final forte annual report 2011 - gsml.com.au · directors’ report forte consolidated limited and...

ABN 37 148 168 825

Annual Financial Report

30 June 2011

CORPORATE INFORMATION Forte Consolidated Limited and Controlled Entities

ABN 37 148 168 825

Directors

John Terpu (Non-executive Chairman)Nick Revell (Executive Director)Bruno Firriolo (Non-executive Director)

Company Secretary

Bruno Firriolo

Registered Officeand Principal Place of Business

Suite 4, 213 Balcatta RoadBalcatta WA 6021Telephone: (08) 9240 4111Facsimile: (08) 9240 4054

Solicitors

Blake Dawson2 The EsplanadePerth WA 6000Telephone: (08) 9366 8022Facsimile: (08) 9366 8111

Auditors

HLB Mann JuddLevel 4, 130 Stirling StreetPerth WA 6000Telephone: (08) 9227 7500Facsimile: (08) 9227 7533

Bankers

National Australia Bank Limited96 High StreetFremantle WA 6160

Share Register

Link Market Services LimitedLevel 12, 680 George StreetSydney NSW 2000Telephone: (within Australia): 1300 554 474Telephone: (outside Australia): +61 (02) 8280 7761

Facsimile: (02) 9287 0303

Securities Exchange Listing

Forte Consolidated Limited is listed on the Australian Securities Exchange (ASX: FRC)

CONTENTS Forte Consolidated Limited and Controlled Entities

1

PAGE

Chairman’s Report……………………………………………………………………………………………… ..........2

Review of Operations Report ……………………………………………………………………………….............. 3

Directors’ Report…………………………………………………………………………………………………..........6

Auditor’s Independence Declaration …………………………………………………………………………. ........13

Corporate Governance………..…………… .....................................................................................................14

Statement of Comprehensive Income………………………………………………………………………... ........19

Statement of Financial Position ...........……………………………………………………………………………. .20

Statement of Cash Flows……………………………………………………………………………………….........21

Statement of Changes in Equity………………………………………………………….. ....................................22

Notes to the Financial Statements……………………………………………………………………………..........23

Directors’ Declaration………………………………………………………………………………………….. .........48

Independent Auditor’s Report………………………………………………………………………………... ..........49

ASX Additional Information……………………………………………………………………………………………51

CHAIRMAN’S REPORT Forte Consolidated Limited and Controlled Entities

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Dear Shareholder,

I am pleased on behalf of the Directors of Forte Consolidated Limited to present the Company’s AnnualReport for 2011.

Following the Company’s listing in April this year, considerable time and effort has gone into reviewing andevaluating our tenement assets, including the commissioning of a report by an expert consultant to assist inthe planning of future field activities. We will continue to aggressively pursue all opportunities to unlock thepotential of our ground, and look forward to providing shareholders with up-to-date information on progress.

Your Board is also actively engaged in reviewing and assessing other projects that have been, and will be,brought to its attention. Notwithstanding the difficult world economic climate facing the equity markets, thereare some solid opportunities that the Company believes warrant careful consideration. To prepare andenhance Forte’s ability to respond to opportunities and developments, the Company will seek to attractexpertise commensurate with future activities as they arise.

My fellow directors and I are very conscious of the current market conditions and sentiment, but havingraised a substantial amount of capital to fund the next two years of proposed project exploration, lookforward to the next phase of our Company’s growth.

John Terpu

Chairman

REVIEW OF OPERATIONS Forte Consolidated Limited and Controlled Entities

3

Following the acquisition of Nextstar Pty Ltd on 8 April 2011, the Company listed on the Australian SecuritiesExchange on 14 April 2011. All exploration tenement assets are currently held in the name of Nextstar PtyLtd.

Pursuant to the IPO prospectus lodged with ASIC on 11 March 2011, the Company’s main exploration focuswas to be on the North Queensland exploration ground known as the Kangaroo Hills Project. This consists of2 granted tenements (EPM 14824 and EPM 14825) and 1 applications (EPM 18683). Granted tenementEPM 14823 and application for MDL 436 were held at IPO date but were subsequently surrendered.

Field Work Completed

A site visit to the Kangaroo Hills Project area during May/June and September 2011 was undertaken inpreparation for the planning of upcoming geological field activities. The required action plans from the field tripwere:

“Mount Moss East Target M2” EPM 14824

Detailed geological mapping of Mount Moss East (M2) location combined with geophysical interpretationto ensure alteration and existing drill holes are fully understood.

A geological cross section to aid in the interpretation of the magnetics and determine further prospectivity.

Confirm nature of potassium/thorium anomaly to the northeast and south of Mount Moss East prospect.

Determination of magnetite content required to process at adjacent third party mines.

Findings

Field inspection of the rock chips from drill holes KHRC0008, KHRC0009, KHRC0011 revealed asimple amphibole-feldspar assemblage with variable magnetite and minor late-stage epidote andprobable chlorite.

There was some variability in amphibole grainsize, usually coarsening where magnetite is moreabundant. Grainsize was typically less than 5mm, although local, coarser grained more amphibole richzones did occur (with corresponding increased magnetite concentration).

The magnetite at this anomaly appears to be entirely within amphibolite, lacking any evidence for acarbonate skarn host such as at Mount Moss (an adjoining operating magnetite mine).


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“Hidden Treasure” EPM14824

Findings

Significant base metal skarn prospectivity was evident from the field work – large limestoneoutcrops and the abundance of granites make these a worthwhile target. Base metals were presentin the granite-related hydrothermal alteration.

The development around the granitoid margins of potassic alteration extending into the country rock,especially where limestone is mapped, is a good indicator of prospectivity.

A report commissioned from Southern Geoscience work developed at least 30 targets that requireinvestigation. These include magnetic highs, potassium and uranium anomalism, skarndevelopment and inferred zones of structurally controlled high fluid flow.

Field checking of these sites is required, in addition to overlaying existing data (especiallygeochemistry) on them.

Gold-Antimony Mineralisation (Camel Creek) EPM 14825

A field inspection investigated the nature of the quartz vein-hosted Au-Sb mineralisation of the historic CamelCreek mine area. The mining completed from 1989 to 1994 was for oxide zone ore by Lynch Mining duringwhich 2.8t of gold was mined (production information from Vos et al – 2005). The operations were spreadacross a large area in three main operations – Camel Creek, Red Gold and Golden Cup (see figure 2). Thefield inspection determined that exploration for orogenic vein-hosted gold mineralisation within EPM 14825 isworth continuing.

Figure 2: Camel Creek Mine Area


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Tenement Movements

During the period (as per Mines Department requirements) a compulsory reduction of sub-blocks on both EPM14824 and EPM 14825 occurred. The remaining sub-blocks are shown in Figure 3.

EPM 14823 and MDL 436 were surrendered during the reporting period.

Figure 3: Retained Blocks EPM’s 14824 &14825

DIRECTORS’ REPORT Forte Consolidated Limited and Controlled Entities

6

Your directors submit the annual financial report of the consolidated entity consisting of Forte ConsolidatedLimited and the entities it controlled during the period for the financial year ended 30 June 2011, accountedfor under reverse acquisition principles (refer Note 1 to the Financial Statements).

Directors and Company Secretary

The names of directors and the secretary who held office during or since the end of the year and until thedate of this report are as follows.

John Terpu MAICD – Non-executive Chairman(Appointed 12 January 2011)

Mr Terpu has over 15 years of commercial and management expertise gained in a broad range of businessand investment activities. He has been involved in the mining and exploration industry through theacquisition and investment in a number of strategic exploration and mining projects. Mr Terpu has a widerange of contacts in the exploration and mining investment community. Mr Terpu was a Director of ConquestMining Limited from June 1999 to May 2010 and Adept Solutions Limited since March 2009.

Nick Revell BSc (Geol) – Executive Director(Appointed 12 January 2011)

Nick Revell has over 20 years experience in mine geology and exploration geology, working for major miningcompanies for 16 years as a mine geologist, subsequent to which he established a consulting companyspecialising in mine development, due diligence and property valuation at all stages of development. He haswide experience in a number of commodities including gold, base metals and iron ore. Mr Revell is a Directorof Kidman Resources Limited since November 2010, Sunseeker Minerals Limited since November 2010,Dynasty Metals Australia Limited from March 2011 to September 2011, Mayan Iron Corporation Limited fromJanuary 2010 to September 2011, South American Ferro Metals Limited from June 2008 to November 2010and Adept Solutions Limited from February 2010 to February 2011.

Bruno Firriolo CPA, B.Bus (Acctg) – Non-executive Director and Company Secretary(Appointed 12 January 2011)

Mr Firriolo is a Certified Practising Accountant who has held the offices of Director and Company Secretarywith listed Australian companies since November 2003. He has been a partner with the accounting firmCleaver & Associates since April 1991 dealing with all aspects of accounting and taxation. For many yearsMr Firriolo offered specialised taxation consulting services to other accounting firms as well as majorcorporate clients. Mr Firriolo’s experience in financial and corporate matters is supplemented by a period ofco-ownership in a national wholesale business. Mr Firriolo was a Director of Conquest Mining Limited fromNovember 2003 to May 2010 and Adept Solutions Limited from March 2009 to June 2011.

Directors’ Meetings

The number of meetings of the Company’s Board of Directors attended by each Director during the yearended 30 June 2011 were as follows:

Number of Board MeetingsHeld Whilst in Office

Number of Board MeetingsAttended

J. Terpu 2 2

N. Revell 2 2

B. Firriolo 2 2


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Interests in the shares and options of the company and related bodies corporate

The following relevant interests in shares and options of the company or a related body corporate were heldby the directors as at the date of this report.

DirectorsNumber of options over

ordinary sharesNumber of fully paid

ordinary shares

John Terpu 19,788,750 26,683,126Nick Revell - -Bruno Firriolo 2,146,665 895,000

Options

Details of ordinary shares issued by the company during or since the end of the financial year as a result ofthe exercise of an option are: Nil

At the date of this report unissued ordinary shares of the Company under option are:

Expiry Date Exercise price Number of shares

30 April 2014 $0.20 47,957,059

Dividends

No dividends were declared since the start of the financial year and the directors do not recommend thepayment of a dividend in respect of the financial year.

Principal Activities

The principal activity of the entities within the consolidated entity during the year were exploration for andevaluation of economic deposits for gold and other minerals.

