Aura Biosciences
Annual Report 2014

Plain-text annual report

ABN 62 115 927 681 ANNUAL REPORT 30 June 2014 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE DIRECTORY Directors Peter Reeve Robert (Bob) Beeson Brett Fraser Julian (Jules) Perkins Company Secretary Stanley Zillwood Chairman Managing Director Non-executive Director Non-executive Director Head Office and Registered Office Street: Level 1, 19-23 Prospect Street Box Hill VIC 3128 Telephone: +61 (0)3 9890 1744 Facsimile: +61 (0)3 9890 3411 Email: info@auraenergy.com.au Website: www.auraenergy.com.au Share Registry Computershare Registry Services Street: Level 2, 45 St Georges Terrace Perth WA 6000 Securities Exchange Australian Securities Exchange Street: Exchange Plaza 2, The Esplanade Perth WA 6000 ASX Code: AEE Auditor Bentleys Level 1, 12 Kings Park Road West Perth WA 6005 P a g e | 1 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 ANNUAL REPORT 30 JUNE 2014 CONTENTS CHAIRMAN'S LETTER .............................................................................................................................................................. 3 OPERATIONS REVIEW ............................................................................................................................................................. 4 DIRECTORS’ REPORT ............................................................................................................................................................. 10 REMUNERATION REPORT ..................................................................................................................................................... 15 AUDITOR’S INDEPENDENCE DECLARATION .......................................................................................................................... 22 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................................................ 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ....................................................................................................... 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ......................................................................................................... 25 CONSOLIDATED STATEMENT OF CASH FLOWS ..................................................................................................................... 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................................................... 27 DIRECTORS’ DECLARATION ................................................................................................................................................... 69 INDEPENDENT AUDITOR'S REPORT ...................................................................................................................................... 70 CORPORATE GOVERNANCE STATEMENT .............................................................................................................................. 72 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES ............................................................................................. 78 TENEMENT REPORT .............................................................................................................................................................. 80 P a g e | 2 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CHAIRMAN'S LETTER Dear Shareholders Aura Energy’s past year has been an active period with much change, restructuring and adjustment that has left the Company stronger and better placed for its planned path to development and growth. This positive change has been forged at a time when the uranium price declined significantly and support for both the junior sector and uranium equities have been weak. Aura’s strength is its exceptional uranium projects in Sweden and Mauritania that contain 852 million pounds of uranium in resource which position Aura to become a major producer in the years ahead. In the past year the Company took a number of decisive steps to move its projects on to a practical business footing with realistic and achievable objectives for a company of Aura’s size and financial resources. Of particular importance was to ensure the Company’s projects were low cost in order to compete in the current weak uranium price environment. At the same time it was important to retain value for shareholders by maintaining 100% ownership of its asset base. The steps Aura took in 2014 that I speak of were; Evaluation of the Häggån heap leach project in Sweden at lower throughput levels to demonstrate technical and commercial viability at achievable throughputs. More detailed beneficiation test work on the Reguibat Project in Mauritania which indicated up to 700% upgrade to the ore grades with simple washing and screening. Completion of the Reguibat Scoping Study which demonstrated excellent economics with a $45 million capital cost, $30/lb C1 cash cost for $360 million pre-tax cash flow. Subsequent to year end raising $1.58 million to progress the Reguibat Feasibility Study Rationalising office costs, Board numbers and employment costs during the year given the difficult financial environment for the junior mining sector. Broadening the marketing of the company in new jurisdictions. With this strengthened basis Aura is now in an excellent position to progress steadily towards it first operating project at Reguibat should the feasibility study confirm the excellent scoping study outcomes. The Feasibility Study has commenced and is expected to run for up to 18 months. To achieve these positive results in that environment is a great effort and I would like to thank all Aura employees and contractors in Australia, Sweden and Mauritania for their contribution during the year. There is some life finally in the uranium price after a sustained down trend . For 2015 the Company has now created a definitive pathway to development and cash flow. With that will come new challenges and opportunities. Aura is excited by the potential to advance its projects and continue to create real shareholder value. Regards PETER REEVE Chairman, Aura Energy Limited P a g e | 3 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 OPERATIONS REVIEW 2014 Aura Energy Limited is fortunate to possess two large uranium resources with the potential to become substantial, low cost mining operations. The Company initially discovered uranium mineralisation in Mauritania in 2008, and has subsequently estimated a 49 million pound U₃O₈) Indicated and Inferred Resource. In the last year exceptional beneficiation and leaching test results have enabled Aura to scope a low capital cost, low operating cost project. The Häggån and Reguibat Projects were both greenfields discoveries by Aura’s exploration team. In addition the Aura team has made bioleaching and beneficiation innovations to transform the economics of these projects. WEST AFRICAN ACTIVITIES Aura has been active in the uranium provinces of West Africa since 2007. It currently holds tenements and a joint venture in Mauritania. REGUIBAT PROJECT SUMMARY Aura Energy Limited has reached a key milestone in the development of the Reguibat Uranium Project, Mauritania with the completion of the Reguibat Scoping Study, which has demonstrated that the Project will generate a high return with strong long term cash flows. robust project with This study has confirmed the potential for an extremely shallow mineralisation upgraded via simple beneficiation to high-grade leach feed. This will result in a leach plant processing a low annual tonnage achieved with low upfront capital and low operating costs. very With beneficiation resulting in leach feed upgrades of up to 700% the Reguibat Scoping Study was designed to provide a cost effective project of a small initial scale, a small footprint and a low infrastructure requirement. Significantly, an independent water study has indicated a strong likelihood that potential sources of water in the immediate vicinity should satisfy the demands of the project. Mineralisation occurs largely within 3-4 metres of the land surface, in gravels and weathered granite as shown below. Schematic section through a typical Reguibat uranium ore pod. Note the extensive horizontal extent. P a g e | 4 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 OPERATIONS REVIEW 2014 Mining will be straightforward. Most of the mineralisation occurs as single sheets with little or no cover. The material is largely unconsolidated and can be readily excavated by diggers or scrapers without blasting. Overlying waste consists of loose windblown sand. The strip ratio is anticipated to be approximately 0.25:1. Simple washing and screening tests have yielded exceptional results. Wet screening at 75 µm resulted in the rejection of 80% by weight with the retention of 91% of the uranium into the screen undersize. This is within the duty range of modern commercial screening equipment. In further testwork splitting at even finer sizes, 89% by weight was rejected when splitting at 10 µm, while remarkably still retaining 86% of the uranium into the -10 µm fraction. The average concentration of the -10 µm product was 2,500 ppm U3O8. This represents a sevenfold upgrade factor from the 334 ppm resource grade. Separations down to sizes such as this may be achievable using well-established processes such as hydrocyloning. A fivefold upgrade factor was used in the scoping study. These exceptional results may be explained by the extremely fine size and ready liberation of the uranium mineral, carnotite, and the large difference in particle size distribution between the carnotite and the bulk of the host rock minerals. Following a series of encouraging small-scale preliminary tests, a standard leach test on -300 µm beneficiated material confirmed exceptional results, with 92% uranium extraction within 4 hours and 95% after 8 hours. This compares, for example, with the 92% extraction in 36 hours at Paladin’s Langer Heinrich Project. P a g e | 5 OPERATIONS REVIEW 2014 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 It is estimated that the project as currently defined will require between 0.5 and 1.0 gigalitres of water per year. Aura commissioned independent consultants to carry out a desk top study, which identified a number potential water sources. The closest is the Oued el Foule ephemeral watercourse, which occurs within a large is depression around Aura's eastern permits. approximately 17,000 square kilometres in size, of which the lowest point is only a few kilometres from the proposed operations. Aquifers within this depression will form the first target for Aura’s water source investigations. It is The main water supply to the iron ore mines of northern the the Taoudeni Basin, Mauritania Mauritanian SNIM operations, and the new Glencore iron ore development near Zouerate. The independent consultants suggest that similar aquifers are likely to be available from known aquifers on the northern edge of the Taoudeni Basin near to the Reguibat Project. including At Zouerate the aquifer occurs in fractured sedimentary rocks. The aquifer thickness there is known to be at least 500 metres, and has been exploited for 30 years, with salinities ranging from fresh to brackish. This Basin is 75 kilometres south of the Project. PROJECT DESIGN AND SCOPING STUDY The process flow-sheet adopted for the study begins with wet drum scrubbing and two stages of wet screening to allow rejection of up to 80% of the original plant feed as essentially barren waste. The remaining 20% of fine, enriched pulp will go to standard alkaline leaching followed by ion exchange in a NIMCIX reactor. Uranium will then be stripped from the NIMCIX resin to generate a pregnant solution for precipitation as ammonium diuranate (ADU). After a dewatering step in a centrifuge the precipitate will be calcined and dried to uranium oxide (“yellowcake”) for packaging and transport to customers. All of these process steps are standard and proven in the industry. All process facilities have been centrally located, allowing a short average haul distance from the individual deposits comprising the Oued El Foule Est (“OEFE”) Zone A resource, which was selected as the first to be mined. The process plant will be made up of re-locatable process modules, primarily as a means of minimising the initial capital cost. This design will also permit the plant to be more easily moved to other resources within the Reguibat tenements when Zone A is exhausted. To the maximum extent possible, industry-proven modules will be used, or modules which will be pre-assembled and tested before export. The total estimated initial capital cost for engineering, procurement, construction, commissioning, startup and the owner’s activities for the Project is A$50.0 million. The table below shows the estimated costs summary by activity. Description Mining Process Plant Infrastructure EPCM Owner's cost Contingency Total Capital Cost Cost (A$ million) Cost (US$ million) 1.24 24.52 10.04 3.54 1.75 8.95 50.04 1.12 22.07 9.03 3.19 1.58 8.05 45.04 P a g e | 6 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 OPERATIONS REVIEW 2014 The life of mine unit operating cost estimate for the Reguibat Project is estimated to be US$30.3/lb U3O8. The table below provides a summary of the costs in terms of US$ per tonne mined. Description Mining Processing Services G & A Total US$/t Ore Mined % of Total 2.59 11.77 3.00 4.08 21.42 8.9 55.0 14.0 19.0 100.0 The planned operation will produce approximately 1.0 million pounds of U3O8 per year in Years 2 and 3, followed by 650,000 pounds for Years 4-11, and 710,000 pounds in Years 12-15. The total uranium produced under these assumptions is 10.7 million pounds over the 15-year mine life. Uranium production will increase in Years 12-15 with the benefit from higher grades from the more distant Zones I, J or C, but the cost of production will also increase in those years because of increased ore transport costs. The project based on the assumptions provided above has very robust financial characteristics, with cumulative cash flow over the 15-year mine life of $360M and an internal rate of return of 78% before tax and royalties. The breakeven price for the Project is US$37/lb U3O8. This makes it among the lowest-cost uranium projects currently being developed. Its financial strength is the low capital cost. Sensitivity analysis below the capital cost has only a limited impact on the value of the project. This project is among the most capital efficient of current peer projects. The project capital cost per pound of U3O8 is less than $4.00/lb, and Reguibat represents the only mining project within the capital cost/lb uranium produced range that compares with the in-situ leach operations. MAURITANIA AS A MINING COUNTRY Mauritania is a country with a well-established and sizeable mining industry and has a favourable and well-administered Mining Act. The Government is stable, democratic, and supportive of foreign investment. It has an established reputation for maintaining stability and security within its borders. The country currently ranks among the highest in Africa as a mining destination, using the independent Fraser Institute rankings. HÄGGÅN PROJECT, SWEDEN (AURA 100%) Häggån is a major uranium project in Central Sweden. Sweden has an active mining industry, with a clear regulatory position and a well-established path from exploration to mining. The Häggån Project is a giant, multi-metal deposit which is underpinned by huge uranium resource. The main metals in the current resources are: 803Mlbs U₃O₈ inferred resource (2.35Bn tonnes @ 155 ppm U₃O₈) Nickel Zinc Molybdenum    1,640Mlbs 2,230Mlbs 1,070Mlbs The size of the Häggån resource places it in the top two largest undeveloped uranium resources that are compliant with ASX or TSX requirements. P a g e | 7 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 OPERATIONS REVIEW 2014 Häggån is located in a largely uninhabited area of swamp and forest degraded by generations of commercial forestry. The scoping study completed in 2012 suggests that the Häggån Project has excellent potential to become a major, low cost producer of uranium, with by-product nickel and other metals. Aura considered it prudent, given the current market conditions, to reassess the May 2012 Häggån Scoping Study, which was based on a conceptual 30Mtpa operation, with smaller options which are more likely to attract funding than a project with a high initial capital cost. Aura has considered three smaller size options: 3.5Mtpa, 5.0 Mtpa and 7.5 Mtpa, in order to provide a number of additional development alternatives with a substantially lower front end capital cost requirement. The table below highlights that the upfront capital costs are significantly reduced at all the modelled scales with operating costs remaining low in all cases. In the analysis Aura’s team used factored scoping study costs and published costs from similar heap leaching projects to develop the capital cost estimates. A peer review analysis of available information for comparable uranium and gold heap leach projects indicates that these cost estimates are appropriate in the current environment. Heap leaching is a widely used low cost extraction technology that is well understood within the mining industry. Good comparative cost data is available. These highlight that unit operating costs show relatively little change when adopting lower production rates. Analysis of Häggån operating costs on this basis indicated the project will be in the lower half of the 2010 WNA cost curve (<$25/lb. U3O8) after by-product credits. This analysis of lower throughput options for Häggån underlines the exceptional financial robustness of this remarkable project even at substantially lower levels of initial capital investment. Aura has assumed similar metal recoveries to that used in the 2012 Scoping Study, namely 75% for uranium, 60% for nickel, and 25% for molybdenum. This gives U3O8 production in the range of 1.0-2.0 million lbs per annum for the mill capacities considered, as indicated in the table below. Range of upfront capital costs at 3.5, 5.0 and 7.5 Mtpa and metal production of uranium, nickel and molybdenum* +/- 35% accuracy level) MTPA APPROX CAPEX* OPCOST 3.5 5 7.5 30.0 $m 150 190 250 540 US$/lb. 21.00 - 25.00 18.00 - 22.00 18.00 - 22.00 13.50 U3O8 Mlbs 1.0 1.4 2.1 7.8 Mo Mlbs 0.4 0.6 1.0 4.3 Ni Mlbs 1.7 2.4 3.6 14.8 SWEDEN AS A MINING COUNTRY Sweden has a long history of mining, and its legislation and regulations are supportive of mining. The country is Europe’s largest iron ore producer, and contains its largest copper mine. It is recognized as a low sovereign risk mining destination. It recently ranked second, after Finland, in the Fraser Institute (Canada) survey of most favoured mining countries. Sweden is a nuclear country, with 50% of electricity needs generated by 10 reactors. The country has a low corporate tax rate and royalties. P a g e | 8 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 OPERATIONS REVIEW 2014 REGUIBAT RESOURCE STATEMENT The Reguibat Project Mineral Resource statement is compliant with the JORC (2012) code and has been prepared by independent consultants. Indicated and Inferred Resources for the Reguibat Project at a 100ppm U3O8 cut-off grade Cut-off grade Tonnes Grade (ppm) Mlb U3O8 Total Indicated & Inferred Indicated Inferred 100 100 100 66 2 64 334 300 335 49 2 47 Competent Persons for Reguibat Resource The information in the report to which this statement is attached that relates to the Mineral Resource and is based on information compiled by Oliver Mapeto. Oliver Mapeto is a Member of The Australasian Institute of Mining and Metallurgy. Dr Robert Beeson 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. This qualifies Dr Beeson as a Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr Robert Beeson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Dr Beeson is a member of the Australian Institute of Geoscientists. Dr Beeson takes responsibility for data integrity, QA/QC and the requirement of “reasonable prospects for eventual economic extraction” for the reporting of Häggån Resources at the quoted cut-off grades. HÄGGÅN RESOURCE STATEMENT The Haggan Project Mineral Resource statement is compliant with the JORC (2012) code and has been prepared by independent consultants. Category Cut-off U3O8 ppm U3O8 Inferred 100 Competent Persons for Häggån Resource Size Bt 2.35 U3O8 ppm 155 Mo ppm 207 V ppm 1,519 Ni ppm 316 Zn ppm 431 Dr Robert Beeson 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. This qualifies Dr Beeson as a Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr Robert Beeson consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Dr Beeson is a member of the Australian Institute of Geoscientists. Dr Beeson takes responsibility for the requirement of “reasonable prospects for eventual economic extraction” for the reporting of Häggån Resources at the quoted cut-off grades. Mr. Arnold van der Heyden takes responsibility for estimation of uranium and associated metals in the Häggån Resource. Mr. van der Heyden is a director of H&SC and is a competent person in the meaning of JORC having had around thirty years relevant experience in exploration and estimation of uranium and other metal resources in many parts of the world. He is a member of the Australian Institute of Geoscientists. Mr. van der Heyden consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. P a g e | 9 DIRECTORS’ REPORT Your Directors present their report together with the financial statements of the Group, being the company and its controlled entities, for the financial year ended 30 June 2014. AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 1. DIRECTORS The names of Directors in office at any time during or since the end of the year are: Mr. Peter Reeve Chairman (Appointed 13 July 2013) Dr. Robert (Bob) Beeson Managing Director Mr. Brett Fraser Non-executive Director (Stepped down as Chairman 13 July 2013) Mr. Julian (Jules) Perkins Non-executive Director Mr. Simon O’Loughlin Non-executive Director (Resigned 12 July 2013) Mr. Jay Stephenson Non-executive Director (Resigned 12 July 2013) Mr. Leigh Junk Non-executive Director (Resigned 12 July 2013) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. 