Brockman Mining Limited
Annual Report 2015

Plain-text annual report

BROCKMAN MINING LIMITED 布萊克萬礦業有限公司ANNUAL REPORT 2015CONTENTS ANNUAL REPORT 2015 Corporate Information ............................................................................................................................................... Chairman’s Message .................................................................................................................................................. Management Discussion and Analysis ...................................................................................................................... Directors and Management ...................................................................................................................................... Corporate Governance Report ................................................................................................................................. Directors’ Report ......................................................................................................................................................... Independent Auditor’s Report ................................................................................................................................... Consolidated Statement of Comprehensive Income ............................................................................................. Consolidated Balance Sheet ..................................................................................................................................... Balance Sheet ............................................................................................................................................................. Consolidated Statement of Changes in Equity ........................................................................................................ Consolidated Statement of Cash Flows .................................................................................................................... Notes to the Consolidated Financial Statements .................................................................................................... Financial Summary ...................................................................................................................................................... ASX Additional Information ........................................................................................................................................ 2 3 4 14 17 31 37 39 41 42 43 45 46 87 88 1 CORPORATE INFORMATION BOARD OF DIRECTORS Non-executive Directors Kwai Sze Hoi (Chairman) Liu Zhengui (Vice Chairman) Ross Stewart Norgard Executive Directors Chan Kam Kwan, Jason (Company Secretary) Kwai Kwun, Lawrence Colin Paterson (Appointed on 25 February 2015) Independent Non-executive Directors Uwe Henke Von Parpart Yip Kwok Cheung, Danny Yap Fat Suan, Henry Choi Yue Chun, Eugene COMPANY SECRETARY Chan Kam Kwan, Jason AUDITOR PricewaterhouseCoopers Certified Public Accountants REGISTERED OFFICE (BERMUDA) Clarendon House 2 Church Street Hamilton HM11 Bermuda PRINCIPAL PLACE OF BUSINESS IN HONG KONG Suites 3812–13, 38/F Two International Finance Centre, 8 Finance Street, Central, Hong Kong T: 852 3978 2800 F: 852 3978 2818 PRINCIPAL PLACE OF BUSINESS IN AUSTRALIA Level 2, 56 Ord Street, West Perth T: +61 8 9389 3000 F: +61 8 9389 3033 PRINCIPAL SHARE REGISTRARS AND TRANSFER OFFICE MUFG Fund Services (Bermuda) Limited The Belvedere Building, 69 Pitts Bay Road, Pembroke HM08, Bermuda BRANCH SHARE REGISTRARS AND TRANSFER OFFICE IN HONG KONG Tricor Secretaries Limited Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong BRANCH SHARE REGISTRARS AND TRANSFER OFFICE IN AUSTRALIA Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace, PERTH WA 6000 PRINCIPAL BANKER Australia and New Zealand Banking Group Limited Hang Seng Bank Limited Standard Chartered Bank (Hong Kong) Limited Bank of Communications Westpac Banking Corporation WEBSITE www.brockmanmining.com www.irasia.com/listco/hk/brockmanmining STOCK CODE 159 (Main Board of The Stock Exchange of Hong Kong Limited) BCK (Australian Securities Exchange) CHAIRMAN’S MESSAGE ANNUAL REPORT 2015 Dear Shareholders, The year 2015 is a tough year for the mining industry. Global economic uncertainty and the plummet of iron ore prices cast a shadow over the whole iron ore industry including Australia. Iron ore prices saw the steepest plunge during the year, dropping from US$96 to US$51 per tonne. Such adverse market and industry condition led to a significant impact on the value of Brockman’s iron ore assets. The sustained low iron ore prices served as a trigger to the significant non-cash impairment of our iron ore mining assets for the year. In light of such adversity, Brockman has achieved a significant cost- saving with the streamlining of operational staffs. Our goal is to maintain our cash position and maximize cash reserves to winter over the harsh environment. Brockman’s copper mine operation was also disrupted due to the impact of the sustained decrease in copper prices. Despite our effort in lowering per unit cost of production, the rapid fall in copper prices has offset profit margin and led to a significant impairment for the copper mine in the PRC. We have implemented a stringent cost control strategy for this business segment minimizing cash outflow for the company. Whilst we are operating with minimal spend, the company is still striving its very best to pursue for a viable infrastructure solution. It was not all doom and gloom as Brockman is utilizing its sizable iron ore reserves to pursue infrastructure solutions and cooperation. Once an infrastructure solution is secured, the value for Brockman will increase tremendously. This year, Brockman has achieved a significant milestone in such — its Access Proposal to a third party rail was held valid by Justice Edelman. Delighted with the successful Supreme Court decision, Brockman will strive its best to progress rail access process in accordance with the Western Australia rail access regime. Brockman has also commenced exploring for other infrastructure alternatives with other counterparties. Brockman will notify shareholders in due course should there be further progress towards the negotiations. L o o k i n g a h e a d , a l t h o u g h t h e g l o b a l e c o n o m i c environment seemed unstable, the infrastructure solutions for Brockman remains optimistic. We foresee that the “One Belt One Road” strategy for China will definitely give a boost to the demand of iron ore in the coming future. I hereby express my heartfelt thanks to all shareholders, investors and employees of the Company for their genuine support. Kwai Sze Hoi Chairman 30 September 2015 3 MANAGEMENT DISCUSSION AND ANALYSIS IRON ORE OPERATIONS — WESTERN AUSTRALIA This segment of the business is comprised of the 100% owned Marillana Iron Ore Project (“Marillana”or “the P r o j e c t ” ) , t h e O p h t h a l m i a I r o n O r e P r o j e c t ( “ O p h t h a l m i a ” ) a n d o t h e r r e g i o n a l e x p l o r a t i o n projects. The net operating loss before income tax expense for the year for this segment and attributable to the Group was HK$1,326.3 million (2014: HK$90.2 million). Total expenditure associated with mineral exploration for the year ended 30 June 2015 amounted to HK$60.6 million (2014: HK$75.1 million). Project Marillana Ophthalmia Total capital expenditures for each of the projects in Western Australia for the financial periods were summarised as follows: Year ended 30 June 2015 HK$’000 2014 HK$’000 Addition to property, plant and equipment 252 – 252 Addition to mining properties – – – Addition to property, plant and equipment 31 487 518 Addition to mining properties – 141 141 Total expenditure associated with mineral exploration and evaluation by each of the projects in Western Australia for the financial periods were summarised as follows: Project Marillana Ophthalmia West Pilbara Year ended 30 June 2015 HK$’000 24,357 28,494 7,789 60,640 2014 HK$’000 11,330 54,153 9,611 75,094 The Group is yet to make a final investment decision toward commencing development of any of its iron ore projects in Western Australia. Accordingly, no development expenditures have been recognised in the financial statements during the year ended 30 June 2015 (year ended 30 June 2014: Nil). Impairment Loss The recent volatility of iron ore price and material reductions in long term iron ore price forecasts during the year are considered to be impairment indicators which triggered the need to perform an impairment assessment. Based on the assessment, an impairment of approximately HK$1,216,618,000 was recognised for the year (2014: Nil). The impairment reduces the deferred income tax liability brought to account following the business combination relating to the value attributed to the mining properties acquired. The reduction in the deferred income tax liability as a result of the impairment is HK$364,986,000 (2014: Nil). Marillana Iron Ore Project Overview The 100% owned Marillana Iron Ore Project (“Marillana” or “the Project”) is Brockman’s flagship project located in the Hamersley Iron Province within the Pilbara region of Western Australia, approximately 100 km north-west of the township of Newman. The Project is located within mining lease M47/1414. T h e P r o j e c t a r e a c o v e r s 8 2 k m 2 b o r d e r i n g t h e Hamersley Range, where extensive areas of supergene iron ore mineralisation, source of the hematite detrital mineralisation at Marillana, have developed within the dissected Brockman Iron Formation that caps the Range. The ultimate delivery of Marillana’s first commercial production is dependent upon securing, funding, and developing suitable rail and port infrastructure. The Company will provide guidance on the timing for delivery of the Project once the infrastructure solution is secured. ANNUAL REPORT 2015 Figure 1: Project location map — Brockman tenements RAIL AND PORT ACCESS AND INFRASTRUCTURE The key to unlocking the value of the Group’s highly prospective iron ore mineral tenements relies on securing a rail and port infrastructure solution and funding. The Company continues to actively pursue various infrastructure alternatives. Rail Access In May 2013, Brockman commenced seeking access rights to The Pilbara Infrastructure Pty Ltd’s (“TPI’s”) below-rail infrastructure under the Western Australian Railways (Access) Code 2000 (WA) (“Code”), to allow it to haul up to 20 Mtpa of hematite iron ore product from its Marillana Project, for a term of 20 years (“Access Proposal”). The access sought proposed to exit the TPI mainline at Port Hedland where North West Infrastructure (“NWI”) has a capacity allocation of 50 Mtpa at the proposed SP3 and the SP4 berths for iron ore export from South West Creek in the Inner Harbour. As part of the Access Proposal Brockman will procure the necessary spur lines and associated infrastructure to connect Marillana with the TPI railway and to connect it to the proposed NWI facilities in Port Hedland, which will include unloading, stockpiling and ship loading facilities in South West Creek, Port Hedland. On 4 October 2013, TPI commenced proceedings in the WA Supreme Court challenging the validity of the Access Proposal. The trial was held in August 2014 and on 26 September 2014 the Honorable Justice James Edelman handed down his decision, which supported Brockman’s position finding that the Access Proposal was valid and complied with the requirements of s 8 of the Access Code. TPI’s action was wholly dismissed, with TPI ordered to pay Brockman’s costs of the action. TPI have appealed this decision and that appeal was heard in late August, 2015, and the finding is expected to be handed down soon. As part of the decision by Justice Edelman, the ERA w a s r e q u i r e d t o r e v i e w t h e c o n s i d e r a t i o n o f ‘contingencies’ and ‘asset lives’ for the purposes of the calculation of GRV which is a primary input into the determination of the Floor and Ceiling Costs. The ERA published a remade determination of the Floor and C e i l i n g C o s t s i n J a n u a r y 2 0 1 5 . T h e r e m a d e determination is similar to the earlier determination of Floor and Ceiling Costs. Following the successful Supreme Court decision, Brockman has continued to progress the required information for the Access Proposal under sections 14 ( f i n a n c i a l a n d m a n a g e r i a l c a p a b i l i t y ) a n d 1 5 (capacity) of the Code. 5 MANAGEMENT DISCUSSION AND ANALYSIS North West Infrastructure Brockman, as a foundation member of the North West Infrastructure joint venture (NWI), has a potential port s o l u t i o n t h r o u g h t h e W e s t e r n A u s t r a l i a n S t a t e Government conferral of 50Mtpa export capacity to NWI and the related potential port stock yards and berth locations (SP3 and SP4 in South West Creek in the Port Hedland inner harbour) set aside by the Pilbara Ports Authority. The NWI opportunity is reliant on securing a viable rail solution to connect potential users mines with the port. Approvals The Project, including the entire deposit and all proposed infrastructure areas, is contained within the granted Mining Lease M47/1414 over an area of 82.5 km2. All required environmental baseline and impact assessment studies and cultural heritage surveys have been completed and key State and Commonwealth environmental approvals have been received for the Project. The remaining secondary approvals will be obtained in parallel with the completion of the updated DFS. NWI has completed a cost review and reduced outflows during this market cycle awaiting resolution of the rail solution. Brockman remains focussed on protecting its foundation shareholding position in NWI and remains vigilant to the opportunity for other aspirant Pilbara based junior developers and miners to support the future port development. MINE DEVELOPMENT Feasibility Study Brockman has invested in a number of feasibility and s u b s i d i a r y s t u d i e s o n t h e M a r i l l a n a P r o j e c t , i n conjunction with ongoing resource development, metallurgical test work and approvals processes. These studies include: 1. 2. 3. Scoping Study in 2007–2008; Preliminary Feasibility Study (“PFS”) in 2009; and Definitive Feasibility Study (“DFS”) in 2010. The project studies have been advanced ahead of resolution of an infrastructure solution. Consequently, Brockman’s current focus is almost entirely on resolving the rail solution for Marillana and advancing the NWI port solution towards its development decision. Upon finalising a rail solution, Brockman will complete an updated DFS to a bankable standard in conjunction with relevant rail and port studies, to support the final investment decision and project financing. Brockman has also focussed its efforts on optimisation studies for the Marillana project. The current economic climate has presented cost saving opportunities and the project team is investigating the likely beneficial impa ct on p revious ca pi tal a nd opera ti ng cost estimates for the Marillana project under the existing c o s t e n v i r o n m e n t , i n r e a d i n e s s f o r w h e n a n infrastructure solution is secured. The Company is also re-evaluating the mine plan to reduce haul distances, increase product yields in the early mine life and minimise rehandling of waste materials, all of which is anticipated to have a positive impact on mining costs. METALLURGY During the year, limited dust extinction moisture testwork was conducted on Marillana iron ore fines. In addition an internal review was conducted on the mass and iron recovery for the -45 and +32 run of mine size fractions. The results of these studies indicated that it was not cost effective to recover these size fractions. RESOURCES AND RESERVES Brockman reports its Mineral Resources and Ore Reserves on an annual basis, in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) 2012 Edition, unless otherwise noted. Mineral Resources are quoted inclusive of Ore Reserves. This information on Resources and Reserves for the Marillana Project was prepared and first disclosed u n d e r g u i d e l i n e s o f t h e 2 0 0 4 E d i t i o n o f t h e “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (the “JORC Code 2004”). It has not been updated since to comply w i t h t h e “ A u s t r a l a s i a n C o d e f o r R e p o r t i n g o f E x p l o r a t i o n R e s u l t s , M i n e r a l R e s o u r c e s a n d O r e Reserves” (the “JORC Code 2012”) on the basis that the information has not materially changed since it was last reported. Marillana has a significant Mineral Resource estimate of 1.63 billion tonnes (“Bt”) of hematite Detrital and Channel Iron (“CID”) mineralisation, comprising 173 million tonnes (“Mt”) of Measured Mineral Resources, 1,238 Mt of Indicated Mineral Resources and 219 Mt of Inferred Mineral Resources (see Tables 1 and 2). In accordance with the requirements of the JORC Code 2004, the Marillana Ore Reserves are based solely on the Measured and Indicated Mineral Resources at Marillana. The 201 Mt of Inferred Mineral Resources (Non CID) is based on wide-spaced drilling to the north of the Indicated Mineral Resource boundary, which has demonstrated continuity of the detrital mineralisation in this area. In addition the mineralisation remains open to the north of the Inferred Mineral Resource boundary. ANNUAL REPORT 2015 Table 1: Beneficiation Feed Mineral Resource Summary (cut-off grade: 38% Fe) Mineralisation type Detrital Pisolite Total Resource classification Measured Indicated Inferred Indicated Measured Indicated Inferred GRAND TOTAL Total tonnes may not add up, due to rounding Table 2: Marillana Project CID Mineral Resource Summary (cut-off grade: 52% Fe) Tonnes (Mt) 173 1,036 201 117 173 1,154 201 1,528 Grade (% Fe) 41.6 42.5 40.7 47.4 41.6 43.0 40.7 42.6 Resource classification Indicated Inferred TOTAL Tonnes (Mt) 84.2 17.7 101.9 Fe (%) 55.8 54.4 55.6 CaFe (%) 61.9 60.0 61.5 AI2O3 (%) 3.6 4.3 3.7 SiO2 (%) 5.0 6.6 5.3 P (%) 0.097 0.080 0.094 LOI (%) 9.8 9.3 9.7 CaFe represents calcined Fe and is calculated by Brockman using the formula CaFe = Fe%/((100- LOI)/100) Table 3: Marillana Detrital Ore Reserves* Reserve classification Proved Probable TOTAL * Reserves are included within Resources Table 4: Marillana CID Ore Reserves* Tonnes (Mt) 133 868 1,001 Fe (%) 41.6 42.5 42.4 Reserve classification Probable TOTAL Tonnes (Mt) 48.5 48.5 Fe (%) 55.5 55.5 CaFe (%) 61.5 61.5 AI2O3 (%) 5.3 5.3 SiO2 (%) 3.7 3.7 P (%) 0.09 0.09 LOI (%) 9.7 9.7 * Reserves are included within Resources Based on extensive beneficiation testwork, the Detrital Ore Reserves are expected to produce 378 Mt of final product grading 60.5–61.5% Fe with impurity levels comparable with other West Australian direct shipping hematite ore (“DSO”) iron ore products. The CID Ore is a DSO product which would be prepared for export as a separate product. The Marillana Project is estimated to produce in excess of 426 Mt of export product (beneficiated detritals plus CID). Metallurgical testwork, undertaken since publication of the Ore Reserve, investigated improvement in the product yield from beneficiation feed by recovering additional -1 mm fines material at +60% Fe, could add a further 30 Mt of total product over the life of the mine. This material was considered as waste in the earlier studies. This represents one of the largest published hematite Ore Reserve positions in the Pilbara, outside the three major producers (BHPB, Rio and FMG). The Detrital Ore is upgraded to a high-quality, sinter feed product via simple beneficiation, which is supported by low-cost mining, low waste ore ratios and large continuous ore zones. Based on existing Resources and Reserves, the Project will support over 20 years of mining operations, producing at a forecast production rate of up to 20 Mtpa of beneficiated iron ore grading from 60.5–61.5% Fe. 7 MANAGEMENT DISCUSSION AND ANALYSIS The Mineral Resource and Reserve estimation (see Tables 1 to 4) was prepared by Golder Associates Pty Ltd and has been classified in accordance with the guidelines of the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. It has been estimated within geological boundaries using a 38% Fe cut-off grade for beneficiation feed mineralisation and a 52% Fe cut-off grade for CID mineralisation. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. There has been no c h a n g e i n t h e M a r i l l a n a R e s o u r c e a n d R e s e r v e estimates during the year. OPHTHALMIA PROJECT Overview The 100% owned Ophthalmia Iron Ore Project, located north of Newman in the East Pilbara region of Western Australia, is the most significant iron ore project for the company outside of its flagship Marillana Project. Since the discovery of significant occurrences of bedded hematite mineralisation by field reconnaissance mapping and surface sampling in August 2011, major exploration drilling programmes have been completed and JORC-compliant Mineral Resources have been estimated and reported for the Sirius, Coondiner, and Kalgan Creek deposits. The total Mineral Resources at Ophthalmia now stand at 341 Mt grading 59.3% Fe. (Table 5) Figure 2: Location of Ophthalmia Prospects ANNUAL REPORT 2015 Approvals I n M a y , t h e C o m p a n y e x e c u t e d a N a t i v e T i t l e Agreement with the Nyiyaparli people covering all tenements comprising the Ophthalmia Iron Ore Project. The agreement was based on the existing agreement with the Nyiyaparli people covering the Marillana Iron O r e P r o j e c t ( s i g n e d i n 2 0 0 9 ) a n d t a k e s i n t o consideration the Nyiyaparli people’s interests with regard to the management of Cultural Heritage and Protection of the lands and environment at the Ophthalmia Project, as well as providing education and training opportunities for the local Nyiyaparli people. The signing of this agreement paves the way for the granting of mining leases over the project area once Brockman has established an infrastructure solution to facilitate development of the project. Feasibility Study The upgraded Mineral Resources and the excellent conversion from Inferred to Indicated Resources support the development of a DSO mining operation at Ophthalmia, predicated on the Company achieving a rail and port infrastructure solution for the Marillana Project. During the year, Brockman commenced a Pre- Feasibility Study (PFS) into the Ophthalmia project but this has been suspended pending the securing of an infrastructure solution for the Company’s Marillana project. Mineral Resources Based on extensive reverse circulation and diamond drilling programmes carried out in 2011, 2012, and 2013, Brockman has developed Indicated and Inferred Mineral Resource estimates for the Kalgan Creek, Sirius and Coondiner Deposits. The Mineral Resource at the Coondiner and Kalgan Creek Deposit was upgraded in December 2014, and significantly, 280 Mt of the total resource is now classified as Indicated Resources, whereas the remaining 61 Mt of the total resource is in the Inferred Resources category. The upgraded Mineral Resource estimate for the Coondiner and Kalgan Creek Deposits during the year was prepared by Golder Associates Pty Ltd and it has incorporated the results of an additional 193 infill and extension RC drill holes (13,627m) completed in 2013 and 2014. The resource estimate was classified in a c c o r d a n c e w i t h g u i d e l i n e s p r o v i d e d i n t h e Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012). Refer ASX Announcement on 1 December 2014. Table 5: Ophthalmia DSO Mineral Resource Summary Deposit Kalgan Creek1 Coondiner1 (Pallas and Castor) Sirius Class Indicated Inferred Sub Total Indicated Inferred Sub Total Indicated Inferred Sub Total Indicated Ophthalmia Project Inferred Total Tonnes (Mt) 34.9 24.4 59.3 140.5 17.1 157.6 105.0 19.0 124.0 280.4 60.5 340.9 Fe (%) 59.3 59.5 59.4 58.5 58.1 58.4 60.4 60.2 60.3 59.3 59.3 59.3 30 June 2015 CaFe* (%) 62.7 63.2 62.9 62.0 61.5 62.0 63.7 63.4 63.6 62.7 62.8 62.7 SiO2 (%) 4.08 4.38 4.21 5.18 6.06 5.27 3.54 4.09 3.62 4.43 4.76 4.49 Al2O3 (%) 4.57 3.90 4.29 4.46 4.45 4.46 3.97 3.83 3.95 4.29 4.03 4.24 S (%) 0.009 0.007 0.009 0.007 0.008 0.007 0.007 0.009 0.007 0.007 0.008 0.007 P (%) 0.183 0.157 0.173 0.176 0.155 0.174 0.18 0.17 0.18 0.178 0.160 0.175 LOI (%) 5.49 5.81 5.63 5.71 5.47 5.68 5.22 5.14 5.20 5.50 5.50 5.50 Class Indicated Inferred Sub Total Indicated Inferred Sub Total Indicated Inferred Sub Total Indicated Inferred Total Tonnes (Mt) 12.5 39.7 52.1 82.5 46.4 128.9 105.0 19.0 124.0 200.0 105.1 305.0 Fe (%) 59.3 59.1 59.1 58.1 58.7 58.3 60.4 60.2 60.3 59.4 59.1 59.3 30 June 2014 CaFe* (%) 62.6 62.6 62.6 61.7 62.1 61.8 63.7 63.4 63.6 62.8 62.5 62.7 SiO2 (%) 4.02 4.53 4.41 5.61 5.37 5.52 3.54 4.09 3.62 4.42 4.82 4.56 Al2O3 (%) 4.79 4.55 4.60 4.48 4.40 4.45 3.97 3.83 3.95 4.23 4.35 4.27 S (%) 0.007 0.005 0.006 0.008 0.006 0.008 0.007 0.009 0.007 0.007 0.006 0.007 P (%) 0.20 0.17 0.18 0.17 0.18 0.17 0.18 0.17 0.18 0.18 0.17 0.17 LOI (%) 5.41 5.56 5.52 5.76 5.44 5.64 5.22 5.14 5.20 5.45 5.43 5.45 * CaFe represents calcined Fe and is calculated by Brockman using the formula CaFe = Fe%/((100-LOI)/100) Total tonnes may not add due to rounding 9 MANAGEMENT DISCUSSION AND ANALYSIS WEST PILBARA PROJECT Overview The West Pilbara Project comprises a number of exploration tenements (Duck Creek, West Hamersley and Mt Stuart) over a 30 km radius and located about 110–150 km WNW of Paraburdoo in the West Pilbara region. (Refer Figure 1) At Duck Creek, mineralisation comprises discrete mesas of channel iron deposits (“CID”) 15–30 m above the surrounding plains with stripping ratios expected to be very low for the targets identified. Seven mesas containing ore grade CID mineralisation have been identified from surface sampling, but only six have been drilled due to access limitations. Brockman has completed an Inferred Mineral Resource estimate of 18.3 Mt grading 56.5% Fe, for