Significant changes in the state of affairs

Significant changes in the state of affairs of the Company during the financial year were as follows :

In April 2011, the Company acquired a portfolio of mineral exploration tenements when Nextstar PtyLtd became a wholly owned subsidiary representing a reverse acquisition. The Company acquired allthe issued capital in Nextstar Pty Ltd in exchange for 70 million ordinary fully paid shares.

In April 2011, the Company was admitted to the Official List of the Australian Securities Exchangefollowing a successful Initial Public Offering. The Company raised $4,061,000 (before costs).

Review of operations

During the year, the Company carried out exploration on its tenements with the objective of identifyingeconomic deposits of gold and other metals. The full review of operations immediately precedes this report.

Operating results for the year

The net result of operations for the year was a loss after income tax of $456,374 (2010: $34,864).


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Significant events after balance date

On 19 August 2011, the Company received acceptances from a non-renounceable rights issue to raise$279,571 from the issue of 27,957,059 listed options exercisable at $0.20 each before 30 April 2014. As at thedate of this report, a shortfall of 33,246,275 listed options, which can be issued at the sole discretion of theBoard, have not yet been allotted.

Except for the above there has not been any matter or circumstance that has arisen after balance date thathas significantly affected, or may significantly affect, the operations of the consolidated entity, the results ofthose operations, or the state of affairs of the consolidated entity in future financial periods.

Likely developments and expected results

Disclosure of information regarding likely developments in the operations of the consolidated entity in futurefinancial years and the expected results of those operations is likely to result in unreasonable prejudice to theconsolidated entity. Therefore, this information has not been presented in this report.

Environmental legislation

The consolidated entity is not subject to any significant environmental legislation.

Indemnification and insurance of Directors and Officers

The company has agreed to indemnify all the directors of the company for any liabilities to another person(other than the Company or related body corporate) that may arise from their position as directors of theCompany and its controlled entities, except where the liability arises out of conduct involving a lack of goodfaith.

During the financial year the Company paid a premium in respect of a contract insuring the directors andofficers of the company and its controlled entities against any liability incurred in the course of their duties tothe extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the natureof the liability and the amount of the premium.


9

Remuneration report

This report outlines the remuneration arrangements in place for the key management personnel of ForteConsolidated Limited (the “company”) for the financial year ended 30 June 2011. The information provided inthis remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001.

The remuneration report details the remuneration arrangements for key management personnel (“KMP”) whoare defined as those persons having authority and responsibility for planning, directing and controlling themajor activities of the Company and the Group, directly or indirectly, including any director (whether executiveor otherwise) of the parent company, and includes the five executives in the Parent and the Group receivingthe highest remuneration.

Key Management Personnel

Directors

J. Terpu (Non-executive Chairman Appointed 12 January 2011)N. Revell (Executive Director Appointed 12 January 2011)

B. Firriolo (Non-executive Director and Company Secretary Appointed 12 January 2011)

Remuneration philosophy

The performance of the company depends upon the quality of the directors and executives. The philosophy ofthe company in determining remuneration levels is to:

- set competitive remuneration packages to attract and retain high calibre employees;- link executive rewards to shareholder value creation; and- establish appropriate, demanding performance hurdles for variable executive remuneration

Remuneration committee

Forte Consolidated Limited has not established a Remuneration Committee. The Board of Directors of thecompany is responsible for determining and reviewing compensation arrangements for the directors, the CEOand the executive team.

The Board of Directors assesses the appropriateness of the nature and amount of remuneration of directorsand executives on a periodic basis by reference to relevant employment market conditions with an overallobjective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executiveteam.

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and executiveremuneration is separate and distinct.

Non-executive director remuneration

The Board seeks to set aggregate remuneration at a level that provides the company with the ability to attractand retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determinedfrom time to time by a general meeting. The latest determination was at a General Meeting prior to theCompany’s listing on ASX, held on 30 March 2011 when shareholders approved an aggregate remunerationof $300,000 per year.


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Remuneration report (continued)

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it isapportioned amongst directors is reviewed annually. The Board considers advice from external shareholders,as well as the fees paid to non-executive directors of comparable companies when undertaking the annualreview process.

Each non-executive director receives a fee for being a director of the company. An additional fee is also paidfor each Board committee on which a non-executive director sits. The payment of additional fees for servingon a committee recognises the additional time commitment required by non-executive directors who serve onone or more sub committees.

Senior manager and executive director remuneration

Remuneration consists of fixed remuneration and variable remuneration (comprising short-term and long-termincentive schemes).

Fixed Remuneration

Fixed remuneration is reviewed annually by the Board of Directors. The process consists of a review ofrelevant comparative remuneration in the market and internally and, where appropriate, external advice onpolicies and practices. The Board has access to external, independent advice where necessary.

Senior managers and executive directors are given the opportunity to receive their fixed (primary)remuneration in a variety of forms including cash and fringe benefits such as motor vehicles and expensepayment plans. It is intended that the manner of payment chosen will be optimal for the recipient withoutcreating undue cost for the Group.

Variable Remuneration

The Group currently has no performance based remuneration component built into director and executiveremuneration packages.

Employment Contracts

Remuneration and other terms of employment for Mr Revell are formalised in an Employment ServicesAgreement as detailed below:

Term of agreement – 2 years commencing 14 April 2011 Base annual salary of $60,000 per annum, plus SGC superannuation Payment of a termination benefit, on early termination by the Company other than in certain specified

circumstances, equal to 4 weeks annual salary.


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Remuneration report (continued)

Remuneration of directors and named executives

Table 1: Directors’ remuneration for the years ended 30 June 2011 and 30 June 2010

(Disclosure is not required for any other persons)

Short-term employee benefits

Post-employment

benefitsOther long-

term benefits Equity

Salary &Fees

$Bonuses

$

Non-MonetaryBenefits

$Other

$Superannuation

$

Long-serviceleave

$

Shareoptions

$Total

$

PerformanceRelated

%

J Terpu 20112010

5,898-

--

1,138-

--

531-

--

--

7,567-

--

N Revell 20112010

11,432-

--

--

--

991-

--

--

12,423-

--

B Firriolo 20112010

--

--

804-

--

6,429-

--

--

7,233-

--

Option plans in existence during the financial year: Nil

Share-based compensation to directors and executives during the year: Nil

Options granted to directors and exercised or lapsed during the year: Nil

Other transactions

Where Directors had other transactions with the Company, particulars of those transactions, which do not form part of this Remuneration Report, are shown at Note 17(c) tothe Financial Statements.


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Proceedings on behalf of the company

No persons have applied for leave pursuant to s.327 of the Corporation Act 2001 to bring, or intervene in,proceedings on behalf of Forte Consolidated Limited.

Auditor Independence and Non-Audit Services

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors ofthe Company with an Independence Declaration in relation to the audit of the annual report. ThisIndependence Declaration is set out on page the next page and forms part of this directors’ report for theyear ended 30 June 2011.

Non-Audit Services

Details of amounts paid or payable to the auditor for non-audit services provided during the year by theauditor are outlined in Note 3 to the financial statements. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by theCorporations Act 2001.

The directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been reviewed to ensure that they do not impact the impartiality and objectivity of theauditor and none of the services undermine the general principles relating to auditor independence as setout in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the AccountingProfessional & Ethical Standards Board.

Signed in accordance with a resolution of the directors.

John TerpuChairmanPerth WA

28 September 2011

AUDITOR’S INDEPENDENCE DECLARATION Forte Consolidated Limited and Controlled Entities

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CORPORATE GOVERNANCE STATEMENT Forte Consolidated Limited and Controlled Entities

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The Company is committed to implementing the ASX Corporate Governance Council’s (Council) secondedition Corporate Governance Principles and Recommendations. Where the Company’s corporategovernance practices do not correlate with the practices recommended by the Council, the Company doesnot consider it practicable or necessary to implement these principles due to the size and stage ofdevelopment of its operations and the Board’s reasoning for any departure is explained.

Set out below are the fundamental corporate governance practices of the Company.

The Board

The Board is responsible for the overall corporate governance of the Company, and it recognises the needfor the highest standards of ethical behaviour and accountability. The Board is committed to administeringits corporate governance structures to promote integrity and responsible decision making.

Board charter

The Board has adopted a board charter. Under the board charter, the Board is responsible for the overalloperation and stewardship of the Company and its subsidiaries and, in particular, is responsible for:

(a) setting the strategic direction of the Company, establishing goals to ensure that these strategicobjectives are met and monitoring the performance of management against these goals andobjectives;

(b) ensuring there are adequate resources available to meet the Company's objectives;

(c) appointing the managing director and company secretary and chief financial officer of the Company;

(d) evaluating the performance and determining the remuneration of senior executives, and ensuringthat appropriate policies and procedures are in place for recruitment, training, remuneration andsuccession planning;

(e) evaluating the performance of the Board and its Directors;

(f) determining remuneration levels of Directors;

(g) approving and monitoring financial reporting and capital management;

(h) approving and monitoring the progress of business objectives;

(i) ensuring that any necessary statutory licences are held and compliance measures are maintained toensure compliance with the law and licences;

(j) ensuring that adequate risk management procedures exist and are being used;

(k) ensuring that the Company has appropriate corporate governance structures in place, includingstandards of ethical behaviour and a culture of corporate and social responsibility;

(l) ensuring that the Company has appropriate corporate governance structures in place, includingstandards of ethical behaviour and a culture of corporate and social responsibility;

(m) ensuring that the Board is and remains appropriately skilled to meet the changing needs of theCompany;

(n) ensuring procedures are in place for ensuring the Company's compliance with the law; and

(o) financial and audit responsibilities, including the appointment of an external auditor and reviewingthe financial statements, accounting policies and management processes.


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Conflicts of interest

In accordance with the Corporations Act and the Constitution, Directors must keep the Board advised, on anongoing basis, of any interest that could potentially conflict with those of the Company. Where the Boardbelieves a significant conflict exists, the Director concerned will not receive the relevant papers and will notbe present at the Board meeting whilst the matter is being considered.

Independent professional advice

In fulfilling their duties, each Director dealing with corporate governance matters may obtain independentprofessional advice at the Company’s expense, subject to prior approval of the Chairman, whose approvalwill not be unreasonably withheld.

