quest minerals limited - asx · quest minerals limited abn 55 062 879 583 subject to a deed of...

QUEST MINERALS LIMITED ABN 55 062 879 583

Subject to a Deed of Company Arrangement

Subject to a Creditors’ Trust

ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2014

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QUEST MINERALS LIMITED

(subject to a deed of company arrangement and a creditors’ trust)

AND ITS CONTROLLED ENTITIES ABN 55 062 879 583

CORPORATE DIRECTORY

Financial Report 2013/2014 Page 1 of 75

Quest Minerals Limited and controlled entities

FINANCIAL REPORT FOR THE YEAR

1 July 2013 to 30 June 2014

Board of Directors Solicitors

Mr Paul Piercy – Non-executive Chairman Mr Jerome G Vitale – Executive Director Dr Dennis Gee – Non-executive Director Mr Stuart Third – Alternate Director

for Mr Piercy Mr Ian Crawford – Alternate Director

for Dr Gee

Company Secretary

Mr Stuart Third

Registered Office

Level 1, 467 Scarborough Beach Road OSBORNE PARK WA 6017 Phone: +61 8 9217 9800 Fax: + 61 8 9217 9899

Banker

National Australia Bank Limited 226 Main Street OSBORNE PARK WA 6017

Auditors

Grant Thornton Audit Pty Ltd Level 1 10 Kings Park Road WEST PERTH WA 6005 Phone: + 61 8 9480 2000 Fax: +61 8 9322 7787

Kings Park Corporate Lawyers Level 2, 45 Richardson Street WEST PERTH WA 6005 Phone: + 61 8 9420 0000 Fax: + 61 8 9226 5821

Share Registry

Advanced Share Registry Ltd 150 Stirling Highway NEDLANDS WA 6009 Phone: +61 8 9389 8033 Fax: + 61 8 9262 3723 Stock Exchange Listing

Australian Securities Exchange Quest Minerals Limited ASX Code: QNL

Deed Administrator and Creditors’ Trustee Mr Adam Shepard Farnsworth Shepard Level 5 2 Barrack Street SYDNEY NSW 2000 Phone: + 61 2 9262 4000 Fax: +61 2 7903 8088

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QUEST MINERALS LIMITED

(subject to a deed of company arrangement)

AND ITS CONTROLLED ENTITIES

CONTENTS



LETTER FROM DIRECTORS 3 REVIEW OF OPERATIONS 4 DIRECTORS’ REPORT 6

AUDITOR’S INDEPENDENCE DECLARATION 20

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 21 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 22 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 23 CONSOLIDATED STATEMENT OF CASH FLOWS 24 NOTES TO THE FINANCIAL STATEMENTS 25

DIRECTORS’ DECLARATION 63 INDEPENDENT AUDITOR’S REPORT 64 CORPORATE GOVERNANCE STATEMENT 67

ASX ADDITIONAL INFORMATION 74 TENEMENT SCHEDULE 75

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LETTER FROM DIRECTORS Dear Shareholder,

On 9 May 2014 the Directors resolved to appoint Mr Adam Shepard from the firm Farnsworth Shepard as voluntary administrator. This decision was taken as a result of the Company’s inability to raise capital following the suspension of trading of its securities on ASX on 1 October 2013. The suspension came about as a result of historical breaches of ASX Listing Rules previously reported in the 2013-014 Annual Report, For reasons outside of its control, and despite numerous attempts to take corrective action as required by ASX, the Company was unable to do so which in turn impacted the ability of the Company to raise capital.

A rights issue to raise approximately $542,000 was launched by the Company in October 2013 to provide working capital thereby demonstrating adequacy of funding to the satisfaction of ASX. This had to be withdrawn in February 2014 as a condition of the rights issue was reinstatement of quotation of its securities on ASX.

The key asset of the Company was the right to earn an 80% equity interest in two exploration licences which constitute the Perenjori iron ore project on which a JORC resource had been estimated. A direct consequence of the failure to raise capital was that the Company was unable to meet expenditure commitments to earn this interest in the Perenjori project within the prescribed time frame. This lead to the forfeiture of its earn-in rights on the project.

On 18 August 2014 the creditors of the Company resolved to adopt a Deed of Company Arrangement (DOCA) proposed by Mr Jerome Vitale under which Mr Shepard was appointed as Trustee of a Creditors Trust. The DOCA provides for the transfer of remaining funds held by the Company as at the date of his appointment as Trustee to administer for the benefit of all creditors (there are no secured creditors).

Control of the Company, with a liability free balance sheet was returned to the directors following the execution of the DOCA. Under the terms of the DOCA, the Directors have an obligation to seek recapitalisation proposals under which a portion of any funds raised by the Company is to be earmarked as a dividend to be paid into a second creditors trust for the benefit of creditors.

The Company’s remaining exploration assets comprise a prospecting licence in the Perenjori project area which would be of limited value if sold outright. The directors believe however that the Company has value as a listed (albeit suspended) corporate shell (all ASX listing fees have been paid and are up to date). Accordingly, negotiations have commenced with several third parties who have expressed interest in providing sufficient funds to recapitalise the Company to the satisfaction of ASX in order to secure requotation of its securities.

The ASX has advised that it will consider requotation of the Company’s securities provided a number of conditions are met. These include the retrospective approval of shareholders and execution of restriction agreements in respect of shares issued pursuant to the historical transactions considered to be with a related party. The Directors in collaboration with the Trustee are taking steps to meet these conditions, including possible legal action under which court orders are to be sought to achieve such compliance if necessary.

Realistically, it is likely that any recapitalisation proposal put forward will require a consolidation of the number of shares on issue as well as the elimination of unmarketable parcels (which presently comprise some 5,000 individual shareholders) to facilitate a fresh capital raising.

Assuming compliance with the Listing Rules can be achieved, the Directors intend to secure the opportunity for remaining shareholders on the register to participate in any capital raising offer to be implemented.

Yours faithfully,

Mr Paul Piercy Mr Jerome (Gino) Vitale Dr Dennis Gee

Non-Executive Chairman Executive Director Non-Executive Director

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QUEST MINERALS LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS



Perenjori Iron Ore Project

As detailed in previous Annual Reports, Quest Minerals Limited had an entitlement to earn 80% interest in EL 70/2777 (Feral) and EL 70/2858 (Alken), collectively referred to as the Perenjori Project. Under the Deed of Variation to the original Binding Term Sheet effective 30 April 2011, Quest Minerals was granted a two-year extension of time with staged expenditure commitments, including one due to April 2014. Activity on the Perenjori Iron Ore Project in the reporting period mainly involved the planning of a drilling program to bring the resource to drill-indicated level, in order to progress to pre-feasibility stage. This followed the positive Scoping Study summarised in the 2013 Annual Report,

On 30 June 2013 Quest Minerals made formal application the Department of Minerals and Petroleum (DMP) for a Program of Works (POW) involving 25 drill holes on Feral EL, requiring the clearing of 2.8 hectares for drill pads and access tracks. In the assessment process DMP advised that the proposal would have to be referred to the Office of the Environmental Protection Authority (OEPA) to determine their assessment level, and to specify any conditions on the activity. Specific details of the drill sites in the form of GIS polygons and a further report by Mattiske Environmental Consultants was provided to DMP and passed on the Office of the EPA in October 2013. In the ensuing eight months no level of assessment was determined by the Office of the EPA. Without the POW, Quest Minerals was unable to meet one of its staged expenditure commitments by 30 April 2014, and had to hand back the project to the Devereux Syndicate, forfeiting all rights to the project. Quest Minerals retains a 100% interest in Prospecting License 70/1608 which is located in the Perenjori Hills, 330km northeast of Perth and 15km northeast of the township of Perenjori, in the Mid-West Region of Western Australia. The tenement is held by Acacia Mining Pty Ltd, a wholly owned subsidiary of Quest Minerals. The greenstones of the Perenjori Hills form a V-shaped stacked thrust structure that contains multiple BIF units within the eastern and western belts. The western belt, within which PL 70/1608 lies, has a structural thickness of 1,700m and dips uniformly at 74 degrees southwest. It contains a 250-meter strike segment of a thick (circa 100 meters) BIF unit into which Quest Minerals drilled two RC holes in 2011. No work was done on PL70/1608 in the reporting period. Quest Minerals holds an exemption from expenditure until November 2015.

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REVIEW OF OPERATIONS



Nigeria Gold Exploration

Quest Minerals, through its subsidiary Boab Mining Nigeria held 11 granted exploration licenses in northern Nigeria for gold exploration. As a result of political unrest in the north of Nigeria, tightness of working capital, and difficulties with tenement management, no exploration work has been undertaken on any of these properties since October 2012. Quest Minerals was unable keep the tenements in good standing by way of rental payments and work commitments. As a consequence Quest Minerals has allowed them to lapse. Victory Bore Project E57/550

Quest Minerals held a 100% interest in E57/550 in the Mid West region of Western Australia until 21 August 2014. The tenement covers a segment of a layered gabbro complex that contains titaniferous magnetite lenses with vanadium. This is an aged exploration license subject to annual renewal, which is normally granted by DMP provided expenditure commitments are made. As stated in the 2012 Annual Report, a full scoping study of a ferrovanadium project was undertaken by leading industry consultants METS and Cube Consulting. Results indicated that it was not economic. The scoping study was independently reviewed by Promet Engineers who concurred with this view. No work was undertaken on Victory Bore in reporting period. Following a further review of the vanadium project, and a review of historic gold exploration, the Board of Quest Minerals decided the tenement did not warrant a further application for renewal, which was likely to be refused by DMP because of low expenditures. Consequently it was relinquished in advance of its anniversary date.

Competent Persons Statement

Information in this Annual Report that relates to exploration results reflects information compiled by Dr Dennis Gee a Director of the

company and a member of the AIG. He has sufficient experience which is relevant to the style of mineralisation and type of deposit

under consideration and to the activity upon which he is reporting on as a Competent Person as defined in the 2012 Edition of “The

Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.” He consents to the inclusion in this

report of the matters based on the information compiled by him, in the form and context in which it appears.

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DIRECTORS’ REPORT



Your directors submit their report for the Company and its controlled entities (“the Consolidated Entity” or “the Group”) for the year ended 30 June 2014. DIRECTORS

The names and details of the Company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Mr Paul Piercy Non-executive Chairman

Qualifications Dip Met. FAusIMM, CP, FAICD Experience Appointed Non-executive Chairman on 22 April 2013 Mr Piercy is a metallurgist with wide operational mining experience who has

held senior management and technical positions within the Rio Tinto Limited group, including General Manager of Hamersley Iron’s Dampier port and the rail operations, General Manager of Hamersley Iron’s Paraburdoo and Channar operations and Managing Director of Novacoal and Kembla Coal and Coke. From 1997 to 2000 Mr Piercy was Managing Director of WestTrac Equipment before paying an integral role in the successful establishment of WestTrac China, as it Chairman/CEO based in China.

Interest in shares & options Nil ordinary shares, nil options. Special responsibilities Mr Piercy is the Non-executive Chairman of the Company. Directorships held in other listed entities Mr Piercy is currently a non-executive Director of Pilbara iron ore developer

Australasian Resources Limited, Nickelore Limited and China based miner Dragon Mountain Gold Limited.

Mr Jerome G Vitale Executive Director

Qualifications B Comm, ACA, FAICD, Sen F Finsia Experience Appointed Managing Director on 22 April 2013 Mr Vitale is a seasoned finance, corporate and operations executive with over 25

years wide ranging experience in the mineral resources sector. He is a Chartered Accountant, a Senior Fellow of the Financial Services Institute of Australia and a Fellow of the Australian Institute of Company Directors.

After a period of 14 years working in the stockbroking sector and later in

investment banking with Standard Chartered Bank and the Normandy Mining Group, as Managing Director of Burdekin Resources Mr Vitale led a team responsible for the mine development and operation of the successful McKinnons gold project in Cobar New South Wales. He was Managing Director of Redbank Mines Limited from 2000 to 2008 during which time the company acquired the Redbank Copper Mine in the Northern Territory producing high value concentrates with off-take and financing arrangements negotiated with a major International commodities trading group.

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DIRECTORS’ REPORT



Most recently Mr Vitale has developed his consultancy, Vitale Corporate, a successful mining consulting business with a focus on corporate turnarounds and extensive relationships with a number of China State Owned enterprises (SOE’s) and private equity investors based in Hong Kong and China.

Interest in shares & options 100 ordinary shares, nil options. Special responsibilities Mr Vitale is the Managing Director of the Company. Directorships held in other listed entities Mr Vitale does not currently hold any directorships in other listed entities. Former directorships in other listed entities in the past 3 years are: nil . Dr Dennis Gee Non-Executive Director

Qualifications BSc (Hons), PhD, GMAICD Experience Appointed Non-executive Director on 15 June 2010 Dr Dennis Gee is an eminent Australian geologist with vast experience in the

mining industry, government service and research management. In the latter part of his career he was Chief Executive Officer of the Cooperative Research Centre for Landscape Environments and Mineral Exploration attached to CSIRO. This involved a large research team working on geochemical, biological and hydrological process in the regolith. Previously he was the Director of the Northern Territory Geological Survey, and successfully implemented a new strategic plan to stimulate mineral exploration in the Northern Territory of Australia. Prior to that, he was Regional Manager with MIM Exploration, and Exploration Manager for Reynolds Australia Metals. Both Reynolds and MIM were top-ranking mining companies in Australia, with world-class gold and base-metal production. He served as Deputy Director of the Geological Survey of Western Australia, and supervised the completion of 1:250,000 scale regional mapping of the State.

Dr Gee commenced his career with the Tasmanian Mines Department. He is a

graduate of the University of Tasmania with BSc (Hons) and PhD. He is a former President of the Geological Society of Australia. He has widespread exploration experience in mineral and energy commodities throughout Australia, South America and Africa. He is Member of the Australian Institute of Geoscientists, and Graduate Member of the Australian Institute of Company Directors.

Interest in shares & options 775,080 ordinary shares, nil options. Special responsibilities Dr Gee provides the Company with technical geological experience. Directorships held in other listed entities Dr Gee does not currently hold any directorships in other listed entities. Former directorships in other listed entities in the past 3 years are: Torrens

Energy Limited (Chairman) (ASX: TEY) (February 2007 to March 2012).

