for personal use only - asx · 2013. 9. 29. · peter johnston non-executive director ... sc rock...

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Phillips River Mining Limited ABN 61 004 287 790

Annual Financial Report for the financial year ended

30 June 2013

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Corporate Directory

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Directors

Paul Chapman Non-Executive Chairman

Les Davis Non-Executive Director

Chris Banasik Non-Executive Director

David Griffiths Non-Executive Director

Peter Johnston Non-Executive Director

Brian Kennedy Non-Executive Director

Hamish Bohannon Non-Executive Chairman (resigned 3 July 2012)

Jason Stirbinskis Managing Director (resigned 3 July 2012)

Anthony Martin Non-Executive Director (resigned 3 July 2012)

Andrew Blair Ellison Non-Executive Director (resigned 3 July 2012)

Company Secretary

Peter Armstrong

Principal Office

Suite 4, Level 3, South Shore Centre

85 South Perth Esplanade

South Perth WA 6151

Tel: +61 8 6313 3800

Fax: +61 8 6313 3888

Email: [email protected]

Registered Office

Suite 4, Level 3, South Shore Centre

85 South Perth Esplanade

South Perth WA 6151

Solicitors

Allion Legal

Level 2, 50 Kings Park Road

West Perth WA 6005

Share Register

Advanced Share Registry Services Ltd

150 Stirling Highway

Nedlands WA 6009

Auditors

Deloitte Touche Tohmatsu

Level 14, Woodside Plaza

240 St Georges Terrace

Perth WA 6000

Internet Address

www.phillipsriver.com.au

ASX Code: PRH

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Table of Contents

3

Message from the Chairman .......................................................................................................... 4

Directors' Report ............................................................................................................................. 5

Corporate Governance Statement ................................................................................................ 14

Auditor’s Independence Declaration ............................................................................................ 20

Independent Auditor's Report ...................................................................................................... 21

Directors' Declaration ................................................................................................................... 23

Consolidated Statement of Profit or Loss and Other Comprehensive Income ............................ 24

Consolidated Statement of Financial Position .............................................................................. 25

Consolidated Statement of Changes in Equity ............................................................................. 26

Consolidated Statement of Cash Flows ........................................................................................ 27

Notes to the Financial Statements ............................................................................................... 28

ASX Additional Information .......................................................................................................... 57

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Message from the Chairman

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As outlined in the 2012 Annual Report, after protracted negotiations, Phillips River had signed an agreement to sell

all of its assets to Silver Lake Resources Limited (Silver Lake). The sale of assets was completed on 3 July 2012 and

the Silver Lake shares received as consideration for the sale were distributed to shareholders as a dividend.

The Company then commenced a search for a new project and management team to take Phillips River forward.

On 27 March 2013 the Company announced that it had signed a conditional merger implementation agreement to

acquire all of the issued shares of Afranex Gold Ltd (Afranex), an unlisted public company which had entered into

conditional agreements with a number of vendors to acquire a strategic portfolio of highly prospective gold

exploration projects within the world-class Tintina Gold Belt, in south west Alaska, USA.

It was intended to have the agreement completed in June 2013, however the agreement was conditional on

Phillips River completing a capital raise of a minimum $4,000,000, which, due to market conditions, has not yet

occurred. The agreement has now been extended to 31 January 2014, however, should this be unachievable, then

the only other option would be to apply for winding up of the Company.

On behalf of the Board, I would like to thank all shareholders for their support during a very difficult year.

Paul Chapman

Non-Executive Chairman

27 September 2013

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Directors’ Report

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The Directors present their report on the consolidated entity consisting of Phillips River Mining Limited (“Phillips River” or

“the Company”) and the entities it controlled at the end of, or during the financial year ended 30 June 2013 (“the

Group”).

Directors

The names and details of the Company’s Directors in office during the financial year and until the date of this report are

detailed below. The Directors were in office for the entire period unless otherwise stated.

Paul Chapman

B Comm, ACA, Grad Dip Tax,, MAICD, MAusIMM


Appointed 3 July 2012

Mr Chapman is a chartered accountant with over 20 years’ experience in the resources sector gained in Australia and the

United States. Mr Chapman has experience across a range of commodity businesses including gold, nickel, uranium,

manganese, bauxite/alumina and oil/gas.

Mr Chapman has held Managing Director and other senior management roles in public companies of various sizes and is

Chairman of WA based copper explorer Encounter Resources Ltd (since 7 October 2005), copper/gold explorer Rex

Minerals Ltd (since 2007) and Silver Lake Resources Limited (since 20 April 2004).

Les Davis

MSc (Min Econs)

Non-Executive Director


Mr Davis has over 30 years industry experience including 17 years hands-on experience in mine development and narrow

vein mining.

Mr Davis’ career incorporates 13 years senior management experience including roles as Mine Manager, Technical

Services Manager, Concentrator Manager, Resident Manager and General Manager Expansion Projects with organisations

including WMC Resources Ltd, Reliance Mining Ltd and Consolidated Minerals Ltd. Mr Davis is a Director of Silver Lake

Resources Limited (since 25 May 2007).

Mr Davis has held no other Directorships in public listed companies in the last three years.

Chris Banasik

B App Sc (Physics), MSc (Econ Geol), Grad Dip Ed, MAusIMM



Mr Banasik has over 25 years’ experience in the resource industry which includes 10 years hands-on experience in mine

geology resource and reserve calculation and a history of successful exploration in the Kambalda region of Western

Australia.

Mr Banasik has extensive experience in leading geology and exploration teams and managing drilling programmes,

surveying, mine planning and other technical services through 11 years in management roles with WMC Resources Ltd,

Reliance Mining Ltd and Consolidated Minerals Ltd. Mr Banasik is a Director of Silver Lake Resources Limited (since 25

May 2007).

Mr Banasik has held no other Directorships in public listed companies in the last three years.

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Directors’ Report

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David Griffiths

B Bus



Mr Griffiths has more than 30 years management and strategic communications experience developing from an initial

focus on human resources and employee relations to broader, group-wide strategic roles. Previously Mr Griffiths was

employed by WMC Resources Ltd and held the roles of Group Manager – Employee Relations and more recently, General

Manager Corporate Affairs and Community Relations.

Currently, Mr Griffiths is the Managing Director of the communications strategy and public relations company Gryphon

Management Australia Pty Ltd which he established in 2004. Gryphon Management assists companies to develop and

implement strategic communication plans, human resources strategies and corporate reputation plans. Mr Griffiths is

also a Director of Silver Lake Resources Limited (since 25 May 2007) and Chairman of Paringa Resources Limited (since 7

September 2012).

Mr Griffiths has held no other Directorships in public listed companies in the last three years.

Peter Johnston

BA, FAICD, FAusIMM



Mr Johnston’s extensive management career spans 30 years. That time includes senior management roles at WMC

Resources Ltd, Alcoa of Australia Limited and Lion Nathan Limited. Mr Johnston has been Chief Executive Officer/Director

of Minara Resources Ltd since 20 November 2001. As Executive General Manager at WMC Resources Ltd for over eight

years, Mr Johnston was at various times responsible for nickel and gold operations, Olympic Dam operations, Queensland

Fertilizers Ltd and human resources.