the channel iron deposit (“CID”) mineralisation at Duck Creek (E47/1725), as detailed in Table 6 below. The Mineral Resource estimate been classified in accordance with guidelines of the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The Mineral Resource estimate is based on the results of 45 vertical RC holes drilled on sections varying from approximately 200 to 400 m apart along the long axis of each mesa, supported by surface sampling to confirm the lateral extent of mineralisation. Table 6: Duck Creek Mineral Resource estimate — (at a lower cut-off grade of 54% Fe) Mesa Classification 1 2 3 4 5 6 All Inferred Inferred Inferred Inferred Inferred Inferred Inferred Tonnes (Mt) 4.1 5.1 2.3 1.4 3.0 2.4 18.3 Fe (%) 55.8 56.6 56.4 56.4 56.3 58.0 56.5 CaFe* (%) 63.2 64.1 61.6 61.9 61.4 62.8 62.8 SiO2 (%) 4.40 3.58 5.71 6.43 6.32 5.15 4.91 Al2O3 (%) 2.69 2.44 4.53 3.34 4.07 3.25 3.22 P (%) 0.032 0.041 0.065 0.077 0.071 0.112 0.060 S (%) 0.058 0.037 0.023 0.087 0.020 0.015 0.037 LOI (%) 11.8 11.7 8.4 8.9 8.4 7.6 10.0 * CaFe represents calcined Fe and is calculated by Brockman using the formula CaFe = Fe%/((100-LOI)/100) The West Hamersley prospect comprises one granted Exploration Licence (E47/1603) covering 54 km2 and containing extensive areas of outcropping Brockman Iron Formation. The Mt Stuart prospect comprises one Exploration Licence containing outcropping CID mineralisation as mapped by the Geological Survey of Western Australia. The West Pilbara results confirm the prospectivity of Brockman’s tenure in the area and support the Company’s objective of developing a production hub in the West Pilbara, as part of its broader resource and business development strategy in the Pilbara region. OTHER PROJECTS Irwin — Coglia Ni-Co And Ni-Cu Prospect — 40% Interest The Group has a 40% interest in the Irwin — Coglia nickel — laterite project, located about 150 km south- east of Laverton in Western Australia. The remaining 60% interest in the Joint Venture is held by Murrin Murrin Holdings Pty Ltd and Glenmurrin Pty Ltd, the owners of the Murrin Murrin Ni-Co laterite mine and high-pressure acid leach treatment plant near Laverton. Mining studies by Murrin Murrin show that the ore body represents high potential value but this value cannot b e c u r r e n t l y r e a l i s e d d u e t o c h l o r i d e i n f e e d constraints. In 2012, Murrin Murrin has carried out further studies on the washing of chloride from its high chloride deposits (including Irwin — Coglia) but limits on the amount of low-chloride wash water available and the cost of installing excess capacity continue to restrict the wash capacity available. Murrin Murrin is continuing to take steps to allow incremental increases in chloride levels in the process plant feed. Desktop investigations indicate low salinity water may be available from an area east of the deposits, which may provide an opportunity for a chloride wash process. The project is managed by Murrin Murrin. ANNUAL REPORT 2015 Competent Persons Statements Marillana Mineral Resources and Ore Reserves The information in this report that relates to Mineral Resources and Ore Reserves at Marillana is based on information compiled by Mr. I Cooper, Mr. J Farrell and Mr. A Zhang. The Ore Reserves statement has been compiled in a c c o r d a n c e w i t h t h e g u i d e l i n e s d e f i n e d i n t h e Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code — 2004 Edition). The Ore Reserves have been compiled by Mr. Iain Cooper, who is a Member of Australasian Institute of Mining and Metallurgy and a full time employee of Golder Associates Pty Ltd. Mr. Cooper has sufficient experience in Ore Reserve estimation relevant to the style of mineralisation and type of deposit under consideration to qualify as Competent P e r s o n a s d e f i n e d i n t h e 2 0 0 4 e d i t i o n o f t h e “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Cooper consents to the inclusion of the matters based on this information in public releases by Brockman, in the form and context in which it appears. Mr. J Farrell, who is a Member of the Australasian Institute of Mining and Metallurgy and a former full- time employee of Golder Associates Pty Ltd, produced the Mineral Resource estimates for Marillana and Ophthalmia based on the data and geological interpretations provided by Brockman. Mr. Farrell has sufficient experience that is relevant to the style of mineralisation, type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Farrell consented to the inclusion in this report of the matters based on his information in the form and context that the information appears. Mr. A Zhang, who is a Member of the Australasian Institute of Mining and Metallurgy and a full-time employee of Brockman Mining Australia Pty Ltd, provided the geological interpretations and the drill hole data used for the Mineral Resource estimations at t h e M a r i l l a n a p r o j e c t . M r . Z h a n g h a s s u f f i c i e n t e x p e r i e n c e t h a t i s r e l e v a n t t o t h e s t y l e o f mineralisation, type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Zhang consents to the inclusion in this report of the matters based on his information in the form and context that the information appears. Ophthalmia Mineral Resources The information in this statement which relates to the Ophthalmia Mineral Resource is based on information compiled by Sia Khosrowshahi who is a full-time employee of Golder Associates Pty Ltd, and Member and Chartered Professional of the Australasian Institute of Mining and Metallurgy. Sia Khosrowshahi has s u f f i c i e n t r e l e v a n t e x p e r i e n c e t o t h e s t y l e o f mineralisation and type of deposit under consideration and to the activity for which he is undertaking to qualify as a Competent Person as defined in the JORC Code 2012. Mr Khosrowshahi consents to the inclusion in this report of the matters based on his information in the form and context that the information appears. The Competent Person responsible for the geological interpretation and the drill hole data used for the resource estimation is Mr Aning Zhang. Mr Zhang is a full-time employee of Brockman Mining Australia Pty Ltd, is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity for which he is undertaking to qualify as a Competent Person as defined in the JORC Code 2012. Mr Zhang consents to the inclusion in this report of the matters based on his information in the form and content in which it appears. 11 MANAGEMENT DISCUSSION AND ANALYSIS Duck Creek Mineral Resource The information in this report that relates to Mineral Resources at Duck Creek is based on information compiled by Mr. A Zhang. Mr. Zhang has sufficient e x p e r i e n c e t h a t i s r e l e v a n t t o t h e s t y l e o f mineralisation, type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Zhang consents to the inclusion in this report of the matters based on his information in the form and context that the information appears. Annual Report Mineral Resource and Ore Reserve Statement The information in this report that relates to the Brockman Mining Iron Ore Division Annual Report Mineral Resources and Ore Reserves Statements as a whole is based on information compiled by Aning Zhang, a full-time employee of Brockman Mining Australia Pty Ltd, and a Member of the Australasian Institute of Mining and Metallurgy. The Annual Report Mineral Resources Statement and Ores Reserves S t a t e m e n t i s b a s e d o n , a n d f a i r l y r e p r e s e n t s , information and supporting documentation prepared by the Competent Persons named above. The Annual Report Mineral Resources and Ore Reserve Statement has been issued with the prior written consent of Mr Zhang, in the form and context in which it appears in the Annual Report. Mineral Resource and Ore Reserve Governance of Internal Controls Brockman ensures that the Mineral Resources and Ore Reserve estimates quoted are subject to governance arrangements and internal controls activated at a site level and at the corporate level. Internal and external review of Mineral Resource and Ore Reserve estimation procedures and results are carried out through a technical review team which is comprised of highly competent and qualified professionals. These reviews have not identified any material issues. MINING BUSINESS — YUNNAN, PRC Our copper mining business comprises processing and sales of copper, silver and other mineral resources in the Yunnan Province of the PRC, through the operation of a subsidiary of the Company — Luchun Xingtai Mining Co., Ltd (“Luchun”) which is the mine operator of the Damajianshan Mine. The Damajianshan Mine is located in Qimaba Township, Luchun County of Yunnan Province in the PRC. It is near the border between the PRC and Vietnam. Production and operation results for the year ended 30 June 2014 and 2015 were summarised as follows: Copper ore processed Production of Copper Ore Concentrates Sales of Copper Ore Concentrates Average selling price per Metal (t) (without VAT) 2015 2014 182,485 tonnes 146,655 tonnes 861 Metal (t) 842 Metal (t) RMB36,469 794 Metal (t) 884 Metal (t) RMB32,746 D u r i n g t h e y e a r , t u r n o v e r o f t h i s s e g m e n t w a s approximately HK$36.5 million (2014: HK$38.7 million), and the segment loss before interest, tax, amortisation and impairment of mining right was approximately HK$16.8 million (2014: HK$6.9 million). In 2015, global copper supply outstripped demand for the fourth consecutive year. This, together with concerns about the growth of the Chinese economy and lower oil prices, continued to weigh on copper prices. The average realised copper price decreased by 10% to RMB32,746 in 2015. Copper ore processed increased by 24% to 182,485 tonnes in 2015, However, lower grades, depleting reserves and higher costs are likely to impact future production. Current reserves are being replaced by l o w e r - g r a d e a n d h i g h e r - c o s t o p e r a t i o n s i n geographically difficult locations. This will ultimately impact the cost curve and realised copper price. Impairment Loss The downturn of global economy and the recent sustained copper price weakness are considered to be the impairment indicators which triggered the need to perform an impairment assessment. Base on the i m p a i r m e n t a s s e s s m e n t , a n i m p a i r m e n t l o s s o f approximately HK$225,000,000 has been recognised in t h e c o n s o l i d a t e d i n c o m e s t a t e m e n t ( 2 0 1 4 : HK$40,000,000). ANNUAL REPORT 2015 Summary of Expenditure T he c os t o f sa les o f th e m in i n g s egment mainly i n c l u d e d m i n i n g , p r o c e s s i n g a n d r e f i n i n g , o r e transportation and waste disposal costs. Total expenditure associated with the mining operation (excluding amortisation and impairment of mining r i g h t ) i n t h e P R C d u r i n g t h e y e a r a m o u n t e d t o approximately HK$53.5 million (2014: HK$47.7 million. Expenditure associated with exploration activities amounted to approximately HK$15.9 million (2014: HK$12.1 million). D u r i n g t h e y e a r e n d e d 3 0 J u n e 2 0 1 5 , c a p i t a l expenditures of HK1.6 million has been capitalised as property, plant and equipment (30 June 2014: HK$2.1 million). Exploration There is no material change to the resources and reserves in the Damajianshan Mine during the year. Exploration activities and tunnelling works continued during the reporting period. The exploration activities are aimed to find additional resources in order to support the Group’s further expansion plan. LIQUIDITY AND FINANCIAL RESOURCES The Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The Group generally finances its short term funding requirement with cash generated from operations and equity funding. The Group’s ability to achieve its Marillana iron ore project development schedule is reliant on access to appropriate and timely funding. RISK DISCLOSURE Market risk The Group is exposed to various types of market risks, including fluctuations in copper price and exchange rates. (a) Commodities Price Risk Copper Ore Concentrate Price Risk The Group’s turnover and profit of the mining b u s i n e s s d u r i n g t h e y e a r w e r e a f f e c t e d b y fluctuations in the copper prices. All of our mining products were sold at market prices and the fluctuation of the price were beyond the control of the Group. Iron Ore Price Risk The fair value of the Group’s mining properties in Australia are exposed to fluctuations in the expected future iron ore price. We have not used any commodity derivative instruments or futures for speculation or hedging purposes. The management will review the m a r k e t c o n d i t i o n f r o m t i m e t o t i m e a n d determine the best strategy to deal with the fluctuation of copper ore concentrate price and iron ore price. (b) Exchange Rate Risk The Group is exposed to exchange rate risk primarily in relation to our mineral tenements that a r e d e n o m i n a t e d i n A u s t r a l i a n d o l l a r . Depreciation in Australian dollar may adversely affect our net asset value and earnings when the value of such assets is converted to Hong Kong dollars. During the year, no financial instrument was used for hedging purpose. The current ratio is measured at 1.17 times as at 30 June 2015 compared to 2.38 times as at 30 June 2014. FINANCIAL GUARANTEE At 30 June 2014 and 2015, the Company did not have any financial guarantees. The gearing ratio of the Group (long term debts over equity and long term debts) is measured at 0.02 (2014: 0.01). CONTINGENT LIABILITIES The Group did not have any contingent liabilities as at 30 June 2015. During the reporting period, the Group did not engage in the use of any financial instruments for hedging p u r p o s e s , a n d t h e r e i s n o o u t s t a n d i n g h e d g i n g instrument as at 30 June 2015. STAFF AND REMUNERATION As at 30 June 2015, the Group employed 238 full time employees (2014: 409 employees), of which 212 employees were in the PRC (2014: 365 employees), and 9 employees were in Australia (2014: 26). The r e m u n e r a t i o n o f e m p l o y e e s i n c l u d e s s a l a r y , discretionary bonus and share based compensation. The remuneration policy and packages of the Group’s employees, senior management and directors are maintained at market level and reviewed annually and when appropriate by the management and the remuneration committee. 13 DIRECTORS AND MANAGEMENT As at the date of this report, the Company has the following directors and senior management: NON-EXECUTIVE DIRECTORS Mr. Kwai Sze Hoi Mr. Kwai Sze Hoi, aged 65. Mr. Kwai joined the Group since June 2012. He is the Chairman of the Group. Mr. Kwai graduated from Anhui University in 1975. Mr. Kwai has more than 30 years of experience in international shipping and port operation businesses, and is a successful entrepreneur. In 1990, he founded Ocean Line Holdings Ltd (“Ocean Line”). Ocean Line wholly o w n s , o p e r a t e s a n d m a n a g e s a f l e e t o f t o t a l deadweight tonnage of 3 million metric tonnes, with routes running worldwide. Besides, Ocean Line invests in infrastructures and operates other shipping related businesses including ports, terminals, warehouses, logistics, ship repairs and crew manning etc. The diversified business of Ocean Line puts it in a highly competitive position globally. Meanwhile, Ocean Line also invests in real estate, mining, financial services, securities, trading and hotel businesses, which makes Ocean Line a dynamic multinational conglomerate with shipping business as the strategic focus. Mr. Kwai is the father of Mr. Kwai Kwun, Lawrence, an Executive Director of the Group. Mr. Liu Zhengui Mr. Liu Zhengui, aged 68. Mr. Liu joined the Group since April 2012, and became the Vice Chairman of the Group since June 2012. Mr. Liu has over 40 years of e x p e r i e n c e i n c o r p o r a t e f i n a n c e a n d c a p i t a l management. Mr. Liu holds a bachelor degree in management engineering from HeFei University of Technology. He is currently a director of Shandong School of Economics and Social Development (山東社 會經濟發展研究院) and is the chairman of Shandong Dongyin Investment Management Co., Ltd (山東東銀投 資管理有限公司). He is also a financial consultant of the Shandong provincial government. Mr. Liu is currently an independent non-executive director of Reorient Group Limited, a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (Stock Code: 376). During the period of 2004 to 2009, Mr. Liu was the chairman of Bank of China Group Investment Limited (BOCGI). Prior to that, he served as the chief executive of Bank of China’s branches in three different provinces for 16 years. Mr. Ross Stewart Norgard Mr. Ross Stewart Norgard, aged 69. Mr. Norgard joined the Company as Non-executive Director in August 2012. He is a chartered accountant and former m a n a g i n g d i r e c t o r o f K M G H u n g e r f o r d s a n d i t s successor firms in Perth, Western Australia. For the past 30 years he has worked extensively in the fields of raising venture capital and the financial reorganisation of businesses. He has held numerous positions on industry committees including past chairman of the Western Australian Professional Standards Committee of the Institute of Chartered Accountants, a current member of the National Disciplinary Committee, a former member of Lionel Bowens National Corporations Law Reform Committee, chairman of the Duke of Edinburghs Awards Scheme and a former member of the University of Western Australia’s Graduate School of Management (MBA programme). Mr. Norgard is also a director of nearmap Limited (formerly known as Ipernica Limited) (Chairman since 1987) and was a director of Ammtec Ltd from 1994 to November 2010. Prior to his present appointment as Non-executive Director of the Company, he was the non-executive deputy chairman of Brockman Resources Limited, a former ASX listed entity now being the Company’s wholly owned subsidiary. EXECUTIVE DIRECTORS Mr. Kwai Kwun, Lawrence Mr. Kwai Kwun, Lawrence, aged 34, joined the Board in March 2014. Previously he served the Group as Vice President and member of the Executive Committee. M r . K w a i r e m a i n s a m e m b e r o f t h e E x e c u t i v e Committee after his appointment as an Executive D i r e c t o r . M r . K w a i h a s e x t e n s i v e e x p e r i e n c e i n i n v e s t m e n t i n m i n i n g , p r o p e r t y , h o t e l , f i n a n c e company, port operation, international shipping and ship building. Mr. Kwai graduated from Harvard University in the United States with a Bachelor of M a t h e m a t i c s d e g r e e . M r . K w a i ’ s r o l e w i t h t h e Company focuses on the oversight of investment of the Group. Mr. Kwai is the son of Mr. Kwai Sze Hoi, the Chairman of the Group. ANNUAL REPORT 2015 Mr. Yip Kwok Cheung, Danny Mr. Yip Kwok Cheung, Danny, aged 51, joined the Group in August 2009. He is an Australian citizen and graduated from the Australian National University majoring in Economics and Accountancy. Mr. Yip has e x t e n s i v e e x p e r i e n c e a s t h e i n t e r n e t s t r a t e g i s t , entrepreneur and specialist in international trade. He was also the founder of several service-oriented business in Hong Kong and Australia, and he was the founder of Tradeeasy Holdings Limited (now known as Merdeka Resources Holdings Limited (“Merdeka”)) in 1996. He had been the executive director and chief executive officer of Merdeka (a company listed on the growth enterprise market of The Stock Exchange of Hong Kong Limited) until June 2007. Mr. Yap Fat Suan, Henry Mr. Yap Fat Suan, Henry, aged 69, joined the Group in January 2014. He holds a master degree in Business Administration from the University of Strathclyde, Glasgow, in the United Kingdom. He is a fellow member of the Institute of Chartered Accountants in England and Wales and an associate member of the Hong Kong Institute of Certified Public Accountants. H e h a s e x t e n s i v e e x p e r i e n c e i n f i n a n c e a n d accounting. He retired as the managing director of Johnson Matthey Hong Kong Limited in June 2007 and prior to that appointment he was the general manager of Sun Hung Kai China Development Limited. He is also an independent non-executive director of China WindPower Group Limited and DVN (Holdings) Limited, which are listed on the Main Board of the Stock Exchange. Mr. Choi Yue Chun, Eugene Mr. Choi Yue Chun, Eugene, aged 43, joined the Group in June 2014. He holds a Bachelor of Laws d e g r e e f r o m T h e U n i v e r s i t y o f H o n g K o n g , w a s admitted as a solicitor of the High Court of Hong Kong in 1997 and is a member of the Law Society of Hong Kong. He has over 15 years of experience in the legal f i e l d , s p e c i a l i s i n g i n c o r p o r a t e f i n a n c e a n d compliance matters for listed companies in Hong Kong. Mr. Choi is currently the senior legal counsel of RUSAL Global Management B.V. Mr. Chan Kam Kwan, Jason Mr. Chan Kam Kwan, Jason, aged 42, joined the Group in January 2008. He is the Company Secretary and a director of certain subsidiaries of the Company. He is also a member of the Executive Committee. Mr. Chan graduated from the University of British Columbia in Canada with a Bachelor of Commerce Degree and he holds a certificate of Certified Public Accountant issued by the Washington State Board of Accountancy in the United States of America. Mr. Chan has extensive experience in corporate finance. Mr. Colin Paterson, also the Chief Executive Officer of Australian Operation (appointed on 25 February 2015) Mr. Colin Paterson, aged 54, has over 30 years’ experience in the resources sector covering a diverse range of geological environments throughout Australia, but principally in Pilbara iron ore as well as gold and nickel exploration in the Archaean of Western Australia. H e h a s e x t e n s i v e e x p e r i e n c e i n t h e t e c h n i c a l s u p e r v i s i o n o f e x p l o r a t i o n p r o j e c t s ; r e s o u r c e d e v e l o p m e n t , p r o j e c t g e n e r a t i o n a n d p r o j e c t evaluations. He was principal geologist with Asarco Australia Ltd and held a similar position with Mining Project Investors Pty Ltd (subsequently MPI Mines Limited). Following which he was the founding director of Brockman Mining Australia Pty Ltd. INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. Uwe Henke Von Parpart Mr. Uwe Henke Von Parpart, aged 74, joined the Group in January 2008. He received a Fulbright scholarship and did his graduate work in mathematics and philosophy (Ph.D.) at Princeton University and the University of Pennsylvania. Mr. Parpart is the managing director and the chief strategist in Reorient Financial Markets Limited (“Reorient”). Prior to his position in Reorient, he was the chief economist and strategist for Asia at Cantor Fitzgerald (“Cantor”) in Hong Kong. In this capacity, he was responsible for macro-economic, f i x e d - i n c o m e a n d e q u i t y - m a r k e t s r e s e a r c h a n d strategy in Asia. He joined Cantor in August, 2006. His analysis are published on a weekly and daily basis and frequently featured on CNBC Asia and Bloomberg TV. Prior to joining Cantor, Mr. Parpart worked for four years as a senior currency strategist at Bank of America, Hong Kong, covering both currencies and bonds. Mr. Parpart has also contributed to numerous magazines and newspapers and until recently was a columnist for Forbes Global and Shinchosha Foresight Magazine (Tokyo). 