terramin australia limited · independent review report 20 terramin australia limited ... project...

ContentsAppendix 4D 2Director’s Report 3Auditor’s Independence Declaration 6Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income 7Consolidated Interim Statement of Financial Position 8Consolidated Interim Statement of Changes in Equity 9Consolidated Interim Statement of Cash Flows 11Notes to the Consolidated Interim Financial Statements 12Directors’ Declaration 19Independent Review Report 20

TERRAMIN AUSTRALIA LIMITEDABN 67 062 576 238

& Controlled Entities

INTERIM FINANCIAL REPORTfor the six months ended 30 June 2013


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TERRAMIN AUSTRALIA LIMITED & CONTROLLED ENTITIES

Results for Announcement to the Marketfor the six months ended 30 June 2013

APPENDIX 4DGroup results

Dividends/Distributions

Net Tangible Assests Per Share

30 June 2013 $’000

30 June 2012 $’000

Change %

Revenue from ordinary activities 28,497 30,884 (7.7)Loss after tax attributable to equity owners of the Company-before non-controlling interests (5,810) (56,547) 89.7Total comprehensive loss attributable to equity owners of the Company-after non-controlling interests (3,720) (57,325) 93.5

Amount per security

Franked amount per security

2013 interim dividend Nil Nil2012 interim dividend Nil Nil

30 June 2013

$/share

30 June 2012

$/shareNet tangible assets per share 0.02 0.07

The commentary on the results for the period is contained in the Director’s Report. This Interim Financial Report is to be read in conjunction with the 2012 Annual Financial Report.


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Director’s Reportfor the six months ended 30 June 2013

Your Directors submit their report on the consolidated entity comprising Terramin Australia Limited (the Company or Terramin) and its controlled entities (the Group) for the six months ended 30 June 2013 and the review report thereon. Terramin is a public company, limited by shares, that is incorporated and domiciled in Australia.

This report should be read in conjunction with the Company’s 2012 Annual Financial Report.

BOARD OF DIRECTORS

The following persons were Directors of the Company during the interim period up to and including the date of this report (unless stated otherwise)

Mr Michael H Kennedy ChairmanMr Kevin McGuinness Non-Executive Director

(Appointed 17 April 2013)Mr Angelo Siciliano Non-Executive Director

(Appointed 2 January 2013)Mr Feng Sheng Non-Executive Director

(Appointed 17 April 2013)Mr Xie Yaheng Non-Executive DirectorMr Nicholas M Clift Managing Director and CEO

(Retired 31 May 2013)Mr Peter Zachert Non-Executive Director

(Retired 30 April 2013)

REVIEW OF OPERATIONS

Principal Activities

The principal activities of the Company during the period were to continue to focus on the mining, development of and exploration for base and precious metals and other economic mineral deposits.

Operating ResultsAngas

2013$’000

Other 2013$’000

Total2013$’000

Total 2012$’000

Revenue 28,497 - 28,497 30,884

Other income - - - 6

Raw materials, consumables and other direct costs (23,532) - (23,532) (27,478)

Change in inventories of finished goods and WIP (2,623) - (2,623) 853

Employee expenses - (1,202) (1,202) (3,274)

Other expenses - (1,083) (1,083) (1,882)

Net finance income/(costs)(non-interest) (183) (471) (654) (1,464)

Earnings before interest, income tax, depreciation and amortisation (EBITDA) 2,159 (2,756) (597) (2,355)

Depreciation and amortisation (7,434) (14) (7,448) (14,853)

Impairment of non-current assets - - - (37,746)

Write back of impairment of non-current assets 5,565 - 5,565 -

Earnings before interest and income tax (EBIT) 290 (2,770) (2,480) (54,954)

Net finance costs (interest) - (3,330) (3,330) (1,593)

Income tax expense - - - -

Profit/(Loss) for the period 290 (6,100) (5,810) (56,547)

Review of Operations

During the period the Company focused on optimising the operations of its Angas Zinc Mine in South Australia and assessing ways to maximise value from the Tala Hamza project which resulted in the commencement of arbitration proceedings. The Company also commenced the evaluation of merger and acquisition opportunities further details of which are outlined in the events after balance date note.

Angas Zinc Mine (Terramin 100%)

The Angas Zinc Mine is the core operating asset of the Company and is located 2km outside the town of Strathalbyn, 60km from Adelaide. The 400,000 tonne per annum mine, produces zinc and lead-copper-silver-gold concentrates. There is a life of mine off-take agreement with Freepoint Metals and Concentrates LLC for zinc concentrate and an off-take agreement with Nyrstar Sales & Marketing AG for lead concentrate.

Ore production in the half year was lower than the previous year largely due to mobile equipment failure and limited options for change in the schedule during the final stages of the operations.

As announced on 5 July 2013, Terramin will cease production at the Angas Zinc Mine on 30 September 2013 and will place the mine on care and maintenance pending the resumption of exploration at depth and near mine and evaluation of the development of the Bird-in-Hand Gold Project (Bird-in-Hand). Terramin recently completed a deep exploration programme under the main ore body which did not encounter significant mineralisation that could be mined commercially at current commodity prices.