Mr Johnston is an Executive Council member and a past President of the Chamber of Minerals and Energy, a Director and

past Chairman of the Nickel Institute, a past Chairman of the Minerals Council of Australia, a past Director of Emeco

Holdings Limited from 1 September 2006 to 30 June 2013, a Director of Silver Lake Resources Limited (since 22 May 2007)

and Vice President of the Australian Mines and Metals Association.

Brian Kennedy

Cert Gen Eng



Mr Kennedy has operated a successful resource consultancy for over 25 years and has worked in the coal, iron ore, nickel,

gold and fertilizer industries. During this time Mr Kennedy managed large scale mining operations such as Kambalda and

Mount Keith on behalf of WMC Resources Ltd.

Mr Kennedy was a founding shareholder and Director of Reliance Mining Ltd, before its takeover by Consolidated

Minerals Ltd. Mr Kennedy is a Director of Silver Lake Resources Limited (since 20 April 2004).

Mr Kennedy has held no other Directorships in public listed companies in the last three years.

Hamish Bohannan

B(Eng)Sc Hons Mining, M(Eng)Sc Rock Mechanics, MBAF, FAusIMM, CE, MAICD

Independent Non-Executive Director & Chairman

Appointed 14 February 2007

Appointed Chairman 26 February 2007

Resigned 3 July 2012

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Directors’ Report

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Mr Bohannan is a Mining Engineer with 34 years’ experience in mining operations throughout Australia, Africa and North

and South America. He qualified at the Royal School of Mines Imperial College in London with a First Class Honours

Degree in Mining Engineering. In addition Mr Bohannan has a Masters in Business Administration from Deakin University.

He is a Fellow of the AusIMM and a Member of the Australian Institute of Company Directors. Mr Bohannan was formerly

Chief Executive Officer of Gallery Gold Limited from 2002 to 2006 and Braemore Resources PLC from 2006 to 2008. He

also served as a Director of Lachlan Star Limited from 2007 to 2009. Mr Bohannan is currently a Director of Bathurst

Resources Limited since 2008.

Jason Stirbinskis

MBA, MAusIMM, MAICD

Managing Director



Originally a geologist, Mr Stirbinskis has worked in the resources and finance sectors from Greenfield mining operations

to IT/telecommunication and finance industry projects over a 20 year history. He has worked with or consulted to

Newcrest Mining, Goldsworthy Mining, Placer Dome, Woodside Energy, Worsley Alumina and was most recently the

Managing Director of Central Asia Resources Limited from 2008 to 2011. Mr Stirbinskis has an MBA and substantial

experience in banking and finance where he project managed the delivery of several multi-million dollar projects. He has

also held executive roles at METS and Simulus, both engineering companies specialising in metallurgical consulting and

Greenfield feasibility studies for junior mining companies in Australia and overseas. In 2009 he was appointed the

Honorary Consul of the Republic of Kazakhstan in Western Australia. Mr Stirbinskis is a member of the AusIMM and a

Member of the Australian Institute of Company Directors. Mr Stirbinskis was appointed to the Board of Drake Resources

Limited as the Chief Executive Officer on 11 February 2013.

Anthony Martin

B Sc (Hons) Geology, MAusIMM (Geologist)

Independent Non-Executive Director

Appointed 18 April 2008


Mr Martin has over 22 years’ experience as an exploration geologist in a wide variety of commodities with the last 10

years in management and corporate roles within publicly listed and private companies. In recent years he was

responsible for the acquisition of the Rover and Yandal base metal and gold projects from AngloGold through his private

company Navarre Resources Pty Ltd. He then became CEO and Director of Westgold Resources NL from 2006 to 2008

following the takeover of Navarre by Westgold. In his time at Westgold he oversaw extensive restructuring of the

company into a successful, focussed gold and base metals explorer as well as the ‘spin out’ of the Yandal gold and

uranium projects into Aragon Resources Limited. Mr Martin currently works as an exploration management consultant.

Andrew Blair Ellison

Independent Non-Executive Director



Mr Ellison has extensive experience in commerce, operations, construction, maintenance and plant management within

the mining, petrochemical, generation and infrastructure industries in Western Australia and West Africa. He has strong

company management skills, with a successful reputation for growing companies into prosperous businesses with a

greater offering of services. Mr Ellison is currently an Executive Director of Forge Group Ltd since 2007 and Managing

Director of Cimeco Pty Ltd (subsidiary of Forge publicly listed company) and during the past five years has led the

successful growth of the Cimeco business. He has extensive experience and continues to actively participate in the day to

day management of Cimeco, plus takes on project director roles on major multi-discipline construction projects, ensuring

that his experience and knowledge is passed onto his management team. He continues to offer his extensive experience

and knowledge growing the business by working with the proposals team offering innovative proposals for large and

complex projects both in Australia and Africa.

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Directors’ Report

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Company Secretary

Peter Armstrong

ACIS, B Bus(Acct)


Mr Armstrong has over 30 years of accounting experience, including the last 25 years in the resources sector. He has

extensive experience in senior commercial management roles with Normandy Mining, WMC and Newcrest. This

experience involved working across a wide range of commodity businesses including gold, nickel, copper, coal and iron

ore.

Graham Anderson

BBus, DipFP, CA



Mr Anderson is a graduate of Curtin University and has over 22 years’ commercial experience as a Chartered Accountant.

He operates his own specialist accounting and management consultancy practise, providing a range of corporate advisory

services to both public and private companies. He was an audit partner at Duesburys from 1990 to 1997 and at Horwath

Perth from 1997 to 1999. Mr Anderson is currently Director and Company Secretary of a number of listed and unlisted

public companies in both the resource and industrial sectors.

Directors’ Meetings

The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by

each of the Directors of the Company during the financial year are:

Board of Directors Number of meetings held Number of meetings attended

Paul Chapman 7 7

Les Davis 7 7

Chris Banasik 7 7

David Griffiths 7 7

Peter Johnston 7 6

Brian Kennedy 7 7

Directors’ Interests

The relevant interest of each Director in the share capital as notified by the Directors to the Australian Stock Exchange in

accordance with s205G(1) of the Corporations Act 2001, at the date of this report is as follows:

Name of Director Fully Paid Ordinary Shares Unlisted Options

Paul Chapman - -

Les Davis - -

Chris Banasik - -

David Griffiths - -

Peter Johnston - -

Brian Kennedy - -

Principal Activities

During the period, the Company remained an Exploration Company and held two exploration leases, however the main

activity carried out by the Group was searching for a new project and a new management team to take Phillips River

forward.

Corporate Structure

Phillips River is a company limited by shares and is domiciled and incorporated in Australia.

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Directors’ Report

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Operating Review

Phillips River reviewed its strategy in 2012 and decided the best option to obtain value for its shareholders was to merge

or sell its assets and therefore entered into agreements to sell all of its exploration assets to Silver Lake Resources

Limited. The sale of the assets was completed on 3 July 2012 when Silver Lake Resources paid Phillips River 5,229,412

fully paid ordinary shares in Silver Lake for the assets. The Silver Lake Shares were distributed to shareholders as a

dividend totalling $14,380,882 on 16 July 2012 at a rate of 22.407 cents per share.