15 MINING OPERATIONS — PRC Ms. Zhang Li Director of Luchun — Damajianshan Mine Operation Ms. Zhang Li, aged 51, is the director of Luchun Xingtai Mining Co., Ltd. She is one of the founders of Luchun X i n g t a i M i n i n g C o . , L t d a n d r e s p o n s i b l e f o r t h e oversight of the Damajianshan Mine operation. She h a s o v e r 2 5 y e a r s o f m i n i n g a n d e x p l o r a t i o n experience and extensive network in the mining industry in China. She graduated from the Kunming University of Science and Technology with a degree in Mining and Exploration and is a senior geological engineer. DIRECTORS AND MANAGEMENT SENIOR MANAGEMENT IRON ORE OPERATIONS — AUSTRALIA Mr. Colin Paterson Chief Executive Officer of Australian Operation Mr. Paterson’s biography is as shown on page 15. Mr. Derek Humphry Chief Financial Officer of Australian Operation M r . D e r e k H u m p h r y , a g e d 4 7 . M r . H u m p h r y i s a qualified Chartered Accountant with over 20 years’ accounting and industry experience, more recently focusing in the areas of corporate consolidation, mineral project evaluation, and joint venture, debt and equity financing. He started his career with an international Chartered Accounting firm and has since worked with industrial minerals, gold, and nickel producers. In the past ten years Mr. Humphry has been involved in ASX, AIM and TSX listings, mergers, and the development of several new mines. Mr. Kevin Watters General Manager — Project Development Mr. Watters has over 35 years’ experience in mine and o r e t r a n s p o r t a t i o n i n f r a s t r u c t u r e e n g i n e e r i n g , construction and operations and previously held the role of project director for Australian Premium Iron Pty Ltd, responsible for the APIJV West Pilbara Iron Ore P r o j e c t , a m a j o r i r o n o r e p r o j e c t i n v o l v i n g t h e development of greenfield mine, rail and port facilities i n t he w e s te r n P i l b a ra re g i on . H e h a s e x t e n s i v e experience in the Western Australian iron ore industry, having held key project management roles originally as Port Manager Finucane Island for Goldsworthy Mining Limited (then BHP Iron Ore Limited) and as GM Projects and Engineering, Portman Mining (now Cliffs Natural Resources). Mr. Watters also played a major role as General Manager Northern Operations in the post construction development and operation of the T i w e s t J V m i n e r a l s a n d s m i n i n g a n d p r o c e s s i n g operations north of Perth. Mr. Watters has significant depth and maturity of understanding of operations and project development across mining, mineral processing, railways and port infrastructure projects in Western Australia. CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2015 CODE ON CORPORATE GOVERNANCE PRACTICES AND ASX BEST PRACTICE RECOMMENDATIONS The Company is listed on both the Australian Securities Exchange (“ASX”) and the Stock Exchange of Hong Kong Limited (“SEHK”). The Company’s Corporate Governance policies have been formulated to ensure that it is a responsible corporate citizen. Unless otherwise noted, the Company complied with all aspects of the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on the SEHK (“the HK Listing Rules”) and the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations 3rd Edition (the CGPR)” which applies for year ends commencing 1 July 2014, (“the ASX Principles”) during the entire year ended 30 June 2015. A description of the Company’s main corporate governance practices is set out below. BOARD OF DIRECTORS The Board is responsible to shareholders for the overall strategic direction of the Group, including establishing g o a l s f o r m a n a g e m e n t a n d m o n i t o r i n g t h e achievement of those goals with the objective of enhancing the Company and shareholders’ value. The B o a r d h a s d e l e g a t e d r e s p o n s i b i l i t y f o r t h e management of the Company’s business and affairs to the Chief Executive Officer, or an Independent Board Committee. The responsibilities reserved for the Board of Directors are set out in the Board Charter, a copy of which is available on the website of the Company. The Board Charter is reviewed periodically and each Director is provided with a letter of appointment which outlines their key terms and conditions so each Director clearly understands their responsibilities. CHAIRMAN AND CHIEF EXECUTIVE OFFICER The roles of the Chief Executive Officer and Chairman are separate and exercised by different individuals. During the period between 1 July 2014 to 5 August 2014, Mr. Luk Kin Peter Joseph was the Chief Executive Officer, and Subsequent to Mr. Luk’s resignation since 5 August 2014, the position of the Chief Executive Officer of the Group was left vacant. The Company will continue to look for the appropriate candidate to fill the vacancy as the Chief Executive Officer of the Group. The Chairman held interests in the shares of the C o m p a n y , a n d i s n o t i n d e p e n d e n t a s h e i s a substantial shareholder of the Company. The Board has determined that his commercial experience is more beneficial to shareholders at this stage of the Company’s development than the independence requirement outlined in the Principles. BOARD MEMBERSHIP The Board has been structured for an effective composition, with a balance of skills, experience and c o m m i t m e n t t o a d e q u a t e l y d i s c h a r g e i t s responsibilities and duties. During the year ended 30 J u n e 2 0 1 5 , f o u r o f t h e e l e v e n D i r e c t o r s a r e I n d e p e n d e n t . W h i l s t t h i s i s n o t a m a j o r i t y o f Independent Non-executive Directors, it is believed a s u i t a b l e b a l a n c e b e t w e e n t h e c o m p o s i t i o n o f Executive and Non-Executive Directors can effectively e x e r c i s e i n d e p e n d e n t j u d g m e n t . E a c h o f t h e independent non-executive Directors has made an annual confirmation stating compliance with the independence criteria set out in Rule 3.13 of the HK L i s t i n g R u l e s . T h e D i r e c t o r s c o n s i d e r a l l o f t h e i n d e p e n d e n t n o n - e x e c u t i v e D i r e c t o r s t o b e independent under the independence criteria and all are capable of effectively exercising independent judgment. 17 CORPORATE GOVERNANCE REPORT Directors in office during the year are as follows: Name of Director/role Non-Executive Directors Kwai Sze Hoi, (Chairman) Liu Zhengui, (Vice Chairman) Ross Stewart Norgard Warren Talbot Beckwith Independent Non-Executive Directors Uwe Henke Von Parpart Yip Kwok Cheung, Danny Yap Fat Suan Henry Choi Yue Chun Eugene Executive Directors Chan Kam Kwan Jason, (Company Secretary) Kwai Kwun Lawrence Colin Paterson Luk Kin Peter Joseph Date of appointment Period in Office as at the date of Annual Report Board Meeting Attended/Eligible to attend* General Meeting Attended/Eligible to attend* 15 June 2012 27 April 2012 22 August 2012 15 June 2012 39 months 41 months 37 months 36 months Resigned 2 July 2015 2 January 2008 5 August 2009 8 January 2014 12 June 2014 92 months 73 months 20 months 15 months 2 January 2008 13 March 2014 25 February 2015 16 February 2009 92 months 8 months 7 months 66 months Resigned 5 August 2014 5/5 5/5 5/5 5/5 5/5 5/5 5/5 5/5 5/5 5/5 5/5 0/0 1/1 0/1 0/1 0/1 0/1 0/1 1/1 1/1 1/1 0/1 0/1 0/0 * Represents total number of board and general meetings held during the period. Determination of eligibility has taken into account the respective directors’ period in office. A total of 5 meetings were held during the year ended 30 June 2015. Biographical details of the Directors are stated under the section “Directors and Management”. During the year, Mr. Colin Paterson has been appointed as an executive director of the Company. The Board has not perform further background check for Mr. Paterson, as he has been the Chief Executive Officer and was one of the founding director of Brockman Mining Australia Pty Ltd prior to his appointment as an Executive Director for the Group. His expertise and experience is well recognized and satisfied by the Board and his background and professional qualification has already been verified and recorded since he joined the group. ANNUAL REPORT 2015 The Board has established different sub-committees with members as at 30 June 2015 as follows: Nomination Committee Audit Committee Remuneration and Performance Committee Executive Committee Health, Safety, Environment and Sustainability Committee Risk Management Committee Member Member Member Member Member Member Chairman Member Member Member Chairman Member Member Chairman Member Member Chairman Member Member Member Chairman Member Non-Executive Directors Kwai Sze Hoi (Chairman) Liu Zhengui (Vice Chairman) Ross Stewart Norgard Warren Talbot Beckwith Executive Directors Colin Paterson Chan Kam Kwan Jason (Company Secretary) Kwai Kwun Lawrence Independent Non-Executive Directors Yap Fat Suan Henry Uwe Henke Von Parpart Yip Kwok Cheung Danny Choi Yue Chun Eugene All Committees of the Board have access to professional advice where necessary. Minutes of Committee meetings are kept by the secretary of the meeting. Board Skills Matrix The following table summarizes the combination of skills and experience of the Board: Experience, skills & attributes Total Non-Executive Directors Total executive Directors Total Independent Non-Executive Directors Experience Corporate leadership Successful experience in CEO and/or other senior corporate leadership International experience Senior experience in multiple international locations Resources industry experience Relevant industry (resources, mining, exploration) experience Other Board level experience Membership of other listed entities (last 3 years) Project finance Finance and capital management Governance Risk and compliance Gender Female Male Board Nomination Committee Audit Committee Remuneration & performance Committee Health, Safety, Environment and Sustainability Committee Risk management Committee 4 3 4 9 6 4 6 8 2 0 11 2 3 5 3 1 2 3 0 0 5 2 3 5 3 1 2 3 0 0 5 1 2 3 1 1 2 2 0 0 3 3 3 1 0 1 2 0 0 3 1 1 3 1 2 2 2 0 0 3 19 CORPORATE GOVERNANCE REPORT Induction of Directors Following appointment, directors are supported through an induction briefing given by the corporate legal counsel, which seeks to familiarize the directors on listing rules, responsibilities and legal obligations of b e i n g a p p o i n t e d a s d i r e c t o r s o f t h e C o m p a n y . Furthermore, meetings with senior management are held at times to familiarize the directors with the operations of the Company. In addition, written directors’ training material is circulated at times to k e e p d i r e c t o r s a b r e a s t o f t h e l a t e s t u p d a t e s i n regulations. • • • NOMINATION COMMITTEE The Board has established a Nomination Committee which carries out its duties in accordance with the Terms of Reference and Nomination Policy, a copy of which is located on the website. The Committee’s primary functions are: • to identify suitable candidates for nomination to t h e B o a r d , B o a r d C o m m i t t e e s a n d s e n i o r management; succession planning for the Board and senior management; the appointment and re-election of Directors; and ensuring appropriate skills are available to the Board to discharge its duties and add value to the Company. The Committee consists of a majority of independent Directors and was comprised of the following during the year ended 30 June 2015: Name of Member Independent Non-Executive Directors Yap Fat Suan Henry (Chairman of the Committee) Uwe Henke Von Parpart Yip Kwok Cheung, Danny Non-Executive Directors Kwai Sze Hoi Liu Zhengui Meetings Attended/ Eligible to attend* 1/1 1/1 1/1 1/1 1/1 * Represents the total number of meetings held during the year ended 30 June 2015. ANNUAL REPORT 2015 APPOINTMENT AND RE-ELECTION OF DIRECTORS In accordance with the Bye-laws of the Company and to comply with relevant HK Listing Rules, every Director should be subject to retirement by rotation at least once every three years. Non-executive Directors were appointed for a fixed term of 3 years. All Directors appointed to fill a casual vacancy should be subject to re-election by shareholders at the first annual general meeting after their appointment and not less than one-third of the Directors should be subject to retirement and re-election every year. Mr. Colin Paterson, having been appointed as casual appointment, shall retire and offer himself for re- election at the forth coming annual general meeting. In addition, Messrs. Kwai Sze Hoi, Chan Kam Kwan Jason and Yip Kwok Cheung Danny will also be standing for re-election at the forth coming annual general meeting. No directors’ service contract contains a provision requiring greater than one year’s notice or requires compensation greater than one year’s emoluments. CONTINUOUS PROFESSIONAL DEVELOPMENT E a c h o f t h e D i r e c t o r s k e e p s a b r e a s t o f h i s responsibilities as a Director of the Company and of the conduct, business activities and development of the Company, as well as the laws and regulations a p p l i c a b l e t o t h e C o m p a n y . C o m p r e h e n s i v e inductions are conducted upon appointment and the Company ensures suitable professional development is undertaken by directors and members of senior management, with an objective to keep them abreast of the listing rules amendments and refresh their knowledge and skills on corporate governance. The Directors provide and the Company maintains a record of all professional development undertaken during the period. Mr. Chan Kam Kwan, being an Executive Director and the Company Secretary of the Company received no less than 15 hours of relevant professional training during the financial year. All other directors reviewed written professional development materials during the year ended 30 June 2015. BOARD MEETINGS The Board conducts meetings on a regular basis as required by business needs. The Bye-laws of the Company allows board meetings to be conducted by way of telephone or video conference. Any resolutions can be passed by way of written resolutions circulated to and signed by all Directors from time to time when necessary except for matters in which a substantial shareholder or a director or their respective associates has a conflict of interest. The Board held 5 meetings during the year ended 30 June 2015. The Company normally provides at reasonable notice of every Board meeting to all the Directors to give them an opportunity to attend. If such notice is not possible, permission to waive is obtained from the Directors. Prior to each meeting of the Board, the Directors are provided with appropriate, complete and reliable information to ensure timely consideration before each Board meeting to enable them to make informed decisions. The Board is provided with the opportunity to meet independently from executive Directors as and when required. Each Director also has separate and independent access to senior management whenever necessary. REMUNERATION AND PERFORMANCE COMMITTEE The Board has a Remuneration and Performance Committee to ensure that the Company is able to attract, retain, and motivate a high-calibre team which is essential to the success of the Company. The Committee carries out its duties accordance with the Terms of Reference and Policy, a copy of which is located on the website. The Committee consists of a majority of independent Directors and was comprised of the following members during the year ended 30 June 2015: Name of Member Independent Non-executive Directors Yap Fat Suan Henry (Chairman of the Committee) Uwe Henke Von Parpart Yip Kwok Cheung, Danny Non-Executive Directors Kwai Sze Hoi Liu Zhengui Meetings Attended/ Eligible to attend* 1/1 1/1 1/1 1/1 1/1 * Represents the total number of meetings held during the year ended 30 June 2015. 21 CORPORATE GOVERNANCE REPORT The principal duties of the Remuneration and Performance Committee include, inter alia, reviewing and making recommendations to the Board on the Company’s remuneration policy; making recommendations to the Board on the remuneration of Executive and Non-executive Directors, and members of the senior management; reviewing and making recommendations to the Board in respect of performance-based remuneration by reference to corporate goals and objectives resolved; and ensuring no Director or any of his or her associates is involved in deciding his own remuneration. In addition to its duties surrounding remuneration, the C o m m i t t e e i s a l s o r e s p o n s i b l e f o r t h e a n n u a l performance review of the Board, Board Committees and individual Director’s performance. REMUNERATION AND PERFORMANCE The terms of reference in respect of the Remuneration a n d P e r f o r m a n c e C o m m i t t e e d i s t i n g u i s h e s t h e structure of the Non-executive Directors’ remuneration from that of Executive Directors and senior executives. Non-executive Director compensation The Board is determined to attract and retain high calibre Non-executive Directors to work with the Company, whilst at the same time preserving cash. Accordingly, the structure of the Non-executive Directors’ remuneration allows for remuneration in the form of scheme options, granted under the share option scheme. Whilst this represents a departure from the Code and the Principles, the Committee believes it is appropriate for the size of the Company, and is satisfied by the fact that all Director participation under the share option scheme is approved by Shareholders and the grant aligns with the long term performance of the Company. The Company’s Bye- laws provide that the directors’ remuneration shall be determined by the Company in general meeting. The Company has fixed a maximum sum of A$1 million in aggregate for Non-executive Directors per annum, unless otherwise and approved by the Shareholders. Performance review of the Board B o a r d p e r f o r m a n c e a n d i n d i v i d u a l D i r e c t o r performance are reviewed on an ongoing basis and e v a l u a t e d a n n u a l l y b y t h e R e m u n e r a t i o n a n d Performance Committee. Individual Directors may meet with the chairman of the Committee to discuss their view towards their remuneration packages. Remuneration of executive directors The Remuneration and Performance Committee of the Board of Directors of the Company is responsible for r e v i e w i n g c o m p e n s a t i o n a r r a n g e m e n t s f o r t h e Executive Directors, including the chief executive officer (if any) and the senior management team, and make recommendation to the Board for approval. The Committee assesses the appropriateness of the nature and amount of remuneration of Directors and senior managers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit f r o m t h e r e t e n t i o n o f a h i g h q u a l i t y b o a r d a n d executive team. Executive compensation framework The Company aims to reward the executive with a level and mix of compensation commensurate with their position and responsibilities within the company. The Remuneration and Performance Committee is assisted in the process by the use of independent salary data. The executive pay and reward framework has 2 components: base pay and long-term incentives through participation in the Brockman Share Option Scheme. Details of the Share Option Scheme can be referenced to Note 25 of the Financial Statements. Performance review — Executives Senior executives’ performance is reviewed on an o n g o i n g b a s i s a n d e v a l u a t e d a n n u a l l y b y t h e Remuneration and Performance Committee. The e v a l u a t i o n i s u n d e r t a k e n b y e a c h e x e c u t i v e completing a questionnaire on performance issues or each executive having one-on-one interviews with the chairman of the Committee. Performance evaluations w e r e c a r r i e d o u t d u r i n g t h e p e r i o d f o r s e n i o r executives. Individual executives may meet with the chairman of the Committee to discuss their responses. ANNUAL REPORT 2015 Remuneration of directors and senior management For details of the remuneration of each director in the financial period, please refer to the notes to the financial statements. The emoluments (include share-based compensation) of the members of the senior management by band for the year ended 30 June 2015 is set out below: HK$0 to HK$1,000,000 HK$1,000,001–HK$2,000,000 HK$2,000,001–HK$3,000,000 HK$3,000,001–HK$4,000,000 HK$4,000,001–HK$5,000,000 HK$5,000,001–HK$6,000,000 HK$6,000,001–HK$7,000,000 HK$7,000,001–HK$8,000,000 Number of members 2015 2014 2 3 2 2 – – – – 9 1 – – 2 2 1 – 1 7 AUDIT COMMITTEE The Board has established an Audit Committee to carry out its oversight of the Company’s financial reporting system and internal control procedures. The Committee carries out its duties accordance with the Terms of Reference, a copy of which is located on the website. The Committee consists of a majority of independent Directors, none of whom have been employed by the previous or current auditors of the Company. The composition and expertise of the Committee was as follows at during the year ended 30 June 2015: Name of Member Meetings Attended/ Eligible to attend* Yap Fat Suan Henry (Chairman of the Committee) Fellow member of the Institute of Chartered Accountants in England and Wales and an associate member of the Hong Kong Institute of Certified Public Accountants Uwe Henke Von Parpart Graduate work in mathematics and philosophy (PhD.) at Princeton University and the University of Pennsylvania, Managing Director and Chief Strategist in Reorient Financial Markets Limited Yip Kwok Cheung, Danny Graduated from the Australian National University in Economics and Accountancy 2/2 2/2 2/2 * Represents the total number of meetings held during the year ended 30 June 2015. 23 CORPORATE GOVERNANCE REPORT The primary responsibilities of the Audit Committee are, inter alia, (a) (b) (c) (d) (e) (f) (g) to review the appointment of external auditors on an annual basis including a review of the audit scope and approval of the audit fees; to ensure continuing auditor objectivity and to safeguard independence of the Company’s auditors; to meet the external auditors to discuss issues and reservations (if any) arising from the interim review and final audit, and any matters the auditors suggest to discuss; t o r e v i e w t h e f i n a n c i a l i n f o r m a t i o n o f t h e Company and monitor the integrity of financial statements; to review the Group’s financial reporting system and internal control system and procedures, i n c l u d i n g t h e a d e q u a c y o f r e s o u r c e s , qualifications and experience of staff of the Group’s accounting and financial reporting function, and their training programmes and budget; to serve as a focal point for communication between the Board and the external auditors in respect of the duties relating to financial and other reporting, internal controls, external audit, and such other matters as the Board determines from time to time; to consider major findings of internal review and management’s response and ensure proper a r r a n g e m e n t i n p l a c e f o r t h e f a i r a n d i n d e p end ent re v i e w o f s uc h conc erns a nd appropriate follow up action; (h) t o d e v i s e a f r a m e w o r k f o r t h e t y p e a n d authorization of non-audit services provided by the external auditors. The external auditors and the senior executives are invited to attend the meeting for annual financial statements with specific time set aside for discussion without the presence of management. Minutes of the Audit Committee Meeting are kept by a secretary of the meeting. Draft and final versions of minutes of the meeting are sent to all members of the committee for their comment and records respectively, in both cases within a reasonable time after the meetings. The term of reference of the audit committee is available in the website of the Company. DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The financial statements of the Company for the year ended 30 June 2015 have been reviewed by the Board and the Audit Committee and audited by the external auditor, PricewaterhouseCoopers. The Directors acknowledge their responsibility for preparing the financial statements of the Group and presenting a balanced, clear and comprehensive assessment of the Group’s performance and prospects. The Directors ensure that the preparation of the financial statements of the Group are in accordance w i t h s t a t u t o r y r e q u i r e m e n t s a n d a p p l i c a b l e accounting standards. The Directors also ensure that the publication of the financial statements of the Group in a timely manner. The report of the auditor of the Company about their reporting responsibilities on the financial statements of the Group is set out in the Independent Auditor’s Report on pages 37 to 38. EXECUTIVE COMMITTEE The Board has constituted the Executive Committee and delegated the responsibility of the day-to-day management and has empowered the Executive Committee to implement policies and strategies, for the business activities and operations, internal control and administration of the Group. The Committee carries out all the general powers of management and control of the activities of the Group as vested in the Board, save for those matters which are reserved for the Board’s decision and approval pursuant to the written terms of reference of the Executive. The members include the Executive Directors and certain senior management appointed by the Board from time to time. The Executive Committee meets whenever it is necessary to carry out its obligations. ANNUAL REPORT 2015 HEALTH, SAFETY, ENVIRONMENT AND SUSTAINABILITY COMMITTEE The Board has established a Committee to oversee the health, safety, environmental and sustainability activities of the Company. The Committee carries out its duties accordance with the Terms of Reference and Policy, a copy of which is located on the website. The Committee consists of a majority of Independent Directors and was comprised of the following members during the year ended 30 June 2015: Name of Member Yip Kwok Cheung, Danny (Chairman of the Committee) Warren Talbot Beckwith Yap Fat Suan Henry Meetings Attended/ Eligible to attend* 1/1 1/1 1/1 * Represents the total number of meetings held during the year ended 30 June 2015 The principle duties of the Committee are: (a) reviewing and monitoring the sustainability, environmental, safety and health policies and activities of the Company; (b) e n c o u r a g i n g , s u p p o r t i n g a n d c o u n s e l l i n g management in developing short and long term p o l i c i e s a n d s t a n d a r d s t o e n s u r e t h a t t h e p r i n c i p l e s s e t o u t i n t h e s u s t a i n a b i l i t y , environmental, health and safety policies are being adhered to and achieved; (c) regularly reviewing community, environmental, health and safety response compliance issues and incidents to determine, on behalf of the B o a r d , w h e t h e r t h e C o m p a n y i s t a k i n g a l l necessary action in respect of those matters and that the Company has been duly diligent in carrying out its responsibilities and activities in that regard; (d) ensuring that the Company monitors trends and reviews current and emerging issues in the field of sustainability, environment, health and safety, and evaluates their impact on the Company; and (e) reviewing and making recommendations to the Board with respect to environmental aspects of expansions, acquisitions and dispositions with material environmental implications. RISK MANAGEMENT COMMITTEE The Board has established a Committee to oversee the risk oversight and the management and internal control of the processes by which risk is considered for both ongoing operations and prospective actions of the Company. The Committee carries out its duties in accordance with the Terms of Reference and Policy, a c o p y o f w h i c h i s l o c a t e d o n t h e w e b s i t e . T h e Committee was comprised of the following members during the year ended 30 June 2015: Name of Member Warren Talbot Beckwith (Chairman of the Committee) Ross Stewart Norgard Yip Kwok Cheung, Danny Meetings Attended/ Eligible to attend* 1/1 1/1 1/1 * Represents the total number of meetings held during the year ended 30 June 2015. 