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DIRECTORS’ REPORT



Mr Stuart Third Alternate Director (P Piercy) Qualifications BBus, MTax, Grad Dip App Corp Gov, FCA, CTA, AGIA Experience Appointed Alternate Director for Mr Piercy on 10 October 2014 Mr Stuart Third is a Chartered Accountant and a Chartered Tax Advisor, and

holds Bachelor of Business and Master of Taxation. He is a director of a Western Australian Chartered Accounting practice and has been involved in professional accounting in public practice for over 15 years, undertaking roles in corporate management, finance and corporate governance matters including ASX and ASIC compliance. He has extensive experience in advising companies both listed and in the private sector.

Interest in shares & options 472,500 ordinary shares, nil options. Special responsibilities Mr Third is also the Company Secretary. Directorships held in other listed entities Mr Third does not currently hold any directorships in other listed entities. Former directorships in other listed entities in the past 3 years are: Black Ridge

Mining NL (24 May 2013 to 26 July 2013). Mr Ian Crawford Alternate Director (D Gee)

Qualifications MAAG Experience Appointed Alternate Director for Dr Gee on 21 October 2014 Mr Ian Crawford is a Geochemist and Industrial Chemist with expertise in

product and process design. His experience includes mineral exploration and processing, including bioleaching applications. His experience in industrial process design includes cryogenic gases, plastics, chemicals, fertilizers, grain processing and coatings.

Mr Crawford’s recent experience in mineral processing includes improving

operation of gold extraction processes, improving mica extraction processes and an innovative bioleaching process for nickel and cobalt extraction.

Interest in shares & options Nil ordinary shares, nil options. Special responsibilities Mr Crawford is an Alternate Director for Dr Gee. Directorships held in other listed entities Mr Crawford does not currently hold any directorships in other listed entities. Former directorships in other listed entities in the past 3 years are: nil.

OTHER OFFICERS

Mr Stuart Third Company Secretary

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DIRECTORS’ REPORT



PRINCIPAL ACTIVITIES

The principal activity during the financial year was mineral exploration including the exploration and evaluation of opportunities located domestically and internationally.

OPERATING RESULTS

The Consolidated Entity’s operating loss after tax for the year ended 30 June 2014 was $3,156,152 (2013: loss of $4,149,387).

REVIEW OF OPERATIONS AND FINANCIAL RESULTS

Progress of the group’s activities, and future emphasis, in relation to projects and negotiations thereon located in Western Australia and overseas are detailed in the Review of Operations which precedes the Directors’ Report.

FINANCIAL POSITION

At the end of the financial year, the Consolidated Entity had $306,983 (2013: $382,355) in cash and on deposit which was, as at 30 June 2014, under the control of the voluntary administrator.

DIVIDENDS

The directors do not recommend the payment of a dividend for this financial year. No dividends have been paid or declared by the Company since the end of the previous financial year (2013: Nil).

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

On 30 July 2013, the Company announced the termination of an administration service contract between Quest Minerals Ltd and Corporate Admin Services Pty Ltd (CAS). CAS had made a claim for approximately $110,000 in unpaid fees, and on that basis had purported to terminate the agreement. CAS has also claimed a termination payment of approximately $33,000 per month from July 2013 to the end of the term of the agreement (4 May 2014). The agreement arose in circumstances that required shareholder approval under Chapter 2E of the Corporations Act 2001. Such approval was not obtained and as a result the agreement is not enforceable. The Directors have advised CAS of this. On 30 August 2013, the Company made calls for a total of $1.1 million on Partly Paid Shares with final payment due on 4 October 2013. Payment was received from one holder of 2,500,000 partly paid shares totalling $137,500. At the date of this report, payments due on the call has not been received from the holders of the remaining partly paid shares. The Company was taking steps for the shares to be forfeited and for the unpaid call to be recovered, with legal action suspended upon the appointment of the voluntary administrator (see below). On 1 October 2013, the Company was suspended from official quotation due to delays associated with the preparation of its statutory financial statements for the year ended 30 June 2013. The delays resulted from the investigation by the Board of corporate governance matters and previous transactions that were considered to be in breach of Chapter 2E of the Corporations Act 2001 and/or the ASX Listing Rules. The Company remains suspended from official quotation by the ASX pending a proposal for recapitalisation of the Company and resolving matters associated with the breach of Listing Rules as identified in the 2013 Annual Report. On 17 October, 2013, the Company announced a non-renounceable rights issue to take place subject to, amongst other conditions, the Company being requoted by the ASX. The rights issue was withdrawn by the Directors on 17 January 2014 when it was apparent that the Company would not be able to meet the conditions for having the suspension lifted by the ASX within a reasonable time.

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DIRECTORS’ REPORT



On 22 October 2013, the Company negotiated an extension of terms in relation to the Debentures and received the final instalment of funds on 30 October 2013. On 31 October 2013, a placement of 81,000,000 shares was made raising $81,000 for working capital. The Company’s AGM was held on 20 December 2013. On 30 April 2014, the farm-in agreement relating to the Perenjori Project was terminated by the vendor syndicate. On 9 May 2014, the Directors appointed Mr Adam Shepard of Farnsworth Shepard to be voluntary Administrator to the Company. The effect of the appointment was that all contractual claims against and obligations of the Company were suspended. In the opinion of Directors there were no other significant changes in the state of affairs of the group that occurred during the financial year under review not otherwise disclosed in this report or the consolidated financial statements.

SIGNIFICANT EVENTS SUBSEQUENT TO BALANCE DATE

On 18 August 2014, the Company entered a Deed of Company Arrangement (Deed) whereby the creditors of the Company were transferred to a Creditors’ Trust. The Deed appointed Mr Adam Shepard of Farnsworth Shepard as the Deed Administrator and Trustee of the Creditors’ Trust. Upon execution of the Deed, the voluntary administration of the Company ceased and control of the Company was returned to the Directors. In accordance with the terms of the Deed, the claims of creditors against the Company were transferred to the Creditors’ Trust. The assets retained by the Company at that time were the Victory Bore tenement (E57/550), which was subsequently surrendered, and the tenement at Perenjori (P70/1608). Both tenements had previously been impaired to nil value. Accordingly, upon return of control of the Company to the Directors on 18 August 2014, the Company had no assets other than the tenements noted above and no pre-administration liabilities. Since return of control of the Company to the Directors, the Company has used best endeavours to engage with interested investor parties to recapitalise the Company. Negotiations continue with potential investors who essentially require the Company to take all steps necessary to have the ASX suspension lifted and its shares to be requoted. The Deed requires the Company to be administered in a way that maximises the opportunity as much as possible for it to continue its business and result in a better return to creditors than would be the case from an immediate winding up. The Deed binds all creditors and parties who may have a claim against the Company arising prior to the period of administration, and the claims of creditors against the Company are extinguished and released in full upon the establishment of the Creditors Trust. The Deed established a Creditors Trust where the funds held by the voluntary administrator were transferred upon execution of the Deed. The Creditors Trust comprises two sub-trusts, the first being the funds available to the administrator at the date of execution of the Deed. The second sub-trust will comprise funds that are contributed by a successful proponent of a recapitalisation proposal that enables the Company to retain its listing with ASX and for the lifting of the suspension of trading of its securities. The admission of claims of creditors to participate in the Creditors Trust is adjudicated by the Deed Administrator. Distributions from the Creditors Trust will only be to admitted claims at a time to be determined by the administrator in accordance with the terms of the Deed and of the Creditors Trust. The administrator has excluded the claims of Mutual Holdings Pty Ltd and Corporate Admin Services Pty Ltd, and also of Haramont Pty Ltd to the extent that Haramont’s claim relates to the assignment of the debt from Mutual Holdings Pty Ltd and any interest accrued thereon. All creditors that have been excluded have disputed the decision of the administrator, with Mutual Holdings and Corporate Admin Services commencing proceedings to have the decision reviewed.

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DIRECTORS’ REPORT



During the period that the Deed and the Creditors Trust are in effect, the management of the Company is conducted by the Directors subject to the terms of the Deed, which include that the Directors are required to act in the best interests of the creditors. On 21 August 2014, the Company surrendered the tenement E57/550 known as Victory Bore. The tenement was due for renewal on 22 August 2014 and required significant expenditure to be incurred prior to the renewal date in order to apply for a conversion to a retention licence. As the Company had been returned to the Directors’ control from the voluntary administration on 18 August 2014, there was insufficient time or available funds to pursue an application for the conversion of status of the tenement, the outcome of which, notwithstanding, is uncertain. Mr Stuart Third was appointed Alternate Director for Mr Paul Piercy and Mr Ian Crawford was appointed Alternate Director for Dr Dennis Gee in October 2014. Except for the above, no matters or circumstances have arisen since the end of the financial year, that have significantly affected, or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

Subject to the implementation of a satisfactory recapitalisation proposal, the Company intends to continue its current activities, in particular project generation and evaluation thereof, in the mid-west region of Western Australia as well as continue to look for other appropriate investment opportunities.

LIKELY DEVELOPMENTS AND FUTURE RESULTS

Other than as referred to in the Review of Operations, further information as to likely developments in the operations of the Consolidated Entity would, in the opinion of the directors, be speculative and may hinder the Consolidated Entity in the achievement of its commercial objectives.

OPTIONS

At the date of this report the Company had 35,000,000 (2013: 35,000,000) options which were outstanding. Refer to Note 19 of the financial statements for further details of the options outstanding. During the year no options (2013: 25,000,000) were issued and no options (2013: 32,000,000) lapsed. During, and since the end of, the financial year, no fully paid ordinary shares were issued by virtue of the exercise of options (2013: Nil). None of the options on issue entitle the holder to participate in any share issue of the Company or any other body corporate.

REMUNERATION REPORT (AUDITED) This report details the nature and amount of remuneration for Directors and Key Management Personnel of Quest Minerals Limited.

Remuneration policy The remuneration policy of Quest Minerals Limited has been designed to align Director objectives with Shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives. The Board of Quest Minerals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best Executives and Directors to run and manage the Company as well as create goal congruence between Directors and Shareholders.

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DIRECTORS’ REPORT



The Board’s policy for determining the nature and amount of remuneration for Board members is as follows:

The remuneration policy, setting the terms and conditions for an Executive Director was developed by the Board. The Board reviews Executive packages annually by reference to the Company’s performance, Executive performances and comparable information from industry sectors and other listed companies in similar industries. The Board policy is to remunerate Non-executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the Non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-executive Directors is subject to approval by Shareholders at the Annual General Meeting. Fees for Non-executive Directors are not linked to the performance of the Company. The full Board reviews recommendations on Remuneration packages and other terms of employment for Executive Directors and other senior Executives. Remuneration packages are set at levels that reflect the nature of the Company’s operations and resources.

Remuneration for work outside that ordinarily performed by of Non-executive Directors from time to time is determined by the Board.

Nomination and Remuneration Committee

The Board is responsible for establishing the Company’s remuneration policies and practices and to ensure they match the group’s objectives. The Company’s Board proposed the Managing Director’s total remuneration package and is responsible for reviewing the non-executive remuneration. The Board is of the opinion that given the size and circumstances of the Company, the functions of the Remuneration Committee are more readily attended to by the Board than a separate committee. The Board did not engage any remuneration consultants during the period.

Non-executive Director and executive remuneration

The remuneration of non-executive directors may not exceed in aggregate in any financial year the amount fixed by the Company. Currently the non-executive directors are remunerated by way of director fees which have been set at $40,000 p.a. for the non-executive Chairman and $30,000 for the non-executive directors, amounts considered reasonable for a company of its size and operational activity. The remuneration of all officers of the Company was suspended whilst the Company was under voluntary administration. Since the return of control of the Company to the Directors on 18 August 2014, the Directors have resolved to reduce directors’ fees and to suspend payment of same pending recapitalisation of the Company, at which time the amounts accrued since that date will become payable.

Details of Executives – Service agreement

Jerome Vitale Managing Director

Remuneration and other terms of employment for Mr Vitale were suspended on the appointment of the voluntary administrator on 9 May 2014. The terms of engagement until that date were formalised in a service agreement with Mr Vitale and his private company Haramont Pty Ltd (Haramont) as detailed below:

• Term of agreement – Commencing on 22 April 2013 for an initial term of twelve (12) months and may be extended by mutual agreement by the parties on an annual basis at the anniversary date. In the event that the Company does not wish to extend the initial term or any subsequent anniversary date, it must provide a minimum of 3 months written noticed before the anniversary date. Failure to provide such notice will be

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deemed to be an automatic extension of the term by a period of twelve (12) months from the anniversary date (no notice was provided by the Company and the automatic extension of the agreement took effect on 22 April 2014);

• Base remuneration of $12,500 per month plus superannuation, standard entitlements and a cash bonus at the discretion of the Board based short and long term key performance criteria to be set by the Board on an annual basis.

• The base remuneration is subject to a rise and fall clause that allows for additional utilisation of Mr Vitale’s time as dictated by project development requirements and the level of complexity and size of the company’s operations, up to a maximum of $25,000 per month.

• Offered 30 million performance rights with annual expiry dates between 30 April 2015 and 30 April 2017,

subject to the market capitalisation of the Company (calculated on the closing price of the Company’s shares as traded on the Australian Securities Exchange (ASX) for 10 consecutive trading days) achieving stated targets as follows:

• Market capitalisation $25.0 million – 10 million performance rights



• Under the service agreement, the issue of the performance rights is subject to the approval of shareholders at the next General Meeting to be held after the 2013 Annual General Meeting. As a result of the Company going into administration and the suspension of the contract, the Directors do not intend to seek approval for the issue of the performance rights at this time.

