ACN 009 468 099 Annual Report 31 December 2014 Contents 2 70 72 Annual Financial Report Shareholder Information Tenement Information 73 Mineral Resources and Ore Reserves Information Centaurus Metals Limited ABN 40 009 468 099 And its controlled entities Annual Financial Report 31 December 2014 Page 2 of 76 Contents Corporate Directory ................................................................................................................................................ 5 Directors’ Report .................................................................................................................................................... 6 1 Directors .......................................................................................................................................................... 6 2 Directors and Officers ...................................................................................................................................... 6 3 Directors Meetings .......................................................................................................................................... 8 4 Corporate Governance Statement .................................................................................................................. 8 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 Board of Directors ............................................................................................................................... 8 Remuneration Committee ................................................................................................................ 10 Remuneration Report – Audited ....................................................................................................... 11 Audit & Risk Committee .................................................................................................................... 19 Risk Management ............................................................................................................................. 20 Ethical Standards .............................................................................................................................. 21 Continuous Disclosure and Shareholder Communication ................................................................ 22 Diversity ............................................................................................................................................ 22 Non-Compliance Statement.............................................................................................................. 23 5 Principal Activities ......................................................................................................................................... 23 6 Operating and Financial Review .................................................................................................................... 23 7 Dividends ....................................................................................................................................................... 26 8 9 Events Subsequent to Reporting Date........................................................................................................... 26 Likely Developments ..................................................................................................................................... 27 10 Environmental Regulation ........................................................................................................................... 27 11 Directors’ Interests ...................................................................................................................................... 27 12 13 Share Options & Rights ................................................................................................................................ 27 Indemnification and Insurance of Officers and Auditors ............................................................................. 28 14 Non- Audit Services ...................................................................................................................................... 28 15 Lead Auditor’s Independence Declaration .................................................................................................. 28 Auditor’s Independence Declaration .................................................................................................................... 29 Consolidated Statement of Profit or Loss and Other Comprehensive Income..................................................... 30 Consolidated Statement of Financial Position ...................................................................................................... 31 Consolidated Statement of Changes in Equity ..................................................................................................... 32 Consolidated Statement of Cash Flows ................................................................................................................ 34 Notes to the Consolidated Financial Statements ................................................................................................. 35 Note 1. Reporting Entity ................................................................................................................................ 35 Note 2. Basis of Preparation .......................................................................................................................... 35 Page 3 of 76 Note 3. Functional and Presentation Currency ............................................................................................. 36 Note 4. Use of Judgements and Estimates .................................................................................................... 36 Note 5. Significant Accounting Policies ......................................................................................................... 37 Note 6. Operating Segments ......................................................................................................................... 46 Note 7. Other Income .................................................................................................................................... 47 Note 8. Employee Benefits Expense .............................................................................................................. 47 Note 9. Depreciation ..................................................................................................................................... 47 Note 10. Finance Income and Expense ......................................................................................................... 47 Note 11. Share-based Payments ................................................................................................................... 48 Note 12. Income Tax ...................................................................................................................................... 50 Note 13. Dividends ........................................................................................................................................ 51 Note 14. Earnings / (Loss) Per Share ............................................................................................................. 51 Note 15 (a). Cash and Cash Equivalents ........................................................................................................ 51 Note 15 (b). Reconciliation of Cash Flows from Operating Activities ............................................................ 52 Note 16. Other Receivables and Prepayments .............................................................................................. 52 Note 17. Other Investments, Including Derivatives ...................................................................................... 53 Note 18. Property, Plant and Equipment ...................................................................................................... 54 Note 18. Property, Plant and Equipment (continued) ................................................................................... 55 Note 19. Exploration and Evaluation Assets .................................................................................................. 56 Note 20. Trade and Other Payables .............................................................................................................. 56 Note 21. Employee Benefits .......................................................................................................................... 56 Note 22. Provisions ........................................................................................................................................ 