25 CORPORATE GOVERNANCE REPORT Whilst the risk management committee was not chaired by an independent director and it does not comprise of a majority of independent directors, the committee was composed of mainly non-executive directors and independent non-executive directors who do not participate in daily operation of the Group. The Company considers that objectivity can still be maintained with such arrangement. Risk management encompasses all areas of the Company’s activities. Once a business risk is identified, t h e r i s k m a n a g e m e n t p r o c e s s e s a n d s y s t e m s implemented by the Company are aimed at providing the necessary framework to enable the business risk to be managed. Management has the key role of i d e n t i f y i n g r i s k s a n d e n a b l i n g p r o c e s s e s f o r r i s k management. Senior management are required to r e p o r t r i s k s i d e n t i f i e d t o t h e R i s k M a n a g e m e n t Committee or Chief Executive Officer. T h e R i s k M a n a g e m e n t C o m m i t t e e w i l l m e e t periodically to review and ensure that the Company has in place processes to assess and manage specific and general business risks and appropriate mitigation procedures where applicable. The overall results of this assessment are presented to the Board, in oral and written form, at every Board meeting by the chairman of the Risk Management Committee, and updated as needed. The Board reviews the Company’s risk management at every Board meeting, and where required, makes improvements to its risk management and internal compliance and control systems. MATERIAL RISKS Examples of the Company’s management of material r i s k s a n d s y s t e m s t h e C o m p a n y h a s i n p l a c e t o manage these risks is included on pages 59 to 61 of the 2015 Annual Report. MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS The Company has adopted a Securities Trading Policy which applies, inter alia, to all Directors and Key Management Personnel. The Securities Trading Policy complies with the ASX Listing Rules and the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of t h e H K L i s t i n g R u l e s . A c o p y o f t h e C o m p a n y ’ s Securities Trading Policy is available on the website of the Company. AUDITORS’ REMUNERATION The aggregate remuneration in respect of services provided by PricewaterhouseCoopers for the year ended 30 June 2015 was HK$2,332,000, of which H K $ 1 , 6 1 2 , 0 0 0 r e p r e s e n t s a n n u a l a u d i t f e e s a n d HK$720,000 represents fees for non-audit services. INTERNAL CONTROL The Board has overall responsibility for the Group’s system of internal control and for the assessment and management of risk. The Board has conducted a review of and is satisfied with the effectiveness of the system of internal control of the Group. The Board also reviews at least annually the adequacy of resources, qualifications and experience of staff of the Group’s accounting and financial reporting function, and their training programmes and budget. The executive directors of the Company, reports directly to the Board and the Audit Committee, and monitors the existence and effectiveness of the controls in the Group’s business operations. The executive directors also discusses the audit plan with the Audit Committee and the external auditors. The audit plan is reassessed during the period as needed to ensure that adequate resources are deployed and the plan’s objectives are met. In addition, regular dialogues are maintained with the Group’s external auditors so that both are aware of t h e s i g n i f i c a n t f a c t o r s w h i c h m a y a f f e c t t h e i r respective scope of work. Reports from the external auditors on relevant financial reporting matter is p r e s e n t e d t o t h e A u d i t C o m m i t t e e , a n d , a s appropriate, to the Board. Although the Company is not required to comply with s e c t i o n 2 9 5 A o f t h e C o r p o r a t i o n s A c t ( b e i n g a company incorporated in Bermuda), the Board requires the Executive Director to state in writing to the Board that: The financial records of the Company have been properly maintained and the financial statements comply with the appropriate accounting standards and give a true and fair view of the Company’s financial position, and that the opinion has been formed based on the basis of a sound system of risk management and internal control which is operating effectively. ANNUAL REPORT 2015 COMMUNICATION WITH SHAREHOLDERS The Board is committed in providing clear and full performance information of the Group to shareholders and have established a communications strategy, a copy of which can be found on the Company’s website. The strategy is designed to promote effective communication with shareholders throughout the year and encourage effective participation at general meetings. In addition to the circulars, notices and financial reports sent to shareholders, additional i n f o r m a t i o n o f t h e G r o u p i s a l s o a v a i l a b l e t o shareholders on the Group’s website. As well as ensuring timely and appropriate access to information for all investors via announcements to the ASX and the SEHK, the Company will also ensure that all relevant documents are released on the website of the Company for the purpose of both stakeholders and shareholders. Copies of all corporate governance policies, charters and terms of references are freely available on the website of the Company. Each year the Company’s external auditor attends the AGM and is available to answer questions from security holders relevant to the audit. Shareholders are encouraged to attend the annual general meeting for which at least 20 clear business days’ notice is given. The Chairman and Directors are available to answer questions on the Group’s business at the meeting. In accordance with the Bye-laws of t h e C o m p a n y , a m i n i m u m o f 1 4 d a y s ’ n o t i c e i s required for every shareholders’ meeting and all shareholders shall have statutory rights to call for special general meetings and put forward agenda items for consideration in the general meetings. All resolutions at the general meeting are decided by a poll which is conducted by the Group’s branch share registrar in Hong Kong. The Group values feedback from shareholders on its effort to promote transparency and foster investor relationships. Comments and suggestions are always welcomed. COMPANY SECRETARY The Company Secretary is responsible to the Board for ensuring that the Board procedures are followed and t h a t t h e a c t i v i t i e s o f t h e B o a r d a r e c a r r i e d o u t efficiently and effectively. The Company Secretary assists the Chairman to prepare agendas and Board papers for meetings and disseminates such documents to the Directors and Board committees in a timely manner. The Company Secretary is responsible for ensuring that the Board is fully briefed on all legislative, regulatory and corporate governance developments when making decisions. The Company Secretary is also directly responsible for the Group’s compliance with the continuous obligations of the Listing Rules and The C o d e s o n T a k e o v e r s a n d M e r g e r s a n d S h a r e Repurchases, including publication and dissemination of the Company’s reports and financial statements and interim reports within the period lad down in the Listing Rules, timely dissemination of announcements and information relating to the Group to the market and ensuring that proper notification is made when there are any dealings by Directors in the securities of the Group. The Company Secretary is accountable directly to the Board. The Company Secretary also advises the Directors on their obligations in respect of disclosure of interests in s e c u r i t i e s , c o n n e c t e d t r a n s a c t i o n s a n d i n s i d e information and ensures that the standards and disclosures required by the Listing Rules are observed. With respect to the secretarial function of the Group, the Company Secretary maintains formal minutes of the Board meetings and other Board committee meetings. During the year, Mr. Chan Kam Kwan Jason, the Company Secretary of the Company, has undertaken no less than 15 hours of professional training to update his skills and knowledge. CONTINUOUS DISCLOSURE The Directors are committed to keeping the market fully informed of material developments to ensure compliance with the ASX Listing Rules, and the HK L i s t i n g R u l e s . T h e D i r e c t o r s h a v e o b s e r v e d t h e disclosure requirements of the ASX Listing Rules and the HK Listing Rules, and to ensure accountability at a senior management level for that compliance. A copy of the policy can be found on the website. 27 CORPORATE GOVERNANCE REPORT SHAREHOLDERS RIGHTS How Shareholders can convene a special general meeting Subject to Section 74 of the Companies Act 1981 of Bermuda (the “Act”) and the Bye-law 58 of the Company, the Board may whenever it thinks fit call special general meetings, and members holding at the date of deposit of the requisition not less than one- tenth of the paid up capital of the Company carrying t h e r i g h t o f v o t i n g a t g e n e r a l m e e t i n g s f o r t h e Company shall at all times have the right, by written requisition to the Board or the Company Secretary of the Company, to require a special general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two months after the deposit of such requisition. If within 21 days of such deposit the Board fails to proceed to convene such meeting the requisitionists themselves may do so in accordance with the provisions of Section 74(3) of the Company Act 1981 of Bermuda. Procedures for directing Shareholders’ enquiries to the Board S h a r e h o l d e r s e n q u i r i e s c a n b e d i r e c t e d t o inquiry@brockmanmining.com or by writing to the Company Secretary office, whose contact details are as follows: Suites 3812–13, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. The enquiries would then be assessed and considered (if appropriate) to put to the board. Shareholders may also make enquiries with the Board at the general meetings of the Company. Procedures for putting forward proposals at a general meeting Any number of shareholders representing not less than 5% of the total voting rights of the Company on the date of the requisition or not less than 100 shareholders of the Company are entitled to put forward a proposal f o r c o n s i d e r a t i o n a t a g e n e r a l m e e t i n g o f t h e Company. Shareholders should follow the procedures as set out in Section 79 of the Act for putting forward such proposals. Provision of information in respect of and by directors Updated information with regard to the change in other directorships of the Directors of the Company are as set out below: — Mr. Chan Kam Kwan, Jason has been appointed as an independent non-executive director of Canvest Environmental Protection Group Company Limited (Stock Code: 1381) effective from December 2014. CONSTITUTIONAL DOCUMENTS There was no significant change in the memorandum and articles of association and the bye-laws of the Company during the year. The memorandum and a r t i c l e s o f a s s o c i a t i o n a n d t h e b y e - l a w s o f t h e Company are available on the Company’s website. ETHICAL STANDARDS AND DIVERSITY All Directors, senior management and employees of the Company are expected to conduct themselves with integrity, openness, honesty and fairness, and in the best interests of the Company. The Board has established a Code of Conduct and Ethics, which is supported by a Whistleblower Policy, to guide all Directors, members of seni or management and employees. A copy of the Code of Conduct and Ethics and Whistleblower Policy is available in the corporate governance section of the Company’s website. The Company’s recognition of the benefits of diversity where people from different gender, age, ethnicity and cultural backgrounds can bring fresh ideas and perceptions which make the workplace more efficient is reinforced in the Diversity Policy, a copy of which is available in the corporate governance section of the Company’s website. This Policy outlines specific di v ers i ty i ni ti a ti v es d es i gned to fa ci l i ta te eq ua l employment opportunities and requires the Company to set out specific diversity initiatives and targets with the aim of reporting the progress towards the metrics in the annual report. These key metrics include: • • • • • p r o p o r t i o n o f w o m e n a p p o i n t e d a s n o n - executive directors of the Company; proportion of women in the workplace; proportion of women in senior management; parental leave return rates; and employee turnover. ANNUAL REPORT 2015 The following metrics shows the comparison over historical data: 2015 2014 2013 2012 Proportion of women appointed as non-executive directors Proportion of women in the workplace Proportion of women in senior management Parental leave return rates Employee turnover 0 10% 11% 0 45% 0 9% 29% 0 23% 0 14% 22% 0 22% 0 10% 11% 0 19% The above key metrics appears distorted as a result of the downsizing and streamlining of staff of the Company in 2015. The policy is generally delivering except for the aspect of proportion of women appointed as senior management and non-executive directors. The Board is continually looking to achieve diversity and absent a diversity of gender will endeavour to appoint individuals who will provide a mix of diverse experiences, perspectives and skills appropriate for the Company, including appropriate technical and commercial skills relevant to the mining industry. The proportion of women employees in the whole organisation is approximately 15%. Key performance indicators for business are as follows: Workplace quality Total workforce by employment type, age group and geographical region Current workforce Corporate Corporate Support Services Project Development Exploration Mining Operation TOTAL Australia China Hong Kong 1 3 2 3 – 9 4 14 – 17 177 212 10 7 – – – 17 29 CORPORATE GOVERNANCE REPORT SUSTAINABILITY The Company is committed to the development of a sustainable iron ore business in Western Australia that benefits its employees, contractors, suppliers, partners and the community. We will achieve this through the effective implementation and proactive management of our commitments and obligations to workplace health and safety, the environment and to the communities in which we operate. To operate an effective and sustainable iron ore business, Brockman will: — Focus on the elimination and management of workplace hazards and risks. — Act ethically and responsibly in all its interactions. — Promote a culture which focuses its employees, contractors, suppliers and partners on workplace health and safety as the responsibility of all those who work in its business. — Provide a workplace free from bullying or discrimination and offering equal opportunity to all employees. — Work actively through all areas of its business to minimize the actual and potential environmental impact of the Company’s activities. — Respect the rights of the traditional owners and value the indigenous cultural heritage associated with its operations. We will implement systems and ensure that resources are allocated to implement and monitor these commitments and its legal obligations. Our employees, contractors and partners will be regularly informed of the Company’s progress towards these goals. The policy and the systems that support it will be routinely measured to ensure the delivery of our commitments & system improvements made where the need arises. DIRECTORS’ REPORT ANNUAL REPORT 2015 The Directors present their report together with the audited consolidated financial statements of the Group for the year ended 30 June 2015. PRINCIPAL ACTIVITIES The Company is an investment holding company. The principal activities of the Company are exploration and development of iron ore mining projects in Western Australia; exploration, processing and production of copper ore concentrates in the PRC. Detailed activities of each of the Company’s subsidiaries are as set out in Note 35 to the consolidated financial statements. RESULTS AND APPROPRIATIONS The results of the Group for the year ended 30 June 2015 are set out in the consolidated statement of comprehensive income on pages 39 to 40. REVIEW OF OPERATIONS It is recommended that the financial statements be read in conjunction with the 30 June 2015 annual report and any public announcements made by the Company during the period. Detailed business review is set out in pages 4 to 13. In accordance with the continuous disclosure requirements, readers are referred to the announcements lodged with the ASX regarding exploration and other activities of the Company. FINAL DIVIDEND The Board does not recommend the payment of a dividend. PROPERTY, PLANT AND EQUIPMENT Details of movements during the period in the property, plant and equipment of the Group are set out in Note 19 to the consolidated financial statements. SHARE CAPITAL Details of the movements in authorised and issued share capital of the Company are set out in Note 24 to the consolidated financial statements. DISTRIBUTABLE RESERVES As at 30 June 2015, the Company has no reserve available for distribution to the shareholders. PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company’s Bye-laws, or the laws in Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders. FINANCIAL SUMMARY A summary of the results and of the assets and liabilities of the Group for the last five financial period/year is set out on page 87. DIRECTORS The Directors of the Company during the year and up to the date of this report were: Non-executive Directors: Kwai Sze Hoi (Chairman) Liu Zhengui (Vice Chairman) Ross Stewart Norgard Warren Talbot Beckwith ( re-designated from Executive Director to Non-executive Director on 25 February 2015) (resigned on 2 July 2015) Executive Directors: Colin Paterson (appointed on 25 February 2015) Chan Kam Kwan, Jason (Company Secretary) Kwai Kwun, Lawrence Luk Kin Peter Joseph (resigned on 5 August 2014) Independent Non-executive Directors: Uwe Henke Von Parpart Yip Kwok Cheung, Danny Yap Fat Suan, Henry Choi Yue Chun, Eugene In accordance with Clauses 86(2) and 87(1) of the Company’s Bye-laws, Messrs. Kwai Sze Hoi, Colin Paterson, Chan Kam Kwan Jason and Yip Kwok Cheung Danny shall retire and, being eligible, offer themselves for re-election at the forthcoming annual general meeting. INDEPENDENT NON EXECUTIVE DIRECTORS All the Independent Non-executive Directors are appointed for a specific term and will be subject to retirement by rotation and re-election in accordance with the HK Listing Rules and the Bye-laws of the Company. The Company has received from each of the Independent Non-executive Directors, an annual confirmation of his independence pursuant to Rule 3.13 of the HK Listing Rules. The Company considered all of the Non-executive Directors are independent. DIRECTOR’S SERVICE CONTRACTS None of the directors who are proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation. 31 DIRECTORS’ REPORT DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS As at 30 June 2015, the interests and short positions of the Directors and chief executives and their respective associa tes in the shares, un derl yi n g s h ares a nd debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or which were otherwise required to be notified to the Company and the SEHK, pursuant to the Model Code were as follows: (i) Long positions in the ordinary shares of HK$0.10 each of the Company Number of issued ordinary shares held Number of share options held Approximate percentage of the issued share capital of the Company 60,720,000 1,776,960,137 – – 0.72% 21.20% – – 70,000,000 30,000,000 1,500,000 – Name of Director Capacity Mr. Kwai Sze Hoi Jointly (Note) Interests of controlled corporation (Note) Beneficial owner (Note) Mr. Liu Zhengui Beneficial owner Mr. Ross Stewart Norgard Beneficial owner Interests of controlled corporation 64,569,834 178,484,166 Mr. Warren Talbot Beckwith* Beneficial owner – 20,000,000 Mr. Colin Paterson Mr. Kwai Kwun Lawrence Beneficial owner Interest of his spouse Beneficial owner Interests of controlled corporation Mr. Chan Kam Kwan, Jason Beneficial owner Mr. Uwe Henke Von Parpart Beneficial owner Mr. Yip Kwok Cheung, Danny Beneficial owner Mr. Yap Fat Suan, Henry Beneficial owner Mr. Choi Yue Chun, Eugene Beneficial owner 30,173,004 22,625,442 22,258,412 59,000,000 – – – 400,000 – 35,000,000 – 15,000,000 – 12,200,000 2,500,000 2,500,000 – – 0.84% 0.36% 0.79% 2.13% 0.24% 0.78% 0.27% 0.44% 0.70% 0.15% 0.03% 0.03% 0.00% 0.00% Note: The 1,776,960,137 shares were held by Ocean Line Holdings Ltd., a company held as to 60% by Mr. Kwai Sze Hoi and as to 40% by Ms. Cheung Wai Fung (Mr. Kwai’s spouse). In addition, Mr. Kwai and Ms. Cheung have a joint direct interest in 60,720,000 shares of the Company. * Subsequent to the year ended 30 June 2015, Mr. Warren Talbot Beckwith has resigned as a director of the Company. Save as disclosed above, none of the Directors and chief executives, nor their associates had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations as at 30 June 2015. ANNUAL REPORT 2015 SHARE OPTIONS The share option scheme (the “Share Option Scheme”) of the Company was adopted by the Company pursuant to the resolution of the shareholders passed in the AGM on 13 November 2012. Particulars of the Share Option Scheme are set out in Note 25 to the consolidated financial statements. Details of the options outstanding as at 30 June 2015 which have been granted to Qualified Persons under the Share Option Scheme are as follows: Option type Outstanding as at 1 July 2014 Granted during the year Reclassified during the year Lapsed during the year Outstanding as at 30 June 2015 2012A 2012A 2013C 2012A 2013C 2012A 2013C 2012A 2013C 2013C 2013C 2013C 2013C 2013C 2013A 2015A 2011B 2012A 2013A 2013B 2012A 2013C Directors Luk Kin Peter Joseph (Note a) Chan Kam Kwan, Jason Lau Kwok Kuen, Eddie (Note c) Uwe Henke Von Parpart Yip Kwok Cheung, Danny Kwai Sze Hoi Liu Zhengui Warren Talbot Beckwith (Note b) Ross Stewart Norgard Kwai Kwun Lawrence Colin Paterson (Note c) Sub-total Employees Sub-total Consultants Sub-total Total Weighted average exercise price Notes: 50,000,000 5,000,000 7,200,000 1,000,000 1,500,000 1,000,000 1,500,000 1,000,000 1,500,000 70,000,000 30,000,000 20,000,000 1,500,000 15,000,000 – – 206,200,000 5,400,000 – 176,200,000 7,200,000 188,800,000 20,000,000 5,000,000 25,000,000 – – – – – – – – – – – – – – – 8,000,000 8,000,000 – – – – – – – 420,000,000 8,000,000 0.82 0.45 (50,000,000) – – – – – – 5,000,000 7,200,000 – – 1,000,000 1,500,000 1,000,000 1,500,000 70,000,000 30,000,000 20,000,000 1,500,000 15,000,000 27,000,000 8,000,000 188,700,000 4,400,000 50,000,000 66,200,000 7,200,000 127,800,000 – – – (1,000,000) (1,500,000) – – – – – – – – – – – (2,500,000) (1,000,000) – (83,000,000) – (84,000,000) (20,000,000) (5,000,000) (25,000,000) (111,500,000) 316,500,000 0.82 0.81 – – – – – – – – – – – 27,000,000 – (23,000,000) 50,000,000 (27,000,000) – 23,000,000 – – – – – (a) Mr. Luk Kin Peter Joseph has resigned as an Executive Director and Chief Executive Officer of the Company on 5 August 2014. (b) Warren Talbot Beckwith resigned as Independent Non-executive Director on 2 July 2015 respectively. (c) Mr. Colin Paterson was appointed as an Executive Director on 25 February 2015. On 6 January 2011, the Company has issued 15,000,000 freely traded options which are attached to each of the 15,000,000 shares subscribed during the dual-listing process of the Company. Options are freely traded and has expired on 30 September 2014. The total number of securities available for issue under the share option scheme amounts to 781,448,213 as at the date of the annual report, representing 9.32% of the issued share capital outstanding. 33 DIRECTORS’ REPORT DIRECTORS’ RIGHTS TO ACQUIRE SHARES Other than as disclosed in the section “Directors’ and Chief Executives’ Interests”, at no time during the period was the Company, its holding company, or any of its subsidiaries or fellow subsidiaries, a party to any arrangements to enable the Directors of the Company nor their associates to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. DIRECTORS’ INTERESTS IN COMPETING BUSINESS None of the Directors has any interests in competing business to the Group. DIRECTORS’/CONTROLLING SHAREHOLDERS’ INTERESTS IN CONTRACTS Details of the related party transactions for the year are set out in Note 34 to the consolidated financial statements. Other than as disclosed therein, no contracts of significance to which the Company, its holding company, subsidiaries or fellow subsidiaries was a party and in which a Director or a controlling shareholder of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the period. DIRECTORS AND OFFICERS INDEMNITIES AND INSURANCE T h e C o m p a n y h a s p a i d p r e m i u m s t o i n s u r e t h e Directors and officers of the Group. 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 the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a willful breach of duty by the officer or the improper use by the officers of their position to gain advantage for themselves or someone else to cause detriment to the Group. RELATED PARTY TRANSACTIONS Significant related party transactions entered into by the Group during the year ended 30 June 2015 are disclosed in Note 34 to the consolidated financial statements. SUBSTANTIAL SHAREHOLDERS A s a t 3 0 J u n e 2 0 1 5 , t h e r e g i s t e r o f s u b s t a n t i a l shareholders maintained by the Company pursuant to Section 336 of the SFO shows that the following shareholders had notified the Company of relevant interests and short positions in the issued share capital of the Company: ANNUAL REPORT 2015 Long positions in ordinary shares and underlying shares of HK$0.10 each of the Company Name of shareholder Capacity Ocean Line Holdings Ltd (Note 1) Beneficial owner Kwai Sze Hoi (Note 1) Cheung Wai Fung (Note 1) Interest held by controlled corporations Interest held jointly with another person Beneficial owner (options) Interest held by controlled corporations Interest held jointly with another person Interest held by spouse (options) Equity Valley Investments Limited Beneficial owner The XSS Group Limited (Note 2) Interest held by controlled corporations Cheung Sze Wai, Catherine (Note 2) Luk Kin Peter Joseph (Note 2) Notes: Interest held by controlled corporations Interest held by spouse (options) Interest held by controlled corporations Beneficial owner (options) Number of shares or underlying shares Percentage of the issued share capital of the Company 1,776,960,137 1,776,960,137 60,720,000 70,000,000 1,776,960,137 60,720,000 70,000,000 515,574,276 515,574,276 515,574,276 50,000,000 515,574,276 50,000,000 21.20% 21.20% 0.72% 0.84% 21.20% 0.72% 0.84% 6.15% 6.15% 6.15% 0.60% 6.15% 0.60% 1. Ocean Line is owned as to 60% by Mr. Kwai Sze Hoi and as to 40% by Ms. Cheung Wai Fung (Mr. Kwai’s spouse). In addition, Mr. Kwai and Ms. Cheung have a joint direct interest in 60,720,000 shares. In addition, Mr. Kwai also held 70,000,000 share options of the Company. 