AVZ Minerals Limited Annual Report 2013

Plain-text annual report

AVZ Minerals Limited (Formerly Avonlea Minerals Limited) ABN 81 125 176 703 Annual Report 2013 Contents Corporate Directory Directors’ Report Auditor’s Independence Declaration Financial Statements Directors’ Declaration Independent Auditor’s Report ASX Additional Information Corporate Governance Statement Schedule of Mineral Tenements 1 2 11 12 41 42 44 45 53 Corporate Directory Directors Roger Steinepreis (Chairman) David Riekie Gary Steinepreis Company Secretary Gary Steinepreis Principal Place of Business & Registered Office Level 1 33 Ord Street WEST PERTH Western Australia 6005 Telephone: (08) 9420 9300 Facsimile: (08) 9420 9399 Share Registry Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153 Telephone: (08) 9315 2333 Facsimile: (08) 9315 2233 Email: registrar@securitytransfer.com.au Auditors BDO Audit (WA) Pty Ltd 38 Station Street SUBIACO WA 6008 Telephone: (08) 6382 4600 Securities Exchange Listing Australian Securities Exchange (Home branch: Perth, Western Australia) ASX Code: AVZ Website Address www.avonleaminerals.com.au AVZ Minerals Limited | 1 Directors’ Report Your directors submit their report on the consolidated entity consisting of AVZ Minerals Limited (ASX: AVZ) (“AVZ”) and the entities it controlled for the financial year ended 30 June 2013. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: Directors 1. The names of directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Roger Steinepreis David Riekie Gary Steinepreis David Macoboy Hamish Halliday Stephen Parsons Non-Executive Chairman Non-Executive Director (Resigned as Managing Director 3 August 2012) Non-Executive Director (Appointed 30 November 2012) Non-Executive Chairman (Resigned 3 August 2012) Non-Executive Director (Resigned 30 November 2012) Alternate Non-Executive Director November 2012) for Hamish Halliday (Resigned 30 Company Secretary 2. The Company Secretary is Gary Steinepreis who was appointed on 30 November 2012. Brett Dunnachie was company secretary for the period 1 July 2012 to 30 November 2012. Principal Activities 3. The principal activity of the consolidated entity during the financial year was mineral exploration. There were no significant changes in the nature of the consolidated entity’s principal activities during the financial year. Operating Results 4. The loss of the consolidated entity attributable to the owners of the company after providing for income tax amounted to $2,413,002 (2012: $3,730,100). Dividends Paid or Recommended 5. The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report. Review of Operations 6. On 3 August 2012, the Company announced Board changes and a strategic review. Mr David Macoboy resigned as Non-Executive Chairman and Mr David Riekie stepped down as Managing Director and has continued as a Non-Executive Director. AVZ changed its name from Avonlea Minerals Limited on 3 December 2012, following the approval by its shareholders. During the year the Company completed a share placement of 30 million new ordinary fully paid shares at an issue price of 1.5 cents to raise $450,000. The placement was made to sophisticated and professional investors pursuant to Section 708 of the Corporations Act and included participation by Gary Steinepreis, at the time a proposed director. On 7 December 2012, the Company lodged a prospectus for a non renounceable entitlement issue on the basis of one new share for every share held to raise $1,517,062. The issue was underwritten and completed in full in January 2013. AVZ has reduced its immediate exploration activities on its Namibian projects to conserve its capital and consider commercial options. In that regard and as part of a broader strategic view, AVZ is also seeking, together with its current projects, new opportunities in the exploration and mining sector. AVZ will continue to progress its review of the exploration potential and maintain the value of its Namibian projects, which include Vanadium and Iron Ore Resources and exploration targets. AVZ Minerals Limited | 2 Directors’ Report Review of Operations (continued) 6. AVZ elected to write down 70% of the capitalised exploration representing an impairment of $2,024,322 based on director’s discretion. AVZ was unable to provide sufficient appropriate audit evidence to support the basis for impairment, as required by the accounting standards, and therefore BDO have issued a qualified audit opinion in relation to the capitalised exploration and evaluation expenditure carried at $867,567 on the consolidated statement of financial position as at 30 June 2013 and the exploration impairment of $2,024,322 recorded in the consolidated statement of profit or loss and other comprehensive income for the year then ended. Significant Changes in the State of Affairs 7. There have been no further significant changes in the state of affairs of the group to the date of this report, not otherwise disclosed in this report. 8. Significant Events After Balance Date Other than as disclosed in this report, there has been no matter or circumstance that has arisen that has significantly affected, or may significantly affect:    the group’s operations in future financial years, or the results of those operations in future financial years, or the group’s state of affairs in future financial years. Likely Developments and Expected Results of Operations 9. The group will continue its mineral exploration activity at and around its exploration projects with the objective of identifying commercial resources. Further information on likely developments in the operations of the group and the expected results of operations have not been included in the annual report because the directors believe it would be likely to result in unreasonable prejudice to the group. Therefore, this information has not been presented in this report. Environmental Regulation 10. The group is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work. Information on Directors and Company Secretary 11. Roger Steinepreis Qualifications Experience Non-Executive Director B.Juris, LLB Mr Steinepreis graduated from the University of Western Australia where he completed his law degree. He was admitted as a barrister and solicitor of the Supreme Court of Western Australia in 1987 and has been practising as a lawyer for over 20 years. Mr Steinepreis is the legal advisor to a number of public companies on a wide range of corporate related matters. His areas of practice focus on initial public offerings and takeovers. He is a company restructures, Director of Firestrike Resources Limited, PHW Consolidated Limited, Apollo Consolidated Limited, DGI Holdings Limited and Integrated Resources Group Limited. Interest in Securities Fully Paid Ordinary Shares 15 cent Options expiring 14 November 2013 24,051,442 1,500,000 AVZ Minerals Limited | 3 Directors’ Report 11. Information on Directors and Company Secretary (continued) Roger Steinepreis (continued) Directorships in last 3 years Firestrike Resources Limited (since 10 March 2011) Adavale Resources Ltd (from 26 May 2006 to 20 December 2012) Imugene Limited (from 29 January 2002 to 1 October 2012) Apollo Consolidated Limited (since 4 August 2009) Digital Performance Group Limited (formerly Comtel Corporation Ltd) (from 9 March 2006 to 24 December 2010) DGI Holdings Limited (from 3 July 2012) PHW Consolidated Limited (from 17 December 2012) Integrated Resources Group Limited (from 5 November 2012) David Riekie Qualifications Experience Non-Executive Director (Formerly Managing Director) B.Ec, Dip Acc, CA, MAICD Mr Riekie was appointed Managing Director on 21 August 2008 and held this position until 3 August 2012. David was previously an Executive Director of a boutique corporate advisory company for over 13 years. During this time has held a variety of non-executive board position with both resource and industrial companies. He has a significant level of experience in capital raising initiatives (public and private), and corporate matters strategies, both in Australia and overseas. David is a Chartered Accountant, a Member of the Institute of Company Directors and holds a Bachelor of Economics Degree and a Diploma of Accounting. Interest in Securities Fully Paid Ordinary Shares 15 cent Options expiring 14 November 2013 16,365,696 1,500,000 Directorships in last 3 years Hawkley Oil and Gas Limited (from 22 June 2010 to 17 September 2013) Gary Steinepreis Qualifications Non-Executive Director B.Com, CA Experience Mr Steinepreis was appointed as a non-executive director and company secretary on 30 November 2012. Gary is a Chartered Accountant and holds a Bachelor of Commerce Degree from the University of Western Australia. He is currently a director of ASX listed entities, Monto Minerals Ltd, New Horizon Coal Ltd and Norseman Gold plc. Interest in Securities Fully Paid Ordinary Shares 15,371,649 Directorships in last 3 years Monto Minerals Ltd (since 16 June 2009) Norseman Gold Plc (since 3 December 2007) New Horizon Coal Ltd (since 4 June 2010) Former Directorships in the Last Three Years: Minerals Corporation Limited (17 February 2011 to 14 October 2011) WAG Limited (2 November 2006 to 23 May 2013) Agri Energy Limited (22 June 2009 to 11 June 2012) Avalon Minerals Ltd (20 December 2006 to 1 March 2011) RMG Limited (31 January 2006 to 30 April 2011) AVZ Minerals Limited | 4 Directors’ Report Audited Remuneration Report 12. This report details the nature and amount of remuneration for all key management personnel of AVZ Minerals Limited and its subsidiaries. The information provided in this remuneration report has been audited as required by section 308(C) of the Corporations Act 2001. For the purposes of this report, key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Group. The individuals included in this report are: Roger Steinepreis David Riekie Gary Steinepreis David Macoboy Hamish Halliday Stephen Parsons Alex Aitken Non-Executive Chairman Non-Executive Director (Resigned as Managing Director 3 August 2012) Non-Executive Director (Appointed 30 November 2012) Non-Executive Chairman (Resigned 3 August 2012) Non-Executive Director (Resigned 30 November 2012) Alternate Non-Executive Director November 2012) Senior Geologist for Hamish Halliday (Resigned 30 All of the key management personnel held their positions for the entire financial year and up to the date of the report except as noted above. Remuneration Policy (a) The remuneration policy of AVZ Minerals Limited has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. By providing components of remuneration that are indirectly linked to share price appreciation (in the form of options), executive, business and shareholder objectives are indirectly aligned. The board of AVZ Minerals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the company, as well as create goal congruence between directors and shareholders. The board’s policy for determining the nature and amount of remuneration for board members is as follows: (i) Executive Directors & Other Key Management Personnel The remuneration policy and the relevant terms and conditions has been developed by the full Board of Directors as the company does not have a Remuneration Committee due to the size of the Company and the Board. In determining competitive remuneration rates, the Board reviews local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Reviews are performed to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices. The executive directors and other key management personnel receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits. The Company is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and senior executives are paid market rates associated with individuals in similar positions, within the same industry. Options have been issued to provide a mechanism to participate in the future development of the Company and an incentive for their future involvement with and commitment to the Company. Options and performance incentives may also be issued in the event that the entity moves from an exploration entity to a producing entity, and key performance indicators such as profits and growth can then be used as measurements for assessing Board performance. All remuneration paid to AVZ Minerals Limited | 5 Directors’ Report 12. Audited Remuneration Report (continued) (a) Remuneration Policy (continued) directors is valued at the cost to the Company and expensed. Shares issued to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using and appropriate option valuation methodology. The Company completed a strategic review of its business and operations and non-executive remuneration is set at $2,000 per month and a daily rate is payable on additional work performed. At this stage due to the size of the Company, no remuneration consultants have been used. The Board’s renumeration policies are outlined below: Fixed Remuneration All executives receive a base cash salary which is based on factors such as length of service and experience as well as other fringe benefits. All executives also receive a superannuation guarantee contribution required by the government, which is currently 9.25% and do not receive any other retirement benefits. Short-term Incentives (STI) Under the group’s current remuneration policy, executives can from time to time receive short-term incentives in the form of cash bonuses. However, as the company is currently undertaking a strategic review, there are currently no short-term incentives anticipated and therefore no key performance targets determined. Pending the strategic review, the Board will determine the criteria of eligibility for short-term incentives and set key performance indicators to appropriately align shareholder wealth and executive remuneration. Long-term Incentives (LTI) Executives are encouraged by the Board to hold shares in the company and it is therefore the objective of the group’s option scheme to provide an incentive for participants to partake in the future growth of the group and, upon becoming shareholders in the Company, to participate in the group’s profits and dividends that may be realised in future years. The Board considers that this equity performance linked remuneration structure is effective in aligning the long-term interests of group executives and shareholders as there exists a direct correlation between shareholder wealth and executive remuneration. (ii) Non-Executive Directors The board policy is to remunerate non-executive directors at market rates for comparable companies In determining competitive remuneration rates, the Board for time, commitment and responsibilities. review local and international trends among comparative companies and the industry generally. Typically the Company will compare non-executive remuneration to companies with similar market capitalisations in the exploration and resource development business group. These on-going reviews are performed to confirm that non-executive remuneration is in line with market practice and is reasonable in context of Australian executive reward practices. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the Company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and from time to time, non-executive’s may receive options subject to shareholder approval, to further align directors’ interests with shareholders. The Company completed a strategic review of remuneration is set at $2,000 per month and a daily rate is payable on additional work performed. its business and operations and non-executive AVZ Minerals Limited | 6 Directors’ Report 12. Audited Remuneration Report (continued) Company Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration (b) The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. This has been achieved by the issue of share options to the majority of the directors and executives to encourage the alignment of personal and shareholder interest. As at the date of the report, the company is currently undergoing a strategic review. With the exception of the senior geologist, no executive is receiving any base remuneration however, this will be reassessed upon completion of the strategic review. Given the review, no remuneration is currently performance related. (c) Details of Key Management Personnel Remuneration 2013 Name Executive Director: David Riekie 4 Non-Executive Directors: Roger Steinepreis David Riekie 4 Gary Steinepreis 6 David Macoboy 2 Hamish Halliday 5 Stephen Parsons 5 Key Executives: Alex Aitken TOTAL 2012 Name Executive Director: David Riekie Non-Executive Directors: Roger Steinepreis David Macoboy 2 Hamish Halliday Stephen Parsons Andrew Gastevich 3 Key Executives: Alex Aitken TOTAL Short term employee benefits Salary $ Consulting fees $ Other amounts $ 38,175 - - - - 3,822 - - 69,350 111,347 14,000 24,000 24,000 - - - - 62,000 Short term employee benefits - - - - - - - - - Salary $ 250,000 24,000 33,643 12,000 12,000 9,170 135,000 475,813 Consulting fees $ Other amounts $ - - - - - - - - 2,332 2,332 2,332 2,332 2,332 - - 11,660 Post- employment benefits Superannuation Equity based payments Options 1 $ 3,435 - - - 344 - - 6,241 10,020 Total $ 41,610 14,000 24,000 24,000 4,166 - - 75,591 183,367 $ - - - - - - - - - Post- employment benefits Superannuation Equity based payments Options 1 $ 22,500 - 688 - - 825 $ - - 67,384 - - - Total $ 274,832 26,332 104,047 14,332 14,332 9,995 12,150 36,163 7,582 74,966 154,732 598,602 1: The fair value of the options is calculated at the date of grant using a Black-Scholes model. No retirement benefits or equity securities were issued to any director of other key management personnel during the current or previous financial year. 2: Mr David Macoboy was appointed Non-Executive Chairman on 22 September 2011 and resigned on 3 August 2012. 3: Mr Andrew Gastevich resigned as Non-Executive Director 3 November 2011. 4: Mr David Riekie resigned as Managing Director on 3 August 2012, however remains as a non-executive director. 5: Mr Hamish Halliday and Mr Stephen Parsons resigned as Non-Executive Directors on 30 November 2012. 6: Mr Gary Steinepreis was appointed on 30 November 2012. AVZ Minerals Limited | 7 Directors’ Report 12. Audited Remuneration Report (continued) Details of Share Based Payments (d) Options are issued to directors and executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to the majority of directors and executives of AVZ Minerals Limited and its subsidiaries to increase goal congruence between executives, directors and shareholders. Granted No. Options granted as Part of Remuneration $ Total Remuneration at Risk and Represented by Options % Exercised Lapsed Other Changes1 No. Vested and Exercisable 30 June 2013 No options granted 30 June 2012 David Macoboy Alex Aitken 1,500,000 300,000 67,384 7,582 65% 5% - - - - - (500,000) 1,500,000 300,000 1 Other changes refer to options cancelled during the year. When exercised, each option is convertible into 1 ordinary share of the company. The options do not carry any vesting conditions. During the financial year and up to the date of this report the company issued options as part of remuneration to directors and executives as follows: Director Expiry Date Exercise Price Number of Options 30 June 2013 No options granted 30 June 2012 David Macoboy Alex Aitken 31 Oct 14 31 Oct 14 11.0 cents 11.0 cents 1,500,000 300,000 The following factors and assumptions were used in determining the fair value of options issued to directors and executives on grant date: Grant Date Expiry Date Exercise Price Fair Value Per Option 30 June 2013 No options granted $ Price of Shares on Grant Date $ 30 June 2012 04 Nov 11 12 Jan 12 31 Oct 14 31 Oct 14 11.0cents 11.0cents 0.045 0.025 0.08 0.06 Estimated Volatility % 98% 94% Risk Free Interest Rate % 3.72% 3.19% Dividend Yield % 0% 0% Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future trends, which may not eventuate. The life of the options is based on historical exercise patterns, which may not eventuate in the future. There were no options exercised during the year. Employment Contracts of Directors and Senior Executives (e) There are currently no Executive Director or key management personnel contracts of employment in place. There were no performance bonuses paid during the year ended 30 June 2013. This is the end of the audited remuneration report. AVZ Minerals Limited | 8 Directors’ Report 13. Meetings of Directors The number of directors' meetings (including committees) held during the financial year and the number of meetings attended by each director is: Director D Macoboy D Riekie R Steinepreis H Halliday S Parsons G Steinepreis Directors Meetings Number Eligible to Attend 1 6 6 1 1 5 Meetings Attended 1 6 6 - - 5 The company does not have a formally constituted audit committee as the board considers that the company’s size and type of operation do not warrant such a committee. Insurance of Officers 14. During the financial year, AVZ Minerals Limited paid a premium of $17,820 (2012: $13,992) to insure the directors and secretary of the company and its controlled entities. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Shares under Option 15. Unissued ordinary shares of AVZ Minerals Limited under option at the date of this report are as follows: Date options granted 10 Mar 09 22 May 09 22 May 09 22 May 09 15 Nov 10 31 Jan 11 4 Nov 11 4 Nov 11 4 Nov 11 12 Jan 12 Expiry Date 31 Mar 14 22 May 14 22 May 14 22 May 14 14 Nov 13 30 Nov 14 31 Oct 14 31 May 14 31 May 14 31 Oct 14 Exercise Price 10.0 cents 20.0 cents 30.0 cents 45.0 cents 15.0 cents 20.0 cents 11.0 cents 20.0 cents 25.0 cents 11.0 cents Number under Option 400,000 7,125,000 7,125,000 7,125,000 6,000,000 2,000,000 1,500,000 2,500,000 2,500,000 400,000 No option holder has any right under the options to participate in any other share issue of the company or any other entity. Proceedings on behalf of the Company 16. 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 these proceedings. The company was not a party to any such proceedings during the year. AVZ Minerals Limited | 9 Directors’ Report Auditor’s Independence Declaration 17. Section 307c of the Corporations Act 2001 requires our auditors, BDO Audit (WA) Pty Ltd, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 11 and forms part of this directors’ report for the year ended 30 June 2013. 18. Non-Audit Services No fees were paid or payable to the auditors for non-audit services performed during the year ended 30 June 2013 (2012: nil). Signed in accordance with a resolution of the Board of Directors. Gary Steinepreis Non-Executive Director West Perth, 25 September 2013 AVZ Minerals Limited | 10 Tel: +8 6382 4600 Tel: +8 6382 4600 Tel: +8 6382 4600 Tel: +8 6382 4600 Tel: +8 6382 4600 Tel: +8 6382 4600 Fax: +8 6382 4601 Fax: +8 6382 4601 Fax: +8 6382 4601 Fax: +8 6382 4601 Fax: +8 6382 4601 Fax: +8 6382 4601 www.bdo.com.au www.bdo.com.au www.bdo.com.au www.bdo.com.au www.bdo.com.au www.bdo.com.au 38 Station Street 38 Station Street 38 Station Street 38 Station Street 38 Station Street 38 Station Street Subiaco, WA 6008 Subiaco, WA 6008 Subiaco, WA 6008 Subiaco, WA 6008 Subiaco, WA 6008 Subiaco, WA 6008 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 PO Box 700 West Perth WA 6872 Australia Australia Australia September 2013 25 September 2013 September 2013 September 2013 September 2013 September 2013 25 The Board of Directors The Board of Directors The Board of Directors The Board of Directors The Board of Directors The Board of Directors The Board of Directors The Board of Directors AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited Level 1, 33 Ord Street Level 1, 33 Ord Street Level 1, 33 Ord Street Level 1, 33 Ord Street Level 1, 33 Ord Street Level 1, 33 Ord Street Level 1, 33 Ord Street Level 1, 33 Ord Street Perth, WA 6005 West Perth, WA 6005 West Perth, WA 6005 Perth, WA 6005 Perth, WA 6005 Perth, WA 6005 West Dear Sirs, Dear Sirs, Dear Sirs, Dear Sirs, DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF DECLARATION OF 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Brad McVeigh Brad McVeigh Brad McVeigh Brad McVeigh Brad McVeigh Brad McVeigh Director Director Director Director BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd Western Australia Western Australia Western Australia Western Australia Western Australia Western Australia Perth, Western Australia Perth, Perth, BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 of BDO (Australia) Ltd ABN 77 050 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members ational Ltd, a UK company limited ational Ltd, a UK company limited ational Ltd, a UK company limited ational Ltd, a UK company limited ational Ltd, a UK company limited ational Ltd, a UK company limited ational Ltd, a UK company limited 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO Intern ty limited by a scheme approved under Professional Standards by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards by guarantee, and form part of the international BDO network of independent member firms. Liabili ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards ty limited by a scheme approved under Professional Standards by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili by guarantee, and form part of the international BDO network of independent member firms. Liabili ania. Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasm AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 AVZ Minerals Limited | 11 Financial Statements Contents Consolidated Statement of Profit and Loss and Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration 13 14 15 16 17 41 These financial statements cover AVZ Minerals Limited as a consolidated entity consisting of AVZ Minerals Limited and its subsidiaries. The financial statements are presented in the Australian dollar currency. AVZ Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: AVZ Minerals Limited Level 1 33 Ord Street West Perth Western Australia 6005 A description of the nature of the consolidated entity's operations and its principal activities is included in the review of operations in the directors’ report, which is not part of these financial statements. The financial statements were authorised for issue by the directors on 25 September 2013. The company has the power to amend and reissue the financial statements. Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the company. All press releases, financial reports and other information are available on our website: www.avonleaminerals.com.au. AVZ Minerals Limited | 12 Consolidated Statement of Profit and Loss and Other Comprehensive Income For the Year Ended 30 June 2013 Note Consolidated 2013 $ 3 3 26 4 11 7 Revenue from continuing operations Other income Administrative costs Consultancy expenses Employee benefits expense Share based payment expenses Occupancy expenses Compliance and regulatory expenses Insurance expenses Depreciation expense Exploration impaired Loss before income tax Income tax expense Loss for the year Other comprehensive income: Items that may be reclassified to profit or loss Exchange differences arising on translation of foreign operations Other comprehensive income 2012 $ 37,662 - (382,633) (325,785) (601,117) (77,496) (46,396) (59,753) (39,340) (33,718) (2,259,760) 30,753 40,089 (135,380) (56,100) (68,571) - (63,033) (70,639) (39,297) (26,502) (2,024,322) (2,413,002) (3,788,336) - - (2,413,002) (3,788,336) 24,632 (502,404) 24,632 (502,404) Total comprehensive loss for the year (2,388,370) (4,290,740) Loss for the year is attributable to: Owners of AVZ Minerals Limited Non-controlling interests Total comprehensive loss for the year attributable to: Owners of AVZ Minerals Limited Non-controlling interests (2,308,824) (104,178) (2,413,002) (3,730,100) (58,236) (3,788,336) (2,270,413) (117,957) (2,388,370) (4,207,384) (83,356) (4,290,740) Basic loss per share (cents per share) Diluted loss per share (cents per share) 19 19 (1.20) N/A (3.65) N/A The accompanying notes form part of these financial statements. AVZ Minerals Limited | 13 Consolidated Statement of Financial Position As at 30 June 2013 Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non Current Assets Receivables Property, plant and equipment Exploration & evaluation expenditure Total Non Current Assets Total Assets Current Liabilities Trade and other payables Provisions Total Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Capital and reserves attributable to owners of AVZ Minerals Ltd Non-controlling interests Total Equity The accompanying notes form part of these financial statements. Note Consolidated 2013 $ 2012 $ 8 9 9 10 11 12 13 14 17 1,834,742 28,925 767,496 87,681 1,863,667 855,177 - 15,607 867,567 30,000 69,445 2,752,038 883,174 2,746,841 2,851,483 3,706,660 25,152 - 366,288 55,782 25,152 25,152 2,721,689 422,070 422,070 3,284,590 12,941,083 759,949 (10,833,700) 2,867,332 (145,643) 11,115,614 721,538 (8,524,876) 3,312,276 (27,686) 2,721,689 3,284,590 AVZ Minerals Limited | 14 Consolidated Statement of Changes in Equity For the Year Ended 30 June 2013 Consolidated Contributed Equity Accumulated Losses Option Reserve $ $ $ Foreign Currency Translation Reserve $ Total Equity Total Non- controlling Interests $ $ $ Balance at 1 July 2012 Total comprehensive income for the year: Loss for the year Exchange differences on translation of foreign operations Equity settled share based payment transactions Contributions of equity (net of transaction costs) Balance at 30 June 2013 Balance at 1 July 2011 Total comprehensive income for the year: Loss for the year Exchange differences on translation of foreign operations Equity settled share based payment transactions Contributions of equity (net of transaction costs) Balance at 30 June 2012 11,115,614 (8,524,876) 1,310,448 (588,910) 3,312,276 (27,686) 3,284,590 - - - - 1,825,469 1,825,469 (2,308,824) - (2,308,824) - - - - - - - - - - (2,308,824) (104,178) (2,413,002) 38,411 38,411 38,411 (2,270,413) (13,779) (117,957) 24,632 (2,388,370) - - - - 1,825,469 1,825,469 - - - - 1,825,469 1,825,469 12,941,083 (10,833,700) 1,310,448 (550,499) 2,867,332 (145,643) 2,721,689 8,611,545 (4,794,776) 1,087,568 (111,626) 4,792,711 55,670 4,848,381 - - - - (3,730,100) - (3,730,100) - - - - 222,880 2,504,069 2,504,069 - - - 222,880 - (3,730,100) (58,236) (3,788,336) (477,284) (477,284) (477,284) (4,207,384) (25,120) (83,356) (502,404) (4,290,740) - - - 222,880 2,504,069 2,726,949 - - - 222,880 2,504,069 2,726,949 11,115,614 (8,524,876) 1,310,448 (588,910) 3,312,276 (27,686) 3,284,590 The accompanying notes form part of these financial statements. AVZ Minerals Limited | 15 Consolidated Statement of Cash Flows For the Year Ended 30 June 2013 Note Consolidated 2013 $ 2012 $ Cash Flows from Operating Activities Payments to suppliers and employees (inclusive of GST) Interest received (705,148) 30,753 (1,293,853) 37,662 Net cash outflow from operating activities 20 (674,395) (1,256,191) Cash Flows from Investing Activities Payments for (proceeds from) property, plant and equipment Payments for exploration and evaluation Credit card deposit returned 26,023 (139,851) 30,000 (12,938) (1,650,467) - Net cash outflow from investing activities (83,828) (1,663,405) Cash Flows from Financing Activities Proceeds from issue of shares and other equity securities Share issue transaction costs 1,967,062 (141,593) 2,290,000 (89,932) Net cash inflow from financing activities 1,825,469 2,200,068 Net increase (decrease) in cash and cash equivalents 1,067,246 (719,528) Cash and cash equivalents at the start of the year 767,496 1,487,024 Cash and cash equivalents at the end of the year 8 1,834,742 767,496 The accompanying notes form part of these financial statements. AVZ Minerals Limited | 16 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. These information for AVZ Minerals Limited as a consolidated entity financial statements present the financial (‘group’ or consisting of AVZ Minerals Limited and the entities is controlled throughout ‘consolidated entity’). the year Basis of Preparation (a) The financial report is a general purpose financial report which has been prepared in accordance with the requirements of Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Accounting Interpretations and the Corporations Act 2001. (i) (ii) Statement of Compliance The financial report complies with Australian Accounting Standards which include International Financial Reporting Standards as adopted in Australia. Compliance with these standards ensures that the consolidated financial statements and notes as presented comply with International Financial Reporting Standards (IFRS). Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available for sale financial assets. (iii) New and Amended Standards Adopted by the Group (b) (i) None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods However, amendments made to AASB 101 Presentation of Financial Statements effective 1 July 2012 now require the statement of comprehensive income to show the items of comprehensive income grouped into those that are not permitted to be reclassified to profit or loss in a future period and those that may have to be reclassified if certain conditions are met. Basis of Consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of the consolidated entity as at 30 June 2013 and the results of the group for the year then ended. Subsidiaries are all those entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The group applies a policy of treating transactions with non- controlling interests as transactions with parties external to the group. Disposals to non-controlling interests result in gains and losses for the group that are recorded in the statement of comprehensive income. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary. A list of controlled entities is contained in Note 24 to the financial statements. All controlled entities have a 30 June financial year-end. (ii) Joint ventures Joint venture entities A joint venture entity is an entity in which the group holds a long-term interest and which is jointly controlled by the group and one or more other venturers. Decisions regarding the financial and operating policies essential to the activities, economic performance and financial position of that venture require the consent of each of the venturers that together jointly control the entity. AVZ Minerals Limited | 17 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies (continued) Jointly controlled assets The group has certain contractual arrangements with other participants to engage in joint activities where all significant matters of operating and financial policy are determined by the participants such that the operation itself has no significant independence to pursue its own commercial strategy. These contractual arrangements do not create a joint venture entity due to the fact that the policies are those of the participants, not a separate entity carrying on a trade or a business of its own. The financial statements of the group include its share of the assets, liabilities and cash flows in such joint venture operations, measured in accordance with the terms of each arrangement, which is usually pro-rata to the group’s interest in the joint venture operations. Segment reporting (c) Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors. Revenue recognition (d) Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for the business activities as follows: Interest income (i) Interest income is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. Income tax (e) The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Leases (f) Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other long-term payables. AVZ Minerals Limited | 18 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies (continued) Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. Impairment of assets (g) At each reporting date the group assesses whether there is any indication that an asset may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Cash and cash equivalents (h) For the purpose of presentation of the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Trade and other receivables (i) Trade and other receivables are initially recognised initially at fair value and subsequently measured at amortised costs using the effective interest method, less provision for impairment. Trade and other receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Amounts that are known to be uncollectible are written off by reducing the carrying amount directly. Exploration and evaluation expenditure (j) Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which:  Such costs are expected to be recouped through successful development and exploitation or from sale of the area: or Exploration and evaluation activities in the area have not, at balance date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing.  Accumulated costs in respect of areas of interest which are abandoned are written off in full against profit in the year in which the decision to abandon the area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Property, plant and equipment (k) All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be AVZ Minerals Limited | 19 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies (continued) measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation on Australian assets is calculated using the straight line method (Namibian assets using diminishing value) to allocate their cost, net of their residual values, over their estimated useful lives, as follows: Plant and equipment - office Furniture and equipment - office Plant and equipment – field (Australia) Plant and equipment – field (Namibia) Motor Vehicles (Namibia) 40.0% 20.0% 20.0% 22.5% 22.5% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(g)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. Trade and other payables (l) These amounts represent liabilities for goods and services provided to the company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. Provisions (m) Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. (n) (i) (ii) Employee benefits Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employee’s services up to the end of the reporting period and are measured at the amounts expected to be paid when liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as other payables. Long service leave The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. AVZ Minerals Limited | 20 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies (continued) (iii) Share-based payments The company provides benefits to employees (including directors) of the company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined using an appropriate option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of shares of AVZ Minerals Limited (‘market conditions’). (o) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. (p) (i) (ii) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit/loss attributable to equity holders of the company excluding any costs of servicing 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. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with the dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and services tax (GST) and Value added tax (VAT) (q) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Revenue, expenses and assets incurred in Namibia are recorded inclusive of VAT and no receivable or payable is recorded as the recoverability of the VAT from the relevant taxation authority is uncertain. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (r) (i) Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is AVZ Mineral’s functional and presentation currency. AVZ Minerals Limited | 21 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies (continued) (ii) (iii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale financial assets are included in the fair value reserve in equity. Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:  Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position Income and expenses for the statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and All resulting exchange differences are recognised as a separate component of comprehensive income.   On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the statement of comprehensive income, as part of the gain or loss on sale where applicable. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate. New accounting standards and interpretations (s) Certain new accounting standards and interpretations have been published that are not mandatory for 30 The group’s assessment of the impact of these new standards and June 2013 reporting periods. interpretations is set out below. (i) (ii) AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2015) AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the group’s accounting for its financial assets. The standard is not applicable until 1 January 2015 but is available for early adoption but has to be fully adopted by 30 June 2016. The group is yet to assess its full impact. The group has not yet decided when to adopt AASB 9. Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective 1 January 2011) The revised AASB 124 is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The aim of the amendment is to clarify and simplify the definition of a related party. The group will apply the amended standard from 1 July 2011. When the amendments are applied, the group will need to disclose any transactions between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the financial statements. AVZ Minerals Limited | 22 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 1. Summary of Significant Accounting Policies (continued) (ii) AASB 10 Consolidated Financial Statements and AASB 2011-7 Amendments to Australian Accounting Standards arising from AASB 10 (effective 1 January 2013). It replaces parts of The revised AASB 10 establishes a new control model that applies to all entities. AASB 127 Consolidated and Separate Financial Statements. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. (iv) (v) (vi) AASB 11 Interest in Joint Ventures AASB 2011-7 Amendments to Australian Accounting Standards arising from AASB 11 (effective 1 January 2013). The revised 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 it removes the option to account for jointly controlled entities using proportionate consolidation. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. AASB 12 Disclosure of Interests in Other Entities (effective 1 January 2013). The revised AASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements and associates. New disclosures have been introduced about the judgements made by management to determine whether control exists, and requires summarised information about joint arrangements, associates and subsidiaries with non-controlling interests. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013). The revised AASB 13 explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques it will have to change as a result of the new guidance. They would therefore be first applied in the financial statements for the annual reporting period ending 30 June 2014. No other amendments or interpretations are expected to affect the financial statements of the group. Parent Entity Financial Information (t) The financial information for the parent entity, AVZ Minerals Limited, disclosed in note 26 has been prepared on the same basis as the consolidated financial statements. 2. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and judgements may differ from the related actual results and may have a significant effect on the carrying amount of assets and liabilities within the next financial year and on the amounts recognised in the financial statements. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Impairment of deferred exploration and evaluation expenditure (a) 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 balance date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. The Board and Management have assessed the carrying value of the Exploration and Evaluation Expenditure to be impaired. Refer to the accounting policy stated in note 1(j) and to note 11 for movements in the exploration and evaluation expenditure balance. AVZ Minerals Limited | 23 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 2. Critical accounting estimates and judgements (continued) Share based payment transactions (b) 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 26. 3. (a) (b) 4. (a) (b) (c) 5. (a) 6. (a) Revenue From continuing operations Interest received Other income Refund of VAT Proceeds from sale of plant and equipment Total revenue from other revenue Loss for the Year Depreciation of non-current assets Plant and equipment - office Plant and equipment - field Motor vehicle Total depreciation Interest and finance charges paid and or payable Total finance costs Asset write-down expense Write-down of fixed assets Total asset write-down expense Foreign exchange loss Net foreign exchange loss Total foreign exchange loss Auditor’s Remuneration Remuneration of the auditors of the consolidated entity for: Auditing or reviewing the financial statements: BDO Audit (WA) Pty Ltd - - HLB Mann Judd (WA Partnership) Non-assurance services Total remuneration of auditors Consolidated 2013 $ 2012 $ 30,753 37,662 21,539 18,550 40,089 12,209 13,825 468 26,502 - - 1,313 1,313 3,224 3,224 33,000 - - 33,000 - - - 11,414 13,251 9,053 33,718 6,017 6,017 1,180 1,180 64,922 64,922 30,545 1,200 - 31,745 Key Management Personnel Compensation Summary remuneration 487,473 Short-term employee benefits 36,163 Post-employment benefits - Long-term benefits 74,966 Share-based payments Total key management personnel compensation 598,602 Details of remuneration disclosures are provided within the audited remuneration report which can be found on pages 5 to 8 of the directors’ report. 173,347 10,020 - - 183,367 AVZ Minerals Limited | 24 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 6. Key Management Personnel Compensation (continued) (b) (c) (d) (e) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with the terms and conditions of the options, are provided within the audited remuneration report which can be found on pages 5 to 8 of the directors’ report. Loans to key management personnel No loans were made to any director or other key management personnel of the group, including their personally related parties during the financial year. Other transactions with key management personnel Information relating to other transactions with any director or other key management personnel can be found at note 25. Option holdings The number of options over ordinary shares in the company held during the financial year by each director of AVZ Minerals Limited and other key management personnel of the group, including their personally related parties, are set out below: Balance at start of the year Granted as remuneration Exercised Other changes Balance at end of the year Vested and exercisable 2013 Directors of AVZ Minerals Limited David Macoboy1 Roger Steinepreis David Riekie Hamish Halliday1 Stephen Parsons1 1,500,000 1,500,000 14,000,000 9,430,000 9,430,000 Other key management personnel - - - - - - - - - - (1,500,000) - - (9,430,000) (9,430,000) - 1,500,000 - 1,500,000 14,000,000 14,000,000 - - - - Alex Aitken1 - 1 Other changes relate to options no longer reported as director/key management personnel resigned during the period. (300,000) 300,000 - - - Balance at start of the year Granted as remuneration Exercised Other changes Balance at end of the year Vested and exercisable 2012 Directors of AVZ Minerals Limited David Macoboy Roger Steinepreis1 David Riekie Andrew Gastevich2 Hamish Halliday Stephen Parsons - 4,500,000 14,000,000 2,250,000 9,430,000 9,430,000 1,500,000 - - - - - Other key management personnel Alex Aitken 1 Other changes relate to options expired during the year. 2 Mr Andrew Gastevich resigned on the 3 November 2011. 300,000 500,000 - - - - - - - - (3,000,000) - (2,250,000) - - 1,500,000 1,500,000 1,500,000 1,500,000 14,000,000 14,000,000 - 3,310,000 3,310,000 - 9,430,000 9,430,000 (500,000) 300,000 300,000 AVZ Minerals Limited | 25 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 6. (f) Key Management Personnel Compensation (continued) Ordinary shareholdings The number of shares in the company held during the financial year by each director of AVZ Minerals Limited and other key management personnel of the group, including their personally related parties, are set out below. There were no shares granted during the period as remuneration. Balance at the start of the year Received on exercise of options Other Changes Balance at the end of the year 2013 Directors of AVZ Minerals Limited David Macoboy1 Roger Steinepreis David Riekie Gary Steinepreis 3 Hamish Halliday 2 Stephen Parsons 2 1,000,000 4,812,500 5,978,441 - 7,385,500 7,397,500 Other key management personnel - - - - - - (1,000,000) 19,238,942 10,387,255 15,371,649 (7,385,500) (7,397,500) Alex Aitken 1 David Macoboy was appointed on the 22 September 2011 and resigned on the 3 August 2012. 2 Hamish Halliday and Stephen Parsons resigned on 30 November 2012. 3 Gary Steinepreis was appointed on 30 November 2012. - - - - 24,051,442 16,365,696 15,371,649 - - - Balance at the start of the year Received on exercise of options Other Changes Balance at the end of the year 2012 Directors of AVZ Minerals Limited David Macoboy1 Roger Steinepreis David Riekie Andrew Gastevich2 Hamish Halliday Stephen Parsons - 3,500,000 3,588,441 950,000 7,198,000 7,210,000 Other key management personnel - - - - - - 1,000,000 1,312,500 2,200,000 (950,000) 187,500 187,500 Alex Aitken 1 David Macoboy was appointed on the 22 September 2011 and resigned on the 3 August 2012. 2 Mr Gastevich resigned on the 3 November 2011. - - - 1,000,000 4,812,500 5,788,441 - 7,385,500 7,397,500 - (g) Converting performance shareholdings The number of converting performance shares in the company held during the financial year by each director of AVZ Minerals Limited and other key management personnel of the group, including their personally related parties, are set out below. Converting performance shares do not form part of remuneration and were previously issued as part consideration for the acquisition of Eris Mining (Pty) Ltd. Balance at the start of the year Issued Other Changes1 Balance at the end of the year 2012 Directors of AVZ Minerals Limited Hamish Halliday Stephen Parsons 1,560,000 1,560,000 - - (1,560,000) (1,560,000) - - 1 Other changes refer to converting performance shares lapsing during the year. AVZ Minerals Limited | 26 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 7. (a) Income Tax Expense (note should be restructured) Income tax expense Current tax Deferred tax Total income tax expense Deferred income tax expense included in income tax expense comprises: Decrease/(Increase) in deferred tax assets (note 7(c)) Increase/(Decrease) in deferred tax liabilities (note 7(d)) Consolidated 2013 $ 2012 $ - - - - - - - - - 8,691 (8,691) - (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense Tax at the tax rate of 30.0% (2012: 30.0%) (2,413,002) (723,901) (3,788,336) (1,136,500) Tax effect of amounts which are not deductible in calculating taxable income: Exploration written off Share based payments Other non-deductible amounts Differences in overseas tax rates Unrecognised tax losses Income tax expense/(benefit) (c) Deferred tax recognised Deferred tax liabilities Exploration and expenditure Other Deferred tax assets Carry forward tax losses recognized Net deferred tax recognised (d) Unrecognised tax losses 607,297 - 29,098 4,444 83,062 762,456 66,864 9,944 (87,353) 384,589 - - 260,270 - 756,583 676 (260,270) - (757,259) - Unused tax losses for which no deferred tax asset has been recognised 5,351,594 5,074,720 Potential tax benefit at the tax rate of 30.0% (2012: 30.0%) Potential tax benefit at the tax rate of 30.0% (2012: 37.5%) 1,552,440 53,038 1,605,478 1,497,759 30,821 1,528,580 (e) Unrecognised temporary differences Unrecognised deferred tax asset relating to capital raising costs 200,922 171,018 1: The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences. AVZ Minerals Limited | 27 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 Cash & Cash Equivalents Cash & cash equivalents Cash at bank & in hand Total cash & cash equivalents Consolidated 2013 $ 2012 $ 1,834,742 1,834,742 767,496 767,496 Cash at bank and in hand Cash on hand is non-interest bearing. Cash at bank bears interest rates between 0.00% and 3.50% (2012: 0.00% and 4.75%). Refer to note 18 for the group’s exposure to interest rate and credit risk. Trade & Other Receivables Current Other receivables Prepayments Total current trade & other receivables Non-current Deposits1 Total non-current trade & other receivables 1 Deposits relate to a guarantee for a corporate credit card facility. Consolidated 2013 $ 28,925 - 28,925 - - 2012 $ 57,600 30,081 87,681 30,000 30,000 Past due and impaired receivables As at 30 June 2013, there were no other receivables that were past due or impaired (2012: nil). Effective interest rates and credit risk Information concerning effective interest rates and credit risk of both current and non-current trade and other receivables is set out in note 18. 