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The Angas Zinc Mine achieved the following during the period:

Summary of Production 6 MonthsJune-13

6 MonthsJune-12

PRODUCTION STATISTICSOreTotal Ore Mined (t) 191,396 217,597

Total Ore Treated (t) 192,990 222,506

Zinc ConcentrateConcentrate (t) 22,341 29,385

Payable Zinc (t) 9,270 12,367

Lead ConcentrateConcentrate(t) 9,173 11,255

Payable Lead (t) 4,620 5,473

Payable Copper (t) 53 71

Payable Silver (oz) 130,170 161,477

Payable Gold (oz) 1,786 2,417

Oued Amizour Zinc Project (Terramin 65%)

The Oued Amizour Zinc Project is 100% owned by Western Mediterranean Zinc Spa (WMZ). Terramin has a 65% shareholding in WMZ. The remaining 35% is held by two Algerian government owned companies: Enterprise National des Produits Miniers Non-Ferreux et des Substances Utiles Spa (ENOF) (32.5%) and Office National de Recherche Géoligique et Minière (ORGM) (2.5%). WMZ was formed following a resolution of the State Participation Council (CPE) to create a joint venture between ENOF and Terramin for the development and mining of the Oued Amizour zinc-lead deposit.

During the period, Terramin informed its Algerian partner and the Algerian government that it is commencing arbitration proceedings pursuant to the joint venture agreement. The proceedings have been brought before the International Chamber of Commerce in Paris with the intention of bringing a resolution to the continuing difference between the partners regarding Terramin’s proposal for developing the Tala Hamza project as set out in the Definitive Feasibility Study (DFS) which was completed and submitted in October 2010.

The application for renewal of the Oued Amizour exploration licence which expired on 26 August 2011 continues to be assessed by Agence Nationale du Patrimoine Minier (ANPM), the Algerian regulator. ANPM has advised that the renewal of the exploration permit will be finalised upon an agreement being reached with the JV partner on the Definitive Feasibility Study. The Company has satisfied all the legal requirements for a renewal to be granted and on this basis has reasonable grounds to expect renewal of the exploration permit.

Fleurieu Exploration Project (Terramin 100%)

The Fleurieu Project comprises a contiguous group of six tenements covering an area of 1,242km2. These are Bremer (EL4936), Hartley (EL5078), Currency Creek (EL4210), Langhorne Creek (EL4466), Pfeiffer (EL5102) and Kinchina (EL5252). A seventh licence (ELA-2012/00315 - Tepko) has been applied for to the north east of the existing Fleurieu tenements, covering an additional 998km2.

Menninnie Zinc Project (Terramin 100%)

The Menninnie Zinc Project comprises a contiguous group of seven tenements covering an area of 3,055km2. These are Menninnie Dam (EL5039), Nonning (EL4813), Kolendo (EL4285), Taringa (EL4669), Wipipippee Hill (EL 4865), Unalla (EL5266) and Mt Ive (EL5276).

Menninnie Metals has entered into a binding heads of agreement with Musgrave Minerals Ltd (Musgrave) for the farm-in and joint venture of the Menninnie Dam Project. All the conditions included in this heads of agreement have been satisfied.

Musgrave has continued exploration drilling on several Menninnie Dam prospects in the six months to June 2013 returning encouraging assay results.

Environment

The Group (in particular the Company’s Angas Zinc Mine) is subject to significant environmental regulation under both Commonwealth and South Australian legislation in relation to its exploration, development and mining activities. Exploration Licences and Mining Leases are issued subject to various obligations as to environmental monitoring and rehabilitation, and ongoing compliance with all relevant legislative obligations. The Group’s Directors, employees and consultants are committed to achieving a high standard of environmental performance and, in this regard, the Board has an established and active Risk & Compliance Committee recently joined with the Audit Committee.

No environmental incidents were recorded during the period with all environmental monitoring areas within compliance. Upgrades in site drainage were undertaken in preparation for the winter rains. The tailings dam facility remains within compliance parameters despite heavy rainfall.

Insofar as the Directors are aware, there have been no material breaches or other material instances of non-compliance, nor any recorded known areas of outstanding compliance, with any applicable environmental legislation or other regulations.

Corporate

A total of 70,300,789 shares were issued during the period. Of these, 15,324,809 were issued for the satisfaction of interest ($344,751) due on outstanding Convertible Notes. The remaining 54,975,980 ($1,300,000) were issued in relation to facility fees regarding restructures of debt.

Total number of options on issue by the Company was reduced by 1,950,000 due to director and employee options which expired and were cancelled accordingly.