57 Note 23. Capital and Reserves ....................................................................................................................... 57 Note 24. Related Parties ................................................................................................................................ 58 Note 25. Financial Instruments – Fair Values and Risk Management ........................................................... 59 Note 26. Contingent Liabilities ...................................................................................................................... 64 Note 27. Operating Leases ............................................................................................................................ 64 Note 28. Capital Commitments ..................................................................................................................... 64 Note 29. Group Entities ................................................................................................................................. 65 Note 30. Subsequent Events ......................................................................................................................... 65 Note 31. Remuneration of Auditors .............................................................................................................. 65 Note 32. Parent Entity Disclosures ................................................................................................................ 65 Directors’ Declaration ........................................................................................................................................... 67 Independent Auditor’s Report .............................................................................................................................. 68 Page 4 of 76 Stock Exchange Listing Centaurus Metals Limited shares are listed on the Australian Securities Exchange Ordinary fully paid shares (ASX code: CTM) Principal Registered Office in Australia Level 3, 10 Outram Street West Perth WA 6005 (PO Box 975, West Perth WA 6872) Telephone: (08) 9420 4000 Facsimile: (08) 9420 4040 Email: info@centaurus.com.au Website: www.centaurus.com.au Brazil Office Rua Pernambuco, 1.077 - andar S - Funcionários Belo Horizonte - MG - CEP: 30.130-151 BRAZIL Telephone: +55 31 3194 7750 Facsimile: +55 31 9301 1938 Annual Financial Report – 31 December 2014 Corporate Directory Directors Mr D M Murcia AM, B.Juris, LL.B Non-Executive Chairman Mr D P Gordon B.Bus, CA, FFin, AGIA, MAICD Managing Director Mr P E Freund FAusIMM(CP), F.AIM Non-Executive Director Mr M D Hancock B.Bus, CA, FFin Non-Executive Director Secretary Mr J W Westdorp B.Bus, CPA, MAICD Chief Financial Officer/Company Secretary Share Registry Advanced Share Registry Limited 150 Stirling Highway Nedlands WA 6009 Telephone: (08) 9389 8033 Auditors KPMG Chartered Accountants 235 St Georges Terrace Perth WA 6000 Bankers Australia National Australia Bank 1232 Hay Street West Perth WA 6005 Brazil Banco Bradesco ag: 2946. c/c:74404-2 Endereço: Rua da Bahia, 951 – 5º andar Belo Horizonte, MG Cep: 30130-008 Page 5 of 76 Annual Financial Report – 31 December 2014 Directors’ Report Your directors present their report on the Consolidated Entity (“Group”) consisting of Centaurus Metals Limited (“Centaurus” or “the Company”) and the entities it controlled at the end of, or during, the year ended 31 December 2014 together with the consolidated financial report and review report thereon. 1 Directors The directors of the Company at any time during or since the end of the year are: D M Murcia D P Gordon P E Freund M Hancock R G Hill S Zaninovich Independent Non- Executive Chairman Managing Director Non-Executive Director Non-Executive Director Independent Non-Executive Director (resigned 4 July 2014) Independent Non-Executive Director (resigned 4 July 2014) Unless otherwise disclosed, all directors held their office from 1 January 2014 until the date of this report. 2 Directors and Officers Mr Didier M Murcia, AM, B.Juris, LL.B Non-Executive Chairman, Age 52 Experience and Expertise Independent non-executive director appointed 16 April 2009 and appointed Chairman 28 January 2010. Lawyer with over 25 years legal and corporate experience in the mining industry. He is currently Honorary Australian Consul for the United Republic of Tanzania. He is Chairman and founding director of Perth-based legal group MPH Lawyers. Other Directorships During the last three years Mr Murcia held directorships in the following ASX listed companies: Cradle Resources Limited (appointed 13 August 2013) Alicanto Minerals Limited (appointed 30 May 2012) Gryphon Minerals Limited (appointed 28 July 2006) Rift Valley Resources Limited (appointed 22 November 2010, resigned 4 June 2013) Special Responsibilities Chairman of the Board Chairman of the Remuneration Committee Mr Darren P Gordon, B.Bus, CA, FFin, AGIA, MAICD Managing Director, Age 43 Experience and Expertise Managing Director appointed 4 May 2009. Chartered Accountant with over 20 years resource sector experience as a senior finance and resources executive. Former Chief Financial Officer for Gindalbie Metals Limited. Special Responsibilities Managing Director Mr Peter E Freund, FAusIMM(CP), F.AIM Non-Executive Director, Age 68 Experience and Expertise Former Operations director appointed 28 January 2010 until 11 July 2014 when he assumed a non-executive directors role. Mechanical Engineer with 40 years operational and project development experience in the mining industry with expertise in all aspects of iron ore mining, processing and other steel-making minerals. Former General Manager of the Karara Joint Venture between Gindalbie Metals Limited and Ansteel. Special Responsibilities Member of the Remuneration Committee Page 6 of 76 Annual Financial Report – 31 December 2014 Mr Mark D Hancock, B.Bus, CA, FFin Non-Executive Director, Age 46 Experience and Expertise Non-executive director appointed 23 September 2011. Currently Chief Commercial Officer at Atlas Iron Limited. Over 20 years experience in senior financial roles across a number of leading companies in Australia and South East Asia, including Lend Lease Corporation Ltd, Woodside Petroleum Ltd and Premier Oil Plc. Other Directorships During the last three years Mr Hancock held directorships in the following ASX listed companies: Atlas Iron Limited (appointed 25 May 2012, resigned 2 December 2014) Special Responsibilities Member of the Remuneration Committee Mr Richard G Hill, B.Juris, LLB., BSc (Hons), FFin Non-executive Director (resigned 4 July 2014), Age 46 Experience and Expertise Independent non-executive director appointed 28 January 2010. Geologist and Solicitor with nearly 20 years experience in the mining industry. Founder of two ASX-listed mining companies. Managing Director of Strandline Resources Ltd. Other Directorships During the last three years Mr Hill held directorships in the following ASX listed companies: Strandline Resources Ltd (appointed 23 October 2014) Genesis Minerals Ltd (appointed 13 February 2013) YTC Resources Limited (appointed 28 April 2006, resigned 11 July 2012) Mr Steven E Zaninovich, B.E Civil Non-executive Director (resigned 4 July 2014), Age 46 Experience and Expertise Independent non-executive director appointed 10 January 2013. Civil Engineer with over 20 years experience in mine development and construction predominately in overseas locations. Currently the Chief Operating Officer of ASX Listed Gryphon Minerals Ltd. Other Directorships Gryphon Minerals Ltd (appointed 28 January 2010, resigned 22 May 2012 to take up Chief Operating Officer role). Mr John W Westdorp, B.Bus, CPA, MAICD Chief Financial Officer & Company Secretary, Age 51 Experience and Expertise Mr Westdorp was appointed as Chief Financial Officer on 3 December 2012. Mr Westdorp is a Certified Practicing Accountant. He has over 20 years’ experience and was previously the Chief Financial Officer of Murchison Metals Ltd. Mr Westdorp was appointed Company Secretary on the 11 July 2014. Special Responsibilities Chief Financial Officer Company Secretary Page 7 of 76 Annual Financial Report – 31 December 2014 3 Directors Meetings The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 31 December 2014 and the number of meetings attended by each director were: Mr D M Murcia Mr D P Gordon Mr P E Freund Mr R G Hill Mr M D Hancock Mr S E Zaninovich Meetings of Directors Meetings of Committees Audit & Risk Committee(1) Remuneration Held Attended Held Attended Held Attended 11 11 11 6 11 6 11 11 11 6 11 6 n/a n/a n/a 1 1 1 n/a n/a n/a 1 1 1 1 n/a 1 n/a 1 n/a 1 n/a 1 n/a 1 n/a Held – denotes the number of meetings held during the time the director held office or was a member of the committee during the year. (1) Subsequent to the restructure of the Board of Directors the Company does not have a formal Audit & Risk Committee. This function is performed by the full Board. The Company does not have a formal Nomination Committee. This function is performed by the full Board. 