Following the sale of assets to Silver Lake Resources, the board of Phillips River was replaced by Sliver Lake board

members, since 3 July 2012 the day to day running of Phillips River has been performed by Silver Lake board members.

The Board was seeking to acquire additional projects and a new management team with a strategy to lead the Company

into the future. On 27 March 2013, after reviewing several projects, Phillips River signed a conditional merger

implementation agreement to acquire all the shares of Afranex Gold Ltd.

Financial Result

The loss of the Group for the financial year, after providing for income tax amounted to $5,880,053 (2012: $15,243,402).

At the end of the financial year the Group had $7,601 in cash (2012: $33,751) and $427,228 in cash deposits (2012:

$386,000).

Significant Changes in the State of Affairs

The following significant changes in the state of affairs of the Company occurred during the year:

• On 3 July 2012 the Company completed the asset sale agreement with Silver Lake and Silver Lake issued the Company with 5,229,412 Silver Lake fully paid ordinary shares.

• On 16 July 2012 the Company distributed the shares to shareholders as a dividend.

• On 27 March 2013 the Company signed a conditional merger implementation agreement to acquire all the shares in Afranex Gold Ltd.

• On 22 May 2013 the Company held a general meeting where the following resolutions were passed:

o Consolidation of capital where every 25 shares be consolidated into 1 share and every 25 options be consolidated into 1 option, with the exercise price amended in inverse proportion to that ratio.

o Change in the nature and scale of the Company’s activities as a result of the merger agreement.

o Allot and issue 6,750,000 shares and 3,937,500 options on a post consolidation basis, to the Afranex shareholders as consideration for the acquisition. (Conditional on capital raising being completed).

o Allot and issue up to 25,000,000 shares and 25,000,000 options on a post consolidation basis, to raise capital to fund future exploration expenditure.

o Authority for related parties to participate in the capital raising.

o Election of new directors Mr Malcolm Norris, Mr Terry Gadenne and Mr Allan Kelly. (Conditional on capital raising being completed).

o Allot and issue up to 12,500,000 shares and 3,125,000 options, on a post consolidation basis, to Gold Crest Mine Inc. in consideration for the acquisition of up to 100% of Kisa Gold Mining Inc. (Conditional on capital

raising being completed).

o Allot and issue up to 12,500,000 shares and 3,125,000 options, on a post consolidation basis, to the Northfork shareholders in consideration for the acquisition of up to 100% of Northfork Resources Pty Ltd.

(Conditional on capital raising being completed).

o Allot and issue up to 3,750,000 shares and 937,500 options, on a post consolidation basis, to Renaissance Alaska Pty Ltd in consideration for the acquisition of Black Peak. (Conditional on capital raising being

completed).

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Directors’ Report

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o Allot and issue up to 500,000 shares and 125,000 options, on a post consolidation basis, to Allan John Kelly in consideration for the acquisition of the Kelly interest. (Conditional on capital raising being completed).

• On 6 June 2013 the Company completed the consolidation of shares and options as approved at the General meeting.

Other than the resolutions passed in the general meeting noted above and the future plans of the Company disclosed in

the going concern note 3.5 in the financial statements, there are no other material future developments of the Company

to be disclosed.

Events Subsequent to Reporting Date

There were no material subsequent events between the reporting date and the date of signing this report.

Environmental Regulations and Performance

The Company’s operations hold licenses issued by the relevant regulatory authorities. These licenses specify limits and

regulate the management associated with the operations of the Company. At the date of this report the Company is not

aware of any breach of those environmental requirements.

Share Options

During the financial year, no unlisted options to acquire ordinary shares were issued to directors or contractors of the

Company. On 6 June 2013 the Company completed the consolidation of shares and options as approved at the General

meeting where every 25 options be consolidated into 1 option, with the exercise price amended in inverse proportion to

that ratio.

As at the date of signing this report, the total unissued ordinary shares of the Company under option are:

Number of Options Exercise Price ($) Vesting Date Expiry Date

45,000 $16.00 Vests upon performance

hurdles being met

30.11.2014


hurdles being met

18.12.2014


hurdles being met

29.12.2013

97,309 $15.00 Vested 30.12.2013

10,000 $30.00 Vested 27.02.2014

20,000 $15.00 Vested 30.12.2013

Employees

The consolidated entity had no employees as at 30 June 2013 (2012: 11 employees). Phillips River engages contractors

and consultants.

Indemnification and Insurance of Directors and Officers

The Company has agreed to indemnify the current Directors and Officers against any liability (other than the Company or

related body corporate) that may arise from their position as Directors and Officers of the Company except where the

liability arises out of conduct involving a lack of good faith.

During the financial year the Company has paid Directors’ & Officers’ insurance premiums of $24,721 in respect of

liability of any current and future Officers, and senior executives of the Company.

Phillips River has not provided any insurance or indemnity to the auditor of the Company.

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Directors’ Report

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Proceedings on Behalf of the Company

At the date of this report there are no leave applications or proceedings brought on behalf of the Group under section

237 of the Corporations Act 2001.

Corporate Governance In recognising the need for high standards of corporate behaviour and accountability, the Directors of Phillips River

support and have adhered to the principles of good corporate governance. The Company’s corporate governance

statement is contained in this annual report and on the Company’s website.

Auditor’s Independence Section 307C of the Corporations Act 2001 requires Phillips River’s auditors, Deloitte Touche Tohmatsu, to provide the

Directors of Phillips River with an Independence Declaration in relation to the audit of the financial report for the year

ended 30 June 2013. This Independence Declaration is attached to the Directors’ Report and forms a part of the

Directors’ Report.

Non-Audit Services The following non-audit services were provided by the Company’s auditor, Deloitte Touche Tohmatsu (‘Deloitte’). The

nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

The Board is satisfied that the provision of non-audit services is compatible with the general standard of independence

for auditors imposed by the Corporations Act and APES 110.

Deloitte received the following amounts for the provision of non-audit services:

2013

$

2012

$

Taxation services 9,950 6,738

REMUNERATION REPORT - AUDITED

Principles of Compensation

The Company does not currently employee any staff and does not compensate the current Directors.

Fixed Compensation


Short-Term Incentives

The Company does not currently employee any staff and does not compensate the current Directors, therefore no short

term incentives are in place.

Long-Term Incentives

The Company does not currently employee any staff and does not compensate the current Directors, therefore no long

term incentives are in place.

Special Benefits


Service Contracts


Non-Executive Directors

Non-Executive Directors do not receive performance related compensation or Directors’ fees.

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Directors’ Report

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Directors and Executive Officers’ Remuneration

None of the current directors or executive officers of the Group received any remuneration for the year ended 30 June 2013. However, final salary payments and termination benefits were

made in July 2012 to the former managing director and company secretary. Details are provided in the table below.