Corporate governance policies

The Board has adopted the corporate governance policies described below. Copies of the policies areavailable on the Company’s web site at www.forteconsolidated.com.au.

As the Company’s activities develop in size, nature and scope, the implementation of additional corporategovernance policies will be given further consideration.

Code of conduct

The Board believes that the success of the Company will be enhanced by a strong ethical culture within theorganisation.

The Company has established a code of conduct (Code) which aims to develop a consistent understandingof, and approach to, the desired standards of conduct and behaviour with which the Directors, officers,managers, employees and consultants of the Company are expected to comply.

The Code sets out the Company’s policies on various matters, including the following:

(a) legal compliance;

(b) conflicts;

(c) fair dealing;

(d) Company assets and property;

(e) computer, email and internet use;

(f) knowledge and information;

(g) health, safety and environment;

(h) disclosure of securities trading;

(i) employment practices; and

(j) gifts and entertainment.

In addition to their obligations under the Corporations Act in relation to inside information, all Directors,employees and consultants have a duty of confidentiality to the Company in relation to confidentialinformation they possess.

The Code also outlines the procedure for reporting any breaches of the Code and the possible disciplinaryaction the Company may take in respect of any breaches.


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Securities trading policy

The Company has in place a securities trading policy which sets out the requirements for all Directors,executives, employees, contractors, consultants and advisers of the Company dealing in the Company’ssecurities.

Key management personnel (including Directors, executives and senior managers) of the Company may notdeal in the Company’s securities without prior approval of the Chairman (or in the Chairman’s absence theBoard or the Managing Director (if and when appointed)) and first notifying the Chairman and the CompanySecretary of the intention to trade. The Chairman may not deal in the Company’s securities without priorapproval of the Board or the next most senior Director, and notifying the Company Secretary of the intentionto trade. The Company Secretary must be subsequently notified by key management personnel of any tradethat has occurred.

Key management personnel may not, except in exceptional circumstances requiring prior written approval ofthe Chairman (or in the Chairman’s absence the Board or the Managing Director (if and when appointed)),deal in Company’s securities during “closed periods” that operate during:

(a) the period of time between the end of a reporting quarter and the release of the Company’squarterly activities and cash flow statements; and

(b) other periods as determined and announced by the Board including:

(i) the period 72 hours before and 24 hours after the release of price sensitive information; and

(ii) periods during which it is considered that certain information is generally known within theCompany but is not known to the market.

Continuous disclosure policy

The Company is a “disclosing entity” pursuant to section 111AR of the Corporations Act and, as such, willneed to comply with the continuous disclosure requirements of Chapter 3 of the ASX Listing Rules andsection 674 of the Corporations Act. Subject to the exceptions contained in the ASX Listing Rules, theCompany will be required to disclose to ASX any information concerning the Company which is not generallyavailable and which a reasonable person would expect to have a material effect on the price or value of theShares.

The Company is committed to observing its disclosure obligations under the Corporations Act and itsobligations under the ASX Listing Rules. All relevant information provided to ASX will be posted on theCompany’s website.

The Company has adopted a continuous disclosure policy, pursuant to which the Company has set policiesand procedures for ensuring that the Company complies with its continuous disclosure obligations under theCorporations Act and the ASX Listing Rules.

Under the policy the Company has allocated roles and responsibilities to the Board, a responsible officer (aperson appointed by the Board for the purpose of determining what information is to be disclosed to themarket) and the company secretary. The authorised spokespersons of the Company are the Chairman, theManaging Director (if and when appointed) and other persons authorised by the Board from time to time.

Shareholder communication policy

The Company has adopted a shareholder communication policy which outlines the processes through whichthe Company will endeavour to ensure effective communication with Shareholders and provide timely andaccurate information to all Shareholders about the Company and its corporate strategies.

The Company supports Shareholder participation in general meetings. Mechanisms for enablingShareholder participation will be reviewed regularly to encourage the highest level of Shareholderparticipation.


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Risk management policy

The Company has established a risk management policy, the purpose of which is to:

(a) provide a framework for identifying, assessing, monitoring and managing risk;

(b) communicate the roles and accountabilities of participants in the risk management system; and

(c) highlight the status of risks to which the Company is exposed, including any material changes to theCompany’s risk profile.

The Board is responsible for the oversight of internal controls within the Company. The Board is required toestablish procedures which provide assurance that material business risks are identified and formulate aprocedure for analysing and evaluating risk.

Diversity policy

The Company has established a diversity policy, the purpose of which is to promote the Company’s beliefthat the promotion of diversity on the Board, in senior management and within the organisation generally:

(a) broadens the pool for recruitment of high quality directors and employees;

(b) supports employee retention;

(c) through the inclusion of different perspectives, encourages greater innovation; and

(d) is a socially and economically responsible governance practice.

The Board is responsible for adopting and implementing the Company’s diversity policy.

In accordance with this policy, the Board provides the following information pertaining to the proportion ofwomen employees across the organisation at the date of this Report:

ACTUAL

NUMBER PERCENTAGE

Number of women employees inthe whole organisation

0 0%

Number of women in seniorexecutive positions

0 0%

Number of women on the board 0 0%

Corporate governance – exceptions to ASX recommendations

The Company sets out below its “if not why not” report in relation to those matters of corporate governancewhere the Company’s practice departs from the ASX Corporate Governance Council’s CorporateGovernance Principles and Recommendations (2

ndedition) (Recommendations) to the extent that they are

currently applicable to the Company.

Recommendations 1.2 and 2.5 (process for evaluation)

The Company does not have in place a formal process for evaluation of the Board, its committees, individualDirectors and key executives.

The small size of the Board and the nature of the Company’s activities make the establishment of a formalperformance evaluation strategy unnecessary. Performance evaluation is a discretionary matter forconsideration by the entire Board and in the normal course of events the Board will review performance ofthe management, Directors and the Board as a whole.


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Recommendation 2.1 (independent directors)

At present the Board does not comprise a majority of “independent directors”. However, given the size andscope of the Company's operations, the Board considers that it has the relevant experience in theexploration and mining industry and is appropriately structured to discharge its duties in a manner that is inthe best interests of the Company and its Shareholders from both a long-term strategic and operationalperspective.

The Chairman of the Company, Mr John Terpu, is not an independent director in accordance with the criteriafor independence as outlined in Recommendation 2.1. However, given the size and scope of the Company'soperations, the Board considers that Mr Terpu has the relevant experience in the exploration and miningindustry and his appointment as Chairman is in the best interests of the Company and its Shareholders.

The Board intends to appoint further independent non-executive directors as suitably qualified candidatesare identified, and the size and scale of the Company’s operations determine.

Recommendation 2.4 (nomination committee)

There is no nomination committee. The full Board considers the matters and issues that would fall to thenomination committee. The Board considers that, given the Board’s size and the current size and scope ofthe Company’s operations, no efficiencies or other benefits would be gained by establishing a separatenomination committee.

As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming aseparate nomination committee.

Recommendation 3.3 (gender diversity)

The Company has not complied in setting measurable objectives for achieving gender diversity. The Boardcontinues to monitor diversity across the organisation and is satisfied with the current level of genderdiversity within the Company as disclosed above. Due to the size of the Company and its small number ofemployees, the Board does not consider it appropriate at this time, to formally set measurable objectives forgender diversity.

Recommendations 4.1, 4.2, 4.3 and 4.4 (audit committee)

There is no audit committee. The role of the audit committee is undertaken by the full Board. The Boardconsiders that, given the Board’s size and the current size and scope of the Company’s operations, noefficiencies or other benefits would be gained by establishing a separate audit committee at present.

As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming aseparate audit committee.

Recommendation 8.1 (remuneration committee)

The Company has not established a separate remuneration committee and does not have a formalremuneration policy in place. The role of the remuneration committee is undertaken by the full Board. TheBoard considers that, given the Board’s size and the current size and scope of the Company’s operations, noefficiencies or other benefits would be gained by establishing a separate remuneration committee.

As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming aseparate remuneration committee.

STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 30 June 2011 Forte Consolidated Limited and Controlled Entities

19

Notes Consolidated

2011 2010

$ $

Revenue 2 52,773 2,912

Expenses

Exploration and evaluation expenditure written off 102,950 1,069

Loss on sale of tenement 29,536 -

Administration expenses 205,890 30,134

Initial Public Offering expenses 160,293 -

Depreciation expense 3,132 6,573

Loss on sale of fixed assets 7,346 -

Total expenses 509,147 37,776

Loss before income tax expense (456,374) (34,864)

Income tax expense 4 - -

Net loss for the year (456,374) (34,864)

Other comprehensive income, net of income tax - -

Total comprehensive loss for the year (456,374) (34,864)

Loss per share (cents per share) 5 (0.73) (0.09)

Diluted loss per share is not shown as it is not materially different to basic loss per share.