2. COMPANY SECRETARY The following person held the position of Company Secretary at the end of the financial year: Mr Stanley Zillwood On 5 February 2014, Mr Stephenson resigned as Company Secretary and Mr Stanley Zillwood was appointed as Company Secretary and Chief Financial Officer of the Company. Mr Zillwood is a Chartered Accountant. 3. NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES The principal activities of the Group during the financial year were the exploration and evaluation of its projects in Sweden and Mauritania. 4. DIVIDENDS PAID OR RECOMMENDED There were no dividends paid or recommended during the financial year ended 30 June 2014. 5. REVIEW OF OPERATIONS 5.1. Operation Review A detailed review of the Group’s exploration activities is set out in the section entitled Operations Review on page 4 in this annual report. 5.2. Operating Results The consolidated loss for the year amounted to $3,855,498 (2013: $2,756,341). The increase is largely attributable to the write- off of exploration assets as set out in note 11 Exploration and Evaluation Assets on page 49. The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. Details of the Group’s assessment in this regard can be found in note 1 Statement Of Significant Accounting Policies: Going Concern on page 27. The auditor's report on page 70 contains an emphasis on matter in this regard. 5.3. Financial Position The net assets of the Group have decreased by $3,867,636 from 30 June 2013 to $12,698,874 at 30 June 2014. As at 30 June 2014, the Group's cash and cash equivalents decreased from 30 June 2013 by $1,441,817 (including foreign exchange movements) to $570,478. The Group had a working capital deficit of $30,423 (2013: $1,540,400 working capital), that included the debt component of a convertible note of $188,600 of which $175,000 has subsequent to balance date been converted to ordinary shares, (refer Note 25 Events Subsequent to Reporting Date). P a g e | 10 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 6. SIGNIFICANT CHANGES IN STATE OF AFFAIRS The following significant changes in the state of affairs of the Group occurred during the financial year: The Group rationalised its tenement holdings in all of its locations by relinquishing non-core assets, this included complete withdrawal from exploration in Australia. As a result of the rationalisation, the Group wrote off exploration expenditure of $2,880,191. Aura Energy Limited relocated its corporate and registered office from Perth to Melbourne during the year as part of a head office reorganisations and cost saving exercise. 7. EVENTS SUBSEQUENT TO REPORTING DATE There are no other significant after balance date events that are not covered in the Operations Review on page 4 or within the financial statements at Note 25 Events Subsequent To Reporting Date on page 65. 8. LIKELY DEVELOPMENTS Likely developments, future prospects and business strategies of the operations of the Group and the expected results of those operations have not been included in this report as the Directors believe that the inclusion of such information would be likely to result in unreasonable prejudice to the Group. 9. INFORMATION ON DIRECTORS Mr. Peter Reeve Qualifications   Chairman (Non-executive) – Appointed 13 July 2013 Mr. Reeve is a professional metallurgist, and has held positions with Rio Tinto, Billiton Australia and Newcrest Mining. Peter was a Resource Fund Manager and Resources Corporate Finance Director at J B Were & Son. More recently Peter was Chief Executive Officer of Ivanhoe Australia Ltd. Experience  Board member since 13 July 2013. Interest in Shares and Options  831,038 Ordinary Shares in Aura Energy Limited and 6,333,104, options. Directorships held in other listed entities  Nil Dr. Robert Beeson  Managing Director Qualifications Experience   Bachelor of Science with Honours; PhD; Member of the Australian Institute of Geoscientists Board member since 31 March 2006. Geologist with over 35 years of global experience in uranium and other commodity management, exploration and development Interest in Shares and Options  3,063,549 Ordinary Shares in Aura Energy Limited and 6,687,377 options. Directorships held in other listed entities Mr. Brett Fraser Qualifications    Managing Director of Drake Resources Limited from November 2004 until 31 January 2013. Non-executive director or Drake Resources Limited since 1 February 2013. No other directorships in the past three years. Director (Non-executive) – stepped down as Chairman 13 July 2013 Fellow of Certified Practicing Accountants; Fellow of the Financial Services Institute of Australasia; Grad Dip Finance, Securities Institute of Australia; Bachelor of Business (Accounting); International Marketing Institute - AGSM Sydney. Experience  Board member since 24 August 2005. Interest in Shares and Options  3,038,040 Ordinary Shares in Aura Energy Limited and 2,602,579 options. P a g e | 11 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT Directorships held in other listed entities  Current non-executive director and Chairman of Drake Resources Limited since March 2004, and non-executive director and Chairman of Blina Diamonds NL since September 2008. Past director of Doray Minerals Limited from October 2009 until November 2011. No other directorships in the past three years. Mr. Julian Perkins  Director (Non-executive) Qualifications  Master of Science (Imperial College of Science & Technology) 1972; Associate of the Camborne School of Metalliferous Mining (Honours) 1967; Fellow of the Australasian Institute of Mining and Metallurgy; Member of the Australian Institute of Company Directors. Experience  Board member since 7 June 2011. Mr. Perkins has over 40 years' experience in operations and management with major companies in the international minerals industry. He was Manager of Mining & Technology (Australia) for AngloGold Ashanti Ltd, one of the world’s largest gold mining companies, until 2006. His career includes underground mining engineering in South Africa and management of metallurgical operations on the Zambian Copperbelt. Jules led the mineral processing department of Shell Research in the Netherlands for three years before moving into corporate management in the Netherlands and then in Australia. He has previously been Chairman of the Board of Parker Centre Ltd, which managed the Parker Cooperative Research Centre (‘CRC’) for Hydrometallurgy and a director on the boards of the CRC Mining and the Australian Centre for Mining Environmental Research. Interest in Shares and Options  925,948 Ordinary Shares in Aura Energy Limited and 1,399,262 options. Directorships held in other listed entities  No other directorships held in other listed entities. Mr. Jay Stephenson Qualifications   Director (Non-executive) – Resigned 12 July 2013 Fellow of Certified Practicing Accountants; Certified Management Accountant; Member Australian Institute of Company Directors; Master of Business Administration; Fellow Institute of Chartered Secretaries Australia. Experience  Board member from 24 August 2005 to 12 July 2013. Interest in Shares and Options  1,881,068 Ordinary Shares in Aura Energy Limited and 1,013,368 options, as at the date of resignation. Directorships held in other listed entities  Current non-executive Director of Drake Resources Limited since March 2004, Strategic Minerals Corporation NL since July 2009, Doray Minerals Limited since August 2009, Spencer Resources Limited since March 2012, and Nickelore Limited since July 2011. Chairman and non-executive Director of Quintessential Resources Limited since February 2011. Past non-executive director of Excelsior Gold Limited from October 2009 to November 2009 and Parker Resources Limited from January 2011 to December 2012. No other directorships in the past three years. Mr. Simon O’Loughlin  Director (Non-executive) – Resigned 12 July 2013 Qualifications Experience  BA(Acc), Law Society Certificate in Law.  Board member from 31 March 2006 to 12 July 2013. Interest in Shares and Options  993,112 Ordinary Shares in Aura Energy Limited and 125,000 options, as at the date of resignation. P a g e | 12 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT Directorships held in other listed entities  Chesser Resources Limited since March 2006, Goldminex Resources Limited since June 2012, Kibaran Resources Limited since September 2010, Petratherm Limited since October 2003, and WCP Resources Limited since March 2005 Former director of Bondi Mining Limited (December 2006 to January 2012), Bioxyne Limited (July 2008 to April 2012), Avenue Resources Limited (March 2010 to March 2012), and Living Cell Technologies Limited (May 2004 to November 2010), Australia Oriental Minerals NL (April 2012to February 2013), Neurodiscovery Limited (March 2012 to July 2013). No other directorships in the past three years. Director (Non-executive) – Resigned 12 July 2013 Diploma of Surveying from Wembley Technical College in 1992, Graduate Diploma of Mining Engineering from University of Ballarat in 2000, and a Masters in Mineral Economics from Curtin University in 2008. Mr. Leigh Junk Qualifications   Experience  Board member from 7 June 2011 to 12 July 2013. Mr. Junk is a mining engineer with extensive experience in the mining industry. Interest in Shares and Options  937,500 Ordinary Shares in Aura Energy Limited and 125,000 options, as at the date of resignation. 12 July 2013 Directorships held in other listed entities  Mr. Junk is a Director of Doray Minerals Limited, Sentosa Mining Limited, and Goldfields Money Limited. 10. MEETINGS OF DIRECTORS During the financial year eight meetings of Directors (including committees of Directors) were held. Attendances by each Director during the year were as follows: COMMITTEE MEETINGS DIRECTORS’ MEETINGS DUE DILIGENCE COMMITTEE REMUNERATION AUDIT COMMITTEE COMMITTEE Number eligible to attend Number Attended Number eligible to attend Number Attended Number eligible to attend Number Attended Number eligible to attend Number Attended Peter Reeve Bob Beeson Brett Fraser Jules Perkins Jay Stephenson Simon O’Loughlin Leigh Junk 8 8 8 8 - - - 8 8 7 8 - - - At the date of this report, the Remuneration Committee, Audit Committee and Nomination Committee comprise the full Board of Directors. The Directors believe the Company is not currently of a size nor are its affairs of such complexity as to warrant the establishment of these separate committees. Accordingly, all matters capable of delegation to such committees are considered by the full Board of Directors. 11. NON-AUDIT SERVICES During the year ended 30 June 2014, taxation consulting services were provided to the Company by a party related to the auditors, Bentleys. These services amounted to $3,000 (2013: $10,150). Details of remuneration paid to the auditor can be found within the financial statements at Note 4 Auditor’s Remuneration on page 44. The Directors are satisfied that the provision of non-audit services during the year by Bentleys (or by another person or firm on Bentley's behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). P a g e | 13 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 12. INDEMNIFYING OFFICERS OR AUDITOR During or since the end of the financial year the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: The Company has entered into agreements to indemnify all Directors and provide access to documents, against any liability arising from a claim brought by a third party against the Company. The agreement provides for the company to pay all damages and costs which may be awarded against the Directors. The Company has paid premiums to insure each of the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium was $9,500. No indemnity has been paid to auditors of the Group. 13. ENVIRONMENTAL REGULATIONS In the normal course of business, there are no environmental regulations or requirements that the Company is subject to. The Directors have considered the enacted National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which introduced a single national reporting framework for the reporting and dissemination of information about the greenhouse gas emissions, greenhouse gas projects, and energy use and production of corporations. At the current stage of development, the Directors have determined that the NGER Act has no effect on the Company for the current, nor subsequent, financial year. The Directors will reassess this position as and when the need arises. 14. OPTIONS At the date of this report, the un-issued ordinary shares of Aura Energy Limited under option (listed and unlisted) are as follows: Grant Date Date of Expiry Exercise Price Number under Option 23 December 2009 23 December 2014 31 March 2011 24 November 2011 23 December 2011 24 May 2012 4 December 2012 15 January 2013 20 December 2013 20 December 2013 20 December 2013 8 March 2014 31 March 2016 31 October 2014 1 December 2014 31 May 2015 4 December 2016 1 December 2014 13 January 2015 13 January 2016 13 July 2016 6 March 2017 $0.300 $0.450 $0.310 $0.200 $0.200 $0.200 $0.200 $0.150 $0.200 $0.200 $0.048 375,000 570,000 3,500,000 32,789,218 1,000,000 200,000 3,000,000 6,625,000 2,250,000 6,625,000 2,600,000 56,934,218 No person entitled to exercise the option has or has any right by virtue of the option to participate in any share issue of any other body corporate. 15. PROCEEDINGS ON BEHALF OF COMPANY No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. 16. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2014 has been received and can be found on page 22 of the annual report. P a g e | 14 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) 17.1. Remuneration Policy The remuneration policy of Aura Energy Limited has been designed to align director and management objectives with shareholder and business objectives by providing a fixed remuneration component, and offering specific long-term incentives based on key performance areas affecting the Group’s financial results. The Board of Aura Energy Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best management and directors to run and manage the Group, as well as create goal congruence between directors, executives and shareholders. The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives of the Group is described in the following paragraphs. The remuneration policy of the Company sets the terms and conditions for executive directors and other senior executives. Due to the rapidly changing circumstances of the Company in recent years, the policy is reviewed annually by the Board with the purpose of maintaining alignment of the board and management with the Company’s strategic objectives. Management is also entitled to participate in employee share and option arrangements. All executives receive a base salary which takes into account such factors as length of service and experience, superannuation and options. The Board reviews executive packages annually by reference to the performance of the Company, individual executives and relevant comparable remuneration data from similar listed companies and appropriate industry sectors. Independent expert advice is sought as required. The total amount of non-executive directors’ remuneration is proposed by the Board from time to time at the Annual General Meeting and is subject to formal approval by shareholders. Within this limit, the Board currently remunerates non-executive directors at around the average of those obtained from relevant comparable data from similar listed companies and appropriate industry sectors. A measure of longer-term incentive is provided by the allocation of options to non-executive directors. The Board determines remuneration to individual non-executive directors, working within the limit set by shareholders, and taking into account any special duties or accountability. Payments to non-executive directors are not linked to Company performance but in order to align their interest with those of shareholders, non- executive directors are encouraged to hold shares in the Company. Executives and non-executive directors have received a superannuation guarantee contribution as required by law, which was 9.25% up to 30 June 2014, but do not receive any other retirement benefits. From 1 July 2014, the superannuation guarantee contribution has been increased to 9.5%. All remuneration paid to non-executive directors and executives is valued at the cost to the Company and is expensed. Options given to directors and employees are valued using the Black-Scholes methodology. Details of directors’ and executives’ interests in options as at 30 June 2014 are provided in 17.5b of the Remuneration Report on page 20 of the financial statements. A resolution that the remuneration report for the last financial year to be adopted was put to the vote at the Company's most recent AGM, held on 21 November 2013. At least 25% of the votes cast were against adoption of that report. As this constituted a second strike under the Corporations Act 2001 (Cth), the meeting considered a spill resolution of non- executive directors. The resolution was lost with 31,105,097 votes against and 12,181,864 votes in favour. Following the last AGM, the Company has since December 2013 paid a portion of directors’ fees by way of issues of fully paid ordinary shares on an average VWAP basis. In addition the Managing Director has reduced his working hours to 80% normal time and settle 25% of his net pay in shares on the same basis as the non-executive directors. P a g e | 15 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) 17.2. Remuneration