Alara Resources Limited
Annual Report 2017

Plain-text annual report

2017 Annual Report Contents About Us Chairman’s Letter Managing Director’s Letter Board of Directors Our Team Projects Overview FY2017 & FY2018 Milestones Financial Summary Full Year Report Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Mineral Licences JORC Competent Persons’ Statements Securities Information Corporate Directory 1 2 3 4 6 8 14 15 16 31 32 33 34 35 36 57 58 63 67 68 69 Mission Statement We will become a mid-tier mineral producer with a focus on mineral deposits and projects in the Middle East region. We will deliver maximum shareholder value through profitable growth, development of low cost operations and through stability and sustainability over time. Core Values Excellence Alara will pursue excellence and will strive for relevant best practice combined with a fit-for-purpose approach through continuous improvement and teamwork in all aspects of our business. To achieve our goals we will ensure our employees and business partners have the appropriate skills and resources to perform their work effectively and efficiently. We will foster an open and supportive environment in all activities and relationships. Respect Alara will show consideration for and value our employees, our Joint Venture and other business partners, our customers, our suppliers, our communities and governments, and the social and physical environment in which we operate. Integrity Alara and its employees are committed to fairness and honesty and will operate with transparency and accountability at all levels of the business. About Us Daris & Al Hadeetha Copper-Gold Projects (Oman) Khnaiguiyah Zinc-Copper Project (Saudi Arabia) Head Office: Perth, Australia For the past 10 years, Alara Resources’ primary activities have been in mineral exploration and resource development, particularly in the burgeoning mining sectors of the Middle East. Having completed two positive feasibility studies, Alara is now focused on building its project portfolio in Oman, with the aim of further increasing its resource base and becoming a profitable mineral producer. The past year has seen the announcement of Alara’s maiden Ore Reserve estimate for the Washihi deposit at the Al Hadeetha Copper-Gold Project in Oman. An updated environmental report is currently under review, pre-requisite to receiving mining approval. Alara Resources Limited ABN: 27 122 892 71912017 Annual Report Chairman’s letter The stage is set for FY2018 to be Alara’s best year yet. James D Phipps Non-Executive Chairman FY2017 saw an improved global environment for commodities, in particular those relevant to Alara’s copper mining exploration projects in Oman, with copper up 35%. It also saw licensing process improvements in both Oman and Saudi Arabia, improvements which Alara’s management team are exploiting to advance the Company’s interests in those jurisdictions. Finally FY2017 also saw the announcement of a maiden ore reserve and an 81% increase in our Indicated Resource at our Al Hadeetha Copper-Gold Project in Washihi, Oman. FY2018 will be pivotal for Alara, as it makes the transition from pure exploration towards a mix of exploration and production. Key milestones for FY2018 will include the:  Licensing of our Al Hadeetha Project;  Commencement of mine construction of our Al Hadeetha Project; and  Construction of our first mineral processing plant in Oman. Efforts to expand the Company’s portfolio of exploration projects are afoot, although the first priority of the board and management for FY2018 is to secure the Washihi Mining Licence for the Al Hadeetha Project and to be fully prepared to move out smartly as soon as that licence is issued. This means having in place the financing, EPC, operations and other contractual arrangements necessary to succeed when the licence is issued. Management is making excellent progress on these matters. I thank my fellow board members for their invaluable input throughout the year and for their disciplined approach towards realising our mission of becoming a mid-tier mineral producer with a focus on mineral deposits and projects in the Middle East region, while delivering maximum shareholder value through profitable growth, development of low cost operations and through stability and sustainability over time. For their outstanding efforts in this regard, and for their constant exemplification of our core values of excellence, respect and integrity, I acknowledge and thank our CEO, Justin Richard, and the rest of our management team. The stage is set for FY2018 to be an exciting year for Alara – one which I look forward to sharing with our shareholders. James D Phipps Alara Resources Limited ABN: 27 122 892 71922017 Annual Report Managing Director’s letter The Company is on the verge of constructing its first mineral processing plant in Oman. 2017 marked the tenth anniversary of Alara Resources’ listing on the Australian Stock Exchange. After starting with projects in Australia, Chile and Peru, in 2010 Alara acquired an interest in its first JV Copper Project in Oman. For the next seven years, the Company’s primary focus was on its middle-east projects. Over 50,000m of exploratory drilling was completed in Saudi Arabia and Oman, culminating in two bankable feasibility studies and JORC Ore Reserve estimates1. The Company is now on the verge of constructing its first mineral processing plant in Oman2. Despite some approval processes taking longer than anticipated, the Company’s JV projects continue to edge forward, with a string of recent approvals in Oman boding well for environmental clearance and grant of the pending mining licence at Washihi. Governments in the gulf region are continuing to implement change to promote foreign investment, particularly into the mining sector. Mining has been identified as a key growth area to diversify the economy and reduce reliance on oil related revenues. Alara’s JV projects are propped ready to capitalise on these initiatives as we enter the next wave of development. Alara participated in two Australian business delegations to Saudi over the last year3. These visits with government and industry leaders explored avenues of mutual interest and collaboration between Australia and Saudi Arabia, especially in the mining sector. Key government decisions are still to be made, but the Khnaiguiyah Project has been identified as a ‘priority project4. During the last financial year, Alara completed an infill drilling program and upgraded resource estimate in Oman. The updated resource model included an 81% increase in the Indicated Resource estimate5. In December 2016, the Company announced a maiden ore reserve estimate for the Al Hadeetha Copper-Gold Project (Washihi site)6. Since then, progress has been made with regard to project finance, offtake, CSR, improved water supply options and project cost savings. Copper prices are up 35% since last year’s annual report and growing supply deficits indicate continuing price support, if not further rises. In light of these and other positive developments, the way is prepared for Alara’s seven year investment into mineral exploration in Oman to pay off, and pave the way for further development of adjoining and nearby exploration licences, including Mullaq, Al Ajal and Daris which show clear evidence of ancient copper mining activity. Until then, we’re persistently working toward grant of a mining licence, until that perseverance is rewarded. Justin Richard 1 Refer Alara’s ASX Announcements dated 18 April 2013, 30 April 2013, 23 December 2015, 1 April 2016 and 15 December 2016. 2 A 1Mtpa copper concentration plant - refer Alara’s ASX Announcement dated 1 April 2016. 3 First business delegation was led by the Hon Stephen Ciobo MP, Minister for Trade, Tourism and Investment and the second by the Hon Keith Pitt MP, Assistant Minister for Trade, Tourism and Investment. Delegation visits included Saudi government ministers, Saudi Arabian Mining Company Ma’aden, and other key government and industry bodies with interests in the mining sector. 4 CEDA oversee government mechanisms to make Saudi Vision 2030 a reality and target potential obstacles or delays, including through the Project Management Office established to identify and facilitate development of ‘priority projects’. 5 The increase was from 6.84MT@ 0.9%Cu and 0.17g/t Au to 12.39MT@ 0.89%Cu & 0.22g/t Au (using 0.25% Cu cut-off). Refer Alara’s ASX Announcement dated 19 September 2016. 6 Refer Alara’s ASX Announcement dated 15 December 2016. Alara Resources Limited ABN: 27 122 892 71932017 Annual Report Board of Directors James D Phipps B.A. (Philosophy), J.D. (Law) Non-Executive Chairman of the Board A business lawyer by background, Mr Phipps is a strategic adviser and business executive with decades of international and Middle East experience. During the last decade, Mr Phipps has served in a variety of board and management leadership roles in a variety of sectors including mining, heavy industry (tissue paper manufacturing), consumer products, sports talk radio, and sports entertainment (English football). Mr Phipps currently chairs Shout TV, Inc. and Flashvote, Inc., Lindon, Utah, businesses in the sports entertainment, fan engagement, consumer activation and social media space. Mr Phipps has experience in corporate turnarounds and has served as chief executive or general manager at a number of companies in a turn-around capacity. He brings experience to the board in the context of Alara's G.C.C. endeavours, where Mr Phipps has been involved one way or another for over two decades. Justin Richard LLB, MBA, FCSA, FCIS Managing Director Mr Richard joined Alara in 2011 and in 2013 relocated from Perth to Riyadh as Alara’s Country Manager for the Middle East. In 2015, he was appointed Managing Director and is currently based in Oman. Prior to joining Alara, Mr Richard worked as Senior Commercial Officer with Bateman Engineering (Australia), Corporate Counsel for UGL Limited’s resources division and as a lawyer in Minter Ellison’s Construction, Engineering and Infrastructure group. Before entering the legal profession, Mr Richard enjoyed a successful career in private enterprise as Managing Director of Irrigate Australia. Mr Richard holds a MBA from London Business School, a Bachelor’s degree in Law from University of Western Australia and is a Fellow of the Governance Institute of Australia. Alara Resources Limited ABN: 27 122 892 71942017 Annual Report Vikas Jain MBA Non-Executive Director Mr Jain holds an MBA obtained in the USA and as a wealth of experience encompassing around 15 years in the field of mineral exploration and allied activities, including open-pit mining. Mr Jain is currently Managing Director and CEO of the Indian company South West Pinnacle Exploration P/L, a company he founded in 2006 and under his leadership grew to become a leading exploration company in India. After starting in mineral exploration, South West Pinnacle has since added coal-bed methane production, transportation, geophysical logging and other geological activities to its domain. Atmavireshwar Sthapak BASc, MTech (Applied Geology) Executive Director Mr Sthapak is a geologist specialising in mineral resource exploration and evaluation studies. He joined Alara in 2011, making valuable contributions to the Company as an Exploration Manager and a Study Manager based in Muscat, including discovery of large VMS copper mineralisation extensions at the Washihi project in Oman. Prior to Alara, Mr Sthapak’s career spanned 10 years with ACC / ACC-CRA Ltd, and 10 years with Rio Tinto (Australasia) where he was awarded a Rio Tinto Discovery Award in 2009. He has worked on world class deposits, including Mt. Isa type copper deposits in Australia, and copper, gold and diamond mines on four continents. Ian Gregory BBus, FGIA, FCIS, F Fin, MAICD Company Secretary Mr Gregory is a professionally well-connected Director and Company Secretary with over 30 years’ experience in the provision of company secretarial, governance and business administration services with listed and unlisted companies in a variety of industries, including oil and gas, exploration, mining, mineral processing, banking and insurance. He also has expertise which includes launching successful start-up operations through the development of the company secretarial role and board reporting processes. Mr Gregory currently consults on company secretarial and governance matters to a number of listed companies. Prior to founding his own consulting Company Secretarial business in 2005 Mr Gregory was the Company Secretary of Iluka Resources Ltd (6 years), IBJ Australia Bank Ltd Group, the Australian operations of The Industrial Bank of Japan (12 years), and the Griffin Coal Mining Group of companies (4 years). He is a past member and Chairman of the Western Australian Branch Council of Governance Institute of Australia (GIA) and has also served on the National Council of GIA. Alara Resources Limited ABN: 27 122 892 71952017 Annual Report Our Team Justin Richard (MBA, LLB, FCSA, FCIS) Joined Alara in August 2011 Managing Director Based in Oman As a corporate lawyer and business manager, Mr Richard has played a key role in establishing and maintaining Alara’s international joint venture operations, including new business relationships to facilitate ongoing project development in the region. After joining Alara in Australia as General Counsel, he relocated to Riyadh in 2013 as Country Manager for the Middle East. Atmavireshwar Sthapak (BASc, MTech (Applied Geology)) Joined Alara in November 2011 Executive Director Based in Oman Mr Sthapak joined Alara as an Exploration Manager and Study Manager, and is a geologist specialising in mineral resource exploration and evaluation studies. His valuable contributions include the discovery of large VMS copper mineralisation extensions at the Al Hadeetha Project (Washihi) in Oman. Ian Gregory (BBus, FGIA, FCIS, F Fin, MAICD) Joined Alara in June 2015 Company Secretary Based in Australia Mr Gregory is a Director and Company Secretary with over 30 years of experience in the provision of company secretarial, governance and business administration services with listed and unlisted companies in a variety of industries, including oil and gas, exploration, mining, mineral processing, banking and insurance. He also has expertise which includes launching successful start-up operations through the development of the company secretarial role and board reporting processes. Tina Newbon (AdvDipAcc, AdvDipBusAdmin) Joined Alara in January 2011 Office Manager Based in Australia Mrs Newbon is a highly experienced administrator and joined Alara as Executive Assistant to the CEO. Since then she has been involved in many aspects of the business including office administration, human resources, corporate affairs, finance, leasing/relocation, ASX requirements and IT management. Mrs Newbon has over 15 years of experience in administration, finance and projects including BGC Blokpave, Shell Australia, WA Gas Networks and BHP Billiton. Rexin Kamilas (MCom, Tally) Joined Alara in November 2011 Finance & Administration Manager Based in Oman Mr Kamilas is an experienced administrator who has been working for over eight years in Oman. He joined Alara as an Administrative and Accounting Assistant and has since been involved in business procurement, auditing, leasing, travel, insurance, banking and payroll for the Company’s projects in both Saudi Arabia and Oman. Alara Resources Limited ABN: 27 122 892 71962017 Annual Report Mindy Ku (BSc, CPA) Contractor, joined Alara in April 2017 Corporate Services Based in Australia Mrs Ku is the Managing Director of Corporate Board Services. She has over 15 years of international experience in financial analysis, financial reporting (annual report, half-year, quarterly), management accounting, compliance reporting, board reporting, company secretarial services and office management across multiple jurisdictions (Australia, Malaysia, UK, Sweden and Norway) including ASX listed companies, public and private companies. Jason Williams Contractor, joined Alara in June 2013 Technical Adviser Based in Australia Mr Williams is a skilled professional with over 15 years of experience in project management across multi-discipline teams including sub-contractor management within the Power Generation, Oil & Gas and Mining/Mineral Processing industries. His experience includes estimating, tender evaluation, contract management/scope of work development, fabrication management, construction management and commissioning, maintenance and shutdown work on a wide range of facilities within these industries. Venkatesan Ganesan (MBA, CPA, ACA, ACS, CBV) Contractor, joined Alara in September 2017 Corporate Financial Adviser Based in Dubai Mr Ganesan runs a boutique advisory services firm in Dubai and India. He has spent over 15 years in a Big-4 financial advisory practice and has advised a variety of industry clients on transaction matters. He also spent six years in an upstream E&P business at the start of his career. Mr Ganesan is currently assisting Alara in optimising development stage capital. Al Hadeetha Investments LLC Partnership commenced in 2011 Joint Venture Partner – Al Hadeetha Copper-Gold Project Based in Oman Al Hadeetha Investments LLC is a private company owned by the family of Sayyid Khalid Al Busaidi, an entrepreneur-cum-educationist, who is the Founder and Chairman of Al Nab’a Group. Al Nab’a is one of the largest employers and a Top 10 brand in Oman. The Group’s services include Integrated Facilities Management, Soft Services, Catering Services, Infrastructure development and Equipment trade. Al Tamman Trading Establishment LLC Partnership commenced in August 2010 Joint Venture Partner – Daris Copper-Gold Project Based in Oman Al Tamman Trading Establishment LLC is a wholly owned subsidiary company of Muscat Overseas Group. The Company’s objective is to utilise the mineral wealth of Oman, including the development and improvement of the mineral industry, its products and derivatives and related industries. Al Tamman’s operations include chromite, manganese and marble mining. Alara Resources Limited ABN: 27 122 892 71972017 Annual Report Projects Overview Alara currently has three Projects in the Middle East:  Al Hadeetha Copper-Gold Project in Oman, Feasibility Study completed, Mining Licence pending  Daris Copper-Gold Project in Oman, Scoping Study, Advanced Scoping Study completed, Mining Licence application submitted  Khnaiguiyah Zinc-Copper Project in Saudi Arabia, Feasibility Study completed, Mining Licence to be re- issued Alara Resources Limited ABN: 27 122 892 71982017 Annual Report Oman Al Hadeetha Copper-Gold Project (formerly Washihi Project) Alara – 70%, Al Hadeetha Investments LLC – 30%, of Al Hadeetha Resources LLC Drilling at Washihi site The Al Hadeetha Project is located approximately 80–160km east and southeast of Alara's Daris Copper-Gold Project, and comprises three Exploration Licences which cover 105km2, and applications for three Mining Licences. In December 2016, Alara announced a maiden JORC Ore Reserve statement of 9.7Mt (@ 0.88 Cu and 0.22g/t Au) based on the Washihi JORC Resource statement (using 0.25% Cu cut-off) of:   Indicated Resource of 12.39MT @ 0.89%Cu & 0.22g/t Au Inferred Resource of 3.71MT @ 0.79%Cu & 0.23g/t Au Shallow gold mineralisation in Gossan was also identified (Inferred Resource of 0.31MT @ 0.51g/t Au) outside the main ore body. Mining Licences are issued by the Public Authority of Mining (PAM) after PAM has reviewed and approved the Project, and clearance/no objections letters are received from other relevant authorities. PAM completed its review early 2017 and is now working with the Company to secure necessary clearances. Clearance from the Ministry of Environment and Climate Affairs (MECA) is still outstanding. Alara Resources Limited ABN: 27 122 892 71992017 Annual Report Last year MECA officials attended a community consultation meeting last year, with a good show of support for the Project coming from the community. The latest correspondence from MECA gave instruction to re- submit the Project’s Environmental Impact Assessment (EIA) through an accredited environmental consultancy firm. The