The accompanying notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITIONFor the year ended 30 June 2011 Forte Consolidated Limited and Controlled Entities

20

Notes Consolidated

2011 2010

$ $

CURRENT ASSETS

Cash and cash equivalents 6 3,886,080 87,020

Other receivables 7 17,003 44,763

Other assets 8 82,574 -

Total Current Assets 3,985,657 131,783

NON-CURRENT ASSETS

Other receivables 9 7,500 10,000

Plant and equipment 10 3,949 22,158

Exploration and evaluation expenditure 11 809,331 839,986

Total Non-Current Assets 820,780 872,144

TOTAL ASSETS 4,806,437 1,003,927

CURRENT LIABILITIES

Trade and other payables 12 116,854 11,522

Total Current Liabilities 116,854 11,522

TOTAL LIABILITIES 116,854 11,522

NET ASSETS 4,689,583 992,405

EQUITY

Issued capital 13 4,794,012 790,225

Reserves 14 200,000 50,235

(Accumulated losses)/retained earnings (304,429) 151,945

TOTAL EQUITY 4,689,583 992,405


STATEMENT OF CASH FLOWSFor the year ended 30 June 2011 Forte Consolidated Limited and Controlled Entities

21

Notes Consolidated

2011 2010

$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Payments to suppliers and employees (89,377) (24,330)

Payments for initial public offering expenses (160,293) -

Interest received 52,773 2,912

Net cash used in operating activities 15 (196,897) (21,418)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for plant and equipment (70,268) -

Proceeds from sale:

- plant and equipment

- tenement

10,000

1,000

-

-

Payments for exploration and evaluationexpenditure (101,329) (225,808)

Refund/(payment) of tenement bonds 2,500 (2,500)

Net cash used in investing activities (158,097) (228,308)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of loan advanced - 15,592

Issue of shares and options 4,061,000 -

Prospectus and share issue costs (136,783) -

Cash balance of Forte Consolidated Limited onreverse acquisition 22 229,837 -

Net cash provided from financing activities 4,154,054 15,592

Net increase/(decrease) in cash held 3,799,060 (234,134)

Cash at beginning of year 87,020 321,154

Cash at end of year 6 3,886,080 87,020


STATEMENT OF CHANGES IN EQUITYFor the year ended 30 June 2011 Forte Consolidated Limited and Controlled Entities

22

The accompanying notes form part of these financial statements

Consolidated

ShareCapital

$

Accumulated(Losses)/

Profits$

OptionReserve

$

Total

$

Balance at 1 July 2009 790,225 186,809 50,235 1,027,269

Total comprehensive income

- Loss for the period - (34,864) - (34,864)

- Other comprehensive income - - - -

Transactions recorded directly in equity - - - -

Balance at 30 June 2010 790,225 151,945 50,235 992,405

Balance at 1 July 2010 790,225 151,945 50,235 992,405

Total comprehensive income

- Loss for the period - (456,374) - (456,374)

- Other comprehensive income - - - -

Transactions recorded directly in equity

- Transfer on exercise of options 50,235 - (50,235) -

- Acquisition of Forte Consolidated Limitedaccounted for under the principles of reverseacquisition accounting 229,335 - - 229,335

- Issue of share capital 3,861,000 - - 3,861,000

- Issue of options - - 200,000 200,000

- Issue costs (136,783) - - (136,783)

Balance at 30 June 2011 4,794,012 (304,429) 200,000 4,689,583

Notes to the Financial StatementsFor the year ended 30 June 2011 Forte Consolidated Limited and Controlled Entities

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NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a) Reporting entity

Forte Consolidated Limited (the “Company”), which was registered on 12 January 2011, is acompany incorporated and domiciled in Australia. The consolidated financial report of the Companyfor the year ended 30 June 2011 comprises the Company and its subsidiaries (together referred toas the Group or consolidated entity).

Forte Consolidated Limited (“Forte”) acquired Nextstar Pty Ltd (“Nextstar”) on 8 April 2011.

In accordance with AASB 3 Business Combinations, the acquisition of Nextstar has been determinedto be a “reverse acquisition” as described in Note 1(z).

Whilst Forte is the “legal acquirer” of Nextstar, Nextstar is treated as the parent for accountingpurposes. The consolidated financial statements are issued under the name of the legal parent(Forte), but are a continuation of the financial statements of the legal subsidiary (Nextstar).

(b) Basis of preparation

The financial report is a general purpose financial report, which has been prepared in accordancewith the requirements of the Corporations Act 2001, Accounting Standards and Interpretations andcomplies with other requirements of the law.

The accounting policies detailed below have been consistently applied to all of the years presentedunless otherwise stated.

The financial report has also been prepared on a historical cost basis except where otherwise stated.Cost is based on the fair values of the consideration given in exchange for assets.

The financial report is presented in Australian dollars.

(c) Adoption of new and revised standardsChanges in accounting policies on initial application of Accounting Standards

In the year ended 30 June 2011, the Group has reviewed all of the new and revised Standards andInterpretations issued by the AASB that are relevant to its operations and effective for the currentannual reporting period.

It has been determined by the Group that there is no impact, material or otherwise, of the new andrevised Standards and Interpretations on its business and, therefore, no change is necessary toGroup accounting policies.

The Group has also reviewed all new Standards and Interpretations that have been issued but arenot yet effective for the year ended 30 June 2011. As a result of this review the Directors havedetermined that there is no impact, material or otherwise, of the new and revised Standards andInterpretations on its business and, therefore, no change necessary to Group accounting policies.

(d) Statement of compliance

The financial report was authorised for issue on the date the directors’ report and declaration wassigned.

The financial report complies with Australian Accounting Standards, which include Australianequivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensuresthat the financial report, comprising the financial statements and notes thereto, complies withInternational Financial Reporting Standards (IFRS).


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NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Basis of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ForteConsolidated Limited (‘company’ or ‘parent entity’) as at 30 June 2011 and the results of allsubsidiaries for the year then ended.

The financial statements of the subsidiaries are prepared for the same reporting period as the parententity, using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions,income and expenses and profit and losses resulting from intra-group transactions have beeneliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group andcease to be consolidated from the date on which control is transferred out of the Group. Controlexists where the company has the power to govern the financial and operating policies of an entity soas to obtain benefits from its activities. The existence and effect of potential voting rights that arecurrently exercisable or convertible are considered when assessing when the Group controls anotherentity.

Business combinations are accounted for using the acquisition method of accounting.

Unrealised gains or transactions between the Group and its associates are eliminated to the extent ofthe Group’s interests in the associates. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the asset transferred. Accounting policies of associates havebeen changed where necessary to ensure consistency with the policies adopted by the Group.

(f) Critical accounting estimates and judgements

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

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

Exploration and evaluation costs carried forwardIn accordance with accounting policy Note 1 (y), management determines when an area of interestshould be abandoned. When a decision is made that an area of interest is not commercially viable,all costs that have been capitalised in respect of that area of interest are written off. In determiningthis, assumptions including the maintenance of title, ongoing expenditure and prospectivity are made.See Note 11 for disclosure of carrying values.

Recovery of deferred tax assetsDeferred tax assets are currently not recognised in the financial statements but will be subject toongoing review.

(g) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to thechief operating decision maker. The chief operating decision maker, who is responsible for allocatingresources and assessing performance of the operating segments, has been identified as the Boardof Forte Consolidated Limited.


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(h) Revenue recognition

Revenue is measured at fair value of the consideration received or receivable. Amounts disclosedas revenue are net of returns, trade allowances, rebates and amounts collected on behalf of thirdparties. Revenue is recognised to the extent that it is probable that the economic benefits will flow tothe Group and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognised:

(i) Sale of goodsRevenue is recognised when the significant risks and rewards of ownership of the goods havepassed to the buyer and the costs incurred or to be incurred in respect of the transaction can bemeasured reliably. Risks and rewards of ownership are considered passed to the buyer at thetime of delivery of the goods to the customer.

(ii) Rendering of servicesRevenue from the rendering of services is recognised by reference to the stage of completion ofthe contract.

(iii) Interest incomeInterest revenue is recognised on a time proportionate basis that takes into account the effectiveyield on the financial asset.

(i) Income tax

The income tax expense or benefit for the period is the tax payable on the current period’s taxableincome based on the applicable income tax rate for each jurisdiction adjusted by changes in deferredtax assets and liabilities attributable to temporary difference and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantivelyenacted at the end of the reporting period in the countries where the company’s subsidiaries andassociates operate and generate taxable income. Management periodically evaluates positionstaken in tax returns with respect to situations in which applicable tax regulation is subject tointerpretation. It establishes provisions where appropriate on the basis of amounts expected to bepaid to the tax authorities.

Current tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used tocompute the amount are those that are enacted or substantively enacted by the balance date.

Deferred income tax is provided on all temporary differences at the balance date between the taxbases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

when the deferred income tax liability arises from the initial recognition of goodwill or of an assetor liability in a transaction that is not a business combination and that, at the time of thetransaction, affects neither the accounting profit nor taxable profit or loss; or

when the taxable temporary difference is associated with investments in subsidiaries, associatesor interests in joint ventures, and the timing of the reversal of the temporary difference can becontrolled and it is probable that the temporary difference will not reverse in the foreseeablefuture.


26


(i) Income Tax (continued)

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward ofunused tax assets and unused tax losses, to the extent that it is probable that taxable profit will beavailable against which the deductible temporary differences and the carry-forward of unused taxcredits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary difference arises fromthe initial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;or

when the deductible temporary difference is associated with investments in subsidiaries,associates or interests in joint ventures, in which case a deferred tax asset is only recognised tothe extent that it is probable that the temporary difference will reverse in the foreseeable futureand taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance date and reduced tothe extent that it is no longer probable that sufficient taxable profit will be available to allow all or partof the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance date and are recognisedto the extent that it has become probable that future taxable profit will allow the deferred tax asset tobe recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply tothe year when the asset is realised or the liability is settled, based on tax rates (and tax laws) thathave been enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profitor loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists toset off current tax assets against current tax liabilities and the deferred tax assets and liabilities relateto the same taxable entity and the same taxation authority.

Tax consolidation legislationForte Consolidated Limited and its 100% owned Australian resident subsidiaries have implementedthe tax consolidation legislation. Current and deferred tax amounts are accounted for in eachindividual entity as if each entity continued to act as a taxpayer on its own.

Forte Consolidated Limited recognises both its own current and deferred tax amounts and thosecurrent tax liabilities, current tax assets and deferred tax assets arising from unused tax credits andunused tax losses which it has assumed from its controlled entities within the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities arerecognised as amounts payable or receivable from or payable to other entities in the Group. Anydifference between the amounts receivable or payable under the tax funding agreement arerecognised as a contribution to (or distribution from) controlled entities in the tax consolidated group.


27


(j) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxationauthority, in which case the GST is recognised as part of the cost of acquisition of the asset or aspart of the expense item as applicable; and

receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part ofreceivables or payables in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis and the GST component ofcash flows arising from investing and financing activities, which is recoverable from, or payable to,the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, orpayable to, the taxation authority.

(k) Business combinations

The acquisition method of accounting is used to account for all business combinations, includingbusiness combinations involving entities or business under common control, regardless of whetherequity instruments or other assets are acquired. The consideration transferred for the acquisition ofa subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equityinterests issued by the group. The consideration transferred also includes the fair value of anycontingent consideration arrangement and the fair value of any pre-existing equity interest in thesubsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired andliabilities and contingent liabilities assumed in a business combination are, with limited exceptions,measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis,the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in theacquiree and the acquisition-date fair value of any previous equity interest in the acquiree over thefair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If thoseamounts are less than the fair value of the net identifiable assets of the subsidiary acquired and themeasurement of all amounts has been reviewed, the difference is recognised directly in profit or lossas a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future arediscounted to their present value as at the date of exchange. The discount rate used is the entity’sincremental borrowing rate, being the rate at which a similar borrowing could be obtained from anindependent financier under comparable terms and conditions.