Details of the nature and amount of each major element of remuneration of each former Director of the Company and each former key management personnel (‘KMP’)for the years ended 30

June 2013 and 30 June 2012 are as follows:

Short term

Post-

employment

Superannuation

benefits

Termination

benefits

Share

based

payments

Options

& rights

Total

S300A(1)(e)(i)(vi)

Proportion of

remuneration

performance

related

S300A(1)(e)(i)(vi)

Value of options

as proportion of

remuneration

Salary

&

fees

STI

cash

bonus

Other

benefits

Total

$ $ $ $ $ $ $ $ % %

Directors

Mr J Stirbinski 2013 30,463 - - 30,463 2,742 408,333 - 441,538 - -

Executive Officers

Adrian Armstrong 2013 30,818 - - 30,818 2,774 41,500 - 75,092 - -

Total Compensation: Former KMP 2013 61,281 - - 61,281 5,516 449,833 - 516,630 - -

Short term

Post-

employment

Superannuation

benefits

Termination

benefits

Share

based

payments

Options

& rights

Total

S300A(1)(e)(i)(vi)

Proportion of

remuneration

performance

related

S300A(1)(e)(i)(vi)

Value of options

as proportion of

remuneration

Salary

&

fees

STI

cash

bonus

Other

benefits

Total

$ $ $ $ $ $ $ $ % %

Directors

Mr H J L Bohannan 2012 25,000 - - 25,000 - - - 25,000 - -

Mr J Stirbinski 2012 350,001 - - 350,001 31,500 - 7,000 388,501 - -

Mr A R Martin 2012 25,001 - - 25,001 2,250 - - 27,251 - -

Mr A B Ellison 2012 - - - - - - - - - -

Executive Officers

Adrian Armstrong 2012 135,357 - - 135,357 12,182 - - 147,539 - -

Mr B E J Armstrong 2012 216,601 - - 216,601 19,494 62,308 - 298,403 - -

Ms J A Christie 2012 312,917 - - 312,917 28,163 - - 341,080 - -

Mr G D Anderson 2012 60,250 - - 60,250 - - - 60,250 - -

Total Compensation: Former KMP 2012 1,125,127 - - 1,125,127 93,589 62,308 7,000 1,288,024 - -

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Equity instruments

All options refer to options over ordinary shares of Phillips River Mining Limited, which are exercisable on a one-

for-one basis under the Employee Share Option Plan.

Options and rights over equity instruments granted as compensation

During the financial year, the following share-based payment arrangements were in existence:

Options series

Grant

date

Expiry

date

Grant date

fair value Vesting date

Issued 20 November 2009 20 Nov 09 30 Nov 14 $8.68 Vests upon performance hurdles

being met (a)

Issued 2 December 2009 02 Dec 09 18 Dec 14 $10.44 Vests upon performance hurdles

being met (a)

Issued 30 November 2010 30 Nov 10 29 Dec 13 $5.46 Vests upon performance hurdle

being met (b)

Issued 6 December 2010 06 Dec 10 30 Dec 13 $5.00 Vests at grant date

Issued 28 February 2011 28 Feb 11 27 Feb 14 $11.24 Vests at grant date

Issued 29 August 2011 29 Aug 11 28 Aug 13 $5.60 Vests at grant date

(a) Performance hurdles: 50% of options vests upon commencement of construction of the mining production

facility; next 50% of options vests upon first shipping of concentrate and/or ore

(b) Performance hurdle: 100% of options vests upon Company share price exceeding 12 cents for 30 consecutive

days

The Directors’ Report is made out in accordance with the resolution of the directors.

On behalf of the Directors

.......................................................

Paul Chapman


27 September 2013

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Corporate Governance

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Phillips River Mining Limited (Company) has adopted systems of control and accountability as the basis for the

administration of corporate governance. Some of these policies and procedures are summarised in this statement.

Commensurate with the spirit of the ASX Corporate Governance Council's Corporate Governance Principles and

Recommendations 2nd

edition (Principles & Recommendations), the Company has followed each recommendation

where the Board has considered the recommendation to be an appropriate benchmark for its corporate

governance practices. Where the Company's corporate governance practices follow a recommendation, the Board

has made appropriate statements reporting on the adoption of the recommendation. In compliance with the "if

not, why not" reporting regime, where, after due consideration, the Company's corporate governance practices

depart from a recommendation, the Board has offered full disclosure and an explanation for the adoption of its

own practice.

The following governance-related documents are maintained by the Company and can be reviewed on request:

Charters

• Board

Policies and Procedures

• Policy and Procedure for Selection and Appointment of Directors

• Process for Performance Evaluation

• Code of Conduct

• Compliance Procedures for ASX Listing Rule Disclosure Requirements (summary)

• Procedure for the Selection, Appointment and Rotation of External Auditor

• Shareholder Communication Strategy

• Risk Management Policy (summary)

• Policy for Trading in Company Securities

The Company reports below on how it has followed, (or otherwise departed from), each of the recommendations

during the 2012/2013 financial year (Reporting Period). The information in this statement is current at 27

September 2013.

Roles and responsibilities of the Board and Senior Executives

(Recommendations: 1.1, 1.3)

The Company has established the functions reserved to the Board and has set out these functions in its Board

Charter.

The Board is collectively responsible for promoting the success of the Company through its key functions of

overseeing the management of the Company, providing overall corporate governance of the Company, monitoring

the financial performance of the Company, engaging appropriate management commensurate with the Company's

structure and objectives, involvement in the development of corporate strategy and performance objectives, and

reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal

compliance.

Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in

implementing the running of the general operations and financial business of the Company in accordance with the

delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the

Company's materiality thresholds at first instance to the Managing Director or, if the matter concerns the

Managing Director, directly to the Chair or the lead independent director, as appropriate.

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Role of the Board

The Board’s primary role is the protection and enhancement of long-term shareholder value.

To fulfil this role, the Board is responsible for the overall corporate governance of the Group including formulating

its strategic direction, approving and monitoring capital expenditure, setting remuneration, appointing, removing

and creating succession policies for Directors and senior executives, establishing and monitoring the achievement

of management’s goals and ensuring the integrity of internal control and management information systems.

It is also responsible for approving and monitoring financial and other reporting. Details of the Board’s charter are

located on the Company’s website (www.phillipsriver.com.au).

Board processes

The full Board currently holds 5 scheduled meetings each year, plus strategy meetings and any extraordinary

meetings at such other times as may be necessary to address any specific significant matters that may arise.

The agenda for meetings is prepared in conjunction with the Chairperson, Chief Executive Officer and Company

Secretary. Standing items include the Chief Executive Officer’s report, financial reports, strategic matters,

governance and compliance. Submissions are circulated in advance.

Skills, experience, expertise and period of office of each Director

(Recommendation: 2.6)

A profile of each Director setting out their skills, experience, expertise and period of office is set out in the

Directors' Report.

The Board considers that the mix of skills and diversity for which it is looking to achieve in membership of the

Board is represented by the Board’s current composition, as the directors possess the skills and expertise

necessary to look at taking on new Company projects, improving the Company’s projects and growing the

Company. The mix of skills and expertise of the current Board includes expertise in the following areas: mining,

geological, commercial, engineering, human resources, native title and public relations.