Omani firm that first prepared the EIA was approved at the time of the original submission, but later discontinued providing environmental services and their accreditation lapsed. Consequently, Alara engaged another firm to review and update the EIA. The revised EIA was completed and resubmitted to MECA in September 2017. The new regulations provide for MECA to respond within thirty days. Alara is currently preparing draft documentation to establish a Public Private Partnership (PPP) for construction and maintenance of a STP supplying water to the Project and local community. Under the PPP proposal, a 25km pipeline from the town of Al Mudhaibi will deliver 2,500 cubic metres of treated water per day to the site. When compared with the previously identified water source 75km away from the Project site (Nizwa), the Al Mudhaibi pipeline route covers relatively terrain with manageable relief. Significant flat, barren environmental/community benefits will also derive from a fivefold increase over the existing town water treatment capacity. Washihi site visit with government officers and community leaders Alara Oman team with Al Hadeetha JV partner, Sayyid Khalid Al Busaidi, Chairman of the Al Nab’a Group Alara Resources Limited ABN: 27 122 892 719102017 Annual Report Daris Copper-Gold Project Alara – 50% with right to increase to 70%, Al Tamman Trading Establishment LLC – 50%, of Daris Resources LLC The Daris Copper-Gold Project is located 150km west of Muscat, the capital of Oman. The Project comprises one Mineral Excavation Licence of approximately 587km2 with applications for two Mining Licences covering 4.5km2. The Project has a JORC Mineral Resource Estimate (Measured and Indicated) of 240Kt sulphide ore at 2.37% Cu and 183Kt oxide ore at 0.72% Cu. The proximity to the capital city, a paved highway and copper extraction facilities (at Washihi) should assist in the development of early cash flow from any discoveries made in the Project area. Alara Resources Limited ABN: 27 122 892 719112017 Annual Report The Daris Project has received clearance from the Ministry of Environment and Climate Affairs. For Daris mineral resources which also include copper oxide ore, we will pursue new developments in metal extraction involving leaching processes with process generated biodegradable substances. This technology is known to have been tested in Australia and South America and has demonstrated very high recoveries of metal from both low grade copper oxide and sulphide ores. Daris Project site Alara’s MD with Daris JV Partner, Mohammed Salahuddin Khan (GM) and the Al Tamman team Alara Resources Limited ABN: 27 122 892 719122017 Annual Report Saudi Arabia Khnaiguiyah Zinc-Copper Project The Khnaiguiyah Zinc-Copper Project is located adjacent to bitumen road ~200km west of Riyadh (capital city) near the major Riyadh to Jeddah highway. The Project previously comprised one Mining Licence which was cancelled in or about December 2015 before zinc mining operations commenced7. The Definitive Feasibility Study for the Khnaiguiyah Project was completed in April 2013, and confirmed a technically and financially robust project with a mine life of 13 years at 2Mtpa, projected US$257M capex, 2.8 year pay-back, A$2.074B Life of Mine (LOM) revenues and A$0.873B LOM EBITDA (at base case Zn/Cu prices). In August 2017, Alara’s legal representative attended a hearing before the Board of Grievances in Riyadh and reported the judge decided to submit the case for consideration. The next hearing was scheduled for late October. Alara is continuing to pursue other channels to advance the Khnaiguiyah Project to production, including those established with the assistance of Austrade and the recent Australian business delegation to Riyadh. 7 For further details refer Alara’s ASX Announcement dated 23 December 2013. Alara Resources Limited ABN: 27 122 892 719132017 Annual Report FY2017 Milestones Achieved In-fill drilling results announced Completion of renounceable rights issue (closed oversubscribed) July 2016 August 2016 Upgraded mineral resource estimate for Al Hadeetha Copper Gold Project (Washihi) September 2016 Maiden Ore Reserve statement for Al Hadeetha Copper Gold Project (Washihi) December 2016 Project Management Consultant appointed Offtake Agreement Project approval from Ministry of Tourism December 2016 March 2017 June 2017 FY2018 Projected Oman Milestones Project approval from Ministry of Heritage and Royal Omani Police Achieved Environmental Approval for Al Hadeetha Project Mining Licence issued for Al Hadeetha Project EPC contractor appointed Project construction commenced Mining Licence issued for Daris Project Alara Resources Limited ABN: 27 122 892 719142017 Annual Report Financial Summary  Full year total comprehensive income was $0.6m compared to a loss of $31.7m in 2016.  The reduced loss in 2017 is primarily the result of the additional provision for impairment of exploration expenditure of $33.9 million on the Khnaiguiyah Zinc-Copper Project in Saudi Arabia in 2016. The underlying Loss Before Income Tax was $460,774 compared to a loss of $32.4 million in 2016.  Interest income revenue of $37,753 was lower than the $199,708 recorded in 2016 due to lower cash balances held for the full year and lower interest rates during 2017.  Total Operating Expenses were $556,704 in 2017 compared to $292,905 in 2016 as a result of additional consultants engaged.  The Consolidated Entity had a closing cash balance as at 30 June 2017 of $1.9 million.  Consolidated net cash outflows were higher in 2017 than 2014 due to additional exploration and evaluation work carried out on the Al Hadeetha Copper-Gold Project and the Daris Copper-Gold Project in Oman. Key Financial Numbers Consolidated Profit & Loss Summary Total revenue Total expenses Loss before tax Income tax benefit Other comprehensive income/(loss) Total comprehensive income/(loss) Consolidated Balance Sheet Summary Total assets Total liabilities Net assets Total equity Consolidated Cash Flow Summary Operating activities Investing activities Financing activities Opening cash Net cash movement Effect of exchange rate changes on cash Closing cash Consolidated EPS Basic earnings/(loss) per share – cents Diluted earnings/(loss) per share – cents Weighted average ordinary shares 2017 $’000 38 (499) (461) 56 (179) (584) 2017 $’000 10,018 (432) 9,586 9,586 2017 $’000 (557) (813) 1,901 1,366 531 (11) 1,886 2017 (0.04) (0.04) 585m 2016 $’000 200 (32,614) (32,414) 301 365 (31,748) 2016 $’000 9,083 (618) 8,465 8,465 2016 $’000 (293) (1,632) 2,367 937 442 (13) 1,366 2016 (7.42) (7.42) 412m Alara Resources Limited ABN: 27 122 892 719152017 Annual Report The Directors present their report on Alara Resources Limited (Company or Alara or AUQ) and the entities it controlled at the end of or during the financial year ended 30 June 2017 (the Consolidated Entity). REVIEW OF OPERATIONS Al Hadeetha Copper-Gold Project (Alara - 70%: Al Hadeetha Investments LLC – 30%, of Al Hadeetha Resources LLC (AHR)) Oman Completion of a successful rights issue in Q1 helped move Alara to announce its maiden Ore Reserve for the Al Hadeetha Copper Gold project in Oman1. The announcement followed a revision of the Resource Model which incorporated an 81% increase in Indicated Copper Gold Mineral Resource (from 6.84MT@ 0.90%Cu and 0.17g/t Au to 12.39MT@ 0.89%Cu & 0.22g/t Au (using 0.25% Cu cut-off))2. Updates to the Al Hadeetha feasibility study took account of 1) the new mining schedule (incorporating the mineral resource upgrade), 2) the maiden ore reserve statement, and 3) copper price forecast trends. Base Case financial modelling on the Feasibility study for the Al Hadeetha Copper Gold Project shows robust returns as follows:       Forecast Revenue US$ 452 million over 10.4 years. Forecast EBITDA over the same period US$ 159 million Pre-Start Capital Expenditure of US$ 49.74 million FCFF – Free Cash flow available in 10.4 years US$ 96 million Project NPV of US$ 39 million Forecast IRR of 26% The study built on ~$10 million in prior exploration and study work completed by Alara between 2011 and 2015, including scoping study, options analysis study, advanced scoping study and an update to the Advanced Scoping Study. The base case used a flat copper price of $5,593/t (cf. recent copper prices of >$6,000/t3) indicating the Project has potential to deliver even better returns if copper price forecasts and underlying supply constraints are realised. A summary of case scenarios and associated financial returns are summarised in Tables 1 and 2 below. Table 1. Copper and Gold prices used for Base Case, Market Case and High Case Case Scenario Base Case Market Case High Case World Bank forecast copper metal price (nominal) for 2019 fixed for Life of Mine. Economist Intelligence Unit forecast price for Copper until 2019 and thereafter flat. Higher of Economist Intelligence Unit and World Bank Copper price forecast until 2025, thereafter flat for remaining Project life Table 2. Financial Summary of Base Case, Market Case and High Case. Cu US$/t Au US$/oz 5,593 for Life of Mine $1,200/oz Minimum 5,907 and maximum 6,171 Minimum 5,593 and maximum 7,000 $1,200/oz $1,200/oz Total Revenue US$ millions Total Opex US$ millions EBITDA US$ millions NPV US$ millions Case Scenario Base Case Market Case 452 479 High Case *NPV is based on a discount rate of 8.92% 521 271 271 271 159 186 228 39 55 73 IRR 26% 33% 37% During the period, the Public Authority of Mining approved the project with issuance of a mining licence now pending, subject to permitting by the other regulatory authorities. The Ministry of Environment and Climate Affairs (‘MECA’) have issued instructions asking for the Environmental Impact Assessment (EIA) report (originally submitted in 2013 by a consultancy firm approved by MECA) to be submitted through a consultant listed on MECA’s 2017 register. MECA also advised that new regulations require MECA to provide its response to the EIA within 30 days of submission. In accordance with the provisions of the Shareholders Agreement, Al Hadeetha Resources LLC entered a Loan Agreement with Al Hadeetha Investments LLC for up to US$2 million to help cover its operating expenses. 1 2 3 Refer Alara’s ASX Announcement of 15 December 2016. Refer Alara’s ASX Announcement dated 19 September 2016. LME cash price was $6,353/t at 11 August 2017. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 2 Alara Resources Limited ABN: 27 122 892 719162017 Annual Report Daris Copper-Gold Project (Alara - 50% with option to increase to 70%: Al Tamman Trading Establishment LLC – 50%, of Daris Resources LLC (DRL)) Oman The Daris project comprises two high grade deposits within the 587km² exploration licence, which includes two mining licence applications covering 4.5km². The project fits well with a ‘hub and spoke’ model, which provides for processing of Daris ore at the Al Hadeetha copper concentration plant to be built 100km to the south. However, new leach processing methods are also being investigated which could allow Daris to operate as a stand- alone project. The processing method has been tested on deposits in Australia and South America and yielded very high recoveries of metal from both low grade copper oxide and sulphide ores. Khnaiguiyah Zinc-Copper Project Saudi Arabia The Khnaiguiyah project includes the development and operation of an open-cut zinc-copper mine and associated infrastructure over an approximate 13-year mine life. Alara Resources has invested over $30m into this project, including:   over $3 million in payments to its former joint venture partners for transfer of the Mining Licence to the joint venture company; and over $23 million to produce a definitive feasibility study with Proved and Probable JORC Reserves of 26.1Mt at 3.3% Zn and 0.24% Cu and a Base Case Project NPV of $172 million at a zinc price of US$2,315/t4. The project reached an impasse after the former licence holder, United Arabian Mining Company LLC, wrote to the Deputy Minister for Mineral Resources asking to halt transfer of the mining licence to the JV company, as required under the JV agreement. In December 2015, Alara announced it had been advised of the cancellation of the Khnaiguiyah Mining Licence. Alara funded and is now in the unique position of holding the only bankable feasibility study for the project, and remains open to any reasonable solution for advancing the project into production. Other Developments Oman and Saudi Arabia Previous public reports have referred to the establishment of Mining Development Oman (‘MDO’), a consortium of four state-owned agencies (i.e. the State General Reserve Fund, the Oman Investment Fund, the Oman Oil Company and the Oman National Investments Development Company) with a focus on both upstream and downstream activities in the mining sector. Earlier this year, Sheikh Abdullah bin Salim Al Salmi, President of Oman’s stock market regulator CMA, reported MDO was in the process of obtaining a licence from the Public Authority for Mining, and that MDO would have a paid-up capital of OMR100 million (AUD$350m) and be offering 40 per cent of its shares to the investing public. It is also reported that Oman’s Public Authority of Mining has engaged SRK Consulting and supporting firms Mayer Brown and Wood Mackenzie to prepare a mining strategy aimed at attracting local and international investment. In March, Alara announced it had entered an offtake agreement with Statdrome Pte Ltd. Under the agreement, annual concentrate production of approximately 35,000 wmt would be supplied to Statdrome at regular intervals. The agreement includes provision for a pre-payment of US$6m to assist in funding project construction and leaves open the possibility of supplying concentrate to an Omani smelter if applicable. Board of Grievances During the period, there were several hearings before the Board of Grievances relating to claims between Manajem and Alara that commenced in 20145. At the latest hearing, the parties confirmed they were not seeking to make further submissions and the judge agreed to consider the facts that are now before the court. The next hearing is scheduled on 21 October 2017. 4 5 Compared to the LME price of >$3,000/t as at 28 August 2017 and the High Case of US$2,373/t (see page 21 of the 2013 Annual Report). For further background, refer to Alara’s ASX Announcement dated 3 May 2016. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 3 Alara Resources Limited ABN: 27 122 892 719172017 Annual Report Corporate Information Alara is a company limited by shares that is incorporated and domiciled in Western Australia. Cash Position The Company’s cash position at 30 June 2017 was A$1.9 million (30 June 2016: A$1.4 million). In August 2016, a total of 72,287,857 shares were offered to eligible shareholders under a Rights Issue at an issue price of $0.02 (2 cents) per share. The Rights Issue closed oversubscribed showing a high level of support from the Company’s shareholders and new investors. The Company opted to not issue additional shares and returned unsubscribed funds to investors who missed the closing deadline for shortfall shares. Funds were utilised to incorporate additional 5.55mt high grade copper and gold mineralisation into the Resource Model and declare a maiden Reserve for the Al Hadeetha Copper-Gold project6 and advance mining licence applications in Oman. During the period, the Company’s partner in the Al Hadeetha project started contributing to the JV operating costs. During the year ended 30 June 2017, the Company requested drawdowns of OMR 63,706 (equivalent of A$215,939). On 9 July 2017, the Company requested a further drawdown of OMR 35,718 (A$121,070). Share Options During the year, the Company issued 19,214,695 fully paid ordinary shares. These were pursuant to the exercise of listed options exercisable at $0.02 per option expiring 30 April 2017. Company Officer Changes On 31 March 2017 Elizabeth Hunt resigned as a Company Secretary with Ian Gregory (appointed 30 June 2015) continuing in that role. The Company acknowledged the valued contributions made by Ms Hunt and Mining Corporate since August 2015. Effective 1 April 2017, Corporate Board Services took over the outsourced company secretarial and accounting services for the Company. Mr Jason Williams was appointed alternate director for the Companies wholly owned subsidiaries. Principal Activities The principal activities of entities within the Consolidated Entity during the year were the exploration, evaluation and development of mineral exploration and evaluation in Oman. Significant Changes in the State of Affairs There have been no significant changes in the state of affairs of the Consolidated Entity save as otherwise disclosed in this Directors’ Report or the financial statements and notes thereto. Dividends No dividends have been paid or declared during the financial year. 6 Refer Alara’s ASX announcement dated 15 December 2016. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 4 Alara Resources Limited ABN: 27 122 892 719182017 Annual Report Operating Results Consolidated Total revenue Total expenses Loss before tax Income tax benefit Loss after tax Loss per Share 2017 $ 37,753 (498,527) (460,774) 55,840 (404,934) 2016 $ 199,708 (32,613,851) (32,414,143) 301,306 (32,112,837) Consolidated Basic and Diluted profit/(loss) per share (cents) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic loss per share 2017 (0.04) 2016 (7.42) 584,929,630 412,463,414 Cash Flows Consolidated Net cash flow used in operating activities Net cash flow from investing activities Net cash flow provided by financing activities Net change in cash held Cash held at year end Financial Position Outlined below is the Consolidated Entity’s Financial Position and prior year comparison. Consolidated Entity Cash Trade and other receivables Exploration and evaluation Other assets Total assets Trade and other payables Financial liabilities Provisions Total liabilities Net assets Issued capital Reserves Accumulated losses Parent interest Non-controlling interest Total equity 2017 $ (556,704) (596,781) 1,684,566 531,081 1,885,556 2017 $ 1,885,556 72,299 7,996,698 63,854 10,018,407 115,368 215,939 100,676 431,983 2016 $ (292,905) (1,631,567) 2,366,780 442,308 1,365,691 2016 $ 1,365,691 318,260 7,327,012 72,482 9,083,445 439,903 439,903 178,082 617,985 9,586,424 8,465,460 65,169,992 208,726 (53,568,320) 11,810,398 (2,223,974) 9,586,424 63,485,425 367,395 (53,309,794) 10,543,026 (2,077,566) 8,465,460 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 5 Alara Resources Limited ABN: 27 122 892 719192017 Annual Report Securities in the Company Issued Capital Fully paid ordinary shares and unlisted options on issue in the Company as at the date of this report are as follows: Fully paid ordinary shares Unlisted Options Quoted on ASX 597,517,589 Total 597,517,589 Listed options – – Total 597,517,589 597,517,589 During and subsequent to the end of the financial year, the following unlisted options were issued: № of Options Date of Issue Description of Options Exercise Price Date of Issue Original Expiry Date 3,000,000 9 March 2017 $0.04 (expiring 9 March 2020) Unlisted Options7 $0.04 9 March 2017 9 March 2020 Likely Developments and Expected Results The Consolidated Entity intends to continue exploration, evaluation and development activities in relation to its mineral exploration and evaluation in future years. The results of these activities depend on a range of technical and economic factors and also industry, geographic and company specific issues. In the opinion of the Directors, it is inappropriate to make predictions on the likely results of the Consolidated Entity’s activities in Saudi Arabia prior to the Khnaiguiyah Mining licence being secured. In Oman, there is an expectation that construction of the Al Hadeetha Copper Gold Project will commence, subject to the Washihi Mining Licence being granted later in 2017. Environmental Regulation and Performance The Consolidated Entity holds licences and abides by Acts and Regulations issued by the relevant mining and environmental protection authorities of the various countries in which the Consolidated Entity operates. These licences, Acts and Regulations specify limits and regulate the management of discharges to the air, surface waters and groundwater associated with exploration and mining operations as well as the storage and use of hazardous materials. There have been no significant breaches of the Consolidated Entity's licence conditions. 