4 Corporate Governance Statement This statement outlines the main corporate governance practices in place throughout the year, which comply with the ASX Corporate Governance Council recommendations, unless otherwise stated. Disclosure is made at the end of this statement of areas of non-compliance with the recommendations. Further details of the various charters, policies, codes and procedures that document the Company’s corporate governance practices are set out in the Company’s website at www.centaurus.com.au. 4.1 Board of Directors Board Role and Responsibilities The Board has approved a formal Board Charter which details the Board’s role, composition and responsibilities. The Charter is available from the corporate governance information section of the Company’s website at www.centaurus.com.au. The central role of the Board is to approve the strategic direction of the Company, to guide and monitor the Management of the Company in achieving its strategic plans and to oversee overall good corporate governance. The Board has delegated to the Managing Director all powers to manage the day-to-day business of the Company, subject to those powers reserved to the Board and any specific delegations of authority approved by the Board. The Managing Director is supported by the senior management team in the day-to-day management of the Company. Board Composition, Size and Structure The Board is responsible for determining an appropriate mix of skills, knowledge, experience, expertise and diversity on the Board. The number of directors on the board shall be determined in accordance with the Company’s Constitution and the requirements of the Corporations Act. The Board shall consist of a majority of non-executive directors. Where practical, at least half of the Board shall consist of independent directors who satisfy the criteria for independence. The Board periodically reviews its composition and the duration of terms served by the directors. Page 8 of 76 Annual Financial Report – 31 December 2014 Details of the members of the Board, their skills, experience, expertise, qualifications, term of office and independence status are set out in the Directors’ Report under the heading “Directors and Officers” (section 2). There are two independent non-executive directors, one executive director and one non independent non- executive director at the date of signing the Directors’ Report. The Board considers that collectively the directors have the range of skills, knowledge and experience necessary to direct the Company. Selection and Appointment of New Directors When the need for a new director is identified, the Board reviews the range of skills, experience and expertise on the Board, identifies its needs and prepares a short-list of candidates with appropriate skills and experience. Where necessary, advice is sought from independent research consultants. When considering new candidates for nomination, the Board takes into account: the candidate’s competence and qualifications; independence; the range of skills, experience and expertise on the Board to identify the skills that will best increase the effectiveness of the Board; the candidate’s ability to devote the time required by a director to effectively undertake his or her responsibilities; and the extent to which the candidate is likely to work constructively with the existing directors and contribute to the overall effectiveness of the Board. The Board then appoints the most suitable candidate who must stand for election at the next Annual General Meeting of the Company. Directors’ Independence The Board has adopted specific principles in relation to directors’ independence and these are set out in its Charter. An independent director is a non-executive director who is not a member of management and who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgement. The names of the directors considered to be independent are set out in the Directors’ Report. Term of Office The Company’s Constitution specifies that all non-executive directors must retire from office no later than the third annual general meeting following their last election. Where eligible, a director may stand for re-election. Responsibilities of Management The Board Charter sets out the responsibilities of management and details are available on the Company’s website. Independent Professional Advice The Board, Board Committees or individual directors may seek independent external professional advice as considered necessary at the Company’s expense, subject to prior consultation with the Chairman. A copy of any such advice received will be made available to all members of the Board. Director and Executive Education The Group has a process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the Group concerning performance of directors. Directors also have the opportunity to visit Group facilities and meet with management to gain a better understanding of business operations. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge. The Group also has a process to educate new senior executives upon taking such positions. The induction program includes reviewing the Group’s structure, strategy, operations, financial position and risk management policies. It also familiarises the individual with the respective rights, duties, responsibilities and roles of the individual and the Board. Page 9 of 76 Annual Financial Report – 31 December 2014 Performance Assessment of the Board and Senior Management The Board is responsible for undertaking an annual evaluation process to review its performance and that of its Committees. The evaluation process includes a self-assessment questionnaire to review performance attributes. The most recent review of the Board was conducted in June 2014. The next Board performance review will be undertaken during 2015. The performance of senior management is assessed annually by the Managing Director. Performance is measured against established targets specific to the individual role and responsibilities of each person. Senior management performance evaluations have been conducted by the Managing Director for the financial year ended 31 December 2014. Board Committees The Board may from time to time establish and delegate any powers to a Committee of the Board in accordance with the Company’s Constitution. The Board is responsible for approving and reviewing the charter terms and membership of each Committee established by the Board. The Board has established a Remuneration Committee. The Board has not established an Audit Committee or a Nomination Committee. The Board considers that given its size, no efficiencies or other benefits are gained by establishing a separate Audit or Nomination Committee. All non-executive directors shall be entitled to attend meetings of Board Committees where there is no conflict of interest. 4.2 Remuneration Committee The Remuneration Committee operates in accordance with its Charter which is available on the Company’s website. The role of the Committee is to review and assist the Board in developing the Company’s remuneration, recruitment, retention and termination policies. The members of the Committee are appointed by the Board. The Committee shall consist of at least three non-executive directors, consisting of a majority of independent directors. The Chairman of the Committee should be an independent director. All persons appointed to the Committee should have sufficient professional expertise, knowledge and understanding to allow them to discharge their duties. Remuneration consultants are required to be appointed by, and report directly to, the Committee. The Committee will ensure the remuneration consultant is sufficiently independent. The Committee will meet as frequently as necessary, but at least once a year, in order to carry out the responsibilities of the Committee. Any Committee member may convene a meeting of the Committee. The Committee may extend an invitation to any person to attend all or part of any meeting which it considers appropriate. The Committee may meet with external advisers, any executive or other employee, any other non-executive director, and may do so with or without the presence of management. If any such person has a material personal interest in a matter being considered that person must not be present when that matter is being considered. All Board members wishing to attend are entitled to be present at Committee Meetings (except in circumstances where there is a conflict of