFS") was published. The DFS was based on a five-year plan, mining Ore Reserves at a nameplate plant throughput rate of 400,000 tonnes per annum to produce a total of 169,000 ounces of gold and 1.8m ounces of silver.

In October 2014, the Company's wholly owned subsidiary, PT Dwinad Nusa Sejahtera ("DNS"), signed a senior secured debt facility of up to US$45m ("Facility") with Nomura Singapore Limited, Indonesia Eximbank and others. An initial tranche of US$40m was drawn down from the Facility in November 2014 and construction re-commenced at Tembang.

The Company achieved its first gold pour at Tembang in September 2015, on budget and 8 weeks ahead of schedule.

The DFS mine plan was predicated on pre-stripping open pit waste and the early rapid development of the Belinau underground mine decline to access high grade ore. However, due to the combined effect of the commissioning of the processing plant 8 weeks ahead of schedule, the earlier than anticipated ramp-up of the processing plant to nameplate capacity and a delay in the permitting and delivery of explosives, the mine plan could not be delivered as planned.

Consequently, during the first half of 2016 underground mine plans were changed to conventional top-down long hole stoping mining methods to try to accelerate access to high grade ore. This approach proved unsuccessful as additional unplanned dilution was experienced and insufficient progress was made on decline development to provide the work fronts needed for higher productivity. A new Chief Operating Officer was appointed during July 2016 and following a review of underground performance changes were made to key personnel and an interim mining method using bench cut and fill was established to allow time for the decline to progress to the bottom of the mine. This interim method is planned to be employed until the end of the first quarter of 2017 when higher production volumes at lower cost can be produced from conventional stoping methods.

During 2016, the Company produced 25,245 ounces of gold and 392,417 ounces of silver (a combined total of 30,509 gold- equivalent ounces).

In December 2016, the Company, and its wholly owned subsidiary PT Dwinad Nusa Sejahtera, entered into an amendment the Facility. This amendment will lower the cost and amount of debt, and improve short term cashflow as summarised below:

• Reduction in interest rate (including redemption premium) from 15% to 7.5%;

• Repayment of US$10m of debt;

• Extension of maturity date from November 2017 to June 2019;

• Cancellation of 250,597,351 warrants for consideration of US$4.05m payable in CDIs and termination of the warrant deed;

• Conversion of the outstanding redemption premium (accrued through a deferral of a portion of the interest rate) of approximately US$5.9m into up to US$3m of CDIs and the balance to a zero coupon, unsecured loan repayable upon maturity of the debt facility;

• Commitment by major shareholders owning US$7m of convertible notes, plus accrued interest, to convert the notes into CDIs; and

• Deferment, without interest, of 50% of the net out-of-the-money value on the six-monthly gold and silver hedge deliveries commencing November 2016 with repayment by 30 June 2017.

  The Amended Facility was signed on 30 December 2016 with conditions precedent being satisfied. The amended facility is subject to a number of conditions, which are legally binding, including:

• Completion of an equity raise of a minimum of US$2.5m by 31 January 2017 ("Initial Equity Raise"); and

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