Director education

The Group has a formal process to educate new Directors about the nature of the business, current issues, the

corporate strategy and the expectations of the Group concerning performance of Directors. Directors also have

the opportunity to visit Group facilities and meet with management to gain a better understanding of business

operations. Directors are given access to continuing education opportunities to update and enhance their skills

and knowledge.

Director independence

(Recommendations: 2.1, 2.2, 2.3, 2.6)

The Board has a majority of directors who are independent.

The Board considers the independence of directors having regard to the relationships listed in Box 2.1 of the

Principles & Recommendations and the Company's materiality thresholds.

The Board has agreed on the following guidelines, as set out in the Company's Board Charter for assessing the

materiality of matters:

• Balance sheet items are material if they have a value of more than 5% of pro-forma net asset.

• Profit and loss items are material if they will have an impact on the current year operating result of 5% or more.

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• Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are outside the ordinary course of business, could affect the Company’s rights to its assets, if accumulated

would trigger the quantitative tests, involve a contingent liability that would have a probable effect of 5% or

more on balance sheet or profit and loss items, or will have an effect on operations which is likely to result

in an increase or decrease in net income or dividend distribution of more than 5%.

• Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerous provisions in the opinion of the Board, impact on income or distribution in excess of

the quantitative tests, there is a likelihood that either party will default, and the default may trigger any of

the quantitative or qualitative tests, are essential to the activities of the Company and cannot be replaced,

or cannot be replaced without an increase in cost which triggers any of the quantitative tests, contain or

trigger change of control provisions, are between or for the benefit of related parties, or otherwise trigger

the quantitative tests.

The independent directors of the Company are Paul Chapman (Chair of the Board), Peter Johnston, Brian Kennedy,

Les Davis, Chris Banasik and David Griffiths. These directors are independent as they are non-executive directors

who are not members of management and who are free of any business or other relationship that could materially

interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their

judgment.

Independent professional advice


Independent professional advice and access to Company information

Each Director has the right of access to all relevant Company information and to the Company’s executives and,

subject to prior consultation with the Chairperson, may seek independent professional advice from a suitably

qualified adviser at the Group’s expense. The Director must consult with an advisor suitably qualified in the

relevant field, and obtain the Chairperson’s approval of the fee payable for the advice before proceeding with the

consultation. A copy of the advice received by the Director is made available to all other members of the Board.

Selection and (Re)Appointment of Directors


Directors are selected by reference to their background and experience which is relevant to the business needs of

the Company. New directors are invited to join the Board by the chairperson, who makes the invitation based on

recommendations made by the Nomination Committee and approved by the Board.

The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession

planning. Each director other than the Managing Director, must not hold office (without re-election) past the third

annual general meeting of the Company following the director's appointment or three years following that

director's last election or appointment (whichever is the longer). However, a director appointed to fill a casual

vacancy or as an addition to the Board must not hold office (without re-election) past the next annual general

meeting of the Company. At each annual general meeting a minimum of one director or one third of the total

number of directors must resign. A director who retires at an annual general meeting is eligible for re-election at

that meeting. Re-appointment of directors is not automatic.

Board committees

The Company is not currently considered to be of a size, nor are its affairs of such complexity to justify the

establishment of separate committees (i.e. Audit or Remuneration or Nomination or Risk Management

Committee). Accordingly, all matters which may be capable of delegation to a committee are dealt with by the full

Board.

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Composition of the Board

The names of the Directors of the Company in office at the date of this report, specifying which are independent,

are set out in the Directors’ report on pages 5 to 7 of this report.

The procedures for election and retirement of the Directors are governed by the Company’s Articles of Association

and the Listing Rules of the Australian Securities Exchange Limited.

The composition of the Board is determined using the following principles:

• The Board shall comprise a majority of Independent Non-Executive Directors.

• The Board shall comprise Directors with a range of expertise encompassing the current and proposed activities of the Company.

• Where a vacancy is considered to exist, the Board selects an appropriate candidate through consultation with external parties, consideration of the needs of the shareholder base and consideration of the needs of the

Company. Such appointments are referred to shareholders at the next available opportunity for re-election in

general meeting.

• The Company is committed to maintaining a Board of a size which has the ability to respond very quickly to the opportunities which may arise as a result of its activities.

• Before agreeing to join the Board, each nominated Director must demonstrate their willingness to commit the necessary time required to discharge their responsibilities.

• The terms and conditions of the appointment of Non-Executive Directors are set out in a letter of appointment.

Performance evaluation

Senior executives


The Company does not currently employee any staff.

Board and individual directors


The Chair is responsible for evaluation of the Board and, when deemed appropriate, individual directors.

The Board and individual directors are subject to ongoing evaluation by the Chair.

During the Reporting Period an evaluation of the Board, individual directors and the Managing Director took place

in accordance with the process disclosed.

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Ethical and responsible decision making

Code of Conduct


The Company has advised each Director, manager and employee that they must comply with the Ethical Standards

Manual. The Manual may be viewed on the Company’s website, and it covers the following:

• Aligning the behaviour of the Board and management with the code of conduct by maintaining appropriate core Company values and objectives

• Fulfilling responsibilities to shareholders by delivering shareholder value

• Usefulness of financial information by maintaining appropriate accounting policies, practices and disclosure

• Fulfilling responsibilities to clients, customers and consumers by maintaining high standards of product quality, service standards, commitments to fair value, and safety of goods produced

• Employment practices such as occupational health and safety, employment opportunity, the community activities, sponsorships and donations

• Responsibilities to the individual, such as privacy, use of privileged or confidential information, and conflict resolution

• Compliance with legislation including policies on legal compliance in countries where the legal systems and protocols are significantly lower than Australia’s

• Conflicts of interest

• Corporate opportunities such as preventing Directors and key executives from taking advantage of property, information or position for personal gain

• Confidentiality of corporate information

• Fair dealing

• Protection and proper use of the Company’s assets

• Compliance with laws

• Reporting of unethical behaviour.

Diversity

(Recommendations: 3.2, 3.3, 3.4, 3.5)

The Company did not establish a Diversity Policy in 2012.

The Board has not set measurable objectives for achieving gender diversity. As noted above, the Board did not

adopt a Diversity Policy in 2012, as it was focussing on the sale of assets which resulted in all employees leaving

the company.

The Company will however continue to provide equal opportunity in respect to employment and ensure

appropriate selection criteria based on diverse skills, experience and perspectives is used when hiring new staff.

The proportion of women employees in the whole organisation, women in senior executive positions and women

on the Board are set out in the following table:

Proportion of women

Whole organisation 0 out of 6 (0%)

Board 0 out of 6 (0%)

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Continuous Disclosure


The Company has established written policies and procedures designed to ensure compliance with ASX Listing Rule

disclosure requirements and accountability at a senior executive level for that compliance.

Shareholder Communication


The Company has designed a communications strategy for promoting effective communication with shareholders

and encouraging shareholder participation at general meetings.

Risk Management

Recommendations: 7.1, 7.2, 7.3, 7.4)

The Board has adopted a Risk Management Policy, which sets out the Company's risk profile. Under the policy, the

Board is responsible for approving the Company's policies on risk oversight and management and satisfying itself

that management has developed and implemented a sound system of risk management and internal control.