• Mr Vitale’s key short term and long term performance criteria will be determined by the Board of Directors from time to time but at least annually. In the first year, or if not met within the first anniversary then as soon as practicable thereafter, the key performance objectives are:

• to secure a suitable joint venture partner for the Perenjori Iron Ore Project on terms that are acceptable to the Board, including the re-imbursement of historical costs on the project expended by the Company. If this objective is met Mr Vitale will be entitled to a bonus equivalent to one year’s remuneration plus applicable superannuation calculated at the statutory rate calculated at the average annualized rate applicable in the three months immediately preceding the date on which this key performance criterion is met.

and

• to complete the recapitalization of the Company through a capital raising of which a minimum ‘new cash’ (i.e. excluding any off-set against existing debt owed by the Company to any third party) component is to be a cumulative $1.6 million. If this objective is met, Mr Vitale will be entitled to a bonus of $100,000 payable within 14 days of completion

• In the event there is a material change to Mr Vitale’s role or seniority, scope of duties, responsibilities, or remuneration which is not agreed, he will be paid a sum equivalent to 12 months’ remuneration calculated at the average annualised rate applicable in the three months immediately preceding the date of the material change termination plus any accrued benefits and any bonus to which he is entitled.

• If, after a probationary period of six (6) months commencing on 22 April 2013, the Agreement is terminated by the Company for any reason other than the insolvency of Haramont or material breaches of duty, Mr Vitale will be paid a sum equivalent to the lesser of (a) 12 months’ remuneration calculated at the average annualized rate applicable in the three months immediately preceding the date of termination plus any accrued benefits and any bonus to which he is entitled and (b) the maximum amount which the Company may pay in accordance with ASX Listing Rule 10.19. The payment will become due and payable within 14 days of the date of termination.

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Amounts were accrued under the agreement until 9 May 2014 when the agreement was suspended by the voluntary administrator and the amounts that were unpaid as at that date are subject to the Deed of Company Arrangement and Creditors’ Trust.

Reward for Performance

During the year there was no reward for the performance component of any remuneration package.

Key Management Personnel (KMP) Positions P Piercy Non-executive Chairman: appointed 22 April 2013. JG Vitale Executive (Managing) Director: appointed 22 April 2013. D Gee Non-Executive Director: appointed as Non-Executive Director on 15 June 2010, appointed as

Executive Director on 18 September 2012 and Non-Executive Director from 20 December 2012. S Third Alternate Director (for P Piercy): appointed 10 October 2014 I Crawford Alternate Director (for D Gee): appointed 21 October 2014

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DIRECTORS’ REPORT



Remuneration report (cont’d)

Remuneration of Directors and Key Management Personnel

1 These amounts include amounts owing as at 9 May 2014, which are subject to the Deed of Company Arrangement and Creditors’ Trust and remain unpaid at the date of this report 2 Remuneration for Mr Third was for all professional services provided as a related party and in his role as the Company’s secretary – no fees were paid or are due and payable in respect to his appointment as Alternate Director for Mr Piercy

Short-term employee benefits

Post-employment

benefits

Share-based

payment

Salary & fees

$

Profit share

& bonus

$

Non-

monetary

$

Superannuation

$

Equity-settled

Total

$

Proportion of

remuneration -

performance

related (%)

Value of

options as

proportion of

remuneration

(%)

Shares

$

Options

$

2014

Paul Piercy 48,4381 - - 5,180 - - 53,618 - -

Jerome Vitale 262,5001 - - 24,281 - - 286,781 - -

Dennis Gee 52,9251 - - - - - 52,925 - -

Stuart Third -2 - - - - - - - -

Ian Crawford - - - - - - - - -

Total 2014 363,863 - - 29,461 - - 393,324 - -

2013

Paul Piercy 7,562 - - - - - 7,562 - -

Jerome Vitale 52,083 - - 4,688 - - 56,771 - -

Dennis Gee 78,750 - - - - - 78,750 - -

Alan Winduss 49,167 - - - - - 49,167 - -

Lewis Tyndall 13,859 - - - - - 13,859 - -

Chris Barker 7,500 - - - - - 7,500 - -

Robert Molkenthin 10,135 - - - - - 10,135 - -

Total 2013 219,056 - - 4,688 - - 223,744 - - For

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DIRECTORS’ REPORT


Quest Minerals Limited and its controlled entities

Options granted as part of remuneration During the year, no options were granted as part of remuneration.

Amounts payable to KMP Upon appointment of the voluntary administrator on 9 May 2014, amounts owing to KMP or their related entities for remuneration and included in the table above were as follows: $ Paul Piercy 14,725 Jerome Vitale 46,675 Dennis Gee 30,244 Stuart Third 64,970 These amounts are included with other creditors of the Company and are subject to the terms of the Deed of Company Arrangement and Creditors’ Trust that was entered into by creditors on 18 August 2014.

DIRECTORS’ INTERESTS

Equity Investments

All options refer to options over ordinary shares of Quest Minerals Limited, which are exercisable on a one-for-one basis.

Options and rights over equity investments granted as compensation.

During the financial year no options over unissued shares in Quest Minerals Limited were granted to directors, employees and consultants as part of their remuneration. In 2013, the Company agreed, subject to shareholder approval which is yet to be obtained, to grant 30 million performance rights to Mr Vitale. During the financial year, there were no options over unissued shares in Quest Minerals Limited granted to the directors, employees or consultants as part of their remuneration that expired.

KMP Options and Rights Holdings

The number of options over ordinary shares held by each KMP of the Company during the financial year is as follows:

30 June

2014

Balance at start of year

Commencing office

Granted as remuneration during the year

Acquired during the

year

Expired during the

year

Cancelled during the

year Ceasing office

Balance at end of year

P Piercy - - - - - - - -

JG Vitale - - - - - - - -

D Gee - - - - - - - -

S Third - - - - - - - -

I Crawford - - - - - - - -

- - - - - - - -

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30 June

2013


Commencing office

Granted as remuneration during the year

Acquired during the

year

Expired during the

year

Cancelled during the

year Ceasing office


P Piercy - - - - - - - -

JG Vitale - - - - - - - -

A Winduss - - - - - - - -

L Tyndall - - - - - - - -

D Gee - - - - - - - -

C Barker - - - - - - - -

- - - - - - - -

KMP shareholdings

The number of ordinary shares in the Company held by each KMP of the Company during the financial year is as follows:

30 June 2014


Commencing Office

Issued during the year

Purchased/(sold) during the year

Ceasing Office


P Piercy - - - - - -

JG Vitale - - - 100 - 100

D Gee 775,080 - - - - 775,080

S Third - 472,500 - - - 472,500

I Crawford - - - - - -

775,080 472,500 - 100 - 1,247,680

30 June 2013


Commencing Office

Issued during the year

Purchased/(sold) during the year

Ceasing Office


P Piercy - - - - - -

JG Vitale - - - - - -

A Winduss 398,796 - - - (398,796) -

L Tyndall 11,689 - - - (11,689) -

D Gee 775,080 - - - - 775,080

C Barker - - - - - -

R Molkenthin - - - - - -

1,185,565 - - - (410,485) 775,080

OTHER CONTRACTS AND TRANSACTIONS WITH KMP

a. Commercial services agreement

– Winduss & Associates Pty Ltd

The Company receives company secretarial, accounting and bookkeeping services from Winduss & Associates Pty Ltd, an accounting practice of which Mr Stuart Third is a director and shareholder. Fees charged are at normal commercial rates and conditions. The amount of fees paid or accrued to 30 June 2014 for accounting, bookkeeping and secretarial services is $71,015 (2013: $119,723). The amount owing to Winduss & Associates Pty Ltd at 30 June 2014 is $64,970 (2013: $44,384).

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DIRECTORS’ REPORT



b. Deed of acknowledgement and release

– Haramont Pty Limited

The Company and Haramont Pty Limited (an entity controlled by Mr Jerome (Gino) Vitale are parties to a deed of acknowledgment and release dated 30 September 2013. Under the agreement and with effect from 30 June 2013, the Company and Haramont compromised a liability of $812,915 plus interest claimed by Haramont from the Company for $175,000. The circumstances surrounding the liability and the Company’s payment obligations relate to the assignment of debt by Mutual Holdings Pty Ltd to Haramont. The independent directors considered the compromise to be reasonable in the circumstances as if the Company and Haramont were dealing at arm’s length, so that shareholder approval was not required for the purposes of Chapter 2E of the Corporations Act. The requirements of the deed of acknowledgement were not met and the Company was served notice stating that the compromise was no longer in effect. As such, the liability to Haramont at balance date was restored to the principal amount of $812,915 plus interest accrued of $102,360. This claim will be subject to the adjudication of the Administrator in the same manner as the claims of the other creditors that were in existence on 9 May 2014. The administrator has advised that the debt has been rejected for inclusion in the Creditors’ Trust, and that Haramont has disputed the decision to exclude the debt. Further information is provided in Note 27 to the Financial Statements for the year ended 30 June 2014.

ADOPTION OF PREVIOUS REMUNERATION REPORT At the 2013 Annual General Meeting of the Company, 87.78% of shareholders who were eligible to and did cast a vote in relation to the remuneration report cast a vote in favour of adopting the remuneration report for the year ended 30 June 2013.

END OF REMUNERATION REPORT (AUDITED)

DIRECTORS’ MEETINGS

The number of Directors’ meetings held in the year and the number of meetings attended by each Director during the year were as follows:

Directors’ Meetings

Nomination and Remuneration

Committee

No. of meetings held while in office

Meetings attended

No. of meetings held while in office

Meetings attended

P. Piercy 9 9 - -

J. Vitale 9 9 - -

D. Gee 9 9 - -

S. Third (Alternate) - - - -

I. Crawford (Alternate) - - - - As at the date of this report, the Consolidated Entity did not have an audit committee, as the directors believe the size of the Consolidated Entity and the size of the Board do not currently warrant its existence. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

During the financial year, the Consolidated Entity paid premiums totalling $9,680 (2013: $15,800) in respect of a contract insuring all the directors of the Company against a liability incurred in their role as directors of the consolidated entity, except where:

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DIRECTORS’ REPORT



• the liability arises out of conduct involving a wilful breach of duty;

• there has been a contravention of the relevant sections of the Corporations Act;

• the conduct involves trading whilst insolvent;

• the conduct involves an operation carried on outside Australia.

On 6 May 2013, Indemnification Agreements were signed with Paul Piercy, Jerome Vitale and Dennis Gee as Directors of the Company and Stuart Third as Company Secretary providing indemnification as officers of the Company against any claim brought against the officers whilst performing their respective duties. There has been no agreements entered into or premiums for insurance paid in respect of providing indemnity to the auditors.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of the Company support and have adhered to the principles of Corporate Governance as outlined in the Corporate Governance Statement.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Company’s exploration operations are subject to environmental regulations under Commonwealth and State legislation. The Directors believe that the Company has adequate systems in place for the management of the requirements under those regulations, and are not aware of any breach of such requirements as they apply to the Company.

PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year.

AUDITOR INDEPENDENCE A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001, is set out on the following page and forms part of the Directors’ report.

NON-AUDIT SERVICES

There were no non-audit services provided by the external auditors during the financial year. SIGNED in accordance with a resolution of the directors

Paul Piercy Chairman Perth, 28 January 2015

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Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the

context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm

is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and

are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its

Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

Page 20 of 75

Level 1

10 Kings Park Road

West Perth WA 6005

Correspondence to:

PO Box 570

West Perth WA 6872

T +61 8 9480 2000

F +61 8 9322 7787

E [email protected]

W www.grantthornton.com.au

Auditor’s Independence Declaration

To the Directors of Quest Minerals Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead

auditor for the audit of Quest Minerals Limited for the year ended 30 June 2014, I declare

that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act

2001 in relation to the audit; and

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

audit.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

J W Vibert

Partner - Audit & Assurance

Perth, 28 January 2015

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2014



Note 2014 2013

$ $

Continuing operations

Other income from ordinary activities

Other revenue 3 302,900 247

Financial income 3 2,989 3,170

Gain on write down of liabilities 3 - 2,557,779

Total other income 305,889 2,561,196

Expenses from ordinary activities

Depreciation 4,14 (3,570) (6,651)

Loss on disposal of Plant and Equipment (6,588) -

Finance expenses 4 (285,989) (6,640)

Professional fees 4 (927,879) (961,276) Exploration and evaluation expenditure written off

12

(1,109,023) (36,335)

Impairment of exploration and evaluation expenditure

12

(24,642) (5,433,860)

Administrative expenses (167,294) (265,821)

Expenses of Voluntary Administration (79,898) -

Reinstatement of Liabilities 27 (857,158) -

Total Expenses (3,462,041) (6,710,583)

Loss from ordinary activities before income tax expense

(3,156,152) (4,149,387)

Income tax expense 5 - -

Loss from continuing operations (3,156,152) (4,149,387)

Other comprehensive income

Total other comprehensive income, net of tax - -

Total comprehensive loss for the year (3,156,152) (4,149,387)

Earnings per share

Basic loss per share (cents per share) 8 0.53 0.81 Diluted loss per share (cents per share)

8

0.53 0.81

The above statement of profit or loss and other comprehensive income should be read in conjunction with

the accompanying notes.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014



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

Note 2014 2013

$ $

ASSETS

Current assets

Cash and cash equivalents 9 306,983 382,355

Trade and other receivable 10 21,916 15,314

Other current asset 11 - 15,459

Total current assets 328,899 413,128

Non-current assets

Property, plant and equipment 14 - 10,158

Exploration and evaluation expenditure 12 - 1,011,314

Total non-current assets - 1,021,472

TOTAL ASSETS 328,899 1,434,600

LIABILITIES

Current liabilities

Trade and other payables 15 1,036,137 280,331

Short term provisions 18 - -

Borrowings 16 2,012,915 879,118

Total current liabilities 3,049,052 1,159,449

TOTAL LIABILITIES 3,049,052 1,159,449

NET (LIABILITIES)/ASSETS (2,720,153) 275,151

EQUITY

Contributed equity 19(a) 92,202,237 92,041,389

Reserves 19(e) 1,356,900 1,356,900

Accumulated losses (96,279,290) (93,123,138)

TOTAL EQUITY/(DEFICIENCY) (2,720,153) 275,151 For

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY




Contributed

Equity

Accumulated

Losses

Share

Option

Reserve

Total

Equity/

(Deficiency)

$ $ $ $

Balance at 1 July 2012 90,925,446 (88,973,751) 1,356,900 3,308,595

Total comprehensive loss for the year - (4,149,387) - (4,149,387)

Shares issued during the year 1,200,500 - - 1,200,500

Share issue costs (84,557) - - (84,557)

Balance at 30 June 2013 92,041,389 (93,123,138) 1,356,900 275,151

Balance at 1 July 2013 92,041,389 (93,123,138) 1,356,900 275,151

Total comprehensive loss for the year - (3,156,152) - (3,156,152)

Shares issued during the year 218,500 - - 218,500

Share issue costs (57,652) - - (57,652)

Balance at 30 June 2014 92,202,237 (96,279,290) 1,356,900 (2,720,153)

The above statement of changes in equity should be read in conjunction with the accompanying notes.