Contingent consideration is classified as either equity or a financial liability. Amounts classified as afinancial liability are subsequently remeasured to fair value with changes in fair value recognised inprofit or loss.


28


(l) Impairment of assets

The Group assesses at each balance date whether there is an indication that an asset may beimpaired. 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 isthe higher of its fair value less costs to sell and its value in use and is determined for an individualasset, unless the asset does not generate cash inflows that are largely independent of those fromother assets or groups of assets and the asset's value in use cannot be estimated to be close to itsfair value. In such cases the asset is tested for impairment as part of the cash-generating unit towhich it belongs. When the carrying amount of an asset or cash-generating unit exceeds itsrecoverable amount, the asset or cash-generating unit is considered impaired and is written down toits recoverable amount.

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

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

(m) Cash and cash equivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investmentsthat are readily convertible to known amounts of cash and which are subject to an insignificant risk ofchanges in value. Bank overdrafts are shown within borrowings in current liabilities in the statementof financial position.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cashequivalents as defined above, net of outstanding bank overdrafts.

(n) Trade and other receivables

Trade receivables are measured on initial recognition at fair value and are subsequently measured atamortised cost using the effective interest rate method, less any allowance for impairment. Tradereceivables are generally due for settlement within periods ranging from 15 days to 30 days.

Impairment of trade receivables is continually reviewed and those that are considered to beuncollectible are written off by reducing the carrying amount directly. An allowance account is usedwhen there is objective evidence that the Group will not be able to collect all amounts due accordingto the original contractual terms. Factors considered by the Group in making this determinationinclude known significant financial difficulties of the debtor, review of financial information andsignificant delinquency in making contractual payments to the Group. The impairment allowance isset equal to the difference between the carrying amount of the receivable and the present value ofestimated future cash flows, discounted at the original effective interest rate. Where receivables areshort-term discounting is not applied in determining the allowance.

The amount of the impairment loss is recognised in the statement of comprehensive income withinother expenses. When a trade receivable for which an impairment allowance had been recognisedbecomes 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 thestatement of comprehensive income.


29


(o) Financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement areclassified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets arerecognised initially, they are measured at fair value, plus, in the case of investments not at fair valuethrough profit or loss, directly attributable transaction costs. The Group determines the classificationof its financial assets after initial recognition and, when allowed and appropriate, re-evaluates thisdesignation at each financial year-end. All regular way purchases and sales of financial assets arerecognised on the trade date i.e. the date that the Group commits to purchase the asset. Regularway purchases or sales are purchases or sales of financial assets under contracts that requiredelivery of the assets within the period established generally by regulation or convention in themarketplace.

(i) Financial assets at fair value through profit or lossFinancial assets classified as held for trading are included in the category ‘financial assets at fairvalue through profit or loss’. Financial assets are classified as held for trading if they are acquired forthe purpose of selling in the near term. Derivatives are also classified as held for trading unless theyare designated as effective hedging instruments. Gains or losses on investments held for trading arerecognised in profit or loss.

(ii) Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturity are classifiedas held-to-maturity when the Group has the positive intention and ability to hold to maturity.Investments intended to be held for an undefined period are not included in this classification.Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured atamortised cost. This cost is computed as the amount initially recognised minus principal repayments,plus or minus the cumulative amortisation using the effective interest method of any differencebetween the initially recognised amount and the maturity amount. This calculation includes all feesand points paid or received between parties to the contract that are an integral part of the effectiveinterest rate, transaction costs and all other premiums and discounts. For investments carried atamortised cost, gains and losses are recognised in profit or loss when the investments arederecognised or impaired, as well as through the amortisation process.

If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, thewhole category would be tainted and reclassified as available-for-sale.

(iii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. Such assets are carried at amortised cost using the effectiveinterest method. Gains and losses are recognised in profit or loss when the loans and receivablesare derecognised or impaired, as well as through the amortisation process.

(iv) Available-for-sale investmentsAvailable-for-sale investments are those non-derivative financial assets that are designated asavailable-for-sale or are not classified as any of the three preceding categories. After initialrecognition available-for-sale investments are measured at fair value with gains or losses beingrecognised as a separate component of equity until the investment is derecognised or until theinvestment is determined to be impaired, at which time the cumulative gain or loss previouslyreported in equity is recognised in profit or loss.

The fair value of investments that are actively traded in organised financial markets is determined byreference to quoted market bid prices at the close of business on the balance date. For investmentswith no active market, fair value is determined using valuation techniques. Such techniques includeusing recent arm’s length market transactions, reference to the current market value of anotherinstrument that is substantially the same, discounted cash flow analysis and option pricing models.


30


(p) Derecognition of financial assets and financial liabilities

(i) Financial assetsA financial asset (or, where applicable, a part of a financial asset or part of a group of similarfinancial assets) is derecognised when:

the rights to receive cash flows from the asset have expired;

the Group retains the right to receive cash flows from the asset, but has assumed an obligationto pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

the Group has transferred its rights to receive cash flows from the asset and either:

(a) has transferred substantially all the risks and rewards of the asset, or(b) has neither transferred nor retained substantially all the risks and rewards of the asset, but

has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset and has neithertransferred nor retained substantially all the risks and rewards of the asset nor transferred control ofthe asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset.Continuing involvement that takes the form of a guarantee over the transferred asset is measured atthe lower of the original carrying amount of the asset and the maximum amount of considerationreceived that the Group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuinginvolvement is the amount of the transferred asset that the Group may repurchase, except that in thecase of a written put option (including a cash-settled option or similar provision) on an assetmeasured at fair value, the extent of the Group’s continuing involvement is limited to the lower of thefair value of the transferred asset and the option exercise price.

(ii) Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelledor expires.

When an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a new liability,and the difference in the respective carrying amounts is recognised in profit or loss.

(q) Impairment of financial assets

The Group assesses at each balance date whether a financial asset or group of financial assets isimpaired.

(i) Financial assets carried at amortised costIf there is objective evidence that an impairment loss on loans and receivables carried at amortisedcost has been incurred, the amount of the loss is measured as the difference between the asset’scarrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset’s original effective interest rate(i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset isreduced either directly or through use of an allowance account. The amount of the loss isrecognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financialassets that are individually significant, and individually or collectively for financial assets that arenot individually significant. If it is determined that no objective evidence of impairment exists for anindividually assessed financial asset, whether significant or not, the asset is included in a group offinancial assets with similar credit risk characteristics and that group of financial assets iscollectively assessed for impairment. Assets that are individually assessed for impairment and forwhich an impairment loss is or continues to be recognised are not included in a collectiveassessment of impairment.


31


(q) Impairment of financial assets (continued)

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognised, the previouslyrecognised impairment loss is reversed. Any subsequent reversal of an impairment loss isrecognised in profit or loss, to the extent that the carrying value of the asset does not exceed itsamortised cost at the reversal date.

(ii) Financial assets carried at costIf there is objective evidence that an impairment loss has been incurred on an unquoted equityinstrument that is not carried at fair value (because its fair value cannot be reliably measured), oron a derivative asset that is linked to and must be settled by delivery of such an unquoted equityinstrument, the amount of the loss is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows, discounted at the current market rateof return for a similar financial asset.

(iii) Available-for-sale investmentsIf there is objective evidence that an available-for-sale investment is impaired, an amountcomprising the difference between its cost (net of any principal repayment and amortisation) and itscurrent fair value, less any impairment loss previously recognised in profit or loss, is transferredfrom equity to the statement of comprehensive income. Reversals of impairment losses for equityinstruments classified as available-for-sale are not recognised in profit. Reversals of impairmentlosses for debt instruments are reversed through profit or loss if the increase in an instrument's fairvalue can be objectively related to an event occurring after the impairment loss was recognised inprofit or loss.

(r) Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulatedimpairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisationwhen the cost of replacing the parts is incurred. Similarly, when each major inspection isperformed, its cost is recognised in the carrying amount of the plant and equipment as areplacement only if it is eligible for capitalisation.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets asfollows:

Plant and equipment – over 3 to 5 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted ifappropriate, at each financial year end.

(i) ImpairmentThe carrying values of plant and equipment are reviewed for impairment at each balance date, withrecoverable amount being estimated when events or changes in circumstances indicate that thecarrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell andvalue in use. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount isdetermined for the cash-generating unit to which the asset belongs, unless the asset's value in usecan be estimated to approximate fair value.

An impairment exists when the carrying value of an asset or cash-generating units exceeds itsestimated recoverable amount. The asset or cash-generating unit is then written down to itsrecoverable amount.


32


(r) Plant and equipment (continued)

For plant and equipment, impairment losses are recognised in the statement of comprehensiveincome in a separate line item.

(ii) Derecognition and disposalAn item of plant and equipment is derecognised upon disposal or when no further future economicbenefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the netdisposal proceeds and the carrying amount of the asset) is included in profit or loss in the year theasset is derecognised.

(s) Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goodsand services provided to the Group prior to the end of the financial year that are unpaid and arisewhen the Group becomes obliged to make future payments in respect of the purchase of thesegoods and services. Trade and other payables are presented as current liabilities unless paymentis not due within 12 months.

(t) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. Provisions are not recognised for future operating losses.

When the Group expects some or all of a provision to be reimbursed, for example under aninsurance contract, the reimbursement is recognised as a separate asset but only when thereimbursement is virtually certain. The expense relating to any provision is presented in thestatement of comprehensive income net of any reimbursement.

Provisions are measured at the present value or management’s best estimate of the expenditurerequired to settle the present obligation at the end of the reporting period. If the effect of the timevalue of money is material, provisions are discounted using a current pre-tax rate that reflects therisks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised asan interest expense.

(u) Employee leave benefits

(i) Wages, salaries, annual leave and sick leaveLiabilities for wages and salaries, including non-monetary benefits, annual leave and accumulatingsick leave expected to be settled within 12 months of the balance date are recognised in otherpayables in respect of employees’ services up to the balance date, They are measured at theamounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sickleave are recognised when the leave is taken and are measured at the rates paid or payable.