2. The 515,574,276 shares were held by Equity Valley Investments Limited. Equity Valley Investments Limited is wholly-owned by The XSS Group Limited, of which 50%, 20% and 30% of its issued share capital were held by Mr. Luk Kin Peter Joseph, Ms. Cheung Sze Wai, Catherine (Mr. Luk’s spouse) and Ms. Chong Yee Kwan (Mr. Luk’s mother) respectively. In addition, Mr. Luk also held 50,000,000 share options of the Company. Other than as disclosed above, the Company has not been notified of any other relevant interests or short positions in the issued share capital of the Company as at 30 June 2015. 35 DIRECTORS’ REPORT PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES During the year, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the listed securities of the Company. MAJOR CUSTOMERS AND SUPPLIERS For the year ended 30 June 2015, the aggregate amount of revenue attributable to the Group’s single customer, which represented 100% of the Group’s total revenue. Aggregate operating and administrative expenses attributable to the Group’s five largest suppliers were less than 14.3% of total operating and administrative expenses (include exploration and evaluation expenses) for the year. At no time during the year did any Director, any associate of a Director, or any shareholder of the Company, which to the knowledge of the Directors owned more than 5% of the Company’s share capital, have any beneficial interests in these customers or suppliers. CORPORATE GOVERNANCE T h e C o m p a n y i s c o m m i t t e d t o m a i n t a i n a h i g h s t a n d a r d o f c o r p o r a t e g o v e r n a n c e p r a c t i c e s . Information on the corporate governance practices is adopted by the Company as set out in the Corporate Governance Report on pages 17 to 30 of the annual report. SUFFICIENCY OF PUBLIC FLOAT Based on the information that is publicly available to the Company and within the knowledge of the Directors, as at the date of this report, there was sufficient of public float of the Company’s securities as required under the HK Listing Rules. AUDITOR The financial statements for the financial year ended 30 June 2015 have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves or re- appointment at the forthcoming annual general meeting of the Company. By order of the Board Kwai Sze Hoi Chairman Hong Kong, 30 September 2015 INDEPENDENT AUDITOR’S REPORT ANNUAL REPORT 2015 TO THE SHAREHOLDERS OF BROCKMAN MINING LIMITED (incorporated in Bermuda with limited liability) We have audited the consolidated financial statements of Brockman Mining Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 39 to 86, which comprise the consolidated and company balance sheets as at 30 June 2015, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the predecessor Hong Kong Companies Ordinance (Cap.32), and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 37 INDEPENDENT AUDITOR’S REPORT OPINION In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2015, and of the Group’s loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the predecessor Hong Kong Companies Ordinance (Cap.32). OTHER MATTERS This report, including the opinion, has been prepared for and only for you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 30 September 2015 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ANNUAL REPORT 2015 For the year ended 30 June 2015 Continuing operations Revenue Cost of sales Gross (loss)/profit Other income Other (losses)/gains, net Selling and administrative expenses Exploration and evaluation expenses Impairment losses Share of losses of joint ventures Operating loss Finance costs Loss before income tax Income tax credit Loss for the year from continuing operations Discontinued operation Profit for the year from discontinued operation Loss for the year Other comprehensive (loss)/income: Items that may be reclassified to profit or loss Exchange differences arising on translation of foreign operations Release of translation reserve arising from disposal of subsidiaries Other comprehensive (loss)/income for the year Total comprehensive loss for the year Loss for the year attributable to: Equity holders of the Company Non-controlling interests Loss for the year attributable to equity holders of the Company arising from: Continuing operations Discontinued operation Total comprehensive loss attributable to: Equity holders of the Company Non-controlling interests Year ended 30 June 2015 HK$’000 2014 HK$’000 Note 7 9 10 11 9 9 12 32 13 14 30 36,525 (38,497) (1,972) 1,954 (6,878) (73,479) (76,560) (1,441,618) (5,031) 38,739 (34,170) 4,569 5,388 1,984 (88,933) (87,188) (40,000) (8,090) (1,603,584) (212,270) – (804) (1,603,584) (213,074) 367,036 – (1,236,548) (213,074) – 3,973 (1,236,548) (209,101) (380,776) – (380,776) 63,880 (2,717) 61,163 (1,617,324) (147,938) (1,236,548) (207,098) – (2,003) (1,236,548) (209,101) (1,236,548) (211,071) – 3,973 (1,236,548) (207,098) (1,617,324) (146,447) – (1,491) (1,617,324) (147,938) 39 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2015 Total comprehensive (loss)/income attributable to equity holders of the Company arising from: Continuing operations Discontinued operation (Loss)/earnings per share attributable to the equity holders of the Company during the year Basic (loss)/earnings per share from: Continuing operations Discontinued operation Diluted (loss)/earnings per share from: Continuing operations Discontinued operation Year ended 30 June 2015 HK$’000 2014 HK$’000 Note (1,617,324) (148,491) – 2,044 (1,617,324) (146,447) HK cents HK cents (14.75) – (14.75) (14.75) – (14.75) (2.61) 0.05 (2.56) (2.61) 0.05 (2.56) 16 16 16 16 The notes on pages 46 to 86 form an integral part of these consolidated financial statements. CONSOLIDATED BALANCE SHEET As at 30 June 2015 ANNUAL REPORT 2015 Non-current assets Mining properties Property, plant and equipment Interests in joint ventures Other non-current assets Current assets Inventories Other receivables, deposits and prepayments Amounts due from related parties Cash and cash equivalents Total assets Equity Share capital Reserves Total equity Non-current liabilities Other payables Deferred income tax liabilities Provisions Current liabilities Trade payables Other payables and accrued charges Amounts due to related parties Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities As at 30 June 2015 HK$’000 2014 HK$’000 Note 18 19 32 20 34 21 24 23 26 27 22 23 34 1,504,573 3,536,267 27,815 288 14,377 33,242 1,264 14,488 1,547,053 3,585,261 4,274 5,480 2,358 98,297 110,409 11,857 8,117 2,993 223,698 246,665 1,657,462 3,831,926 838,198 315,607 1,153,805 838,198 1,941,198 2,779,396 26,995 381,510 940 409,445 10,201 83,842 169 94,212 26,865 920,561 1,660 949,086 9,540 91,070 2,834 103,444 503,657 1,052,530 1,657,462 3,831,926 16,197 143,221 1,563,250 3,728,482 The consolidated financial statements on pages 39 to 86 were approved by the Board of Directors on 30 September 2015 and were signed on its behalf Kwai Kwun, Lawrence Director Chan Kam Kwan, Jason Director The notes on pages 46 to 86 form an integral part of these consolidated financial statements. 41 BALANCE SHEET As at 30 June 2015 Non-current assets Investments in subsidiaries Amounts due from subsidiaries Property, plant and equipment Current assets Other receivables, deposits and prepayments Amount due from subsidiaries Cash and cash equivalents Total assets Equity Share capital Reserves Total equity Current liabilities Other payables and accrued charges Amount due to a subsidiary Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities As at 30 June 2015 HK$’000 2014 HK$’000 Note 35 35 19 35 21 24 36 – – 1,136,332 2,739,497 844 1,451 1,137,176 2,740,948 3,176 237,931 24,178 265,285 3,194 133,797 133,010 270,001 1,402,461 3,010,949 838,198 313,631 1,151,829 3,644 246,988 250,632 250,632 838,198 1,921,220 2,759,418 4,538 246,993 251,531 251,531 1,402,461 3,010,949 14,653 18,470 1,151,829 2,759,418 The financial statements on pages 39 to 86 were approved by the Board of Directors on 30 September 2015 and were signed on its behalf Kwai Kwun, Lawrence Director Chan Kam Kwan, Jason Director The notes on pages 46 to 86 form an integral part of these financial statements. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2015 ANNUAL REPORT 2015 6 9 3 , 9 7 7 , 2 – 6 9 3 , 9 7 7 , 2 5 2 2 , 8 5 4 ) 9 9 4 , 2 4 8 , 2 ( ) 4 8 3 , 0 3 2 ( l a t o T 0 0 0 ’ $ K H 6 4 5 , 6 5 7 , 2 - n o N g n i l l o r t n o c s t s e r e t n i 0 0 0 ’ $ K H 5 7 0 , 3 4 l a t o T 0 0 0 ’ $ K H 1 7 4 , 3 1 7 , 2 r e h t O s e v r e s e r 0 0 0 ’ $ K H 1 6 4 , 2 6 4 ) 1 0 1 , 9 0 2 ( ) 3 0 0 , 2 ( ) 8 9 0 , 7 0 2 ( 0 8 8 , 3 6 ) 7 1 7 , 2 ( 3 6 1 , 1 6 2 1 5 – 2 1 5 8 6 3 , 3 6 ) 7 1 7 , 2 ( 1 5 6 , 0 6 ) 8 3 9 , 7 4 1 ( ) 1 9 4 , 1 ( ) 7 4 4 , 6 4 1 ( ) 3 5 6 , 5 4 ( 0 0 8 , 3 6 1 – 0 0 2 , 1 3 1 4 4 , 1 2 8 8 7 , 0 7 1 – – ) 7 1 4 , 1 4 ( – ) 7 6 1 ( ) 4 8 5 , 1 4 ( ) 6 3 2 , 4 ( 0 0 8 , 3 6 1 7 6 1 0 0 2 , 1 3 1 4 4 , 1 2 2 7 3 , 2 1 2 – – – – – – – – – ) 6 3 2 , 4 ( ) 6 3 2 , 4 ( ) 8 9 0 , 7 0 2 ( – – – – ) 8 9 0 , 7 0 2 ( – – – – ) 1 9 0 , 2 ( ) 1 9 0 , 2 ( 8 6 3 , 3 6 ) 7 1 7 , 2 ( 1 5 6 , 0 6 1 5 6 , 0 6 – – – 6 – 6 – – – – – – – – – 1 4 4 , 1 2 1 4 4 , 1 2 0 8 0 , 8 8 – – – – – – – – – 2 5 2 , 2 2 5 2 , 2 0 7 6 , 7 s e s s o l 0 0 0 ’ $ K H e v r e s e r 0 0 0 ’ $ K H ) 0 1 3 , 3 3 6 , 2 ( ) 1 4 0 , 1 9 2 ( e v r e s e r 0 0 0 ’ $ K H 9 3 6 , 6 6 ) e t o n ( 0 0 0 ’ $ K H 8 1 4 , 5 y n a p m o C e h t f o s r e d o h l y t i u q e o t l e b a t u b i r t t A d e s a b r - e a h S y r o t u t a t S d e t l a u m u c c A n o i t a l s n a r T n o i t a s n e p m o c s e v r e s e r r e a h S i m u m e p r – – – – – – 0 0 0 ’ $ K H 6 5 8 , 3 1 3 , 4 r e a h S l a t i p a c 0 0 0 ’ $ K H 8 4 4 , 9 8 7 – – – – – – 0 5 8 , 2 2 1 0 5 9 , 0 4 – – – – 0 0 4 , 3 2 0 0 8 , 7 f o n o i t a l s n a r t n o g n i s i r a s e c n e r e f f i d e g n a h c x E e m o c n i e v i s n e h e r p m o c r e h O t e m o c n i e v i s n e h e r p m o C 3 1 0 2 l y u J 1 t a e c n a a B l r a e y e h t r o f s s o L s n o i t r a e p o n g e i r o f r a e y e h t r o f e m o c n i e v i s n e h e p m o c r r e h t o l a t o T r a e y e h t r o f ) s s o l ( / e m o c n i e v i s n e h e p m o c r l a t o T i y r a d i s b u s a n i t s e r e t n i l a n o i t i d d a f o n o i t i s i u q c A s r e d o h l y t i u q e h t i w s n o i t c a s n a r T m o r f g n i s i r a e v r e s e r n o i t a l s n a r t f o e s a e e R l ) 0 3 e t o N ( s e i r i a d i s b u s f o l a s o p s i d f o n o i t p m e d e r n o p u r s e a h s f o e u s s I ) 4 2 e t o N ( d n o b e t a r d e x i f s e v r e s e r y r o t u t a t s o t s n o i t a i r r p o p p A n o i t a s n e p m o c d e s a b r - e a h S ) 4 2 e t o N ( r s e a h s f o e u s s I ) 1 3 e t o N ( 0 5 2 , 6 4 1 0 5 7 , 8 4 s r e d o h l y t i u q e h t i w s n o i t c a s n a r t l a t o T 6 0 1 , 0 6 4 , 4 8 9 1 , 8 3 8 4 1 0 2 e n u J 0 3 t a e c n a a B l 43 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2015 l a t o T 0 0 0 ’ $ K H 6 9 3 , 9 7 7 , 2 ) 8 4 5 , 6 3 2 , 1 ( ) 6 7 7 , 0 8 3 ( ) 6 7 7 , 0 8 3 ( ) 4 2 3 , 7 1 6 , 1 ( – ) 7 6 2 , 8 ( ) 7 6 2 , 8 ( 5 0 8 , 3 5 1 , 1 – – – – – – – – – - n o N g n i l l o r t n o c s t s e r e t n i 0 0 0 ’ $ K H l a t o T 0 0 0 ’ $ K H 6 9 3 , 9 7 7 , 2 ) 8 4 5 , 6 3 2 , 1 ( ) 6 7 7 , 0 8 3 ( ) 6 7 7 , 0 8 3 ( ) 4 2 3 , 7 1 6 , 1 ( – ) 7 6 2 , 8 ( ) 7 6 2 , 8 ( r e h t O s e v r e s e r 0 0 0 ’ $ K H 5 2 2 , 8 5 4 – – – – – – – ) 8 4 5 , 6 3 2 , 1 ( – – – ) 8 4 5 , 6 3 2 , 1 ( ) 6 7 7 , 0 8 3 ( ) 6 7 7 , 0 8 3 ( ) 6 7 7 , 0 8 3 ( – ) 4 3 1 , 2 ( ) 4 3 1 , 2 ( ) 3 ( – ) 3 ( – – – – – ) 7 6 2 , 8 ( ) 7 6 2 , 8 ( – – – – – 7 3 1 , 2 7 3 1 , 2 7 0 8 , 9 s e s s o l 0 0 0 ’ $ K H e v r e s e r 0 0 0 ’ $ K H ) 9 9 4 , 2 4 8 , 2 ( ) 4 8 3 , 0 3 2 ( e v r e s e r 0 0 0 ’ $ K H 0 8 0 , 8 8 ) e t o n ( 0 0 0 ’ $ K H 0 7 6 , 7 y n a p m o C e h t f o s r e d o h l y t i u q e o t l e b a t u b i r t t A d e s a b r - e a h S y r o t u t a t S d e t l a u m u c c A n o i t a l s n a r T n o i t a s n e p m o c s e v r e s e r r e a h S i m u m e p r – – – – – – – 0 0 0 ’ $ K H 6 0 1 , 0 6 4 , 4 r e a h S l a t i p a c 0 0 0 ’ $ K H 8 9 1 , 8 3 8 – – – – – – – f o n o i t a l s n a r t n o g n i s i r a s e c n e r e f f i d e g n a h c x E e m o c n i e v i s n e h e r p m o c r e h O t e m o c n i e v i s n e h e r p m o C 4 1 0 2 l y u J 1 t a e c n a a B l r a e y e h t r o f s s o L s n o i t r a e p o n g e i r o f r a e y e h t r o f s s o l e v i s n e h e p m o c r r e h t o l a t o T r a e y e h t r o f s s o l e v i s n e h e p m o c r l a t o T s e v r e s e r y r o t u t a t s o t s n o i t a i r r p o p p A s r e d o h l y t i u q e h t i w s n o i t c a s n a r T ) 5 2 e t o N ( n o i t a s n e p m o c d e s a b r - e a h S s r e d o h l y t i u q e h t i w s n o i t c a s n a r t l a t o T 5 0 8 , 3 5 1 , 1 5 2 2 , 8 5 4 ) 1 8 1 , 1 8 0 , 4 ( ) 3 6 1 , 1 1 6 ( 3 1 8 , 9 7 6 0 1 , 0 6 4 , 4 8 9 1 , 8 3 8 5 1 0 2 e n u J 0 3 t a e c n a a B l h t i w e c n a d o c c a r n i C R P e h t n i d e h s i l b a t s e i y r a d i s b u s a f o x a t r e t f a s s o l e h t m o r f d e t a i r r p o p p a s d n u f e v r e s e r l r a e n e g t n e s e p e r r s e v r e s e r y r o t u t a t s e h T : e t o N . s n o i t l a u g e r d n a s w a l C R P . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l r a g e t n i n a m o r f 6 8 o t 6 4 s e g a p n o s e t o n e h T CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2015 ANNUAL REPORT 2015 Cash flows from operating activities Cash used in operating activities Income tax refund Net cash used in operating activities Cash flows from investing activities Interest received Proceeds from disposal of property, plant and equipment Purchases of property, plant and equipment Purchase of mining properties Investments in joint ventures Net cash inflows arising from disposal of subsidiaries 30 Net cash (used in)/generated from investing activities Cash flows from financing activities Proceeds from issuance of fixed rate bonds Proceeds from issuance of ordinary shares Acquisition of additional interest in subsidiaries Repayment of borrowings Repayment of finance leases Interest paid Finance lease charges Net cash generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Effects of foreign exchange rate changes Cash and cash equivalents at end of the year 21 Cash used for exploration and evaluation activities were included in: — Operating activities Year ended 30 June 2015 HK$’000 2014 HK$’000 Note 28 (114,415) (195,501) – 331 (114,415) (195,170) 1,014 46 (1,980) – (4,230) – (5,150) – – – – – – – – (119,565) 223,698 (5,836) 98,297 3,901 904 (2,864) (141) (8,043) 35,090 28,847 31,200 163,800 (45,654) (5,158) (4,545) (955) (416) 138,272 (28,051) 252,994 (1,245) 223,698 (87,302) (89,609) The notes on pages 46 to 86 form an integral part of these consolidated financial statements. 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 GENERAL INFORMATION Brockman Mining Limited (the “Company”) and its subsidiaries (collectively, the “Group”) principally engage in the acquisition, exploration and towards future development of iron ore project in Australia; and in the exploitation, processing and sales of mineral resources, including copper ore concentrates and other mineral ore products in the People’s Republic of China (“PRC”). The Company is a public limited company incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “SEHK”) and Australian Securities Exchange (the “ASX”). The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. These consolidated financial statements are presented in thousands of Hong Kong dollars (“HK$”), unless otherwise stated. 2 BASIS OF PREPARATION The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and with the applicable disclosure requirements of the Hong Kong Companies Ordinance. The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements are prepared in accordance with the applicable requirements of the predecessor Companies Ordinance (Cap. 32) for this financial year and the comparative period. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4. Going concern During the year ended 30 June 2015, the Group incurred net operating cash outflows of HK$114,415,000, and the cash and cash equivalents of the Group reduced to HK$98,297,000 as at 30 June 2015 from HK$223,698,000 as at 30 June 2014. In view of these circumstances, the directors of the Company are taking certain measures to mitigate the liquidity pressure and to improve the financial performance which include, but not limited to the reduction in exploration and evaluation activities and the implementation of other cost-saving measures. The directors have reviewed the Group’s cash flow projections which cover a period of not less than twelve months from 30 June 2015. Based on these projections, the Group’s cash outflows will be reduced through the implementation of the measures described above. On this basis, the directors of the Company consider that, taking into account the Group’s operating performance, reduction of exploration and evaluation activities, and the successful implementation of cost saving measures mentioned above, the Group is expected to have sufficient financial resources to satisfy its future working capital requirements, and to meet its financial obligations as and when required for the next twelve months from the balance sheet date. Accordingly, the directors consider that it is appropriate to prepare the Group’s consolidated financial statements on a going concern basis. ANNUAL REPORT 2015 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Amended standards and interpretation adopted by the Group The Group adopted the following amended standards and interpretation which are mandatory for the Group’s financial year ended 30 June 2015. The adoption of these amendments to standards and interpretation does not have any significant impact to the results and financial position of the Group. IAS 19 (2011) (Amendment) Employee Benefits IAS 32 (Amendment) IAS 36 (Amendment) IAS 39 (Amendment) IFRIC-Int 21 IFRS 10, IFRS 12 and IAS 27 (Revised 2011) (Amendment) Financial Instruments: Presentation — Offsetting Financial Assets and Financial Liabilities Impairments of Assets Financial Instruments: Recognition and Measurement Levies Investment Entities Annual Improvements Project 2012 Annual Improvements 2010–2012 Cycle Annual Improvements Project 2013 Annual Improvements 2011–2013 Cycle (b) New and amended standards have been issued but are not effective for the Group’s financial year ended 30 June 2015 and have not been early adopted The following new standards and amendments to standards have been issued, but are not effective for the Group’s financial year ended 30 June 2015 and have not been early adopted: Effective for annual periods beginning on or after Annual Improvements Project 2014 Annual Improvements 2012–2014 Cycle 1 January 2016 IAS 1 (Amendment) The Disclosure Initiative IAS 16 and IAS 38 (Amendment) Classification of Acceptable Methods of Depreciation and Amortisation IAS 16 and IAS 41 (Amendment) Agriculture: Bearer Plants IAS 27 (Amendment) Equity Method in Separate Financial Statements 1 January 2016 1 January 2016 1 January 2016 1 January 2016 IFRS 10, IFRS 12 and Investment Entities: Applying 1 January 2016 IAS 28 (Amendment) the Consolidation Exception IFRS 10 and IAS 28 (Amendment) Sale or Contribution of Assets between an Investor and Its associate or Joint Venture 1 January 2016 IFRS 11 (Amendment) Accounting for Acquisitions of Interests 1 January 2016 IFRS 14 IFRS 15 IFRS 9 in Joint Operations Regulatory Deferral Accounts Revenue from Contracts with Customers Financial Instruments 1 January 2016 1 January 2017 1 January 2018 The Group is in the process of making an assessment of the impact of the above new standards and amendments to standards and is not yet in a position to state the impact on the Group’s results of operations and financial position. 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (c) New Hong Kong Companies Ordinance (Cap. 622) In addition, the requirements of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance (Cap. 622) come into operation as from the Company’s first financial year ending 30 June 2015 in accordance with section 358 of that Ordinance. The Group is in the process of making an assessment of expected impact of the changes in the Companies Ordinance on the consolidated financial statements in the period of initial application of Part 9 of the new Hong Kong Companies Ordinance (Cap. 622). So far, it has concluded that the impact is unlikely to be significant and only the presentation and the disclosure of information in the consolidated financial statements will be affected. (d) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies. (i) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions with equity holders of the Group. The difference between fair value of any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. (ii) Disposal of subsidiaries When the Group ceases to have control of a subsidiary, any retained interest in the entity is re- measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (iii) Separate financial statements Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable. Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill. ANNUAL REPORT 2015 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (e) Joint arrangements The Group had applied IFRS 11 to all joint arrangements. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in joint ventures equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. (f) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the executive directors of the Company, who are responsible for allocating resources, assessing performance of the operating segments, and making strategic decisions. (g) Foreign currency translation (i) (ii) 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 Hong Kong dollars, which is the Company’s functional and the Group’s presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. 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 consolidated statement of comprehensive income. (iii) 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 balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each consolidated statement of comprehensive income are translated at average exchange rates (unless this average 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 rates on the dates of the transactions); and — all resulting currency translation differences are recognised in other comprehensive income. 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (g) Foreign currency translation (Continued) (iii) Group companies (Continued) On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of joint control over a joint venture that includes a foreign operation), all of the currency translation differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated currency translation differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest in joint ventures that do not result in the Group losing joint control) the proportionate share of the accumulated exchange difference is reclassified to profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Currency translation differences arising are recognised in other comprehensive income. (h) Mining properties Mining properties are stated in the balance sheet at cost less subsequent accumulated amortisation and any accumulated impairment losses. Mining properties are amortised using the units of production method based on the proven and probable mineral reserves and starts when commercial production commences. Mining properties acquired in a business combination are identified and recognised as intangible assets separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair values at the acquisition date. Impairment reviews of mining properties are undertaken if events or changes in circumstances indicate a potential impairment. The carrying value of mining properties is compared to the recoverable amount, which is the higher of value-in-use and the fair value less costs of disposal. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Mining properties that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. (i) Property, plant and equipment Property, plant and equipment including buildings held for use in the production or supply of goods or services, or for administrative purposes, other than construction in progress, are stated at historical cost less subsequent accumulated depreciation and any accumulated impairment losses. 