Under the policy, the Board delegates day-to-day management of risk to the Managing Director, who is

responsible for identifying, assessing, monitoring and managing risks with the assistance of senior management.

The Managing Director is also responsible for updating the Company's material business risks to reflect any

material changes, with the approval of the Board.

In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company

employees, contractors and records and may obtain independent expert advice on any matter they believe

appropriate, with the prior approval of the Board.

The Board adopts practices designed to identify significant areas of business risks and to effectively manage those

risks in accordance with the Company’s risk profile. Where necessary, the Board draws on the expertise of

appropriate external consultants to assist in dealing with or mitigating risks.

The Company’s main areas of risks, and its approach to managing these risks, are set out hereunder.

Mining, exploration and development

The Company’s current major area of focus is to complete the merger implementation agreement with Afranex. If

this does not occur, then the only other option will be to place the Company in voluntary administration.

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Auditor’s Independence declaration

20

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Auditor’s Report

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Directors’ Declaration

23

1. In the opinion of the Directors:

a) The financial statements and notes of the Company are in accordance with the Corporations Act 2001 including:

i) Giving a true and fair view of the Group’s financial position as at 30 June 2013 and of its performance for the year then ended; and

ii) Complying with Australian Accounting Standards (including Australian Accounting Interpretations) and Corporations Regulations 2001

b) The financial report also complies with International Financial Reporting Standards as disclosed in Note 3;

c) The remuneration disclosures that are contained in the remuneration report in the Directors report comply with Australian Accounting Standards AASB 124 related party disclosures, the Corporations Act

2001 and the Corporations Regulations 2001;

d) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with s295A of the Corporations Act 2001 for the financial year ended 30 June 2013.

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

Paul Chapman


27 September 2013

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Consolidated Statement of Profit or Loss and Other Comprehensive

Income

For the year ended 30 June 2013

24

30 June 13 30 June 12

Note $ $

Continuing Operations

Other income 6 464,566 -

Employee benefits expense 6 (516,630) -

Change in fair value of Silver Lake shares 6 (732,118) -

Other expenses 6 (1,334,692) (69,000)

Finance income 15,632 -

Finance expenses (8,018) -

Results from continuing activities (2,111,260) (69,000)

Loss before income tax expense (2,111,260) (69,000)

Income tax (expense)/benefit 8 (3,768,793) 20,700

Loss for the year from continuing operations (5,880,053) (48,300)

Discontinued Operations

Loss for the year from discontinued operations 9 - (15,195,102)

Loss for the year (5,880,053) (15,243,402)

Other comprehensive income net of income tax - -

Total comprehensive loss for the year (5,880,053) (15,243,402)

Loss attributable to:

Owners of the Company (5,880,053) (15,243,402)

Total comprehensive income attributable to:

Owners of the Company (5,880,053) (15,243,402)

Loss per share

From continuing and discontinued operations

Basic (cents per share) 10 (185.6905) (23.7513)

Diluted (cents per share) 10 (172.9327) (23.7513)

From continuing operations

Basic (cents per share) 10 (185.6905) (0.0008)

Diluted (cents per share) 10 (172.9327) (0.0008)

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statement of Financial Position


25

30 June 13 30 June 12

Note $ $

Assets

Current assets

Cash and cash equivalents 7,601 33,751

Trade and other receivables 11 3,250 158,103

Capitalised exploration expenditure 15 - -

Asset held for sale 12 - 16,075,522

Prepayments & other assets 13 427,228 426,524

Total current assets 438,079 16,693,900

Non-current assets

Property, plant and equipment 14 - 152

Deferred tax assets 16 - 3,768,793

Total non-current assets - 3,768,945

Total assets 438,079 20,462,845

Liabilities

Current liabilities

Trade and other payables 17 25,114 327,988

Interest-bearing loans and borrowings 18 385,000 892,662

Employee benefits - 43,318

Liabilities held for sale - 637,522

Total current liabilities 410,114 1,901,490

Non-current liabilities

Employee benefits - 25,629

Total non-current liabilities - 25,629

Total liabilities 410,114 1,927,119

Net assets 27,965 18,535,726

Equity

Issued capital 20 58,593,923 56,840,749

Reserves 21 1,206,080 2,274,124

Accumulated losses (59,772,038) (40,579,147)

Total equity 27,965 18,535,726


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Consolidated Statement of Changes in Equity


26

Issued

capital

Asset

revaluation

reserve

Options

reserve

Accumulated

losses

Total

equity

$ $ $ $ $

Balance at 1 July 2012 56,840,749 1,068,044 1,206,080 (40,579,147) 18,535,726

Loss for the period - - - (5,880,053) (5,880,053)

Total comprehensive loss for the

period - - - (5,880,053) (5,880,053)

Transfer to accumulated losses - (1,068,044) - 1,068,044 -

Dividend paid - - - (14,380,882) (14,380,882)

Shares issued 1,753,174 - - - 1,753,174

Options issued - - - - -

Balance at 30 June 2013 58,593,923 - 1,206,080 (59,772,038) 27,965

Balance at 1 July 2011 56,837,750 1,068,044 979,916 (25,335,745) 33,549,965

Loss for the period - - - (15,243,402) (15,243,402)

Total comprehensive loss for the

period - - - (15,243,402) (15,243,402)

Convertible notes 169,639 169,639

Shares issued 2,999 - - - 2,999

Options issued - - 56,525 - 56,525

Balance at 30 June 2012 56,840,749 1,068,044 1,206,080 (40,579,147) 18,535,726


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Consolidated Statement of Cash Flows


27

Note

30 June 13

$

30 June 12

$

Cash flows from operating activities

Cash receipts from customers - 29,617

Cash payments to suppliers and employees (2,023,817) (3,460,040)

Cash used in operations (2,023,817) (3,430,423)

Interest received 16,140 99,740

Income tax paid (8,018) 379,539

Net cash used in operating activities 25 (2,015,695) (2,951,144)

Cash flows from investing activities

Proceeds from disposal of plant and equipment - 65,357

Repayment of bonds - 81,177

Increase in rent security bond (41,228) -

Payments for plant and equipment - (122,322)

Payments for exploration and evaluation expenditure (49,666) (2,503,450)

Net cash generated from/(used) in investing activities (90,894) (2,479,238)

Cash flows from financing activities

Net proceeds from the issue of shares 1,753,174 -

Repayment of hire purchase liabilities (103,957) (210,663)

Repayment of insurance premium funding (33,344) -

Proceeds from borrowings 464,566 925,000

Net cash generated from/(used in) financing activities 2,080,439 714,337

Net increase/(decrease) in cash and cash equivalents (26,150) (4,716,045)

Cash and cash equivalents at 1 July 33,751 4,749,796

Cash and cash equivalents at 30 June 7,601 33,751


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Notes to the Consolidated Financial Statements

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1. Reporting entity

Phillips River Mining Limited (the 'Company') is a company domiciled in Australia. The Company's registered office

address is Suite 4, Level 3, South Shore Centre, 85 South Perth Esplanade, South Perth, WA. The consolidated

financial statements of the Company as at and for the year ended 30 June 2013 comprise the Company and its

subsidiaries (together referred to as the 'Group' and individually as 'Group entities'). The Group is a Western

Australian-based resources company which has two exploration leases.