8. (a) (b) 9. (a) (b) (c) (d) AVZ Minerals Limited | 28 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 Property, Plant & Equipment 10. (a) Year ended 30 June 2013 Opening net book amount Additions Disposals/write-offs/adjustments Depreciation charge Closing net book amount At 30 June 2013 Cost Accumulated depreciation Net book amount (b) Year ended 30 June 2012 Opening net book amount Additions Effect of exchange rates Disposals/write-offs Depreciation charge Closing net book amount At 30 June 2012 Cost Accumulated depreciation Net book amount Exploration & Evaluation Expenditure 11. (a) Exploration and evaluation phase Opening balance Exploration and acquisition costs Impairment expense1 Closing balance Consolidated Motor Vehicles Plant & Office Field $ $ Plant & Office Equipment $ 30,878 - (30,410) (468) - - - - 39,473 - 458 - (9,053) 30,878 41,821 (10,943) 30,878 21,819 - 3,074 (13,825) 11,068 58,896 (47,828) 11,068 35,069 - - - (13,250) 21,819 58,896 (37,077) 21,819 16,748 - - (12,209) 4,539 28,544 (24,005) 4,539 16,863 12,480 - (1,180) (11,415) 16,748 28,542 (11,794) 16,748 Total $ 69,445 - (27,336) (26,502) 15,607 87,440 (71,833) 15,607 91,405 12,480 458 (1,180) (33,718) 69,445 129,259 (59,814) 69,445 Consolidated 2013 $ 2012 $ 2,752,038 139,851 (2,024,322) 867,567 3,636,334 1,375,464 (2,259,760) 2,752,038 1 Board and Management have assessed the carrying value of the Exploration and Evaluation Expenditure to be impaired and have provided for an impairment expense to reduce the carrying value to the expected recoverable amount. The value of the group’s interest in exploration expenditure is dependent upon:    the continuance of the company’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. AVZ Minerals Limited | 29 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 Trade & Other Payables 12. (a) Current Trade Payables Other Payables Total current trade & other payables The group’s exposure to foreign currency risk is noted in note 18. Provisions 13. (a) Current Accrued employee benefits Total Provisions Amounts shown are expected to be settled within 12 months. Consolidated 2013 $ 2012 $ 25,152 - 315,417 50,871 25,152 366,288 Consolidated 2013 $ 2012 $ - - 55,782 55,782 Consolidated 2013 Shares 2012 Shares Consolidated 2013 $ 2012 $ Contributed Equity 14. (a) Contributed Equity Ordinary shares - fully paid 303,412,482 121,706,241 12,941,083 11,115,614 Total Contributed Equity 303,412,482 121,706,241 12,941,083 11,115,614 (b) Ordinary Shares Ordinary shares participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held and in proportion to the amount paid up on the shares held. At shareholders meetings each ordinary share is entitled to one vote in proportion to the paid up amount of the share when a poll is called, otherwise each shareholder has one vote on a show of hands. (c) Options Information relating to options including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 15. (d) Performance incentive shares Information relating to performance incentive shares including details of performance incentive shares issued, exercised and lapsed during the financial year and options performance incentive shares outstanding at the end of the financial year, is set out in note 16. (e) Capital risk management The group’s principal objective when managing capital is to ensure that the group can continue as a going concern in order to provide benefits for shareholders and other stakeholders. Due to the nature of the group’s activities being mineral exploration, the primary source of funding of the The focus for the group’s capital risk management is the current activities is equity raisings. working capital position against the group’s requirements to meet exploration programmes and corporate overheads. AVZ Minerals Limited | 30 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 (f) Capital risk management (continued) Consolidated 2013 $ 2012 $ Cash and cash equivalents Trade & other receivables - current Trade & other receivables - non- current Trade & other payables Working capital position 1,834,742 28,925 - (25,152) 1,838,515 Date Number Shares $ Issue Price $ (g) Movements in contributed equity Opening Balance 1 July 2011 Issue of shares: Placement Issue of shares: Kudu Minerals Issue of shares: Placement Issue of shares: Placement Less: Transaction costs arising on share issues Closing Balance at 30 June 2012 Opening Balance 1 July 2012 Issue of shares: Placement Issue of shares: Placement Issue of shares: Entitlement issue Less: Transaction costs arising on share issues Closing Balance at 30 June 2013 30 Sep 11 4 Nov 11 10 Nov 11 18 Apr 12 83,356,241 10,000,000 3,800,000 8,750,000 15,800,000 $0.08 $0.08 $0.08 $0.05 121,706,241 121,706,241 23 Oct 12 29 Nov 12 29 Jan 13 18,250,000 $0.015 11,750,000 $0.015 $0.01 151,706,241 303,412,482 767,496 87,681 30,000 (422,070) 463,107 Total $ 8,611,545 800,000 304,000 700,000 790,000 (89,931) 11,115,614 11,115,614 273,750 176,250 1,517,062 (141,593) 12,941,083 Balance at start of year Granted during the year Exercised during the year Cancelled/ lapsed during the year Balance at end of the year Expiry date Share Options Exercise price 15. (a) 2013 unlisted share option details 31 Aug 13 31 Aug 13 31 Aug 13 31 Aug 13 31 Aug 13 14 Nov 13 31 Mar 14 22 May 14 22 May 14 22 May 14 30 Nov 14 31 May 14 31 May 14 31 May 14 31 Oct 14 15.0 cents 20.0 cents 25.0 cents 30.0 cents 45.0 cents 15.0 cents 10.0 cents 20.0 cents 30.0 cents 45.0 cents 20.0 cents 11.0 cents 20.0 cents 25.0 cents 11.0 cents 3,250,000 2,500,000 2,500,000 2,500,000 2,500,000 6,000,000 400,000 7,125,000 7,125,000 7,125,000 2,000,000 400,000 2,500,000 2,500,000 1,500,000 49,925,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,250,000 2,500,000 2,500,000 2,500,000 2,500,000 6,000,000 400,000 7,125,000 7,125,000 7,125,000 2,000,000 400,000 2,500,000 2,500,000 1,500,000 49,925,000 AVZ Minerals Limited | 31 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 Expiry date Share Options (continued) Exercise price 15. (b) 2012 unlisted share option details Balance at start of year Granted during the year Exercised during the year Cancelled/ lapsed during the year Balance at end of the year 31 Mar 12 31 Aug 13 31 Aug 13 31 Aug 13 31 Aug 13 31 Aug 13 14 Nov 13 31 Jan 14 31 Mar 14 22 May 14 22 May 14 22 May 14 30 Nov 14 31 May 14 31 May 14 31 May 14 31 Oct 14 20.0 cents 15.0 cents 20.0 cents 25.0 cents 30.0 cents 45.0 cents 15.0 cents 28.0 cents 10.0 cents 20.0 cents 30.0 cents 45.0 cents 20.0 cents 11.0 cents 20.0 cents 25.0 cents 11.0 cents 7,000,000 3,250,000 2,500,000 2,500,000 2,500,000 2,500,000 6,000,000 500,000 400,000 7,125,000 7,125,000 7,125,000 2,000,000 - - - - 50,525,000 - - - - - - - - - - - - - 400,000 2,500,000 2,500,000 1,500,000 6,900,000 - - - - - - - - - - - - - - - - - - (7,000,000) - - - - - - (500,000) - - - - - - - - - (7,500,000) - 3,250,000 2,500,000 2,500,000 2,500,000 2,500,000 6,000,000 - 400,000 7,125,000 7,125,000 7,125,000 2,000,000 400,000 2,500,000 2,500,000 1,500,000 49,925,000 Balance at start of year Granted during the year Converted during the year Lapsed during the year Balance at end of the year 16. (a) (b) Performance Incentive Shares 2013 performance incentive shares Performance incentive shares - - 2012 performance incentive shares Performance incentive shares 7,125,000 7,125,000 - - - - - - - - - - (7,125,000) (7,125,000) - - - - The performance incentive shares lapsed as the conditions were not met in the required timeframe. 17. (a) Reserves Unlisted option reserve Opening balance Unlisted options issued as remuneration during the year Closing balance Consolidated 2013 $ 2012 $ 1,310,448 - 1,310,448 1,087,568 222,880 1,310,448 The unlisted option reserve records items recognised on valuation of director, employee and contractor share options as well as share options issued during the course of a business combination. Information relating to the details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 15. AVZ Minerals Limited | 32 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 17. (b) Reserves (continued) Foreign Currency Translation Reserve Opening balance Exchange difference arising on translation of foreign operations Closing balance (588,910) (111,626) 38,411 (550,499) (477,284) (588,910) The foreign currency translation reserve records exchange differences arising on translation of foreign controlled entities. The exchange differences arising are recognised in other comprehensive income as detailed in note 1(r) and accumulated within a separate reserve within equity. The cumulative amount is reclassified to the statement of profit or loss or other comprehensive income when the net investment is disposed of. (c) Total reserves Unlisted option reserve Foreign currency translation reserve Total reserves 1,310,448 (550,499) 759,949 1,310,448 (588,910) 721,538 18. Financial Instruments, Risk Management Objectives and Policies instruments comprise cash and cash equivalents. The main The consolidated entity’s principal financial purpose of the financial instruments is to earn the maximum amount of interest at a low risk to the company. The consolidated entity also has other financial instruments such as trade debtors and creditors which arise directly from its operations. For the year under review, it has been the consolidated entity’s policy not to trade in financial instruments. The main risks arising from the consolidated entity’s financial instruments are interest rate risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below: AVZ Minerals Limited | 33 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 18. Financial Instruments, Risk Management Objectives and Policies (continued) (a) Interest Rate Risk The group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities comprises: Consolidated 2013 Financial assets Cash and cash equivalents Trade & other receivables - current Weighted Average Interest Rate % Floating Interest Rate $ 3.50% 0.00% 1,834,742 28,925 1,863,667 Financial Liabilities Trade and other payables - current 0.00% 2012 Financial assets Cash and cash equivalents Trade & other receivables - current Trade & other receivables - non- current 3.50% 0.00% 4.00% Financial Liabilities Trade and other payables - current 0.00% Fixed Interest Non- interest bearing Total $ 1,834,742 28,925 1,834,667 $ - - 25,152 25,152 25,152 25,152 38,027 57,600 - 95,627 767,496 57,600 30,000 855,096 $ - - - - - - - - 729,469 - - 729,469 30,000 30,000 - - - - 366,288 366,288 366,288 366,288 The maturity date for all cash, current receivables and trade and other payable financial instruments included in the above tables is one year or less from balance date. The maturity for the non-current receivables is between 1 and 3 years from balance date. (i) Sensitivity analysis The group’s main interest rate risk arises from cash equivalents with variable and fixed interest rates. At 30 June 2013 and 30 June 2012, the group’s exposure to interest rate risk is not deemed material. (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has adopted the policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the group’s maximum exposure to credit risk. All cash equivalents are held with financial institutions with a credit rating of A1+ or above, with the exception of cash on hand of $- (2012: $2,149) which is not rated. AVZ Minerals Limited | 34 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 18. Financial Instruments, Risk Management Objectives and Policies (continued) (c) Foreign Currency Risk The group is exposed to fluctuations in foreign currencies arising from exploration commitments in currencies other than the group’s presentational currency (Australian Dollars). The group operates internationally and is exposed to foreign exchange risk arising from currency exposures to the Namibian Dollar (NAD). The group has not formalised a foreign currency risk management policy, however it monitors its foreign currency expenditure in light of exchange rate movements, and retains the right to withdraw from the foreign exploration commitments after the minimum expenditure targets have been met. (i) Sensitivity analysis The group’s main foreign currency risk arises from cash equivalents held in foreign currency denominated bank accounts and other payable amounts denominated in currencies other than the group’s functional currency. At 30 June 2013 and 30 June 2012, the group’s exposure to foreign currency risk is not deemed material as the cash held in overseas financial institutions is not considered material to the group. (d) Liquidity risk The group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the group aims at ensuring flexibility in its liquidity profile by maintaining the ability to undertake capital raisings. The current trade and other payables are due and payable within 3 to 6 months. Contractual maturities of financial liabilities At 30 June 2013 Trade and other payables At 30 June 2012 Trade and other payables Less than 6 months $ 25,152 366,288 6-12 months $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contractual cashflows $ Carrying amount liabilities $ - - - - - - - - 25,152 25,152 366,288 366,288 (e) Net fair value The carrying value and net fair values of financial assets and liabilities at balance date are: Consolidated 2013 2012 Financial assets Cash and cash equivalents Trade & other receivables - current Trade & other receivables - non-current Financial Liabilities Trade and other payables - current Carrying Amount $ 1,834,742 28,925 - 1,863,667 Net fair Value $ 1,834,742 28,925 - 1,863,667 Carrying Amount $ 767,496 57,600 30,000 855,096 Net fair Value $ 767,496 57,600 30,000 855,096 25,152 25,152 25,152 25,152 366,288 366,288 366,288 366,288 AVZ Minerals Limited | 35 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 18. Financial Instruments, Risk Management Objectives and Policies (continued) (f) Fair value measurements The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: i) ii) iii) Quoted prices in active markets for identical assets or liabilities (level 1) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (level 2); and Inputs for (unobservable inputs) (level 3). liability that are not based on observable market data the asset or The group does not currently hold any assets and liabilities measured and recognised at fair value at 30 June 2013 and 30 June 2012. 