7 On 9 March 2017, the Company issued 3,000,000 unlisted options exercisable at $0.04 expiring on or before 9 March 2020. This was granted under the Company’s Employee Share Option Plan approved by shareholders at the 19 November 2014 Annual General Meeting. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 6 Alara Resources Limited ABN: 27 122 892 719202017 Annual Report Board of Directors The names and details of the directors of the Company in office during the financial year and until the date of this report are as follows. Names, qualifications, experience and special responsibilities of current Directors James D. Phipps BA (Philosophy), JD (Law) Previously Alternate Director to HRH Prince Abdullah (from 28 October 2013 to 1 November 2014) Non-Executive Chairman Appointed Chairman 31 July 2015; Appointed Director 1 November 2014; Experience James Phipps is a strategic advisor, business executive and lawyer with extensive international and Middle East experience. James serves as principal advisor to His Royal Highness Prince Abdullah bin Mosaad bin Abdulaziz Al Saud, providing strategic advice relative to a worldwide portfolio of businesses, properties and investments. James was (until May 2016) Co-Chairman of Sheffield United Football Club, the first "United" and the first association football club worldwide and a founding member of the English Premier League. James also chairs Flashvote Inc., Shout TV, Inc., Delaware corporations engaged in the sports entertainment business. James sits on the board of the publicly listed Saudi Paper Manufacturing Company, the leading manufacturer of tissue paper products in the Gulf Region. James has experience in corporate turnarounds and has served as chief executive or general manager at different companies in a turn-around capacity. James brings experience to the Board in the context of Alara's Middle East and G.C.C. endeavours. Special Responsibilities Chairman of the Remuneration and Nomination Committee and Member of the Audit Committee. Other Directorships in Listed Companies in Past 3 Years  Saudi Paper Manufacturing Company (Saudi Stock Exchange (Tadawul): Code 2300) – November 2011 to June 2016. Justin J Richard LLB, GradDipACG, MBA, FGIA, FCIS Managing Director Appointed 16 June 2015 Experience Justin Richard had been the Company’s General Counsel since 2011 when he took up residence in the Middle East as Alara’s Country Manager for Saudi Arabia. His role later expanded to include management of Alara’s joint venture companies in Oman and has played a key role in establishing and developing the Company’s joint venture businesses and stakeholder relationships. After being appointed CEO in 2015, he lead the company through capital restructuring to complete a feasibility study and maiden ore reserve statement for the Al Hadeetha Copper Gold project in Oman. He has also established new relationships in Saudi Arabia to navigate the impasse on the Khnaiguiyah Zinc Copper project in preparation for the mining licence being reissued. Prior to joining Alara, Mr Richard worked with UGL Resources and Minter Ellison Lawyers. He has a MBA from London Business School, a law degree from the University of Western Australia and is a Fellow of the Governance Institute in Australia and the UK. Alternate Director On 22 June 2015, Justin Richard appointed Ian E. Gregory as his Alternate Director8. Ian Gregory was also appointed joint Company Secretary on 30 June 2015.9 Ian Gregory’s experience and qualifications are set out below. Other Directorships in Listed Companies in Past 3 Years  None Ian E. Gregory BBus, FGIA, FCIS, F Fin, MAICD Appointed 30 June 2015 Experience Ian Gregory is a highly regarded Director and Company Secretary with over 30 years’ experience in the provision of governance and business administration services covering a variety of industries, including oil and gas, exploration, mining, mineral processing, banking and insurance. Prior to founding his own consulting business in 2005, he was the Company Secretary of Iluka Resources Limited (ASX:ILU), IBJ Australia Bank Ltd Group, the Australian operations of The Industrial Bank of Japan, and the Griffin Coal Mining Group of companies. Ian Gregory is a past member of the Western Australian Branch Council of Governance Institute of Australia (GIA), a past Chairman of that body and has also served on the National Council of GIA. Ian Gregory is also currently Company Secretary of a number of other ASX listed and private companies and consults on company secretarial and governance matters to various listed and unlisted companies. Other Directorships in Listed Companies in Past 3 Years  Phoenix Gold Limited 8 9 Pursuant to Clause 10.1 of the Company’s Constitution. Refer Alara’s 1 July 2015 ASX Announcement: Appointment of Joint Company Secretary. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 7 Alara Resources Limited ABN: 27 122 892 719212017 Annual Report Atmavireshwar Sthapak Bachelor of Applied Science and Master of Technology, Applied Geology Executive Director Appointed 22 September 2015 as Non-Executive Director Appointed 3 February 2016 as Executive Director Experience Atmavireshwar Sthapak is a geologist specializing in mineral resource exploration and evaluation studies. He joined Alara in 2011, making valuable contributions to the Company as an Exploration Manager and a Study Manager based in Muscat; including discovery of large VMS copper mineralisation extensions at the Washihi project in Oman and recent resource upgrade at Washihi. Prior to Alara, his career spanned 10 years with ACC / ACC-CRA Ltd, and 10 years with Rio Tinto (Australasia) where he was awarded a Rio Tinto Discovery Award in 2009. He has worked on world class deposits; including Mt. Isa type copper deposits in Australia, and copper, gold and diamond mines on four continents. Special Responsibilities Member of the Audit Committee and Remuneration and Nomination Committee. Other Directorships in Listed Companies in Past 3 Years  None Vikas Jain MBA Non-Executive Director Appointed 6 April 2016 Experience Vikas Jain holds an MBA obtained in the USA and has a vast experience of around 15 years in the field of mineral exploration and allied activities. He is currently Managing Director and CEO of the Indian Company South West Pinnacle Exploration P/L, founded by him in 2006. Under his leadership and able guidance, this company has grown manifold and at present is a premier exploration company in India. The company started primarily as mineral exploration company and gradually added Coal Bed Methane (CBM) exploration and production, Geophysical logging, transportation and other geological activities into its domain. He also has wide experience in open cast mining of various minerals and allied activities through his earlier stint with other companies as well as existing exposure in other family run business/interest. Special Responsibilities Chairman of the Audit Committee and Member of the Remuneration and Nomination Committee. Other Directorships in Listed Companies in Past 3 Years  None Retired Directors All the directors held office during the year and up to the date of this report. Company Secretaries Ian E. Gregory BBus, FGIA, FCIS, F Fin, MAICD Experience Refer to Mr Gregory’s details on the previous page. Retired Company Secretary The following Company Secretary resigned during the financial year: Elizabeth Hunt – 31 August 2015 to 31 March 2017.  Appointed 30 June 2015 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 8 Alara Resources Limited ABN: 27 122 892 719222017 Annual Report Directors’ Interests in Shares and Options As at the date of this report, the relevant interests of the Directors in shares and options held in the Company are: James Phipps Justin Richard Atmavireshwar Sthapak Vikas Jain Ian Gregory Fully Paid Ordinary Shares – 30,757,03710 1,951,45111 34,285,23012 – Options – – – – – Directors’ Meetings The number of meetings and resolutions of directors (including meetings of committees of directors) held during the year and the number of meetings (or resolutions) attended by each director were as follows: Name of Director Appointment / Resignation James Phipps Justin Richard Atmavireshwar Sthapak Vikas Jain Ian Gregory (Alternate Director to Justin Richard) Appointed 1 November 2014; appointed member of Audit Committee and Remuneration Committee 30 June 2016 Appointed 16 June 2015 Appointed 22 September 2015 Appointed 6 April 2016 Appointed 22 June 2015 Board Audit Committee Meetings Attended Maximum Possible Meetings Meetings Attended Maximum Possible Meetings Remuneration and Nomination Committee Maximum Possible Meetings Meetings Attended 10 12 11 9 – 12 12 12 12 – 4 6 5 6 6 6 2 2 2 2 2 2 Audit Committee The Audit Committee currently comprises Non-Executive Directors, Vikas Jain (as Chairman) (since 6 April 2016), James Phipps (since 30 June 2015) and Atmavireshwar Sthapak (since 28 September 2016). The Audit Committee has a formal charter to prescribe its objectives, duties and responsibilities, access and authority, composition, membership requirements of the Committee and other administrative matters. Its function includes reviewing and approving the audited annual and reviewed half-yearly financial reports, ensuring a risk management framework is in place, reviewing and monitoring compliance issues, reviewing reports from management and matters related to the external auditor. The Audit Committee Charter may be viewed and downloaded from the Company’s website. 10 Refer Alara’s 13 June 2017 ASX Announcement: Appendix 3Y. 11 Refer Alara’s 10 May 2017 ASX Announcement: Appendix 3Y. 12 Refer Alara’s 9 August 2016 ASX Announcement: Appendix 3Y. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 9 Alara Resources Limited ABN: 27 122 892 719232017 Annual Report REMUNERATION REPORT The following information in the Remuneration Report has been audited. This Remuneration Report details the nature and amount of remuneration for each Director and Company Executive (being a company secretary or senior managers with authority and responsibility for planning, directing and controlling the major activities of the Company or Consolidated entity, directly or indirectly) (Key Management Personnel) of the Consolidated Entity in respect of the financial year ended 30 June 2017. Key Management Personnel Directors James Phipps Justin Richard Atmavireshwar Sthapak Vikas Jain Ian Gregory Executives Ian Gregory Elizabeth Hunt Non-Executive Director (appointed 1 November 2014); Non-Executive Chairman (from 31 July 2015); Alternate Director to HRH Prince Abdullah (until 1 November 2014) Managing Director (appointed 16 June 2015); Country Manager, Saudi Arabia and Oman Executive Director (first appointed 22 September 2015) Non-Executive Director (appointed 31 March 2016) Alternate Director to Justin Richard (appointed 30 June 2015) Company Secretary (appointed 30 June 2015) Company Secretary (appointed 31 August 2015, resigned: 31 March 2017) Remuneration and Nomination Committee The Remuneration and Nomination Committee currently comprises Non-Executive Directors, James Phipps (member since 30 June 2015 and Chairman since 31 July 2015) and Vikas Jain (since 6 April 2016) and Atmavireshwar Sthapak (since 28 June 2016). The Remuneration and Nomination Committee has a formal charter to prescribe its purpose, key responsibilities, composition, membership requirements, powers and other administrative matters. The Committee has a remuneration function (with key responsibilities to make recommendations to the Board on policy governing the remuneration benefits of the Managing Director and Executive Directors, including equity- based remuneration and assist the Managing Director to determine the remuneration benefits of senior management and advise on those determinations) and a nomination function (with key responsibilities to make recommendations to the Board as to various Board matters including the necessary and desirable qualifications, experience and competencies of Directors and the extent to which these are reflected in the Board, the appointment of the Chairman and Managing Director, the development and review of Board succession plans and addressing Board diversity). The Remuneration and Nomination Committee Charter may be viewed and downloaded from the Company’s website. Remuneration Policy The Board (with guidance from the Remuneration and Nomination Committee) determines the remuneration structure of all Key Management Personnel having regard to the Consolidated Entity’s strategic objectives, scale and scope of operations and other relevant factors, including experience and qualifications, length of service, market practice, the duties and accountability of Key Management Personnel and the objective of maintaining a balanced Board which has appropriate expertise and experience, at a reasonable cost to the Company. The Board recognises that the performance of the Company depends upon the quality of its Directors and Executives. To achieve its financial and operating objectives, the Company must attract, motivate and retain highly skilled Directors and Executives. The Company embodies the following principles in its remuneration framework:   Provide competitive rewards to attract and retain high calibre Executives. Structure remuneration at a level that reflects the Executive’s duties and accountabilities and is competitive. Remuneration Structure The structure of non-executive director and executive director remuneration is separate and distinct. Director Remuneration Objective The Board seeks to set aggregate remuneration (for directors) at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Company’s constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at the General Meeting held on 26 May 2011 where shareholders approved an aggregate remuneration of $275,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each non-executive director receives a fee for being a director of the Company and for sitting on relevant board committees. The fee size is commensurate with the workload and responsibilities undertaken. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 10 Alara Resources Limited ABN: 27 122 892 719242017 Annual Report Managing Director and Senior Executive Remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to ensure total remuneration is competitive by market standards. Formal employment contracts are entered into with the Managing Director and senior executives. Details of these contracts are outlined later in this report. Consequences of Company Performance on Shareholder Wealth In considering the Company’s performance and benefits for shareholder wealth, the Board have regard to the following information in relation to the current financial year and the previous four financial years: Basic earnings/(loss) per share – cents Dividend – cents per share 2017 (0.04) – 2016 (7.42) – 2015 (0.67) – 2014 0.30 – 2013 (2.84) – Net Profit/(Loss) attributable to members (258,526) (30,595,088) (1,661,238) 732,003 (6,579,965) Market Capitalisation $8.4m $14m $4m $12.1m $12.1m Fixed Remuneration During the financial year, the Key Management Personnel of the Company are paid a fixed base salary/fee per annum plus applicable employer superannuation contributions, as detailed below (Details of Remuneration Provided to Key Management Personnel). Performance Related Benefits/Variable Remuneration Performance related benefits/variable remuneration payable to Key Management Personnel is disclosed in the table Details of Remuneration Provided to Key Management Personnel. Justin Richard was paid expat allowances, including house, school, travel and medical insurance and Atmavireshwar Sthapak was paid allowances including house, travel and medical insurance. Special Exertions and Reimbursements Pursuant to the Company’s Constitution, each Director is entitled to receive:  Payment for the performance of extra services or the undertaking of special exertions at the request of the Board and for the purposes of the Company. Payment for reimbursement of all reasonable expenses (including traveling and accommodation expenses) incurred by a Director for the purpose of attending meetings of the Company or the Board, on the business of the Company, or in carrying out duties as a Director.  Post-Employment Benefits Other than employer contributions to nominated complying superannuation funds or gratuity of Key Management Personnel (where applicable) and entitlements to accrued unused annual and long service leave (where applicable), the Company does not presently provide retirement benefits to Key Management Personnel. The Company notes that shareholder approval is required where a Company proposes to make a “termination payment” (for example, a payment in lieu of notice, a payment for a post-employment restraint and payments made as a result of the automatic or accelerated vesting of share based payments) in excess of one year’s “base salary” (defined as the average base salary over the previous 3 years) to a director or any person who holds a managerial or executive office. Long Term Benefits Other than early termination benefits disclosed in ‘Employment Contracts’ below, Key Management Personnel have no right to termination payments save for payment of accrued unused annual and long service and/or end of service leave (where applicable). ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 11 Alara Resources Limited ABN: 27 122 892 719252017 Annual Report Details of Remuneration Provided to Key Management Personnel Short-term benefits Cash payments Key Management Person Perfor- mance based At risk STI Options related Salary, and fees Allo- wances(i) Cash Bonus Non- cash(ii) Other(iii) Super- annuation Fixed 2017 % % % % $ $ Executive Directors: Justin Richard Atmavireshwar Sthapak – – 100% 100% Non-Executive Directors: James Phipps Vikas Jain Ian Gregory Executives: – – – – 100% 100% – – Company Secretary: Elizabeth Hunt(v) – 100% – – – – – – – – – – – – – – 282,150 205,383 148,341 24,723 75,000 50,000 – – 113,655 – – – – – Notes: (i) Allowances is based on the executive agreement and may include company car allowance, rent allowance and security bond, and school allowance received from subsidiaries and related joint venture entities. (ii) Non-cash benefits include net annual leave expensed but not paid during the year. Post-employment benefits Other long-term benefits Equity based benefits End of Service(iv) / Termi- nation $ 11,484 6,179 – – – – – Other Options Total $ – – – – – – – $ – – – – – – $ 595,349 182,876 75,000 50,000 – – – 113,655 $ – – – – – – – $ $ 17,695 78,637 3,633 – – – – – – – – – – – $ – – – – – – – (iii) Other short-term benefits consist of exchange gain/(loss) due to foreign currency translation from Oman Riyal to Australia Dollars and Saudi Riyal to Australian Dollars on Mr Richard’s salary. (iv) Under Omani labour law, an End of Service Gratuity is payable upon termination of employment. (v) Resigned on 31 March 2017, remuneration paid to Mining Corporate Pty Ltd. Post-employment benefits Other long-term benefits Equity based benefits Key Management Person Perfor- mance based At risk STI Options related Salary, and fees Allo- wances(i) Cash Bonus Fixed Short-term benefits Cash payments 2016 % % % % $ $ Non- cash(ii) $ Other(iii) Super- annuation $ Executive Directors: Justin Richard H. Shanker Madan(v) Atmavireshwar Sthapak(vi) – 58% 100% 42% 28% 72% Non-Executive Directors: Ian Williams(vii) James Phipps Vikas Jain(viii) Ian Gregory Executives: – – – – – 100% 100% 100% – – Company Secretary: Victor Ho(ix) Elizabeth Hunt(x) – – 100% 100% – – – – – – – – – – – – – – – – – – – – $ – – 282,150 247,234 77,220 – 118,137 12,521 50,716 4,167 72,977 11,806 – – 16,781 111,947 – – – – – – – – – – – – – – 7,039 65,055 – – – – – – – – – – – – – – – – – – End of Service(iv) / Termi- nation $ 6,843 – – $ – – – 2,177 18,750 – – – – – – – – – – – – Other Options Total $ – – – – – – – – – – $ – – – – – – – – – – $ 608,321 77,220 181,374 25,094 72,977 11,806 – – 16,781 111,947 Notes: (i) Allowances is based on the executive agreement and may include company car allowance, rent allowance and security bond, and school allowance received from subsidiaries and related joint venture entities. (ii) Non-cash benefits include net annual leave expensed but not paid during the year. (iii) Other short-term benefits consist of exchange gain/(loss) due to foreign currency translation from Oman Riyal to Australia Dollars and Saudi Riyal to Australian Dollars on Mr Richard’s salary. (iv) Under Omani labour law, an End of Service Gratuity is payable upon termination of employment. (v) Appointed 31 July 2015 and resigned 31 March 2016. (vi) Appointed 2 September 2015 with remuneration and allowances commencing January 2016. (vii) Resigned 31 July 2015, termination payment was accrued at 30 June 2015. (viii) Appointed 6 April 2016 (ix) Resigned 31 August 2015. (x) Appointed 31 August 2015, remuneration paid to Mining Corporate Pty Ltd. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 12 Alara Resources Limited ABN: 27 122 892 719262017 Annual Report Equity Based Benefits The Company has not provided equity based benefits (e.g. grant of shares or options) to Key Management Personnel during the financial year. The Company received approval by shareholders at the 2016 AGM for issuing a total of up to 72,000,000 options with varying exercise prices, expiry dates and milestones to be reached to James Phipps, Justin Richard and Atmavireshwar Sthapak (including grant of mining licence and financing for the Al Hadeetha Project, and commencing construction on the Khnaiguiyah Zinc Copper Project). Refer to the ASX Announcement for further detail. Milestones 2, 3 and 4 were not reached in time and no options were granted to Key Management Personnel during the year. There were 4,250,000 shares issued as a result of the exercise of options previously held by Key Management Personnel during the financial year. Options Lapsed During the Year During and subsequent to the end of the financial year, listed options lapsed without being exercised, as detailed below: № of Options Date of Lapse Description of Listed Options 228,792,805 30 April 2017 $0.02 (14 October 2015) Listed Options13 Exercise Price Date of Issue Expiry Date $0.02 14 October 2015 30 April 2017 Details of Shares Held By Key Management Personnel 2017 Name of Director/KMP Justin Richard(i) Atmavireshwar Sthapak(ii) James Phipps Vikas Jain Ian Gregory Elizabeth Hunt(iii) Balance at 1 July 2016 20,500,000 – – 30,000,000 – – Balance at appointment Ordinary Fully Paid Shares Net change 10,257,037 900,000 – 4,285,230 – – Balance at cessation – Notes: (i) Mr Richard submitted a request for trading approval to the Company on 3 occasions during the relevant period. (ii) Mr Sthapak submitted a request for trading approval to the Company on 2 occasions during the relevant period. (iii) Resigned 31 March 2017. Ordinary Fully Paid Shares 2016 Name of Director/KMP Justin Richard(i) H. Shanker Madan(ii) Atmavireshwar Sthapak(iii) Ian Williams(iv) James Phipps Vikas Jain(v) Ian Gregory Victor Ho(vi) Elizabeth Hunt(vii) Balance at 1 July 2015 – 713 100,000 – – – – Balance at appointment – 713 – – 30,000,000 – Net change 20,500,000 – – – – – – – – Balance at cessation 713 100,000 – Balance at 30 June 2017 30,757,037 900,000 – 34,285,230 – Balance at 30 June 2016 20,500,000 713 – 100,000 – 30,000,000 – – – Notes: (i) Mr Richard submitted a request for trading approval to the Company on at least 1 occasion during the relevant period. (ii) Appointed 31 July 2015 and resigned 31 March 2016 (iii) Appointed 22 September 2015 (iv) Resigned 31 July 2015 (v) Appointed 6 April 2016 (vi) Resigned 31 August 2015 (vii) Appointed 31 August 2015. The following Key Management Personnel retired during the 2017 year with balances at cessation:  Elizabeth Hunt – 31 March 2017: Nil shares 13 Refer Alara’s 10 May 2017 ASX Announcement: Appendix 3B ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 13 Alara Resources Limited ABN: 27 122 892 719272017 Annual Report Granted and vested during year – Vested and exercisabl e at 30 June 2017 – – – – – – – – – – – Granted and vested during year – Vested and exercisabl e at 30 June 2016 20,000,000 Details of Options Held By Key Management Personnel 2017 Balance at 1 July 2016 20,000,000 Name of Director/KMP Justin Richard Atmavireshwar Sthapak James Phipps Vikas Jain Ian Gregory Elizabeth Hunt(i) Notes: (i) Resigned 31 March 2017. – 30,000,000 – – – 2016 Granted – Exercised 4,250,000 Acquired – – – – – – – – – – – – – – – – Lapsed / Cancelled (15,750,000) – – (30,000,000) – – Balance at Cessation Balance at 30 June 2017 – – – – – – Balance at 1 July 2015 – Balance at Cessation Balance at 30 June 2016 20,000,000 – – – Grante d – Exercised – Acquired 20,000,000 Lapsed / Cancelled – Name of Director/KMP Justin Richard H. Shanker Madan(i) Atmavireshwar Sthapak(ii) Ian Williams(iii) James Phipps Vikas Jain(iv) Ian Gregory Victor Ho(v) Elizabeth Hunt(vi) Notes: (i) Appointed 31 July 2015 and resigned 31 March 2016; (ii) Appointed 22 September 2015 (iii) Resigned 31 July 2015 (iv) Appointed 6 April 2016 (v) Resigned 31 August 2015 – – 30,000,000 – – – – 30,000,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 30,000,000 – – – (vi) Appointed 31 August 2015. Employment Contracts (a) Managing Director/CEO – Justin Richard    Justin Richard has been the Company’s Legal & Commercial Manager since August 2011 and also Alara’s Country Manager in Saudi Arabia (since November 2012) and Oman (since December 2013). He was appointed as Managing Director on 16 June 2015. The terms of his employment contract were carried over from his previous agreement contract with no increase in salary or allowance, the material terms of which are as follows: One year term with annual base salary of A$282,150 (subject to adjustments for exchange rate variations* for salaries paid in Saudi  Arabian Riyals and Omani Rials); Expatriate allowances (including housing, school and travel) totalling approximately A$175,000 per annum (subject to adjustments for exchange rate variations*); Provision of medical insurance cover; Standard annual leave (20 days) and personal/sick leave (10 days paid) entitlements plus any additional entitlements prescribed under Saudi Arabian Labour Law; 60 days long service leave after 6 years of service and 5 days long service leave in respect of each year of service thereafter; Compulsory statutory ‘end of service’ payments due under Saudi Arabian Labour and Omani Law; One month’s notice of termination within first six months, subject to repatriation provisions which total approximately three months remuneration; and As announced on 31 March 201614 and as approved by shareholders at the 2016 AGM, it was resolved that the Company will grant the following options as a long term incentive subject to the following milestones being achieved: o o o Milestones 2, 3 and 4 were not reached in time and no options were granted during the year. Tranche 1 – 7,000,000 $0.04 options expiring 31 October 2016 upon attainment of Milestone 2; Tranche 2 – 7,000,000 $0.04 options expiring 31 December 2016 upon attainment of Milestone 3; and Tranche 3 – 10,000,000 $0.10 options expiring 31 December 2016 upon attainment of Milestone 4.     *Exchange rate variations based on rates prevailing at the time the expatriate assignments commenced. 14 Refer Alara’s 31 March 2016 ASX Announcement: Board Changes and Employee Options ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 14 Alara Resources Limited ABN: 27 122 892 719282017 Annual Report (b) Technical Director – Atmavireshwar Sthapak Atmavireshwar Sthapak was appointed Non-Executive Director on 22 September 2015 and subsequently appointed as Executive Director on 3 February 2016. The material terms of his contract are as follows15: An annual base salary of OMR 43,200 per annum;  Use of a company car;  Provision of medical insurance cover;  Allowances totalling approximately OMR 7,695 per annum;  Compulsory statutory ‘end of service’ payments due under Oman Labour Law;  Standard annual leave (20 days) and personal/sick leave (10 days paid) entitlements plus any additional entitlements prescribed under  Oman Labour Law; Separate bonus totalling up to OMR 28,000 paid in 2016; Either party may terminate this agreement by providing one months’ notice; and As announced on 31 March 201616 and as approved by shareholders at the 2016 AGM, it was resolved that the Company will grant the following options as a long term incentive subject to the following milestones being achieved: o o o Milestones 2, 3 and 4 were not reached in time and no options were granted during the year. Tranche 1 – 7,000,000 $0.04 options expiring 31 October 2016 upon attainment of Milestone 2; Tranche 2 – 7,000,000 $0.04 options expiring 31 December 2016 upon attainment of Milestone 3; and Tranche 3 – 10,000,000 $0.10 options expiring 31 December 2016 upon attainment of Milestone 4.    (c) Other Executives Details of the material terms of formal employment/consultancy agreements (as the case may be) between the Company and other Key Management Personnel during the period are as follows: Key Management Personnel and Position(s) Held Elizabeth Hunt Company Secretary Relevant Date(s) Base Salary/Fees per annum Other Terms 31 August 2015 (commencement date) 31 March 2017 (resignation date) $132,000 per annum (including accounting services) payable to Mining Corporate Pty Ltd, of which Elizabeth Hunt is the managing director.  Notice period 1 month. Other Benefits Provided to Key Management Personnel No Key Management Personnel has during or since the end of the financial year, received or become entitled to receive a benefit, other than a remuneration benefit as disclosed above, by reason of a contract made by the Company or a related entity with the Director or with a firm of which he is a member, or with a Company in which he has a substantial interest. There were no loans to directors or executives during the reporting period. Employee Share Option Plan The Company has an Employee Share Option Plan (the ESOP) which was most recently approved by shareholders at the 2014 Annual General Meeting held on 19 November 2014. The ESOP was developed to assist in the recruitment, reward, retention and motivation of employees (excluding Directors) of Alara. Under the ESOP, the Board will nominate personnel to participate and will offer options to subscribe for shares to those personnel. A summary of the terms of ESOP is set out in Annexure A to Alara’s Notice of Annual General Meeting and Explanatory Statement dated 2 October 2014. No securities were issued to KMP under the ESOP during the financial year (2016: Nil). Director Loan Agreement There were no loan agreements with the Directors during the year. On 9 September 2015 Justin Richard entered into a loan agreement with the Consolidated Entity providing a $250,000 loan facility to the Consolidated Entity. $60,000 was drawn down by the Consolidated Entity during the relevant period and was settled upon the rights issue announced 12 November 2015. 20,000,000 shares were issued to Justin Richard at the issue price of $0.01, raising $200,000 in capital and extinguishing the $60,000 loan payable with no interest charged. The loan was fully repaid during the year. Securities Trading Policy The Company has a Securities Trading Policy, a copy of which is available for viewing and downloading from the Company’s website. Voting and Comments on the Remuneration Report at the 2016 Annual General Meeting At the Company’s most recent (2016) Annual General Meeting (AGM), a resolution to adopt the 2016 Remuneration Report was put to a vote and passed unanimously on a show of hands with the proxies received also indicating majority (89.7%) support in favour of adopting the Remuneration Report.17 No comments were made on the Remuneration Report at the AGM. 15 Refer Alara’s 3 February 2016 ASX Announcement: Appointment of Executive Director 16 Refer Alara’s 31 March 2016 ASX Announcement: Board Changes and Employee Options 17 Refer Alara’s 23 November 2016 ASX Announcement: Results of Meeting ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 15 Alara Resources Limited ABN: 27 122 892 719292017 Annual ReportEngagement of Remuneration Consultants The Company has not engaged any remuneration consultants to provide remuneration recommendations in relation to Key Management Personnel during the year. The Board has established a policy for engaging external Key Management Personnel remuneration consultants which includes, inter alia, that the Remuneration and Nomination Committee be responsible for approving all engagements of and executing contracts to engage remuneration consultants and for receiving remuneration recommendations from remuneration consultants regarding Key Management Personnel. This concludes the audited Remuneration Report. Directors’ and Officers’ Insurance The Company insures Directors and Officers against liability they may incur in respect of any wrongful acts or omissions made by them in such capacity (to the extent permitted by the Corporations Act 2001) (D&O Policy). Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. Directors’ Deeds In addition to the rights of indemnity provided under the Company’s Constitution (to the extent permitted by the Corporations Act), the Company has also entered into a deed with each of the Directors (Officer) to regulate certain matters between the Company and each Officer, both during the time the Officer holds office and after the Officer ceases to be an officer of the Company, including the following matters:  The Company’s obligation to indemnify an Officer for liabilities or legal costs incurred as an officer of the Company (to the extent permitted by the Corporations Act). Subject to the terms of the deed and the Corporations Act, the Company may advance monies to the Officer to meet any costs or expenses of the Officer incurred in circumstances relating to the indemnities provided under the deed and prior to the outcome of any legal proceedings brought against the Officer.  Legal Proceedings on Behalf of Consolidated Entity (Derivative Actions) Except for the legal proceedings in Saudi Arabia as noted above, no person has applied for leave of a court to bring proceedings on behalf of the Consolidated Entity or intervene in any proceedings to which the Consolidated Entity is a party for the purpose of taking responsibility on behalf of the Consolidated Entity for all or any part of such proceedings and the Consolidated Entity was not a party to any such proceedings during and since the financial year. Auditor Details of the amounts paid or payable to the Company’s auditors (Bentleys Audit & Corporate (WA) Pty Ltd for 30 June 2017 and Moore Stephens Chartered Accountants for the Oman entity audits) for audit and non-audit services (paid to a related party of Bentleys Audit and Corporate (WA) Pty Ltd) provided during the financial year are set out below (refer to Note 5): Audit and Review Fees $ Fees for Other Non-Audit Services $ 38,181 – Total $ 38,181 The Board is satisfied that the provision of non-audit services by the auditors during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Board is satisfied that the nature of the non-audit services disclosed above did not compromise the general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. Bentleys Audit & Corporate (WA) Pty Ltd continue in office in accordance with section 327B of the Corporations Act 2001. Auditor’s Independence Declaration A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 forms part of this Directors Report and is set out on page 17. This relates to the Audit Report, where the Auditors state that they have issued an Independence Declaration. Events Subsequent to Reporting Date The Directors are not aware of any matters or circumstances at the date of this Directors’ Report, other than those referred to in this Directors’ Report or the financial statements or notes thereto, that have significantly affected or may significantly affect the operations, the results of operations or the state of affairs of the Company and Consolidated Entity in subsequent financial years. Signed for and on behalf of the Directors in accordance with a resolution of the Board: Justin Richard Managing Director 19 September 2017 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 16 Alara Resources Limited ABN: 27 122 892 719302017 Annual ReportALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 17 Alara Resources Limited ABN: 27 122 892 719312017 Annual Report Revenue Provision for impairment of exploration expenditure Personnel Occupancy costs Finance expenses Corporate expenses Extinguishment of financial liability Administration expenses LOSS BEFORE INCOME TAX Income tax benefit PROFIT/(LOSS) FOR THE YEAR Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Total other comprehensive income/(loss) Note 3 11 12,14 2017 $ 37,753 2016 $ 199,708 – (33,906,473) (379,902) (51,355) (3,043) (61,985) 236,413 (238,655) (460,774) 55,840 (404,934) (211,170) (35,198) (3,949) (173) 1,713,737 (170,625) (32,414,143) 301,306 (32,112,837) (178,669) (178,669) 364,946 364,946 TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR (583,603) (31,747,891) Profit/(loss) attributable to: Owners of Alara Resources Limited Non-controlling interest Total comprehensive income/(loss) for the year attributable to: Owners of Alara Resources Limited Non-controlling interest (258,526) (146,408) (404,934) (437,195) (146,408) (583,603) (30,595,089) (1,517,748) (32,112,837) (30,230,143) (1,517,748) (31,747,891) Earnings/Loss per share: Basic earnings/(loss) per share cents Diluted earnings/(loss) per share cents 6 6 (0.04) (0.04) (7.42) (7.42) The accompanying notes form part of this consolidated financial statement. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 18 Alara Resources Limited ABN: 27 122 892 719322017 Annual Report CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON CURRENT ASSETS Property, plant and equipment Exploration and evaluation TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provisions TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Financial liabilities Provisions TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Parent interest Non-controlling interest TOTAL EQUITY The accompanying notes form part of this consolidated financial statement. Note 7 8 9 10 11 12 13 14 13 15 16 2017 $ 1,885,556 72,299 9,728 1,967,583 54,126 7,996,698 8,050,824 2016 $ 1,365,691 318,260 7,979 1,691,930 64,503 7,327,012 7,391,515 10,018,407 9,083,445 115,368 75,450 190,818 215,939 25,226 241,165 439,903 130,296 570,199 – 47,786 47,786 431,983 617,985 9,586,424 8,465,460 65,169,992 208,726 (53,568,320) 11,810,398 (2,223,974) 9,586,424 63,485,425 367,395 (53,309,794) 10,543,026 (2,077,566) 8,465,460 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 19 Alara Resources Limited ABN: 27 122 892 719332017 Annual Report Issued Capital Note Options Reserve $ $ Foreign Currency Translation Reserve $ Accumulated Losses Non-Controlling Interest $ $ Total $ Balance as at 1 July 2015 61,018,659 358,980 2,449 (23,073,685) (559,818) 37,746,585 Foreign currency translation reserve Net income and expense recognised directly in equity Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Share placement Share placement costs Options lapsed during the year 15 15 16 – – – – 2,580,075 (113,309) – – – – – – – (358,980) Balance as at 30 June 2016 63,485,425 Balance as at 1 July 2016 63,485,425 Foreign currency translation reserve Net income and expense recognised directly in equity Loss for the year Total comprehensive loss for the year – – – – Transactions with owners in their capacity as owners: Share placement Share placement costs Options issued during the year 15 15 16 1,830,052 (145,485) – Balance as at 30 June 2017 65,169,992 – – – – – – – – 20,000 20,000 The accompanying notes form part of this consolidated financial statement. 