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CONSOLIDATED STATEMENT OF CASH FLOW




Note 2014 2013

$

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers - 319

Interest received 2,989 3,170

Other revenue 302,900 247

Finance expenses (151) (750)

Payment to suppliers and employees (716,301) (928,064)

Foreign exchange loss - (192)

Receipts from Taxation 812 -

Net cash used in operating activities 23 (409,751) (925,270)

CASH FLOWS FROM INVESTING ACTIVITIES

Exploration and evaluation expenditures 12 (122,351) (375,309)

Net cash used in investing activities (122,351) (375,309)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of ordinary shares 218,500 480,500

Proceeds from issue of debentures 300,000 700,000

Share issue expenses (57,652) (84,557)

Repayment of borrowings (4,118) (22,500)

Net cash provided by financing activities 456,730 1,073,443

Net (decrease) in cash held (75,372) (227,136)

Cash and cash equivalents at the beginning of

financial year 382,355 609,491

Cash and cash equivalents at the end of financial

year

9 306,983 382,355

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

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014



NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This financial report includes the financial statements and notes of Quest Minerals Limited (“the Company”) and its Controlled Entities (“the Group”). The separate financial statements of the Parent Entity, Quest Minerals Limited, have not been presented within this financial report as permitted by the Corporations Act 2001.

The financial statements were authorised for issue on 28 January 2015 by the Directors of the Company.

Basis of preparation

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

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise.

Except for cash flow information, the financial statements have been prepared on an accruals basis

and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

a. Principles of consolidation

The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2014. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total

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comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.

b. Income tax

The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

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

Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

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

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

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

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

c. Plant and equipment

Each class of plant and equipment is carried at cost less any accumulated depreciation and impairment losses.

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Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(g) for details of impairment).

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in the profit or loss during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land and leasehold improvements, is depreciated on a prime cost basis over the asset’s useful life to the Company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated on a straight line basis over the estimated useful lives of the improvements.

The depreciation rates used for the depreciable assets are:

Class of fixed asset Depreciation rate

Furniture & fittings 10%

Computer equipment 25%

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the carrying amount of the asset is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the profit or loss. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

d. Exploration, evaluation and development expenditure

Exploration, evaluation and development expenditures incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

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Accumulated costs in relation to an abandoned area are written off in full in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest.

Costs of site restoration are provided over the life of the project from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with local laws and regulations and clauses of the permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

e. Lease

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the consolidated group, are classified as finance leases.

Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term.

f. Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

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Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Finance instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method, or cost.

Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method.

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

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense item in profit or loss.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments.

i) Financial assets at fair value through profit or loss

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

ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to

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hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

iv) Available-for-sale financial assets

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

They are subsequently measured at fair value with any remeasurements other than impairment losses and foreign exchange gains and losses recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss.

Available-for-sale financial assets are classified as non-current assets when they are expected to be sold after 12 months from the end of the reporting period. All other available-for-sale financial assets are classified as current assets.

v) Financial Liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

Fair values

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

Impairment

At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s).

In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.

In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or

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other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.

For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account

When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Company recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered.

Financial guarantees

Where material, financial guarantees issued that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due are recognised as a financial liability at fair value on initial recognition.

The fair value of financial guarantee contracts has been assessed using a probability-weighted discounted cash flow approach. The probability has been based on:

- the likelihood of the guaranteed party defaulting during the next reporting period;

- the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and

- the maximum loss exposure if the guaranteed party were to default.

Financial guarantees are subsequently measured at the higher of the best estimate of the obligation in accordance with AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118.

Derecognition

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

g. Impairment of non-current assets

At the end of each reporting period, the Group assesses whether there is any indication that a non-current asset may be impaired. The assessment will include the consideration of external

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and internal sources of information, including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.

Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

h. Foreign currency transactions and balances

Functional and presentation currency

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

Transactions and balances

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

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss.

Group companies

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

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

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

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- retained earnings are translated at the exchange rates prevailing at the date of the

transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in profit or loss in the period in which the operation is disposed of.

i. Contributed equity

Issued and paid up-capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

j. Employee benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy any vesting requirements. Those cash flows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows attributable to employee benefits.

Equity-settled compensation

The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions)

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a pricing model which incorporates all market vesting conditions.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (market conditions) if applicable.

The cost of equity-based transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these

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conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If any equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

k. Provisions

Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

l. Cash and cash equivalents

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

m. Revenue and other income

Revenue is measured at the fair value of the consideration received or receivable after taking into account any discounts and rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.

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Interest revenue is recognised using the effective interest rate method.

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at reporting date and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.

Recognition of revenue from research and development concessions available to the Company has been adopted on a receipts basis due to the inherent uncertainty of the receipt of the concession each year.

All revenue is stated net of the amount of goods and services tax.

n. Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

o. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.

p. Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

Where the Group has retrospectively applied an accounting policy, made a retrospective restatement of items in the financial statements or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed.

q. Critical accounting estimates and judgments

The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

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Key estimates

Impairment – general

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. If such an indication exists, the recoverable amounts of relevant assets, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expenses to the statement of profit or loss and other comprehensive income. A review of the Group’s carrying amounts for its exploration assets has resulted in an impairment loss of $24,642 (2013: $5,433,860) being recorded.

r. Earnings per Share

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

Diluted earnings per share is calculated as net loss attributable to members of the Company, adjusted for:

- costs of servicing equity (other than 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 of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

s. Share-based payments

Equity settled transactions:

Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

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t. New and Revised Accounting Standards that are effective for these financial statements

A number of new and revised accounting standards are effective for annual periods commencing on 1 July 2013. Information on these new standards is presented below:

- AASB 10 Consolidated Financial Statements supersedes AASB127 Consolidated and Separate Financial Statements and AASB Interpretation 112 Consolidation – Special Purpose Entities. AASB 10 establishes a revised control model that applies to all entities and provides extensive new guidance on its application. The revised control model broadens the situations when an entity is considered to be controlled by another entity which has the potential to affect which of the Group’s investees are considered to be subsidiaries and therefore to change the scope of consolidation. The requirements on consolidation procedures, accounting for changes in non-controlling interests and accounting for loss of control of a subsidiary have not changed. Management has reviewed its control assessment in accordance with AASB10 and has concluded that there is no effect on the classification (as subsidiaries or otherwise) of any of the Group’s investees held during the period or comparative period covered by these financial statements. - AASB 11 Joint Arrangements AASB 11 supersedes AASB 131 Interests in Joint Ventures and AASB Interpretation 113 Jointly- controlled Entities – Non-monetary Contributions by Ventures. AASB 11 revises the categories of joint arrangement, and the criteria for classification into the categories, with the objective of more closely aligning the accounting with the investor’s rights and obligations relating to the arrangement. In addition, AASB 131’s option of using proportionate consolidation for arrangements classified as jointly controlled entities under that Standard has been eliminated. AASB 11 now requires the use of the equity method for arrangements classified as joint ventures (as for investments in associates). The Group did not have any joint arrangements within the scope of AASB 11. Management has concluded that there is no effect on the financial statements upon adopting AASB 11.

- AASB 12 Disclosure of Interests in Other Entities AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities. Management has reviewed the interests held in other entities in accordance with the revised standard.

- Consequential amendments to AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures. As a consequence of issuing AASB 10, AASB 11 and AASB 12, revised versions of AASB 127 and AASB 128 have also been issued. AASB 127 now only deals with separate financial statements. AASB 128’s equity accounting methodology remains unchanged.

- AASB 13 Fair Value Measurement clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It does not affect which items are required to be fair-valued. The scope of AASB 13 is broad and it applies for both financial and non-financial items for which other Australian Accounting Standards require or permit fair value measurements or disclosures about fair value measurements, except in certain circumstances.

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AASB 13 applies prospectively for annual periods beginning on or after 1 January 2013. Its disclosure requirements need not be applied to comparative information in the first year of application.

The Group has applied AASB 13 for the first time in the current year.

- AASB 119 Employee Benefits was amended making a number of changes to the accounting for employee benefits, the most significant relating to defined benefit plans. The amendments:

• Eliminate the ‘corridor method’ and requires the recognition of re-measurements (including actuarial gains and losses) arising in the reporting period in other comprehensive income;

• Change the measurement and presentation of certain components of the defined benefit cost. The net amount in profit or loss is affected by the removal of the expected return on plan assets and interest cost components and their replacement by a net interest expense or income based on the net defined benefit asset or liability; and

• Enhance disclosures, including more information about the characteristics of defined benefit plans and related risks.

Under the amendments, employee benefits ‘expected to be settled wholly’ (as opposed to ‘due to be settled’ under the superseded version of AASB 119) within 12 months after the end of the reporting period are short-term benefits, and are therefore not discounted when calculating leave liabilities. This change has had no impact on the presentation of annual leave as a current liability in accordance with AASB 101 Presentation of Financial Statements as the Company presently has no employees.

u. New accounting standards for application in future periods

The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting period, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the group but applicable in future reporting periods is set out below: - AASB 9: Financial Instruments and associated Amending Standards (applicable for annual reporting periods commencing on or after 1 January 2018). The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes made to the Standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change its hedge policies in line with the new hedge

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accounting requirements of AASB 9, the application of such accounting would be largely prospective. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group's financial instruments, including hedging activity, it is impracticable at this stage to provide a reasonable estimate of such impact. -AASB 2012-3: Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities (applicable for annual reporting periods commencing on or after 1 January 2014).This Standard provides clarifying guidance relating to the offsetting of financial instruments, which is not expected to impact the Group's financial statements. - Interpretation 21: Levies (applicable for annual reporting periods commencing on or after 1 January 2014). Interpretation 21 clarifies the circumstances under which a liability to pay a levy imposed by a government should be recognised, and whether that liability should be recognised in full at a specific date or progressively over a period of time. This Interpretation is not expected to significantly impact the Group's financial statements. - AASB 2013-3: Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets (applicable for annual reporting periods commencing on or after 1 January 2014). This Standard amends the disclosure requirements in AASB 136: Impairment of Assets pertaining to the use of fair value in impairment assessment and is not expected to significantly impact the Group's financial statements. - AASB 2013-4: Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of Hedge Accounting (applicable for annual reporting periods commencing on or after 1 January 2014). AASB 2013-4 makes amendments to AASB 139: Financial Instruments: Recognition and Measurement to permit the continuation of hedge accounting in circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. This Standard is not expected to significantly impact the Group's financial statements. - AASB 2013-5: Amendments to Australian Accounting Standards - Investment Entities (applicable for annual reporting periods commencing on or after 1 January 2014). AASB 2013-5 amends AASB 10: Consolidated Financial Statements to define an "investment entity" and requires, with limited exceptions, that the subsidiaries of such entities be accounted for at fair value through profit or loss in accordance with AASB 9 and not be consolidated. Additional disclosures are also required. As neither the parent nor its subsidiaries meet the definition of an investment entity, this Standard is not expected to significantly impact the Group's financial statements. - AASB 2013-7 Amendments to AASB 1038 arising from AASB 10 in relation to Consolidation and Interests of Policyholders (applicable for annual reporting periods commencing on or after 1 January 2014). AASB 2013-7 removes the specific requirements in relation to consolidation from AASB 1038 Life Insurance Contracts, which leaves AASB 10 Consolidated Financial Statements as the sole source for consolidation requirements applicable to life insurer entities. - AASB 1031 Materiality (December 2013) AASB 1031 Materiality (July 2004, as amended) (applicable for annual reporting periods commencing on or after 1 January 2014). The revised AASB 1031 is an interim standard that cross-references to other Standards and the

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Framework for the Preparation and Presentation of Financial Statements (issued December 2013) that contain guidance on materiality. The AASB is progressively removing references to AASB 1031 in all Standards and Interpretations, and once all these references have been removed, AASB 1031 will be withdrawn. - AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments (Part B: Materiality) (applicable for annual reporting periods commencing on or after 1 January 2014). Part B of AASB 2013-9 deletes references to AASB 1031 in various Australian Accounting Standards (including Interpretations). - IFRS 15 Revenue from Contracts with Customers has been issued by the IASB but not yet by the AASB. IFRS 15 will replace IAS 18 Revenue, IAS 11 Construction Contracts and some revenue related Interpretations, establish a new control based revenue recognition model, change the basis for deciding whether revenue is to be recognised over time or at a point in time, provide new and more detailed guidance on specific topics (such as multiple element arrangements, variable pricing, rights of return) and expand and improve disclosures and revenue. The AASB is expected to issue the equivalent Australian standard with a new Exposure Draft. The Group has not yet assessed the full impact of this Standard.

v. Going concern

The financial report has been prepared on a going concern basis, which contemplates the continuity of the normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.

For the year ended 30 June 2014, the Group incurred an operating loss of $3,156,152 (2013: $4,149,387) and an operating cash outflow of $409,751 (2013: $925,270). As at 30 June 2014, the Group had a net current asset deficiency of $2,720,153 (2013: $746,321). During the period and up to the date of this report, the Directors have taken steps to ensure that the Company and the Consolidated Entity continue as going concerns. These steps included entering into discussions with prospective lead managers and underwriters with a view to:

i) making a placement of shares to sophisticated investors accordance with ASX Listing Rule 7.1 under which the Company may issue up to 15% of its present number of shares on issue, the purpose of which is to raise working capital; and

ii) making a pro rata entitlements issue offer to shareholders for the purpose of raising

capital to further develop its exploration interests in the Perenjori project, provide working capital to cover administration costs and to repay $875,000 in outstanding Debenture Notes and financial obligations, and for general working capital.