Director’s Reportfor the six months ended 30 June 2013 (continued)


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Director’s Reportfor the six months ended 30 June 2013 (continued)GROUP TENEMENT LISTING

Title Name and LocationLicence Number

Licence Area

Expiry Date Terramin Interest

Minimum Expenditure Commitment

Angas - South Australia ML 6229 87.97 ha 16/08/2016 100% Not applicable

Bremer - South Australia EL 4936 457km2 26/10/2013 100% $580,000 per annum1

Currency Creek - South Australia EL 4210 174km2 23/11/2013 100% Amalgamated with EL 4936

Hartley - South Australia EL 5078 126km2 03/06/2014 100% Amalgamated with EL 4936

Langhorne Creek - South Australia EL 4466 275km2 18/04/2015 100% Amalgamated with EL 4936

Kinchina - South Australia EL 5252 56km2 23/11/2013 100% $100,000 over two years

Pfeiffer - South Australia EL 5102 154km2 03/06/2014 100% $90,000 over two years

Tepko2 - South Australia ELA2012/00315 998km2 18/04/2013 100%

WMZ Interest

Oued Amizour - Algeria3 5225PE 12,276 ha 26/08/2011 100% Not applicable

Menninnie Interest

Menninnie Dam - South Australia EL 5039 101km2 26/10/2014 100% $480,000 over three years

Nonning - South Australia EL 4813 312km2 30/11/2013 100% $240,000 over two years

Kolendo - South Australia EL 4285 208km2 26/07/2014 100% $100,000 over two years

Mount Ive - South Australia EL 5276 429km2 20/05/2015 100% $150,000 over two years

Taringa - South Australia EL 4669 988km2 20/02/2015 100% $250,000 over two years

Unalla - South Australia EL 5266 155km2 06/06/2015 100% $90,000 over two years

Wipipippee - South Australia EL 4865 862km2 02/05/2014 100% $230,000 over two years

1. Amalgamated Expenditure Agreement application for the period 1/07/2013 to 30/06/2014 lodged with DMITRE 27/06/2013.2. Letter of offer for new licence received from DMITRE 28/06/2013.3. Application lodged for renewal of licence on 23/06/2011. The application for renewal of the Oued Amizour exploration licence which expired on 26 August 2011 continues to be assessed by Agence Nationale du Patrimoine Minier (ANPM), the Algerian regulator. ANPM has advised that the renewal of the exploration permit will be finalised upon an agreement being reached with the JV partner on the Definitive Feasibility Study. The Company has satisfied all the legal requirements for a renewal to be granted and on this basis has reasonable grounds to expect renewal of the exploration permit.

FINANCIALThe consolidated loss of the Group after providing for income tax was $5.8 million for the half year ended 30 June 2013 (2012:$56.5 million).

The Angas Zinc Mine produced earnings before interest, tax depreciation and amortisation charges (EBITDA) for the half year of $2.2 million (2012:$4 million).

Sales revenue from zinc and lead concentrates was $28.5 million, an 8% decrease from the corresponding period last year. Angas Zinc Mine operating expenditure reduced for half year by 14% to $23.5m (2012:$27.5 million). In relation to depreciation and amortisation, charges for the period were $7.4 million (2012:$14.9 million).

The consolidated net asset position as at 30 June 2013 was $12.5 million (31 December 2012 was $14.6 million) with current liabilities exceeding current assets by $27.1 million (2012:$27.9 million).

The EBITDA of $2.2 million is lower than the corresponding period last year primarily as a result of reduced production and lower grade ore accessed in the period as a result of reduced scheduling options as the mine approaches completion.

No dividends were paid during the interim period and the Directors have not recommended the payment of a dividend.

EVENTS OCCURRING AFTER THE REPORTING DATEOn 19 July 2013, the Company announced that it has entered into a binding agreement to acquire 100% of the high grade Bird-in-Hand Gold Project and a portfolio of highly prospective Adelaide Hills exploration tenements from Maximus Resources Limited. It is anticipated that, subject to the required regulatory approvals, the ore will be processed using the existing facilities at Angas which can be modified to process gold ore. The existing tailings dam at Angas has the capacity to hold all the Bird-in-Hand tailings. Terramin has agreed to pay $3,500,000 in upfront and staged payments conditional on the satisfaction of certain project milestones and 25 million ordinary Terramin shares. Terramin has also agreed to pay Maximus a royalty in respect of gold production from the project. In the Directors’ opinion, no further events or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of the Company or the Group, the results of those operations or the state of affairs of the Group in future financial years that have not been otherwise disclosed in this report.

AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration for the six months ended 30 June 2013 can be found on page 6 and forms part of the Director’s Report.

Signed in Adelaide the 31st day of August 2013 in accordance with a resolution of the Board of Directors.

Michael KennedyChairman

Kevin McGuinnessDirector


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Auditor’s Independence Declaration

Level 1, 67 Greenhill Rd Wayville SA 5034 GPO Box 1270 Adelaide SA 5001 T 61 8 8372 6666 F 61 8 8372 6677 E [email protected] W www.grantthornton.com.au

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.