interest). The Managing Director and Company Secretary will normally be invited to attend meetings. The Chairman of the Committee will report to the Board, at the following Board meeting, on the proceedings of each meeting of the Committee, bringing forward all recommendations of the Committee which require Board endorsement or approval. A copy of Committee papers should be circulated to all Directors who are not members of the Committee. Page 10 of 76 Annual Financial Report – 31 December 2014 The Company’s remuneration policy consists of: a clear distinguished structure of non-executive remuneration from that of executive directors and senior management; balancing the Company’s desire to attract and retain personnel against its interest in not paying excessive remuneration; providing an appropriate balance between fixed and incentive pay, reflecting short and long term performance objectives appropriate to the Company’s circumstances and goals; motivating personnel to pursue the long term growth and success of the Company; and demonstrating a clear relationship between personnel performance and remuneration. Further information on directors’ and executives’ remuneration is set out in the Remuneration Report. Details of the qualifications of directors of the Remuneration Committee and their attendance at Committee meetings are set out in the Directors’ Report. 4.3 Remuneration Report – Audited 4.3.1 Principles of Remuneration The primary objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders. The Board ensures that executive reward satisfies the following key criteria for good reward and governance practices: competitiveness and reasonableness; acceptability to shareholders; performance linked executive compensation; transparency; and capital management. The Group has structured an executive remuneration framework that complimentary to the reward strategy of the organisation to ensure: is market competitive and (i) Alignment to shareholders’ interests: focuses on the creation of shareholder value and returns; and attracts and retains high calibre executives. (ii) Alignment to program participants’ interests: rewards capability and experience; reflects competitive reward for contribution to growth in shareholder wealth; provides a clear structure for earning rewards; provides recognition for contribution; and seeks to retain experienced and competent individuals in key executives roles The remuneration framework currently consists of base pay, cash incentive bonuses and long-term incentives through participation in the Employee Share Option Plan and/ or the Performance Share Plan. The overall level of executive reward takes into account the performance of the Group over a number of years, with greater emphasis given to the current and prior year. Over the past 5 years, the Group was involved in mineral exploration and pre-development activities and therefore growth in earnings is not considered relevant. Shareholder wealth is dependent upon exploration success and has fluctuated accordingly in addition to being influenced by broader market factors. The performance of the Group in respect of the current period and the previous four financial years is set out below: 2014 $ 2013 $ Dec 2012 $ June 2012 $ June 2011 $ Net Loss (10,460,299) (32,714,987) (9,125,800) (20,783,843) (12,204,218) Change in share price ($0.15) ($0.13) ($0.11) ($0.20) $0.064 Market capitalisation at year end $12.2 million $39.2 million $64.6 million $58.7 million $68 million Iron Ore Price (USD/tonne) CFR China 62% Fe at relevant year end date 71.75 134.75 144.50 135.25 170.75 Page 11 of 76 Annual Financial Report – 31 December 2014 During the years stated above, there were no returns of capital made by the Company to shareholders and no dividends paid. During the year financial year ended 31 December 2014, no salary or fee increases were awarded to non- executive directors, executive directors or executives of the Company. The executive pay and reward framework has four components: base pay and benefits; short term incentives in the form of cash bonuses based on achievement of milestones; long term incentives through participation in the Employee Share Option Plan and/ or the Performance Share Plan; and other remuneration such as superannuation. The combination of these components comprises the executive’s total remuneration. Base Pay Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-financial benefits at the executive’s discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for senior executives is reviewed annually to ensure the executive’s remuneration is competitive with the market. An executive’s base pay is also reviewed on promotion. There are no guaranteed base pay increases included in any senior executive contracts. Incentives – Cash Bonuses The Board may pay discretionary cash bonuses or offer performance based incentives. When offered, bonus amounts are pre-determined and are based on achievement of milestones relevant to the Company’s strategic objectives. No cash bonuses were offered or paid for the year ended 31 December 2014. Expatriate Benefits Expatriate executives located in Brazil receive benefits including housing, relocation costs and return travel. The Company’s focus is to minimise the number of executives on expatriate arrangements. Currently the Company has one expatriate employee. Retirement Benefits In accordance with regulatory requirements, Directors and employees are permitted to nominate a superannuation fund of their choice to receive superannuation contributions. Long Term Incentives – Options and Performance Rights Long term incentives comprising share options and performance rights are granted from time to time to encourage exceptional performance in the realisation of strategic outcomes and growth in shareholder wealth. Options and performance rights are granted for no consideration and do not carry voting or dividend entitlements. Information on share options and performance rights granted during the year is set out in section 4.3.4. Short Term Incentive Plan No new STIs were offered in the year ended 31 December 2014. There are no short term incentives in place as at the date of this report. Employment Agreements Remuneration and other terms of employment for executives are formalised in employment agreements. The agreements provide for the provision of other benefits and participation, when eligible, in the Employee Share Option Plan and Performance Share Plan. Page 12 of 76 Annual Financial Report – 31 December 2014 Other major provisions of the agreements relating to remuneration are set out below: D P Gordon – Managing Director Term of agreement – commenced on 4 May 2009. Mr Gordon may terminate the agreement by giving 6 months notice. The Company may terminate the agreement by giving 12 months notice. Base salary, exclusive of superannuation during the year ended 31 December 2014 was $400,000. Base salary is reviewed annually. Subsequent to year end base salary has been reduced to $360,000 effective from 1 April 2015. Provision of four weeks annual leave. Long Term Incentive Performance Rights – subject to shareholder approval, performance rights are issued under the Company’s Performance Share Plan with vesting conditions based on performance hurdles relating to production targets. Long Term Incentive Options– subject to shareholder approval, options are issued under the Company’s Employee Share Option Plan with vesting conditions based on performance conditions. J W Westdorp – Chief Financial Officer Term of agreement – commenced on 3 December 2012 with no set term. Mr Westdorp or the Company may terminate the agreement by giving 2 months notice. Entitled to 6 months salary if position is made redundant. Base salary, exclusive of superannuation is $325,000 effective from 1 July 2014, reviewed annually. Provision of four weeks annual leave. Long Term Incentive Performance Rights – performance rights are issued under the Company’s Performance Share Plan with vesting conditions based on performance hurdles relating to production and market capitalisation targets. Long Term Incentive Options – subject to shareholder approval, options are issued under the Company’s Employee Share Option Plan with vesting conditions based on service conditions. P E Freund – Operations Director (resigned 11 July 2014) Term of agreement – commenced on 1 February 2010 with no set term. Mr Freund or the Company may terminate the agreement by giving 2 months notice. Entitled to 6 months salary if position is made redundant. Base salary, inclusive of superannuation is $400,000 effective from 1 July 2013, reviewed annually. Provision of four weeks annual leave. Expatriate benefits including accommodation, relocation expenses and tax equalisation are