The farm-in agreement for the Perenjori Iron Ore Project was terminated by the owners of the tenements on 30 April 2014. On 9 May 2014, the Directors appointed an administrator to the Company after the termination of the farm-in agreement due to the inability of the Company to meet the requirements of expenditure under the agreement and the continued suspension from quotation of the Company leading to the withdrawal of the rights issue. The Company remained in administration until 18 August 2014 at which time a Deed of Company Arrangement was entered into with the creditors of the Company and a Creditors’ Trust formed under the control of the administrator. The administrator has the ability to exclude

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liabilities from the Creditors’ Trust, and has advised Mutual Holdings Pty Ltd and Corporate Admin Services Pty Ltd of his decision to exclude their liabilities from the Trust and also Haramont Pty Ltd of his decision to exclude its claim to the extent that it relates to the assignment of debt from Mutual Holdings and any interest accrued thereon. All excluded creditors have disputed the decision of the administrator and served notice on the administrator to that effect. Control of the Company returned to the Directors on 18 August 2014, and negotiations with parties interested in recapitalising the Company have continued pending re-quotation of the Company’s shares by ASX.

In addition, the ability of the Company and the Group to continue as a going concern and to pay their debts as and when they fall due is dependent on the following:

i) the ability of the Company and Group to secure additional funding through either the issue of new shares, convertible notes, debt or a combination of all these to further explore and develop its exploration assets. The form and value of such raisings is yet to be determined;

ii) ongoing management of the quantum and timing of discretionary exploration

expenditure in line with the Company’s available funds;

The Directors have reviewed the general business outlook and the circumstances of the Company and the Group including the matters associated with being able to meet the requirements of the ASX to lift the suspension of trading in its securities and to be able to subsequently raise sufficient capital to maintain the operations of the Company. The Directors have also negotiated with professional service providers to undertake services assisting the Company to meet ongoing statutory reporting requirements, the ASX requirements and to raise capital with applicable fees to be deferred and conditional upon completion of a capital raising, at which time the deferred fees shall become payable. Other costs are being met through arrangements with the administrator or funding by Directors and, as such, the Directors are of the opinion that there are therefore reasonable grounds to believe that the Company and the Group will be able to pay their debts as and when they become due and payable, and that the going concern basis of preparation is appropriate for the preparation of the Group’s 2014 financial report.

Notwithstanding this, as a junior explorer with exploration projects and a dependency on the financial markets for its future funding, there is significant uncertainty whether the Company and the Group will be able to continue as going concerns.

Should the Company and the Group be unable to continue as going concerns, they may be required to realise their assets and extinguish liabilities other than in the normal course of business and at amounts different from those stated in the financial report. 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 may be necessary should the Company and the Group be unable to continue as going concerns.

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Note 2014 2013

$ $

NOTE 2: PARENT INFORMATION

The following information has been extracted from the books and records of the parent and has been prepared in accordance with Accounting Standards.

STATEMENT OF FINANCIAL POSITION

ASSETS

Current assets 328,899 413,128

Non-current assets - 1,021,472

TOTAL ASSETS 328,899 1,434,600

LIABILITIES

Current liabilities 3,049,052 1,159,449

TOTAL LIABILITIES 3,049,052 1,159,449

EQUITY

Issued capital 92,202,237 92,041,389

Reserves 1,356,900 1,356,900

Accumulated losses (96,279,290) (93,123,138)

TOTAL EQUITY (2,720,153) 275,151

STATEMENT OF COMPREHENSIVE INCOME

Total loss for the year (3,156,152) (4,149,387)

Guarantees

The Company has not entered into any guarantees, in the current or previous financial year, in relation to the debts of its subsidiaries. Contingent liabilities

Details of contingent liabilities are set out in Note 21.

Contractual commitments

Details of contractual commitments are set out in Note 20. At 30 June 2014, the Company had not entered into any contractual commitments for the acquisition of property, plant and equipment (2013: Nil).

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Note 2014 2013

$ $

NOTE 3: OTHER INCOME

Other revenue - 247

Research and development tax incentive 302,900 -

Gain on write down of liabilities - 2,557,779

Finance income 2,989 3,170

Total other income from ordinary activities 305,889 2,561,196

The gain on write down of liabilities for 30 June 2013 was recognised following a thorough review of the circumstances in which the previously reported obligations came about. Previously reported obligations aggregating to this value were considered to be unenforceable against the Group.

NOTE 4: LOSS FOR THE YEAR

Loss from ordinary activities before income tax expenses has been arrived at after charging the following items:

Professional fees

- Audit fees 58,085 19,500

- Company secretarial fees 31,126 70,254

- Consulting and administration fees 370,549 629,974

- Legal fees 349,459 83,872

- Accounting fees 39,890 56,927

- Share registry fees 78,770 100,749

927,879 961,276

Rental expenses on operating leases

- Minimum lease payments - 86,649

Finance expenses – External 285,989 6,640

Depreciation 3,570 6,651

NOTE 5: INCOME TAX A reconciliation between tax revenue and the product of accounting loss before income tax multiplied by Group’s applicable income tax rate is as follows:

Accounting loss before tax from continuing operations (3,156,152) (4,149,387)

Loss before tax from discontinued operations At the parent entity’s statutory income tax rate of 30% (2013: 30%) (946,846) (1,244,816)

- Other non deductible items - - Unused tax losses and temporary differences

not recognised as deferred tax assets 946,846 1,244,816

Income tax attributable to entity - -

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Net deferred tax assets have not been brought to account, as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. Refer Note 17. NOTE 6: KEY MANAGEMENT PERSONNEL (KMP) COMPENSATION

Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2014.

The totals of remuneration attributable to KMP of the Company during the year are as follows:

Note 2014 2013

$ $

Short-term employee benefits 363,863 219,056

Post-employment benefits 29,461 4,688

Total KMP compensation 393,324 223,744

NOTE 7: AUDITORS’ REMUNERATION

Audit of accounts - Rothsays 27,000 19,500

Audit of accounts – Grant Thornton Audit Pty Ltd 31,085 -

58,085 19,500

With effect from the Annual General Meeting held on 20 December 2013, Rothsays resigned and Grant Thornton Audit Pty Ltd were appointed as auditors of the Company.

NOTE 8: EARNINGS PER SHARE

Earnings used in the calculation of EPS

Loss for the year (3,156,152) (4,149,387)

Number Number

Weighted average number of ordinary shares used

as the denominator in calculating basic EPS 597,506,299 513,117,943

The Company’s 35,000,000 (2013: 35,000,000) options on issue are not considered dilutive and accordingly basic loss per share is the same as diluted loss per share.

NOTE 9: CASH AND CASH EQUIVALENTS

Cash at bank - 382,355

Cash at bank – held by Voluntary Administrator 306,983 -

306,983 382,355

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Note 2014 2013

$ $

NOTE 10: TRADE AND OTHER RECEIVABLES

GST receivable 21,916 14,502

Other receivables - 812

21,986 15,314

As all amounts are short-term, the net carrying value is considered to be a reasonable approximation of fair value.

NOTE 11: OTHER CURRENT ASSETS

Prepayments - 15,459

- 15,459

NOTE 12: EXPLORATION AND EVALUATION EXPENDITURE

Balance at beginning of year 1,011,314 3,069,143

Mining tenement acquired - -

Exploration and evaluation expenditure incurred 122,351 392,366 Payments due under Sale Agreement recognised at 31 December 2012 (refer Note 21) - 3,020,000

Exploration expenditure written off (1,109,023) (36,335)

Impairment adjustment (24,642) (5,433,860)

- 1,011,314

Impairment of Projects and Write-off of Expenditure A review of the capitalised expenditure for each of the projects of the Group was undertaken by the Board in 2013. Given the priorities of the Group and market conditions, a decision was made to write down the carrying values of the Victory Bore project and the Nigerian interests to nil. The Board considered the carrying value of the Perenjori project and determined that the carrying value was justified due to the Company’s intention to continue work and further invest in the project as the key asset of the Company. Under the farm-in agreement for the Perenjori Project (E70/2227 (Feral) and E70/2858 (Alken) the Company had an obligation to spend $2.3 million in aggregate by end of May 2014 to earn an 80% respective interest in the underlying tenements. The Company negotiated with the private syndicate from whom it was earning its interest in the project to extend the term for the farm-in for a period of two years from May 2014. Under the revised agreement, the Company was required to meet the total expenditure target by May 2016, with certain expenditure targets to be met through the extended period, the first of which was due by 30 April 2014. The Company was unable to meet the commitment for 30 April 2014 and the syndicate terminated the agreement. The Company has written off all expenditure associated with the project. In respect of Exploration Licence 50/550 known as the Victory Bore project, after impairment provision the carrying value at 30 June 2013 is nil. The Company was granted an Extension of Term

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with DMP for a further one year for a reduced number of blocks (which contained the reported JORC Inferred Resource) to extend the project to 22 August 2014. Subsequent to year end, the Licence was unable to be further extended and required an application to be converted to a Retention Licence. As the application needed to be lodged prior to expiry on 22 August 2014, and as the Company had been in voluntary administration until 18 August 2014, the Company did not have funding available with which to make the application in time. The Licence was surrendered on 21 August 2014.

NOTE 13: CONTROLLED ENTITIES

Controlled entities consolidated

Country of

incorporation

and Principal

place of

Business Principal Activity

Percentage

owned (%)

Subsidiaries of Quest Minerals Limited 2014 2013

Direct

Victory Bore Pty Ltd Australia

Held Victory Bore tenement – now dormant 100 100

Acacia Mining Pty Ltd Australia Holds P70/1608 tenement 100 100

Mulga Mining Pty Ltd Australia Dormant 100 100

Quest Gold Prospects Pty Ltd Australia Dormant 100 100

Boab Mining Nigeria Ltd Nigeria Holds Nigerian tenements 100 100

Note 2014 2013

$ $

NOTE 14: PROPERTY, PLANT AND EQUIPMENT

Funiture & fittings

At cost - 768

Accumulated depreciation - (428)

- 340

Computer equipment

At cost - 33,127

Accumulated depreciation - (23,309)

- 9,818

- 10,158

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Note 2014 2013

$ $

Movements in carrying amount

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year:

Furniture & fittings

Balance at beginning of the year 490 569

Disposals (490) -

Depreciation expense - (79)

Carrying amount at the end of the year - 490

Computer equipment

Balance at beginning of the year 9,668 16,240

Disposals (6,098) -

Depreciation expense (3,570) (6,572)

Carrying amount at the end of the year - 9,668

- 10,158

NOTE 15: TRADE AND OTHER PAYABLES

Trade payables* 617,340 191,011

Sundry payables and accrued expenses 418,797 89,320

1,036,137 280,331

*Trade payables are non-interest bearing and have normal trade terms of 30 days or less. The carrying value is considered to be a reasonable approximation of fair value.

NOTE 16: BORROWINGS - CURRENT

Loans from others – unsecured1 200,000 4,118

Loans from others – related2 812,915 175,000

Debenture Notes3 1,000,000 700,000

2,012,915 879,118

1 The Group recognised an unsecured debt owing to NatWest Securities Limited (NatWest) of $200,000 in its report for the year ended 30 June 2012 which was derecognised at 30 June 2013 as part of the review undertaken by the Directors. Upon review by the voluntary administrator and advice provided to the administrator, the derecognition of the debt has been reversed. The loan was originally drawn in 2009 repayable in 12 months with interest of 8% per annum. In 2010, the loan was extended for 2 years upon payment of an extension fee and interest payable of 12% per annum. The loan was not called for repayment on its due date and interest continued to be accrued at the rate of 12% per annum.

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2 On 30 September 2013 and with effect from 30 June 2013, the Company entered into a deed of acknowledgement and release with Haramont Pty Limited, an entity controlled by Mr Jerome (Gino) Vitale with respect to a debt assigned by Mutual Holdings Pty Limited to Haramont. Refer Notes 25, 26 and 27. 3 On 21 May 2013, the Company announced that it had secured the financial support of major shareholder Maxillion Limited (Maxillion) and other professional and sophisticated investors via the provision of unsecured Debenture Notes to an aggregate value of $1,000,000 (Notes). Of the total of $1,000,000 in Notes, Maxillion agreed to subscribe to $700,000 which was received during May and June 2013. The balance from the other investors was received in October 2013. The $700,000 notes were originally due for payment on 15 December 2013, but the terms were extended to become payable on 15 December 2014. The further $300,000 Notes were payable on 15 December 2014. All Notes were accruing interest at 10% per annum. As all liabilities are subject to the Deed of Company Arrangement entered into on 18 August 2014 and the Creditors’ Trust, the Company is not able to reliably estimate the amounts for which they will be ultimately settled by the Creditors’ Trust.

Note 2014 2013

$ $

NOTE 17: NON-CURRENT TAX

Deferred tax assets

Deferred tax not brought to accounts, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(b) occur: Losses available for offset against future tax liabilities (at 30%) 5,542,013 4,941,622

Accrued expenses and provisions 199,845 (97,542)

5,741,858 4,844,080

Movement in temporary difference during the year

Temporary differences

30 June

2014

$

Movement

2014

$

1 July 2013

$

Movement

2013

$

1 July 2012

$

Exploration expenditures - 303,394 (303,394) 617,349 (920,743) Other payables and provisions 124,816 98,098 26,718 (2,387) 29,105

Other items - - - - - Capital raising expenses (Section 40-880) 75,029 (104,105) 179,134 14,500 164,634

199,845 297,387 (97,542) 629,462 (727,004)

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

Note 2014 2013

$ $

NOTE 18: PROVISIONS

Current

Employee leave entitlement - -

- -

NOTE 19: ISSUED CAPITAL

a. Issued share capital

625,443,285 fully paid ordinary shares (2013: 541,943,285) 92,159,787 91,986,439 Nil contributing ordinary shares; partly paid to $0.005 (2013: 2,500,000) - 12,500 16,980,000 contributing ordinary shares; partly paid to $0.0025 (2013: 16,980,000) 42,450 42,450

92,202,237 92,041,389

b. Ordinary shares Number Number

At the beginning of the reporting period: 541,943,285 413,637,730

Shares issued during the year

- Shares issued on 22 August 2012 pursuant to a placement at $0.011 each 60,000,000

- Shares issued on 15 October 2012 pursuant to a placement at $0.06 each* 3,000,000

- Shares issued on 2 November 2012 pursuant to a placement at $0.09 each 30,555,555

- Shares issued on 31 December 2012 pursuant to a placement at $0.008 each 24,750,000

- Shares issued on 11 January 2013 pursuant to a placement at $0.006 each 10,000,000

- Shares issued on 31 October 2013 pursuant to a placement at $0.001 each 81,000,000

- Shares issued on 4 November 2013 pursuant to a placement at $0.06 each** 2,500,000

At the end of the reporting period 625,443,285 541,943,285

* 2013 - Issue of Fully Paid Ordinary Shares on final payment of $0.0025 each on 3,000,000 Partly Paid Shares of $0.0575. ** 2014 – Issue of Fully Paid Ordinary Shares on final payment of $0.055 each on 2,500,000 Partly Paid Shares of $0.005.