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 Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred. ANNUAL REPORT 2015 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (i) Property, plant and equipment (Continued) Depreciation is calculated using the straight-line method to allocate their cost to their residual value at the following rates per annum: Buildings 5% Leasehold improvements Shorter of remaining lease terms or 25% Plants, furniture, fixtures and equipment 12.5%–25% Motor vehicles 10%–20% The assets’ residual value and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised in the consolidated statement of comprehensive income. (j) Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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 of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. (k) Discontinued operation A discontinued operation is a component of the Group’s business, the operation and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographic area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. When an operation is classified as discontinued, a single amount is presented in the consolidated statement of comprehensive income, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group constituting the discontinued operation. (l) Financial assets Classification The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise “other receivables and deposits”, “amount due from related parties”, and “cash and cash equivalents” in the consolidated balance sheet. 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (l) Financial assets (Continued) Recognition and measurement Regular way purchases and sales of financial assets are recognised on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Impairment of financial assets (i) Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income. If a loan or held- to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income. (m) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. ANNUAL REPORT 2015 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (n) Trade and other receivables Trade receivables are amounts due from customers for inventories sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. (o) Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held at call with banks. (p) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (q) Trade and other payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. (r) Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised directly in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. All wholly-owned Australian subsidiaries of the Company form a tax consolidated group under Australian tax law and are taxed as a single entity. Brockman Mining Holdings (Australia) Pty Ltd (“BMH”), a wholly-owned subsidiary of the Company, is the head entity of the Australian tax consolidated group. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination which at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (r) Current and deferred income tax (Continued) Deferred income tax is provided on temporary differences arising on investments in subsidiaries and joint ventures, except when the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. (s) Employee benefits (i) Short-term obligations Salaries, annual bonuses, annual leave entitlement and the cost of non-monetary benefits expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. (ii) Other long term employee benefit obligations The liability for long service payment 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 the expected future payments to be made in respect of services provided by employees up to the end of a reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of services. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. (iii) Pension obligations The Group participates in various defined contribution schemes. The schemes are generally funded through payments to insurance companies, trustee-administrated funds or the relevant government authorities. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to the employee services in the current and prior periods. Payments to state-managed retirement benefit and Mandatory Provident Fund retirement benefits scheme are charged as expenses when employees have rendered services entitling them to the contributions. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is available. ANNUAL REPORT 2015 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (t) Share-based payments (a) Equity-settled share-based payment transactions The Group operates equity-settled, share-based compensation plans, under which the entity receives services from directors, employees or consultants as consideration for equity instruments (share options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: • • • Including any market performance conditions (for example, an entity’s share price); Excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining as an employee of the entity over a specified time period); and Including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. (b) Share-based payment transactions among group entities The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts. (c) Share-based payment transactions with non-employees For equity-settled share-based payment transactions with non-employees, the fair value of goods or services received in exchange for a share-based payment is measured directly unless the fair value cannot be estimated reliably. In this case, the fair value is measured by reference to the fair value of the equity instruments granted as consideration. The measurement date is the date that the entity obtains the goods or the counterparty renders the service. Expenses are recognised in the consolidated statement of comprehensive income, and the corresponding the increase in equity. (u) Provisions Provisions for environment restoration, restructuring costs and legal claims are recognised when: the Group 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. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (u) Provisions (Continued) Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using pre-tax that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. (v) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for inventories supplied in the normal course of business, net of goods and services tax or value-added tax, discounts and after eliminating sales within the Group. Revenue on provisionally priced sales is recognised at the estimated fair value of the total consideration received or receivable. Contract terms for copper ore concentrates allow for a price adjustment based on the final assay of the goods by the customer to determine content. Recognition of the sales revenue for copper ore concentrates is based on the most recently determined estimate of product specifications with a subsequent adjustment made to revenue upon final determination. The fair value of the final sales price adjustment is re-estimated continuously and changes in fair value are recognised as an adjustment to revenue. In all cases, fair value is estimated by reference to market prices. (w) Interest income Interest income from a financial asset is accrued on a time basis at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. (x) Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the consolidated statement of comprehensive income over the year necessary to match them with the costs that they are intended to compensate. (y) Exploration and evaluation costs The Group has a policy of expensing all exploration and evaluation expenditure, except for acquisition costs, in the financial year in which it is incurred, unless its recoupment out of revenue to be derived from the successful development of the prospect, or from sale of that prospect, is assured beyond reasonable doubt. ANNUAL REPORT 2015 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (z) Consumption tax (Goods and Services Tax and Value-added Tax) Revenues, expenses and assets are recognised net of the amount of consumption tax except: • where the consumption tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the consumption tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of consumption tax included. The net amount of consumption tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the consolidated statement of cash flows on a gross basis and the consumption tax component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of consumption tax recoverable from, or payable to, the taxation authority. (aa) Leases 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 consolidated statement of comprehensive income on a straight-line basis over the period of the lease. 4 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 are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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. (a) Expected remaining useful life of mining right in the PRC and mineral reserves The Group’s management has determined the estimated remaining useful life of 30 years for its mining right based on the proven and probable reserves reported in the independent geologist’s report issued in November 2011. In July 2014, Yunnan State Land Resources Bureau granted Luchun Xingtai Mining Co. Ltd (“Luchun”), a subsidiary of the Group, a mining right certificate for a term of two years expiring in July 2016. With reference to an independent legal opinion received by Luchun, there is no legal barrier for Luchun to renew its mining right certificate when it expires. The independent legal opinion also confirmed that there was no illegal activity undertaken by Luchun and there was no penalty exerted or will be exerted by the government regarding Luchun’s mining operation. Accordingly, the directors of the Company are of the opinion that the Group will be able to continuously renew the mining right and the business licenses of respective mining subsidiaries at minimal charges. Therefore, the Group has used the proven and probable reserves as the basis of estimation for the useful life of its mining rights. 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued) (a) Expected remaining useful life of mining right in the PRC and mineral reserves (Continued) Amortisation rate is determined based on estimated proven and probable mine reserve quantities with reference to the independent technical assessment report. The capitalized cost of mining rights are amortised using the units of production method. Any change to the estimated proven and probable mine reserves will affect the amortisation charge of those mining rights. Management will reassess the useful lives whenever events or changes in circumstances indicate that the mining right and business licenses may not be renewed continually. (b) (c) (d) Proven and probable mineral reserve estimates are updated on a regular basis and have taken into account recent production and technical information about the mine. This change is considered a change in estimate for accounting purposes and is reflected on a prospective basis in related amortisation rate. Impairment of mining properties in the PRC Determining whether the mining properties are impaired requires an estimation of the recoverable amount of the cash-generating unit to which the mining right has been allocated, by value-in-use and fair value less costs of disposal approaches. The Group estimates the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 30 June 2015, the carrying amount of the mining properties is approximately HK$226,635,000 (2014: HK$460,055,000). An impairment loss of HK$225,000,000 was recognised for the year ended 30 June 2015 (2014: HK$40,000,000). Details of the key assumptions used are disclosed in Note 18. Impairment of mining properties in Australia Determining whether the mining properties in Australia are impaired requires an estimation of the recoverable amount of the cash-generating unit to which the mining properties have been allocated, by value-in-use and fair value less costs of disposal approaches. The Group estimates the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 30 June 2015, the carrying amount of the mining properties is approximately HK$1,277,938,000 (2014: HK$3,076,212,000). An impairment loss of HK$1,216,618,000 was recognised for the year ended 30 June 2015(2014: Nil). Details of the key assumptions used are disclosed in Note 18. Income taxes While deferred income tax liabilities are provided in full on all taxable temporary differences, deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. In assessing the amount of deferred income tax assets that need to be recognised, the Group considers future taxable income and ongoing prudent and feasible tax planning strategies. In the event that the Company’s estimates of projected future taxable income and benefits from available tax strategies are changed, or changes in current income tax regulations are enacted that would impact the timing or extent of the Company’s ability to utilise the temporary differences in the future, adjustments to the recorded amount of net deferred income tax assets and income tax expense would be made. As at 30 June 2015, the Group did not recognise any deferred income tax assets in the balance sheet. Details of the Group’s deferred income tax are set out in Note 26. ANNUAL REPORT 2015 5 CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debts and equity balances. The directors of the Company consider that the capital structure of the Group consists of long- term debts, and equity attributable to equity holders of the Company comprising issued capital and reserves. The directors of the Company review the capital structure by considering the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through payment of dividends, new share issues as well as the issue of the new debt or the repayment of existing debts. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. The gearing ratios at 30 June 2015 and 2014 were as follows: Long-term debts (Notes 23) Total equity Total capital Gearing ratio 6 FINANCIAL RISK MANAGEMENT (a) Financial risk factors 2015 HK$’000 26,995 1,153,805 1,180,800 2.29% 2014 HK$’000 26,865 2,779,396 2,806,261 0.96% The Group’s activities expose itself to a variety of financial risks: market risk (including currency risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. The Group does not and is prohibited to enter into derivative contracts for speculative purposes. (i) Foreign exchange risk The Group mainly operates in Hong Kong, the PRC and Australia with most of the transactions originally denominated in the respective local currency. Foreign exchange risk arises when future commercial transactions or recognised financial assets or liabilities are denominated in a currency that is not the entity’s functional currency. The Group is exposed to foreign exchange risk from various currencies, primarily with respect to Australian Dollars (“A$”), Renminbi (“RMB”) and United States Dollars (“US$”). The Group manages its foreign exchange risk by performing regular reviews of the Group’s net foreign exchange exposures and through natural hedges wherever possible. The Group does not use any derivative financial instrument to mitigate the foreign exchange risk. Given the exchange rate peg between the HK$ and the US$, it is not foreseen that the Group will be exposed to any significant exchange rate risk for the transactions conducted in HK$ or US$. As at 30 June 2015 and 2014, the Group was not exposed to any significant exchange risk for RMB as all of the Group’s RMB denominated financial assets and liabilities held by the Group’s companies with RMB as the functional currency. However, exchange rate fluctuation of the A$ against the HK$ could affect the Group’s performance and asset value. As at 30 June 2015, if the A$ has strengthened or weakened by 10% (2014: 10%) against the HK$ with all other variables held constant, loss for the year would have been HK$44,000 (2014: HK$1,782,000) lower/higher, mainly as a result of foreign exchange gains/losses on translation of A$ denominated cash and cash equivalents. 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6 FINANCIAL RISK MANAGEMENT (Continued) (a) Financial risk factors (Continued) (ii) Commodities price risk The Group is exposed to commodity price volatility on commodity sales made by its mine operation in the PRC, mainly copper concentrate products, which are priced on, or benchmarked to, open market. The Group’s iron ore projects in Australia are yet to commence commercial operations and are therefore not exposed to any commodity price volatility. However, iron ore price fluctuation will be relevant to its future activities. The Group does not use any derivative financial instrument for speculation or hedging purposes. As at 30 June 2015 and 2014, the Group is not exposed to any significant commodities price as the commodities price movements do not affect the measurement of the carrying amount of its financial assets or liabilities. (iii) Cash flow and fair value interest rate risks The Group is exposed to interest rate volatility on its financial assets and liabilities. In 2015, the Group was exposed to fair value interest rate risk relating to non-current other payables. However, any interest rate movements will not affect the measurement of the carrying amounts of these financial liabilities according to the Group’s accounting policy. The Group does not have an interest rate hedging policy. However, management monitors interest rate exposures and will consider hedging significant interest rate exposures should the need arises. (iv) Credit risk The Group and the Company’s maximum exposure to credit risk which could cause a financial loss to the Group due to failure to discharge an obligation by the counterparties arises from the carrying amount of the other receivables and deposits, amounts due from related parties and cash and cash equivalents as stated in the consolidated balance sheet. Management reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the credit risk of the Group is significantly reduced. The credit risk on cash and cash equivalents is limited for both the Group and the Company because counterparties are mainly the banks with high credit-rating, i.e. above Aa1 assigned by international credit-rating agencies. The Group and the Company manage concentration of credit risk, with exposure spread over a number of financial institutions. (v) Liquidity risk The Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The Group generally finances its short term funding requirement with cash generated from operations, credit facilities from suppliers and equity funding. The Group’s ability to deliver its Marillana iron ore project is reliant on access to appropriate and timely export infrastructure and funding. The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. ANNUAL REPORT 2015 6 FINANCIAL RISK MANAGEMENT (Continued) (a) Financial risk factors (Continued) (v) Liquidity risk (Continued) As at 30 June 2015 Non-derivative financial liabilities: Trade payables Other payables Amounts due to related parties As at 30 June 2014 Non-derivative financial liabilities: Trade payables Other payables Amounts due to related parties As at 30 June 2015 Non-derivative financial liabilities: Other payables Amount due to a subsidiary As at 30 June 2014 Non-derivative financial liabilities: Other payables Amount due to a subsidiary The Group Within 1 year of demand HK$’000 Total undiscounted cash flows HK$’000 1–2 years HK$’000 Carrying amount at year end date HK$’000 10,201 29,258 169 39,628 9,540 34,817 2,834 47,191 – 29,093 – 29,093 – 28,952 – 28,952 10,201 58,351 169 68,721 9,540 63,769 2,834 76,143 10,201 56,253 169 66,623 9,540 61,682 2,834 74,056 The Company Within 1 year of demand HK$’000 Total undiscounted cash flows HK$’000 1–2 years HK$’000 Carrying amount at year end date HK$’000 192 246,988 247,180 366 246,993 247,359 – – – – – – 192 246,988 247,180 366 246,993 247,359 192 246,988 247,180 366 246,993 247,359 (b) Fair value estimation The Group’s financial instruments carried at fair value as at balance sheet date are measured by level of the following fair value hierarchy. Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 Level 3 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The fair values of the Group’s financial assets, including other receivables, deposits, amounts due from related parties and cash and cash equivalents; and the Group’s financial liabilities, including trade and other payables, amounts due to related parties, approximate their carrying amounts due to their short-term maturities. 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7 REVENUE Revenue represents the amounts received and receivable for sales of mineral ore products for the year. An analysis of the Group’s revenue for the year is as follows: Continuing operations: Sales of copper ore concentrates Discontinued operation: Year ended 30 June 2015 HK$’000 2014 HK$’000 36,525 38,739 Income from provision of transportation services – 73,124 Turnover consists of sales from mining operation in the PRC of HK$36,525,000 for the year ended 30 June 2015 (2014: HK$38,739,000). 8 SEGMENT INFORMATION Operating segments are reported in a manner consistent with internal reporting provided to executive directors of the Company who are responsible for allocating resources and assessing performance of the operating segments. The executive directors consider the performance of the Group from a business perspective. (a) Business segments The Group’s reportable operating segments are as follows: Mineral tenements in Australia Mining operations in the PRC Discontinued operation — Transportation services (Note 30) — — — tenements acquisition, exploration and towards future development of iron ore project in Western Australia e x p l o i t a t i o n , p r o c e s s i n g a n d s a l e s o f c o p p e r o r e concentrates in the PRC provision of limousine rental services in Hong Kong and the PRC and provision of airport shuttle bus services in Hong Kong Others primarily relate to the provision of corporate services for investment holding companies. These activities are excluded from the reportable operating segments and are presented to reconcile to the totals included in the Group’s consolidated statement of comprehensive income and consolidated balance sheet. The Group’s chief operating decision-maker assesses the performance of the operating segments based on adjusted operating profit/(loss). Finance costs are not included in the result for each operating segment that is reviewed by executive directors of the Company. Segment assets reported to executive directors of the Company are measured in a manner consistent with that in the consolidated balance sheet. ANNUAL REPORT 2015 8 SEGMENT INFORMATION (Continued) (a) Business segments (Continued) The following is an analysis of the Group’s revenue and results by business segment: Continuing operations Discontinued operation Mineral tenements in Australia Mining operation in the PRC Others Sub-total Transportation services Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 For the year ended 30 June 2015: Segment revenue from external customers – 36,525 – 36,525 Segment results (1,326,318) (252,635) (19,600) (1,598,553) Share of losses of joint ventures Loss before income tax Other information: (5,031) (1,603,584) Depreciation of property, plant and equipment (910) (5,442) (761) (7,113) Impairment of mining properties (Note 18) (1,216,618) (225,000) Amortisation of mining properties Relinquishment of mining properties Exploration and evaluation expenses Income tax credit For the year ended 30 June 2014: – (10,884) (6,833) (60,640) 367,036 – (15,920) – – – – – – (1,441,618) (10,884) (6,833) (76,560) 367,036 – – – – – – – – 36,525 (1,598,553) (5,031) (1,603,584) (7,113) (1,441,618) (10,884) (6,833) (76,560) 367,036 Segment revenue from external customers – 38,739 – 38,739 73,124 111,863 Segment results Share of losses of joint ventures Finance costs (Loss)/profit before income tax Other information: Gain on disposal of subsidiaries Depreciation of property, plant and equipment Impairment of mining properties (Note 18) Amortisation of mining properties Exploration and evaluation expenses (75,094) Finance costs Income tax credit – – (90,233) (59,099) (54,848) (204,180) (8,090) (804) (213,074) – (6,972) (40,000) (12,205) (87,188) (804) – – (5,425) (40,000) (12,205) (12,094) – – – (751) – – – (804) – – (796) – – 3,781 – (567) 3,214 2,822 (9,380) – – – (567) 759 (200,399) (8,090) (1,371) (209,860) 2,822 (16,352) (40,000) (12,205) (87,188) (1,371) 759 The revenue from external parties reported to executive directors of the Company is measured in a manner consistent with that in the consolidated statement of comprehensive income. Revenue from mining operation in the PRC amounting to HK$36,525,000 (2014: HK$38,739,000) represents sales to a single customer. 