19. (a) Earnings per Share Earnings/(Loss) Earnings/(loss) used in the calculation of basic EPS Consolidated 2013 $ 2012 $ (2,413,002) (3,730,100) (b) Weighted average number of ordinary shares (‘WANOS’) WANOS used in the calculation of basic earnings per share: 204,239,388 102,097,630 Diluted earnings per share is not shown or calculated as the company is in a loss position. Consolidated 2013 $ 2012 $ 20. (a) Cash Flow Information Reconciliation of cash flows from operating activities with loss from ordinary activities after income tax: (Loss) for the year Depreciation Asset write-down expense Exploration expenditure write off Share based payments Other Changes in assets and liabilities: (Increase) in operating receivables & prepayments (Decrease) in trade and other payables (2,413,002) (3,788,336) 26,502 1,313 2,024,322 - 24,632 58,756 (396,918) 33,718 1,180 2,259,760 222,880 64,787 (17,695) (32,485) Net cash (outflows) from Operating Activities (674,395) (1,256,191) (b) Non-cash investing and financing activities ordinary activities On 4 November 2011 the company issued 3,800,000 ordinary shares at $0.08 per share to Kudu Minerals. (Pty) Ltd to relinquish all current and pending mining claims held by Kudu over exclusive prospecting licence 4416 in Northern Namibia. AVZ Minerals Limited | 36 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 21. (a) Segment Information Description of segments Management has determined the operating segments based on the reports reviewed by the chief operating decision maker that are used to make strategic decisions. For the purposes of segment reporting the chief operating decision maker has been determined as the board of directors. The board monitors the entity primarily from a geographical perspective, and has identified two operating segments, being exploration for mineral reserves within Africa and the corporate/head office function. (b) Segment information provided to the board of directors The segment information provided to the board of directors for the reportable segments for the year ended 30 June 2013 as follows: 2013 Total segment revenue Interest revenue Depreciation and amortisation expense Exploration impairment expense Total segment loss before income tax Africa $ Corporate $ Total $ - - 930 2,024,322 2,083,569 30,753 30,753 25,572 - 329,433 30,753 30,753 26,502 2,024,322 2,413,002 Total segment assets 900,567 1,846,274 2,746,841 Total segment liabilities 1,160 23,992 25,152 2012 Total segment revenue Interest revenue Depreciation and amortisation expense Exploration impairment expense Africa $ Corporate $ Total $ - - 9,053 2,259,760 37,622 37,622 24,665 - 37,622 37,622 33718 2,259,760 Total segment loss before income tax (2,297,426) (1,490,910) (3,788,336) Total segment assets 2,822,413 884,247 3,706,660 Total segment liabilities 3,920 418,150 422,070 (c) Measurement of segment information information presented in part (b) above is measured in a manner consistent with that in the All financial statements. (d) Segment revenue No inter-segment sales occurred during the current or previous financial year. The entity is domiciled in Australia. No revenue was derived from external customers in countries other than the country of domicile. Revenues of $30,753 (2012: $37,622) were derived from one Australian financial institution during the period. These revenues are attributable to the corporate segment. AVZ Minerals Limited | 37 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 21. Segment Information (continued) (e) Reconciliation of segment information Total segment revenue, total segment profit/loss before income tax, total segment assets and total segment liabilities as presented in part (b) above, equal total entity revenue, total entity profit/loss before income tax, total entity assets and total entity liabilities respectively, as reported within the financial statements. Commitments and Contingencies 22. There are no commitments or contingent liabilities outstanding at the end of the year. Subsidiaries 23. The consolidated financial statements incorporate the assets, subsidiaries in accordance with the accounting policy described in note 1(b): liabilities and results of the following Name of entity Country of incorporation Class of shares Northam Resources Ltd2 Himba Iron Exploration (Pty) Ltd Eris Mining (Pty) Ltd Tumba Base Metals X (Pty) Ltd Australia Namibia Namibia Namibia Ordinary Ordinary Ordinary Ordinary Equity holding1 2013 % 100 95 95 95 2012 % 100 95 95 95 1: The proportion of ownership interest is equal to the proportion of voting power held. 2: Company is dormant. 24. (a) (b) (c) (d) Related Party Information Parent entity The ultimate parent entity within the group is AVZ Minerals Limited. Subsidiaries Interests in subsidiaries are set out in note 24. Key management personnel Disclosures relating to key management personnel are set out in note 6. Transactions with Director Related Parties The following transactions occurred with related parties: Consolidated Purchases from director related entities Payments for shared services costs to Gryphon Minerals Limited Payments for shared services costs to Venture Minerals Limited Payment to Steinepreis Paganin for legal fees Payment to Ascent Capital – rent 2013 $ 29,481 19,291 28,030 30,000 Outstanding balances arising from recharges/purchases with Director Related Parties Current payables (purchases) - There were no loans made to or from related parties during the year. 2012 $ 104,861 98,053 4,434 - 37,694 AVZ Minerals Limited | 38 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 24. Related Party Information (continued) (e) Terms and conditions of related party transactions Transactions between related parties are on commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated. 25. Share Based Payments The Directors have not issued any options as remuneration during the current year. 2012 – The Directors issued options as remuneration: (a) (b) Fair value of listed options granted The fair value of listed options granted is calculated as the market value prevailing at the date on which the options are authorised for issue. Fair value of unlisted options granted The weighted average fair value of the options granted during the financial year was $0.032 cents. The price was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs: Weighted average exercise price Weighted average years to expiry Weighted average underlying share price Weighted average expected volatility Weighted average risk-free rate Discount for unmarketability of options 2012 $0. 1921 2.7 $0.0786 98% 3.69% - The following factors and assumptions were used in determining the fair value of options issued on grant date: Grant Date Expiry Date Exercise Price Fair Value Per Option 30 June 2012 04 Nov 11 04 Nov 11 04 Nov 11 12 Jan 2012 31 Oct 14 31 May 14 31 May 14 31 Oct 14 11.0cents 20.0cents 25.0cents 11.0cents $ 0.045 0.039 0.027 0.025 Price of Shares on Grant Date $ 0.08 0.08 0.08 0.06 Estimated Volatility % 98% 98% 98% 94% Risk Free Interest Rate % 3.72% 3.72% 3.72% 3.19% Dividend Yield % 0% 0% 0% 0% Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future trends, which may not eventuate. The life of the options is based on historical exercise patterns, which may not eventuate in the future. The total share-based payment expense recognised during the year, are set out below: AVZ Minerals Limited | 39 Notes to the Consolidated Financial Statements for the year ended 30 June 2013 25. Share Based Payments (continued) Unlisted options: Share based payments expense - Options issued to directors and employees Consultants expense -Options issued to Consultants Contributed equity: Ordinary shares issued to Kudu Minerals (Pty) Ltd – Capitalised to exploration & evaluation expenditure Consolidated 2013 $ - - - 2012 $ 77,496 145,384 304,000 Amounts reflected above have been included in the statement of comprehensive income. Details of other option movements and balances are set out in note 15. 26. (a) (b) (c) (d) Parent Entity Information Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Contributed equity Accumulated losses Option reserve Total equity Total Comprehensive loss for the year Loss for the year Other comprehensive income for the year Total comprehensive loss for the year Company 2013 $ 2012 $ 1,835,091 878,749 2,713,840 815,680 2,820,605 3,636,285 23,992 23,992 418,151 418,151 12,941,083 (11,561,683) 1,310,448 2,689,848 11,115,614 (9,207,928) 1,310,448 3,218,134 (2,353,755) - (2,353,755) (4,487,145) - (4,487,145) The parent entity has not guaranteed any loans for any entity during the year. The parent entity does not have any contingent liabilities, or capital commitments. AVZ Minerals Limited | 40 Directors’ Declaration In the directors’ opinion: (a) the financial statements and notes set out on pages 13 to 41 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the group’s financial position as at 30 June 2013 and of its performance for the financial year ended on that date; and (b) the audited remuneration disclosures set out on pages 5 to 8 of the directors’ report comply with section 300A of the Corporations Act 2001; and (c) at the date of this declaration, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. The directors have been given the declarations required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Board of Directors. Gary Steinepreis Non-Executive Director West Perth, Western Australia 25 September 2013 AVZ Minerals Limited | 41 Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVZ MINERALS LIMITED Report on the Financial Report We have audited the accompanying financial report of AVZ Minerals Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about 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 judgement, 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 company’s preparation of the financial report that gives a true and fair view 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 company’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 qualified audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of AVZ Minerals Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. AVZ Minerals Limited | 42 Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion Basis for Qualified Opinion on carried at $867,567 on carried at $867,567 carried at $867,567 expenditure carried at $867,567 carried at $867,567 carried at $867,567 carried at $867,567 expenditure expenditure Attention is drawn to the capitalised exploration and evaluation expenditure expenditure expenditure Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation Attention is drawn to the capitalised exploration and evaluation impairment exploration impairment impairment impairment impairment exploration exploration 30 June 2013 and the exploration exploration 30 June 2013 and the statement of financial position as at 30 June 2013 and the 30 June 2013 and the 30 June 2013 and the 30 June 2013 and the 30 June 2013 and the 30 June 2013 and the statement of financial position as at statement of financial position as at consolidated statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at statement of financial position as at consolidated consolidated the consolidated consolidated consolidated the statement of profit or loss and other comprehensive consolidated statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive statement of profit or loss and other comprehensive of $2,024,322 recorded in the consolidated consolidated consolidated of $2,024,322 recorded in the consolidated of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the of $2,024,322 recorded in the income for the year then ended. We were unable to obtain sufficient appropriate audit evidence to unable to obtain sufficient appropriate audit evidence to unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence unable to obtain sufficient appropriate audit evidence income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were income for the year then ended. We were capitalised exploration capitalised exploration capitalised exploration capitalised exploration capitalised exploration capitalised exploration capitalised exploration capitalised exploration the capitalised exploration the the recoverable value of the the recoverable value of the recoverable value of as to the appropriateness of the recoverable value of the recoverable value of the recoverable value of the recoverable value of the recoverable value of the recoverable value of as to the appropriateness of as to the appropriateness of satisfy ourselves as to the appropriateness of as to the appropriateness of as to the appropriateness of as to the appropriateness of as to the appropriateness of as to the appropriateness of as to the appropriateness of as to the appropriateness of satisfy ourselves satisfy ourselves satisfy ourselves satisfy ourselves satisfy ourselves due to this limitation Consequently, due to this limitation due to this limitation due to this limitation due to this limitation due to this limitation due to this limitation due to this limitation Consequently, Consequently, Consequently, Consequently, expenditure. Consequently, expenditure expenditure expenditure and evaluation expenditure and evaluation and evaluation and evaluation and evaluation and evaluation necessary. would be necessary. necessary. necessary. would be would be her any adjustments to these amounts would be would be her any adjustments to these amounts her any adjustments to these amounts whether any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts her any adjustments to these amounts whet we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine we were unable to determine Opinion Qualified Opinion Opinion Opinion Qualified Qualified Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph: Opinion paragraph: Opinion paragraph: Opinion paragraph: Opinion paragraph: Opinion paragraph: Opinion paragraph: (a) (a) , is in accordance with the Corporations Act 2001 Corporations Act 2001, Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 is in accordance with the is in accordance with the AVZ Minerals Limited is in accordance with the is in accordance with the is in accordance with the is in accordance with the is in accordance with the is in accordance with the is in accordance with the AVZ Minerals Limited AVZ Minerals Limited report of AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited AVZ Minerals Limited report of report of financial report of financial the financial the financial the including: including: including: including: including: (i) (i) and of its performance for the year ended on that date; and 13 and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and and of its performance for the year ended on that date; and entity’s financial position as at 30 June consolidated entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June entity’s financial position as at 30 June consolidated consolidated giving a true and fair view of the consolidated consolidated consolidated giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the giving a true and fair view of the 20 2013 ; dards and the Corporations Regulations 2001 Corporations Regulations 2001; Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 Corporations Regulations 2001 dards and the dards and the complying with Australian Accounting Standards and the dards and the dards and the complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan complying with Australian Accounting Stan and and (ii) (ii) (b) (b) with International Financial Reporting Standards the financial report also complies with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards with International Financial Reporting Standards the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies the financial report also complies . in Note 1. in Note in Note in Note disclosed as disclosed disclosed disclosed disclosed Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report Report on the Remuneration Report ’ report for the year ended 30 We have audited the Remuneration Report included in the directors ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 ’ report for the year ended 30 We have audited the Remuneration Report included in the directors’ report for the year ended 30 We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors We have audited the Remuneration Report included in the directors June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the . Our Corporations Act 2001. Our . Our Corporations Act 2001 Corporations Act 2001 the Remuneration Report in accordance with section 300A of the Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the the Remuneration Report in accordance with section 300A of the responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. Opinion Opinion Opinion Opinion In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 In our opinion, the Remuneration Report of AVZ Minerals Limited for the year ended 30 June 2013 complies with section 300A of the Corporations Act 2001. complies with section 300A of the Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 Corporations Act 2001 complies with section 300A of the complies with section 300A of the complies with section 300A of the complies with section 300A of the complies with section 300A of the complies with section 300A of the complies with section 300A of the complies with section 300A of the Corporations Act 2001 complies with section 300A of the complies with section 300A of the BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd BDO Audit (WA) Pty Ltd Brad McVeigh Brad McVeigh Brad McVeigh Brad McVeigh Brad McVeigh Director Director Director Perth, Western Australia Perth, Western Australia Perth, Western Australia Perth, Western Australia Perth, Western Australia Perth, Western Australia Perth, Western Australia Perth, Western Australia Perth, Western Australia Dated this 25th Dated this 25 Dated this 25 Dated this 25 Dated this 25 th day of September 2013 day of September 2013 September 2013 September 2013 September 2013 September 2013 day of September 2013 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 AVZ Minerals Limited | 43 Corporate Governance Statement Shareholding The distribution of members and their holdings of equity securities in the holding company as at 24 September 2013 was as follows: Number Held as at 24 September 2013 1- 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Holders of less than a marketable parcel: 251 Class of Equity Securities Fully Paid Ordinary Shares 18 19 62 175 174 448 Substantial Shareholders The names of the substantial shareholders as at 24 September 2013. Shareholder Ranchland Holdings Pty Ltd David Noel Riekie Oakhurst Enterprises Pty Ltd Number 24,051,442 16,365,696 15,371,649 % 7.93 5.39 5.07 Voting Rights - Ordinary Shares In accordance with the holding company's Constitution, on a show of hands every member present in person or by proxy or attorney or duly authorised representative has one vote. On a poll every member present in person or by proxy or attorney or duly authorised representative has one vote for every fully paid ordinary share held. Twenty Largest Shareholders The names of the twenty largest ordinary fully paid shareholders as at 24 September 2013 are as follows: Shareholder Oakhurst Enterprises Pty Ltd Leilani Inv Pty Ltd Ranchland Holdings Pty Ltd Seventy Three Pty Ltd N&J Mitchell Holdings Pty Ltd J & J Brady Nominees Pty Ltd Aviemore Cap Pty Ltd Wilhaja Pty Ltd Merrill Lynch Aust Nom Pty Ltd Symorgh Inv Pty Ltd Blueknight Pty Ltd Talltree Holdings Pty Ltd Talltree Holdings Pty Ltd McTavish Industries Pty Ltd SDG Nominees Pty Ltd < T J Strapp s/f a/c> Ardlussa Pty Ltd < V & V Pendal s/f a/c> Zero Nominees Pty Ltd Syncopated Pty Ltd Symington Pty Ltd N&J Mitchell Holdings Pty Ltd Number % Held of Issued Ordinary Capital 15,371,649 15,066,957 14,426,442 11,920,308 11,371,649 11,120,308 8,994,638 8,228,814 7,717,598 7,140,000 7,000,000 7,000,000 6,500,000 5,640,000 5,250,000 5,250,000 4,540,000 4,371,649 3,583,332 3,476,832 163,970,176 5.07% 4.97% 4.75% 3.93% 3.75% 3.67% 2.96% 2.71% 2.54% 2.35% 2.31% 2.31% 2.14% 1.86% 1.73% 1.73% 1.50% 1.44% 1.18% 1.15% 54.05% AVZ Minerals Limited | 44 Corporate Governance Statement Corporate Governance The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve the Company has turned to the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. The Company is pleased to advise that the Company’s practices are largely consistent with those ASX guidelines. As consistency with the guidelines has been a gradual process, where the Company did not have certain policies or committees recommended by the ASX Corporate Governance Council (the Council) in place during the reporting period, we have identified such policies or committees. Where the Company’s corporate governance practices do not correlate with the practices recommended by the Council, the Company is working towards compliance however it does not consider that all the practices are appropriate for the Company due to the size and scale of Company operations. To illustrate where the Company has addressed each of the Council’s recommendations, the following table cross-references each recommendation with sections of this report. The table does not provide the full text of each recommendation but rather the topic covered. Recommendation Recommendation 1.1 Functions of the Board and Management Section 1.1 Recommendation 1.2 Executives Evaluation of Board, Directors and Key 1.4.10 Recommendation 1.3 Reporting on Principle 1 Recommendation 2.1 Independent Directors Recommendation 2.2 Independent Chairman Recommendation 2.3 Role of the Chairman and CEO 1.1 and 1.4.10 1.2 and 1.3 1.2 and 1.3 1.2 and 1.3 Recommendation 2.4 Establishment of Nomination Committee 2.3 Recommendation 2.5 Evaluation of Board, Committees and Directors 1.4.10 Recommendation 2.6 Reporting on Principle 2 1.2, 1.4.6, 1.4.10, 2.3.1 and the Directors’ Report Recommendation 3.1 Code of Conduct Recommendation 3.2 Disclosure of Diversity 4 3.2 Recommendation 3.3 Reporting on Principle 3 1.1 and 1.4.9, 3 Recommendation 4.1 Establishment of Audit Committee Recommendation 4.2 Structure of Audit Committee Recommendation 4.3 Audit Committee Charter Recommendation 4.4 Reporting on Principle 4 2.1 2.1.1 2.1 2.1 Recommendation 5.1 Disclosure Policy for Compliance with Continuous 1.4.4 Recommendation 5.2 Reporting on Principle 5 Recommendation 6.1 Communications Strategy Recommendation 6.2 Reporting on Principle 6 Recommendation 7.1 Policies on Risk Oversight and Management Recommendation 7.2 Managing and Implementing Risk Management Recommendation 7.3 Attestations by CEO and CFO Recommendation 7.4 Reporting on Principle 7 Recommendation 8.1 Establishment of Remuneration Committee 1.4.4 1.4.8 1.4.8 2.1.3 2.1.3 2.1.3 2.1.3 2.2 Recommendation 8.2 Remuneration Executive and Non-Executive Director 2.2.3.1 and 2.2.3.2 Recommendation 8.3 Reporting on Principle 8 1.2, 2.2.1 and 2.2.3.2 AVZ Minerals Limited | 45 Corporate Governance Statement 1. Board of Directors Role of the Board 1.1 In governing the Company, the The Board’s role is to govern the Company rather than to manage it. Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties. In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board has the final responsibility for the successful operations of the Company. To assist the Board carry out its functions, the Company has adopted a Charter. A copy is available for inspection on the Company’s website. Composition of the Board 1.2 To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations. The names of the Directors and their qualifications and experience are stated in the Directors’ Report along with the term of office held by each of the Directors. Directors are appointed based on the specific skills required by the Company and on their decision-making and judgment skills. The Company recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can offer. An Independent Director is a Non-Executive Director and:  is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;  within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment;    within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member. Or an employee materially associated with the service provided; is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; has no material contractual relationship with the Company or other group member other than as a Director of the Company; has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company; and is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.   Material is defined as being where the relationship accounts for more than five percent of consolidated gross expenditure per annum of the Company. The Company currently does not have a majority of the Board independent. The Board currently comprises of three two non-independent Directors. Due to the size of the Company and the experience of the Directors, the Company believes that the current composition of the Board remains appropriate. Responsibilities of the Board 1.3 In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company. AVZ Minerals Limited | 46 Corporate Governance Statement Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following.    Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the Company and guide the conduct of the Board. Strategy Formulation: that there are policies in place to govern the operation of the Company. to set and review the overall strategy and goals for the Company and ensuring the development of the Company’s strategic plan.  Overseeing Planning Activities:  Shareholder Liaison: communications policy and promoting participation at general meetings of the Company. ensuring effective communications with shareholders through an appropriate  Monitoring, Compliance and Risk Management: the development of the Company’s risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company. Company Finances: approving expenses and approving and monitoring acquisitions, divestitures and financial and other reporting.   Human Resources: appointing, and, where appropriate, removing the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) as well as reviewing the performance of the CEO and monitoring the performance of senior management in their implementation of the Company’s strategy. in conjunction with the senior management Ensuring the Health, Safety and Well-Being of Employees: team, developing, overseeing and reviewing the effectiveness of the Company’s occupational health and safety systems to ensure the well-being of all employees.   Delegation of Authority: delegating appropriate powers to the CEO to ensure the effective day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board. Full details of the Board’s role and responsibilities are contained in the Board Charter, a copy of which is available for inspection on the Company’s website. 1.4 Board Policies 1.4.1 Conflicts of Interest Directors must:  disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Company; and if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest.  