Details for the Year Ended 30 June 2014 There were no cash bonuses paid during the year and there are no set performance criteria for achieving cash bonuses. The following table of benefits and payment details, in respect to the financial year, the components of remuneration for each member of the key management personnel of the Group: 2014 Group Key Management Personnel Salary, fees and leave $ Peter Reeve (5)(7) 67,588 Bob Beeson(4)(5)(7) 271,836 Brett Fraser(1)(5)(7) Jules Perkins(2)(7) Jay Stephenson(1) Simon O’Loughlin Leigh Junk Stanley Zillwood(6)(7) 46,068 36,667 1,995 1,995 1,995 - 428,144 2013 Group Key Management Personnel Brett Fraser(1)(5) Bob Beeson(4)(5) Jay Stephenson(1) Salary, fees and leave $ 60,000 239,388 55,000 Simon O’Loughlin 55,000 Leigh Junk Jules Perkins(2) James Merrillees(3) 55,000 55,000 - 519,388 Short-term benefits Non- monetary $ 24,368 16,251 13,932 Other $ - - - 18,333 1,375 - - - - - - - 43,341 Profit share and bonuses $ - - - - - - - - - Post- employment benefits Super- annuation $ 8,814 29,913 5,550 5,088 184 184 184 - Long-term benefits Equity-settled share- based payments Total Other Equity Options Compen- sation consisting of options $ - - - - - - - - - $ - - - - - - - - - $ $ % 24,440 125,210 19.52% 11,718 329,718 3.55% 6,893 72,443 9.52% 6,893 68,356 10.08% - - - - 2,179 2,179 2,179 43,341 - - - - 49,944 645,605 7.74% 72,884 44,716 49,917 Short-term benefits Post- employment benefits Super- annuation $ Non- monetary $ Other $ Long-term benefits Equity-settled share- based payments Total Other Equity Options Compen- sation consisting of options $ - - - - - - - - $ - - - - - - - - $ $ % 62,234 128,834 48.31% 82,979 340,292 24.38% - - - - - 61,150 59,950 59,950 91,265 118,865 - - - - - 145,213 860,306 16.88% - - - - - - - - 1,200 5,400 2,400 15,525 1,200 - - 31,315 118,865 4,950 4,950 4,950 4,950 - 154,980 40,725 Profit share and bonuses $ - - - - - - - - (1) Wolfstar Group Pty Ltd, a company controlled by Messrs Fraser and Stephenson, provided financial services and company secretarial services to Aura Energy Limited. These services were provided indirectly by Messrs Fraser and Stephenson and have therefore not been included in remuneration. Please refer to part 17.7 Other transactions with key management personnel on page 21 for further details. (2) Amounts paid to the RRI Trust are in respect to metallurgical consulting provided directly by Mr. Perkins. (3) Mr. Merrillees was employed as Exploration Manager by Drake Resources Limited, which recharged his salary pro rata for the prior year on a time basis of hours charge to the Aura Group. (4) From February 2013, Dr. Beeson ceased acting as a dual Managing Director for Aura Energy and Drake Resources, and became solely employed by Aura Energy in this role. (5) An expense was raised in the year for options issued in current and /or prior periods, in accordance with their vesting conditions. Refer part 17.4 Share-based compensation. (6) The Company Secretary and CFO, Stan Zillwood is employed by Foster Resources Pty Ltd, a company controlled by Mr Zillwood, to provide services to the Group under a contract dated 30 December 2013. (7) For the 2014 financial year the following amounts remain unpaid: P Reeve $11,666 ($7,754 to be settled in shares); B Beeson $10,753 ($6,500 to be settled in shares); B Fraser $5,000 ($3,483 to be settled in shares); and J Perkins $4,583 all to be settled in shares and S. Zillwood $7,500. P a g e | 16 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) 17.3. Service Agreements The Managing Director, Dr. Robert Beeson, is employed under a deed of employment, effective 1 January 2013. The employment deed stipulates a four weeks' resignation period. The Company may terminate the employment deed without cause by providing four weeks' written notice, or making payment in lieu of notice based on the individual’s annual salary component. If employment is terminated other than for serious misconduct, and the Employee is not then otherwise in default of deed and his employment, the Managing Director will, in connection with his retirement from the Office, receive in addition to the required four weeks' notice period, three months' salary. An additional benefit may be paid in the amount of one month for every year of service. This is subject to the provisions of the Corporations Act 2001 (Cth), which may require shareholder approval. 17.4. Share-based compensation a. Incentive Option Scheme Options are granted under the Aura Energy Limited Incentive Option Scheme. All staff who have been continuously employed by the Company for a period of at least one year are eligible to participate in the plan. Options are granted under the plan for no consideration. b. Director and Key Management Personnel Options On 24 November 2013, the follow share options were granted to directors to take up ordinary shares: (i) 2,000,000 at an exercise price of $0.15 each. The options are exercisable on or before 13 January 2015; (ii) 2,250,000 at an exercise price of $0.20 each. The options are exercisable on or before 13 January 2016; (iii) 2,000,000 at an exercise price of $0.20 each. The options are exercisable on or before 13 July 2016; (iv) 4,625,000 at an exercise price of $0.15 each. The options are exercisable on or before 13 January 2015; and (v) 4,625,000 at an exercise price of $0.20 each. The options are exercisable on or before 13 July 2016. On 24 November 2011, 3,500,000 share options were granted to directors to take up ordinary shares at an exercise price of $0.31 each. The options are exercisable on or before 31 October 2014. c. Share-based Payments The terms and conditions relating to options granted as remuneration during the year to Directors and Key Management Personnel are as follows: 2014 Group Key Management Person Grant date Grant value $ (Note 4) Reason for Grant Vesting date Percentage vested during year % Percentage forfeited during year % Percentage remaining as unvested % Expiry date Range of possible values relating to future payments Peter Reeve 21 Nov 2013 7,890 Note 1 21 Nov 2013 100 21 Nov 2013 13,534 Note 1 21 May 2015 21 Nov 2013 16,100 Note 1 21 Nov 2015 Robert Beeson 21 Nov 2013 21 Nov 2013 Brett Fraser 21 Nov 2013 21 Nov 2013 Julian Perkins 21 Nov 2013 21 Nov 2013 2,511 9,207 1,477 5,416 1,477 5,416 Note 2 21 Nov 2013 Note 2 21 Nov 2013 Note 2 21 Nov 2013 Note 2 21 Nov 2013 Note 2 21 Nov 2013 Note 2 21 Nov 2013 39 29 100 100 100 100 100 100 - - - - - - - - - - 61 71 - - - - - - 13 Jan 2015 13 Jan 2016 13 July 2016 13 Jan 2016 13 July 2016 13 Jan 2016 13 July 2016 13 Jan 2016 13 July 2016 - - - - - - - - - P a g e | 17 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) 2013 Group Key Management Person Grant date Brett Fraser Bob Beeson 24 Nov 2011 Grant value $ (Note 4) 154,950 206,600 Reason for Grant Vesting date Percentage vested during year % Percentage forfeited during year % Percentage remaining as unvested % Expiry date Range of possible values relating to future payments Note 3 24 Nov 2012 Nil, vested in prior year - Nil, vested in prior year 31 Oct 2014 - Note 1. The options have been granted to the Chairman as part of his remuneration and for future performance. The vesting conditions of the options are as follows: Tranche 1: vest at immediately, exercisable at 15 cents, expire 13 January 2015; Tranche 2: vest at 18 months from issue, exercisable at 20 cents, expire 13 January 2016; and Tranche 3: vest at 24 months from issue, exercisable at 20 cents, expire 13 July 2016. Note 2. The options have been granted to the Directors (excluding the Chairman) to provide a market-linked incentive package in their capacity as Directors and for future performance by them in their roles. The vesting conditions of the options are as follows Tranche 1: vest at immediately, exercisable at 15 cents, expire 13 January 2015; Tranche 2: vest at immediately, exercisable at 20 cents, expire 13 July 2016. Note 3. The options have been granted to Directors to provide a market-linked incentive package in their capacity as Directors and for future performance by them in their roles. The vesting conditions of the options are as follows: Director options will vest 12 months after the issue date. KMP options will vest 12 months after the issue date and if the Director is continually employed by the Company during that 12 months. KMP options vest only if the share price is greater than 26 cents for 5 consecutive days during the 12 months vesting period. Note 4. The monetary value of the percentage vested during the period has been reflected in the table of benefits and payments on the previous page. All options were issued by Aura Energy Limited and entitle the holder to one ordinary share in the Company for each option exercised. Details of all Share-Based Payments in existence during the year can be found at Note 19 Share-Based Payments on page 55. d. Description of Options Issued as Remuneration Details of the options granted as remuneration to those KMP listed in the previous tables are as follows: Amount paid/ Reference Value per option payable by Grant date Issuer Entitlement on exercise Dates exercisable Exercise price $ at grant date $ recipient $ 21 Nov 2013 21 Nov 2013 21 Nov 2013 21 Nov 2013 21 Nov 2013 24 Nov 2011 Aura Energy Limited 1:1 Ordinary Shares in Aura Energy Limited From vesting date to 13 Jan 2015 (expiry) 13 Jan 2016 (expiry) 13 Jul 2016 (expiry) 13 Jan 2016 (expiry) 13 Jul 2016 (expiry) 31 Oct 2014 (expiry) 0.15 0.20 0.20 0.15 0.20 0.31 0.0039 0.0060 0.0080 0.0012 0.0043 0.1033 - - - - - - Note 1 Note 1 Note 1 Note 2 Note 2 Note 3 Option values at grant date were determined using the Black-Scholes method. Details relating to service and performance criteria required for vesting have been provided in the within the financial statements at Note 19 Share-Based Payments on page 55. P a g e | 18 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) 17.5. Key management personnel equity holdings a. Fully paid ordinary shares of Aura Energy Limited held by each KMP 2014 Group Key Management Person Directors of Aura Energy Limited Peter Reeve Robert Beeson(1) Brett Fraser(3) Julian Perkins Jay Stephenson (2) Simon O’Loughlin (2) Leigh Junk (2) Other KMP Stanley Zillwood 2013 Group Key Management Person Directors of Aura Energy Limited Brett Fraser Robert Beeson Jay Stephenson Simon O’Loughlin Leigh Junk Julian Perkins Other KMP James Merrillees (2) Balance at start of year No. Received during the year as compensation No. Received during the year on the exercise of options No. Other changes during the year No. Balance at end of year No. - 2,257,460 2,486,040 240,000 1,881,067 993,112 937,500 - 664,830 442,756 380,540 500,758 - - - - 8,795,179 1,988,884 - - - - - - - - - - 30,000 (190,270) - - - - - 664,830 2,730,216 2,676,310 740,758 1,881,067 993,112 937,500 - (160,270) 10,623,793 Balance at start of year No. Received during the year as compensation No. Received during the year on the exercise of options No. Other changes during the year(1) No. Balance at end of year No. 2,286,040 2,069,960 1,843,567 993,112 875,000 106,667 99,167 8,273,513 - - - - - - - - - - - - - - - - 200,000 187,500 37,500 - 62,500 133,333 2,486,040 2,257,460 1,881,067 993,112 937,500 240,000 - 99,167 620,833 8,894,346 (1) Other changes during the year relate to shares purchased or sold on market. (2) (3) Other Changes during the year relates to shares received as compensation by B Fraser being allotted to a third party. Equities disclosed are up to and as at the date of resignation P a g e | 19 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) b. Options of Aura Energy Limited held by each KMP 2014 Group Key Management Person Balance at start of year No. Granted as Remuneration during the year No. Directors of Aura Energy Limited Peter Reeve Robert Beeson Brett Fraser(2) Julian Perkins Jay Stephenson (1) Simon O’Loughlin (1) Leigh Junk (1) Other KMP - 6,250,000 2,270,710 4,250,000 1,076,579 2,500,000 56,667 2,500,000 1,013,368 125,000 125,000 - - - - Stanley Zillwood - 2013 Group Key Management Person 4,667,324 15,500,000 Balance at start of year No. Granted as Remuneration during the year No. Directors of Aura Energy Limited AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 Exercised during the year No. Other changes during the year No. Balance at end of year No. Vested and Exercisable No. 6,250,000 2,000,000 - 6,520,710 6,520,710 (1,250,000) 2,326,579 2,326,579 - - - - - 2,556,667 2,556,667 1,013,368 1,013,368 125,000 125,000 125,000 125,000 - - (1,250,000) 18,917,324 14,667,324 - - - - - - - - Exercised during the year No. Other changes during the year No. Balance at end of year No. Vested and Exercisable No. Brett Fraser Robert Beeson Jay Stephenson Simon O’Loughlin Leigh Junk Julian Perkins Other KMP James Merrillees (1) 1,076,579 2,270,710 1,013,368 125,000 125,000 56,667 64,167 4,731,491 - - - - - - - - - - - - - - - - - - - - - - - - 1,076,579 1,076,579 2,270,710 2,270,710 1,013,368 1,013,368 125,000 125,000 56,667 125,000 125,000 56,667 64,167 64,167 4,731,491 4,731,491 Equities disclosed are up to and as at the date of resignation (1) (2) Other changes represent options issued to a third-party P a g e | 20 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ REPORT 17. REMUNERATION REPORT (AUDITED) 17.6. Loans to key management personnel There are no loans made to directors of Aura Energy as at 30 June 2014 (2013: nil). 17.7. Other transactions with key management personnel Note 2014 $ 2013 $ Wolfstar Group Pty Ltd  Wolfstar Group Pty Ltd, a company controlled by Messrs Fraser and Stephenson, provided financial services and company secretarial services to Aura Energy Limited. These services were provided directly and indirectly by Messrs Fraser and Stephenson and have therefore not been included in the Remuneration table contained in part 17.2 of this Remuneration Report.  Financial services provided to Wolfstar Group  Amounts due from Wolfstar Group for other services provided by Aura Energy staff RRI Trust 64,917 90,000 17,987 9,242 - - Mr Perkins provides metallurgical consulting services to the Group that is charged through the RRI Trust, being a trust associated with Mr Perkins. 1,804 31,418 James Merrillees Drake Resources Limited provided the services of James Merrillees to Aura Energy Limited, recharging for his salary and superannuation on a cost basis. Amounts owing to KMP Payable for unpaid fees  P. Reeve  B. Beeson  B. Fraser  J. Perkins  S. Zillwood - 118,865 11,666 10,753 5,000 4,583 7,500 - - - - - There have been no other transactions involving equity instruments other than those described in the tables above. END OF REMUNERATION REPORT This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001 (Cth). PETER REEVE Chairman Dated this Tuesday, 30 September 2014 P a g e | 21 To The Board of Directors As lead audit director for the audit of the financial statements of Aura Energy Limited for the financial year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of: the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours faithfully BENTLEYS Chartered Accountants DOUG BELL CA Director Dated at Perth this 30th day of September 2014 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014 Continuing operations Revenue Other income Project partnering and divestment Accounting and audit fees Business development Computers and communications Depreciation Employee benefits Finance Costs Impairment Insurance Legal and consulting fees Public relations Rent and utilities Share-based payments Share registry and listing fees Travel and accommodation Exploration expenditure written-off Other expenses Loss before income tax Income tax benefit Loss from continuing operations Other comprehensive income, net of income tax   Items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss: Foreign currency movement Other comprehensive income for the year, net of tax Note 2 2 19 2014 $ 2013 $ 8,332 79,451 87,783 (4,785) (190,577) (26,419) (29,025) (6,700) 26,421 4,736 31,157 (334,395) (142,228) (6,051) (54,041) (14,610) (562,693) (760,773) (3,064) - (36,223) (67,229) (94,165) (123,832) (49,944) (69,517) (162,686) (755) (11,388) (52,740) (98,706) (137,892) (154,124) (152,765) (61,527) (51,937) 11 (2,880,191) (1,747,939) (41,860) (83,005) 3 5 (4,261,127) (3,833,719) 405,629 1,077,378 (3,855,498) (2,756,341) - - (294,741) 830,674 (294,741) 830,674 Total comprehensive income attributable to members of the parent entity (4,150,239) (1,925,667) Earnings per share: Basic loss per share (cents per share) ₵ 6 (2.07) ₵ (1.65) The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. P a g e | 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014 Current assets Cash and cash equivalents Trade and other receivables Financial assets Total current assets Non-current assets Plant and equipment Exploration and evaluation assets Total non-current assets Total assets Current liabilities Trade and other payables Short-term provisions Borrowings Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses TOTAL EQUITY AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 Note 2014 $ 2013 $ 7 8 9 10 11 12 13 14 570,478 2,012,295 92,830 64,453 102,926 - 727,761 2,115,221 2,994 9,694 12,726,303 15,016,416 12,729,297 15,026,110 13,457,058 17,141,331 431,087 106,081 221,016 427,374 116,311 31,136 758,184 574,821 758,184 574,821 12,698,874 16,566,510 15 16 27,935,558 27,759,558 1,238,119 1,426,258 (16,474,803) (12,619,305) 12,698,874 16,566,511 The consolidated statement of financial position is to be read in conjunction with the accompanying notes. P a g e | 24 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014 Issued Capital $ Accumulated Losses $ Options Reserve $ Foreign Exchange Translation Reserve $ Total $ Balance at 1 July 2012 25,723,535 (10,081,664) 625,968 (46,932) 16,220,907 Loss for the year attributable owners of the parent Other comprehensive income for the year attributable owners of the parent Total comprehensive income for the year attributable owners of the parent Transaction with owners, directly in equity Shares issued during the year Transaction costs Options expired during the year Options exercised during the year Options issued during the year - - - (2,756,341) - (2,756,341) 2,165,771 (129,748) - - - - - - - - - - 218,700 (218,700) - - - 235,248 - (2,756,341) 830,674 830,674 830,674 (1,925,667) - - - - - 2,165,771 (129,748) - - 235,248 Balance at 30 June 2013 27,759,558 (12,619,305) 642,516 783,742 16,566,511 Balance at 1 July 2013 27,759,558 (12,619,305) 642,516 783,742 16,566,511 Loss for the year attributable owners of the parent Other comprehensive income for the year attributable owners of the parent Total comprehensive income for the year attributable owners of the parent Transaction with owners, directly in equity Shares issued during the year Transaction costs Options expired during the year Options exercised during the year Options issued during the year - - - (3,855,498) - (3,855,498) 359,944 (183,944) - - - - - - - - - - - - - 106,602 - (3,855,498) (294,741) (294,741) (294,741) (4,150,239) - - - - - 359,944 (183,944) - - 106,602 Balance at 30 June 2014 27,935,558 (16,474,803) 749,118 489,001 12,698,874 The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. P a g e | 25 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2014 Cash flows from operating activities Receipts from customers Interest received Interest and borrowing costs Payments to suppliers and employees Payments for exploration expenditure Rebate received for Research and Development AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 Note 2014 $ 2013 $ - 843 8,332 25,578 (3,064) (4,059) (1,491,687) (1,656,554) (846,242) (1,202,076) 405,629 1,077,378 Net cash used in operating activities 18a (1,927,032) (1,758,890) Cash flows from investing activities Purchase of plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from issue of convertible notes Capital raising costs Net cash provided by financing activities Net increase/(decrease) in cash held Cash at 1 July Change in foreign currency held Cash at 30 June The statement of cash flows is to be read in conjunction with the accompanying notes. - - (2,361) (2,361) 234,943 2,055,338 250,000 - (15,000) (21,732) 469,943 2,033,606 (1,457,089) 272,355 2,012,295 1,725,512 15,272 14,428 7 570,478 2,012,295 P a g e | 26 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES These are the consolidated financial statements and notes of Aura Energy Limited and controlled entities (“Consolidated Group” or “Group”). Aura Energy Limited is a company limited by shares, domiciled and incorporated in Australia. The separate financial statements of the parent entity, Aura Energy Limited, have not been presented with this financial report as permitted by the Corporations Act 2001 (Cth). a. Basis of preparation i. Statement of compliance The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 (Cth). Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless otherwise stated. The financial statements were authorised for issue on 30 September 2014 by the directors of the Company. ii. Financial position The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. iii. Going Concern The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. The Group incurred a loss for the year of $3,855,498 (2013: $2,756,341 loss) and a net cash out-flow of $1,457,089 (2013: $272,355 in-flow) As at 30 June 2014, the Group had a working capital deficit of $30,423 (2013: $1,540,400 working capital), that included the debt component of a convertible note of $188,600 of which $175,000 has subsequent to balance date been converted to ordinary shares, refer note 25 Events Subsequent to Reporting Date. The ability of the Group to continue as a going concern is principally dependent upon the ability of the Group to secure funds by raising capital from equity markets or by other means, and by managing cash flows in line with available funds, and / or the successful development of the Group's exploration assets. These conditions indicate a material uncertainty that may cast doubt about the ability of the Group to continue as a going concern. On 2 September 2014, the Company raised $1,572,855 before costs, via a non-renounceable rights issue (refer note 25 Events Subsequent to Reporting Date). Based upon cash flow forecasts and other factors referred to above, the directors are satisfied that the going concern basis of preparation is appropriate, including the meeting of exploration commitments. In addition, given the Group's history of raising funds to date, the directors are confident of the Group's ability to raise additional funds as and when they are required. Should the Group be unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or to the amount and classification of liabilities that might result should the Group be unable to continue as a going concern and meet its debts as and when they fall due. P a g e | 27 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES iv. Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Judgements made by management in the application of Australian Accounting Standards that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 1r Critical Accounting Estimates and Judgements on page 37. v. Comparative figures Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year. b. Principles of Consolidation A controlled entity is any entity over which Aura Energy Limited has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. A list of controlled entities is contained in Note 17 Controlled Entities on page 53 of the financial statements. All inter-group balances and transactions between entities in the Consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the Consolidated Group during the year, their operating results have been included (excluded) from the date control was obtained (ceased). i. Business Combinations Business combinations occur when an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of profit or loss and comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. c. Exploration and Development Expenditure i. Recognition and measurement Exploration, evaluation, and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. P a g e | 28 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES ii. Subsequent measurement 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. When production commences, the accumulated costs for the relevant area of interest will be amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest. iii. Site restoration and rehabilitation Costs of site restoration will be provided over the life of the project, when such costs are incurred or the Group becomes liable for, from when exploration commences and are included in the costs of that stage. Site restoration costs will include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. d. Income Tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items recognised outside profit or loss. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. P a g e | 29 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Where the Group receives the Australian Government's Research and Development Tax Incentive, The Group accounts for the refundable tax offset under AASB 112. Funds are received as a rebate through the parent company’s income tax return and disclosed as such in Note 5 Income Tax, on page 45. e. Plant and Equipment i. Recognition and measurement Each class of plant and equipment is measured at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. 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 asset’s employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts. Items of property, plant and equipment are measured at cost less accumulated depreciation (see below) and impairment losses (refer Note 1m Impairment of non-financial assets and Note 1c Exploration and Development Expenditure). ii. Depreciation The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight line basis over their useful lives to the Consolidated Group, commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Plant and equipment ........................................................ 20.00% Computers ........................................................................ 33.00% Motor Vehicles ................................................................. 25.00% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When re-valued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. f. Employee Benefits For the period ending 30 June 2014 the Company has three employees. i. Defined contribution superannuation funds A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions onto a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the income statement as incurred. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. ii. Short-term benefits Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees’ services provided to the reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay at the reporting date including related on-costs, such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees. P a g e | 30 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES iii. Other long-term benefits Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. g. Equity-settled compensation The Group operates an employee share ownership scheme. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. h. Revenue and Other Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Management fees are recognised on portion of completion basis. Gain on disposal of tenements, and revenue from equipment chargebacks, are recognised on receipt of compensation. All revenue is stated net of the amount of value added taxes (see Note 1i Value Added Taxes). i. Value Added Taxes Value-added taxes (VAT) is the generic term for the broad-based consumption taxes that the Group is exposed to such as: Australia (GST); Sweden (MOMS); and in Mauritania (VAT). Revenues, expenses, and assets are recognised net of the amount of VAT, except where the amount of VAT incurred is not recoverable from the relevant country's taxation authority. In these circumstances the VAT 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 VAT. Cash flows are presented in the statement of cash flows on a gross basis, except for the VAT component of investing and financing activities, which are disclosed as operating cash flows. Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the taxation authority. j. Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the Group are classified as finance leases. Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the Group will obtain ownership of the asset or over the term of the lease. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. P a g e | 31 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES k. Financial Instruments Initial recognition and measurement i. Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transaction costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. ii. Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transactions costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. iii. Classification and Subsequent Measurement (1) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-borrowings in current liabilities on the Statement of Financial Position. (2) Loans Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Loans are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period. (3) Trade and other receivables Trade and other receivables are stated at amortised cost. Receivables are usually settled within 30 to 90 days. Collectability of trade and other debtors is reviewed on an ongoing basis. An impairment loss is recognised for debts which are known to be uncollectible. An impairment provision is raised for any doubtful amounts. (4) Trade and other payables Trade payables and other payable are recognised when the Group becomes obligated to make future payments resulting from the purchase of goods and services which are unpaid and stated at their amortised cost. The amounts are unsecured and are generally settled on 30 day terms. (5) Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. (6) Share capital Ordinary issued capital is recorded at the consideration received. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any related income tax benefit. Ordinary issued capital bears no special terms or conditions affecting income or capital entitlements of the shareholders. P a g e | 32 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES iv. Amortised cost Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. v. Fair value 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. vi. Effective interest method The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss. vii. Impairment A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in the income statement. viii. Derecognition Financial assets are derecognised where the contractual rights to cash flow expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. ix. Financial income and expenses Finance income comprises interest income on funds invested (including available-for-sale financial assets), gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Financial expenses comprise interest expense on borrowings calculated using the effective interest method, unwinding of discounts on provisions, changes in the fair value of financial assets at fair value through profit or loss and impairment losses recognised on financial assets. All borrowing costs are recognised in profit or loss using the effective interest method. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in income in the period in which they are incurred. P a g e | 33 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Foreign currency gains and losses are reported on a net basis. l. Earnings per share i. Basic earnings per share Basic earnings (or loss) per share is determined by dividing the profit or loss attributable to equity holders of the parent company, excluding any costs of service equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. ii. Diluted earnings per share Diluted earnings (or loss) per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares which comprise share options granted as share-based payments. The Group does not report diluted earnings per share, as dilution is not applied to annual losses generated by the Group. m. Impairment of non-financial assets The carrying amounts of the Company’s non-financial assets, other than deferred tax assets (refer Note 1d Income Tax) and exploration and evaluation assets (refer Note 1c Exploration and Development Expenditure) are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement, unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the income statement. Impairment losses recognised in respect of cash- generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised. n. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. o. Foreign Currency Transactions and Balances i. Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. P a g e | 34 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES ii. 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. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the profit or loss except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the gain or loss is directly recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. iii. Group companies The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; income and expenses are translated at average exchange rates for the period; and 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 Group’s foreign currency translation reserve in the statement of financial position. These differences are recognised in the profit or loss in the period in which the operation is disposed. p. Fair value estimation A number of the group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Information about the assumptions made in determining fair values of assets and liabilities is disclosed in the notes specific to that asset or liability. q. Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant's ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity's own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. P a g e | 35 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES i. Valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: (1) Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. (2) Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. (3) Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. ii. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: (1) Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. (2) Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. (3) Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: a. b. if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. P a g e | 36 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES r. Critical Accounting Estimates and Judgements The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. i. Key Judgements – Exploration and evaluation expenditure Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at reporting date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, (refer to Note 1c Exploration and Development Expenditure).The carrying value of capitalised expenditure at reporting date is $12,726,303. During the financial year, the Group undertook assessment of its tenement assets, As a result of this assessment, the Group decided to impair some of its exploration assets. Refer Note 11 Exploration And Evaluation Assets on page 49. ii. Key Judgements – Environmental issues Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the Directors’ understanding thereof. At the current stage of the Group’s development and its current environmental impact, the Directors believe such treatment is reasonable and appropriate. iii. Key Estimate – Taxation Balances disclosed in the financial statements and the notes thereto, related to taxation, are based on the best estimates of directors. These estimates take into account both the financial performance and position of the Group as they pertain to current income taxation legislation, and the Directors’ understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position represents that Directors’ best estimate, pending an assessment by tax authorities in relevant jurisdictions (refer Note 5 Income Tax on page 45). iv. Key Estimate — Impairment The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in- use calculations performed in assessing recoverable amounts incorporate a number of key estimates. v. Key Estimate – Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black- Scholes option pricing model, using the assumptions detailed in Note 19 Share-Based Payments on page 55. s. Application of new and revised Australian Accounting Standards ("AASBs") In the current year, the Group has applied a number of new and revised AASs issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2013. i. AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements Applicable for annual reporting periods commencing on or after 1 July 2013. The Standard amends AASB 124 Related Party Disclosures to remove the individual key management personnel (KMP) disclosures required by Australian specific paragraphs. This amendment reflects the AASB’s view that these disclosures are more in the nature of governance disclosures that are better dealt within the legislation, rather than by the AASBs. As a result the Company only discloses the KMP compensation in total and for each of the categories required in AASB 124. In the current year the individual KMP disclosure previously required by AASB 124 (note 24 in the 30 June 2013 financial statements) is now disclosed in the remuneration report on page 17, due to an amendment to Corporations Regulations 2001 issued in June 2013. P a g e | 37 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES ii. AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities Applicable for annual reporting periods commencing on or after 1 January 2013. This Standard amends the required disclosures in AASB 7 to include information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position. This Standard also amends AASB 132 to refer to the additional disclosures added to AASB 7 by this Standard. The amendments have been applied retrospectively. As the Company does not have any offsetting arrangements in place, the application of the amendments does not have any material impact on the financial statements. iii. AASB 2012-5: Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle Applicable for annual reporting periods commencing on or after 1 January 2013. These amendments are a consequence of the annual improvements process, which provides a vehicle for making non-urgent but necessary amendments to Standards. The amendments made are largely of the nature of clarifications or removals of unintended inconsistencies between Australian Accounting Standards (for example, AASB 101 is amended to clarify that related notes to an additional statement of financial position are not required in the event of a change in accounting policy, reclassification or restatement). These amendments have had no significant impact on the entity for the 2014 financial year, given that they are largely of the nature of clarifications or removals of unintended inconsistencies between Australian Accounting Standards. iv. AASB 2012-9 Amendment to AASB 1048 arising from the Withdrawal of Australian Interpretation 1039 This standard makes amendment to AASB 1048 Interpretation of Standards following the withdrawal of Australian Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia. The adoption of this amending standard does not have any material impact on the financial statements. v. AASB CF 2013-1 Amendments to the Australian Conceptual Framework and AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments (Part A Conceptual Framework) This amendment has incorporated IASB’s