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8 SEGMENT INFORMATION (Continued) (a) Business segments (Continued) The following is an analysis of the Group’s assets by business segment as at the respective balance sheet dates: Continuing operations Discontinued operation Mineral tenements in Australia Mining operation in the PRC Others Sub-total Transportation services Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 1,285,073 274,764 97,625 1,657,462 288 252 (6,833) – 1,551 – – 177 – 288 1,980 (6,833) 3,114,123 521,442 196,361 3,831,926 1,264 518 141 – 2,133 – – 39 – 1,264 2,690 141 – – – – – – 2,489 – 1,657,462 288 1,980 (6,833) 3,831,926 1,264 5,179 141 As at 30 June 2015: Segment assets Total segment assets include: Interests in joint ventures Additions to property, plant and equipment Relinquishment of mining properties As at 30 June 2014: Segment assets Total segment assets include: Interests in joint ventures Additions to property, plant and equipment Additions to mining properties (b) Geographical information The transportation services are provided in Hong Kong and the PRC. The mining operation is located in the PRC and the mineral tenements are located in Australia. The following table provides an analysis of the Group’s revenue by geographical market, based on the origin of the services: For continuing operations: PRC For discontinued operation: PRC Hong Kong Year ended 30 June 2015 HK$’000 2014 HK$’000 36,525 38,739 – – – 15,817 57,307 73,124 The following is an analysis of the carrying amounts of the Group’s mining properties, property, plant and equipment and other non-current assets (excluding financial assets) analysed by geographical area in which the assets are located: For continuing operations: PRC Hong Kong Australia As at 30 June 2015 HK$’000 265,910 872 1,279,283 1,546,065 2014 HK$’000 503,078 1,493 3,079,527 3,584,098 9 EXPENSES BY NATURE Amortisation of mining properties (included in cost of sales) Auditor’s remuneration — Audit services — Non-audit services Cost of inventories Depreciation of property, plant and equipment Equity-settled share-based compensation for consultants Operating lease rentals Staff costs (including directors’ emoluments) Exploration and evaluation expenses (excluding staff costs and rental expenses) Staff costs (including directors’ emoluments) include: Wages, salaries and welfares Retirement benefit scheme contributions Share-based compensation 10 OTHER INCOME Interest on bank deposits Government grant (Note) Others ANNUAL REPORT 2015 Year ended 30 June 2015 HK$’000 10,884 1,612 720 11,284 7,113 (1,105) 10,557 51,901 57,328 Year ended 30 June 2015 HK$’000 56,551 2,512 (7,162) 51,901 Year ended 30 June 2015 HK$’000 1,014 862 78 1,954 2014 HK$’000 12,205 2,401 1,176 5,456 6,972 896 11,351 99,518 61,736 2014 HK$’000 75,628 3,345 20,545 99,518 2014 HK$’000 3,895 869 624 5,388 Note: Government grant mainly represents incentive credits provided by the Australia Federal government, for research and development activities carried out in Australia. 11 OTHER (LOSSES)/GAINS, NET Loss on disposal of property, plant and equipment Effect of discounting on initial recognition of a long-term payable (Note) Relinquishment of mining properties (Note 18) Others Year ended 30 June 2015 HK$’000 (48) – (6,833) 3 (6,878) 2014 HK$’000 (109) 2,093 – – 1,984 Note: The amount represents the gain arising from discounting the interest-free other payable (classified as non-current liabilities) to present value on the initial recognition date (Note 23). 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12 IMPAIRMENT LOSSES Impairment of mining properties (Note 18) 13 FINANCE COSTS Interest on fixed rate bonds Year ended 30 June 2015 HK$’000 1,441,618 2014 HK$’000 40,000 Year ended 30 June 2015 HK$’000 – 2014 HK$’000 804 14 INCOME TAX CREDIT Hong Kong profits tax has been provided at the rate of 16.5% (2014: 16.5%) on the estimated assessable profit for the year. Overseas income tax has been provided at the prevailing rates ranging from 25% to 30% (2014: 25% to 30%) on the estimated assessable profit applicable to the Company’s subsidiaries established in the PRC and Australia. Deferred income tax (Note 26) Year ended 30 June 2015 HK$’000 (367,036) 2014 HK$’000 – The income tax on the Group’s loss before income tax differs from the theoretical amount that would arise using the enacted tax rate of the consolidated entities as follows: Loss before income tax (2014: 16.5%) Notional tax at the applicable tax rate of 16.5% Effect of different tax rates of subsidiaries operating overseas Income not subject to tax Expenses not deductible for tax purposes Tax losses for which no deferred income tax asset was recognised Year ended 30 June 2015 HK$’000 2014 HK$’000 (1,603,584) (213,074) (264,591) (210,532) (147) 39,128 69,106 (367,036) (35,157) (42,238) (1,544) 16,464 62,475 – ANNUAL REPORT 2015 15 DIRECTORS AND EMPLOYEES’ EMOLUMENTS (a) Directors’ emoluments The emoluments paid or payable to each of the twelve (2014: twelve) directors were as follows: Kwai Sze Hoi Luk Kin Peter Joseph Chan Kam Kwan, Jason Kwai Kwun Lawrence Warren Talbot Beckwith Liu Zhengui Yip Kwok Cheung, Danny Yap Fat Suan, Henry Choi Yue Chun, Eugene Uwe Henke Von Parpart Ross Steward Norgard Colin Paterson Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note i) (Note ii) Year ended 30 June 2015 Fees Salaries and other benefits Contribution to retirement benefit scheme Share-based compensation – – – 1,137 1,137 – 296 18 – 314 – – 2,263 240 228 228 228 228 414 1,083 1,083 50 117 50 244 1,250 1,377 – – 325 2,588 – – 487 727 – – 24 252 – – – – – – 228 228 – – 24 252 – – 24 438 (Note iii) – 750 79 171 1,000 Kwai Sze Hoi Luk Kin Peter Joseph Chan Kam Kwan, Jason Kwai Kwun Lawrence Warren Talbot Beckwith Liu Zhengui Yip Kwok Cheung, Danny Lau Kwok Kuen, Eddie Yap Fat Suan, Henry Choi Yue Chun, Eugene Uwe Henke Von Parpart Ross Stewart Norgard 3,829 3,212 197 2,553 9,791 Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note iv) (Note ii) (Note v) (Note v) – – – 4,558 4,558 – – 5,250 1,167 120 – 50 468 5,370 1,685 – 301 15 266 582 2,744 240 228 118 110 12 228 600 – – – – 1,302 4,046 1,954 2,194 – – 98 326 – – 98 216 – – – 110 – – – 12 – – 98 326 – – 98 698 4,280 6,718 185 8,940 20,123 Year ended 30 June 2014 Fees Salaries and other benefits Contribution to retirement benefit scheme Share-based compensation Note: (i) On 5 August 2014, Mr. Luk Kin Peter Joseph resigned as an Executive Director and Chief Executive Officer of the Company. (ii) Lau Kwok Kuen, Eddie and Warren Talbot Beckwith resigned as Independent Non-executive Director on 8 January 2014 and 2 July 2015 respectively. (iii) Colin Paterson was appointed as Executive Director on 25 February 2015. (iv) Kwai Kwun, Lawrence was appointed as Executive Director on 13 March 2014. (v) Yap Fat Suan, Henry and Choi Yue Chun, Eugene were appointed as Independent Non- executive Directors on 8 January 2014 and 12 June 2014 respectively. No director waived any emoluments during the year. 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15 DIRECTORS AND EMPLOYEES’ EMOLUMENTS (Continued) (b) Five highest paid individuals Of the five individuals who received the highest emoluments in the Group for the year, four (2014: two) are the directors of the Company whose emoluments are disclosed in Note 15(a) above. The emoluments of the remaining one (2014: three) individuals are as follows: Salaries and other benefits Contribution to retirement benefit scheme Share-based compensation The emoluments of the remaining individuals fell within the following bands: HK$3,000,001 – HK$3,500,000 HK$4,500,001 – HK$5,000,000 HK$5,000,001 – HK$5,500,000 HK$7,500,001 – HK$8,000,000 Year ended 30 June 2015 HK$’000 2,415 225 405 3,045 Number of individuals Year ended 30 June 2015 1 – – – 1 2014 HK$’000 10,238 947 6,173 17,358 2014 – 1 1 1 3 16 LOSS PER SHARE Basic loss per share is calculated by dividing the loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. (Loss)/profit for the year attributable to the equity holders of the Company (HK$’000) — Continuing operations — Discontinued operation Year ended 30 June 2015 2014 (1,236,548) – (1,236,548) (211,071) 3,973 (207,098) 16 LOSS PER SHARE (Continued) Weighted average number of ordinary shares for the purpose of calculating the basic and diluted loss per share (thousands) (Loss)/earnings per share attributable to the equity holders of the Company Basic (HK cents) — Continuing operations — Discontinued operation Diluted (HK cents) — Continuing operations — Discontinued operation ANNUAL REPORT 2015 Year ended 30 June 2015 2014 8,381,982 8,078,797 (14.75) – (14.75) (14.75) – (14.75) (2.61) 0.05 (2.56) (2.61) 0.05 (2.56) Diluted loss per share is the same as basic loss per share for the year ended 30 June 2015 and 2014 because the effect of the assumed exercise of share options of the Company during these years was anti-dilutive. 17 DIVIDEND No dividend was paid or proposed during the year ended 30 June 2015, nor has any dividend been proposed since the balance sheet date (2014: Nil). 18 MINING PROPERTIES At 1 July 2013 Additions Amortisation Impairment losses (Note 12) Exchange differences At 30 June 2014 Amortisation Relinquishment Impairment losses (Note 12) Exchange differences At 30 June 2015 Mining right in the PRC HK$’000 510,171 – (12,382) (40,000) 2,266 460,055 (10,202) – Mining properties in Australia HK$’000 2,984,261 141 – – 91,810 Total HK$’000 3,494,432 141 (12,382) (40,000) 94,076 3,076,212 3,536,267 – (6,833) (10,202) (6,833) (225,000) (1,216,618) (1,441,618) 1,782 (574,823) (573,041) 226,635 1,277,938 1,504,573 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18 MINING PROPERTIES (Continued) Mining right in the PRC Mining right in the PRC represents the right to conduct mining activities in Damajianshan, Honghe Zhou, Luchun County, Yunnan. The mine is located on land in the PRC to which the Group has no formal title. Yunnan State Land Resources Bureau issued the mining right certificate to Luchun in January 2005. After such, Luchun renewed the certificates for a few times. In June 2013, Yunnan State Land Resources Bureau granted Luchun a mining right certificate for one year which expired in June 2014. In July 2014, the mining right certificate was renewed for a period of two years expiring in July 2016. With reference to an independent legal opinion received by Luchun, there is no legal barrier for Luchun to renew its mining right certificate when it expires. The independent legal opinion also confirmed that there was no illegal activity undertaken by Luchun and there was no penalty exerted or will be exerted by the government regarding Luchun’s mining operation. Accordingly, the directors of the Company are of the opinion that the Group will be able to continuously renew the mining right and the business licenses of respective mining subsidiaries at minimal charges. The mining right in the PRC is amortised using the units of production method based on the proven and probable mineral reserves under the assumption that the Group can renew the mining right in the future until all proven and probable reserves have been mined. As at 30 June 2015, the Group assessed and concluded that the downturn of global economy and recent sustained copper price weakness are considered to be impairment indicators and therefore an impairment assessment have been performed by the directors. The directors have taken into consideration fair value less costs of disposal and value-in-use calculations to determine the recoverable amount of the mining right. As at 30 June 2015, the recoverable amount is determined by the value-in-use calculation. Key assumptions adopted by management are summarised as follows: Copper price assumption (with reference to forecast by industry experts) Discount rate Production capacity As at 30 June 2015 2015: US$5,761/t 2016: US$4,827/t 2017: US$5,500/t 2018: US$6,000/t 2019: US$6,080/t 2014 2014: US$7,020/t 2015: US$7,053/t 2016: US$7,183/t 2017: US$7,466/t 2018: US$7,531/t 2020 onwards: US$6,200/t 2019 onwards: US$7,419/t 18.2% 17.8% 800 tonnes to 1,300 tonnes per day 800 tonnes to 1,300 tonnes per day Based on the above impairment assessment, an impairment of approximately HK$225,000,000 (2014: HK$40,000,000) was recognised for the year. These calculations use cash flow projections based on financial projections approved by management. The fair value of the mining right is highly sensitive to these assumptions adopted in the valuation. • • If the long-term copper price adopted in the valuation had been 5% lower, the recoverable amount would have reduced by approximately HK$13,065,000 and further impairment of HK$13,065,000 would be required. If the production volume adopted in discounted cash flow calculation had been 5% lower than management’s estimates at 30 June 2015, the recoverable amount of the mining right recognised would have decreased by HK$15,920,000 and further impairment of HK$15,920,000 would be recognised. ANNUAL REPORT 2015 18 MINING PROPERTIES (Continued) Mining properties in Australia The mining properties in Australia represent the carrying value of mining and exploration projects in Australia (including the Marillana iron ore project) acquired by the Group. During the year ended 30 June 2015, the Group has relinquished two tenements located in the West Pilbara to the Government of Western Australia. As a result, a loss of HK$6,833,000 has been recognised in the consolidated statement of comprehensive income (Note 11). As at 30 June 2015, the Group assessed and concluded that the downturn of global economy and recent sustained iron ore price weakness are considered to be impairment indicators and therefore an impairment assessment have been performed by the directors. As at 30 June 2015, the recoverable amount is determined by the fair value less cost of disposal approach. Key assumptions adopted by management are summarised as follows: Estimated mine life Average production Long-term iron ore price (per dry metric tonne unit (“dmtu”)) Exchange rate of AUD to USD Discount rate 30 June 2015 25 years from 2020 18 million tonnes per year US¢97/dmtu 0.72 13% Based on the above impairment assessment, an impairment of approximately HK$1,216,618,000 (2014: Nil) was recognised for the year. The impairment reduces the deferred income tax liability brought to account following the business combination relating to the value attributed to the mining properties acquired. The reduction in the deferred income tax liability as a result of the impairment is HK$364,986,000 (2014: Nil). The impairment assessment has made reference to industry experts’ long term iron ore price forecasts, discount rate and exchange rate. The fair value of the Australian projects is highly sensitive to these assumptions adopted in the valuation. • • • If the long-term iron ore price adopted in the valuation had been 1% lower, the recoverable amount would be reduced by approximately HK$249,000,000. Further impairment loss of HK$356,000,000 and a reversal of deferred income tax liabilities of HK$107,000,000 would be required. If the discount rate adopted in the valuation had been 0.5% higher, the recoverable amount would be reduced by approximately HK$285,000,000. Further impairment loss of HK$407,000,000 and a reversal of deferred income tax liabilities of HK$122,000,000 would be required. If the exchange rate adopted in the valuation had been 1% higher, the recoverable amount would be reduced by approximately HK$244,000,000. Further impairment loss of HK$349,000,000 and a reversal of deferred income tax liabilities of HK$105,000,000 would be required. The ultimate recoupment of the carrying value of mining properties is dependent on the successful development and commercial exploitation of, or sale of interests in, the mining properties. 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19 PROPERTY, PLANT AND EQUIPMENT The Group Buildings HK$’000 Leasehold Improvements HK$’000 Plants, furniture, fixtures and equipment HK$’000 Motor vehicles HK$’000 Subtotal HK$’000 Construction in progress HK$’000 Total HK$’000 For the year ended 30 June 2014 At 1 July 2013 (Restated) Additions Disposals Disposal of subsidiaries (Note 30) Depreciation Exchange differences At 30 June 2014 At 30 June 2014 Cost Accumulated depreciation Net book amount For the year ended 30 June 2015 At 1 July 2014 Additions Disposals Depreciation Exchange differences At 30 June 2015 At 30 June 2015 Cost Accumulated depreciation Net book amount For the year ended 30 June 2014 At 1 July 2013 Additions Depreciation At 30 June 2014 At 30 June 2014 Cost Accumulated depreciation Net book amount For the year ended 30 June 2015 At 1 July 2014 Additions Depreciation Disposal At 30 June 2015 At 30 June 2015 Cost Accumulated depreciation Net book amount 10,750 – – – (707) 49 10,092 14,113 (4,021) 10,092 10,092 – – (707) 47 9,432 14,181 (4,749) 9,432 2,284 – – (22) (656) 3 1,609 3,007 (1,398) 1,609 1,609 159 – (670) 2 1,100 3,169 (2,069) 1,100 23,633 2,704 (50) (169) (5,407) 158 20,869 41,589 (20,720) 20,869 20,869 1,802 (40) (5,564) (251) 16,816 42,222 (25,406) 16,816 52,274 2,472 (1,158) (44,047) (9,582) 333 292 5,011 (4,719) 292 292 – (55) (172) 1 66 4,777 (4,711) 66 88,941 5,176 (1,208) (44,238) (16,352) 543 32,862 63,720 (30,858) 32,862 32,862 1,961 (95) (7,113) (201) 27,414 64,349 (36,935) 27,414 375 3 – – – 2 380 380 – 380 380 19 – – 2 401 401 – 401 Leasehold improvements HK$’000 The Company Furniture, fixtures and equipment HK$’000 1,736 – (610) 1,126 2,441 (1,315) 1,126 1,126 159 (643) – 642 2,600 (1,958) 642 424 12 (111) 325 562 (237) 325 325 18 (104) (37) 202 511 (309) 202 89,316 5,179 (1,208) (44,238) (16,352) 545 33,242 64,100 (30,858) 33,242 33,242 1,980 (95) (7,113) (199) 27,815 64,750 (36,935) 27,815 Total HK$’000 2,160 12 (721) 1,451 3,003 (1,552) 1,451 1,451 177 (747) (37) 844 3,111 (2,267) 844 20 INVENTORIES Raw materials Work in progress Finished goods Less: provision for inventories ANNUAL REPORT 2015 2015 HK$’000 5,019 467 – (1,212) 4,274 2014 HK$’000 4,704 6,096 2,263 (1,206) 11,857 21 CASH AND CASH EQUIVALENTS The balance of cash and cash equivalents are denominated in the following currencies: Hong Kong dollar Australian dollar Renminbi United States dollar Hong Kong dollar Australian dollar United States dollar The Group 2015 HK$’000 22,086 4,567 591 71,053 98,297 The Company 2015 11,533 433 12,212 24,178 2014 HK$’000 76,336 37,233 148 109,981 223,698 2014 76,045 5,349 51,616 133,010 22 TRADE PAYABLES Trade payables of the Group principally represent amounts outstanding to suppliers. The normal credit period is between 30 days and 90 days. In certain circumstances, the credit period has been extended to over 90 days. The following is an ageing analysis of trade payables of the Group at the balance sheet date: 0–30 days 31–60 days 61–90 days Over 90 days 2015 HK$’000 4,470 78 199 5,454 10,201 2014 HK$’000 4,538 157 191 4,654 9,540 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23 OTHER PAYABLES AND ACCRUED CHARGES Acquisition liabilities (Note) Accrued payroll and employee benefits Receipt in advance Other payables Other accrued expenses Less: Non-current portion Amount shown under current liabilities 2015 HK$’000 8,291 26,413 9,693 46,560 19,880 110,837 (26,995) 83,842 2014 HK$’000 9,568 25,165 10,235 51,447 21,520 117,935 (26,865) 91,070 Amount classified as non-current liability is unsecured, interest-free and not repayable within 12 months and is carried at amortised cost using the effective interest method. Note: Acquisition liabilities mainly represent stamp duty liabilities arising from the acquisition transactions of Brockman Mining Australia Pty Ltd (“BMA”). 24 SHARE CAPITAL Ordinary shares of HK$0.1 each Authorised: At 30 June 2014 and 2015 Issued and fully paid: At 1 July 2013 Issue of shares (Note (a)) Issue of shares in settlement of a fixed rate bond (Note (b)) As at 30 June 2014 and 2015 Notes: Number of shares ’000 Share capital HK$’000 10,000,000 1,000,000 7,894,482 409,500 78,000 8,381,982 789,448 40,950 7,800 838,198 (a) On 13 February 2014, a total of 195,000,000 ordinary shares were issued to China Guoyin at an issue price of HK$0.40 per share, raising net proceeds of approximately HK$78 million. On the same day, a total of 214,500,000 ordinary shares were issued to Ocean Line, a substantial shareholder of the Company, at issue price of HK$0.40 per share with net proceeds from share subscription at HK$85.8 million. (b) Pursuant to the share subscription agreement with Ocean Line, the Company redeemed a fixed rate bond in full by issuing a total of 78,000,000 ordinary shares to Ocean Line on 13 February 2014 at the issue price of HK$0.40 per share. All the new shares issued rank pari passu in respect of the then shares in issue. ANNUAL REPORT 2015 25 SHARE OPTION SCHEME Share option scheme of the Company The 2012 share option scheme (the “2012 Share Option Scheme”) of the Company was adopted by the Company pursuant to the approval by shareholders at the Annual General Meeting on 13 November 2012. The 2012 Share Option Scheme replaced the old share option scheme which expired in August 2012 for the primary purpose of providing incentives or rewards to selected participants for their contribution to the Group. The 2012 Share Option Scheme is valid and effective for a period of ten years from the date of its adoption and expired in August 2022. Share options granted under the old share option scheme prior to its expiry shall continue to be valid and exercisable pursuant to its rule. The total number of shares in respect of which options may be granted under the Share Option Scheme is not permitted to exceed 10% of the shares of the Company on the adoption date of the Share Option Scheme unless prior approval from the Company’s shareholders in general meeting has been obtained. The number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30% of the shares in issue from time to time. The total number of shares in respect of which options may be granted to any eligible participant in any twelve-month period is not permitted to exceed 1% of the shares of the Company in issue at any point in time, unless prior approval from the Company’s shareholders in general meeting has been obtained. Options granted to a substantial shareholder or an independent non-executive Director of the Company in excess of 0.1% of the Company’s share in issue and with a value in excess of HK$5 million must be approved in advance by the Company’s shareholders in general meeting. There is no general requirement that an option must be held to any minimum period before it can be exercised but the board of directors is empowered to impose at its discretion any such minimum period at the time of grant of any particular option. Options offered must be taken up not later than 28 days after the date of offer. A non-refundable remittance of HK$1 is payable as consideration by the grantee upon acceptance of every grant of option under the Share Option Scheme. The period during which an option may be exercised will be determined by the board of directors at its absolute discretion, save that such period of time shall not exceed a period of ten years commencing on the date which the option is granted. The exercise price is determined by the board of directors of the Company, and will not be less than the highest of (i) the closing price of the shares of the SEHK’s daily quotation sheet on the date of offer (ii) the average closing price of the shares of the SEHK’s daily quotation sheet for the five business days immediately preceding the date of offer and (iii) the nominal value of a share of the Company. The fair value of the employee services and consultancy services received in exchange for the grant of the share options is recognised as an expense, with a corresponding adjustment to employee share-based compensation reserve, over the vesting period. At the end of each reporting period, the Company revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity. 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 SHARE OPTION SCHEME (Continued) Share option scheme of the Company (Continued) Details of specific categories of options are as follows: Option type Date of grant Vesting period granted Exercise period (HK$) Number of share options Exercise price 2011B 14 December 2011 14 December 2011 – 1,000,000 14 December 2014 – 0.720 13 December 2014 13 December 2015 14 December 2011 14 December 2011 – 1,000,000 14 December 2013 – 0.720 13 December 2013 13 December 2015 14 December 2011 14 December 2011 – 3,000,000 14 December 2012 – 0.720 13 December 2012 13 December 2015 14 December 2011 Immediate 2,000,000 14 December 2011 – 0.720 13 December 2015 2012A 28 March 2012 28 March 2012 – 5,000,000 28 March 2015 – 27 March 2015 13 December 2015 28 March 2012 28 March 2012 – 5,000,000 28 March 2014 – 27 March 2014 13 December 2015 28 March 2012 28 March 2012 – 39,000,000 28 March 2013 – 27 March 2013 13 December 2015 28 March 2012 Immediate 29,000,000 28 March 2012 – 13 December 2015 2013A 14 January 2013 14 January 2013 – 88,100,000 14 January 2014 – 14 January 2014 14 January 2016 14 January 2013 14 January 2013 – 88,100,000 14 January 2015 – 14 January 2015 14 January 2016 2013B 28 February 2013 28 February 2013 – 3,750,000 28 February 2014 – 28 February 2014 28 February 2016 28 February 2013 28 February 2013 – 3,750,000 28 February 2015 – 28 February 2015 28 February 2016 2013C 20 May 2013 20 May 2013 20 May 2013 – 20 May 2014 20 May 2013 – 20 May 2015 77,350,000 20 May 2014 – 20 May 2016 77,350,000 20 May 2015 – 20 May 2016 2015A 19 January 2015 19 January 2015 – 4,000,000 19 January 2016 – 19 January 2016 19 January 2018 19 January 2015 19 January 2015 – 4,000,000 19 January 2017 – 19 January 2017 19 January 2018 0.720 0.720 0.720 0.720 0.717 0.967 0.717 0.967 0.717 0.967 0.450 0.450 ANNUAL REPORT 2015 25 SHARE OPTION SCHEME (Continued) Share option scheme of the Company (Continued) The fair values of all the share options were calculated using the Binomial model prepared by an independent valuer. The inputs into the model were as follows: 2011B 2012A 2013A 2013B 2013C 2015A Exercise price HK$0.72 HK$0.72 HK$0.717– HK$0.967 HK$0.717– HK$0.967 HK$0.717– HK$0.967 HK$0.45 Volatility Expected option life Annual risk-free rate Expected dividend yield 55% 4 years 0.649% 0% 49% 4 years 0.396% 0% 57% 3 years 0.170% 0% 56% 3 years 0.273% 0% 56% 3 years 0.247% 0% 49% 3 years 0.648% 0% The volatility measured at grant date is referenced to the historical volatility of shares of the Company. For the year ended 30 June 2015, the Company recognised the total expense of HK$4,303,000 (2014: HK$21,520,000) in relation to the share options granted by the Company. For the year ended 30 June 2015, a total of 111,500,000 share options (2014: 75,300,000) were lapsed following the resignation/termination of certain directors, employees and consultants. Accordingly, there was a reversal of previously recognised share-based compensation expenses attributed to those resigned/ terminated staff and a total of HK$12,570,000 (2014: HK$79,000) was credited to the consolidated statement of comprehensive income. Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: 2015 2014 Average exercise price in HK$ per share option 0.82 0.45 0.82 0.81 Number of share options (thousands) 420,000 8,000 (111,500) 316,500 Average exercise price in HK$ per share option 0.94 – 1.62 0.82 Number of share options (thousands) 495,300 – (75,300) 420,000 At 1 July Granted Lapsed At 30 June As at 30 June 2015, out of the 316,500,000 outstanding options (2014: 420,000,000 outstanding options), 308,500,000 options (2014: 248,200,000 options) were exercisable, with weighted average exercise price of HK$0.82 (2014: HK$0.71) per option. 