If a Director cannot or is unwilling to remove a conflict of interest then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the conflict relates. 1.4.2 Commitments Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company. Board Policies (continued) 1.4 1.4.3 Confidentiality In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company have agreed to keep confidential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated. 1.4.4 Continuous Disclosure The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the ASX Listing Rules the Company immediately notifies the ASX of information: AVZ Minerals Limited | 47 Corporate Governance Statement 1. Board of Directors (continued)   concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities; and that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities. The Company has a Continuous Disclosure Policy which is available for inspection on the Company’s website. Information conveyed to new Directors include: 1.4.5 Education and Induction It is the policy of the Company that new Directors undergo an induction process in which they are given a full briefing on the Company. Where possible this includes meetings with key executives, tours of the premises, an induction package and presentations.          details of the roles and responsibilities of a Director; formal policies on Director appointment as well as conduct and contribution expectations; access to a copy of the Board Charter; guidelines on how the Board processes function; details of past, recent and likely future developments relating to the Board; background information on and contact information for key people in the organisation; an analysis of the Company; a synopsis of the current strategic direction of the Company; and a copy of the Constitution of the Company. In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifically, Directors are provided with the resources and training to address skills gaps where they are identified. 1.4.6 Independent Professional Advice The Board collectively and each Director has the right to seek independent professional advice at the Company’s expense, to assist them to carry out their responsibilities. 1.4.7 Related Party Transactions Related party transactions include any financial transaction between a Director and the Company. Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction. 1.4.8 Shareholder Communication The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is committed to:  communicating effectively with shareholders through releases to the market via ASX, information mailed to shareholders and the general meetings of the Company; giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;   making it easy for shareholders to participate in general meetings of the Company; and  requesting 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. The Company also makes available a telephone number and email address for shareholders to make enquiries of the Company. The Company has a Shareholder Communication Policy which is available for inspection on the Company’s website. AVZ Minerals Limited | 48 Corporate Governance Statement 1. Board of Directors (continued) Board Policies (continued) 1.4 1.4.9 Trading in Company Shares The Company has had a formal Share Trading Policy in place since May 2007 and subsequently reviewed and updated in December 2010. A copy of the policy is available for inspection on the Company’s website. 1.4.10 Performance Review/Evaluation It is the policy of the Board to conduct annual evaluations of its effectiveness and that of individual Directors. Each Directors performance is appraised personally by the Chairman and in a meeting led by the other independent Director, the Chairman’s performance is assessed. The evaluation process in the current year was overseen by the Chairman. The evaluation process of the The Chairman was led by the other independent Director in conjunction with the Managing Director. objective of this evaluation is to provide best practice corporate governance to the Company. 2. Board Committees Audit Committee 2.1 Due to the size and scale of operations of the Company the full Board undertakes the role of the Audit Committee. As the full Board undertakes the role of the Audit Committee, no formal Charter has been adopted however below is a summary of the role and responsibilities of an Audit Committee. 2.1.1 Role The Audit Committee is responsible for reviewing the integrity of the Company’s financial reporting and overseeing the independence of the external auditors. As the whole Board only consists of three (3) members, the Company does not have an audit committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues and an audit committee cannot be justified based on a cost-benefit analysis. However, in accordance with the ASX Listing Rules, the Company is moving towards establishing an audit committee consisting primarily of Independent Directors. In the absence of an audit committee, the Board sets aside time to deal with issues and responsibilities usually delegated to the audit committee to ensure the integrity of the financial statements of the Company and the independence of the external auditor. 2.1.2 Responsibilities The Audit Committee reviews the audited annual and half-yearly financial statements and any reports which accompany published financial statements and recommends their approval to the members. The Audit Committee each year reviews the appointment of the external auditor, their independence, the audit fee, and any questions of resignation or dismissal. The Audit Committee or is also responsible for establishing policies on risk oversight and management. 2.1.3 Risk Management Policies The Board’s Charter clearly establishes that it is responsible for ensuring there is a good sound system for overseeing and managing risk. Due to the size and scale of operations, risk management issues are considered by the Board as a whole. AVZ Minerals Limited | 49 Corporate Governance Statement 2. Board Committees (continued) A risk management plan has been developed and implemented by AVZ. The plan provides a framework for systematically understanding and identifying the types of business risks threatening AVZ as whole and specific business activities within the Company. A risk register has been developed through the implementation and review of the risk management plan which has identified material business risk of the Company. The risk register also provides the controls in place to mitigate the material business risks and management’s assessment of residual risk. The board believes that it has a thorough understanding of the Company’s key risks and is managing them appropriately. The board is responsible for reviewing annually its risk management system. This includes reviewing operational, financial, compliance, systems and risk management procedures. The directors confirm they have completed their annual review for the 2012 financial year. A copy of the company’s risk management statement is available from the corporate governance section of the company’s website. 2.1.3 Risk Management Policies (continued) Mr David Riekie (Non-Executive Director) and Mr Gary Steinepreis (Company Secretary) provided the Board with a declaration in accordance with S295A of the Corporations Act that the financial statements are founded on a sound system of risk management and internal compliance. Their statement assured the Board that the risk management and internal compliance and control system is operating efficiently and effectively in all material respects. Remuneration Committee 2.2 2.2.1 Role The role of a Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees. As the whole Board only consists of three (3) members, the Company does not have a remuneration committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues. As the full Board undertakes the role of the Remuneration Committee, no formal Charter has been adopted however below is a summary of the role and responsibilities of a Remuneration Committee. 2.2.2 Responsibilities The responsibilities of a Remuneration Committee, or the full Board include setting policies for senior officers’ remuneration, setting the terms and conditions of employment for the Chief Executive Officer, reviewing and making recommendations to the Board on the Company’s incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors and making recommendations on any proposed changes and undertaking reviews of the Chief Executive Officer’s performance, including, setting with the Chief Executive Officer goals and reviewing progress in achieving those goals. 2.2.3 Remuneration Policy Directors’ Remuneration was approved by resolution of the Board on 25 August 2010, however the Board has implemented reduced fee base. 2.2.3.1 Senior Executive Remuneration Policy The Company is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:  fixed salary that is determined from a review of the market and reflects core performance requirements and expectations; a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;  AVZ Minerals Limited | 50 Corporate Governance Statement 2.Board Committees (continued)   participation in any share/option scheme with thresholds approved by shareholders; statutory superannuation. By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance. The value of shares and options granted to senior executives are calculated using the Black and Scholes method. The objective behind using this remuneration structure is to drive improved Company performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders. The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments. 2.2.3.2 Non-Executive Director Remuneration Policy Non-Executive Directors are to be paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance based bonuses however they do participate in option schemes. Non-Executive Directors are entitled to but not necessarily paid statutory superannuation. Non-Executive Directors are not provided with any retirement benefits other than superannuation. 2.2.4 Current Director Remuneration Full details regarding the remuneration of Directors, is included in the Directors’ Report. Nomination Committee 2.3 2.3.1 Role The role of a Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills and diversity are present in Directors on the Board at all times. As the whole Board only consists of three (3) members, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues. As the full Board undertakes the role of the Nomination Committee, no formal Charter has been adopted however below is a summary of the role and responsibilities of a Nomination Committee. The Company has adopted a Diversity Policy and is available for inspection on the Company’s website. 2.3.2 Responsibilities The responsibilities of a Nomination Committee would include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board. The Nomination Committee would also oversee management succession plans including the CEO and his/her direct reports and evaluate the Board’s performance and make recommendations for the appointment and removal of Directors. Currently the Board as a whole performs this role. 2.3.3 Criteria for selection of Directors Directors are appointed based on the specific governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least one Director with experience appropriate to the Company’s target market. In addition, Directors should have the relevant blend of personal experience in accounting and financial management and Director-level business experience. AVZ Minerals Limited | 51 Corporate Governance Statement Diversity Diversity and inclusion 3. 3.1 AVZ and all its related bodies corporate are committed to workplace diversity in relation to genders, age, ethnicity and background. The Company recognises the benefits arising from employee and Board diversity, including a broader pool of high quality employees, improving employee retention, accessing different perspectives and ideas and benefiting from all available talent. Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. Diversity Policy 3.2 The Company has developed a Diversity Policy during the current period which was formally adopted in June 2012. A copy of the policy is available for inspection on the Company’s website. 3.3 Measurable Objectives for Gender Diversity Due to the size and nature of the company’s operations, AVZ has yet to establish measurable objectives for gender diversity. Proportion of women employees and board members 3.4 As at 30 June 2012, the proportion of women on the Board and in senior management positions was nil. The proportion of women in our workplace was 0%. Company Code of Conduct 4. The Company has had a formal Code of Conduct which provides guidelines aimed at maintaining high ethical standards, corporate behaviour and accountability within the Company. A copy of the Code of Conduct is available for inspection on the Company’s website. AVZ Minerals Limited | 52 Schedule of Mineral Tenements As at 25 September 2013 Tenement Interest EPL 4126 EPL 4127 EPL 4128 EPL 4125 EPL 4129 EPL 4339 EPL 4416 EPL 4436 EPL 4437 EPL 4438 EPL 4439 EPL 4440 EPL 4286 EPL 4283 EPL 4284 EPL 4285 EPL 4788 EPL 4624 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% Status Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted (renewal lodged) Pending Pending Pending Pending Granted Project Hoarusib Paresis Hammerhead/Thresher Abenab Tumba Himba Brandberg Key EPL: Exploration Licence AVZ Minerals Limited | 53

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