provided for living in Brazil. Non- Executive Directors Fees and payments to non-executives reflect the demands which are made on, and the responsibilities of, the directors. Non-Executive directors’ fees and payments are reviewed at least annually by the Board. The Chairman’s fees are determined independently to the fees of non-executive based on comparative roles in the external market. Non-executive directors’ remuneration consists of set fee amounts and statutory superannuation. The level of fees for Non-Executive directors during the year was $60,000 per annum and $90,000 per annum for the Non- Executive Chairman. The current base remuneration has recently been adjusted with effect from 1 April 2015. The level of fees for Non-Executive directors is set at $40,000 per annum and $60,000 per annum for the Non- Executive Chairman. Directors do not receive additional committee fees. Non-Executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The total maximum currently stands at $400,000. There is no provision for retirement allowances for Non-Executive directors. Non-Executives are eligible to be granted options and performance rights to provide a material additional incentive for their ongoing commitment and dedication to the continued growth of the Group. There have been no new grants of performance rights or options to Non-Executives during the year. Prior to issuing incentives the Board considers whether the issue is reasonable in the circumstances. In the past incentives have been offered to assist the Company in attracting and retaining the highest calibre of Non-Executive, whilst maintaining the Group’s cash reserves. Page 13 of 76 Annual Financial Report – 31 December 2014 4.3.2 Directors’ and Executive Officers’ Remuneration Details of the nature and amount of each major element of remuneration of each director of the Company, each of the named Company executives and other key management personnel of the Group are: Short Term Benefits Post- employment Benefits Long Term Benefits Share- based Payments(4) Salary & Fees $ Other Benefits(2) $ Super- annuation $ Redundancy Benefits $ Long Service Leave(3) $ Options and Rights $ Total $ 90,000 26,062 60,000 27,460 30,000 400,000 254,115 325,000 1,212,637 - - - - - 23,736 22,830 18,750 65,316 - 2,476 - 2,540 - 25,000 23,701 25,000 78,717 - - - - - - - - - - - - - - - - 53,260 34,567 - 90,000 28,538 60,000 30,000 30,000 536,563 483,295 182,649 - - - 182,649 53,260 73,722 108,289 442,472 1,700,868 S300A(1)(e)(i) Proportion of Remuneration Performance Related(5) % S300A(1)(e)(vi ) Value of Options and Rights as Proportion of Remuneration % - - - - - - - - 6.4% - 6.4% - 16.7% 16.7% Year Ended 31 December 2014 Non- Executive Directors Mr D M Murcia Mr P E Freund(1) Mr M D Hancock Mr R G Hill (resigned 4 July 2014) Mr S E Zaninovich (resigned 4 July 2014) Executive Directors Mr D P Gordon Mr P E Freund(1) Executives Mr J W Westdorp Total (1) Effective of 11 July 2014 Mr P E Freund stepped down from his executive position but remains on the Board as a non-executive Director. (2) Other benefits include annual leave entitlements, measured on an accrual basis, and reflects the movement in entitlement over the 12 month period and non-cash benefits and expatriate benefits for executives located in Brazil. (3) Relates to pro rata long service leave which has been recorded as a provision for the first time during the year. (4) The fair value of the options is calculated at the date of grant using the Black Scholes option-pricing model and allocated to each reporting period evenly over the period from grant date to vesting date. The fair value of the rights is calculated using the 5 day volume weighted average share price prior to date of grant. The value disclosed is the portion of the fair value of the options and rights recognised in this reporting period. (5) The vesting of performance rights and options is conditional on the achievement of future targets which if not achieved will result in the forfeiture of the related rights or options. The proportion of performance related remuneration consists of short term incentives and long term incentives. The percentages disclosed include the value of options and performance rights expensed during the year in accordance with Australian Accounting Standards. Details of the vesting conditions related to the options and rights have been disclosed in section 4.3.4. Page 14 of 76 Annual Financial Report – 31 December 2014 Year Ended 31 December 2013 Non- Executive Directors Mr D M Murcia Mr R G Hill Mr M D Hancock Mr S E Zaninovich (appointed 10 January 2013) Ms S Lyons (resigned 12 April 2013) Mr K G McKay (resigned 10 January 2013) Executive Directors Mr D P Gordon Mr P E Freund Executives Mr J W Westdorp Short Term Benefits Post- employment Benefits Salary & Fees $ Other Benefits(1) $ Super-annuation $ Share- based Payments(2) Options and Rights $ S300A(1)(e)(i) Proportion of Remuneration Performance Related(3) % S300A(1)(e)(vi) Value of Options and Rights as Proportion of Remuneration % Total $ 90,000 54,920 60,000 58,692 16,667 1,694 400,000 375,000 325,000 1,381,973 - - - - - - 5,514 30,795 - 36,309 - 5,080 - - - 152 25,000 25,000 25,000 80,232 11,482 101,482 - - - - - (96,209) (36,647) 37,034 (84,340) 60,000 60,000 58,692 16,667 1,846 334,305 394,148 387,034 1,414,174 - - - - - - - - 11.3% - - - - - - - 9.5% 9.5% Total (1) (2) (3) . Other benefits include non-cash benefits and expatriate benefits for executives located in Brazil. The fair value of the options is calculated at the date of grant using the Black Scholes option-pricing model and allocated to each reporting period evenly over the period from grant date to vesting date. The fair value of the rights is calculated using the 5 day volume weighted average share price prior to date of grant. The value disclosed is the portion of the fair value of the options and rights recognised in this reporting period. During the year performance rights were forfeited due to failure to meet vesting conditions. Share based payment expenses in relation to these performance rights and options were reversed during the period. In addition a number of unvested options and performance rights are not expected to vest due to the revised development strategy for the Jambreiro Project and the expected timeframe required to develop an economic export business for the Project. Share based payment expenses in relation to these performance rights and options which are not expected to vest were reversed during the period. The vesting of performance rights and options is conditional on the achievement of future targets which if not achieved will result in the forfeiture of the related rights or options. The proportion of performance related remuneration consists of short term incentives and long term incentives. The percentages disclosed include the value of options and performance rights expensed during the year in accordance with Australian Accounting Standards. Details of the vesting conditions related to the options and rights have been disclosed in section 4.3.4 Page 15 of 76 Annual Financial Report – 31 December 2014 4.3.3 Analysis of Bonuses There were no cash bonuses awarded as remuneration to directors or other key management personnel of the Company during the year or the prior year. There were no unvested cash bonuses as at 31 December 2014. Unvested cash bonuses as at 31 December 2013 were forfeited during the year. 4.3.4 Equity Instruments A Performance Share Plan (PSP) was adopted by the Board on 23 July 2012 and was approved by shareholders on 31 August 2012. Under the PSP, the Board may from time to time in its absolute discretion grant performance rights to eligible persons including executives and employees, subject to such terms and conditions as the Board determines. Performance rights are, in effect, options to acquire unissued shares in the Company, the exercise of which is subject to certain performance milestones and remaining in employment during the vesting period. Performance rights are granted under the PSP for no consideration and are granted for a period not exceeding 5 years. The performance rights will only vest into shares if the performance conditions relating to the targets are met. Options are granted under the Employee Share Option Plan (ESOP) which was approved by shareholders at the 2013 annual general meeting. Eligibility to participate in the ESOP (including participation by Executive and Non-Executive directors) is determined by the Board in its absolute discretion. Where provided, options granted under the ESOP are for no consideration and are granted for a period of up to 5 years. The vesting and exercise conditions of options granted are also determined by the Board in its absolute