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF TERRAMIN AUSTRALIA LIMITED In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Terramin Australia Limited for the half-year ended 30 June 2013, 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 review; and

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

GRANT THORNTON AUDIT PTY LTD Chartered Accountants J L Humphrey Director – Audit & Assurance Adelaide, 31 August 2013


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Consolidated Interim Statement of Profit or Loss and Other Comprehensive Incomeas at 30 June 2013

Note2013$’000

2012$’000

Revenue 28,497 30,884Other income 4 - 6Raw materials, consumables and other direct costs (23,532) (27,478)Change in inventories (2,623) 853Employee expenses (1,202) (3,274)Depreciation and amortisation 5 (7,448) (14,853)Impairment of non-current assets 7 - (37,746)Write Back of Impairment Losses 7 5,565 -Other expenses (1,083) (1,882)Loss before net financing costs and income tax (1,826) (53,490)

Finance income 4 2,577 1,155Finance costs 4 (6,561) (4,212)Net finance costs (3,984) (3,057)

Loss before income tax (5,810) (56,547)

Income tax expense - -Loss for the period (5,810) (56,547)

Other comprehensive income/(loss)Items that are or may be reclassified subsequently to profit and loss:

Foreign currency translation differences for foreign operations 2,090 (778)Other comprehensive income/(loss) for the period, net of income tax 2,090 (778)

Total comprehensive loss for the period attributable to equity holders of the Company (3,720) (57,325)

Loss attributable to:Owners of the Company (5,810) (56,547)Non-controlling interest - -Loss for the period (5,810) (56,547)

Earnings per share attributable to the ordinary equity holders of the Company:

Note 2013 2012Basic earnings/(loss) per share - (cents per share) 13(a) (0.75) (26.78)Diluted earnings/(loss) per share - (cents per share) 13(b) (0.75) (26.78)

The statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the financial statements.


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Consolidated Interim Statement of Financial Positionas at 30 June 2013

Note2013$’000

December2012$’000

AssetsCash and cash equivalents 4,107 10,865Trade and other receivables 5,183 6,233Inventories 8 4,471 7,276Derivative financial instruments 10 373 -Other assets 22 317Total Current assets 14,156 24,691

Non-current assetsProperty, plant and equipment 5 9,938 10,943Exploration and evaluation 6 50,672 47,374Total non-current assets 60,610 58,317TOTAL ASSETS 74,766 83,008

LiabilitiesCurrent LiabilitiesTrade and other payables 8,726 11,697Borrowings 9 29,248 36,373Provisions 3,298 2,801Derivative financial instruments 10 - 1,687Total current liabilities 41,272 52,558

Non-current liabilities

Borrowings 9 15,618 10,420Provisions 5,332 5,411Total non-current liabilities 20,950 15,831TOTAL LIABILITIES 62,222 68,389

NET ASSETS 12,544 14,619

EQUITYShare capital 11 145,344 143,699Reserves 4,615 2,525Accumulated losses (152,581) (146,620)Total equity attributable to equity holders of the Company (2,622) (396)Non-controlling interest 15,166 15,015TOTAL EQUITY 12,544 14,619

The statement of financial position is to be read in conjunction with the notes to the financial statements.


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Consolidated Interim Statement of Changes in Equityfor the half-year ended 30 June 2013

Share capital $’000

Share option reserve

$’000

Translation reserve

$’000

Accumulated losses $’000

Total $’000

Non-controlling interest

$’000

Total equity $’000

Balance as at 1 January 2013 143,699 8,966 (6,441) (146,620) (396) 15,015 14,619

Total comprehensive income for the periodLoss for the period - - - (5,810) (5,810) - (5,810)

Other comprehensive incomeForeign currency translation differences - - 2,090 - 2,090 - 2,090

Total other comprehensive income - - 2,090 - 2,090 - 2,090

Total comprehensive income for the period - - 2,090 (5,810) (3,720) - (3,720)

Transactons with owners, recorded directly in equityContributions by and distributions to owners

Issue of ordinary shares 1,645 - - - 1,645 - 1,645

Total contributions by and distributions to owners 1,645 - - - 1,645 - 1,645

Changes in ownership interests in subsidiaries that do not result in a loss of controlNon-controlling interest share of parent exploration expenditure - - - (151) (151) 151 -

Total changes in ownership interests in subsidiaries - - - (151) (151) 151 -

Balance at 30 June 2013 145,344 8,966 (4,351) (152,581) (2,622) 15,166 12,544

The statement of changes in equity is to be read in conjunction with the notes to the financial statements.


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Consolidated Interim Statement of Changes in Equityfor the half-year ended 30 June 2012

Share capital $’000

Share option reserve

$’000

Translation reserve

$’000

Accumulated losses $’000

Total $’000

Non-controlling interest

$’000

Total equity $’000

Balance as at 1 January 2012 133,882 8,966 (5,272) (81,508) 56,068 15,080 71,148

Total comprehensive income for the periodLoss for the period - - - (56,547) (56,547) - (56,547)

Other comprehensive incomeForeign currency translation differences - - (778) - (778) - (778)

Total other comprehensive income - - (778) - (778) - (778)

Total comprehensive income for the period - - (778) (56,547) (57,325) - (57,325)

Transactons with owners, recorded directly in equityContributions by and distributions to owners

Issue of ordinary shares 223 - - - 223 - 223

Share issue costs (16) - - - (16) - (16)

Total contributions by and distributions to owners 207 - - - 207 - 207

Changes in ownership interests in subsidiaries that do not result in a loss of controlNon-controlling interest (223) (223) 223 -

Total changes in ownership interests in subsidiaries - - - (223) (223) 223 -

Balance at 30 June 2012 134,089 8,966 (6,050) (138,278) (1,273) 15,303 14,030

The statement of changes in equity is to be read in conjunction with the notes to the financial statements.