(ii) Long service leaveThe liability for long service leave is recognised in the provision for employee benefits andmeasured as the present value of expected future payments to be made in respect of servicesprovided by employees up to the balance date. Consideration is given to expected future wage andsalary levels, experience of employee departures, and period of service. Expected future paymentsare discounted using market yields at the balance date on national government bonds with terms tomaturity and currencies that match, as closely as possible, the estimated future cash outflows.


33


(v) Issued capital

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

(w) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjustedto exclude any costs of servicing equity (other than dividends) and preference share dividends,divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjustedfor: costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares

that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result

from the dilution of potential ordinary shares; divided by the weighted average number ofordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(x) Provision for restoration and rehabilitation

A provision for restoration and rehabilitation is recognised when there is a present obligation as aresult of development activities undertaken, it is probable that an outflow of economic benefits willbe required to settle the obligation, and the amount of the provision can be measured reliably. Theestimated future obligations include the costs of abandoning sites, removing facilities and restoringthe affected areas.

The provision for future restoration costs is the best estimate of the present value of theexpenditure required to settle the restoration obligation at the balance date. Future restoration costsare reviewed annually and any changes in the estimate are reflected in the present value of therestoration provision at each balance date.

The initial estimate of the restoration and rehabilitation provision is capitalised into the cost of therelated asset and amortised on the same basis as the related asset, unless the present obligationarises from the production of inventory in the period, in which case the amount is included in thecost of production for the period. Changes in the estimate of the provision for restoration andrehabilitation are treated in the same manner, except that the unwinding of the effect of discountingon the provision is recognised as a finance cost rather than being capitalised into the cost of therelated asset.

(y) Exploration and evaluation

Exploration and evaluation expenditures in relation to each separate area of interest arerecognised as an exploration and evaluation asset in the year in which they are incurred where thefollowing conditions are satisfied:

(i) the rights to tenure of the area of interest are current; and(ii) at least one of the following conditions is also met:

(a) the exploration and evaluation expenditures are expected to be recouped throughsuccessful development and exploration of the area of interest, or alternatively, by its sale;or

(b) exploration and evaluation activities in the area of interest have not at the balance datereached a stage which permits a reasonable assessment of the existence or otherwise ofeconomically recoverable reserves, and active and significant operations in, or in relationto, the area of interest are continuing.


34


(y) Exploration and evaluation (continued)

Exploration and evaluation assets are initially measured at cost and include acquisition of rights toexplore, studies, exploratory drilling, trenching and sampling and associated activities and anallocation of depreciation and amortised of assets used in exploration and evaluation activities.General and administrative costs are only included in the measurement of exploration andevaluation costs where they are related directly to operational activities in a particular area ofinterest.

Exploration and evaluation assets are assessed for impairment when facts and circumstancessuggest that the carrying amount of an exploration and evaluation asset may exceed itsrecoverable amount. The recoverable amount of the exploration and evaluation asset (for the cashgenerating unit(s) to which it has been allocated being no larger than the relevant area of interest)is estimated to determine the extent of the impairment loss (if any). Where an impairment losssubsequently reverses, the carrying amount of the asset is increased to the revised estimate of itsrecoverable amount, but only to the extent that the increased carrying amount does not exceed thecarrying amount that would have been determined had no impairment loss been recognised for theasset in previous years.

Where a decision has been made to proceed with development in respect of a particular area ofinterest, the relevant exploration and evaluation asset is tested for impairment and the balance isthen reclassified to development.

(z) Reverse acquisition accounting

The transaction involving Forte acquiring all the issued shares in Nextstar has been accounted forunder the principles of Reverse Acquisitions included in Australian Accounting Standards AASB 3Business Combinations.

The legal structure of the Forte Group subsequent to the acquisition of Nextstar will be that Fortewill remain as the legal parent entity. However, the principles of reverse acquisition accountingapply where the owners of the acquired entity (in this case, Nextstar) obtain control of the acquiringentity (in this case, Forte) as a result of the businesses’ combination. Under the reverse acquisitionaccounting, the consolidated financial statements are issued under the name of the legal parent(Forte) but are a continuation of the financial statements of the legal subsidiary (Nextstar), with theassets and liabilities of the legal subsidiary being recognised and measured at their pre-combination carrying amounts rather than their fair values.

(aa) Parent entity financial information

The financial information for the parent entity, Forte Consolidated Limited, disclosed in note 23 hasbeen prepared on the same basis as the consolidated financial statements


35

NOTE 2: REVENUE

Consolidated

Operating Activities2011

$2010

$

Interest received 52,773 2,912

NOTE 3: AUDITOR’S REMUNERATION

The auditor of Forte Consolidated Limited is HLB Mann Judd.

Amounts received or due and receivable by HLB MannJudd for:

Audit and review of financial reports 16,000 -

Other services 7,500 -

NOTE 4: INCOME TAX EXPENSE

(a) Recognised in the statement of comprehensive income

Current income tax expense - -

Deferred tax expense relating to the origination and reversalof temporary differences

- -

Total income tax benefit - -

(b) Reconciliation between income tax expense and pre-tax profit/(loss)

Loss before tax (456,374) (34,864)

Income tax using the domestic corporation tax rate of 30%(2010: 30%) (136,912) (10,459)

Tax effect of:Non-deductible expensesUnused tax losses and temporary differences notrecognised as deferred tax assets

11,413

125,499

-

10,459

Income tax expense on pre-tax loss - -

(c) Unrecognised deferred tax balances

Deferred tax assets and (liabilities) calculated at 30% (2010:30%) have not been recognised in respect of the following:

Income tax losses 298,693 208,633

Temporary differences (161,762) (251,933)

136,931 (43,300)

Deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets (anddeferred tax liabilities relating to capitalised exploration expenditure for which immediate tax write-off is available) havenot been recognised in the financial statements.


36

NOTE 4: INCOME TAX EXPENSE (continued)

(d) Movement in temporary differences during the year

30 June2011

$

Movements2011

1 July2010

$

Movements2010

$

1 July2009

$

Temporary differences

(a) Recognised in income

Exploration expenditure (242,799) 9,197 (251,996) (67,422) (184,574)

Other payables and provisions 4,800 4,800 - - -

Other items 4,426 4,426 - - -

(b) Recognised in equity

Capital raising expenses 71,811 71,748 63 (64) 127

Totals (161,762) 90,171 (251,933) (67,486) (184,447)

NOTE 5: LOSS PER SHARE

Consolidated

2011Cents per

share

2010Cents per

share

Basic loss per share (0.73) (0.09)

Weighted average number of ordinary shares used in calculation of loss per share 62,406,195 40,119,630

Loss used in calculation of basic loss per share (456,374) (34,864)

Diluted loss per share is not presented as the entity does not have on issue any dilutive potential ordinary shares.

NOTE 6: CASH AND CASH EQUIVALENTS

Consolidated

2011

$

2010

$

Cash on hand and at bank 3,886,080 87,020

Cash at bank earns interest at floating rates on daily bank deposit rates.

NOTE 7: OTHER RECEIVABLES – CURRENT

Other receivables 17,003 44,763

No receivables are past due.

NOTE 8: OTHER ASSETS

Deposits paid (i)68,000

-

Prepaid expenses 14,574 -

82,574 -

(i) The amount relates to a deposit paid for plant and equipment delivered subsequent to balance date.

NOTE 9: OTHER RECEIVABLES – NON CURRENT

Exploration tenement guarantees 7,500 10,000


37

NOTE 10: PLANT AND EQUIPMENT

Consolidated

2011$

2010$

Plant and equipment at cost 11,917 33,908

Less: Accumulated depreciation (7,968) (11,750)

3,949 22,158

Movement schedule for plant and equipment

Opening written down value 22,158 28,731

Additions 2,268 -

Disposal (17,345) -

Depreciation (3,132) (6,573)

Closing written down value 3,949 22,158

NOTE 11: EXPLORATION & EVALUATION EXPENDITURE

Cost brought forward in respect of areas of interest in theexploration and evaluation stage 839,986 615,248

Expenditure incurred during the year 102,830 225,807

Disposals (30,535) -

Expenditure written off during the year (102,950) (1,069)

Cost carried forward 809,331 839,986

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is

dependent on successful development and commercial exploitation or sale of respective areas.

NOTE 12: TRADE AND OTHER PAYABLES

Trade and other payables 83,529 11,522

Related party payables 33,325 -

116,854 11,522

All payables are non-interest bearing and are normally settled on 30 day terms.

NOTE 13: ISSUED CAPITAL

Issued capital comprises

91,805,002 fully paid ordinary shares (2010: 40,119,630) 4,794,012 790,225

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

2011 2010

Movement in issued shares for the year No. $ No. $

Balance at beginning of the financial year 40,119,630 790,225 40,119,630 790,225

Issued on exercise of options 29,880,370 50,235 - -

Acquisition of Forte Consolidated Limited – accountedfor under the principles of reverse acquisitionaccounting 2,500,002 229,336 - -

Issued for cash 19,305,000 3,861,000 - -

Costs associated with the issue of shares (136,783) -

Balance at end of the financial year 91,805,002 4,794,012 40,119,630 790,225


38

NOTE 13: ISSUED CAPITAL (continued)

Options over ordinary shares 2011 2010

No. No.

Options on issue at beginning of period 29,994,562 29,994,562

Options issued during the year 20,000,000 -

Options exercised during the year (29,880,370) -

Options cancelled during the year (114,192) -

Options on issue at end of period 20,000,000 20,994,562

Date of Expiry Exercise PriceNumber under

Option

30 April 2014 $0.20 20,000,000

NOTE 14: RESERVES

The option reserve arises on the grant and/or issue of share options. Amounts are transferred out of the reserve toaccumulated losses when the options lapse or expire. When options are exercised, amounts carried in the reserverelated to those particular options are dealt with based on their origination. If cash-related those amounts may betransferred out of the reserve to issued capital. If not cash-related the amounts are transferred out of the reserve toaccumulated losses.