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Note 2014 2013

c. Contributing shares Number Number

At the beginning of the reporting period: 19,480,000 22,480,000

Shares issued during the year

- Shares converted to fully paid on 15 October 2012 pursuant to a placement at $0.06 each* - (3,000,000)

- Shares converted to fully paid on 4 November 2013 pursuant to a placement at $0.06 each** (2,500,000) -

At the end of the reporting period 16,980,000 19,480,000

* 2013 - Issue of Fully Paid Ordinary Shares on final payment of $0.0025 each on 3,000,000 Partly Paid Shares of $0.0575. ** 2014 – Issue of Fully Paid Ordinary Shares on final payment of $0.055 each on 2,500,000 Partly Paid Shares of $0.005.

Number Number

d. Options over ordinary shares

As at 30 June 2014, there are 35,000,000 (2013: 35,000,000) unissued options on issue over ordinary shares:

Options on issue at beginning of period 35,000,000 42,000,000

Options issued for cash - 25,000,000

Options expired - (32,000,000)

Options on issue at end of period 35,000,000 35,000,000

Options on issue at 30 June 2014:

Date of expiry Exercise price Number Number

29 June 2015 $0.020 10,000,000 10,000,000

03 April 2016 $0.012 25,000,000 25,000,000

35,000,000 35,000,000

Terms and conditions of contributed equity

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. The shares do not have a par value. Contributing ordinary shares Contributing ordinary shares will participate proportionately in any dividends declared to the extent that the contributing ordinary shares are paid or credited as paid. The Directors may deduct from any dividend payable to a member all sums of money presently payable by the member to the Company

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on account of calls. The shareholder has an obligation to make payment of calls made, and where the amounts is not paid, the shareholder remains liable for the amount unpaid and the shares may be forfeited. e. Share Option reserve

Note 2014 2013

$ $

Opening balance 1,356,900 1,356,900

Employee share based payments - -

Transfer to equity - -

Transfer to accumulated losses - -

Issue of options - -

1,356,900 1,356,900

2014

During the year ended 30 June 2014, no options were issued or expired.

2013

During the year ended 30 June 2013, the following options were issued:

• 25,000,000 unlisted options exercisable at 1.2 cents each on or before 4 April 2016

During the year ended 30 June 2013, the following options expired:

• 15,000,000 unlisted options exercisable at 2 cents expired on 30 June 2013



f. Capital management policy The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern, so as to maintain a capital base sufficient to maintain future exploration and development of its 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 through equity to fund its activities. The Group monitors capital on the basis of the gearing ratio. There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting. The Group is not subject to externally imposed capital requirements.

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NOTE 20: CONTRACTUAL AND LEASING COMMITMENTS

a. Operating lease commitments

The Company occupies its business premises on a monthly tenancy. There is no future lease commitment as either the Landlord or the Company may terminate the tenancy by providing one months’ notice to the other party.

b. Employee remuneration commitments

Commitment under employee contract not provided for in the financial statements. Remuneration and other terms of employment for Mr Vitale, Managing Director, were formalised in a Consulting and Service agreement as detailed below:

• term of agreement – 12 months to 22 April 2014 with an option to extend for a further 12 months;

• minimum consulting Fees of $150,000 pa;

• the Agreement may be terminated by either party by the provision of 3 months’ written notice or written resignation by Mr Vitale.

The agreement was suspended upon the appointment of the voluntary administrator on 9 May 2014 and amounts payable under the agreement are subject to the terms of the Deed of Company Arrangement and Creditors’ Trust. Pending recapitalisation of the Company, alternative remuneration arrangements are currently being negotiated, which are intended to apply from 18 August 2014, the date on which control of the Company returned to the Directors. It has been estimated that this may equate to $50,000 over the period to 30 June 2015.

Note 2014 2013

$ $

- not later than 12 months 50,000 121,644

- between 12 months and 5 years - -

- greater than 5 years - -

50,000 121,644

c. Exploration expenditure commitments

In order to maintain current rights of tenure to exploration tenements, the Controlled Entity is required to outlay tenement lease rentals and perform minimum exploration work to meet minimum expenditure requirements specified by various government authorities. These obligations are subject to renegotiation when application for a mining lease is made and at various other times. These obligations are not provided for in the financial report and are payable:

- not later than 12 months 4,489 31,264

- between 12 months and 5 years - 10,486

- greater than 5 years - -

4,489 41,750

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NOTE 21: CONTINGENT LIABILITIES

Deed of Company Arrangement On 18 August 2014, the Company entered into a Deed of Company Arrangement (the Deed) which concluded the voluntary administration period and returned control of the Company to the Directors. As at that date, all creditors associated with the Company prior to that date were bound by the Deed and liabilities owed by the Company, including contingent liabilities, were extinguished pursuant to the terms of the Deed and the associated Creditors’ Trust established by the Deed. Claims previously noted as contingent liabilities in relation to the Administration Service Agreement with Corporate Admin Services Pty Ltd, the Victory Bore tenement with Mutual Holdings Pty Ltd and unsecured loan of Natwest Securities Ltd are now subject to the operation of the Deed and Creditors’ Trust. Mutual Holdings Pty Ltd and Corporate Admin Services Pty Ltd were notified by the administrator that their claims were to be excluded from the Creditors’ Trust and both Mutual Holdings Pty Ltd and Corporate Admin Services Pty Ltd have commenced proceedings to dispute the exclusion of their respective debt amounts from the Creditors’ Trust. Other than the matters detailed above, the Directors are not aware of any further contingent liability as at the date of the financial statements.

NOTE 22: OPERATING SEGMENT

For the year ended 30 June 2014, the Consolidated Entity’s operations were predominantly in the mining exploration sector in Australia.

The Consolidated Entity identified its operating segments based on the internal reports that are reviewed and used by the Directors (the Chief Operating Decision Makers) in assessing performance and in determining the allocation of resources.

The segments identified for reporting are Mining and Exploration, which is identified as the operational activities of the Company attending all matters associated with tenements and projects including exploration and assessment activities, and Corporate, which is identified as all other activities of the Company including capital raising and other financial activities, activities associated with legal matters and other corporate governance issues.

At 30 June 2014

Mining &

exploration Corporate Consolidated

$ $ $

REVENUE

Other revenue - 305,889 305,889

Segment result (1,133,665) (2,022,487) (3,162,152)

ASSETS / LIABILITIES

Asset

Segments assets - 328,899 328,899

Liabilities

Segment liabilities - (3,049,052) (3,049,052)

Net assets - (2,720,153) (2,720,153)

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At 30 June 2013

Mining &

exploration Corporate Consolidated

$ $ $

REVENUE

Other revenue - 2,561,196 2,561,196

Segment result (5,470,195) 1,320,808 (4,149,387)

ASSETS / LIABILITIES

Asset

Segments assets 1,011,314 423,286 1,434,600

Liabilities

Segment liabilities - (1,159,449) (1,159,449)

Net assets 1,011,314 (736,163) 275,151

Note 2014 2013 $ $

NOTE 23: CASH FLOW INFORMATION

a. Reconciliation of cash Cash at end of financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows:

Cash and cash equivalents 306,983 382,355

b. Reconciliation with operating loss

Reconciliation of cash flows from operations with operating loss after income tax is set out as follows:

Operating loss after income tax (3,156,152) (4,149,387)

Non-cash flows included in loss:

- Exploration expenditure written off / impaired 1,133,665 5,470,195

- Depreciation expense 3,570 6,651

- Loss on Plant and Equipment 6,588 -

- (Gain)/Loss on adjustment of liabilities 837,915 (2,557,779)

Changes in assets and liabilities:

- (Increase)/decrease in receivables (6,602) -

- (Increase)/decrease in prepayments 15,459 (5,945)

- (Increase)/decrease in creditors and accruals 755,806 284,251

- Increase/(decrease) in employee entitlements - -

- Increase/(decrease) in provisions - 26,744

Net cash used in operating activities (409,751) (925,270)

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Note 2014 2013 $ $

c. Non-cash operating activities

Expenses settled by equity - -

NOTE 24: SHARE-BASED PAYMENTS

a. Options granted to key management personnel as share-based payments

No key management personnel hold options in year 2014. NOTE 25: EVENTS AFTER THE REPORTING PERIOD

On 18 August 2014, the Company entered a Deed of Company Arrangement (Deed) whereby the creditors of the Company were transferred to a Creditors’ Trust. The Deed appointed Mr Adam Shepard of Farnsworth Shepard as the Deed Administrator and Trustee of the Creditors’ Trust. Upon execution of the Deed, the voluntary administration of the Company ceased and control of the Company was returned to the Directors. In accordance with the terms of the Deed, the claims of creditors against the Company were transferred to the Creditors’ Trust. The assets retained by the Company at that time were the Victory Bore tenement (E57/550), which was subsequently surrendered, and the tenement at Perenjori (P70/1608). Both tenements had previously been impaired to nil value. Accordingly, upon return of control of the Company to the Directors on 18 August 2014, the Company had no assets other than the tenements noted above and pre-administration liabilities are bound by the terms of the Deed. Since return of control of the Company to the Directors, the Company has used best endeavours to engage with interested investor parties to recapitalise the Company. Negotiations continue with potential investors who essentially require the Company to take all steps necessary to have the ASX suspension lifted and its shares to be requoted. The Deed requires the Company to be administered in a way that maximises the opportunity as much as possible for it to continue its business and result in a better return to creditors than would be the case from an immediate winding up. The Deed binds all creditors and parties who may have a claim against the Company arising prior to the period of administration, and the claims of creditors against the Company are extinguished and released in full upon the establishment of the Creditors Trust. The Deed established a Creditors Trust where the funds held by the voluntary administrator were transferred upon execution of the Deed. The Creditors Trust comprises two sub-trusts, the first being the funds available to the administrator at the date of execution of the Deed. The second sub-trust will comprise funds that are contributed by a successful proponent of a recapitalisation proposal that enables the Company to retain its listing with ASX and for the lifting of the suspension of trading of its securities. The admission of claims of creditors to participate in the Creditors Trust is adjudicated by the Deed Administrator. Distributions from the Creditors Trust will only be to admitted claims at a time to be determined by the administrator in accordance with the terms of the Deed and of the Creditors Trust. The administrator has excluded the claims of Mutual Holdings Pty Ltd and Corporate Admin Services Pty Ltd, and also of Haramont Pty Ltd to the extent that Haramont’s claim relates to the assignment of the debt from Mutual Holdings Pty Ltd and any interest accrued thereon. All creditors that have been excluded

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have disputed the decision of the administrator, with Mutual Holdings and Corporate Admin Services commencing proceedings to have the decision reviewed. During the period that the Deed and the Creditors Trust are in effect, the management of the Company is conducted by the Directors subject to the terms of the Deed, which include that the Directors are required to act in the best interests of the creditors. On 21 August 2014, the Company surrendered the tenement E57/550 known as Victory Bore. The tenement was due for renewal on 22 August 2014 and required significant expenditure to be incurred prior to the renewal date in order to apply for a conversion to a retention licence. As the Company had been returned to the Directors’ control from the voluntary administration on 18 August 2014, there was insufficient time or available funds to pursue an application for the conversion of status of the tenement, the outcome of which, notwithstanding, is uncertain.

Mr Stuart Third was appointed Alternate Director for Mr Paul Piercy and Mr Ian Crawford was appointed Alternate Director for Dr Dennis Gee in October 2014.

Except for the above, no matters or circumstances have arisen since the end of the financial year, that have significantly affected, or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

NOTE 26: RELATED PARTY TRANSACTIONS

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Key management personnel

The names of each person holding the position of Director of Quest Minerals Limited during the financial year are:

D Gee Non-Executive Director

P Piercy Non-Executive Chairman

JG Vitale Managing Director

S Third Alternate Director (Mr P Piercy)

I Crawford Alternate Director (Dr D Gee) For details of disclosures relating to key management personnel, refer to the Remuneration Report contained in the Directors’ Report.

NOTE 27: REINSTATEMENT OF LIABILITIES

For the year ended 30 June 2013, the Company wrote down certain liabilities associated with Haramont Pty Ltd as a result of a compromise agreement reached between the Company and Haramont. At the time of the agreement, the Company was of the opinion that the terms of the agreement would be met, and as such, wrote down the liability to the compromised amount. As the terms of the compromise were not met by the Company, it was served notice by Haramont that the compromise was no longer in effect thus the full principal plus accrued interest was due. After due consideration by the unrelated Directors, the full balance of the debt was reinstated as a liability at balance date.

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The Voluntary Administrator having been appointed on 9 May 2014, initially recognised the full amount of the debt based on Haramont’s informal proof of debt in two reports to creditors and recommended the terms of a Deed of Company Arrangement (Deed) to creditors which also recognised the debt. The recommended Deed was formally adopted by the creditors at their meeting on 18 August, 2014. On 14 October 2014 the Administrator (acting as Trustee for the Creditors) served notice on Haramont rejecting its claim. Haramont has given notice of its intention to appeal the decision. At the date of this report the matter is pending formal lodgement of the appeal through the court system. The Directors believe the matter will be resolved either through litigation or commercial negotiation. For the purpose of these financial statements, the Directors have adopted the conservative view and recognised the full amount of principal and interest as a liability at balance date. Also during the year ended 30 June 2013, the loan from Natwest Securities Ltd was written off but disclosed as a contingent liability as Natwest was unable to provide evidence to the satisfaction of the Board for the Company to discharge its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). Subsequent to the appointment of the voluntary administrator, based on subsequent advice, the liability has been re-instated to the Company’s balance sheet.