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Consolidated Interim Statement of Cash Flowsfor the half-year ended 30 June 2013

2013 $’000

2012 $’000

Cash from operating activities:Receipts from customers 28,560 32,764Payments to suppliers and employees (27,393) (34,484)Financing costs and interest paid (983) (2,128)Interest received 57 64Total cash (used by)/from operating activities 241 (3,784)

Cash flows from investing activities:Proceeds from the sale of fixed assets - 54Acquisition of property, plant and equipment (106) (1,136)Mine construction and development expenditure (24) (426)Exploration and evaluation expenditure (1,210) (1,822)Net cash (used by) investing activities (1,340) (3,330)

Cash flows from financing activities:Payment of transaction costs on debt and/or equity (582) (14)Realised derivative gains (931) 935Proceeds from borrowings 4,400 3,770Repayment of borrowings (8,693) (2,510)Net cash (used by)/ from financing activities (5,806) 2,181

Other activities:Net decrease in cash and cash equivalents (6,905) (4,933)Net foreign exchange differences 147 (70)Cash and cash equivalents at beginning of period 10,865 7,502Cash and cash equivalents at end of period 4,107 2,499

The statement of cash flows is to be read in conjunction with the notes to the financial statements.


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Condensed Notesto the Consolidated Interim Financial Statements for the half-year ended 30 June 2013

NOTE 1: REPORTING ENTITY

Terramin Australia Limited is a listed public company, incorporated and domiciled in Australia. The consolidated interim financial report as at and for the six months ended 30 June 2013, covers the economic entity of Terramin Australia Limited and its controlled entities (together referred to as the “Group”).

NOTE 2: BASIS OF PREPARATION

(a) Statement of ComplianceThe consolidated interim financial report is a general purpose financial report that has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001 (Cth).

The consolidated interim financial report was authorised for issue by the Directors on 31 August 2013.

(b) Reporting BasisThe interim financial report does not include full disclosures of the type normally included in an annual financial report, and therefore it is recommended that this financial report be read in conjunction with the annual financial report for the year ended 31 December 2012, and any public announcements made by the Company during the interim reporting period in accordance with continuous disclosure requirements arising under the Australian Securities Exchange Listing Rules and the Corporations Act 2001 (Cth).

Where required by accounting standards, comparative figures have been reclassified to conform with changes in presentation in the current interim financial period.

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.

This report has been prepared in Australian dollars on the basis of historical costs and does not take into account changing money values or fair values of assets.

(c) EstimatesThe preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing this consolidated interim financial report, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 31 December 2012.

(d) Going ConcernThe financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

During the 2013 interim period, the Group incurred a loss of $5.8 million, bringing accumulated losses to $152.6 million. As at 30 June 2013, the Group’s current liabilities exceeded its current assets by $27.1 million and had neutral operating cash outflows during the interim period.

Current liabilities at 30 June 2013 include the Investec revolving debt facility of $10.5 million which is due for repayment on 30 September 2013. Subsequent to the balance date, the Company has advanced negotiations with Investec to restructure this facility.

The Directors expect that, with the assistance of its major shareholder Asipac Capital Pty Limited (Asipac), a restructure of the debt facility will be agreed with Investec. However, in the unlikely event that the current negotiations with Investec are not finalised by 30 September 2013, Asipac have confirmed in writing that they will continue to provide financial support to Terramin in respect of a restructure of the debt facility for at least the next 12 months, including through equity raising initiatives.

Details of other current borrowings are outlined in note 9 to the interim financial statements.

The financial report has been prepared on a going concern basis on the expectation that the Group can raise additional equity or restructure debt when required.

The Directors note that the matters outlined above indicate material uncertainty, which may cast doubt on the ability of the Group to continue as a going concern. At the date of this report, the Directors are confident that the Group has adequate resources to continue to explore, evaluate and develop the Group’s areas of interest and will ensure the company has sufficient funds to meet its obligations. For the reasons outlined above, the Board has no intention or indeed the necessity to liquidate or otherwise wind up its operations for the foreseeable future.


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Condensed Notesto the Consolidated Interim Financial Statements for the half-year ended 30 June 2013 (continued)

NOTE 4: OTHER INCOME & EXPENSES30 June 2013

$’00030 June 2012

$’000

Other incomeRental income - 6

Total other income - 6

Finance incomeInterest income 57 46

Unrealised foreign exchange gain on convertible notes1 - 85

Unrealised foreign exchange gains 2,243 49

Realised foreign exchange and commodity hedging gains 277 975

Total financial income 2,577 1,155

Finance costs

Interest on convertible notes 586 599

Interest on borrowings 628 1,040

Unwinding of discount on mine rehabilitation provision 64 135

Other borrowing costs 1,026 1,280

Unrealised foreign exchange loss on convertible notes1 2,884 -

Unrealised foreign exchange and commodity hedging losses - 1,088

Realised foreign exchange and commodity hedging losses 1,373 70

Total finance costs 6,561 4,212

1. At 30 June 2013, the Company had $25.05 million of USD denominated convertible notes on issue (30 June 2012: 25.05 million).