NOTE 15: STATEMENT OF CASH FLOWS

Reconciliation of operating loss after income tax to net cash used in operating activities

Operating loss after income tax (456,374) (34,864)

Add: Non-cash items

Depreciation 3,132 6,573

Loss on disposal of fixed assets 7,346 -

Loss on sale of tenement 29,536 -

Exploration and evaluation expenditure written off 102,950 1,069

Change in assets and liabilities

(Increase)/decrease in other current assets (12,866) -

(Increase)/decrease in other current receivables 27,760 -

Increase/(decrease) in operating payables 101,619 5,804

Net cash used in operating activities (196,897) (21,418)

Consolidated

2011$

2010$

Option Reserve

Balance at beginning of the financial year 50,235 50,235

Issue of options 200,000 -

Transfer on exercise of options (50,235) -

Balance at end of the financial year 200,000 50,235


39

NOTE 16: DIRECTORS AND EXECUTIVE DISCLOSURES

(a) Details of Key Management Personnel

(b) Key management personnel remuneration has been included in the Remuneration Report section ofthe Directors’ Report.

(c) Other transactions with key management personnel are disclosed in note 17(c).(d) Movements in share and option holdings of key management personnel are disclosed in note 17(d).

NOTE 17: RELATED PARTY DISCLOSURES

a) Equity Interests in related parties

Equity Interests in controlled entities

Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 18 to thefinancial statements.

b) Transactions within wholly owned group

The wholly owned group includes:

The ultimate parent entity in the wholly-owned group and; The wholly-owned controlled entities

The ultimate parent entity in the wholly-owned group is Forte Consolidated Limited

During the financial year Forte Consolidated Limited provided accounting and administrative services at nocost to the controlled entities and the advancement of interest free loans.

c) Transactions with directors

The following comprises amounts paid or payable and received or receivable applicable to entities in whichdirectors have an interest.

Amounts owed to related parties at 30 June 2011 were Chellserv $33,325 (2010: Nil).

(i) Directors

John Terpu Chairman (non-executive) – appointed 12 January 2011

Nick Revell Director (executive) – appointed 12 January 2011

Bruno Firriolo Director (non-executive) – appointed 12 January 2011

(ii) Executives

Bruno Firriolo Company Secretary – appointed 12 January 2011

Consolidated entity

Directors2011

$2010

$

Paid/payable to:

J Terpu and B Firriolo (as Directors of the CAS Trust & BCF Trusttrading as Chellserv) for administration services 80,803 -

J Terpu (as Director of Chellingtons Pty Ltd ATF Red Star Trust) forcorporate consulting services 23,500 -

J Terpu (as Director of Ruby Lane Pty Ltd ATF Sharny Unit Trust)for lease of business premises 11,058 13,497

Received/receivable from:

J Terpu (as Director of Ruby Lane Pty Ltd ATF Tukura Trust) forplant and equipment bought from Nextstar Pty Ltd 10,000 -

J Terpu (as Director of Valleybrook Investments Pty Ltd) fortenement bought from Nextstar Pty Ltd 1,000 -


40

NOTE 17: RELATED PARTY DISCLOSURES (continued)

d) Movements in key management personnel share and option holdings

(Directors unless stated otherwise)

NOTE 18: CONTROLLED ENTITIES

Name of EntityCountry of

IncorporationOwnership Interest

2011

%

2010

%

Parent Entity

Forte Consolidated LimitedAustralia

Controlled Entities

Nextstar Pty LtdAustralia 100 -

2011

OpeningBalance1/7/2010

Exercise ofOptions Bought

Transferredor Cancelled

ClosingBalance

30/06/2011

Fully paid ordinary shares– directly and indirectlyheld

J. Terpu 29,991,280 26,166,250 135,002 (29,609,406) 26,683,126

N. Revell - - - - -

B. Firriolo - - 895,000 - 895,000

Listed Options – directlyand indirectly held

J. Terpu 26,166,250 (26,166,250) 2,000,000 - 2,000,000

N. Revell - - - - -

B. Firriolo - - 1,550,000 - 1,550,000

2010

OpeningBalance1/7/2009

Exercise ofOptions

Bought /(Sold)

Transferredor Cancelled

ClosingBalance

30/06/2010

Fully paid ordinary shares– directly and indirectlyheld

J. Terpu 29,991,280 - - - 29,991,280

Listed Options – directlyand indirectly held

J. Terpu 29,991,280 - - (3,825,030) 26,166,250


41

NOTE 19: COMMITMENTS FOR EXPENDITURE, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Exploration Expenditure Commitments

The Group has certain obligations to perform exploration work and expend minimum amounts of money onsuch works on mineral exploration tenements.

These obligations will vary from time to time, subject to statutory approval. The terms of current and futurejoint ventures, the grant or relinquishment of licences, and changes to licence areas at renewal or expiry, willalter the expenditure commitments of the Group.

Total expenditure commitments at balance date in respect of minimum expenditure requirements notprovided for in the financial statements, where the status of the tenements is to remain unchanged, andexcluding commitments where a joint venture party has agreed to meet the Group’s obligations, areapproximately:

2011$

2010$

Not later than one year 630,000 315,000

Later than one year but not later than five years 1,250,000 1,880,000

1,880,000 2,195,000

(b) Native Title

Native title claims have been made with respect to areas which include tenements in which ForteConsolidated Limited has interests. The Group is unable to determine the prospects for success orotherwise of the claims and, in any event, whether or not and to what extent the claims may significantlyaffect the Group or its projects.

(c) Contingent Liabilities

Under the terms of an Administration Services Agreement with Chellserv (of which Messrs Terpu and Firrioloare the principals), which agreement is scheduled to terminate 14 April 2013, in the event of earlytermination, the Company may be liable for a termination payment of up to $360,000 plus GST.

Other than as disclosed above the Group has no contingent liabilities at 30 June 2011.

NOTE 20: SEGMENT INFORMATION

The group has one reportable segment being mineral exploration in Australia.

NOTE 21: FINANCIAL RISK MANAGEMENT

Overview

This note presents information about the Group’s exposure to credit, liquidity and market risks, its objectives,policies and processes for measuring and managing risk, and the management of capital.

The Group does not use any form of derivatives as it is not at a level of exposure that requires the use ofderivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. TheGroup does not enter into or trade financial instruments, including derivative financial instruments, forspeculative purposes.

The Board of Directors has overall responsibility for the establishment and oversight of the risk managementframework. Management monitors and manages the financial risks relating to the operations of the Groupthrough regular reviews of the risks.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument failsto meet its contractual obligations, and arises principally from the Group’s receivables from customers andinvestment securities. At the balance date there were no significant concentrations of credit risk.


42

NOTE 21: FINANCIAL RISK MANAGEMENT (continued)

Credit risk (continued)

Cash and cash equivalentsThe Group limits its exposure to credit risk by only investing in liquid securities and only with counterpartiesthat have an acceptable credit rating.

Trade and other receivablesAs the Group operates primarily in exploration activities, it does not have trade receivables and therefore isnot exposed to credit risk in relation to trade receivables.

The Group where necessary establishes an allowance for impairment that represents its estimate of incurredlosses in respect of other receivables and investments. Management does not expect any counterparty to failto meet its obligations.

Exposure to credit riskThe carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’smaximum exposure to credit risk at the reporting date was:

Impairment LossesNone of the Group’s other receivables are past due (2010: nil).

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. TheGroup’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficientliquidity to meet its liabilities when due, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the Group’s reputation.

The Group manages liquidity risk by maintaining adequate cash reserves from funds raised in the marketand by continuously monitoring forecast and actual cash flows. The Group does not have any externalborrowings.

The following are the Group’s contractual maturities of financial liabilities, including estimated interestpayments and excluding the impact of netting agreements:

30 June 2011

Carryingamount

Contractualcash flows

6 mths orless

6-12 mths 1-2 years 2-5 years

Non-interest bearing 116,854 116,854 116,854 - - -

30 June 2010

Consolidated

Carryingamount

Contractualcash flows

6 mths orless

6-12 mths 1-2 years 2-5 years

Non-interest bearing 11,522 11,522 11,522 - - -

Consolidated

Company Carrying amount

2011 2010

Cash and cash equivalents 3,886,080 87,020

Other receivables 24,503 54,763


43


Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates andequity prices will affect the Group’s income or the value of its holdings of financial instruments. The objectiveof market risk management is to manage and control market risk exposures within acceptable parameters,while optimising the return.

Currency Risk

The Company is not exposed to currency risk and at balance date the Group holds no financial assets orliabilities which are exposed to foreign currency risk.

Interest Rate Risk

The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that afinancial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. The Company does not use derivatives to mitigate these exposures.

The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalentsin short term deposit at interest rates maturing over 90 day rolling periods.

ProfileAt the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Consolidated

Carrying amount

2011 2010

Variable rate instruments

Financial assets – cash and cash equivalents 3,886,080 87,020

Fair value sensitivity analysis for fixed rate instrumentsThe Group does not account for any fixed rate financial assets and liabilities at fair value through profit orloss or through equity, therefore a change in interest rates at the reporting date would not affect profit or lossor equity.

Cash flow sensitivity analysis for variable rate instrumentsA change of 100 basis points in interest rates at the reporting date would have increased (decreased) equityand profit or loss by the amounts shown below. This analysis assumes that all other variables remainconstant. The analysis is performed on the same basis for 2010.

Company

Profit or loss Equity

100bpincrease

100bpdecrease

100bpincrease

100bpdecrease

30 June 2011

Variable rate instruments 38,848 (38,795) 38,848 (38,795)

30 June 2010

Variable rate instruments 868 (868) 868 (868)


44


Fair Values

Fair values versus carrying amountsThe fair values of financial assets and liabilities, together with the carrying amounts shown in the statementof financial position are as follows:

Commodity Price Risk

The Group operates primarily in the exploration and evaluation phase and accordingly the Group’s financialassets and liabilities are subject to minimal commodity price risk.

Capital Management

Capital is defined as the equity of the Group.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern, so as to maintain a strong capital base sufficient to maintain future exploration and development ofits projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders,issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds throughequity to fund exploration and evaluation activities. The Group monitors capital on the basis of the gearingratio, however there are no external borrowings as at balance date.

There were no changes in the Group’s approach to capital management during the year. Risk managementpolicies and procedures are established with regular monitoring and reporting.

The Group is not subject to externally imposed capital requirements.