Reinstatement of Haramont debt 657,158

Reinstatement of Natwest loan 200,000

857,158

As at the date of the report, the Haramont debt and the Natwest loan are subject to the terms of the Deed of Company Arrangement entered into on 18 August 2014 and are no longer claimable against the Company. The Haramont debt has been excluded from the Creditors’ Trust by the administrator and Haramont has given notice of its intention to formally appeal the decision of the administrator to exclude the debt. The reinstatement of the liabilities noted have resulted from a change in the conditions and information available to the Company at the time of the report and are not considered to be an error of the prior year. The write down of the liabilities at 30 June 2013 was undertaken by the Company after seeking advice and the Directors forming a view in relation to various issues associated with the liabilities including those noted above. Since the date of the 2013 Annual Report, the compromise agreement with Haramont was terminated for non-fulfilment of the conditions by the Company requiring the debt to be reinstated to its original value based on the advice received by the Company regarding the recognition of the debt when the report for the year ended 30 June 2013 was being prepared. The Natwest loan has been admitted to the Creditors’ Trust by the administrator, and as such, has been reinstated as a liability of the Company at 30 June 2014. The Company has reinstated the liabilities on which there is a divergence in the advice received by the Company and the advice of the administrator. Where the advice provided to the Company and the administrator agreed, such as for the claims of Mutual Holdings Pty Ltd and Corporate Admin Services Pty Ltd, the liabilities have not been reinstated.

NOTE 28: FINANCIAL RISK MANAGEMENT

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.

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The Group does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Board of Directors of the Company has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Company and the Group through regular reviews of the risks. The totals for each category of financial instruments, measured in accordance with AASB 139, as detailed in the accounting policies to these financial statements, are as follows:

Categories of financial instruments Note 2014 2013

$ $

Financial assets

Cash and cash equivalents 9 306,983 382,355

Receivables 10 21,916 15,314

328,899 397,669

Financial liabilities

Payables 15 1,036,137 280,331

Borrowings – unsecured loan 16 200,000 4,118

Loans from others 16 812,915 175,000

Debentures 16 1,000,000 700,000

3,049,052 1,159,449

a. General objectives, policies and processes In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. The principal financial instruments from which financial instrument risk arises: - trade and other receivables - cash at bank - trade and other payables - borrowings The Board has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure effective implementation of the objectives and policies to the Company’s finance function. The Company’s risk management policies and objectives are therefore designed to minimise the potential impact of these risks on the results of the Company where such impacts may be material.

Specific financial risk exposures and management

The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk, foreign currency risk and other price risk (commodity

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and equity price risk). There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period.

b. Credit risks

Exposure to credit risk relating to financial assets arises from the potential non- performance by counter parties of the contract obligations that could lead to a financial loss to the Company. There is no material amount of collateral held as security at 30 June 2014. Cash and cash equivalents

The Company limits its exposure to credit risk by only depositing cash at banks or financial institutions that have an acceptable credit rating.

Trade and other receivables

As the Company operates primarily in investment and exploration activities, it does not have trade receivables and therefore is not exposed to credit risk in relation to trade receivables. The Company, where necessary, establishes an allowance for impairment that represents its estimate of incurred losses in respect of other receivables and investments. Management does not expect any counterparty to fail to meet its obligations. Exposure to credit risk

The carrying amount of the group’s financial assets represents the maximum credit exposure. The Company’s maximum exposure to credit risk at balance date is as follows: Note 2014 2013

$ $

Other receivables 10 21,916 15,314

21,916 15,314

c. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual flows. The Company does not have any external borrowings. The Company anticipates a need to raise additional capital in the next 12 months to meet forecast operational activities. The decision on how the Company will raise future capital will depend on market conditions existing at that time. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

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Financial liability and financial asset maturity analysis

At 30 June 2014

Within 1 year 1 to 5 years Over 5 years Total

$ $ $ $

Financial liabilities due

for payment

Payables 1,036,137 - - 1,036,137

Loans and borrowings 2,012,915 - - 2,012,915

Total expected outflows 3,049,052 - - 3,049,052

At 30 June 2014


$ $ $ $

Financial assets – cash

flows realisable

Cash and cash equivalents 306,983 - - 306,983

Receivables 21,916 - - 21,916

Total anticipated inflows 328,899 - - 328,899

Net (outflow)/ inflow on

financial instruments (2,720,153) - - (2,720,153)

All claims and liabilities as at 30 June 2014 have been compromised and will be treated according to the terms of the Deed of Company Arrangement.

At 30 June 2013


Financial liabilities due

for payment

Payables 280,331 - - 280,331

Loans and borrowings 879,118 - - 879,118

Total expected outflows 1,159,449 - - 1,159,449

Financial assets – cash

flows realisable

Cash and cash equivalents 382,355 - - 382,355

Receivables 15,314 - - 15,314

Total anticipated inflows 397,669 - - 397,669

Net (outflow)/ inflow on

financial instruments (761,780) - - (761,780)

Financial arrangements

At 30 June 2014: nil (2013: nil)

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d. Market risk

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

i) Foreign exchange risk

Overseas transactions are negotiated in foreign currencies which give rise to assets and liabilities which are translated to Australian currency in accordance with the accounting policies set out in Note 1(j).

At balance date, there were no amounts receivable and payable in foreign currency and therefore the Group does not have any exposure to foreign currency risk.

ii) Interest rate risk

The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. The Group does not use derivatives to mitigate these exposures. The Company adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents on short term deposit at best available market interest rates.

Profile

At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

Consolidated and Company

carrying amount

2014 2013

$ $

Variable rate instruments

Financial assets – cash and cash equivalents 306,983 382,355

Fair value sensitivity analysis for variable rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss or through equity, therefore a change in interest rates at the reporting date would not affect profit or loss or equity.

Cash flow sensitivity analysis for variable rate instruments

The group has performed a sensitivity analysis relating to its exposure to interest rate risk at balance date.

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2013.

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Profit or loss Equity

100bp

Increase 100bp

decrease

100bp

increase

100bp

decrease

$ $ $ $

30 June 2014

Variable rate instruments 3,069 (3,069) 3,069 (3,069)

Unsecured loan (20,129) 20,129 (20,129) 20,129

30 June 2013

Variable rate instruments 3,505 (3,505) 3,505 (3,505)

Unsecured loan (8,791) 8,791 (8,791) 8,791

e. Fair values

The fair values of:

• Term receivables, government and fixed interest securities and bonds are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value

• Other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar borrowings, to their present value

• Other assets and other liabilities approximate their carrying value There are no financial assets and financial liabilities readily traded on organised markets in standardised form. Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date:

Carrying amount Net fair value

2014 2013 2014 2013

$ $ $ $

Financial assets:

Cash and cash equivalents 306,983 382,355 306,983 382,355

Receivables 21,916 15,314 21,916 15,314

Total financial assets 328,899 397,669 328,899 397,669

Financial liabilities:

Trade and other payables 1,036,137 280,331 1,036,137 280,331

Borrowings 2,012,915 879,118 2,012,915 879,118

Total financial liabilities 3,049,052 1,159,449 3,049,052 1,159,449

END OF NOTES TO FINANCIAL STATEMENTS (AUDITED)

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DIRECTORS’ DECLARATION



1. In the opinion of the Directors of Quest Minerals Limited (the ‘Group’): (a) the financial statements and notes set out on pages 21 to 62 and the Remuneration

disclosures that are contained in pages 11 to 18 of the Remuneration Report in the Director’s Report, 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 2014 and of

its performance, for the financial year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

(iii) complying with International Financial Reporting Standards as disclosed in Note 1;

and

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

2. The Directors have been given the declarations required by Section 295A of the Corporations

Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2014.

Signed in accordance with a resolution of the Board of Directors:

Paul Piercy Chairman Perth, 28 January 2015

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Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the

context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm

is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and

are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its

Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

Page 64 of 75

Level 1

10 Kings Park Road

West Perth WA 6005

Correspondence to:

PO Box 570

West Perth WA 6872

T +61 8 9480 2000

F +61 8 9322 7787

E [email protected]

W www.grantthornton.com.au

Independent Auditor’s Report

To the Members of Quest Minerals Limited

Report on the financial report

We have audited the accompanying financial report of Quest Minerals Limited (the

“Company”), which comprises the consolidated statement of financial position as at 30 June

2014, the consolidated statement of profit or loss and other comprehensive income,

consolidated statement of changes in equity and consolidated statement of cash flows for

the year then ended, notes comprising a summary of significant accounting policies and

other explanatory information and the directors’ declaration of the consolidated entity

comprising the Company and the entities it controlled at the year’s end or from time to time

during the financial year.

Directors’ responsibility for the financial report

The Directors of the Company are responsible for the preparation of the financial report

that gives a true and fair view in accordance with Australian Accounting Standards and the

Corporations Act 2001. The Directors’ responsibility also includes such internal control as

the Directors determine is necessary to enable the preparation of the financial report that

gives a true and fair view and is free from material misstatement, whether due to fraud or

error. The Directors also state, in the notes to the financial report, in accordance with

Accounting Standard AASB 101 Presentation of Financial Statements, the financial

statements comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We

conducted our audit in accordance with Australian Auditing Standards. Because of the

matters described in the basis for disclaimer of opinion paragraph, however, we were not

able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

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Independence

In conducting our audit, we have complied with the independence requirements of the

Corporations Act 2001.

Basis for disclaimer of opinion

We have been unable to obtain sufficient appropriate audit evidence on the books and

records and basis of accounting of the consolidated entity. Specifically we have been unable

to satisfy ourselves on the following matter:

Loan payable to Haramont Pty Ltd

As at 30 June 2014, the company has recorded a loan payable to Haramont Pty Ltd of

$812,915 (2013: $175,000), plus accrued interest of $102,360 (2013: Nil). These balances

include a significant reinstatement of an amount derecognised in the prior financial year.

As a result of the matters concerning this debt as set out in Notes 16, 25 and 27, we have

been unable to obtain sufficient appropriate audit evidence as to whether this loan and

accrued interest were payable at balance date at the amount recorded in the financial report.

As a result of the above matters, we were unable to determine whether any adjustments

might have been found necessary in respect of the elements making up the consolidated

statement of financial position, consolidated statement of profit or loss and other

comprehensive income, consolidated statement of changes in equity and consolidated

statement of cash flows, and related notes and disclosures thereto.

Disclaimer of opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion

paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide

a basis for an audit opinion. Accordingly, we do not express an opinion on the financial

report.

Report on the remuneration report

We have audited the remuneration report included in pages 11 to 18 of the directors’ report

for the year ended 30 June 2014. The Directors of the Company are responsible for the

preparation and presentation of the remuneration report in accordance with section 300A of

the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration

report, based on our audit conducted in accordance with Australian Auditing Standards.

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Auditor’s opinion on the remuneration report

In our opinion, the remuneration report of Quest Minerals Limited for the year ended 30

June 2014, complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

J W Vibert

Partner - Audit & Assurance

Perth, 28 January 2015

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CORPORATE GOVERNANCE STATEMENT



Introduction

Since the introduction of the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations ("ASX Guidelines" or “the Recommendations”), Quest Minerals Limited ("Company") has, in the opinion of the present Board of Directors, failed to adopt corporate governance policies and systems of control and accountability appropriate for a public listed company. In the opinion of the present Board, the policies and procedures summarised in previous annual reports issued by the Company amounted to nothing more than lip service. This much is clear from the remedial steps the Directors have deemed it necessary to take on a number of fronts since the present Board was constituted on 22 April 2013, details of which are specified in the accompanying financial statements. As a result of the failure to implement basic corporate governance principles as outlined in the 2013 Annual Report, the Company has identified breaches of certain provisions of the Corporations Act and of the ASX Listing Rules. These breaches have been communicated in writing to ASIC and ASX respectively. In the opinion of the Directors, it is likely that such departures from good governance practices have also resulted in the Company incurring material losses. By definition, this has diminished shareholder wealth and has resulted in a negative perception of the Company in financial markets, making it more difficult to attract capital at normal commercial terms. The present Board has adopted ASX Guidelines and Recommendations as summarised in this report. Notwithstanding the historical departures from good corporate governance principles identified in the financial statements, in the future the Company intends to follow each Recommendation where the Board has considered the Recommendation to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the Company, the Board, resources available and activities of the Company. Where, after due consideration, the Company's corporate governance practices depart from the Recommendations, the Board offers disclosure of the nature of, and reason for, the adoption of its own practice. Since the reconstitution of the Board on 22 April 2013, the Company has resolved to adopt and monitor basic systems of control and accountability as the basis for the administration its corporate governance policies. The Board believes it is important to ensure there are checks and balances, even though it has extremely limited human resources. It is recognised that such an environment heightens the risk of limited division of duties where the same person may initiate a transaction and authorise it. Wherever possible risk mitigation procedures have been adopted to protect both the Company’s assets and the individual or contracted services provider. Notwithstanding its limited resources, the Board has implemented minimum procedures to administer the policies and procedures in a transparent fashion and with integrity, with the objective of pursuing the fundamental tenets of good corporate governance as applicable to a junior explorer.

Corporate Governance Council Recommendation 1

Lay Solid Foundations for Management and Oversight

Role of the Board of Directors

The Board has responsibility for protecting the rights and interests of Shareholders and is responsible for the overall direction, monitoring and governance of the Company. Responsibility for managing the business on a day-to-day basis has been delegated to the Managing Director. The Company has one executive director who is responsible for management of the Company’s day-to-day affairs. All other functions including management and financial accounting and reporting, accounts payable, tenement management and administration, company secretarial function and website management are provided by contracted service providers.