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied by the Group in the consolidated interim financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 31 December 2012. The following have been applied in the period.

New and amended standards adopted by the GroupAASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income (Applies annual reporting periods beginning on or after 1 July 2012)

AASB 2011-9 requires entities to group items presented in Other Comprehensive Income on the basis of whether they are potentially re-classifiable to profit or loss subsequently, and changes the title of ‘statement of comprehensive income’ to ‘statement of profit or loss and other comprehensive income’.

The adoption of the new and revised Australian Accounting Standards and Interpretations has had no significant impact on the Group’s accounting policies or the amounts reported during the current half-year period. The adoption of AASB 2011-9 has resulted in changes to the Group’s presentation of its financial statements.

AASB 10 Consolidated Financial StatementsThe core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. Control exists when the investor can use its power to affect the amount of its returns.

The group has reassessed its consolidation conclusions in light of the new control principles in AASB 10 and concluded that no changes are required. Accordingly, the adoption of AASB 10 has not resulted in any adjustments to the carrying amounts in the financial statements.

AASB 11 Investments in joint venturesAASB 11 replaces AASB 131 Interests in Joint Ventures and AASB Interpretation 113 Jointly- controlled Entities – Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition, AASB 11 removes the option to account for jointly-controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations for liabilities are accounted for by recognising the share of those assets and liabilities. Joint ventures that give the venturers a right to the net assets are accounted for using the equity method.

The adoption of AASB 11 has not resulted in any changes to the group’s accounting for joint operations.

New and amended accounting standards that apply for the first time to the 30 June 2013 interim period include AASB 12 Disclosure of Interests in Other Entities, AASB 13 Fair Value Measurement, AASB 119 Employee Benefits (September 2011), AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13, AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities and AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle.

While these standards introduced new disclosure requirements, they did not affect the Group’s accounting policies or any of the amounts recognised in the financial statements.


14



NOTE 6: EXPLORATION AND EVALUATION ASSETS

CONSOLIDATEDExploration and Evaluation

$’000

Opening Carrying amount 47,374

Additions 1,210

Transfers -

Writedowns -

Foreign currency movement 2,088

Carrying amount at the end of period 50,672

Exploration by Region $’000

- Australia 5,499

- Algeria 45,173

Total 50,672

The Oued Amizour asset in Algeria is held by Western Meditteranean Zinc Spa (WMZ), an entity controlled by the Group. WMZ has the right to explore and evaluate the Oued Amizour deposit and surrounds.

During the period, Terramin informed its Algerian partner and the Algerian government that it is commencing arbitration proceedings pursuant to the joint venture agreement. The proceedings have been brought before the International Chamber of Commerce in Paris with the intention of bringing a resolution to the continuing difference between the partners regarding Terramin’s proposal for developing the Tala Hamza project as set out in the Definitive Feasibility Study (DFS) which was completed and submitted in October 2010. The arbitration tribunal is expected to be appointed in the September 2013 quarter.

The Oued Amizour exploration license expired on 26 August 2011. The license is required to undertake additional drilling on the site. Agence Nationale du Patrimoine Minier, the Algerian regulator, have advised that the renewal of the exploration permit will be finalised upon the agreement being reached with the JV partner on the Definitive Feasibility Study (DFS).Recoverability of the carrying amount of the exploration and evaluation assets is dependent on either the successful development and commerical exploration, sale of respective area of interest, or alternatively reaching a settlement agreement through the arbitration process.

NOTE 7: IMPAIRMENT OF NON-CURRENT ASSETS

Original Carrying Amount

Impairment in 2012

Reversal in 2013

in thousands of dollarsExploration and evaluation assets 4,214 (4,214) -

Mining Property and Development 23,113 (13,748) -

Plant and Equipment 28,450 (19,784) 5,565

Total (37,746) 5,565

During the six months ended 30 June 2012, changes were made to the mine plan as a result of a revised estimate of Angas Ore Reserves and Mineral Resources which showed a reduction of mineral reserves resulting from mining depletion and the impact of lower forecast $AUD commodity prices on the economic cut-off grade. Due to this change, total impairment charges of $33.5 million were recognised in respect of mining property and development and associated plant and equipment at the Angas Zinc Mine. In 2013, an independent valuation of the plant based on an estimated salvage value less costs to sell showed a realisable value to be greater than the calculated value in use. As a result, the Group has reassessed the value of the plant and equipment and $5.6 million of the intially recognised impairment has been reversed. This is shown separately in the statement of profit or loss and other comprehensive income.

During the six months ended 30 June 2012, impairment losses of $4.2 million were recognised in relation to the exploration and evaluation assets held in the Fleurieu region. The impairment was triggered for accounting purposes due to a lack of active and significant exploration activities occurring. Due to exploration work taking place in 2013, no further impairment is required.