Consolidated

30 June 2011 30 June 2010

Carryingamount

Fair valueCarryingamount

Fair value

Cash and cash equivalents 3,886,080 3,886,080 87,020 87,020

Other receivables 24,503 24,503 54,763 54,763

Trade and other payables (116,854) (116,854) (11,522) (11,522)

3,793,729 3,793,729 130,261 130,261


45

NOTE 22: BUSINESS COMBINATION

Acquisition of Nextstar Pty Ltd

On 8 April 2011, Forte Consolidated Limited (“Forte”) acquired 100% of the voting shares of Nextstar Pty Ltd(“Nextstar”), for the consideration of 70,000,000 shares in Forte.

As disclosed in Note 1(a) and Note 1(z) , the transaction involving Forte acquiring all the issued capital ofNextstar has been accounted for under the principles of Reverse Acquisitions included in AASB 3 BusinessCombinations.

Therefore the following represents the net assets of Forte, comprising the acquisition and consideration paidby Nextstar for Forte, as at the date of acquisition:

Fair value atacquisition date

$

Cash and cash equivalents 229,837

Trade and other payables 502

Fair value of net assets 229,335

These amounts are represented by:

Contributed equity 231,873

Accumulated losses (2,538)

229,335

2011

$

Acquisition date fair value of consideration transferred:

Shares issued, at fair value 229,335

Consolidated

$

The cash inflow on acquisition is as follows:

Cash paid -

Net cash acquired 229,837

Net cash inflow 229,837

Acquisition and initial listing related costs of $160,293 are included in the statement of comprehensiveincome. Directly attributable costs of raising equity have been included as a deduction from equity.


46

NOTE 23: PARENT ENTITY DISCLOSURES

Financial position

30 June

2011

$

30 June

2010

$

Assets

Current assets 3,980,913 -

Non-current assets 14,013,655 -

Total assets 17,994,568 -

Liabilities

Current Liabilities 116,854 -

Total liabilities 116,854 -

Net Assets 17,877,714 -

Equity

Issued capital 17,956,090 -

Reserves

Option Reserve 200,000 -

Accumulated losses (278,376) -

Total equity 17,877,714 -

Financial performance

30 June

2011

$

30 June

2010

$

Loss for the year (278,376) -

Other comprehensive income - -

Total comprehensive income (278,376) -

Commitments and Contingencies – refer Note 19.

The exploration expenditure commitments and native title claims referred to relate solely to the legalsubsidiary’s tenements. Other than the potential termination payment to Chellserv, the parent Entity has nocontingent liabilities at 30 June 2011.


47

NOTE 24: EVENTS AFTER BALANCE DATE

On 19 August 2011, the Company received acceptances from a non-renounceable rights issue to raise$279,571 from the issue of 27,957,059 listed options exercisable at $0.20 each before 30 April 2014. As at thedate of this report, a shortfall of 33,246,275 listed options, which can be issued at the sole discretion of theBoard, have not yet been allotted.

DIRECTORS’ DECLARATION Forte Consolidated Limited and Controlled Entities

48

1. In the opinion of the Directors of Forte Consolidated Limited (the “Company”):

(a) the accompanying financial statements and notes are in accordance with the Corporations Act2001 including:

(i) giving a true and fair view of the group’s financial position at 30 June 2011 and of itsperformance for the year then ended; and

(ii) complying with Australian Accounting Standards, the Corporations Regulations 2001,professional reporting requirements and other mandatory requirements.

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as andwhen they become due and payable.

(c) the financial statements and notes thereto are in accordance with International FinancialReporting Standards issued by the International Accounting Standards Board.

2. This declaration has been made after receiving the declarations required to be made to the Directorsin accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June2011.

This declaration is signed in accordance with a resolution of the Board of Directors.

John TerpuChairmanPerth WA

28 September 2011

INDEPENDENT AUDITOR’S REPORT Forte Consolidated Limited and Controlled Entities

49

INDEPENDENT AUDITOR’S REPORT Forte Consolidated Limited and Controlled Entities

50

ASX ADDITIONAL INFORMATION Forte Consolidated Limited and Controlled Entities

51

Additional information as required by the Australian Stock Exchange Limited Listing Rules and notdisclosed elsewhere in this report is set out below.

1. Shareholder Information

1.1 As at 23 September 2011 the Company had 322 holders of Ordinary Fully Paid Shares and 286holders of Listed Options expiring 30 April 2014.

Voting Rights

Subject to any rights or restrictions for the time being attached to any class or classes (at present there arenone) at general meetings of shareholders or classes of shareholders:

(a) each shareholder entitled to vote, may vote in person or by proxy, attorney or representative;

(b) on a show of hands, every person present who is a shareholder or a proxy, attorney or representativeof a shareholder has one vote; and

(c) on a poll, every person present who is a shareholder or a proxy, attorney or representative of ashareholder shall, in respect of each Fully Paid Share held, or in respect of which he/she hasappointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paidShares shall have a fraction of a vote equivalent to the proportion which the amount paid up bears tothe total issue price for the Share.

1.2 Distribution of Shares (as at 23 September 2011)

No.Fully Paid

Shares

Listed Options

1-1,000 26 803

1,001-5,000 24,654 75,285

5,001-10,000 956,700 1,346,318

10,001-100,000 6,452,063 3,530,569

100,001-over 13,121,599 43,004,084

Total 20,555,002 49,957,059

The number of shareholders holding less than a marketable parcel is 9.

1.3 Substantial Shareholders

The following shareholders are recorded as substantial shareholders:

Fully Paid SharesName

Number

GOLDEN GATE SA 6,250,000

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 5,504,333

Total 11,754,333


52

1.4 Twenty Largest Shareholders (as at 23 September 2011)

Fully Paid Ordinary

Ordinary Shareholders Number Percentage

GOLDEN GATE S A 6,250,000 30.41%

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 5,504,333 26.78%

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 300,000 1.46%

ORBIT DRILLING PTY LTD 297,226 1.45%

ARODAM PTY LTD <THE ARODAM A/C> 230,000 1.12%

BISTONA PTY LTD <J RADICI FAMILY A/C> 150,000 0.73%

MILLWEST INVESTMENTS PTY LTD <MILLWEST A/C> 140,000 0.68%

VALLEYROSE PTY LTD <TERPU SUPER FUND A/C> 125,000 0.61%

LUCA INVESTMENTS PTY LTD <SUPER FUND A/C> 125,000 0.61%

MR SIDNEY REX BAKER & MRS DEBRA JADWIGA BAKER <SR & DJ BAKER S/F A/C> 100,000 0.49%

SAMAR INVESTMENTS PTY LTD <SARICH SUPER FUND A/C> 100,000 0.49%

BISTONA PTY LTD <THE RADICI SUPER FUND A/C> 100,000 0.49%

MR MICHAEL PETER JOSEPH MARTIN & MRS GILLIAN MARTIN <MARTIN SUPER FUND A/C> 100,000 0.49%

JA RODGERS SUPERANNUATION PTY LTD <JOHN RODGERS SUPER FUND A/C> 100,000 0.49%

MS NATALIE JANE MAYNARD WRIGHT <NJM WRIGHT A/C> 100,000 0.49%

AUTO MANAGEMENT PTY LTD <THE BRANCHI FAMILY A/C> 100,000 0.49%

MR VICTOR VLAHOS & MRS SOFIA VLAHOS <N & S SUPER FUND A/C> 100,000 0.49%

MR PHILIP RUSSELL HARRIS <HARRIS FAMILY A/C> 100,000 0.49%

MS FIONA LORRIMER HARDMAN & MR PETER MANOLAS <FJCJ SUPER FUND A/C> 100,000 0.49%

MONTY PYTHON PTY LTD <DZ ADMIN SERVICE SUPER A/C> 100,000 0.49%

Total 14,221,559 69.19%


53

1.5 Twenty Largest 30 April 2014 Listed Option Holders (as at 23 September 2011)

30 April 2014 Listed Options

Option Holders Number Percentage

VALLEYBROOK INVESTMENTS PTY LTD <TERPU A/C> 17,705,417 36.92%

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 3,669,555 7.65%

ROJUL NOMINEES PTY LTD <R & R MARTIN SUPER FUND A/C> 3,460,000 7.21%

VALLEYROSE PTY LTD <TERPU SUPER FUND A/C> 2,083,333 4.34%

MR MARK BARNABA 2,000,000 4.17%

YFG PTY LTD <YFG UNIT A/C> 2,000,000 4.17%

MR BRUNO FIRRIOLO & MRS CARMELA FIRRIOLO <FIRRIOLO SUPER FUND A/C> 1,506,666 3.14%

WESTLINK ASSET PTY LTD <THE VENIA A/C> 1,500,000 3.13%

MOGA TO PTY LTD <MT A/C> 1,310,000 2.73%

MARTIN SMITH & DAMIAN SMITH <KIWI BATTLER SUPERANNUATION FUND A/C> 1,000,000 2.09%

MRS RHODA JOY HARRIS & MR PHILIP RUSSELL HARRIS <HARRIS SUPER FUND A/C> 1,000,000 2.09%

MISS TIFFANY SARAH TERPU 616,666 1.29%

MISS NATASHA SANDRA TERPU 616,666 1.29%

GOLDEN MILE INVESTMENTS PTY LTD 600,000 1.25%

MRS CARMELA FIRRIOLO 583,333 1.22%

MELISSA DOMENICA CIFELLI 583,333 1.22%

EVELLO PARTNERS PTY LTD 500,000 1.04%

MR ROBERT BARRETT BROWNING & MRS NANCY JEAN BROWNING 500,000 1.04%

ARODAM PTY LTD <THE ARODAM A/C> 292,359 0.61%

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 200,000 0.42%

Total 41,727,328 87.01%

1.6 Share Buy-Backs

There is no current on-market buy-back scheme.

2. Other Information

Forte Consolidated Limited Limited, incorporated and domiciled in Australia, is a public listed Companylimited by Shares.

3. Tenement Schedule

TenementNo.

Registered HolderForte

Equity

Area (ha/sqkm)

Application/

Grant dateExpiry date

Queensland

EPM 14824 Nextstar Pty Ltd 100% 20 Oct 2004 13 Sept 2012

EPM 14825 Nextstar Pty Ltd 100% 20 Oct 2004 13 Sept 2012

EPM 18683 Nextstar Pty Ltd 100% 12 May 2010 Application

final forte annual report 2011 - gsml.com.au · directors’ report forte consolidated limited and...

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