discretion. Employees must remain in employment during the vesting period. Options may also be granted by the Company outside of the ESOP, but under similar terms and conditions. The Group has a policy that prohibits directors and employees who are granted share options and performance rights as part of their remuneration from entering into arrangements that limit their exposure to losses that would result from share price decreases. Rights over Equity Instruments Granted as Compensation Details on options and rights over ordinary shares in the Company that were granted as remuneration to each key management personnel during the reporting period and details of options and rights that vested during the period are detailed below. On 5 September 2014 the Board announced that it had agreed to issue the Managing Director, Mr Darren Gordon, share options and performance rights as part of his remuneration arrangements. The issue was subject to shareholder approval. The Board and Mr Gordon have subsequently agreed to cancel the issue and will not seek shareholder approval. There were no rights that vested during the reporting period. Analysis of Rights over Equity Instruments Granted as Compensation Details of vesting profiles of the rights held by each key management person of the Group are detailed below: PERFORMANCE RIGHTS Number Of Performance Rights Issued Grant Date Fair value per right at grant date % Vest In Year % Forfeited In Year Financial Year In Which Grant Vests Directors Mr D Gordon Mr P Freund Executives Mr J Westdorp 400,000 300,000 31/08/12 23/11/12 200,000 200,000 300,000 200,000 03/12/12 03/12/12 25/08/14 25/08/14 $0.2853 $0.3000 $0.2926 $0.2926 $0.0770 $0.0770 - - - - - - - 100% - - - - 2015(1) - 2015(1) 2016(2) 2015(3) 2015(4) Page 16 of 76 Annual Financial Report – 31 December 2014 Performance rights have a nil exercise price. (1) (2) (3) Performance rights vest on first sale of iron ore into the export market from the Company’s current or future Brazilian Projects on or before 30 June 2015. Performance rights vest on market capitalisation exceeding $500 million by 30 June 2016. Performance rights vest on first sale of Iron Ore from any of the Company’s current or future Brazilian Projects on or before 30 April 2015. (4) Performance rights vest on a decision to mine in respect the Jambreiro Project by 30 June 2015. Analysis of Options over Equity Instruments Granted as Compensation Details of vesting profiles of the options granted as remuneration to key management personnel of the Group are detailed below: OPTIONS Number Of Options Issued Grant Date Expiry Date Exercise Price Fair value per option at grant date % Vest In Year % Forfeited In Year Financial Year In Which Grant Vests Executive Director Mr D Gordon Executives Mr J Westdorp 125,000 125,000 31/03/10 31/08/10 31/03/15 31/03/15 $0.6400 $0.6400 $0.5360 $0.5360 - - 250,000 250,000 500,000 25/08/14 25/08/14 25/08/14 31/08/18 31/08/18 31/08/18 $0.1250 $0.1250 $0.1250 $0.0450 $0.0450 $0.0450 100% - - - - - - - 2015(1) 2015(2) 2016(3) 2017(3) (1) (2) Options vest on commencement of iron ore production on a Mining Lease from the Company’s iron ore projects in Brazil. Options vest on achievement of iron ore production from the Company's iron ore projects at an average rate of 250,000 tonnes per month over a consecutive 3 month period. (3) Options vested on completion of service conditions. Exercise of Options Granted as Compensation There were no shares issued on exercise of options which were previously granted as compensation to key management personnel. Options and Rights Over Equity Instruments The movement during the reporting period, by number of rights and options over ordinary shares in Centaurus Metals Limited held, directly, indirectly and beneficially, by each key management person, including their related parties, is as follows: Page 17 of 76 Annual Financial Report – 31 December 2014 Held 1 January 2014 Granted as Compensat ion Exercised Other Changes(2) Directors Mr D M Murcia Mr D P Gordon Mr P E Freund Mr M Hancock Mr R G Hill(1) Mr S E Zaninovich(1) Executives Mr J Westdorp 312,500 1,150,000 2,300,000 - 187,500 - - - - - - - 400,000 1,500,000 - - - - - - - (187,500) (500,000) (2,300,000) - (187,500) - - Held 31 December 2014 Vested During the Period Vested and Exercisable 31 December 2014 125,000 650,000 - - - - - - - - - - 125,000 - - - - - 1,900,000 250,000 250,000 (1) (2) Resigned 4 July 2014 Other changes represent options that expired or were forfeited during the year. Analysis of Movements in Options and Rights The movement during the reporting period, by value, of options and rights over ordinary shares in the Company held by each director, key management person and each of the Company executives and relevant Group executives is detailed below: Value Of Options Granted $(A) Value Of Performance Rights Granted $(B) Value Of Options Exercised In Year $(C) Value Of Options Lapsed In Year $(D) Value Of Performance Rights Lapsed In Year $(E) - - - - - - - - 44,592 38,394 - - - - - - - - - - - - 21,000 - - Director Mr D M Murcia Mr D P Gordon Mr P E Freund Mr R G Hill Executives Mr J W Westdorp (1) (2) (3) (4) (5) The value of options granted in the year is the fair value of the options calculated at grant date using the Black Scholes option-pricing model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period. The value of performance rights granted in the period is the fair value calculated using the 5 day volume weighted average share price prior to grant date. This amount is allocated to remuneration over the vesting period. The value of options exercised during the year is calculated as the market price of shares of the Company as at close of trading on the date the options were exercised after deducting the price paid to exercise the option. The value of unvested options that lapsed during the year represents the benefit forgone and is calculated at the date the options lapsed using the Black Scholes option-pricing model assuming the performance criteria had been achieved. The value of the Options which lapsed during the year is nil as the options were out of the money. The value of unvested performance rights that lapsed during the year represents the benefit forgone and is calculated based on the share price at the date the performance rights lapsed assuming the performance criteria had been achieved. Page 18 of 76 Annual Financial Report – 31 December 2014 4.3.5 Key Management Personnel Transactions Loans to Key Management Personnel and Their Related Parties No loans have been made to directors or other key management personnel of Centaurus Metals Limited or the Group. Key Management Personnel and Director Transactions A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows: Key Management Person Mr D M Murcia(1) Total and current liabilities Transaction Value Balance Outstanding As At Transaction Legal fees 2014 $ 25,335 2013 $ 28,691 2014 $ 2013 $ - - - - (1) Payable to MPH Lawyers, a firm in which Mr D Murcia is a partner. Shareholdings of Key Management Personnel The movement during the reporting period of ordinary shares in Centaurus Metals Limited held, directly, indirectly and beneficially, by each key management person, including their related parties, is as follows: Purchases Received on Exercise of Options Sales Other(2) Held 1 January 2014 1,613,405 6,769,791 25,000 33,333 1,569,430 6,250 120,000 120,000 40,000 120,000 - - Held at 31 December 2014 1,733,405 6,889,791 65,000 153,333 - - - - - - - - - - - - - - - - (1,569,430) (6,250) Director Mr D M Murcia Mr D P Gordon Mr P E Freund Mr M Hancock Mr R G Hill(1) Mr S E Zaninovich(1) Executives Mr J Westdorp - - - - All equity transactions with Key Management Personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arms length. (1) (2) Resigned 4 July 2014. Other changes represent balances held on resignation. 