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The Board is responsible for the overall corporate governance of the Company and its subsidiaries. Responsibilities and Functions of the Board are set out below:

i. setting the strategic direction of the Company, establishing goals to ensure that these strategic objectives are met and monitoring the performance of management against these goals and objectives;

ii. ensuring that there are adequate resources available to meet the Company's objectives; iii. appointing the Managing Director/Chief Executive Officer and evaluating the performance and

determining the remuneration of senior executives, and ensuring that appropriate policies and procedures are in place for recruitment, training, remuneration and succession planning;

iv. evaluating the performance of the Board and its Directors on an annual basis; v. determining remuneration levels of Directors; vi. approving and monitoring financial reporting and capital management; vii. approving and monitoring the progress of business objectives; viii. ensuring that any necessary statutory licences are held and compliance measures are maintained

to ensure compliance with the law and licence(s); ix. ensuring that adequate risk management procedures exist and are being used; x. ensuring that the Company has appropriate corporate governance structures in place, including

standards of ethical behaviour and a culture of corporate and social responsibility; xi. ensuring that the Board is and remains appropriately skilled to meet the changing needs of the

Company; xii. ensuring procedures are in place for ensuring the Company's compliance with the law; and

financial and audit responsibilities, including the appointment of an external auditor and reviewing the financial statements, accounting policies and management processes.

The Company has not adopted a formal Board Charter.

Board Processes

A standard agenda for the meetings has been determined to ensure certain standing information is addressed and other items which are relevant to reporting deadlines and or regular review are scheduled when appropriate. The agenda is regularly reviewed for relevance by the Chairman, the Managing Director and the Company Secretary. Corporate Governance Council Recommendation 2

Structure the Board to Add Value

Board Composition

The relevant provisions in the Constitution and the Corporations Act determine the terms and conditions relating to the appointment and termination of Directors. All Directors, other than the Managing Director, are subject to re-election by rotation every three years.

On 6 June 2012, the Board resolved to form a Nomination and Remuneration Committee to oversee the nomination policy of the Company. The Committee consisted of 2 Non-executive Directors. Any changes to Directorships will be considered by the Committee subject to any applicable laws. Identification of potential Board candidates includes consideration of the skills, experience, personal attributes and capability to devote the necessary time and commitment to the role. After the reconstitution of the Board in April 2013, the need for a separate Committee was reconsidered, and it was resolved to return the functions of the Nomination and Remuneration Committee to the full Board. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area. The relevant experience of Board members is detailed in the Directors’ section of the Directors’ Report.

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The Board consists of Non-executive Chairman Mr Paul Piercy, Executive Director Mr Jerome Vitale, and Non-executive Dr Dennis Gee.

The Constitution requires a minimum number of three Directors. The maximum number of Directors is fixed by the Board but may not be more than 9, unless the members of the Company, in general meeting, resolve otherwise. The skills, experience and expertise of all Directors is set out in the Directors’ section of the Annual Report.

Directors are expected to bring independent views and judgement to the Board’s deliberations, and it has been determined that Mr Paul Piercy, the Company’s Chairman satisfies the criteria for independence as outlined in recommendation 2.1 of the ASX Corporate Governance Principles. Dr Dennis Gee, although a non-executive director, is not considered independent because he provides geological consulting services to the Company.

The Board considers that given the size and scope of the Company's operations at present, it has the relevant experience in the exploration and mining industry and is appropriately structured to discharge its duties in a manner that is in the best interests of the Company and its Shareholders from both a long-term strategic and operational perspective.

Independent Chairman

The Chairman is considered to be an independent director and as such Recommendation 2.2 of the Corporate Governance Council has been complied with. The Board believes that Mr Piercy is an appropriate person for the position as Chairman because of his experience and proven track record as a public company director. Roles of Chairman and Managing Director

The roles of Chairman and Managing Director are undertaken by different individuals, and as such the Company complies with Recommendation 2.3 of the Corporate Governance Council. Evaluation of Board Performance

The Company does not have a formal process for the evaluation of the performance of the Board and as such does not comply with Recommendation 2.5 of the Corporate Governance Council. The Board is of the opinion that the competitive environment in which the Company operates will effectively provide a measure of the performance of the Directors, in addition the Chairman assesses the performance of the Board, individual directors and key executives on an informal basis. Education

All Directors are members of their respective professional bodies and are encouraged to attend professional education courses relevant to their roles. Independent Professional Advice and Access to Information

Each Director has the right to access all relevant information in respect of the Company and to make appropriate enquiries of senior management. Each Director has the right to seek independent professional advice at the Company’s expense, subject to the prior approval of the Chairman, which shall not be unreasonably withheld.

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Corporate Governance Council Recommendation 3

Promote Ethical and Responsible Decision Making

The Board actively promotes ethical and responsible decision making. Code of Conduct

The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the Company, and as such complies with Recommendation 3.1 of the Corporate Governance Council. This Code addresses expectations for conduct in accordance with legal requirements and agreed ethical standards. A copy of the Code is available on the Company’s website.

Diversity Policy The Board recognises the benefits of promoting and encouraging diversity within the Company and its Controlled Entities and has adopted a Diversity Policy encompassing these principles. The Company’s policy allows the Board to determine whether measureable objectives should be set based on the size and nature of the Company. The Board believes that the Company will not be able to set meaningful and measurable objectives in this area given the Company’s current size, nature and scope of activities. Notwithstanding this, the Company strives to provide opportunities for current and prospective employees and contracted service providers and consultants of all backgrounds in such a manner that best improves shareholder value and which reflects the values, principles and intention of the Company’s Diversity Policy. For the 2013 financial year, the Company had no female employees or any females holding senior executive or board positions. The Company had one employed consultant during the year. Corporate Governance Council Recommendation 4

Safeguarding Integrity in Financial Reporting

Audit Committee

The Board does not have a separate Audit Committee with a composition as suggested by Recommendations 4.1, 4.2 and 4.3 of the Corporate Governance Council. The full Board carries out the function of an audit committee. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area. The relevant experience of Board members is detailed in the Directors’ section of the Directors’ Report.

Financial Reporting The Board relies on its Managing Director and contracted Company Secretary who acts effectively as Chief Financial Officer to monitor the internal controls within the Company. Financial performance, given that the Company is not in production or at project development stage, comprises cash management and corporate overhead cost control. These functions are monitored by the Managing Director who reports to the Board at the scheduled Board meetings. Corporate Governance Council Recommendation 5

Make timely and balanced disclosure

The Board reviews the performance of the external auditor on an annual basis and meets with them during the year to review findings and assist with Board recommendations.

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In the absence of a formal audit committee the Directors of the Company are available for correspondence with the auditor of the Company. The Company has received formal nomination for Grant Thornton Audit Pty Ltd to be appointed as external auditor. Subject to the present external auditor, Mr Graham Swan of Rothsay resigning prior to the AGM to be held in November 2013, ASIC approving the resignation and shareholders approving the appointment, Grant Thornton is expected to assume the role of external auditor as from the closure of the AGM.

Continuous Disclosure The Board places a high priority on communication with Shareholders and is aware of the obligations it has, under the Corporations Act and ASX Listing Rules, to keep the market fully informed of information which is not generally available and which may have a material effect on the price or value of the Company's securities.

The Company has adopted policies which establish procedures to ensure that Directors and, where relevant, professional contracted service providers are aware of and fulfil their obligations in relation to the timely disclosure of material price sensitive information. A copy of the Company’s Disclosure Policy can be found on the Company’s website.

Continuous disclosure is discussed at all regular Board meetings and on an ongoing basis the Board ensures that all activities are reviewed with a view to the necessity for disclosure to security holders.

In accordance with ASX Listing Rules the Company Secretary has been appointed as the Company’s disclosure officer. Corporate Governance Council Recommendation 6

Respect the Rights of Shareholders

Communications The Board fully supports security holder participation at general meetings as well as ensuring that communications with security holders are effective and clear. This has been incorporated into a formal shareholder communication strategy, in accordance with Recommendation 6.1 of the Corporate Governance Council. A copy of the Company’s Shareholder Communication Policy is available on the Company’s website. In addition to electronic communication via the ASX web site, the Company publishes all significant announcements together with all quarterly reports. These documents are available in both hardcopy on request and on the Company web site at www.questminerals.com.au Shareholders are able to pose questions on the audit process and the financial statements directly to the independent auditor who attends the Company Annual General Meeting for that purpose. Corporate Governance Council Recommendation 7

Recognise and manage risk

Risk Management Policy The Board has adopted a risk management policy that sets out a framework for a system of risk management and internal compliance and control, whereby the Board delegates day-to-day management of risk to the Managing Director therefore complying with Recommendation 7.1 of the Corporate Governance Council. The Board is responsible for supervising management’s framework of control and accountability systems to enable risk to be assessed and managed. A copy of the Company’s Risk Management Policy can be found on the Company’s website.

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The Company is committed to ensuring that sound environmental management and safety practices are maintained for its exploration activities. A copy of the Company’s Environmental Policy is available on the Company’s website. A copy of the Company’s Occupational Health and Safety Policy is available on the Company’s website. The Company’s risk management strategy is evolving and will be an ongoing process and it is recognised that the level and extent of the strategy will develop with the growth and change in the Company’s activities. Risk Reporting

As the Board has responsibility for the monitoring of risk management it has not required a formal report regarding the material risks and whether those risks are managed effectively therefore not complying with Recommendation 7.2 of the Corporate Governance Council. The Board believes that the Company is currently effectively communicating its significant and material risks to the Board and its affairs are not of sufficient complexity to justify the implementation of a more formal system for identifying, assessing monitoring and managing risk in the Company. The Company does not have an internal audit function. Managing Director Written Statement

The Board requires that the Managing Director, or if there is no person appointed to that position, an Executive Director, and another relevant Officer or holder of a Key Management position provide a written statement that the financial statements of the Company present a true and fair view, in all material aspects, of the financial position and operational results and have been prepared in accordance with Australian Accounting Standards and the Corporation Act. The Board also requires that the Managing Director, or if there is no person appointed to that position, an Executive Director, and another relevant Officer or holder of a Key Management position provide sufficient assurance that the declaration is founded on a sound system of risk management and internal control, and that the system is working effectively. The declarations have been received by the Board, in accordance with Recommendation 7.3 of the Corporate Governance Council. Corporate Governance Council Recommendation 8

Remunerate Fairly and Responsibly

Remuneration Committee

On 6 June 2012, the Board resolved to form a Nomination and Remuneration Committee to oversee the Remuneration Policy. The Committee is to consist of 2 Non-executive Directors. Prior to the formation of the Committee, the Board was responsible for establishing the Company’s remuneration policies and practices, and to ensure they match the Group’s objectives. After the reconstitution of the Board in April 2013, the need for a separate Committee was reconsidered, and it was resolved to return the functions of the Nomination and Remuneration Committee to the main Board. The Board believes that the Company is not of a sufficient size to warrant a separate committee and that the full Board is able to meet objectives of the best practice recommendations and discharge its duties in this area. The Managing Director receives a salary package which may include performance based components are designed to reward and motivate. Non-executive Directors receive fees agreed on an annual basis by the Board.

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The Board determines all compensation arrangements for Directors. It is also responsible for setting performance criteria, performance monitors, share option schemes, incentive performance schemes, superannuation entitlements, retirement and termination entitlements and professional indemnity and liability insurance cover. The Board ensures that all matters of remuneration will continue to be in accordance with the Corporations Act requirements.

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ABN 55 062 879 583

ASX ADDITIONAL INFORMATION



A. Distribution of equity securities

Distribution of Shareholders as at 27 January 2015:

Ordinary

shares

Partly

paid

shares

Options

29/6/15

@$0.02

Options

30/4/16

@$0.012 1 – 1,000 3,976 - - - 1,001 – 5,000 486 - - - 5,001 – 10,000 113 - - - 10,001 – 100,000 343 - - - 100,001 and over 311 2 1 4

Total number of holders 5,229 4 1 1

Total number of shares on issue 625,443,285 Number of holders of less than a marketable parcel 5,123 Percentage held by the 20 largest holders 74.30%

B. Substantial shareholders

As at 27 January 2015 the Company has the following Substantial Shareholders: Vladimir Nikolaenko 102,301,707 shares 16.36% Droxford International Limited 98,686,092 shares 15.78% Maxillion Limited 82,313,928 shares 13.16%

C. Voting rights

Voting rights are one vote per ordinary share, with no voting rights attached to options.

D. Twenty largest equity security holders

The names of the 20 largest shareholders as at 27 January 2015 are listed below:

Name Number held Percentage

Droxford International Ltd 98,686,092 15.78 Maxillion Limited 82,313,908 13.16 KHV Holdings Pty Ltd 70,000,000 11.19 John Wardman & Associates Pty Ltd <The Wardman Super Fund A/C> 25,000,000 4.00 Nefco Nominees Pty Ltd 22,688,628 3.63 Pacrim Mining Limited 21,260,000 3.40 Pharaoh Nominees Pty Ltd <Tuscan Super Fund A/C> 21,215,757 3.39 Natwest Securities Limited 19,650,000 3.14 Mr Theodore Tindaro Marchese & Mrs Yvonne Margaret Marchese <TYM Super Fund A/C> 18,800,000 3.01 ACT2 Pty Ltd 15,000,000 2.40 Pershing Australia Nominees Pty Ltd <Indian Ocean A/C> 15,000,000 2.40 Carrington Street Investments Pty Ltd<Cheney Securities A/C> 9,542,702 1.53 Pacrim Mining Limited 7,000,000 1.12 Mutual Holdings Pty Ltd 7,000,000 1.12 Middleton Nominees (SA) Pty Ltd <The Middleton Family A/C> 6,847,746 1.09 Monacan Nominees Pty Ltd 6,027,579 0.96 Pacrim Mining Limited 6,000,000 0.96 Black Ridge Mining NL 5,555,555 0.89 Mr John Andrew Levings 3,548,000 0.57 JNAA Pty Ltd <Jona Alan Super Fund A/C> 3,500,000 0.56

464,635,967 74.30

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ABN 55 062 879 583

TENEMENT SCHEDULE



Project Reference QNL Interest Status

Nigeria

Nigeria Exploration Licence 6181 100% Certificate of Title









Nigeria Exploration Licence 7852 - Notification of Grant






Nigeria Exploration Licence 9173 Notification of Grant

Western Australia

Perenjori P70/1608 100% Current

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quest minerals limited - asx · quest minerals limited abn 55 062 879 583 subject to a deed of...

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