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25 SHARE OPTION SCHEME (Continued) Share option scheme of the Company (Continued) Share options outstanding at the end of the year have the following expiry date and exercise prices: Expiry date — 30 June 2016 2018 2015 2014 Average exercise price per share option HK$ Average exercise price per share option HK$ Options Options 0.82 0.45 0.81 308,500,000 8,000,000 316,500,000 0.82 – 0.82 420,000,000 – 420,000,000 As at 30 June 2015, the weighted average remaining contractual life of outstanding share options was 0.74 years (2014: 1.65 years). No share option had been exercised during the year (2014: Nil). 26 DEFERRED INCOME TAX The following is the major deferred income tax liabilities recognised by the Group and movements thereon during the current and prior year: At 1 July 2013 Credited to consolidated statement of comprehensive income Disposal of subsidiaries (Note 30) Exchange differences At 30 June 2014 Credited to consolidated statement of comprehensive income Exchange differences At 30 June 2015 Accelerated tax depreciation Mining properties in Australia HK$’000 (2,975) HK$’000 (893,087) 324 2,654 (3) – – – – – – (27,474) (920,561) 367,036 172,015 Total HK$’000 (896,062) 324 2,654 (27,477) (920,561) 367,036 172,015 (381,510) (381,510) All deferred tax liabilities are expected to be settled more than twelve months after the balance sheet. Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets in respect of losses amounting to approximately HK$1,372 million as at 30 June 2015 (2014: HK$1,233 million). Tax losses of HK$1,284 million (2014: HK$1,161 million) are available indefinitely to offset against future taxable income, of which HK$1,097 million (2014: HK$1,002 million) is relating to overseas subsidiaries which the utilization of tax losses is subject to the satisfaction of the loss recoupment rules in respective tax jurisdiction. Tax losses of HK$88 million (2014: HK$72 million) will expire in one to five years from 30 June 2015. Following the acquisition of BMA in August 2012, the Australian subsidiaries of the Company have formed an income tax consolidation group and were taxed as a single entity. BMH, a wholly-owned subsidiary of the Company, is the head company of this Australian tax consolidated group. As a consequence of the acquisition of the iron ore business, BMH is required to assess additional deductions and uplift in tax bases of certain assets brought into this tax group. As at 30 June 2015, the directors of BMH are yet to conclude the tax losses and additional deductions arising from the uplift in tax bases of certain assets with the local tax authorities. 27 PROVISIONS At 1 July 2013 Provision for the year Disposal of subsidiaries (Note 30) Exchange differences At 30 June 2014 Utilisation of provision during the year Exchange differences At 30 June 2015 ANNUAL REPORT 2015 HK$’000 2,122 563 (1,061) 36 1,660 (552) (168) 940 The balance mainly represents provision for land restoration costs for PRC mine and provision for long service payment. 28 CASH USED IN OPERATING ACTIVITIES Cash flows from operating activities (Loss)/profit before income tax — Continuing operations — Discontinued operation Adjustments for: Impairment losses Finance costs Depreciation of property, plant and equipment Amortisation of mining properties Share-based compensation Interest income Loss on disposal of property, plant and equipment Effect of discounting on initial recognition on amount not repayable within 1 year Gain on disposal of subsidiaries Relinquishment of mining properties Share of losses of joint ventures Exchange loss/(gain) Year ended 30 June 2015 HK$’000 2014 HK$’000 Note (1,603,584) (213,074) – 3,214 (1,603,584) (209,860) 1,441,618 – 7,113 10,884 (8,267) (1,014) 48 – – 6,833 5,031 23,340 40,000 1,371 16,352 12,205 21,441 (3,901) 307 (2,093) (2,822) – 8,090 (1,047) 12 19 9 25 11 30 11 32 Operating cash flows before movements in working capital (117,998) (119,957) Decrease/(Increase) in inventories Decrease/(Increase) in trade and other receivables Decrease/(Increase) in amounts due from related parties (Decrease)/Increase in provisions Decrease in trade and other payables Decrease in amounts due to related parties Cash used in operating activities 6,938 2,362 648 (552) (3,141) (2,672) (4,373) (833) (1,837) 563 (42,172) (26,892) (114,415) (195,501) 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29 COMMITMENTS (a) Operating lease commitments (i) The Group had commitments mainly for future minimum lease payments under non-cancellable operating lease in respect of office premises which fall due as follows: Not later than 1 year Later than 1 year and no later than 5 years 2015 HK$’000 7,198 1,256 8,454 2014 HK$’000 11,431 6,268 17,699 Leases are negotiated for an average of three years and rentals are fixed for the lease period. (ii) The Group had total future minimum sublease receivable under non-cancellable operating lease in respect of the warehouse and office as follows: Not later than one year (b) Capital commitments 2015 HK$’000 – 2014 HK$’000 252 As at 30 June 2015, the Group did not have any capital commitments (30 June 2014: Nil) (c) Exploration expenditure commitments In order to maintain current rights of tenure to exploration tenements in Australia, the Group is required to perform minimum exploration work to meet the minimum expenditure of A$1,544,000 (equivalent to approximately HK$9,165,000) (2014: A$1,582,000, equivalent to approximately HK$11,550,000) over the next year. Exploration expenditure commitments for subsequent years are contingent upon production of iron ore from the area of interest. Obligations are subject to change upon expiry of the existing exploration leases or when application for a mining lease is made and have not been provided for in the consolidated financial statements. (d) Joint venture commitments The Group is involved in a number of joint venture arrangements. As at 30 June 2015, the Group did not share any joint venture commitment (2014: A$22,000, equivalent to approximately HK$162,000). ANNUAL REPORT 2015 30 DISPOSAL OF SUBSIDIARIES On 24 October 2013, the Company and Mr. Leung Chi Yan, Danny (“Mr. Leung”), a director of Perryville Group, entered into a sale and purchase agreement pursuant to which the Company agreed to sell the entire equity interest in Perryville Group Limited and its subsidiaries (“Perryville Group”) to Mr. Leung at a consideration of HK$45,000,000 (“Disposal”). Perryville Group is principally engaged in the provision of limousine and airport shuttle transportation services which represents the reportable segment of transportation services. As part of the Disposal, the payable by Perryville Group to the Company of HK$11,000,000 was assigned to Mr. Leung, the adjusted consideration amounted to HK$34,000,000 which represents the consideration for the Company’s equity interest in Perryville Group at the date of Disposal. The Disposal was completed on 19 February 2014 and the Company ceased to have any control and equity interests in Perryville Group. The results of Perryville Group are presented in the consolidated financial statements as discontinued operation in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. The consolidated statement of comprehensive income and consolidated statement of cash flows distinguish discontinued operation from continuing operations. (a) Profit from discontinued operation An analysis of the result of discontinued operation, and the result recognised on the re-measurement of assets or disposal group, is as follows: Revenue Cost of sales Other income Other losses, net Selling and administrative expenses Finance costs Profit before income tax Income tax credit Profit for the year from operating activities Gain on disposal of subsidiaries Profit for the year from discontinued operation Profit for the year from discontinued operation attributable to: — Equity holders of the Company Year ended 30 June 2014 HK$’000 73,124 (58,644) 14,480 107 (198) (13,430) (567) 392 759 1,151 2,822 3,973 3,973 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 DISPOSAL OF SUBSIDIARIES (Continued) (b) Analysis of the cash flows from discontinued operation Net cash generated from operating activities Net cash used in investing activities Net cash used in financing activities Year ended 30 June 2014 HK$’000 7,720 (1,807) (7,954) (2,041) The effect on the consolidated balance sheet, the total considerations received and gain on disposal of subsidiaries are as follows: Net assets of the disposal group: Property, plant and equipment Trade receivables Other receivables, deposits and prepayments Cash and cash equivalents Trade payables Other payable and accrued charges Bank borrowings Obligations under finance leases Deferred income tax liabilities Provisions Total net assets disposed Legal and professional fee paid Release of translation reserve Gain on disposal Consideration, net of direct costs Cash consideration Legal and professional fee paid Cash and bank balances disposed of Total cash inflows from the disposal 31 TRANSACTION WITH NON-CONTROLLING INTERESTS Carrying amount of non-controlling interests acquired Consideration paid to non-controlling interests Transaction costs related to transactions with non-controlling interests Excess of consideration paid recognised within equity • 2014 HK$’000 44,238 23,861 4,549 9,112 (7,627) (8,492) (5,623) (12,206) (2,654) (1,061) 44,097 798 (2,717) 2,822 45,000 45,000 (798) (9,112) 35,090 2014 HK$’000 41,417 (45,000) (653) 4,236 On 21 February 2014, the Group acquired the remaining 10% equity interest in Luchun at a consideration of HK$45,000,000. After the transaction, Luchun becomes a wholly-owned subsidiary of the Group. This represents a transaction with non-controlling interest. The difference between the consideration paid and the share of net asset value acquired from the non-controlling interest of HK$4,236,000 is debited in equity in the Group. 32 JOINT ARRANGEMENTS At 1 July Contributions to the joint ventures Share of losses Exchange differences At 30 June ANNUAL REPORT 2015 2015 HK$’000 1,264 4,230 (5,031) (175) 288 2014 HK$’000 1,276 8,043 (8,090) 35 1,264 Details of the Group’s interest in the joint ventures are as follows: Name of joint ventures North West Infrastructure Pty Ltd (Note a) Irwin-Coglia JV (Note b) Interest held in share of output 37% 40% Principal activities Port and related infrastructure Nickel exploration Notes: (a) North West Infrastructure Pty Ltd is a joint venture incorporated in Australia which is seeking to develop port and related infrastructure on behalf of the North West Iron Ore Alliance (“NWIOA”) members. (b) Irwin-Coglia is an unincorporated joint venture operating in Australia for the purpose of exploration activities and holding of tenement interests. Summarised financial information of the joint ventures is set as below: Loss and total comprehensive loss Group’s share of loss for the year 33 RETIREMENT BENEFITS SCHEMES — THE GROUP Year ended 30 June 2015 HK$’000 (13,597) (5,031) 2014 HK$’000 (21,865) (8,090) The Group operates a defined contribution retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for its employees in Hong Kong. The Group contributes at least 5% of the employees’ basic salaries to the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The employees of the Group’s subsidiaries in the PRC are members of a state-managed retirement benefits scheme operated by the PRC government. The PRC subsidiaries are required to contribute an average 20% of payroll costs to the retirement benefits scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The employees of the Group subsidiaries in Australia are entitled to superannuation through a defined contribution plan under which fixed contributions of up to 9.25% are required to be made to a superannuation fund with no further legal or constructive obligation to pay. The total cost charged to the cost of sales and selling and administrative expenses of approximately HK$2,512,000 (2014: HK$3,345,000) represents contributions to these schemes by the Group in respect of the current year. 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 34 RELATED PARTY DISCLOSURES (a) Material related party transactions Save as disclosed elsewhere in this consolidated financial statements, the Group has the following related party transactions during the year: Administrative expenses paid to a related company (Note) Note: Year ended 30 June 2015 HK$’000 20 2014 HK$’000 360 Administrative expenses were paid to a company in which Mr. Luk Kin Peter Joseph, has beneficial interest. Mr. Luk Kin Peter Joseph, resigned as an Executive Director and Chief Executive Officer of the Company on 5 August 2014. In the opinion of the directors of the Company, the above related party transactions were carried out in the normal course of business and at terms mutually agreed between the Group and the respective related party. (b) Related party balances The amounts due from/to related parties included as current assets or current liabilities are unsecured, interest-free and repayable on demand. (c) Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: Wages, salaries and other short-term welfare Post-employment benefits Termination benefits Share-based compensation expenses Year ended 30 June 2015 HK$’000 19,888 1,288 4,435 (4,610) 21,001 2014 HK$’000 38,373 2,038 67 20,253 60,731 The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. 35 INVESTMENTS IN SUBSIDIARIES AND AMOUNTS DUE FROM SUBSIDIARIES — THE COMPANY Amounts due from subsidiaries Amounts due from subsidiaries Less: provision for impairment Less: current portion Non-current portion 2015 HK$’000 2014 HK$’000 5,829,701 (4,455,438) 1,374,263 (237,931) 1,136,332 5,535,153 (2,661,859) 2,873,294 (133,797) 2,739,497 The amounts due from subsidiaries under non-current portion are unsecured, have no fixed terms of repayment, which bears interest at 4.6631% per annum. The amounts due from subsidiaries under current portion are unsecured, interest-free and repayable on demand. ANNUAL REPORT 2015 35 INVESTMENTS IN SUBSIDIARIES AND AMOUNTS DUE FROM SUBSIDIARIES — THE COMPANY (Continued) Details of the principal subsidiaries held by the Company as at 30 June 2015 and 30 June 2014, except otherwise specified, are as follows: Name of subsidiaries Place of incorporation Place of operation Particular of issued share capital Proportion ownership interest held by the Company 2015 2014 Principal activities Subsidiaries directly held by the Company: Brockman Mining (Management) Limited Golden Genie Limited Wah Nam Iron Ore Limited Best Resources Developments Limited 綠春鑫泰礦業有限公司 Luchun Xingtai Mining Company Limited (Note a)1 BVI BVI BVI PRC Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong 1 Ordinary share of HK$1 1 Ordinary share of US$1 1 Ordinary share of US$1 1 Ordinary share of US$1 100% 100% Investment holding 100% 100% Investment holding 100% 100% Investment holding 100% 100% Investment holding PRC RMB20,000,000 100% 100% Exploration, processing, and sales of copper ore concentrates Subsidiaries indirectly held by the Company: Brockman East Pty Ltd Australia Australia Brockman Exploration Pty Ltd Australia Australia Brockman Infrastructure Pty Ltd Australia Australia Brockman Iron Pty Ltd Australia Australia Brockman Ports Pty Ltd Australia Australia Brockman Mining Australia Pty Ltd Australia Australia Brockman Mining Holding (Australia) Pty Ltd Australia Australia Smart Year Investments Limited BVI Hong Kong Wah Nam Australia Finance Pty Ltd Australia Australia Yilgarn Mining (WA) Pty Ltd Australia Australia 1 Ordinary share of A$1 1 Ordinary share of A$1 1 Ordinary share of A$1 1 Ordinary share of A$1 76 Ordinary shares of A$1 each 145,053,151 Ordinary shares of A$1 each 12 Ordinary shares of A$1 each 10,000 Ordinary shares of US$1 each 3,027,006 Ordinary shares of AU$1 each 841,001 Ordinary shares of AU$1 each 100% 100% Exploration and evaluation 100% 100% Exploration and evaluation 100% 100% Rail infrastructure company 100% 100% Exploration and evaluation 100% 100% Port infrastructure Company 100% 100% Investment holding 100% 100% Investment holding 100% 100% Investment holding 100% 100% Investment holding 100% 100% Exploration and evaluation Note a: The subsidiary has accounting year date of 31 December. It prepares, for the purpose of consolidation, financial statements as at the same date as the Group. 1 The English name is for identification purpose only. None of the subsidiaries had any debt securities outstanding at the end of the year or any time during the year. 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 36 RESERVES — THE COMPANY At 1 July 2013 Comprehensive loss: Loss for the year Transactions with equity holders: Issue of shares (Note 24) Issue of shares upon redemption of fixed rate bond (Note 24) Share-based compensation (Note 25) At 30 June 2014 Comprehensive loss: Loss for the year Transactions with equity holders: Share-based compensation (Note 25) At 30 June 2015 Share premium HK$’000 4,313,856 Share-based compensation reserve HK$’000 66,639 Accumulated losses HK$’000 (2,438,963) Total HK$’000 1,941,532 – 122,850 23,400 – 4,460,106 – – (188,003) (188,003) – 122,850 – 21,441 88,080 – – (2,626,966) 23,400 21,441 1,921,220 – – (1,599,322) (1,599,322) – 4,460,106 (8,267) 79,813 – (4,226,288) (8,267) 313,631 37 LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY The loss attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of a loss of approximately HK$1,599,332,000 (2014: HK$188,003,000). 38 EVENTS OCCURRING AFTER THE REPORTING PERIOD There is no significant event occurred subsequently after the balance sheet date. FINANCIAL SUMMARY ANNUAL REPORT 2015 Year ended 30 June 2015 HK$’000 Year ended 30 June 2014 HK$’000 (Note a) (Note a) The Group Year ended 30 June 2013 HK$’000 (Restated) (Note a) 18 months ended 30 June 2012 HK$’000 Year ended 31 December 2010 HK$’000 (Note b) (Note b) 36,525 38,739 50,298 200,796 131,996 RESULTS Revenue Loss before income tax (1,603,584) (213,074) (467,566) (2,417,397) (226,394) Income tax credit/(expenses) 367,036 – (948) 719,310 (338) Loss for the year/period from continuing operations Profit/(loss) for the year from discontinued operation (1,236,548) (213,074) (468,514) (1,698,087) (226,732) – 3,973 (8,328) – – Loss for the year/ period (1,236,548) (209,101) (476,842) (1,698,087) (226,732) Attribute to: Equity holders of the Company (1,236,548) (207,098) (449,384) (1,579,652) (210,644) Non-controlling interest – (2,003) (27,458) (118,435) (16,088) (1,236,548) (209,101) (476,842) (1,698,087) (226,732) Loss per share — Basic (HK cents) — Diluted (HK cents) ASSETS AND LIABILITIES Total assets Total liabilities Equity attributable to equity holders of the Company Non-controlling interest (14.75) (14.75) As at 30 June 2015 HK$’000 (2.56) (2.56) (6.01) (6.01) (29.77) (29.77) (5.99) (5.99) As at 30 June 2014 HK$’000 As at 30 June 2013 HK$’000 As at 30 June 2012 HK$’000 As at 31 December 2010 HK$’000 (Note a) (Restated) (Note a) (Restated) (Note a) (Note b) 1,657,462 3,831,926 3,896,362 4,604,779 2,715,481 (503,657) (1,052,530) (1,139,816) (1,505,763) (365,568) 1,153,805 2,779,396 2,756,546 3,099,016 2,349,913 1,153,805 2,779,396 2,713,471 3,029,382 2,267,615 – – 43,075 69,634 82,298 Total equity 1,153,805 2,779,396 2,756,546 3,099,016 2,349,913 Notes: (a) The financial figures were extracted from the Consolidated Financial Statements. (b) The financial figures were extracted from the 2013 annual report. No separate disclosures of continuing operations and discontinued operation were made on the financial figures for 2010 to 2012. 87 ASX ADDITIONAL INFORMATION Additional information in accordance with the listing requirements of the Australian Securities Exchange Limited are as follows: A. DISTRIBUTION OF SHAREHOLDINGS AT 18 SEPTEMBER 2015 Category 1 — 1,000 1,001 — 5,000 5,001 — 10,000 10,001 — 100,000 100,001 and over Listed Shares 766 213 108 729 419 Total number of security holders 2,235 Unlisted HK$0.45 options HK$0.717 options HK$0.967 options HK$0.72 options – – – – 1 1 – – – – 16 16 – – – – 16 16 – – – – 9 9 The number of shareholders holding less than a marketable parcel of shares as at 18 September 2015 is 1,194. Unquoted Securities As at 18 September 2015, unlisted options amounted to a total of 309,300,000 units, including: Unquoted securities 309,300,000 unlisted options granted — 61,400,000 share options, expiring 13 December 2015 EX HK$0.72 — 43,000,000 share options, expiring 14 January 2016 EX HK$0.717 — 43,000,000 share options, expiring 14 January 2016 EX HK$0.967 — 3,600,000 share options, expiring 28 February 2016 EX HK$0.717 — 3,600,000 share options, expiring 28 February 2016 EX HK$0.967 — 73,350,000 share options, expiring 20 May 2016 EX HK$0.717 — 73,350,000 share options, expiring 20 May 2016 EX HK$0.967 — 8,000,000 share options, expiring 18 January 2018 EX HK$0.45 ANNUAL REPORT 2015 B. TWENTY LARGEST SECURITY HOLDERS Name OCEAN LINE HOLDINGS LTD THE HONGKONG AND SHANGHAI BANKING YGD SECURITIES (HK) LTD EQUITY VALLEY INVESTMENTS LIMITED REORIENT CAPITAL MARKETS LTD SUN HUNG KAI INVESTMENT SERVICES LTD KINGSTON SECURITIES LTD DELIGHT TIME LIMITED CORNERSTONE PACIFIC LIMITED ROSS STEWART NORGARD/LONGFELLOW NOMINEES PTY LTD DEUTSCHE BANK AG EVERCREST CAPITAL LIMITED CITIBANK N.A. HING WONG SECURITIES LTD BARWICK INVESTMENTS LIMITED GUOYUAN SECURITIES BROKERAGE (HONG KONG) HANG SENG BANK LTD VC BROKERAGE LTD GREATER INCREASE INVESTMENTS LIMITED DBS VICKERS (HONG KONG) LTD Number of shares 1,207,743,902 928,294,725 764,904,972 499,972,276 341,571,020 329,232,201 316,821,000 277,216,000 250,000,000 243,054,000 229,267,880 208,000,000 206,635,421 189,231,000 174,668,000 174,414,800 114,130,455 110,482,600 100,000,000 81,333,568 Percentage held 14.41% 11.07% 9.13% 5.96% 4.08% 3.93% 3.78% 3.31% 2.98% 2.90% 2.74% 2.48% 2.47% 2.26% 2.08% 2.08% 1.36% 1.32% 1.19% 0.97% 89 ASX ADDITIONAL INFORMATION C. SUBSTANTIAL HOLDERS Name of shareholder Capacity Number of shares or underlying shares Percentage of the issued share capital of the Company Ocean Line Holdings Ltd (Note) Beneficial owner 1,776,960,137 Kwai Sze Hoi (Note) Interest held by controlled corporations 1,776,960,137 Interest held jointly with another person 60,720,000 Beneficial owner (options) 70,000,000 21.20% 21.20% 0.72% 0.84% Cheung Wai Fung (Note) Interest held by controlled corporations 1,776,960,137 21.02% Interest held jointly with another person 60,720,000 Interest held by spouse (options) 70,000,000 Equity Valley Investments Limited Beneficial owner 515,574,276 (Note) The XSS Group Limited (Note) Interest held by controlled corporations 515,574,276 Cheung Sze Wai, Catherine (Note) Interest held by controlled corporations 515,574,276 Interest held by spouse (options) 50,000,000 Luk Kin Peter Joseph (Note) Interest held by controlled corporations 515,574,276 Beneficial owner (options) 50,000,000 Notes: Please refer to Notes 1 & 2 under section headed: Substantial Shareholders on P.35. 0.72% 0.84% 6.15% 6.15% 6.15% 0.60% 6.15% 0.60% ANNUAL REPORT 2015 D. VOTING RIGHTS The voting rights attaching to each class of equity securities are set out below: a) Ordinary shares Each shareholder present in person or by proxy, attorney or representative in a meeting shall have one vote on a poll for each share held. b) Options No voting rights. E. STOCK EXCHANGE LISTING Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the ASX Limited. F. INCOME TAX Brockman Mining Limited is taxed as a public company. G. TENEMENT SCHEDULE — AS AT 18 SEPTEMBER 2015 Tenement type Tenement number Commodity Project Chichester Range Chichester Range Duck Creek Duck Creek Duck Creek Ethel Creek Fig Tree Indabiddy Creek Irwin Hills Irwin Hills Irwin Hills Juna Downs Marillana Marillana Marillana Marillana Millstream Hill Mindy Mt Goldsworthy Mt Grant Mt Lockyer Mt Lockyer Mt Maguire Mt Maguire Mt Stevenson Mt Stuart E E E E E E E E L M L E E L L M E E E E E E E E E E 45/3693 47/3362 47/1725 47/3151 47/3152 46/781 47/3025 52/3123 39/0163 39/1088 39/0232 47/3276 47/3170 45/0238 45/296 47/1414 47/3314 47/3310 45/3931 45/4496 47/3235 47/3236 52/3307 47/3308 47/3105 47/1850 Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Nickel/Cobalt Nickel/Cobalt Status Granted Application Granted Granted Granted Granted Application Application Granted Granted Nickel/Cobalt Application Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Application Application Application Application Granted Application Application Granted Application Application Application Application Application Granted Granted Interest held 100% 100% 100% 100% 100% 100% 100% 100% 40% 40% 40% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 91 ASX ADDITIONAL INFORMATION Project Mt Stuart Mt Stuart Mt Stuart Ophthalmia Ophthalmia Ophthalmia Ophthalmia Ophthalmia Ophthalmia Ophthalmia Pannawonica Pannawonica Parsons George Phils Bore Phils Bore Port Hedland Shovelana Soansville Tom Price Tom Price Tom Price Tom Price Tom Price West Hamersley Tenement type Tenement number Commodity E E E E E E E E P E E E E E E E E E E E E E P E 47/2215 47/2994 47/3285 47/1598 47/1599 47/2280 47/2291 47/2594 47/1715 47/3323 47/2409 47/2410 47/3217 47/2904 47/2905 45/0298 46/0781 45/4465 47/2098 47/2455 47/2699 47/3216 47/1767 47/1603 Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Iron Ore Status Granted Application Application Granted Granted Granted Granted Granted Granted Application Granted Granted Application Granted Application Application Granted Application Granted Granted Application Application Application Granted Interest held 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% BROCKMAN MINING LIMITED 布萊克萬礦業有限公司ANNUAL REPORT 2015

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