NOTE 5: PROPERTY, PLANT AND EQUIPMENT

CONSOLIDATED

Freeholdland

$’000

Buildingsand other

infrastructure$’000

Leasehold improve-

ments$’000

Plant andequipment

$’000

MiningProperty and Development

$’000

Construc-tion in

Progress$’000

Mine Reha-bilitation

Assets$’000

Total Property Plant

& Equipment$’000

Opening carrying amount 2,819 14 3 3,465 4,064 237 341 10,943

Additions - - - - - 936 - 936

Transfers - - - 1,149 24 (1,173) - -

Depreciation and amortisation - (8) (3) (3,629) (3,567) - (241) (7,448)

Reversal of Impairment Loss1 - - - 5,565 - - - 5,565

Foreign currency movement - - - (58) - - - (58)

Carrying amount at the end of period 2,819 6 - 6,492 521 - 100 9,938

1. Refer to note 7.


15



NOTE 8: INVENTORIES

30 June2013$’000

31 December2012$’000

Raw materials and consumables (at cost) 2,622 2,805

Work in progress - ore run of mine (at net realisable value) 207 311

Finished goods (at net realisable value) 1,642 4,160

Total inventories at the lower of cost and net realisable value 4,471 7,276

NOTE 9: BORROWINGS

30 June 2013$’000

31 December2012$’000

CurrentLease liabilities1 1,503 1,550Bank loans-secured-Angas Zinc project2 11,519 15,328Convertible Notes3 16,226 19,495

29,248 36,373Non-currentLease liabilities1 81 790Convertible Notes3 15,537 9,630

15,618 10,420

1. Lease liabilities are effectively secured as rights to the leased assets revert to the lessor in the event of default.

2. The Company has a corporate revolving loan facility provided by Investec Bank (Australia) Limited. The Directors expect that, with Asipac’s assistance, a restructure of the debt facility will be agreed with Investec before the due date of 30 September 2013.

3. Asipac Capital Pty Limited (Asipac) holds US$15,050,000 (AU$16.2 million) in five year unlisted convertible redeemable notes issued by the Group with a maturity date of 31 May 2014. The notes are convertible to ordinary equity on certain terms.

An institutional investor holds $5 million in five year unlisted convertible notes issued by the Group with a maturity date of 31 July 2014.

Transaminvest S.A hold US$10.0 million (AU$10.8 million) in 5 year unlisted convertible redeemable notes issued by the Company with a maturity date of 23 September 2014.

Full details of the convertible notes are listed in the 2012 Annual Report. There has been no material changes to the above facilities since the 2012 Annual Report other than those listed above.

NOTE 10: DERIVATIVE FINANCIAL INSTRUMENTS

The Group is exposed to market risk in the form of commodity price risk, foreign currency exchange risk, and interest rate risk. Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to fluctuations in commodity prices, foreign currency rates and interest rates. The carrying value of the derivative financial instruments of the Group are disclosed as follows:

30 June2013$’000

31 December 2012$’000

Current AssetsFoward currency contracts (a) 2 -Commodity contracts(b) 371 -

373 -

Current LiabilitiesCommodity contracts(b) - (1,687)

- (1,687)

(a) In line with Company policy, the Group has a USD hedging programme in place in order to mitigate foreign exchange risk on USD denominated metal sales with fixed metal prices and forward contracts. At the end of the period, USD sold forward against the AUD totalled US$1 million at an average exchange rate of 0.9238 (2012: US$7.8 million).

(b) At period end, the Group has price protection in place in respect of 1,100 tonnes of lead metal fixed at a price of US$2,377/t via a sold forward contract.

The fair value forward currency contracts and commodity contracts have been based on inputs other than quoted prices.


16



NOTE 11: ISSUED CAPITAL

Table of issued capital for the half year ended 30 June 2013:

Type of Share Issue

Number ofOrdinary Shares

on issue

ShareCapital

$’000Opening Balance 718,881,339 143,699Share issue pursuant to facility agreements1 54,975,980 1,300Shares issued in lieu of interest2 15,324,809 345Closing Balance 789,182,128 145,344Share issue costs -Issued Capital 145,344

Table of issued capital for the year ended 31 December 2012:

Type of Share Issue

Number ofOrdinary Shares

on issue

ShareCapital

$’000Opening Balance 210,800,124 133,882Share placement 502,090,083 10,063Shares issued in lieu of interest 5,991,132 395Closing Balance 718,881,339 144,340Share issue costs (641)Issued Capital 143,699

1. During the period the Company issued 54,975,980 shares to financiers with a total fair value of $1,300,000 pursuant to terms of Amendment Deeds.

2. The Company issued 15,324,809 shares to financiers with a total fair value of $345,000 in satisfaction of interest due on Convertible Notes.


17



NOTE 12: SEGMENT REPORTING

For management purposes, the Group is organised into business units based on geography and has two reportable operating segments:

• Australia – Develops and mines zinc and lead deposits.• Northern Africa – Developing a zinc and lead deposit.

No operating segments have been aggregated to form the above reportable operating segments.