2. Application of new and revised Accounting Standards

2.1 Standards and Interpretations adopted in the current year

The Company has adopted all of the new and revised Standards and Interpretations issued by the Australian

Accounting Standards Board that are relevant to their operations and are effective for the current financial

reporting period beginning 1 July 2012.

The following new and revised Standards and Interpretations have been adopted in the current period:

• Amendments to AASB 101 ‘Presentation of Financial Statements’

The impact of the adoption of these Standards and Interpretation did not have a material impact on the Company.

2.2 Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the following Australian Accounting Standards and

Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the

Company for the year ended 30 June 2013:

Standard/Interpretation

Effective for annual

reporting periods

beginning on or after

Expected to be initially

applied in the financial

year ending

AASB 9 ‘Financial Instruments’ (December 2009), AASB

2009-11 ‘Amendments to Australian Accounting

Standards arising from AASB 9’ and AASB 2012-6

‘Amendments to Australian Accounting Standards –

Mandatory Effective Date of AASB 9 and Transition

Disclosures’

AASB 9 ‘Financial Instruments’ (December 2010) and

AASB 2010-7 ‘Amendments to Australian Accounting

Standards arising from AASB 9 (December 2010)’ and


Standards – Mandatory Effective Date of AASB 9 and

Transition Disclosures’

1 January 2015 30 June 2016

AASB 10 ‘Consolidated Financial Statements’ 1 January 2013 30 June 2014

AASB 11 ‘Joint Arrangements’ 1 January 2013 30 June 2014

AASB 12 ‘Disclosure of Interests in Other Entities’ 1 January 2013 30 June 2014

AASB 127 ‘Separate Financial Statements’ (2011) 1 January 2013 30 June 2014

AASB 128 ‘Investments in Associates and Joint

Ventures’ (2011)



Standards arising from the Consolidation and Joint

Arrangements Standards’


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Standard/Interpretation

Effective for annual

reporting periods

beginning on or after

Expected to be initially

applied in the financial

year ending

AASB 13 ‘Fair Value Measurement’ and AASB 2011-8

‘Amendments to Australian Accounting Standards

arising from AASB 13’


AASB 119 ‘Employee Benefits’ (2011), AASB 2011-10

‘Amendments to Australian Accounting Standards

arising from AASB 119 (2011)’



Standards to Remove Individual Key Management

Personnel Disclosure Requirements’

1 July 2013 30 June 2014


Standards – Disclosures – Offsetting Financial Assets

and Financial Liabilities (Amendments to AASB 7)’



Standards – Offsetting Financial Assets and Financial

Liabilities (Amendments to AASB 132)’



Standards arising from Annual Improvements 2009–

2011 Cycle’


AASB 2013-3 ‘Amendments to AASB 136 – recoverable

amount disclosures for non-financial assets


The impact of these recently issued or amended standards and interpretations have not been determined as yet by

the Company.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these

consolidated financial statements, and have been applied consistently by Group entities.

3.1 Statement of compliance

These financial statements are general purpose financial statements which have been prepared in accordance with

the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the

law.

The financial statements comprise the consolidated financial statements of the Group. For the purposes of

preparing the consolidated financial statements, the Company is a for-profit entity.

Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards

ensures that the financial statements and notes of the Company and the Group comply with International Financial

Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by the Directors on 27 September 2013.

3.2 Basis of measurement

The consolidated financial statements have been prepared on the basis of historical cost, except for certain non-

current assets and financial instruments that are measured at revalued amounts or fair values, as explained in the

accounting policies below. Historical cost is generally based on the fair values of the consideration given in

exchange for assets.

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3.3 Financial and presentation currency

These consolidated financial statements are presented in Australian dollars, which is the Company's functional

currency and the functional currency of the other companies within the Group.

3.4 Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions

that affect the application of accounting policies and the reported amounts of assets, liabilities, income and

expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on

an ongoing basis.

In particular information about significant areas of estimation, uncertainty and critical judgements in applying

accounting policies that have the most significant effect on the amounts recognised in the financial statements

are:

• Utilisation of tax losses.

• Exploration and evaluation expenditure carried forward.

• Impairment of assets

Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future

periods affected.

3.5 Going concern

The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and

the realisation of assets and settlement of liabilities in the ordinary course of business.

For the year ended 30 June 2013 the Consolidated Entity incurred losses of $5,880,053 (2012: $15,243,402) and had net cash

outflows from operating and investing activities of $2,106,589 (2012: $5,430,382).

During the previous year, the Consolidated Entity disposed of its Great Southern project assets, and as a result expenditure

during the current year has reduced. Any future exploration expenditure will depend on obtaining a new project, recapitalising

the Company and obtaining a new management team. As at 27 September 2013 the Consolidated Entity has $5,623 in cash and

a payable of $385,000 which is a non-interest bearing loan from Silver Lake Resources Limited. The loan will be repaid from

proceeds received from the release of the office rental and rehabilitation bonds totalling $427,228.

Subsequent to 30 June 2013 the Consolidated Entity has received a letter of financial support from Silver Lake Resources

Limited to a limit of $20,000 which extends to 31 March 2014.

The ability of the Company and Consolidated Entity to continue as going concerns is principally dependent upon the ability of

the Consolidated Entity to secure a new project, the recapitalisation of the Company and the ongoing financial support from

Silver Lake Resources Limited. As announced to ASX on 23 March 2013, the Company has signed a merger agreement with

Afranex Gold Ltd, the main condition of which is the raising of a minimum of $4,000,000 (‘the Afranex Project’). The agreement

expires on 31 January 2014. Should this be completed on time, the Company expects to have sufficient funds to carry out

exploration on the newly acquired assets.

Recapitalisation of the Company will require compliance with Chapters 1 and 2 of the ASX Listing Rules. If recapitalisation does

not occur on or before 31 January 2014, the directors of the Company currently intend to wind up the Company by 31 March

2014.

These conditions indicate a material uncertainty that may cast significant doubt about the ability of the Company and

Consolidated Entity to continue as going concerns.

The Directors have prepared a cash flow forecast, which indicates that the Company and Consolidated Entity will have sufficient

cash flows to meet all commitments and working capital requirements up to 31 March 2014.

If the matters set out above in relation to the Afranex Project are not successfully achieved prior to 31 January 2014 the

Company and Consolidated Entity will cease to be going concerns after 31 March 2014.

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The financial report does not include any adjustments relating to the recoverability and classification of recorded asset

amounts, or to the amounts and classification of liabilities that might be necessary should the Company and Consolidated Entity

not continue as going concerns.

3.6 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled

by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial

and operating policies of an entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

3.7 Property, plant and equipment

(i) Recognition and measurement

Land held for use in the production or supply of goods or services are stated in the statement of financial position

at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated

impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not

differ materially from those that would be determined using fair values at the end of the reporting period.