Chapters 1 and 3 Conceptual Framework for Financial Reporting as an Appendix to the Australian Framework for the Preparation and Presentation of Financial Statements. The amendment also included not-for-profit specific paragraphs to help clarify the concepts from the perspective of not-for-profit entities in the private and public sectors. As a result the Australian Conceptual Framework now supersedes the objective and the qualitative characteristics of financial statements, as well as the guidance previously available in Statement of Accounting Concepts SAC 2 Objective of General Purpose Financial Reporting. The adoption of this amending standard does not have any material impact on the financial statements. t. New and revised Standards on consolidation, joint arrangements, associates and disclosures In August 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 127 (as revised in 2011) Separate Financial Statements and AASB 128 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to AASB 10, AASB 11 and AASB 12 were issued to clarify certain transitional guidance on the first- time application of the standards. In the current year, the Company has applied for the first time AASB 10, AASB 11, AASB 12 and AASB 128 (as revised in 2011) together with the amendments to AASB 10, AASB 11 and AASB 12 regarding the transitional guidance. AASB 127 (as revised in 2011) is not applicable to the Company as it deals only with separate financial statements. The impact of the application of these standards is set out below. i. AASB 10 Consolidated Financial Statements (issued August 2011) Applicable for annual reporting periods commencing on or after 1 January 2013. AASB 10 establishes a revised control model that applies to all entities. It replaces the consolidation requirements in AASB 127 Consolidated and Separate Financial Statements and AASB Interpretation 112 Consolidation – Special Purpose Entities. P a g e | 38 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The revised control model broadens the situations when an entity is considered to be controlled by another entity and includes additional guidance for applying the model to specific situations, including when acting as an agent may give control, the impact of potential voting rights and when holding less than a majority voting rights may give ‘de facto’ control. This is likely to lead to more entities being consolidated into the Company. This Standard was first adopted for the year ended 30 June 2014. There was no impact on the transactions and balances recognised in the financial statements. The Group does not utilise any special purpose entities. ii. AASB 11: Joint Arrangements (issued August 2011) Applicable for annual reporting periods commencing on or after 1 January 2013. AASB 11 replaces AASB 131 Interests in Joint Ventures and AASB Interpretation 113 Jointly- controlled Entities – Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition, AASB 11 removes the option to account for jointly-controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations for liabilities are accounted for by recognising the share of those assets and liabilities. Joint ventures that give the venturers a right to the net assets are accounted for using the equity method. This Standard was first adopted for the year ended 30 June 2014. There was no impact on transactions and balances recognised in the financial statements because the Group has no arrangements crystallised into joint arrangements and require reporting as such. iii. AASB 12 Disclosure of Interests in Other Entities (issued August 2011) Applicable for annual reporting periods commencing on or after 1 January 2013. AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. New disclosures introduced by AASB 12 include disclosures about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests. As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements. Additional disclosure will be required for interests in associates, joint arrangements, and unconsolidated structured entities, should the Company acquire interests in such entities in the future. iv. AASB 13: Fair Value Measurement (issued September 2011) Applicable for annual reporting periods commencing on or after 1 January 2013. AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted by other Standards. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. This Standard was first adopted for the year ended 30 June 2014.The Group does not have any material assets or liabilities significantly impacted by this Standard. Consequently, additional disclosures under this Standard, required about fair values, have had minimal impact to the financial statements. v. AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments Applicable for annual reporting periods commencing on or after 1 January 2013. AASB 2012-10 clarifies the transition guidance in AASB 10 Consolidated Financial Statements. It also provides additional transition relief in AASB 10, AASB 11 Joint Arrangements and AASB 12 Disclosure of Interests in Other Entities by limiting the requirement to provide adjusted comparative information only to the immediately preceding comparative period. In addition, for disclosures related to unconsolidated structured entities, AASB 2012-10 removes the requirement to present comparative information for any periods beginning before the first annual reporting period for which AASB 12 is applied. P a g e | 39 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Furthermore, AASB 2012-10 defers the mandatory effective date of AASB 10, AASB 11, AASB 12, AASB 127 Separate Financial Statements (August 2011) and AASB 128 Investments in Associates and Joint Arrangements (August 2011) for not-for-profit entities from 1 January 2013 to 1 January 2014. This Standard was first adopted for the year ended 30 June 2014. There was no impact on transactions and balances recognised in the financial statements because the Group has no arrangements. u. Other new and revised Standards The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on the Group is as follows: i. AASB 119 Employee Benefits (September 2011) Applicable for annual reporting periods commencing on or after 1 January 2013. Consequential amendments were also made to other standards via AASB 2011-10. Main changes include: Elimination of the ‘corridor’ approach for deferring gains/losses for defined benefit plans Actuarial gains/losses on remeasuring the defined benefit plan obligation/asset to be recognised in OCI rather than in profit or loss, and cannot be reclassified in subsequent periods Subtle amendments to timing for recognition of liabilities for termination benefits Employee benefits ‘expected to be settled’ (as opposed to ‘due to be settled’ under current standard) within 12 months after the end of the reporting period are short-term benefits, and therefore not discounted when calculating leave liabilities. Annual leave not expected to be used within 12 months of end of reporting period will in future be discounted when calculating leave liability. The Company does not have any defined benefit plans. Therefore, these amendments will have no significant impact on the Company. v. New Accounting Standards for Application in Future Periods At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. i. AASB 9 Financial Instruments (issued December 2009 and amended December 2010) Applicable for annual reporting periods commencing on or after 1 January 2015. AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are: Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business model for managing the financial assets; and (2) the characteristics of the contractual cash flows. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument. Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows:  The change attributable to changes in credit risk are presented in other comprehensive income (OCI); and  The remaining change is presented in profit or loss. P a g e | 40 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. Otherwise, the following requirements have generally been carried forward unchanged from AASB 139 into AASB 9: Classification and measurement of financial liabilities; and Derecognition requirements for financial assets and liabilities. Consequential amendments arising from AASB 9 are contained in AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010), AASB 2010-10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters and AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures. The entity has not yet assessed the full impact of AASB 9 as this standard does not apply mandatorily before 1 January 2018 and the IASB is yet to finalise the remaining phases of its project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 in Australia). ii. AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities Applicable for annual reporting periods commencing on or after 1 January 2014. AASB 2012-3 adds application guidance to AASB 132 to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement. When AASB 2012-3 is first adopted for the year ended 30 June 2015, there will be no impact on the Group as this standard merely clarifies existing requirements in AASB 132. iii. AASB 2013-3 Recoverable Amount Disclosures for Non-Financial Assets Applicable for annual reporting periods commencing on or after 1 January 2014. These narrow-scope amendments address disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. When developing IFRS 13 Fair Value Measurement, the IASB decided to amend IAS 36 Impairment of Assets to require disclosures about the recoverable amount of impaired assets. The IASB noticed however that some of the amendments made in introducing those requirements resulted in the requirement being more broadly applicable than the IASB had intended. These amendments to IAS 36 therefore clarify the IASB’s original intention that the scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal. AASB 2013-3 makes the equivalent amendments to AASB 136 Impairment of Assets. When these amendments are first adopted for the year ending 30 June 2015, they are unlikely to have any significant impact on the entity given that they are largely of the nature of clarification of existing requirements iv. AASB 1031 Materiality (December 2013) Applicable for annual reporting periods commencing on or after 1 January 2014. The revised AASB 1031 is an interim standard that cross-references to other Standards and the Framework for the Preparation and Presentation of Financial Statements (issued December 2013) that contain guidance on materiality. The AASB is progressively removing references to AASB 1031 in all Standards and Interpretations, and once all these references have been removed, AASB 1031 will be withdrawn. When the revised AASB 1031 is first adopted for the year ending 30 June 2015, it is unlikely to have any significant impact on the entity. v. AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments (Part B: Materiality) Applicable for annual reporting periods commencing on or after 1 January 2014. Part B of AASB 2013-9 deletes references to AASB 1031 in various Australian Accounting Standards (including Interpretations). When these amendments are first adopted for the year ending 30 June 2015, they are unlikely to have any significant impact on the entity. P a g e | 41 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES vi. AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments (Part C: Financial Instruments) Applicable for annual reporting periods commencing on or after 1 January 2015. These amendments: add a new chapter on hedge accounting to AASB 9 Financial Instruments, substantially overhauling previous accounting requirements in this area; allow the changes to address the so-called ‘own credit’ issue that were already included in AASB 9 to be applied in isolation without the need to change any other accounting for financial instruments; and defer the mandatory effective date of AASB 9 from ‘1 January 2015’ to ‘1 January 2017’. Note that, subsequent to issuing these amendments, the AASB has issued AASB 2014-1 which defers the effective date of AASB 9 to ‘1 January 2018’. The entity has not yet assessed the full impact of these amendments. vii. AASB 2014-1 Amendments to Australian Accounting Standards (Part A: Annual Improvements 2010–2012 and 2011–2013 Cycles) Applicable for annual reporting periods commencing on or after 1 July 2014 Part A of AASB 2014-1 makes amendments to various Australian Accounting Standards arising from the issuance by the International Accounting Standards Board (IASB) of International Financial Reporting Standards Annual Improvements to IFRSs 2010-2012 Cycle and Annual Improvements to IFRSs 2011-2013 Cycle. Among other improvements, the amendments arising from Annual Improvements to IFRSs 2010-2012 Cycle: (1) clarify that the definition of a ‘related party’ includes a management entity that provides KMP services to the reporting entity (either directly or through a group entity); and (2) amend AASB 8 Operating Segments to explicitly require the disclosure of judgements made by management in applying the aggregation criteria. Among other improvements, the amendments arising from Annual Improvements to IFRSs 2011-2013 Cycle clarify that an entity should assess whether an acquired property is an investment property under AASB 140 Investment Property and perform a separate assessment under AASB 3 Business Combinations to determine whether the acquisition of the investment property constitutes a business combination. When these amendments are first adopted for the year ending 30 June 2015, there will be no material impact on the entity. viii. AASB 2014-1 Amendments to Australian Accounting Standards (Part B: Defined Benefit Plans: Employee Contributions (Amendments to AASB 119)) Applicable for annual reporting periods commencing on or after 1 July 2014 Part B of AASB 2014-1 makes amendments to AASB 119 Employee Benefits to incorporate the IASB’s practical expedient amendments finalised in International Financial Reporting Standard Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) in relation to the requirements for contributions from employees or third parties that are linked to service. The amendments clarify that if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service. In contrast, if the amount of the contributions is dependent on the number of years of service, an entity is required to attribute those contributions to periods of service using the same attribution method required by paragraph 70 of AASB 119 for the gross benefit. When these amendments are first adopted for the year ending 30 June 2015, there will be no material impact on the entity. ix. AASB 2014-1 Amendments to Australian Accounting Standards (Part C: Materiality) Applicable for annual reporting periods commencing on or after 1 July 2014 Part C of AASB 2014-1 makes amendments to particular Australian Accounting Standards to delete their references to AASB 1031 Materiality, which historically has been referenced in each Australian Accounting Standard. When these amendments are first adopted for the year ending 30 June 2015, there will be no material impact on the entity. P a g e | 42 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES x. AASB 2014-1 Amendments to Australian Accounting Standards (Part D: Consequential Amendments arising from AASB 14) Applicable for annual reporting periods commencing on or after 1 January 2016 Part D of AASB 2014-1 makes consequential amendments arising from the issuance of AASB 14. When these amendments become effective for the first time for the year ending 30 June 2017, they will not have any impact on the entity. xi. AASB 2014-1 Amendments to Australian Accounting Standards (Part E: Financial Instruments) Applicable for annual reporting periods commencing on or after 1 January 2015 Part E of AASB 2014-1 makes amendments to Australian Accounting Standards to reflect the AASB’s decision to defer the mandatory application date of AASB 9 Financial Instruments to annual reporting periods beginning on or after 1 January 2018. Part E also makes amendments to numerous Australian Accounting Standards as a consequence of the introduction of Chapter 6 Hedge Accounting into AASB 9 and to amend reduced disclosure requirements for AASB 7 Financial Instruments: Disclosures and AASB 101 Presentation of Financial Statements. The entity has not yet assessed the full impact of these amendments. P a g e | 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 2 REVENUE AND OTHER INCOME a. Revenue Interest received from financial institutions Management fees Total Revenue b. Other Income Interest on convertible note Foreign exchange gain Total Other Income NOTE 3 LOSS BEFORE INCOME TAX The following significant revenue and (expense) items are relevant in explaining the financial performance: Superannuation expense NOTE 4 AUDITOR’S REMUNERATION Remuneration of the auditor of the Group for: Auditing or reviewing the financial reports Taxation services provided by a related practice of the auditor AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 2014 $ 8,332 - 8,332 48,684 30,767 79,451 2014 $ 2013 $ 25,578 843 26,421 - 4,736 4,736 2013 $ (77,725) (65,642) 2014 $ 32,950 3,000 35,950 2013 $ 34,950 10,150 45,100 P a g e | 44 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 5 INCOME TAX Note a. Income tax expense / (benefit) Current tax Deferred tax Tax rebate for Research and Development 2014 $ - - 2013 $ - - (405,629) (1,077,378) (405,629) (1,077,378) Deferred income tax expense included in income tax expense comprises: Increase / (decrease) in deferred tax assets (Increase) / decrease in deferred tax liabilities 5c 5d 279,000 (279,000) 12,664 (12,664) - - b. Reconciliation of income tax expense to prima facie tax payable The prima facie tax payable / (benefit) on loss from ordinary activities before income tax is reconciled to the income tax expense as follows: Prima facie tax on operating loss at 30% (2013: 30%) (1,278,338) (1,150,116) Add / (Less) Tax effect of: Capital-raising costs deductible Capitalised Australian Exploration and Evaluation expenditure Share-based payments Write-off of exploration assets Deferred tax asset not brought to account Income tax expense / (benefit) attributable to operating loss Less rebates: Tax rebate for Research and Development Income tax expense / (benefit) The applicable weighted average effective tax rates attributable to operating profit are as follows Balance of franking account at year end (70,691) - 14,983 864,057 469,989 - (65,487) (16,791) 45,830 532,956 653,608 - (405,629) (1,077,378) (405,629) (1,077,378) % nil $ nil % nil $ nil P a g e | 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 5 INCOME TAX c. Deferred tax assets Tax losses Provisions and accruals Other Set-off deferred tax liabilities Net deferred tax assets Less deferred tax assets not recognised Net tax assets d. Deferred tax liabilities Exploration expenditure Set-off deferred tax assets Net deferred tax liabilities e. Tax losses Unused tax losses for which no deferred tax asset has been recognised, that may be utilised to offset tax liabilities: Revenue losses Capital losses AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 2014 $ 2013 $ 3,132,262 2,755,968 69,337 105,563 72,406 173,659 3,307,162 3,002,033 5d - (279,000) 3,307,162 2,723,033 (3,307,162) (2,723,033) - - - - - - 279,000 279,000 (279,000) - 5c 10,790,535 9,076,778 691,104 691,104 11,481,639 9,767,882 Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been brought to account at 30 June 2014 because the Directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time. These benefits will only be obtained if: i. the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss and exploration expenditure to be realised; ii. the Group continues to comply with conditions for deductibility imposed by law; and iii. no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the loss and exploration expenditure. P a g e | 46 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 6 EARNINGS PER SHARE 2014 $ 2013 $ a. Reconciliation of earnings to net profit or loss (3,855,498) (2,756,341) b. Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS 186,055,240 166,669,039 2014 No. 2013 No. 2014 ₵ 2013 ₵ c. Basic and diluted earnings per share (cents per share) (2.07) (1.65) i. The Group is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, ordinary share capital in respect of potential ordinary shares would lead to diluted earnings per share that shows an inferior view of the earnings per share. Therefore in the event the Group has dilutionary equity instruments on issue, the diluted loss per share for the year ended 30 June 2014 is the same as basic loss per share, whilst the Company remains loss making. ii. There are 59,534,218 (2013: 41,434,218) unissued shares under option which are anti-dilutive. NOTE 7 CASH AND CASH EQUIVALENTS Cash at bank Short-term bank deposits 2014 $ 554,953 15,525 2013 $ 1,919,517 92,778 570,478 2,012,295 7a a. Short-term deposits are made for varying periods of between 1 day and 6 months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The bank deposit is held by Westpac as security for their guarantee. The effective interest rate on short-term term deposits and maturity date was as follows: Aura Energy Limited Terms (Days) 90 Interest rate % Maturity Date 3.57 29 August 2014(1) Principal $ 15,525 15,525 (1) This account was subsequent rolled over for a further 90 days b. The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 24 Financial Risk Management on page 62. P a g e | 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 8 TRADE AND OTHER RECEIVABLES Current Value-added tax receivable Trade debtors Other Less: Provision for Impairment AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 8a 2014 $ 31,065 29,728 37,075 (5,038) 2013 $ 26,725 52,038 36,167 (12,004) 92,830 102,926 a. Value-added tax (VAT) is a generic term for the broad-based consumption taxes that the Group is exposed to such as: Australia (GST); Sweden (MOMS); and in Mauritania (VAT). b. The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 24 Financial Risk Management on page 62. NOTE 9 FINANCIAL ASSETS Current Mauritanian cautions / bonds receivable NOTE 10 PLANT AND EQUIPMENT Non-current Plant and equipment Accumulated depreciation Motor vehicles Accumulated depreciation Total plant and equipment a. Movements in Carrying Amounts Balance at the beginning of year Additions Depreciation expense Carrying amount at the end of year 2014 $ 64,453 64,453 2014 $ 2013 $ - - 2013 $ 156,818 182,366 (153,824) (172,672) 2,994 - - - 2,994 9,694 - (6,700) 2,994 9,694 62,948 (62,948) - 9,694 21,943 2,361 (14,610) 9,694 P a g e | 48 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 11 EXPLORATION AND EVALUATION ASSETS Non-current Exploration expenditure capitalised: Exploration and evaluation phase at cost Other 2014 $ 2013 $ 15,089,645 15,922,505 - - Add: Effect of exchange rate changes on exploration and evaluation assets 516,849 841,850 Less: Exploration expenditure impairment 11b (2,880,191) (1,747,939) Net carrying value 11a,c 12,726,303 15,016,416 a. The value of the Group interest in exploration expenditure is dependent upon: the continuance of the Group’s rights to tenure of the areas of interest; the results of future exploration; and the recoupment of costs through successful development and exploitation of the areas of interest, or alternatively, by their sale. The Group’s exploration properties may be subjected to claim(s) under native title (or jurisdictional equivalent), or contain sacred sites, or sites of significance to the indigenous people of Sweden and Mauritania. As a result, exploration properties or areas within the tenements may be subject to exploration restrictions, mining restrictions and/or claims for compensation. At this time, it is not possible to quantify whether such claims exist, or the quantum of such claims. b. c. The Group relinquished a number of tenements during the financial year resulting in an impairment loss of $2,880,191 (2013: $1,747,939). The Group is currently appealing a decision made by the Swedish mining authorities not to grant an extension to one of its tenements, which has capital costs associated to it with a carrying value of A$243,939. The Group is confident it will be successful with its appeal NOTE 12 TRADE AND OTHER PAYABLES Current Unsecured Trade payables Accrued expenses Other taxes payable 2014 $ 2013 $ 12a 229,901 137,937 63,249 250,057 108,341 68,976 431,087 427,374 a. Trade payables are non-interest bearing and arise from the usual operating activities of the Group. Trade payables and other payables and accruals, except directors' fees, are usually settled within the lower of terms of trade or 30 days. b. The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 24 Financial Risk Management on page 62. P a g e | 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 13 SHORT-TERM PROVISIONS Current Employee benefits Number of employees at year end NOTE 14 BORROWINGS Current Short-term Borrowings Convertible note AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 2014 $ 2013 $ 106,081 116,311 106,081 116,311 2014 No. 3 2014 $ 32,416 188,600 221,016 2013 No. 3 2013 $ 31,136 - 31,136 14a a. Short-term borrowings comprise premium funding for insurance policies, repayable within 12 months. b. On 28 February 2014, the Company entered into a financing arrangement providing up to $3,775,000 over 24 months. Under the agreement with The Australian Special Opportunity Fund, LP, managed by The Lind Partners, LLC, Aura received $325,000, in the form of a $250,000 convertible note and $75,000 as a prepayment for placement of ordinary shares in Aura. Lind will further invest in tranches of $75,000, in monthly share subscriptions, over the next two years. The note and shares will be issued at a 10% discount to a specified three day volume weighted share price. Further key terms of the agreement are as follows: The $250,000 convertible note is secured by the issue of 2,200,000 shares. Aura has the ability to repurchase the note at a premium to the issue price during the first 90 days of the agreement. An issue of 2,946,378 shares as a commencement fees for the provision of the funding facility, The issue of 2,600,000 options with an exercise price of 4.8 cents and the three year expiration date. The convertible note liability is measured at its present value. P a g e | 50 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 15 ISSUED CAPITAL Note 2014 $ 2013 $ The Company has issued share capital amounting to 195,825,149 (2013: 183,285,591) fully paid ordinary shares at no par value. 15a 27,935,558 27,759,558 a. Ordinary shares At the beginning of the reporting period Shares issued during the year: 9,090,909 Shares issued on 9 November 2012 10,498,750 Shares issued on 20 May 2013 4,073,392 Shares issued on 26 June 2013 2,946,378 Shares issued on 6 March 2014 2,200,000 Shares issued on 6 March 2014 2,272,727 Shares issued on 8 April 2014 2,777,778 Shares issued on 13 May 2013 1,433,067 Shares issued on 13 May 2014 555,816 Shares issued on 6 June 2014 353,792 Shares issued on 10 June 2014 Transaction costs relating to share issues At reporting date At the beginning of the reporting period Shares issued during the year: 9,090,909 Shares issued on 9 November 2012 10,498,750 Shares issued on 20 May 2013 4,073,392 Shares issued on 26 June 2013 2,946,378 Shares issued on 6 March 2014 2,200,000 Shares issued on 6 March 2014 2,272,727 Shares issued on 8 April 2014 2,777,778 Shares issued on 13 May 2014 1,433,067 Shares issued on 13 May 2014 555,816 Shares issued on 6 June 2014 353,792 Shares issued on 10 June 2014 15a.ii 15a.iii 15a.iv 15a.iv 15a.v 15a.v 15a.vi 27,759,558 25,723,535 - - - 125,000 nil 75,000 75,000 56,031 16,855 12,058 1,000,000 839,900 325,871 - - - - - - - (183,944) (129,748) 27,935,558 27,759,558 2014 No. 2013 No. 183,285,591 159,622,540 - - - 9,090,909 10,498,750 4,073,392 15a.ii 15a.iii 15a.iv 15a.iv 15a.v 15a.v 15a.vi 2,946,378 2,200,000 2,272,727 2,777,778 1,433,067 555,816 353,792 - - - - - - - At reporting date 195,825,149 183,285,591 P a g e | 51 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 15 ISSUED CAPITAL (cont.) i. Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has a vote on a show of hands. ii. iii. iv. v. vi. Shares issued under financing agreement with The Australian Special Opportunity Fund LP (ASOF) to settle $125,000 facility fee Issued as collateral for the $250,000 convertible note from ASOF Issued to settle $75,000 funding tranche under ASOF financing agreement Issued to directors in lieu of fees, as approved at a general meeting of shareholders on 8 May 2014 Issued to suppliers in lieu of payment for services b. Options For information relating to the Aura Energy Limited employee options scheme, including details of options issued, issued and lapsed during the financial year, and the options outstanding at balance date, refer to Note 19 Share-based Payments on page 55 The total number of options on issue are as follows: Listed options Unlisted options c. Capital Management i. Capital management policy 2014 No. 2013 No. 35,789,218 35,789,218 23,745,000 5,645,000 59,534,218 41,434,218 The Directors’ objectives when managing capital are to ensure that the Group can fund its operations and continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet exploration programmes and corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. ii. Current ratio The current ratio the Group at 30 June 2014 and 30 June 2013 were as follows: Current ratio 2014 0.96 2013 3.68 P a g e | 52 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 15 ISSUED CAPITAL (cont.) iii. Working capital position The working capital position of the Group at 30 June 2014 and 30 June 2013 were as follows: Cash and cash equivalents Trade and other receivables Financial assets Trade and other payables Short-term provisions Short-term borrowings Working capital position / (deficit) NOTE 16 RESERVES Option reserve Foreign exchange reserve a. Option reserve Note 2014 No. 2013 No. 7 8 9 12 13 14 16a 16b 570,478 2,012,295 92,830 64,453 (431,087) (106,081) (221,016) 102,926 - (427,374) (116,311) (31,136) (30,423) 1,540,400 2014 $ 749,118 489,001 2013 $ 642,516 783,742 1,198,708 1,426,258 The option reserve records items recognised as expenses on the value of employee and consultant share options. b. Foreign Exchange Translation Reserve The foreign exchange reserve records exchange differences arising on translation of foreign controlled subsidiary. NOTE 17 CONTROLLED ENTITIES Controlled Entities Keyano Jack Pty Limited Aura Energy Sweden AB Country of Incorporation Australia Sweden GCM Africa Uranium Limited United Kingdom a. Investments in subsidiaries are accounted for at cost. Class of Shares Ordinary Ordinary Ordinary Percentage Owned 2014 100% 100% 100% 2013 100% 100% 100% P a g e | 53 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 18 CASH FLOW INFORMATION Note 2014 $ 2014 $ a. Reconciliation of Cash Flow from Operations to Loss After Income Tax Loss after income tax (3,855,498) (2,756,341) Cash flows excluded from profit attributable to operating activities Non-cash flows in profit from ordinary activities: Share-based payments expense Consulting fees payable settled through the issue of options Net interest on convertible notes Depreciation Effects of foreign exchange on translation Impairment Reclassification of insurance funding Write-off of capitalised exploration Capitalised exploration expenditure included in cash flows from operations Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: (Increase)/decrease in receivables and prepayments Increase/(decrease) in trade and other payables Increase/(decrease) in provisions Cash flow from operations b. Credit Standby Facilities The Group has no credit standby facilities. c. Non-Cash Investing and Financing Activities The Group has no non-cash investing and financing activities. 49,944 - (48,684) 6,700 (89,053) - - 152,765 82,483 - 14,610 (25,603) 11,388 31,136 2,880,191 1,747,939 (846,242) (1,202,076) 10,096 (24,256) (10,230) 135,635 (23,814) 72,988 (1,927,032) (1,758,890) P a g e | 54 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 19 SHARE-BASED PAYMENTS Note 2014 $ 2013 $ Share-based payment expense 49,944 152,765 a. The above share-based payment expense is comprised of the following arrangements in place at 30 June 2014: On 24 November 2013, the follow share options were granted to directors to take up ordinary shares: (i) 2,000,000 at an exercise price of $0.15 each. The options are exercisable on or before 13 January 2015; (ii) 2,250,000 at an exercise price of $0.20 each. The options are exercisable on or before 13 January 2016; (iii) 2,000,000 at an exercise price of $0.20 each. The options are exercisable on or before 13 July 2016; (iv) 4,625,000 at an exercise price of $0.15 each. The options are exercisable on or before 13 January 2015; and (v) 4,625,000 at an exercise price of $0.20 each. The options are exercisable on or before 13 July 2016. The options hold no voting or dividend rights and are not transferable. At balance date, no share option has been exercised or forfeited and 15,500,000 options remain. b. The above share-based payment expense is comprised of the following arrangements in place at 30 June 2013: i. On 24 November 2011, 3,500,000 share options were granted to Directors under the Aura Energy Limited Incentive Option Plan to take up ordinary shares at an exercise price of $0.31 each. The options are exercisable on or before 31 October 2014. The options hold no voting or dividend rights and are not transferable. At balance date, no share option has been exercised or forfeited and 3,500,000 options remain. ii. On 4 December 2012, 200,000 share options were granted to an employee under the terms of an employment contract at an exercise price of $0.20 each. The options are exercisable on or before 14 December 2016. The options hold no voting or dividend rights. Options are not transferable. At balance date, no share option has been exercised or forfeited and 200,000 options remain. iii. On 15 January 2013, 3,000,000 listed share options were granted to consultants as settlement of an invoice of $82,483 in connection with corporate promotion and marketing services at an exercise price of $0.20 each. The options are exercisable on or before 1 December 2014. The options hold no voting or dividend rights. Listed options are transferable. These options are recognised in public relations in the Consolidated Statement of Profit or Loss and Other Comprehensive Income on page 23. All options granted to key management personnel are ordinary shares in Aura Energy Limited, which confer a right to one ordinary share for every option held. c. Share-based payments recognised directly in equity and in place at 30 June 2014: i. On 8 March 2014, 2,600,000 options were issued under an agreement with The Australian Special Opportunity Fund, LP, managed by The Lind Partners, LLC, to take up ordinary shares at an exercise price of $0.048 each. The options expire 6 March 2017. Value of $56,661 was deemed a transaction costs under the agreement and has been recognised as such in the consolidated statement of changes in equity. d. Share-based payments recognised directly in equity and in place at 30 June 2013: i. On 24 February 2008, 600,000 share options were granted to employees and consultants under the Aura Energy Limited Incentive Option Plan to take up ordinary shares at an exercise price of $0.60 each. The options expired 24 April 2014 and the related option reserve was applied to accumulated losses. ii. On 8 February 2011, two tranches of 650,000 share options (1,300,000) were granted to Gold Resources Limited to take up ordinary shares at an exercise price of $0.69 and $1.05 each for each tranche. The options expired 30 March 2014 and the related option reserve was applied to accumulated losses. P a g e | 55 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 19 SHARE-BASED PAYMENTS (cont.) e. Movement in share-based payment arrangements during the period A summary of the movements of all Company options issued as share-based payments is as follows: Outstanding at the beginning of the year Issued Exercised Expired 2014 2013 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price 18,645,000 15,500,000 $0.1767 $0.1599 17,145,000 $0.2348 3,200,000 $0.2000 - - - - - - (1,700,000) $0.8065 Outstanding at year-end 34,145,000 $0.1952 18,645,000 Exercisable at year-end 29,895,000 $0.1917 18,645,000 $0.1767 $0.1767 The weighted average remaining contractual life of options outstanding at year end was 1.496 years. The weighted average exercise price of outstanding shares at the end of the reporting period was $0.1767 f. Fair value of options grants during the period The fair value of the options granted to employees is deemed to represent the value of the employee services received over the vesting period. The weighted average fair value of options granted during the year was $0.00407 (2013: $0.0284). These values were calculated using the Black-Scholes option pricing model, applying the following inputs to options issued this year: Grant date: 28 October 2013 (ratified at AGM 21 November 2013) 21 November 2013 Grant date share price: Option exercise price: $0.15 $0.052 $0.20 $0.20 $0.15 $0.200 $0.044 Number of options issued: 2,000,000 2,250,000 2,000,000 4,625,000 4,625,000 Remaining life (years): 0.540 1.540 Expected share price volatility: Risk-free interest rate: 0.540 2.038 2.038 69.63% 2.77% Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future movements. The life of the options is based on the historical exercise patterns, which may not eventuate in the future. P a g e | 56 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 20 KEY MANAGEMENT PERSONNEL COMPENSATION a. Key management personnel ("KMP") The names are positions of KMP are as follows: Chairman (1) Non-executive Director Peter Reeve Robert (Bob) Beeson Managing Director Brett Fraser Julian (Jules) Perkins Simon O’Loughlin Jay Stephenson Leigh Junk Stanley Zillwood James Merrillees Non-executive Director Non-executive Director (2) Non-executive Director (2) Non-executive Director (2) Exploration Manager Company Secretary and Chief Financial Officer (1) Appointed Chairman 13 July 2013 (2) Resigned as director 12 July 2013 b. KMP compensation The totals of remuneration paid to KMP during the year are as follows: Short-term employee benefits Post-employment benefits Share-based payments Other long term benefits Termination benefits Total 2014 $ 545,744 49,917 49,944 - - 2013 $ 674,368 40,725 145,213 - - 645,605 860,306 Refer to the Remuneration Report contained in the Director’s Report commencing on page 15 for details of the remuneration paid to each member of the Group’s KMP for the year ended 30 June 2014. NOTE 21 RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Other than those transactions contained in section 17.7 Other transactions with key management personnel on page 21 of the Remuneration Report, there are no other related party transactions. P a g e | 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 22 COMMITMENTS a. Exploration expenditure commitments: AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 2014 $ 2013 $ Exploration tenement minimum expenditure requirements 588,912 340,029 Payable: not later than 12 months between 12 months and 5 years greater than 5 years The Group has no contracted exploration expenditure, however the Group has treatment core asset tenement renewals as expenditure the Group is committed to. b. Operating lease commitments: Operating leases contracted for or committed to but not capitalised in the financial statements Payable: not later than 12 months between 12 months and 5 years greater than 5 years 212,647 376,265 - 340,029 - - 588,912 340,029 19,900 13,618 - 141,938 280,723 - 33,518 422,661 The Group shares premises with a number of companies. Balances stated represent the maximum gross amount payable, prior to reimbursement from other parties. NOTE 23 OPERATING SEGMENTS a. Identification of reportable segments The Group operates predominantly in the mining industry. This comprises exploration and evaluation of uranium, gold, silver and base metals projects. Inter-segment transactions are priced at cost to the Consolidated Group. The Group has identified its operating segments based on the internal reports that are provided to the Board of Directors on a monthly basis. Management has identified the operating segments based on the two principal locations of its projects – Sweden and West Africa. The Group also maintains a treasury function, primarily responsible for raising capital and managing and distributing those funds raised. Corporate expenses include administration and regulatory expenses arising from operating an ASX listed entity. Segment assets include the costs to acquire tenements and the capitalised exploration costs of those tenements Financial assets including cash and cash equivalents, and investments in financial assets, are reported in the Treasury segment. P a g e | 58 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 23 OPERATING SEGMENTS (cont.) b. Basis of accounting for purposes of reporting by operating segments i. Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. ii. Inter-segment transactions An internally determined transfer price is set for all inter-segment sales. This price is reset quarterly and is based on what would be realised in the event the sale was made to an external party at arm’s length. All such transactions are eliminated on consolidation of the Group’s financial statements. Corporate charges are allocated to reporting segments based on the segments’ overall proportion of revenue generation within the Group. The Board of Directors believes this is representative of likely consumption of head office expenditure that should be used in assessing segment performance and cost recoveries. Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. This policy represents a departure from that applied to the statutory financial statements. iii. Segment assets Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. iv. Segment liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. v. Unallocated items The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: Non-exploration impairment of assets and other non-recurring items of revenue or expense Income tax expense Deferred tax assets and liabilities Current tax liabilities Other financial liabilities P a g e | 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 23 OPERATING SEGMENTS (cont.) AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 For the Year to 30 June 2014 Segment revenue Segment results Amounts not included in segment results but reviewed by Board: Expenses not directly allocable to identifiable segments or areas of interest Accounting and audit fees Business development Computers and communications Depreciation Employee benefits expense Financing costs Impairment Insurance Legal and consulting Public relations Rent and utilities Share-based payment expenses Share registry and listing fees Travel and accommodation Other unallocated expenses Tax rebate for Research and Development Loss after income tax As at 30 June 2014 Segment assets Unallocated assets: Trade and other receivables Plant and equipment Other non-current assets Total assets Segment asset increases for the period: Capital expenditure - exploration Less: Write-off of exploration assets Segment liabilities Unallocated liabilities: Trade and other payables Short-term provisions Short-term borrowings Total liabilities Australian Exploration $ Sweden Exploration $ African Exploration $ Treasury $ Total $ - - - 87,783 87,783 (954,767) (1,559,848) (365,576) 82,998 (2,797,193) (190,577) (26,419) (29,025) (6,700) (562,693) (3,064) - (36,223) (67,229) (94,165) (123,832) (49,944) (69,517) (162,686) (41,860) 405,629 (3,855,498) (3,855,498) - 6,327,428 6,500,553 533,254 13,361,235 92,829 2,994 - 13,457,058 - (954,767) 349,250 (1,559,848) 555,901 (365,576) (954,767) (1,210,598) 190,325 - - - 905,151 (2,880,191) (1,975,040) 3,300 41,967 68,550 75,000 188,817 242,270 106,081 221,016 758,184 P a g e | 60 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 23 OPERATING SEGMENTS (cont.) Australian Exploration $ Sweden Exploration $ African Exploration $ Treasury $ Total $ - - 843 30,314 31,157 (365,907) (370,652) (1,344,932) 30,314 (2,051,177) (142,228) (6,051) (54,041) (14,610) (760,773) (755) (11,388) (52,740) (98,706) (137,892) (154,124) (152,765) (61,527) (51,937) (83,005) 1,077,378 (2,756,341) 954,767 7,808,174 6,233,845 2,031,925 17,028,711 57,789 (362,584) 1,448,303 (35,745) 719,683 (1,378,190) (304,795) 1,412,558 (658,507) 6,163 56,948 69,986 - - - - 102,926 9,694 - 17,141,331 2,225,775 (1,776,519) 449,256 133,097 294,276 116,311 31,136 574,820 For the Year to 30 June 2013 Segment revenue Segment results Amounts not included in segment results but reviewed by Board: Expenses not directly allocable to identifiable segments or areas of interest Accounting and audit fees Business development Computers and communications Depreciation Employee benefits expense Financing costs Impairment Insurance Legal and consulting Public relations Rent and utilities Share-based payment expenses Share registry and listing fees Travel and accommodation Other unallocated expenses Tax rebate for Research and Development Loss after income tax As at 30 June 2013 Segment assets Unallocated Assets: Trade and other receivables Plant and equipment Other non-current assets Total assets Segment asset increases for the period: Capital expenditure - exploration Less: Write-off of exploration assets Segment liabilities Unallocated Liabilities: Trade and other payables Short term provisions Short-term borrowings Total liabilities P a g e | 61 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 24 FINANCIAL RISK MANAGEMENT a. Financial Risk Management Policies This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and procedures for measuring and managing risk, and the management of capital. The Group’s financial instruments consist mainly of deposits with banks, short-term investments, and accounts payable and receivable. The Group does not speculate in the trading of derivative instruments. A summary of the Group’s Financial Assets and Liabilities is shown below: Floating Interest Rate $ Financial Assets  Cash and cash equivalents 570,478  Trade and other receivables  Financial assets - - Total Financial Assets 570,478 Fixed Interest Rate Non- interest Bearing 2014 Total $ Floating Interest Rate $ 570,478 2,012,295 $ - 92,830 92,830 64,453 64,453 - - 157,283 727,761 2,012,295 $ - - - - Fixed Interest Rate Non- interest Bearing 2013 Total $ 2,012,295 $ - 102,926 102,926 - - 102,926 2,115,221 $ - - - - Financial Liabilities Financial liabilities at amortised cost  Trade and other payables  Short-term borrowings Total Financial Liabilities - - - - 431,087 431,087 221,016 - 221,016 221,016 431,087 652,103 - - - - 427,374 427,374 31,136 - 31,136 31,136 427,374 458,510 Net Financial Assets 570,478 (221,016) (273,804) 75,658 2,012,295 (31,136) (324,448) 1,656,711 b. Specific Financial Risk Exposures and Management The main risk the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate, foreign currency risk and equity price risk. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board adopts practices designed to identify significant areas of business risk and to effectively manage those risks in accordance with the risk profile. This includes assessing, monitoring and managing risks for the Group and setting appropriate risk limits and controls. The Group is not of a size nor is its affairs of such complexity to justify the establishment of a formal system for risk management and associated controls. Instead, the Board approves all expenditure, is intimately acquainted with all operations and discuss all relevant issues at the Board meetings. The operational and other compliance risk management have also been assessed and found to be operating efficiently and effectively. i. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. The Group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the Group. P a g e | 62 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 24 FINANCIAL RISK MANAGEMENT Credit risk exposures The maximum exposure to credit risk is that to its alliance partners and that is limited to the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Credit risk related to balances with banks and other financial institutions is managed by the Group in accordance with approved Board policy. Such policy requires that surplus funds are only invested with financial institutions residing in Australia, where ever possible. Impairment losses None of the Group’s financial assets are past due (2013: $nil). There has been no allowance for impairment in respect of the financial assets of the Group during this year. ii. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a view to initiating appropriate capital raisings as required. Any surplus funds are invested with major financial institutions. The financial liabilities of the Group are confined to trade and other payables as disclosed in the statement of financial position. All trade and other payables are non-interest bearing and due within 30 days of the reporting date. iii. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Board meets on a regular basis and considers the Group’s exposure currency and interest rate risk. (1) Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments. Interest rate risk is not material to the Group as no debt arrangements have been entered into, and movement in interest rates on the Group’s financial assets is not material. (2) Foreign exchange risk Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. With instruments being held by overseas operations, fluctuations in foreign currencies may impact on the Group’s financial results. The Group’s exposure to foreign exchange risk is minimal; however the Board continues to review this exposure regularly. P a g e | 63 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 24 FINANCIAL RISK MANAGEMENT (3) Price risk Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group is exposed to securities price risk on investments held for trading or for medium to longer terms. The investment in listed equities has been valued at the market price prevailing at balance date. Management of this investment’s price risk is by ongoing monitoring of the value with respect to any impairment. iv. Sensitivity Analyses (1) Interest rates The following table illustrates sensitivities to the Group’s exposures to changes in interest rates. The table indicates the impact on how profit and equity values reported at balance sheet date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. A change of 100 basis points in the interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. The analysis was performed on a change of 100 basis points for 2014. Profit $ Equity $ Year ended 30 June 2014 ± 100 basis points change in interest rates ± 5,705 ± 5,705 Year ended 30 June 2013 ± 100 basis points change in interest rates ± 20,123 ± 20,123 (2) Foreign exchange The Group main exposure to foreign currency risk is to Swedish Krona (SEK) for assets the Group holds through its Swedish subsidiary, Aura Energy Sweden AB. The following table illustrates sensitivities to the Group’s exposures to changes in the SEK rate. The table indicates the impact on how profit and equity values reported at balance sheet date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Year ended 30 June 2014 ± 10% of Australian dollar strengthening/weakening against the SEK Year ended 30 June 2013 ± 10% of Australian dollar strengthening/weakening against the SEK Profit $ ± nil ± nil Equity $ + 572,914 - 700,228 + 790,554 - 646,817 P a g e | 64 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 24 FINANCIAL RISK MANAGEMENT v. Net Fair Values (1) Fair value estimation The fair values of financial assets and financial liabilities are presented in the table below and can be compared to their carrying values as presented in the statement of financial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Cash and cash equivalents, trade and other receivables, and trade and other payables are short-term investments in nature whose carrying value is equivalent to fair value. The methods and assumptions used in determining the fair values of financial instruments are disclosed in the accounting policy notes specific to the asset or liability. vi. Financial Liability and Asset Maturity Analysis Financial liabilities due for payment Trade and other payables Short-term borrowings Within 1 Year 2014 $ 431,087 221,016 2013 $ 410,672 31,136 Total 2014 $ 431,087 221,016 2013 $ 410,672 31,136 Total contractual outflows 652,103 441,808 652,103 441,808 Financial assets Cash and cash equivalents Trade and other receivables Financial assets 570,478 2,012,295 570,478 2,012,295 92,830 64,453 102,926 - 92,830 64,453 102,926 - Total anticipated inflows 727,761 2,115,221 727,761 2,115,221 Net (outflow)/inflow on financial instruments 75,658 1,673,413 75,658 1,673,413 NOTE 25 EVENTS SUBSEQUENT TO REPORTING DATE The Company received notice from The Australian Special Opportunities Fund (ASOF) on 18 July 2014 for the conversion of $175,000 of the $250,000 convertible note that it had issued to ASOF on 6 March 2014. The exercise price on conversion was $0.018 per share and consequently 9,722,222 fully paid ordinary shares were issued to the nominee of ASOF on 24 July 2014. On 5 August 2014 the Company announced a non-renounceable issue to eligible shareholders of 1 new share at $0.03 per share for every 4 shares held on the record date, together with an option to acquire another share for every two new shares acquired. The option exercise price is $0.06 and the expiry date is 1 September 2015. The issue closed on 2 September 2014 fully subscribed to by rights holders and shortfall applications. The issue raised $1,572,855 before costs that will be applied, in accordance with the prospectus for the issue, to commencing a feasibility study for the Reguibat Project in Mauritania and for general working capital purposes. There are no other significant events subsequent to report date. P a g e | 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 26 PARENT ENTITY DISCLOSURES a. Financial Position of Aura Energy Limited Current assets Cash and cash equivalents Trade and other receivables Financial assets Total current assets Non-current assets Plant and equipment Financial assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Short-term provisions Short-term borrowings Total current liabilities Total liabilities Net assets Equity Issued capital Option reserve Accumulated losses Total equity AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 2014 $ 2013 $ 545,183 550,325 64,453 1,932,039 259,457 - 1,159,961 2,191,496 26b 2,994 8,177,908 4,485,341 9,694 8,503,031 5,937,790 12,666,243 14,450,515 13,826,204 16,642,011 410,605 122,782 32,416 565,803 565,803 410,672 133,012 31,136 574,820 574,820 13,260,401 16,067,191 28,354,502 27,759,558 653,046 642,516 (15,747,147) (12,334,883) 13,260,401 16,067,191 b. Financial assets Loans to subsidiaries Shares in controlled entities at cost Net carrying value 26b.i 6,108,675 2,069,233 6,433,798 2,069,233 8,177,908 8,503,031 i. Loans are provided by the parent entity to its controlled entities to fund their activities. The eventual recovery of loans and investments will be dependent upon the successful commercial application of these projects or their sale to third parties. P a g e | 66 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 26 PARENT ENTITY DISCLOSURES (cont.) c. Financial Performance of Aura Energy Limited Loss for the year Other comprehensive income Total comprehensive income 2014 $ 2013 $ (3,451,677) (2,576,142) - - (3,451,677) (2,576,142) d. Guarantees entered into by Aura Energy Limited for the debts of its subsidiaries There are no guarantees entered into by Aura Energy Limited for the debts of its subsidiaries as at 30 June 2014 (2013: none). e. Contingent liabilities of Aura Energy Limited There are no contingent liabilities as at 30 June 2014, other than as detailed in note 27 Contingent Liabilities on page 68 (2013: none). f. Commitments by Aura Energy Limited i. Exploration expenditure commitments: 2014 $ 2013 $ Exploration tenement minimum expenditure requirements 588,912 340,029 Payable: not later than 12 months between 12 months and 5 years greater than 5 years The Group has no contracted exploration expenditure, however the Group has treatment core asset tenement renewals as expenditure the Group is committed to. ii. Operating lease commitments: Operating leases contracted for or committed to but not capitalised in the financial statements Payable: not later than 12 months between 12 months and 5 years greater than 5 years 212,647 376,265 - 340,029 - - 588,912 340,029 19,900 13,618 - 141,938 280,723 - 33,518 422,661 The Aura Group shares premises with a number of companies. Balances stated represent the maximum gross amount payable, prior to reimbursement from other parties. The amounts noted above are applicable for both Aura Energy Limited (the parent) and the Consolidated Group. P a g e | 67 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 NOTE 27 CONTINGENT LIABILITIES The Group has a contingent consideration of US$2,000,000 to the vendors of GCM Africa Uranium Limited if the uranium resource it holds exceeds 75,000,000Lbs, and up to an additional US$4,000,000 plus 4,000,000 Aura shares if the resource significantly exceeds this 75,000,000Lbs. There are no other contingent liabilities as at 30 June 2014. NOTE 28 COMPANY DETAILS The registered office and principal place of the Company is: Address: Street: Suite 3, Level 1 19-23 Prospect Place Box Hill VIC 3128 +61 (0)8 6141 3570 +61 (0)8 6141 3599 www.auraenergy.com.au info@auraenergy.com.au Telephone: Facsimile: Website: E-mail: P a g e | 68 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 DIRECTORS’ DECLARATION The directors of the Company declare that: 1. The financial statements and notes, as set out on pages 23 to 68, are in accordance with the Corporations Act 2001 (Cth) and: (a) comply with Accounting Standards; (b) (c) are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in note 1 to the financial statements; and give a true and fair view of the financial position as at 30 June 2014 and of the performance for the year ended on that date of the Company and Consolidated Group. 2. the Chief Executive Officer and Chief Finance Officer have each declared that: (a) the financial records of the Company for the financial year have been properly maintained in accordance with s.286 of the Corporations Act 2001 (Cth); (b) the financial statements and notes for the financial year comply with the Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view. 3. 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. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by: PETER REEVE Chairman Dated this Tuesday, 30 September 2014 P a g e | 69 We have audited the accompanying financial report of Aura Energy Limited (“the Company”) and Controlled Entities (“the Consolidated Entity”), which comprises the statement of financial position as at 30 June 2014, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the Consolidated Entity, comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standards AASB 101: Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In our opinion: a. The financial report of Aura Energy Limited is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; b. The financial statements also comply with International Financial Reporting Standards as disclosed in Note 1. Without qualifying our opinion, we draw attention to Note 1 in the financial report which indicates that the Consolidated Entity incurred a net loss of $3,855,498 during the year ended 30 June 2014. This condition, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the ability of the Consolidated Entity to continue as a going concern and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2014. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. In our opinion, the Remuneration Report of Aura Energy Limited for the year ended 30 June 2014, complies with section 300A of the Corporations Act 2001. BENTLEYS Chartered Accountants DOUG BELL CA Director Dated at Perth this 30th day of September 2014 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE GOVERNANCE STATEMENT As the framework of how the Board of Directors of Aura Energy Limited (“Company”) carries out its duties and obligations, the Board has considered the eight principles of corporate governance as set out in the ASX Good Corporate Governance and Best Practice Recommendations. The essential corporate governance principles are: 1 Lay solid foundations for management and oversight; 2 Structure the Board to add value; 3 Promote ethical and responsible decision-making; 4 Safeguard integrity in financial reporting; 5 Make timely and balanced disclosure; 6 Respect the rights of shareholders; 7 Recognise and manage risk; 8 Remunerate fairly and responsibly. 1. BOARD OF DIRECTORS The Board is accountable to shareholders for the performance of the Company. 1.1. Roles and functions of the board and senior management (ASX Corporate Governance Principles and Recommendations: 1.1, 1.3, 2.3) Roles and Responsibilities: The roles and responsibilities carried out by the Board are to:  Oversee control and accountability of the Group;  Set the broad targets, objectives, and strategies;  Monitor financial performance;  Assess and review risk exposure and management;  Oversee compliance, corporate governance, and legal obligations;  Approve all major purchases, disposals, acquisitions, and issue of new shares;  Approve the annual and half-year financial statements;  Appoint and remove the Group’s auditor(s);  Appoint and assess the performance of the Managing Director and members of the senior management team;  Report to shareholders. 1.2: Companies should disclose the process for evaluating the performance of senior executives. The Board periodically reviews the performance of senior executives. 1.3: Provide the information indicated in the ASX Corporate Governance Council’s Guide to Reporting on Principle 1. The evaluation of performance of senior executives has taken place throughout the year. 2. STRUCTURE THE BOARD TO ADD VALUE. 2.1: A majority of the Board should be independent Directors. The majority of the Board is independent. Refer general comments below. 2.2: The Chairperson should be an independent Director. The Chairman is not independent. Refer general comments below. 2.3: The roles of the Chairperson and Chief Executive should not be exercised by the same individual. Refer general comments below. 2.4: Establishment of a nominations committee. Refer general comments below. P a g e | 72 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE GOVERNANCE STATEMENT 2.5: Disclose the process for performance evaluation of the board, its committees and individual directors, and key executives. Refer general comments below. 2.6: Provide the information indicated in the ASX Corporate Governance Council’s Guide to Reporting on Principle 2. Refer general comments below. GENERAL COMMENTS: Membership The Board’s membership and structure is selected to provide the Group with the most appropriate direction in the areas of business controlled by the parent company. The Board of the parent company currently consists of four members; a Managing Director, and three non-executive Directors. Refer to the Directors’ Report: Information on Directors on page 11 for details of each Director’s profile. The majority of the Board is independent. Chairman and Managing Director The roles of the Chairman and the Managing Director are separate. The Chairman is responsible for leading the Board in its duties, and facilitating effective discussions at Board level. The Managing Director is responsible for the efficient and effective operation of the Group. Performance Evaluation The Board assesses its performance, the performance of individual directors and the performance of its committees annually through a process of internal review. The Board also formally reviews its governance arrangements on a similar basis annually. The performance of Key Management Personnel ("KMP") is reviewed on an annual basis by the Board and remuneration committee. The performance of each member of KMP is assessed against their individual performance plans, which comprise target performance indicators. Performance indicators for each KMP are set annually in consultation with KMP. Consideration is also given to the contribution each member of KMP makes to board meetings. Further details regarding the Board’s remuneration policy for KMP is provided in the Remuneration Report on page 15. Nomination Committee The parent company has a formal charter for the Nomination Committee, however, no Committee has been appointed to date. The Board as a whole deals with areas that would normally fall under the charter of the Nomination Committee. These include matters relating to the renewal of Board members, and Board performance. Skills The Directors bring a range of skills and background to the Board including exploration, mining engineering, metallurgical engineering, technical management, accountancy, finance, stockbroking, and legal. Experience The Directors have considerable experience in business at both operational and corporate levels. Meetings The Board endeavours to meet at least bi-monthly on a formal basis, although the Board regularly meets informally. Independent professional advice Each Director has the right to seek independent professional advice at the Company’s expense for which the prior approval of the Chairman is required, and is not unreasonably withheld. P a g e | 73 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE GOVERNANCE STATEMENT 3. PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING. 3.1: Establish a code of conduct to guide the Directors, the Chief Executive Officer (or equivalent) and any other key executives as to: 3.1.1 The practices necessary to maintain confidence in the Company’s integrity; 3.1.2 The practices necessary to take into account legal obligations and the reasonable expectations of shareholders; 3.1.3 The responsibility and accountability of individuals for reporting and investigating reports of unethical practices. The Group is committed to its Directors and employees maintaining high standards of integrity, and ensuring that activities are in compliance with the letter and spirit of both the law and parent company policies. Each staff member is issued with the parent company’s Policies and Procedures manual at the beginning of their employment. 3.2: Establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. The parent company has a diversity policy included in its Corporate Governance Policy. 3.3: Disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. The Board has established and disclosed its policy concerning diversity. However, the Board considers due to the size of the Company that setting measurable diversity objectives is not appropriate. The Company currently has no employees and utilises external consultants and contractors as and when required. The Board will review this position on an annual basis and will implement measurable objectives as and when they deem the Company to require them. 3.4: Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. Currently there are four women employees and contractors in the whole organisation in varying positions. Given the present size of the Group, there are no plans to establish measurable objectives for achieving gender diversity at this time. The need for establishing and assessing measurable objectives for achieving gender diversity will be re-assessed as the size of the Group increases. 3.5: Provide the information indicated in the ASX Corporate Governance Council’s Guide to Reporting on Principle 3. A summary of both the parent company’s Code of Conduct and its Share Trading Policy is included on the Aura’s website at http://auraenergy.com.au/ourcompany-corporategovernance.html. 4. SAFEGUARD INTEGRITY IN FINANCIAL REPORTING. The Board should establish an audit committee. 4.1: Refer general comments below. 4.2: Structure the audit committee so that it consists of: Only non-executive Directors; A majority of independent Directors; An independent Chairperson, who is not Chairperson of the Board; At least three members. Refer general comments below. 4.3: The Audit Committee should have a formal charter. Refer general comments below. GENERAL COMMENTS: Integrity of Company’s Financial Condition The Group’s Company Secretary and CFO report in writing to the Board that the consolidated financial statements of the Company and its controlled entities for the half and full financial year present a true and fair view, in all material respects, of the Group’s financial condition and operational results are in accordance with relevant accounting standards. P a g e | 74 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE GOVERNANCE STATEMENT Audit Committee Aura has a formal charter for an Audit Committee. Currently the board as a whole acts as the audit committee as and when required to be responsible for the following activities:  Review the Company’s accounting policies;  Review the content of financial statements;  Review the scope of the external audit, its effectiveness, and independence of the external audit;  Ensure accounting records are maintained in accordance with statutory and accounting standard requirements;  Monitor systems used to ensure financial and other information provided is reliable, accurate, and timely;  Review the audit process with the external auditors to ensure full and frank discussion of audit issues;  Present half and full year financial statements to the Board. Audit Committee Meetings Details of meetings held can be found in the Directors' Report: Meetings of Directors on page 13. 5. MAKE TIMELY AND BALANCED DISCLOSURE. 5.1: Establish written policies and procedures designed to ensure compliance with ASX Listing rules disclosure requirements and to ensure accountability at a senior management level for that compliance. Being a listed entity on the Australian Securities Exchange (ASX), the parent company has an obligation under the ASX Listing Rules to maintain an informed market with respect to its securities. Accordingly, Aura advises the market of all information required to be disclosed under the Rules that the Board believes would have a material effect on the price of the parent company's securities. The Company Secretary has been appointed as the person responsible for communication with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements of the ASX Listing Rules, and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media, and the public. All shareholders receive a copy of the Group's annual report. 5.2: Provide the information indicated in the ASX Corporate Governance Councils’ Guide to Reporting on Principle 5. Disclosure is reviewed as a routine agenda item at each Board meeting 6. RESPECT THE RIGHTS OF SHAREHOLDERS. 6.1: Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings. Refer general comments below. 6.2: Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit, and the preparation and content of the auditor's report. Refer general comments below. GENERAL COMMENTS: Aura is committed to keeping shareholders fully informed of significant developments in the Group. In addition to public announcements of its financial statements and significant matters, Aura provides the opportunity for shareholders to question the Board and management about its activities at the parent company's annual general meeting. The Group's auditor, Bentleys, will be in attendance at the annual general meeting and be available to answer questions from shareholders about the conduct of the audit and the preparation and content of the auditor's report. 7. RECOGNISE AND MANAGE RISK 7.1: The Board or appropriate Board committee should establish policies on risk oversight and management. Refer general comments below. P a g e | 75 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE GOVERNANCE STATEMENT 7.2: The chief executive officer (or equivalent) and the chief financial officer (or equivalent) to state in writing to the Board that: 7.2.1 The statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board. 7.2.2 The Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects. Refer general comments below. 7.3: The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a system of risk management and internal control and that the system is operating effectively in all material respects in relation to the financial reporting risks. Refer general comments below. 7.4: Provide the information indicated in the ASX Corporate Governance Council’s Guide to reporting on Principle 7. Refer general comments below. GENERAL COMMENTS: The Board oversees the Company's risk profile. The financial position of the Company and matters of risk are considered by the Board. The Board is responsible for ensuring that controls and procedures to identify, analyse, assess, prioritise, monitor and manage risk are in place, being maintained and adhered to. The Company Secretary and CFO state in writing to the Board that:  The statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control, which implements the policies adopted by the Board.  The Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects. In addition to their regular reporting on business risks, risk management and internal control systems, the CEO and Chief Financial Officer also provide the Board with written assurance that the directors’ declaration provided with the annual report is founded on a sound system of risk management and internal control, and that this system is operating effectively in all material respects in relation to the financial reporting risks. This assurance is provided prior to the meeting at which the directors are due to authorise and sign the company’s financial statements. 8. REMUNERATE FAIRLY AND RESPONSIBLY 8.1: The Board should establish a Remuneration Committee. Currently in the circumstances of the Company, the full board acts as the Remuneration Committee. This will be reviewed in future when the activity of the Company and the size of the board warrants.. 8.2 The remuneration committee should be structured so that it: consists of a majority of independent directors; is chaired by an independent director; and has at least three members. Refer general comments below. 8.3: Clearly distinguish the structure of non-executive Directors' remuneration from that of executives. Refer general comments below. 8.4: Provide the information indicated in the ASX Corporate Governance Council’s Guide to Reporting on Principle 8. Refer general comments below. GENERAL COMMENTS: Principles used to determine the nature and amount of remuneration The objective of the Company's remuneration framework is to ensure reward for performance is competitive and appropriate to the results delivered. The framework aligns executive reward with the creation of value for shareholders, and conforms to market best practice. P a g e | 76 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 CORPORATE GOVERNANCE STATEMENT The remuneration committee ensures that executive rewards satisfy the following key criteria for good reward governance practices:  Competitiveness and reasonableness;  Acceptability to the shareholders;  Performance linked;  Transparency;  Capital management. The Company has structured an executive remuneration framework that complimentary to the reward strategy of the organisation. is market competitive and Remuneration Committee Currently all non-executive directors. Remuneration Committee Meetings Details of meetings held can be found in the Directors' Report: Meetings of Directors on page 13. Directors' Remuneration Further information on Directors' and executives' remuneration is set out in the Directors' Report: Remuneration Report on page 15 and Note 20 Key Management Personnel Compensation to the financial statements on page 57. P a g e | 77 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The following additional information is required by the Australian Securities Exchange in respect of listed public companies. 1 SHAREHOLDING AS AT 22 SEPTEMBER 2014 a. Distribution of Shareholders Category (size of holding) Total Holders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over b. Unmarketable Parcels 96 214 179 769 281 1,539 Number Ordinary 11,890 689,515 1,488,138 28,786,678 231,166,327 262,142,548 % Held of Issued Ordinary Capital 0.01 0.26 0.57 10.98 88.18 100.00 Minimum $500.00 parcel at $ 0.0370 per unit 13,514 588 3,364,743 Minimum Parcel Size Holders Units c. Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary shares: Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. d. 20 Largest Shareholders — Ordinary Shares as at 22 September 2014. Rank Name Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital 1. 2. 3. 4. 5. 6. 7. 8. 9. UBS NOMINEES PTY LTD BBY NOMINEES LIMITED PRE-EMPTIVE TRADING PTY LTD WISEVEST PTY LTD ASHABIA PTY LTD MR MICHAEL BUSHELL YARANDI INVESTMENTS PTY LTD PASAGEAN PTY LIMITED SAMBOLD PTY LTD 10. DRAKE RESOURCES LIMITED 11. SUVALE NOMINEES PTY LTD 12. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 13. MRS JENNY LEE BUSHELL 14. DIRDOT PTY LTD 15. CITICORP NOMINEES PTY LIMITED 16. SLADE TECHNOLOGIES PTY LTD 17. DUNDEE COURT INVESTMENTS 18. DRAKE RESOURCES LIMITED 19. PAN AUSTRALIAN NOMINEES PTY LTD 20. CRX INVESTMENTS PTY LIMITED TOTAL 2 The name of the Company Secretary is Stanley Zillwood 31,459,794 25,502,230 8,000,000 6,750,000 6,330,212 5,975,903 5,754,793 5,625,000 5,000,000 4,795,000 3,776,043 3,384,817 3,091,182 2,787,500 2,613,330 2,554,608 2,500,000 2,333,334 2,202,386 2,046,875 12.00 9.73 3.05 2.57 2.41 2.28 2.20 2.15 1.91 1.83 1.44 1.29 1.18 1.06 1.00 0.97 0.95 0.89 0.84 0.78 132,483,007 50.53 P a g e | 78 AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES 3 PRINCIPAL REGISTERED OFFICE As disclosed in Note 28 Company Details on page 68 of this Annual Report. 4 REGISTERS OF SECURITIES ARE HELD AT THE FOLLOWING ADDRESSES As disclosed in the Corporate Directory on page 1 of this Annual Report. 5 STOCK EXCHANGE LISTING Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian Securities Exchange Limited, as disclosed in the Corporate Directory on page 1 of this Annual Report. 6 UNQUOTED SECURITIES a. Options over Unissued Shares A total of 59,534,218 options are on issue of which 14,779,306 options are issued to the four (4) Directors as at 22 September 2014. 7 USE OF FUNDS The Company has used its funds in accordance with its initial business objectives. P a g e | 79 TENEMENT REPORT As at 30 June 2014 Europe SWEDEN Häggån Project  Gurumyren nr 1  Häggån nr 1  Häggån nr 2  Marby nr 1  Koborgsmyren nr 1  Häggån nr 3 Kallsedet Project  Hamborg nr 1 100% 100% 100% 100% 100% 100% 100% West Africa MAURITANIA Reguibat Project  Oued El Foule Est  Ain Sder  Oum Ferkik  Oum Ferkik Sud  Saabia  Oued El Foule Nord  Oued El Merre  Aguellet Tiris Joint Venture  Oued Bel Guerdane  Oued El Keheb AURA ENERGY LIMITED AND CONTROLLED ENTITIES ABN 62 115 927 681 ANNUAL REPORT 30 JUNE 2014 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% P a g e | 80  

Continue reading text version or see original annual report in PDF format above