Australia Northern Africa Consolidated2013$’000

2012$’000

2013$’000

2012$’000

2013$’000

2012$’000

RevenueExternal Customers 28,497 30,884 - - 28,497 30,884Total Revenue 28,497 30,884 - - 28,497 30,884

ResultsDepreciation and amortisation (7,448) (14,853) - - (7,448) (14,853)Impairment of non-current assets - (37,746) - - - (37,746)Write back of impairment losses 5,565 - - - 5,565 -Loss before income tax (5,810) (56,547) - - (5,810) (56,547)

Income tax expense - - - - - -Loss for the period attributable equity holders of the Company (5,810) (56,547) - - (5,810) (56,547)

Operating assets 29,247 40,051 45,519 42,957 74,766 83,008

Other disclosuresCapital expenditure1 954 2,120 1,191 590 2,145 2,710

1. Capital expenditure consists of additions of property, plant and equipment, mine properties and development and exploration and evaluation assets.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, the Group’s income taxes are managed on a Group basis and are not allocated to operating segments. There are no transactions other than cash funding between reportable segments.


18



NOTE 13: EARNINGS PER SHARE

(a) Basic earnings per shareThe calculation of basic earnings per share at 30 June 2013 was based on the net loss attributable to equity holders of the Company of $5.8 million (2012: loss of $56.5 million) and a weighted average number of ordinary shares outstanding during the period ended 30 June 2013 of 776,243,422 (2012: 211,142,109), calculated as follows:

30 June2013 $’000

30 June2012 $’000

Net loss for the half year (5,810) (56,547)

Issued ordinary shares 789,182,128 212,318,205

Weighted average number of ordinary shares 776,243,422 211,142,109

Basic loss per share (cents) (0.75) (26.78)

(b) Diluted earnings per shareThe calculation of diluted earnings per share does not include potential ordinary shares on issue as to do so would have the effect of reducing the amount of the loss per share.

30 June2013 $’000

30 June2012 $’000

Diluted earnings per share (cents) (0.75) (26.78)

NOTE 14: CONTINGENCIES & COMMITMENTS

No contingent assets or liabilities exist at the reporting date.

(a) Capital expenditure commitments30 June

2013 $’00030 December

2012 $’000

Capital expenditure commitments contracted for:

Within 1 year - 17

Total - 17

(b) Finance leases Commitments in relation to finance leases for the purchases of mining equipment are:

Within 1 year 1,573 1,678

Longer than 1 year and not longer than 5 years 81 808

Minimum lease payments 1,654 2,486

Less: Future Finance Charges 70 146

Total lease liabilities 1,584 2,340

Representing:

Current 1,503 1,550

Non-Current 81 790

1,584 2,340

The interest rate implicit in the various leases vary from 6.7% to 11%.

NOTE 15: RELATED PARTY TRANSACTIONS

The following table provides the total amount of loans from related parties:

Associate

Interest Accrued

$’000

Amounts owed to related Parties

$’000Asipac 2013 235 16,200

2012 - -

Asipac owns 33.71% of the ordinary shares in Terramin (2012:Nil). Mr Sheng is Chairman and Mr Siciliano is Chief Finance Officer of Asipac.

There were no further significant loans or related party transactions between key management personnel and the Company and its subsidiaries during or in existence at the end of the interim period, other than remuneration arrangements which remain in place and are consistent with those disclosed in the 2012 Annual Report.

On 11 June 2013, Martin Janes was appointed Chief Executive Officer of the Company, following the resignation of Nic Clift. Mr Janes receives a total salary package of $350,000 per annum excluding superannuation.

NOTE 16: EVENTS OCCURRING AFTER THE REPORTING PERIOD

On 19 July 2013, the Company announced that it has entered into a binding agreement to acquire 100% of the high grade Bird-in-Hand Gold Project and a portfolio of highly prospective Adelaide Hills exploration tenements from Maximus Resources Limited. It is anticipated that, subject to the required regulatory approvals, the ore will be processed using the existing facilities at Angas which can be modified to process gold ore. The existing tailings dam at Angas has the capacity to hold all the Bird-in-Hand tailings. Terramin has agreed to pay $3,500,000 in upfront and staged payments conditional on the satisfaction of certain project milestones and 25 million ordinary Terramin shares. Terramin has also agreed to pay Maximus a royalty in respect of gold production from the project. In the Directors’ opinion, no further events or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of the Company or the Group, the results of those operations or the state of affairs of the Group in future financial years that have not been otherwise disclosed in this report.


19


Director’s Declaration

The Directors of the Company declare that:

1. The financial statements and notes, as set out on pages 7 to 18:

(a) comply with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations; and

(b) give a true and fair view of the economic entity’s financial position as at 30 June 2013 and of its performance for the half-year ended on that date.

2. In the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in Adelaide the 31st day of August 2013 in accordance with a resolution of the Board of Directors.

Michael Kennedy Kevin McGuinnessChairman Director


20


Independent Review Report to the Members of Terramin Australia Limited


21


Independent Review Report to the Members of Terramin Australia Limited (continued)


22


Independent Review Report to the Members of Terramin Australia Limited (continued)


23



Level 3 70 Hindmarsh Square Adelaide, 5000 South Australia t: +61 8 8213 1415 f: +61 8 8213 1416 e: [email protected] w: www.terramin.com.au

TERRAMIN AUSTRALIA LIMITED

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