Any revaluation increase arising on the revaluation of such land is recognised in other comprehensive income,

except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or

loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A

decrease in the carrying amount arising on the revaluation of such land is recognised in profit or loss to the extent

that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that

asset.

On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the

asset revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation

reserve to retained earnings except when an asset is derecognised.

Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment

losses.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as

separate items of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the

proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within

‘other income’ in the statement of comprehensive income.

All assets sold as part of the Asset Sale Agreement have been written down to their recoverable amount and

transferred to current assets – assets held for sale.

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(ii) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as

finance leases. An asset acquired by way of a finance lease is stated at amounts equal to the lower of its fair value

and the present value of the minimum lease payments at inception of the lease less any accumulated amortisation

and impairment losses. Lease payments are accounted for as described in accounting policy 3.20.

(iii) Depreciation

With the exception of mine property assets, depreciation or amortisation is charged to profit or loss over the lower

of their estimated useful lives and the estimated remaining life of the mine. Mine property assets are amortised

over the estimated remaining life of the mine. The estimated remaining life of the mine is based upon geological

ore reserves and resources. Assets not linked to the mining operation are depreciated over their estimated useful

lives using the straight line method.

The estimated useful lives in the current and comparative periods are as follows:

2013 2012

Plant and equipment N/A 2-20 years

Assets are depreciated or amortised from the date of acquisition or from the time an asset is completed and held

ready for use.

If the estimated remaining economic life of the mine, based on economically recoverable resources, is less than

the depreciation period for an asset group then the depreciation period is limited to the estimated remaining

economic life of the mine.

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

Depreciation is not charged on land.

(iv) Deferred stripping costs

Mining costs associated with the removal of waste rock are referred to as ‘deferred stripping’ costs and are

capitalised to the Balance Sheet using a life of mine waste-to-ore strip ratio. Costs of mining waste rock, in excess

of the life of mine waste-to-ore strip ratio, are accumulated and classified as property, plant and equipment. The

deferred stripping accounting method is generally accepted in the mining industry where mining operations have

diverse ore grades and waste-to-ore strip ratios over the mine life. Deferred stripping matches the costs of

production with extraction of ore.

3.8 Exploration and evaluation

Exploration and evaluation costs are capitalised as exploration and evaluation assets on an area of interest basis.

Costs incurred before the Group has obtained the legal rights to explore an area are recognised in profit or loss.

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

(i) the expenditures are expected to be recouped through successful development and exploitation of the area

of interest; or,

(ii) activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable

assessment of the existence or otherwise of economically recoverable reserves and active and significant

operations in, or in relation to, the area of interest are continuing.

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Exploration and evaluation assets are assessed for impairment if:

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

(ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see accounting policy 3.12).

For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to

which the exploration activity relates. The cash generating unit shall not be larger than the area of interest.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest

are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for

impairment and then reclassified from intangible assets to mine property assets within property, plant and

equipment.

In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced

value, accumulated costs carried forward are written off in the period in which that assessment is made. Each area

of interest is reviewed at the end of each accounting period and accumulated costs are written off to the extent

that they will not be recoverable in the future.

All exploration and evaluation assets sold as part of the Asset Sale Agreement have been written down to their

recoverable amount and transferred to current assets – assets held for sale.

3.9 Receivables

Trade and other receivables are stated at amortised cost. Receivables are usually settled within no more than 30

days.

Receivables are reviewed on an ongoing basis. An impairment loss is recognised for debts which are known to be

uncollectible. An impairment provision is raised for any doubtful accounts (see accounting policy 3.12).

3.10 Cash and cash equivalents

Cash and cash equivalents comprise cash and bank balances.

3.11 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated

by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average

number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss

attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the

effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

3.12 Impairment

(i) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is

impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events

have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying amount, and the present value of the estimated future cash flows discounted at the original

effective interest rate.

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Individually significant financial assets are tested for impairment on an individual basis. The remaining financial

assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the statement of comprehensive income.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than exploration and evaluation, inventories and

deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of

impairment. If any such indication exists then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less

costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a

pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to

the asset. For the purpose of impairment testing, assets are grouped together into smallest group of assets that

generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or

groups of assets (the ‘cash generating unit’).

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its

recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of

cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and

then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for

any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a

change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the

extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,

net of depreciation or amortisation, if no impairment loss had been recognised.

3.13 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are

assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to

the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on

qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

3.14 Interest-bearing borrowings

The financial assets and financial liabilities included in non-current assets and non-current liabilities approximate

fair values. Fair value is calculated based on discounted expected future principal and interest cash flows.

3.15 Employee benefits

(i) Short-term benefits

Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within twelve

months of the reporting date represent present obligations resulting from employee’s services provided to

reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the

Group expects to pay as at reporting date including related on-costs, such as workers compensation insurance and

payroll tax.

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(ii) Long-term benefits

Liabilities for employee benefits for long service leave that are not expected to be settled within twelve months of

the reporting date represent present obligations resulting from employee’s services provided to reporting date,

are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to

pay as at reporting date.

(iii) Share-based payments

Employee options are, from time to time, granted to executives and employees. The fair value of options granted

is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant

date and spread over the period during which the employees become unconditionally entitled to the options. The

fair value of the options granted is measured using the Black and Scholes option pricing model, taking into account

the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted

to reflect the actual number of share options that vest except where forfeiture is only due to share prices not

achieving the threshold for vesting.

(iv) Termination benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic

possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement

date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer

encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances

can be estimated reliably.

3.16 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that

can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the

obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects

current market assessments of the time value of money and the risks specific to the liability.

3.17 Restoration and rehabilitation

Mine restoration and rehabilitation costs are provided for at the present value of future expected expenditures

required to settle the Group’s obligations on commencement of commercial production, discounted using a rate

specified to the liability. When this provision is recognised a corresponding asset is also recognised as part of the

development costs of the mine to the extent that it is considered that the provision gives access to future

economic benefits. The capitalised cost of this asset is amortised over the life of the mine. On an ongoing basis, the

rehabilitation liability is remeasured at each reporting period in line with the changes in the time value of money

(recognised as a finance expense in profit or loss and an increase in the provision), changes in rehabilitation costs

will be recognised as additions or changes to the corresponding asset and rehabilitation liability.

Provision for restoration and rehabilitation includes the following costs: reclamation, waste stabilisation, site

closure and monitoring activities. These costs have been determined based on future expected costs, current legal

requirements and current technology. The provisions referred to above do not include any amounts related to

remediation costs associated with unforeseen circumstances.

3.18 Trade and other payables

Liabilities are recognised for amounts to be paid in the future for goods and services provided to the Group prior to

the end of the reporting period and are stated at amortised cost. The amounts are unsecured and are usually paid

within 30 days of recognition.

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3.19 Revenue

(i) Goods sold

Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership

have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding

recovery of the consideration due.

Revenues are recognised at fair value of the consideration received net of the amount of GST. Exchanges of goods

for personal use only - asx · 2013. 9. 29. · peter johnston non-executive director ... sc rock...

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