364,946 364,946 – – – – 364,946 364,946 – (30,595,089) (1,517,748) (32,112,837) 364,946 (30,595,089) (1,517,748) (31,747,891) – – – – – 358,980 – – – 2,580,075 (113,309) – 367,395 (53,309,794) (2,077,566) 8,465,460 367,395 (53,309,794) (2,077,566) 8,465,460 (178,669) (178,669) – – – – (178,669) (178,669) – (178,669) (258,526) (258,526) (146,408) (146,408) (404,934) (583,603) – – – – – – – – – 1,830,052 (145,485) 20,000 188,726 (53,568,320) (2,223,974) 9,586,424 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 20 Alara Resources Limited ABN: 27 122 892 719342017 Annual Report Note CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Income tax refunded/(paid) NET CASHFLOWS USED IN OPERATING ACTIVITIES 7b CASH FLOWS FROM INVESTING ACTIVITIES Payments for plant and equipment Payments for exploration and evaluation activities NET CASHFLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuing ordinary shares Proceeds from exercise of options Costs of issuing ordinary shares Proceeds from borrowings NET CASHFLOWS PROVIDED BY INVESTING ACTIVITIES 2017 $ (895,640) 37,753 – 301,183 (556,704) (1,079) (811,641) (812,720) 1,445,821 384,230 (145,485) 215,939 1,900,505 2016 $ (323,911) 31,041 (35) – (292,905) (28,777) (1,602,790) (1,631,567) 2,480,089 – (113,309) – 2,366,780 NET INCREASE IN CASH AND CASH EQUIVALENTS HELD 531,081 442,308 Cash and cash equivalents at beginning of the financial year Effect of exchange rate changes on cash CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 7 1,365,691 (11,216) 1,885,556 937,192 (13,809) 1,365,691 The accompanying notes form part of this consolidated financial statement. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 21 Alara Resources Limited ABN: 27 122 892 719352017 Annual Report 1. SUMMARY OF ACCOUNTING POLICIES Statement of Significant Accounting Policies The principal accounting policies adopted in the preparation of these financial statements are set out below. The financial report includes the financial statements for the Consolidated Entity consisting of Alara Resources Limited and its controlled and jointly controlled entities. Alara Resources Limited is a company limited by shares, incorporated in Western Australia, Australia and whose shares are publicly traded on the Australian Securities Exchange (ASX). Basis of preparation 1.1. These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretation, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Alara Resources Limited is a for-profit entity for the purposes of preparing the financial statements. Compliance with IFRS The consolidated financial statements of the Consolidated Entity, Alara Resources Limited, also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Reporting Basis and Conventions The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied. Going Concern Assumption The financial report has been prepared on the going concern basis, which contemplates continuity of normal business activities and realisation of assets and settlement of liabilities in the ordinary course of business. During the year the Consolidated Entity incurred an operating loss before tax of $460,774 (2016: $32,414,143), and has a working capital position of $1,776,765 (2016: $1,121,731). The receipt of a research and development rebate of $55,840 was received after the year end. The ability of the Consolidated Entity to continue as a going concern is dependent upon it maintaining sufficient funds for its operations and commitments. The Directors continue to be focused on meeting the Consolidated Entity’s business objectives and are mindful of the funding requirements to meet these objectives. To enable the Consolidated Entity to advance its Projects into production, it would be required to raise funds from debt or equity sources. Should the Consolidated Entity not be able to obtain this funding it has the ability to defer these plans and meet its contractual commitments and manage cash flow in line with its available funds. The Directors consider the basis of going concern to be appropriate given the current cash and working capital position of the Consolidated Entity relative to its fixed and discretionary commitments. As part of the joint venture (JV) arrangement the Group entered into an unsecured loan agreement with Al Hadeetha Investments LLC on 16 April 2017 for a maximum of USD 2 million to assist in the working capital funding requirements. The interest rate will be calculated and accrued monthly at a rate of LIBOR plus two percent per annum. The loan agreement will be in effect for the duration of the JV arrangement. During the year a total of OMR 63,706 (equivalent of A$215,939) was received. On 9 July 2017, the Company requested a further drawdown of OMR 35,718 (A$121,070). The Directors are confident that the Consolidated Entity can continue as a going concern and as such are of the opinion that the financial report has been appropriately prepared on a going concern basis. Principles of Consolidation 1.2. The consolidated financial statements incorporate the assets and liabilities of the subsidiaries of Alara Resources Limited as at 30 June 2017 and the results of its subsidiaries for the year then ended. Alara Resources Limited and its subsidiaries are referred to in this financial report as the Consolidated Entity. All transactions and balances between Consolidated Entity companies are eliminated on consolidation, including unrealised gains and losses on transactions between Consolidated Entity companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Consolidated Entity perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Consolidated Entity. 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 Consolidated Entity. The Consolidated Entity attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 22 Alara Resources Limited ABN: 27 122 892 719362017 Annual Report 1.3. Foreign Currency Translation and Balances Functional and presentation currency The functional currency of each entity within the Consolidated Entity 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 and presentation currency. Transaction 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. 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 equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in profit or loss. Consolidated entity The financial results and position of foreign operations whose functional currency is different from the Consolidated Entity’s presentation currency are translated as follows: (a) assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; (b) income and expenses are translated at average exchange rates for the period; and (c) retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the Consolidated Entity’s 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. Joint Arrangements 1.4. Joint arrangements exist when two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control, in the event the Company does not share control the financials are consolidated (or deconsolidated in the event of loss of control) (refer to 1.2 for further information). The Consolidated Entity’s joint arrangements are currently of one type: Joint operations Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities relating to the arrangement. The activities of a joint operation are primarily designed for the provision of output to the parties to the arrangement, indicating that:   all liabilities are satisfied by the joint participants through their purchases of that output. This indicates that, in substance, the joint participants the parties have the rights to substantially all the economic benefits of the assets of the arrangement; and have an obligation for the liabilities of the arrangement. Leases 1.5. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease. Comparative Figures 1.6. Certain comparative figures have been adjusted to conform to changes in presentation for the current financial year. Critical Accounting Judgements and Estimates 1.7. The preparation of the Consolidated Financial Statements requires Directors to make judgements and estimates and form assumptions that affect how certain assets, liabilities, revenue, expenses and equity are reported. At each reporting period, the Directors evaluate their judgements and estimates based on historical experience and on other various factors they believe to be reasonable under the circumstances, the results of which form the basis of the carrying values of assets and liabilities (that are not readily apparent from other sources, such as independent valuations). Actual results may differ from these estimates under different assumptions and conditions. Exploration and evaluation expenditure The Consolidated Entity’s accounting policy for exploration, evaluation and development expenditure being capitalised include the Daris Project where these costs are expected to be recoverable 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 or otherwise of economically recoverable reserves. In the case of the Al Hadeetha project, a maiden reserve announcement was issued in December 2016. This policy requires management to make certain estimates to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is not possible, the relevant capitalised amount will be written off to the statement of profit or loss and other comprehensive income. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 23 Alara Resources Limited ABN: 27 122 892 719372017 Annual Report Share-based payments transactions The Consolidated Entity measures the cost of equity-settled transactions with Directors and employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes options valuation model, taking into account the terms and conditions upon which the instruments were granted. The related assumptions are detailed in Note 17. The accounting estimates have no impact on the carrying amounts of assets and liabilities but will impact expenses and equity. New, Revised or Amending Accounting Standards and Interpretations Adopted 1.8. The Consolidated Entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Consolidated Entity during the financial year. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. New Accounting Standards and Interpretations Not Yet Mandatory or Early Adopted 1.9. Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Consolidated Entity for the annual reporting period ended 30 June 2017. The Consolidated Entity’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Consolidated Entity, are set out below. AASB 9 Financial Institutions The Standard will be applicable retrospectively 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 that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Based on preliminary analysis the directors anticipate that the adoption of AASB 9 is unlikely to have a material impact on the Group’s financial instruments. AASB 15 Revenue from Contracts with Customers When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Apart from a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non- monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers. The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process: identify the contract(s) with a customer;   identify the performance obligations in the contract(s);  determine the transaction price;  allocate the transaction price to the performance obligations in the contract(s); and  recognise revenue when (or as) the performance obligations are satisfied. The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each prior period presented per AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors (subject to certain practical expedients in AASB 15 ); or recognise the cumulative effect of retrospective application to incomplete contracts on the date of initial application. There are also enhanced disclosure requirements regarding revenue. Given the nature of the Group there is not expected to be a material impact on adoption of this standard. AASB 16 Leases When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The main changes introduced by the new Standard are as follows:  recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets);  depreciation of right-of-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in  principal and interest components; inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using the index or rate at the commencement date;  application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account for all components as a lease; and inclusion of additional disclosure requirements.  The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. The group is currently continuing to assess the impact of these changes. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 24 Alara Resources Limited ABN: 27 122 892 719382017 Annual Report 2. PARENT ENTITY INFORMATION The following information provided relates to the Company, Alara Resources Limited, as at 30 June 2017. Statement of Financial Position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Options Reserve Accumulated losses Total equity Profit/(loss) for the year Other comprehensive income for the year Total comprehensive income /(loss) for the year 3. LOSS FOR THE YEAR The operating loss before income tax includes the following items of revenue and expense: Revenue Interest 2017 $ 1,690,036 7,995,422 9,685,458 73,808 25,226 99,034 9,586,424 65,169,992 20,000 (55,603,568) 9,586,424 (583,603) – (583,603) 2016 $ 1,397,117 6,888,540 8,285,657 132,017 47,786 179,803 8,465,460 63,485,425 – (55,019,965) 8,465,460 (31,388,911) – (31,388,911) 2017 $ 37,753 37,753 2016 $ 199,708 199,708 ACCOUNTING POLICY NOTE Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured. All revenue is stated net of the amount of goods and services tax (“GST”) except where the amount of GST incurred is not recoverable from the Australian Tax Office. The following specific recognition criteria must also be met before revenue is recognised:  Interest Revenue – Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.  Other Revenues – Other revenues are recognised on a receipts basis. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 25 Alara Resources Limited ABN: 27 122 892 719392017 Annual Report 4. INCOME TAX EXPENSE (a) Income tax expense Current tax benefit Deferred tax expense Total income tax benefit per statement of profit or loss and other comprehensive income (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax Tax at the Australian tax rate of 27.5% (2016: 30%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: 2017 $ (55,840) – (55,840) 2016 $ (301,306) – (301,306) (460,774) (32,414,143) (126,713) (9,724,243) Other non-assessable income Non-deductible expenses (Refund) of Research & Development Claim Tax losses not brought to account Income tax benefit (c) Deferred tax assets Tax losses Other Potential tax benefit at 30% Set-off deferred tax liabilities Net deferred tax assets (d) Deferred tax liabilities Exploration and evaluation expenditure Set-off deferred tax assets Potential tax liability at 30% (e) Deferred tax assets not recognised Deferred tax assets have not been recognised in relation to the following matters: Tax losses Capital losses (1,048) 123,457 (55,840) 4,304 (55,840) 6,020 392,310 398,330 (398,330) – (398,330) (398,330) 398,330 – 856,569 450,990 1,307,559 (1,214) 9,743,361 (301,306) (17,904) (301,306) 431,547 2,996 434,543 (434,543) – (434,543) (434,543) 434,543 – 923,922 491,989 1,415,911 The benefit of the deferred tax assets not recognised will only be obtained if: (i) The Consolidated Entity derives future income that is assessable for Australian income tax purposes and is of a type and an amount sufficient to enable the benefit of them to be realised; (ii) The Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation in Australia; and (iii) There are no changes in tax law which will adversely affect the Consolidated Entity in realising the benefit of them. The Consolidated Entity has elected to consolidate for taxation purposes and has entered into a tax sharing and funding agreement in respect of such arrangements. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 26 Alara Resources Limited ABN: 27 122 892 719402017 Annual Report 4. INCOME TAX EXPENSE (continued) ACCOUNTING POLICY NOTE Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the notional income tax rate for each taxing jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses (if applicable). Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each taxing jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The amount of deferred tax assets benefits brought to account or which may be realised in the future, is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Consolidated Entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in other comprehensive income or equity are also recognised directly in other comprehensive income or equity. Tax consolidation legislation The Consolidated Entity implemented the tax consolidation legislation. The head entity, Alara Resources Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets (as appropriate) arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements within the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Consolidated Entity. Any differences between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. 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 Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. 5. AUDITOR’S REMUNERATION During the year the following fees were paid or payable for services provided by the auditors to the Consolidated Entity, their related practices and non-audit related firms: Bentleys Audit and Corporate (WA) Pty Ltd – Auditors of the Consolidated Entity (Audit and review of financial reports) Grant Thornton Audit Pty Ltd – Auditors of the Consolidated Entity (Audit and review of financial reports) Grant Thornton Australia Limited – related practice of Grant Thornton Audit Pty Ltd (Taxation services) Moore Stephens Chartered Accountants – Auditors of Oman controlled entities (Audit and review of financial reports) 2017 $ 32,000 – – 6,181 38,181 2016 $ 22,000 29,875 27,625 5,217 84,717 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 27 Alara Resources Limited ABN: 27 122 892 719412017 Annual Report 6. EARNINGS/(LOSS) PER SHARE Basic earnings/(loss) per share cents Diluted earnings/(loss) per share cents Profit/(loss) $ used to calculate earnings/(loss) per share 2017 $ (0.04) (0.04) (258,526) 2016 $ (7.42) (7.42) (30,595,090) Weighted average number of ordinary shares during the period used in calculation of basic earnings/(loss) per share Weighted average number of ordinary shares during the period used in calculation of diluted earnings/(loss) per share 584,929,630 412,463,414 584,929,630 412,463,414 Under AASB 133 "Earnings per share", potential ordinary shares such as options will only be treated as dilutive when their conversion to ordinary shares would increase loss per share from continuing operations. ACCOUNTING POLICY NOTE Basic Earnings per share is determined by dividing the operating result after income tax by the weighted average number of ordinary shares on issue during the financial period. Diluted Earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the financial period. 7. CASH AND CASH EQUIVALENTS Cash in hand Cash at bank Term deposits 2017 $ 4,047 551,193 1,330,316 1,885,556 2016 $ 7,245 742,619 615,827 1,365,691 The Consolidated Entity has granted numerous term deposit security bonds to the value of $93,468 (2016: $107,044) which has not been called up as at the reporting date. The Parent Entity also has a bank guarantee for the sublease of the former office to the value of $64,943 (2016: $ 64,943). The effective interest rate on short-term bank deposits was 2.41% (2016: 2.77%) with an average maturity of 76 days. (a) Risk exposure The Consolidated Entity’s exposure to interest rate and foreign exchange risk is discussed in Note 19. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. ACCOUNTING POLICY NOTE Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments and bank overdrafts. Bank overdrafts (if any) are shown within short-term borrowings in current liabilities on the statement of financial position. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 28 Alara Resources Limited ABN: 27 122 892 719422017 Annual Report 7. CASH AND CASH EQUIVALENTS (continued) (b) Reconciliation of Net Profit/(Loss) after Tax to Net Cash Flow From Operations Profit/(Loss) after income tax Provision for impairment of exploration expenditure Loan extinguishment Foreign exchange movement Depreciation Equity settled share-based payments Write off/down fixed assets (Increase)/Decrease in Assets: Trade and other receivables Other current assets Increase/(Decrease) in Liabilities: Trade and other payables Provisions Net cashflows from/(used in) operating activities (c) Non-cash financing and investing activities Share based payments (Refer to Note 17) 8. TRADE AND OTHER RECEIVABLES Current Amounts receivable from: Sundry debtors Goods and services tax recoverable 2017 $ (404,934) – (236,413) (100,092) 15,562 256,413 – 245,961 (1,749) (254,045) (77,407) (556,704) 2016 $ (32,112,837) 33,906,473 (1,713,737) (254,544) 18,037 – 29,424 (62,298) 65,148 (220,887) 52,316 (292,905) (20,000) (100,000) 2017 $ 63,785 8,514 72,299 2016 $ 310,821 7,439 318,260 (a) Risk exposure Information about the Consolidated Entity's exposure to credit risk, foreign exchange risk and interest rate risk is in Note 19. (b) Impaired receivables None of the above receivables are impaired or past due. ACCOUNTING POLICY NOTE Trade and other receivables are recorded at amounts due less any provision for doubtful debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when considered non-recoverable. 9. OTHER CURRENT ASSETS Prepayments 2017 $ 9,728 9,728 2016 $ 7,979 7,979 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 29 Alara Resources Limited ABN: 27 122 892 719432017 Annual Report 10. PROPERTY, PLANT AND EQUIPMENT Year ended 30 June 2016 Carrying amount at beginning Additions Write-offs Depreciation expense Exchange Difference Closing amount at reporting date Year ended 30 June 2016 Cost or fair value Accumulated depreciation Net carrying amount Year ended 30 June 2017 Carrying amount at beginning Additions Write-offs Depreciation expense Exchange Difference Closing amount at reporting date Year ended 30 June 2017 Cost or fair value Accumulated depreciation Net carrying amount Motor Vehicles $ Office Equipment $ Plant and Equipment $ – 28,777 – (1,692) – 27,085 28,777 (1,692) 27,085 27,085 – – (3,865) (1,715) 21,505 26,932 (5,427) 21,505 49,071 – (10,294) (14,454) 9,309 33,632 164,925 (131,293) 33,632 33,632 1,079 – (10,448) 5,908 30,171 189,253 (159,082) 30,171 19,862 – (19,130) (1,891) 4,945 3,786 12,898 (9,112) 3,786 3,786 – – (1,249) (87) 2,450 21,056 (18,606) 2,450 Total $ 68,933 28,777 (29,424) (18,037) 14,254 64,503 206,600 (142,097) 64,503 64,503 1,079 – (15,562) 4,106 54,126 237,241 (183,115) 54,126 ACCOUNTING POLICY NOTE All plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present value in determining recoverable amount. 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 Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. The depreciable amount of all fixed assets is depreciated on a diminishing value basis over the asset's useful life to the Consolidated Entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Office Equipment Motor Vehicles Plant and Equipment Depreciation Rate 15 – 37.5% 33.3% 15 – 33.3% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of profit or loss and other comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 30 Alara Resources Limited ABN: 27 122 892 719442017 Annual Report 11. EXPLORATION AND EVALUATION Opening balance - Exploration and evaluation expenditure - Exchange differences - Impairment of exploration and evaluation expenditure Closing balance 2017 $ 7,327,012 613,007 56,679 – 7,996,698 2016 $ 38,566,735 660,647 2,006,103 (33,906,473) 7,327,012 On 21 October 2010, Alara Saudi Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with mineral licences holder, United Arabian Mining LLC (Manajem). Pursuant to the shareholders’ agreement a joint venture entity, Khnaiguiyah Mining Company LLC (KMC) (in which the Consolidated Entity has a 50% shareholding interest) was established and Manajem are required to transfer legal title to the mining licence and exploration licences over the Khnaiguiyah Project to KMC. The Consolidated Entity has obtained independent advice confirming that valid and legally enforceable rights existed for KMC to commercially exploit the Khnaiguiyah Project. The financial statements of previous Annual Reports were prepared on this basis with the asset carried at $33,190,221 as at 30 June 2015. Following cancellation of the Khnaiguiyah Mining Licence, a provision for impairment of the carrying value of exploration and evaluation attributable to the Khnaiguiyah Project was made. It is expected this provision for impairment will be reversed once Alara can demonstrate its exploration and evaluation expenses (relating to the Khnaiguiyah Project and the accompanying Feasibility Study) will be recovered via its agreement with Bayan Mining Company LLC or otherwise (see accounting policy note on mineral exploration and evaluation expenditure below). Alara Oman Operations Pty Limited (a wholly owned Australian subsidiary) gained a 70% shareholding interest in a jointly controlled company, Al Hadeetha Resource LLC (Oman), on 23 November 2011. The principal activity of the company is exploration, evaluation and development of mineral licences in Oman. Alara Oman Operations Pty Limited (a wholly owned Australian subsidiary) gained a 50% shareholding interest in a jointly controlled company, Daris Resources LLC (Oman), on 1 December 2010. The principal activity of this company is exploration, evaluation and development of mineral licences in Oman. The Consolidated Entity has a valid and legally enforceable contractual right to commercially exploit the Daris Project held by Daris Resources LLC (in which the Consolidated Entity has a 50% shareholding interest) and does not hold the legal title to the mineral exploration licence (which is held by the other 50% shareholder of Daris Resources LLC). The financial statements have been prepared on this basis (refer Note 22 for further disclosures). Should these legal rights not be enforceable, the carrying value of Exploration and Evaluation Expenditure attributable to the Daris Project would be impaired. Assets previously classified as other non-current assets have been reclassified to exploration and evaluation expenditure. The Consolidated Entity has granted numerous security bonds to the value of $93,468 (2016: $107,380) which have not been called up as at reporting date. ACCOUNTING POLICY NOTE Mineral Exploration and Evaluation Expenditure Exploration, evaluation and development expenditure incurred is accumulated (i.e. capitalised) in respect of each identifiable area of interest. These costs are only carried forward where they are expected to be recoverable through the successful development of the area or where activities in the area and includes areas that have not yet reached a stage that permits reasonable assessment of the existence or otherwise of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. Exploration and evaluation expenditure is written-off when it fails to meet at least one of the conditions outlined above or an area of interest is abandoned. Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount, the impairment loss will be measured in accordance with the Consolidated Entity’s impairment policy (Note 1.7). This policy requires management to make certain estimates to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised the expenditure under the policy, a judgement is made that recovery of the expenditure is not possible, the relevant capitalised amount will be written off to the statement of profit or loss and other comprehensive income. Impairment of Non-Financial Assets At each reporting date, the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, 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 expensed to the profit or loss. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 31 Alara Resources Limited ABN: 27 122 892 719452017 Annual Report 12. TRADE AND OTHER PAYABLES Current Trade payables Other payables 2017 $ 65,383 49,985 115,368 2016 $ 393,435 46,468 439,903 Due to the short-term nature of the trade and other payables, their carrying value is assumed to approximate their fair value. The liabilities of the Khnaiguiyah Mining Company LLC (‘KMC’) of $236,413 were extinguished from the financial statements after the Consolidated Entity ceased to control KMC. As disclosed in note 11, the KMC assets were fully provided for in 2016. (a) Risk exposure Details of the Consolidated Entity's exposure to risks arising from current payables are set out in Note 19. ACCOUNTING POLICY NOTE These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. 13. PROVISIONS Current Employee benefits – annual leave Income tax Non-Current Employee benefits – long service leave 2017 $ 75,450 – 25,226 100,676 2016 $ 21,586 108,710 47,786 178,082 Amounts not expected to be settled within the next 12 months The entire annual leave obligation is presented as current as the Consolidated Entity does not have an unconditional right to defer settlement. The non-current provision for long service leave is a provision towards the future entitlements of employees who will have completed the required period of long service and that is not expected to be taken or paid within the next 12 months. ACCOUNTING POLICY NOTE Employee Benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in other payables and accruals together with other employee benefit obligations. (ii) Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employee renders the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 32 Alara Resources Limited ABN: 27 122 892 719462017 Annual Report 14. FINANCIAL LIABILITIES Non-Current Loan with unrelated third party (i) Financial liabilities Exchange differences Extinguishment of financial liability (ii) 2017 $ 215,939 – – – 215,939 2016 $ – 1,509,585 204,152 (1,713,737) – (i) Pursuant to the Shareholders’ Agreement with Al Hadeetha Investments LLC (AHI), Al Hadeetha Resources LLC (AHR) (a controlled entity of Alara Resources Limited) executed a Loan Agreement of up to USD 2 million with AHI on 16 April 2017. As at 30 June 2017, the loan balance was OMR63,706 (A$215,939). Under the Loan Agreement, interest accrues at a rate of LIBOR plus 2%. The loan is repayable (alongside the loan of OMR1,853,822 (A$6,241,586) from Alara Resources Limited and its controlled entities, which has been eliminated on consolidation of these financial statements) from profits of AHR prior to any dividends being issued to the shareholders of AHR, or in the event that AHI ceases to be a shareholder of AHR. AHI and/or Alara Resources Limited may elect to convert all or part of the loan into equity in AHR. On 9 July 2017, the Company requested a drawdown from AHI of OMR 35,718 (A$121,070). (ii) The financial liability with United Arabian Mining Company LLC (Manajem) was extinguished pursuant to the terms of the shareholders agreement whereby repayment can only be made from profits of the joint venture and shall be discharged pro rata for funds contributed by Alara. The Company has impaired its interest in the Khnaiguiyah project upon cancellation of the Khnaiguiyah mining licence. 15. ISSUED CAPITAL Fully paid ordinary shares 2016 Balance as at 1 July 2015 - Share movement during the 2016 financial year - Share issue costs during the 2016 financial year Balance as at 30 June 2016 2017 Balance as at 1 July 2016 - Share movement during the 2017 financial year - Share issue costs during the 2017 financial year Balance as at 30 June 2017 2017 № 597,517,589 2016 № 506,015,000 2017 $ 65,169,992 2016 $ 63,485,425 № 248,007,500 258,007,500 – 506,015,000 № 506,015,000 91,502,589 – 597,517,589 $ 61,018,659 2,580,075 (113,309) 63,485,425 $ 63,485,425 1,830,052 (145,485) 65,169,992 Each fully paid ordinary share carries one vote per share and the right to participate in dividends. Ordinary shares have no par value and the Company does not have a limit on the amount of its capital. Capital risk management The Consolidated Entity's objective when managing its capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure balancing the interests of all shareholders. The Board will consider capital management initiatives as is appropriate and in the best interests of the Consolidated Entity and shareholders from time to time. The Consolidated Entity had no external borrowings as at 30 June 2017. The Consolidated Entity's non-cash investments can be realised to meet accounts payable arising in the normal course of business. Accounting Policy Note Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 33 Alara Resources Limited ABN: 27 122 892 719472017 Annual Report 16. RESERVES Foreign currency translation reserve Options reserve 2017 $ 188,726 20,000 208,726 2016 $ 367,395 – 367,395 Foreign currency translation reserve Exchange differences arising on translation of a foreign controlled entity's financial results and position are taken to the foreign currency translation reserve. The reserve is de-recognised when the investment is disposed of. Options reserve The number of unlisted options outstanding over unissued ordinary shares at the reporting date is as follows: Employees’ Options Unlisted options exercisable at $0.04; expiring 9 March 2020 Grant date 9 Mar 2017 Number of options 3,000,000 3,000,000 2017 $ 20,000 20,000 2016 $ – – The Option Reserve records the consideration (net of expenses) received by the Company on the issue of listed options and the fair value of unlisted Employees' options that were issued for nil consideration. 17. SHARE BASED PAYMENTS A total of 3,000,000 unlisted options expiring 9 March 2020 were issued to consultants during the year. Grant date Expiry date Exercise price Opening balance Granted Exercised Lapsed Closing balance Vested and exercisable Fair value $ Movement during the year As at 30 June 2017 Employees 9 Mar 2017 9 Mar 2020 $0.04 Weighted average exercise price Weighted average exercise price – – 3,000,000 3,000,000 $0.04 $0.04 – – – – – – 3,000,000 3,000,000 3,000,000 3,000,000 $0.04 $0.04 20,000 20,000 Other than options exercised by Mr Richard (which were not share based payments), there were no shares issued as a result of the exercise of any options during the year (2016: nil). The fair value of these options are expensed, from their date of grant, over their vesting period; fair values are determined as at date of grant using the Black-Scholes options valuation model that takes into account the exercise price, the term of the option, the underlying share price as at date of grant, the expected price volatility of the underlying shares and the risk-free interest rate for the term of the option. The Company is required to expense the fair value of options granted, on the basis that the fair value cost at date of grant is apportioned over the vesting period applicable to each option. The model inputs for assessing the fair value of options granted during the period are as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Options are granted for no consideration and vest as detailed in the table below; Exercise price is as detailed in the table above; Grant or issue date is as detailed in the table above; Expiry date is as detailed in the table above; Share price is based on the last bid price on ASX as at date of grant, as detailed in the table below; Expected price volatility of the Company’s shares has been assessed independently as described in the table below; Expected dividend yield is nil; and Risk-free interest rate is based on the 3/5 year Commonwealth bond yield, as detailed in the table below. Date of issue Description of unlisted options Vesting criteria Share price at grant date Risk free rate Price volatility 9 Mar 2017 $0.04 (9 Mar 2020) Options Vested at the date of the issue of the options $0.022 2.08% 100% ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 34 Alara Resources Limited ABN: 27 122 892 719482017 Annual Report 17. SHARE BASED PAYMENTS (continued) As announced on 31 March 2016 and approved by shareholders at the 2016 AGM, it was resolved that the Company will grant the following options as a long term incentive subject to the following milestones being achieved:    Tranche 1: 21,000,000 $0.04 options expiring 3 years from grant date upon attainment of Milestone 2 before 31 October 2016; Tranche 2: 21,000,000 $0.04 options expiring 3 years from grant date upon attainment of Milestone 3 before 31 December 2016; and Tranche 3: 30,000,000 $0.10 options expiring 3 years from grant date upon attainment of Milestone 4 before 31 December 2016. Milestones 2, 3 and 4 were not reached before the due date and no options were granted during the year. ACCOUNTING POLICY NOTE Director/Employee Options The fair value of options granted by the Company to directors and employees is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured as at grant date and is expensed in full as at their date of issue where they are 100% vested on grant and otherwise over their vesting period (where applicable). The fair value at grant date is determined using the Black-Scholes valuation model that takes into account the exercise price, the term of the option, the vesting criteria, the unlisted nature of the option, the share price at grant date and the expected price volatility of the underlying shares in the Company, and the risk-free interest rate for the term of the option. Upon the exercise of options, the balance of the reserve relating to those options is transferred to share capital. 18. SEGMENT INFORMATION The Board has considered the activities/operations and geographical perspective within the operating results and have determined that the Consolidated Entity operates in the resource exploration, evaluation and development sector within geographic segments - Australia, Saudi Arabia and Oman. 2017 Total segment revenues Total segment loss before tax Total segment assets Total segment liabilities 2016 Total segment revenues Total segment loss before tax Total segment assets Total segment liabilities Australia $ 37,491 (378,106) 2,208,115 (99,034) 199,262 (16,480,443) 2,839,835 (413,675) Oman $ 262 (293,175) 7,810,292 (332,949) 446 (5,573,028) 6,243,610 (95,599) Saudi Arabia $ – 210,507 – – – (10,360,672) – (108,711) Total $ 37,753 (460,774) 10,018,407 (431,983) 199,708 (32,414,143) 9,083,445 (617,985) (a) Reconciliation of segment information (i) Total Segment Assets Total Assets as per Statement of Financial Position (ii) Total Segment Revenues Total Revenue as per Statement of Profit or Loss and Other Comprehensive Income (iii) Total Segment profit/(loss) before tax Total Consolidated Entity profit/(loss) before tax 2017 $ 2016 $ 10,018,407 9,083,445 37,753 199,708 (460,774) (32,414,143) ACCOUNTING POLICY NOTE Operating Segments The Consolidated Entity has applied AASB 8: Operating Segments which requires that segment information be presented on the same basis as that used for internal reporting purposes. An operating segment is a component of the Consolidated Entity that engages in business activities from which it may earn revenues and incur expenses. An operating segment's operating results are reviewed regularly by the management to make decisions on allocation of resources to the relevant segments and assess performance. Unallocated items comprise mainly share investments, corporate and office expenses. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 35 Alara Resources Limited ABN: 27 122 892 719492017 Annual Report 19. FINANCIAL RISK MANAGEMENT The Consolidated Entity's financial instruments mainly consist of deposits with banks, accounts receivable and payable, and investments in a listed security. The principal activity of the Consolidated Entity is resource exploration, evaluation and development. The main risks arising from the Consolidated Entity's financial instruments are market (which includes price, interest rate and foreign exchange risks), credit and liquidity risks. Risk management is carried out by the Board of Directors. The Board evaluates, monitors and manages the Consolidated Entity's financial risk in close co-operation with its operating units. The financial receivables and payables of the Consolidated Entity in the table below are due or payable within 30 days. The financial investments are held for trading and are realised at the discretion of the Board. The Consolidated Entity holds the following financial instruments: Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities at amortised cost Trade and other payables Total segment revenue Net Financial Assets (a) Market Risk 2017 $ 1,885,556 72,299 1,957,855 (115,368) (215,939) (331,307) 2016 $ 1,365,691 318,260 1,683,951 (439,903) – (439,903) 1,626,548 1,244,048 (i) Price risk The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and classified in the statement of financial position at fair value through profit or loss. The Consolidated Entity is not directly exposed to commodity price risk. The value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments in the market. The Consolidated Entity does not manage this risk through entering into derivative contracts, futures, options or swaps. Market risk is minimised through ensuring that investment activities are undertaken in accordance with Board established mandate limits and investment strategies. (ii) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Consolidated Entity's exposure to market risk for changes in interest rates relate primarily to investments held in interest bearing instruments and its loan from third parties. The average interest rate applicable to funds held on deposit during the year was 2.41% (2016: 2.77%). Cash at bank Term deposits Loan from third parties 2017 $ 551,193 1,330,316 (215,939) 1,665,570 2016 $ 742,619 615,827 – 1,358,446 The Consolidated Entity has borrowings subject to interest rate risk. The possible impact on profit or loss or total equity on this exposure is displayed below: Loan with unrelated third party Change in profit Increase by 1% Decrease by 1% Change in equity Increase by 1% Decrease by 1% 2017 $ (2,159) 2,159 (2,159) 2,159 2016 $ – – – – ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 36 Alara Resources Limited ABN: 27 122 892 719502017 Annual Report 19. FINANCIAL RISK MANAGEMENT (continued) Revenue Change in profit Increase by 3% Decrease by 3% Change in equity Increase by 3% Decrease by 3% 2017 $ 56,567 (56,567) 56,567 (56,567) 2016 $ 40,971 (40,971) 40,971 (40,971) (iii) Foreign exchange risk The Consolidated Entity is exposed to foreign currency risk in cash held in Omani Riyals (OMR) by the Consolidated Entity's foreign controlled entity, foreign resource project investment commitments and exploration and evaluation expenditure on foreign exploration and evaluation. The primary currency giving rise to this risk is Omani Riyals (OMR). The Consolidated Entity has not entered into any forward exchange contracts as at reporting date and is currently fully exposed to foreign exchange risk. The Consolidated Entity's exposure to foreign currency risk at reporting date was as follows: Cash and cash equivalents Trade and other receivables Trade and other payables Non-current financial liabilities 2017 OMR 78,855 261 (13,447) (64,144) 1,525 2016 OMR 80,426 32 (21,632) – 58,826 The Consolidated Entity's exposure to foreign exchange risk is mitigated by having comparable asset and liability balances in US dollars. Therefore a sensitivity analysis has not been performed. The Consolidated Entity enters into forward exchange contracts with its Australian bank from time to time to hedge against foreign exchange risk. (b) Credit risk Credit risk refers to the risk that a counterparty under a financial instrument will default (in whole or in part) on its contractual obligations resulting in financial loss to the Consolidated Entity. Concentrations of credit risk are minimised primarily by undertaking appropriate due diligence on potential investments, carrying out all market transactions through approved brokers, settling non-market transactions with the involvement of suitably qualified legal and accounting personnel (both internal and external), and obtaining sufficient collateral or other security (where appropriate) as a means of mitigating the risk of financial loss from defaults. This financial year there was no necessity to obtain collateral. The credit quality of the financial assets are neither past due nor impaired and can be assessed by reference to external credit ratings (if available with Standard & Poor's) or to historical information about counterparty default rates. The maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as summarised below: Cash and cash equivalents AA- No external credit rating available Trade and other receivables (due within 30 days) No external credit rating available 2017 $ 1,881,509 4,047 1,885,556 2016 $ 1,358,446 7,245 1,365,691 72,299 318,260 The Consolidated Entity measures credit risk on a fair value basis. The carrying amount of financial assets recorded in the financial statements, net of any provision for losses, represents the Consolidated Entity’s maximum exposure to credit risk. All receivables noted above are due within 30 days. None of the above receivables are past due. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 37 Alara Resources Limited ABN: 27 122 892 719512017 Annual Report 19. FINANCIAL RISK MANAGEMENT (continued) (c) Liquidity risk Liquidity risk is the risk that the Consolidated Entity will encounter difficulty in meeting obligations associated with financial liabilities. There is sufficient cash and cash equivalents and the non-cash investments can be realised to meet accounts payable arising in the normal course of business. The financial liabilities maturity obligation is disclosed below: 2017 Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Non-current financial liabilities Net inflow/(outflow) 2016 Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Net inflow/(outflow) Less than 6 months $ 1,885,556 72,299 1,957,855 (115,368) – (115,368) 1,842,487 1,365,691 318,260 1,683,951 (439,903) 1,244,048 6-12 months $ – – – – – – – – – – – – 1-5 years $ – – – – (215,939) (215,939) (215,939) – – – – – Total $ 1,885,556 72,299 1,957,855 (115,368) (215,939) (331,307) 1,626,548 1,365,691 318,260 1,683,951 (439,903) 1,244,048 (d) Fair Value of Financial Assets and Liabilities The carrying amount of financial instruments recorded in the financial statements represents their fair value determined in accordance with the accounting policies disclosed in Note 1. The aggregate fair value and carrying amount of financial assets at reporting date are set out in Note 9 and Note 10. The financial liabilities at reporting date are set out in Note 14. (e) Fair value measurements The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The Consolidated Entity’s financial assets and liabilities approximate their fair values. ACCOUNTING POLICY NOTE Financial Instruments 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 entity commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). 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. Subsequent to initial recognition, these instruments are measured as set out below:  Financial assets at fair value through profit or loss - A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the profit or loss in the period in which they arise.  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 stated at amortised cost using the effective interest rate method.  Financial liabilities - Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. 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. At each reporting date, the Consolidated Entity assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the profit or loss. The Consolidated Entity’s investment portfolio (comprising listed and unlisted securities) is accounted for as “financial assets at fair value through profit or loss”. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 38 Alara Resources Limited ABN: 27 122 892 719522017 Annual Report 19. FINANCIAL RISK MANAGEMENT (continued) Fair Value Estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques, including but not limited to recent arm’s length transactions, reference to similar instruments and option pricing models. The Consolidated Entity may use a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Other techniques, such as estimated discounted cash flows, are used to determine fair value for other financial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. The Consolidated Entity’s investment portfolio (comprising listed and unlisted securities) is accounted for as a “financial assets at fair value through profit or loss” and is carried at fair value based on the quoted last bid prices at reporting date. 20. COMMITMENTS (a) Lease Commitments Non-cancellable operating lease commitments: Within 1 year 1-5 years After 5 years Total The Group leases office space under a non-cancellable operating lease. On renewal, the terms of the lease are renegotiated. The Group does not have an option to purchase the leased asset at the expiry of the lease period. During the year the Group has signed a sub-lease for the office space hence mitigating the outstanding lease commitments remaining on the lease. 2017 $ 23,750 460 – 24,210 2016 $ 39,211 12,460 – 51,671 21. CONTROLLED ENTITIES Investment in Controlled Entities Alara Resources Limited (AUQ) Alara Peru Opertaions Pty Ltd (APO) Alara Saudi Operations Pty Ltd (ASO) Saudi Investments Pty Limited (SIV) (formerly Alara Saudi Marjan Operations Pty Limited) Alara Oman Operations Pty Limited (AOO) Alara Kingdom Operations Pty Limited (AKO) Alara Saudi Holdings Pty Limited (ASH) Alara Resources LLC Al Hadeetha Resources LLC (formerly Pilatus Resources Oman LLC) Alara Resource Ghana Limited Alara Peru S.A.C Controlled entity Parent AUQ AUQ Principal Activity Exploration Inactive Management Country of Incorporation Australia Australia Australia Date of Incorporation 6-Dec-06 9-Mar-07 4-Aug-10 AUQ AUQ AUQ AUQ AOO AOO AUQ APO Development Management Management Inactive Exploration Exploration Inactive Inactive Australia Australia Australia Australia Oman Oman Ghana Peru 14-Feb-11 28-Jun-10 5-Sep-11 5-Jun-13 2-Oct-10 6-Feb-07 8-Dec-09 1-Mar-07 Jun-17 100% 100% 100% 100% 100% 100% 100% 70% 70% 100% 100% Jun-16 100% 100% 100% 100% 100% 100% 100% 70% 70% 100% 100% ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 39 Alara Resources Limited ABN: 27 122 892 719532017 Annual Report 22. JOINTLY CONTROLED ENTITIES Investment in Jointly Controlled Entities Daris Resources LLC Controlled entity AOO Principal Activity Exploration Country of Incorporation Oman Date of Incorporation 1-Dec-10 Jun-17 50% Jun-16 50% 23. RELATED PARTY TRANSACTIONS (a) Controlled and Jointly Controlled Entities Details of the interest in controlled entities and jointly controlled entities are set out in Notes 21 and 22. (b) Transactions with other related parties The following transactions occurred with related parties during the year ending 30 June 2017: (i) Controlled and Jointly Controlled Entities Details of the interest in controlled entities and jointly controlled entities are set out in Notes 21 and 22. (ii) Director loan agreement There was no outstanding directors’ loan during the year. On 9 September 2015 Justin Richard entered into a loan agreement with the Consolidated Entity providing a $250,000 loan facility to the Consolidated Entity. $60,000 was drawn down by the Consolidated Entity during the relevant period and was settled upon the rights issue announced 12 November 2015. 20,000,000 shares were issued to Justin Richard at the issue price of $0.01, raising $200,000 in capital and extinguishing the $60,000 loan payable with no interest charged. The loan was fully repaid during the year. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Key Management of the Consolidated Entity are each Director and Company Executive being a company secretary or senior managers with authority and responsibility for planning, directing and controlling the major activities of the Company or Consolidated entity. Details of key management personnel individual remuneration are disclosed in the remuneration report section of the directors’ report. Key Management Personnel remuneration includes the following expenses: Short term employee benefits: Remuneration including bonuses and allowances Social security costs Total short term employee benefits Long service leave Total other long-term benefits Post-employment benefits: Defined benefit pension plans Defined contribution pension plans Total post-employment benefits Termination benefits Share-based payments Total remuneration 2017 $ 999,217 – 999,217 – – – – – 17,663 – 2016 $ 1,084,592 – 1,084,592 – – – 2,177 2,177 18,750 – 1,016,880 1,105,519 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 40 Alara Resources Limited ABN: 27 122 892 719542017 Annual Report 24. CONTINGENT ASSETS AND LIABILITIES Contingent assets and liabilities exist in relation to certain exploration and evaluation of the Consolidated Entity subject to the continued development and advancement of the same, as described below. (a) (b) (c) (d) (e) Shareholders’ Agreement (SHA) – Khnaiguiyah Mining Company – Khnaiguiyah Zinc-Copper Project (Saudi Arabia) – On 21 October 2010, Alara Saudi Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with mineral licences holder, United Arabian Mining (“Manajem” in Arabic) Company (Manajem) pursuant to which Alara would pay a total of US$7.5 million to Manajem in stages subject to completion of project milestones and the parties forming a new joint venture company, Khnaiguiyah Mining Company LLC (KMC), which will hold the Khnaiguiyah Zinc-Copper Project mineral licences. KMC was incorporated in Saudi Arabia on 10 January 2010. Alara has paid Manajem a total of US$3.654 million (including advance payments of US$3.388 million in respect of the tranches payable under the Shareholders Agreement in connection with the transfer of the Khnaiguiyah Mining Licence to KMC. In November 2014, Alara served notice on Manajem suspending Alara’s obligations under the SHA and reserving Alara’s rights to file claims against Manajem (in addition to the counter-claims referred to in (c) below) pursuant to Manajem’s breaches under the SHA and updated JV Agreement (referred to in (b) below). Updated Joint Venture Agreement – Khnaiguiyah Mining Company – Khnaiguiyah Zinc-Copper Project (Saudi Arabia) – In March 2014, Alara Saudi Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a series of agreements with Manajem to update the joint venture between the parties. This included amendments to the Shareholders’ Agreement referred to in (a) above and provided for Alara to acquire an additional 10% of the joint venture entity, KMC, thus increasing its equity to 60% (from 50%) and have control of KMC and the Project. Under these updated joint venture agreements Alara would pay a total of US$6,664,120 to Manajem (principally) in stages conditional on attainment defined milestones (with such amount to be added to Alara’s loan to KMC, repayable from KMC net profits) and issue 60 million shares to Manajem subject to Alara shareholder approval. The parties also agreed to settle and/or waive all historical claims in relation to the KMC joint venture and or the Khnaiguiyah Project. As at the date of this report, no payment has been effected as Manajem has, inter alia, not yet complied with its initial obligation under the same to notify the Deputy Ministry of Mineral Resources (DMMR) to recommence the process to effect the transfer of the ML to KMC. ‘Financial Claim’ – Khnaiguiyah Zinc-Copper Project (Saudi Arabia) – In November 2014, former Khnaiguiyah Project joint venture partner, Manajem, filed a ‘claim’ against Alara Saudi Operations Pty Limited before the Board of Grievance in Riyadh, Kingdom of Saudi Arabia. Manajem alleges broad unspecified breaches of the SHA and Saudi law by Alara. Alara, based on the advice of external legal counsel maintain that Manajem’s claims are unsubstantiated and has lodged a counter-claim against Manajem based on a number of specific breaches of the SHA by Manajem (including via acting through Manajem company executives) pursuant to Manajem’s obligations under the SHA and in relation to a number of operational matters involving the JV Company, KMC. Alara will defend Manajem’s claim and pursue its counter-claims against Manajem before the Board of Grievance in accordance with due process. There next court date is scheduled for October 2017. Shareholders’ Agreement – Daris Resources LLC – Daris Copper-Gold Project (Oman) – On 28 August 2010, Alara Oman Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with Daris Copper Project concession holder, Al Tamman Trading Establishment LLC (ATTE) pursuant to which Alara will invest up to a total of US$7 million into a new joint venture company (“Daris Resources LLC” (DarisCo)) to gain up to a 70% shareholding. DarisCo was incorporated in Oman on 1 December 2010 (Alara 50%:ATTE 50%). To the extent that further funding is required, Alara is entitled to advance up to US$4 million to DarisCo as a loan (on commercial terms and repayable as a priority before distribution of dividends) - convertible into equity in DarisCo to take Alara’s interest to 70%. DarisCo has exclusive rights (to be further formalised under a management agreement with ATTE) to manage, operate and commercially exploit the concession. DarisCo is governed by a 6 member board of directors with 3 nominees (including the Chairman) from Alara and 3 nominees from ATTE. Shareholders’ Agreement – Alara Resources LLC (Oman) – On 8 August 2010, Alara Oman Operations Pty Limited, a wholly owned subsidiary of the Company, entered into a shareholders’ agreement with Sur United International Co. LLC (SUR) pursuant to which a new joint venture company (“Alara Resources LLC” (AlaraCo)) will be established to identify, secure and commercially exploit other exploration and evaluation in Oman introduced to AlaraCo by SUR. AlaraCo was incorporated in Oman in 2 October 2010. Alara contributed 100% of the initial capital of 150,000 Omani Rials (RO) (equivalent to ~A$425,000 at that time) for its 70% shareholding interest in AlaraCo with SUR holding the balance of 30%. Alara is entitled to advance funds to AlaraCo as a loan (on commercial terms and repayable as a priority before distribution of dividends). SUR is entitled to receive a priority payment out of net profits equivalent to 2% NSR (Net Smelter Return) – which amount is deducted from the dividend entitlement of SUR. There is a mechanism for the dilution of SUR’s profit interest (ie. 30%) if SUR fails to meet capital calls after a ‘Decision to Mine’ has been made by Alara in respect of a proposed ‘Mine’ (supported by the results of any feasibility study confirming the commercial viability of the exploitation of a ‘Mine’). If SUR's entitlement to dividends is diluted below 10% as above, SUR has an option to assign its dividend rights to Alara in return for a 2% NSR payment from AlaraCo, subject to AlaraCo making a net profit. The shareholders agreement is subject to conditions precedent including, amongst other matters, the execution of an ancillary loan agreement (which is currently pending execution by the parties) and an exploration licence being granted to AlaraCo – AlaraCo has lodged several applications for exploration licences over open areas prospective for base and precious metals introduced by SUR (which are currently pending grant by the Oman Government). AlaraCo is governed by a 5 member board of directors with 3 nominees (including the Chairman) from Alara and 2 nominees from SUR. (f) Introduction Fees – Net Smelter Return Royalty and Bonus Obligation – Oman Projects – A 5.0% Net Smelter Return (NSR) royalty is due and payable to the individual who introduced the prospects the subject of exploration licence applications by Alara Resources LLC or Al Hadeetha Resources LLC. An OMR25,000 cash bonus is also due and payable to the same individual upon commencement of production from the Daris Copper-Gold Project (Oman). ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 41 Alara Resources Limited ABN: 27 122 892 719552017 Annual Report 24. (g) (h) (i) (j) CONTINGENT ASSETS AND LIABILITIES (continued) Shareholders Agreement – Al Hadeetha Copper-Gold Project (Oman) – On 23 November 2011, Alara Oman Operations Pty Limited (a wholly owned subsidiary of the Company) entered into a shareholders agreement with the concession holder, Al Hadeetha Resources LLC (‘Al Hadeetha’) and the then shareholders of Al Hadeetha. An Amendment Agreement between Alara and Al Hadeetha Investments LLC dated 3 August 2013 acknowledges Alara now holds a 70% shareholding in Al Hadeetha and Al Hadeetha Investments LLC (‘AHI’) holds 30%. Post completion of a definitive feasibility study, the Al Hadeetha Board may issue shareholders with payment notices requiring them to contribute equity funding in proportion to their shareholding. If AHI decline to make the required capital contribution to develop the Project’s first mine, then Alara may elect to pay Al Hadeetha the amount which AHI were required to contribute under their payment notice and (subject to Omani law) Alara may increase its economic interest in Al Hadeetha to 75%. This payment shall be treated as a loan and Alara shall be entitled to 60% of all dividends in favour of AHI until such time that 25% of the total amount required under the payment notices is repaid to Alara. If a Al Hadeetha shareholder’s interest falls below 10%, that party shall (subject to Omani law) assign its dividend and voting rights to the other shareholder(s) in exchange for a 2% net smelter return on production payable by Al Hadeetha. Al Hadeetha is governed by a 3 member board of directors with 2 nominees appointed by Alara (including the Chairman) and 1 nominees appointed by the Al Hadeetha Investments LLC (30% shareholder). Directors' Deeds – The Company has entered into deeds of indemnity with each of its Directors indemnifying them against liability incurred in discharging their duties as directors/officers of the Consolidated Entity. As at the reporting date, no claims have been made under any such indemnities and accordingly, it is not possible to quantify the potential financial obligation of the Consolidated Entity under these indemnities. Bayan Mining LLC JV Agreement – On 16 July 2015 Saudi Investments Pty Ltd (a wholly owned subsidiary of the Company) entered into a JV agreement with Bayan Mining LLC. 40,000,000 shares are to be issued upon satisfaction of all of the conditions precedent, which includes the granting of the Khnaiguiyah mining licence to Bayan or the JV. Off-take agreement – Al Hadeetha Copper Gold Project – On 15 March 2017 Alara Oman Operations Pty Ltd (a wholly owned subsidiary of the Company) entered into an off-take agreement for the supply of copper concentrate from the Al Hadeetha Project to Statdrome Pte Ltd. Under the agreement, annual concentrate production of approximately 35,000 wmt will be shipped at regular intervals from the Sohar port. There also exists the possibility of supplying the material to the Omani smelter in case it restarts. However, the project financial model allows for sea freight and other charges associated with the sale of concentrate from the port at Sohar. The agreement also includes a pre-payment of US$6 million to assist in funding project construction costs and mine start up, and will be drawn down in instalments during the project construction phase, starting once the mining licence is issued. 25. SUBSEQUENT EVENTS The Directors are not aware of any matters or circumstances at the date of this Directors’ Report, other than those referred to in this Directors’ Report or the financial statements or notes thereto, that have significantly affected or may significantly affect the operations, the results of operations or the state of affairs of the Company and Consolidated Entity in subsequent financial years. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 42 Alara Resources Limited ABN: 27 122 892 719562017 Annual ReportThe Directors of the Company declare that: 1. 2. 3. 4. 5. The Financial Statements, comprising the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and accompanying notes as set out on pages 22 to 42, are in accordance with the Corporations Act 2001 and: (a) (b) Comply with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and Give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017 and of its performance for the year ended on that date; 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; The Remuneration Report disclosures set out (within the Directors’ Report) on pages 10 to 15 (as the audited Remuneration Report) comply with section 300A of the Corporations Act 2001; The Company has included in the notes to the Financial Statements an explicit and unreserved statement of compliance with the International Financial Reporting Standards. The Directors have received the declarations required to be made to the Directors by the Managing Director (the person who performs the chief executive officer function) and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017. This declaration is made in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001. Justin Richard Managing Director 19 September 2017 ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 43 Alara Resources Limited ABN: 27 122 892 719572017 Annual ReportALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 44 Alara Resources Limited ABN: 27 122 892 719582017 Annual Report ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 45 Alara Resources Limited ABN: 27 122 892 719592017 Annual ReportALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 46 Alara Resources Limited ABN: 27 122 892 719602017 Annual Report ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 47 Alara Resources Limited ABN: 27 122 892 719612017 Annual ReportALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 48 Alara Resources Limited ABN: 27 122 892 719622017 Annual ReportSAUDI ARABIA Khnaiguiyah Zinc-Copper Project The Khnaiguiyah Zinc-Copper Project18 is located approximately 170km south-west of the capital city Riyadh and 35km north-west of Al- Quwayiyah, which is a regional centre located around the Riyadh to Jeddah Expressway. The Khnaiguiyah Project previously comprised one mining licence, 2 exploration licences and 5 exploration licence applications, totalling approximately 380km2 held or applied for by United Arabian Mining Company (“Manajem”). The two exploration licences expired and are considered by Alara to be non-core to the Khnaiguiyah Project. The mining licence that was issued in December 2010, was cancelled in or about December 2015, and is currently the subject of a legal appeal by Manajem. As at the date of this report, a final appeal decision had not made, nor had the mining licence been reissued. Project Licence Owner Status Tenement Grant/ Application Date Area Location/ Property Name Country Khnaiguiyah Zinc-Copper Project TBC Cancelled – appeal decision pending Mining Lease No 2. Qaaf 2010 5.462km2 ~170km west of Riyadh Saudi Arabia 18 Refer to 18 April 2013 ASX Announcement: Maiden JORC Ore Reserves – Khnaiguiyah Zinc-Copper Project ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 49 Alara Resources Limited ABN: 27 122 892 719632017 Annual ReportOMAN Daris and Al Hadeetha Copper-Gold Projects Alara has joint venture interests in five copper-gold deposits located within four Exploration Licences in Oman extending over 692km2. These deposits are also covered by 5 Mining Licence applications pending grant, totalling ~9km2. The Daris Copper-Gold Project19 is located ~170km northwest of Muscat (the capital of Oman). The Washihi/Mullaq20 prospects are located ~100km south-southeast of Daris. Both projects/prospects are located on or very close to high quality bitumen roads. Al Hadeetha Copper-Gold Project The current status of all licences/applications for this project is presented in the table below. Licence Name Licence Owner Alara JV Interest Exploration Licence Area Date of Grant Date of Expiry Status Area Mining Licence within EL Date of Application Status Washihi Al Hadeetha Resources LLC Mullaq Al Hadeetha Resources LLC Al Ajal Al Hadeetha Resources LLC 70% 39km2 Jan 2008 Nov 2016 Active* 2.1km2 Dec 2012 Pending 70% 41km2 Oct 2009 Nov 2016 Active* 1km2 Jan 2013 Pending 70% 25km2 Jan 2008 Nov 2016 Active* 1.5km2 Jan 2013 Pending *Pursuant to Ministerial decree (38/2013) which declares that the exploration licence ends when its duration ends, unless the licensee has submitted an application for a mining licence, in which case the duration for the exploration licence extends until the date that a determination is made on the mining application. Table 1: Washihi JORC Mineral Resources Cu % Cut off 0.20 0.25 0.30 0.40 0.50 Indicated Resource Inferred Resource Tonnes (Million) Copper (Cu) % Gold (Au) g/t Tonnes (Million) Copper (Cu) % Gold (Au) g/t 12.40 12.39 12.37 12.16 11.39 0.89 0.89 0.89 0.90 0.93 0.22 0.22 0.22 0.22 0.23 3.74 3.71 3.68 3.54 2.98 0.78 0.79 0.79 0.81 0.88 0.23 0.23 0.23 0.24 0.25 19 Refer Alara’s 30 August 2010 ASX Announcement: Project Acquisition - Daris Copper Project in Oman 20 Refer Alara’s 8 December 2011 ASX Announcement: Project Acquisition - Al Ajal-Washihi-Mullaq Copper-Gold Project in Oman ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 50 Alara Resources Limited ABN: 27 122 892 719642017 Annual ReportTable 2: Gossan Hill Mineralisation - Gold21 Cut off Au g/t Inferred Resource Kilo Tonnes (kt) Gold (Au) g/t Ounces k/Oz 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 439.00 420.31 405.58 346.93 307.60 274.40 257.40 220.48 197.79 147.82 0.41 0.42 0.43 0.48 0.51 0.54 0.55 0.58 0.60 0.64 5.74 5.69 5.63 5.31 5.03 4.73 4.55 4.09 3.79 3.02 Notes 1. Mineral Resources are not Mineral Reserves. There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves. 2. Mineral Resources reported in accordance with the JORC 2012. 3. Resource for Cu-Au is stated @ 0.25 % Cu cut-off grade; the mineral resource for gold in the Gossan hill (outside main ore body) has been stated @ .25 g/t Au. 4. Mineral resource tonnages have been rounded to reflect the accuracy of the estimate. 5. 1 ounce of Au = 31.1035 grams. Table 3: Summary of Washihi Copper Gold Mineral Resources @ 0.25% Cu Cut-off22 Resource classification Tonnes Mt Copper (Cu) % Gold (Au) g/t Indicated Inferred Grand total 12.4 3.71 16.1 0.89 0.79 0.87 0.22 0.23 0.22 Indicated Resources were converted to a Probable Ore Reserve after the application of modifying factors, including pit optimization, mine design and an economic evaluation23. The Ore Reserve estimate (based on a 0.3% Cu cut-off), and in pit mineral inventory are shown in Tables 4 and 5 below. Table 4: Washihi Ore Reserve Classification Probable Tonnes Mt 9.7 Ore reserve Copper (Cu) % Gold (Au) g/t 0.88 0.22 Table 5: Washihi Mining Inventory Classification Ore reserve Inferred resource Total Tonnes Mt Copper (Cu) % Gold (Au) g/t 9.7 0.35 10.05 0.88 0.65 0.87 0.22 0.22 0.22 21 Refer Alara’s 19 September 2016 ASX Announcement 22 23 Refer Alara’s 15 December 2016 ASX Announcement: Maiden JORC Ore Reserves – Al Hadeetha Copper-Gold Project Detail of the modifying factors supporting the Ore Reserve are contained in Appendix 1 (JORC Code, 2012 Edition - Table 1) of the 15 December announcement. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 51 Alara Resources Limited ABN: 27 122 892 719652017 Annual Report Daris Copper-Gold Project The current status of all licences/applications for this project is presented in the table below. Block Name Licence Owner Alara JV Interest Exploration Licence Mining Licences within EL Area Date of Grant Date of Expiry Status Area Date of Application Status Block 7 Al Tamman Trading and Est. LLC 50% 587km2 Nov 2009 Feb 2016 Active* Daris East 3.2km2 Daris 3A-5 1.3km2 Dec 2012 Pending *Pursuant to Ministerial decree (38/2013) which declares that the exploration licence ends when its duration ends, unless the licensee has submitted an application for a mining licence, in which case the duration for the exploration licence extends until the date that a determination is made on the mining application. Table 6: Daris-East JORC Mineral Resources Ore type Cut-off grade Cu% Sulphides Oxides 0.5 0.5 Measured Indicated Tonnes Cu% Gold (Au) g/t Tonnes Cu% Gold (Au) g/t Measured and Indicated Tonnes Cu% Inferred Tonnes Cu% Gold (Au) g/t Gold (Au) g/t 129,155 2.48 0.23 110,870 2.24 0.51 240,024 2.37 0.43 30,566 2.25 0.55 96,526 0.77 0.03 86,839 0.66 0.14 183,365 0.72 0.08 1,712 0.61 0.97 The information in these JORC Resource tables was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 52 Alara Resources Limited ABN: 27 122 892 719662017 Annual ReportJORC Competent Persons Statements The information in this announcement that relates to the feasibility study of the Al Hadeetha Copper-Gold project is based on information compiled by Mr Shanker Madan, who is a Member of the Australasian Institute of Mining and Metallurgy, and consultant to Alara Resources. Mr Madan has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code, 2012 edition. Mr Madan consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears. The information in this announcement that relates to Ore Reserve of the Al Hadeetha Project was compiled by Mr Harry Warries, who is a Fellow of the Australasian Institute of Mining and Metallurgy, and a consultant to Alara Resources. Mr Warries has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ In assessing the appropriateness of the Ore Reserve estimate, Mr Warries has relied on various reports, from both internal and external sources, in either draft or final version, which form part of or contribute to the Al Hadeetha Project Feasibility Study. These reports are understood to be compiled by persons considered by Alara to be competent in the field on which they have reported. Mr Warries consents to the inclusion in the report of the information in the form and context in which it appears. The information in this announcement that relates to JORC Resources of the Daris Copper Gold Project and the Al Hadeetha Copper-Gold Project (Oman) are based on, and fairly represents, information and supporting documentation prepared by Mr Ravi Sharma, who is a Chartered Member of The Australasian Institute of Mining and Metallurgy, Registered Member of The Society for Mining, Metallurgy and Exploration. Mr Sharma was a principal consultant to Alara Resources and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code, 2012 edition. Mr Sharma approves and consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Forward Looking Statements This report contains “forward-looking statements” and “forward-looking information”, including statements and forecasts which include without limitation, expectations regarding future performance, costs, production levels or rates, mineral reserves and resources, the financial position of Alara, industry growth and other trend projections. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “is expecting”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes”, or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might”, or “will” be taken, occur or be achieved. Such information is based on assumptions and judgements of management regarding future events and results. The purpose of forward-looking information is to provide the audience with information about management’s expectations and plans. Readers are cautioned that forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Alara and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, among others, changes in market conditions, future prices of gold and silver, the actual results of current production, development and/or exploration activities, changes in project parameters as plans continue to be refined, variations in grade or recovery rates, plant and/or equipment failure and the possibility of cost overruns. Forward-looking information and statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date such statements are made, but which may prove to be incorrect. Alara believes that the assumptions and expectations reflected in such forward-looking statements and information are reasonable. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Alara does not undertake to update any forward-looking information or statements, except in accordance with applicable securities laws. ALARA RESOURCES LIMITED 2017 FULL YEAR REPORT | 53 Alara Resources Limited ABN: 27 122 892 719672017 Annual Report Securities Information as at 9 October 2017 Issued Securities Fully paid ordinary shares Total At a general meeting of shareholders: Quoted on ASX 597,517,589 597,517,589 (a) on a show of hands, each person who is a member or sole proxy has one vote; and (b) on a poll, each shareholder is entitled to one vote for each fully paid share. Unlisted - - Total 597,517,589 597,517,589 Summary of Directors’ and Employees’ Unlisted Options Description of Unlisted Options Date of Issue $0.04 (9 Mar 2020) Options 9 March 2017 Exercise Price Expiry Date $0.04 9 March 2020 Vesting Criteria8 № of Options 3,000,000 None Distribution of Listed Ordinary Fully Paid Shares Spread of Holdings 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Number of Holders 893 295 142 368 292 1,990 Number of Units 303,663 697,690 1,182,992 14,747,444 580,585,800 597,517,589 % of Total Issued Capital 0.051% 0.117% 0.198% 2.468% 97.166% 100% Unmarketable Parcel Minimum $500.00 parcel at $0.016 per unit Minimum parcel size 31,249 Holders 1,507 Units 5,580,144 Top 20 Listed Ordinary Fully Paid Shareholders Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Total * Substantial shareholders Shareholder Ms Meng Meng* Mr Vikas Jain* Mr Justin Richard* & Mrs Debbie Ann Richard Metals Corners Holding Co* Citicorp Nominees Pty Limited Mr Mul Chand Malu Mr Vikas Malu Inkese Pty Ltd / Mr Jay Hughes & Mrs Linda Hughes Mr Piyush Jain Whitechurch Developments Pty Ltd HSBC Custody Nominees (Australia) Limited My Tyrone James Giese Mr Warren William Brown & Mrs Marilyn Helena Brown Flannery Foundation Pty Ltd / Mr Brian Joseph Flannery & Mrs Peggy Ann Flannery Mr Peter Kelvin Rodwell BNP Paribas Nominees Pty Ltd Baron Nominees Pty Ltd Ferguson Superannuation Pty Ltd Mrs Liliana Teofilova Thorpe Road Nominees Pty Ltd On-Market Buy Back There is no current on-market buy back. 8 Options which have vested may be exercised at any time thereafter, up to their expiry date. Shares Held 38,521,027 34,285,230 30,757,037 30,500,000 29,007,631 28,571,025 28,571,025 27,060,532 22,856,820 20,575,550 17,602,933 15,742,199 10,628,572 10,085,464 9,142,858 8,108,873 6,860,397 6,500,000 5,778,200 5,622,858 386,778,231 Issued Capital 6.447% 5.738% 5.147% 5.104% 4.855% 4.782% 4.782% 4.529% 3.825% 3.444% 2.946% 2.635% 1.779% 1.688% 1.530% 1.357% 1.148% 1.088% 0.967% 0.941% 64.732% Alara Resources Limited ABN: 27 122 892 719682017 Annual Report Corporate Directory ASX Code: ABN: AUQ 27 122 892 719 Registered Office and Business Address Level 11, London House 216 St Georges Terrace Perth, Western Australia 6000 PO Box 1227 West Perth WA 6872 Telephone: E-mail: Website: +61 8 9322 3383 info@alararesources.com www.alararesources.com Auditors Bentleys Audit & Corporate (WA) Pty Ltd Level 3, London House 216 St Georges Terrace Perth, Western Australia 6000 Telephone: Facsimile: Website: +61 8 9226 4500 +61 8 9226 4300 www.bentleys.com.au Australian Securities Exchange ASX Limited Level 40, Central Park 152-158 St Georges Terrace Perth, Western Australia 6000 Directors James Phipps Justin Richard Atmavireshwar Sthapak Vikas Jain Ian Gregory Company Secretary Ian Gregory Non-Executive Chairman Managing Director Executive Director Non-Executive Director Alternate Director Share Registry Advanced Share Registry Services 110 Stirling Highway Nedlands, Western Australia 6009 Telephone: Facsimile: +61 8 9389 8033 +61 8 9262 3723 Level 6, 225 Clarence Street Sydney, New South Wales 2000 Telephone: E-mail: Website: +61 2 8096 3502 admin@advancedshare.com.au www.advancedshare.com.au Corporate Governance Statement Alara’s Corporate Governance Statement is available on the Company’s website: www.alararesources.com. Investors wishing to receive e-mail alerts of all Company ASX Announcements can register their interest here: http://www.alararesources.com/irm/UserEdit.aspx?masterpage=7&title=Email%20Alerts&RID=317 or by e-mailing info@alararesources.com. By the way, Alara was the father of the Napatan royal dynasty. As King of Kush, he was responsible for unifying the upper kingdom and establishing Napata as the capital, with base and precious metals becoming an important part of the city’s flourishing economy. Alara Resources Limited ABN: 27 122 892 719692017 Annual Report  

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