4.4 Audit & Risk Committee Following the restructure of the Board of Directors on 4 July 2014 the responsibilities of the Audit & Risk Committee were assumed by the full Board. The Board is responsible for overseeing the Company’s financial reporting, compliance with legal and regulatory requirements, internal control structure, risk management procedures, and the internal audit (if and when appointed) and external audit functions. Page 19 of 76 Annual Financial Report – 31 December 2014 The Board has ensured that the Managing Director and Chief Financial Officer have provided the following written declarations prior to the sign-off of the annual financial reports: that the financial records of the Group for the financial year have been properly maintained, the Group’s financial reports for the financial year comply with accounting standards and present a true and fair view of the Group’s financial position and operational results; and the above statement is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. The Board is responsible for monitoring the Company’s external auditor relationship. The Company appoints as external auditor an internationally recognised and respected accountancy firm which has clearly demonstrable audit quality processes and resources to carry out the assignment and who is independent from the Company. The external auditor is required to provide an annual declaration of independence to the Board. The external auditor is required to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. The external auditor is required to rotate the audit and review partners at least once every five years. A previous audit partner should not be involved in the Company’s audit for at least two years subsequent. An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the Directors’ Report and in Note 31 to the financial statements. 4.5 Risk Management The Company recognises that risk is inherent to its business and effective management of risk is essential for the achievement of the Company’s objectives and to sustainable success. Successful risk management can enhance opportunities, reduce threats and maximise competitive advantage. The objective of the Company’s risk management system is to provide a consistent process for the recognition and management of risks across its business. The success of the Company’s risk management system lies in the responsibility placed on everyone at all levels to proactively identify, manage, review and report on risks relating to the objectives they are accountable for delivering. The Company applies a structured approach to identifying key areas of business risk which include strategic, health and safety, environment, human capital, finance, technology, reputation and brand, legal and compliance, and social and cultural risks. At a strategic level, the Board undertakes periodic reviews of strategic and corporate risks facing the Company. The Board may use the services of external risk management consultants in these reviews. At an operational level, senior management conduct regular reviews of operational risks. These reviews may include participation by the Company’s key service providers and external risk management consultants. A risk register is developed from the risk reviews. The risk register includes details of the risks identified, qualitative risk assessment and the risk response plan. A consolidated report of key strategic, corporate and operational risks and the appropriate management strategies is prepared and presented to the Board. The Company’s risk profile may change over time. Part of the process of regular reviews of existing risks is to identify new and emerging risks. Due to the size and nature of the Company, an internal audit function has not been established or internal audit review conducted. The Board oversees the processes by which risks are managed. This will include the Company’s risk appetite, monitoring of risk performance and those risks that may have a material impact to the business. The Board is responsible for satisfying itself that management has developed and implemented a sound system of risk management. The Managing Director and Chief Financial Officer are required to state to the Board in writing that the declaration relating to the integrity of the Company’s financial statements is founded on a sound system of risk management and that the system is operating in all material respects in relation to financial reporting risks. Senior management is responsible for the design and implementation of the risk management system to manage the Company’s risks and report to the Board whether those risks are being effectively managed. Page 20 of 76 Annual Financial Report – 31 December 2014 4.6 Ethical Standards Code of Conduct The Group has developed a statement of values and a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all directors and employees. The Code is available on the Company’s website. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group's integrity. In summary, the Code requires that at all times, all Group personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and Group policies. Securities Trading Policy The Company has adopted a Securities Trading Policy which is available on the Company’s website. The Policy applies to executive and non-executive directors, full-time, part-time and casual employees, and contractors, consultants and advisers of the Company. Additional trading restrictions apply to directors and senior managers who report directly to the Managing Director. The Policy prohibits dealings in the Company’s securities when in possession of price-sensitive information that is not generally available to the market. Directors and employees must not partake in short-term trading of the Company’s securities which is defined as less than a 30-day period. Directors and senior managers are prohibited from trading in the Company’s securities during the following blackout periods: 1 week prior to the release of annual and half yearly accounts to the ASX; 1 week prior to the release of the quarterly results announcement to the ASX; and 2 business days after the release of any ASX announcement. Trading during blackout periods may only be permitted with prior approval of the Chairman where there are exceptional circumstances (such as severe financial hardship) and the director or senior manager is not aware of inside information. Before trading in the Company’s securities during periods outside of the Blackout Periods (if permitted by the Policy), directors and senior managers must comply with the following: Directors must advise the Chairman prior to any proposed trading; and In the case of the Chairman and senior managers, the Managing Director and Company Secretary must be advised. Directors must notify the Company Secretary promptly of sufficient details of any trading to enable notice to be filed in accordance with the ASX Listing Rules within 5 business days of the trading. Before any director or senior manager enters into a loan arrangement (for example margin lending) whereby the Company’s securities are mortgaged, provided as security, lent or charged to a financier, they must comply with the following: Directors must seek approval from the Chairman; and In the case of the Chairman and senior managers, approval from the Managing Director is required. Directors and senior managers must also inform the Company Secretary of all loan arrangements affecting the Company’s securities. This includes the creation, variation or discharge of security arrangements. Directors and employees participating in an equity-based incentive plan are prohibited from entering into any transaction which would have the effect of hedging or otherwise transferring to any other person the risk of any fluctuation in the value of any unvested entitlement in the Company’s securities. Anti-Bribery & Corruption Policy The Company has an established Anti-Bribery & Corruption Policy which is available on the Company’s website. The Company is committed to operating in a manner consistent with the laws of the jurisdictions in which it operates, including those relating to anti-bribery and corruption. Honesty, integrity and fairness are considered integral to the way the Company operates, and conduct associated with bribery and corruption is inconsistent with these values. Page 21 of 76 Annual Financial Report – 31 December 2014 The Company has a strict policy which forbids its personnel, suppliers and all third parties with whom the Company transacts from engaging in any activity that constitutes bribery or corruption. The Company strictly prohibits the payment, offer or authorisation of a bribe, as well as the receipt or acceptance of a bribe. The Anti-Bribery and Corruption Policy sets out the Company’s policy requirements and procedures to ensure compliance with applicable anti-bribery and anti-corruption laws. A breach of the Policy is a serious matter which will be investigated and addressed by the Company. Disciplinary action will be taken against any personnel who breach the Policy. This includes failure to report breaches of the Policy. The action taken will depend on the severity of the breach but may include: reprimands; formal warnings; demotions; and termination of employment or engagement arrangements. In the case of third parties to whom the Policy also applies, the Company will terminate its relationship with a third party who has been found to breach the Policy. 4.7 Continuous Disclosure and Shareholder Communication The Group has written policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Company and its controlled entities that a reasonable person would expect to have a material effect on the price of the Company’s securities. These policies and procedures also include the arrangements the Group has in place to promote communication with shareholders and encourage effective participation at general meetings. A summary of these policies and procedures is available on the Company’s website. The Company Secretary has been nominated as the person responsible for communications with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing, in conjunction with the Managing Director and Chairman, information disclosure to the ASX, analysts, brokers, shareholders, the media and the public. All information disclosed to the ASX is posted on the Company’s website on the same day it is released to the ASX. When analysts are briefed on aspects of the Group’s operations, the material used in the presentation is released to the ASX and posted on the Company’s website prior to the presentation being made. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed, and if so, this information is also immediately released to the market. The Group seeks to provide opportunities for shareholders to participate through electronic means. All Company announcements, media briefings, details of Company meetings, press releases, and financial reports are available on the Company's website. 4.8 Diversity The Group values diversity in all aspects of its business and is committed to creating a working environment that recognises and utilises the contribution of all its employees. The purpose of this policy is to provide diversity and equality relating to all employment matters. The Group’s policy is to recruit and manage on the basis of ability and qualification for the position and performance, irrespective of gender, age, marital status, sexuality, nationality, race/cultural background, religious or political opinions, family responsibilities or disability. The Group opposes all forms of unlawful and unfair discrimination. Gender Diversity The Board is responsible for establishing and monitoring on an annual basis the achievement against gender diversity objectives and strategies, including the representation of women at all levels of the organisation. The proportion of women within the whole organisation was as follows: 2014 2013 Women employees in the whole organisation Women in Managerial positions Women on the Board of Directors 38% 25% 0% 36% 0% 0% Page 22 of 76 Annual Financial Report – 31 December 2014 The Board recognises that there is a gender imbalance amongst managerial and non-executive director positions, and that an opportunity exists to address this upon future appointments to these positions. A copy of the Diversity Policy is available on the Company's website. 4.9 Non-Compliance Statement The Company has not followed all of the Recommendations set out in Australian Securities Exchange Limited’s Listing Rule 4.10.3. The Recommendations that have not been followed and the explanation of any departures are as follows: A majority of the Board should be independent directors. The Board is comprised of four directors, three non-executive and one executive. Of the three non-executive directors, two are deemed to be independent directors. The other non-executive director, Mr Hancock, is the representative of the Company’s largest shareholder, and as such does not meet the requirement to qualify as an independent director. The current size of the Company does not justify a larger Board with a majority of independent directors. The Board should establish a Nomination Committee. The role of the Nomination Committee is carried out by the full Board. The Board considers that given its size, no efficiencies or other benefits are gained by establishing a separate Nomination Committee. The Board should establish an Audit Committee. The Company complied with this recommendation until 4 July 2014 when it restructured the Board of Directors. From 4 July 2014 the responsibilities of the Audit Committee were assumed by the Board. The Audit Committee should be structured so that it: consists of only Non-Executive Directors, consist of a majority of independent Directors, is chaired by an independent Chair; who is not Chair of the Board and has at least three members. The Board considers that the size and complexity of the Company’s affairs do not merit establishment of a separate Audit Committee. The Board meets on a regular basis and discusses matters normally included within the terms of reference of an Audit Committee, being company risk, control and general and specific financial matters. Companies should establish measurable objectives for achieving gender diversity. Due to the size of the Company, the Board does not deem it practical to limit the Company to specific targets for gender diversity. When filling a position every candidate suitably qualified for a position has an equal opportunity of appointment regardless of gender, age, ethnicity or cultural background. Non-executive directors should not receive options. Non-executive directors are eligible to participate in the Employee Share Option Plan to provide a material additional incentive for their ongoing commitment and dedication to the continued growth of the Group. The Board considers that there are circumstances where the issue of options is reasonable and will assist the Company in attracting and retaining the highest calibre of non-executive directors to the Company, whilst maintaining the Group’s cash reserves and delivering on the Group’s strategic objectives. 5 Principal Activities During the period the principal activities of the Group consisted of exploration and pre-development activities related to iron ore mineral resources. There were no significant changes in the nature of the activities of the Group during the year. 6 Operating and Financial Review A summary of consolidated results is set out below Interest Income Other Income Loss before income tax expense Income tax benefit 31 December 2014 $ 31 December 2013 $ 252,806 318,180 570,986 693,518 494 694,012 (10,460,299) - (35,921,292) 3,206,305 Loss attributable to members of Centaurus Metals Limited (10,460,299) (32,714,987) Page 23 of 76 Annual Financial Report – 31 December 2014 Financial Performance During the year ended 31 December 2014 the Group received proceeds from the Liberdade court settlement of $512,270, which resulted in a reversal of a provision for impairment of $181,618 and a gain of $330,652. During the year the Group recognised an impairment loss of $1,397,191 on the carrying values of its Passabém Iron Ore Project. The project was assessed for impairment as a result of the Group’s intent to focus on the Candonga project. Exploration and Evaluation costs totalling $5,136,663 (2013 $12,240,270) were expensed in accordance with the Group’s accounting policy. The exploration and evaluation costs primarily comprise costs in relation detailed engineering work at Jambreiro and exploration and feasibility studies at the Candonga project in Brazil. Financial Position At the end of the year the Group had a net cash balance of $891,990 (2013: $4,843,508) and net assets of $6,507,522 (2013: $12,008,268). Total liabilities amounted to $1,019,303 (2013: $1,680,558) and were limited to trade and other payables, provisions, employee benefits and deferred tax liabilities. Strategy The key focus of the Group during the year has remained on its Domestic Iron & Steel Strategy, which is based on commencing production from its Candonga Iron Ore Project in Brazil. The Group achieved a number of important milestones during year towards achieving this goal. Production from the Candonga Project is planned to be sold into the large domestic steel industry in south- eastern Brazil, which is based in and around the world class iron ore mining region known as the “Iron Quadrangle”. In the longer term Centaurus holds a portfolio of iron ore assets that will be evaluated as potential future production centres or hubs for the Company’s Domestic Strategy. In addition to producing iron ore to sell into the Brazilian steel industry, Centaurus also plans in the future to sell iron ore into the seaborne market. This Export Market Strategy would leverage off the cash flow to be generated by the domestic iron ore business to develop projects around existing port and rail infrastructure. Project Activities Candonga Project During the year the Company fast-tracked the development of its 100% owned Candonga Direct Shipping Ore (DSO) Project. Exploration activities during the year included completing a drilling program and a feasibility study which was completed in September. Key highlights of the Candonga Feasibility Study included low forecast mine gate operation costs (C1+ royalities) of A$14.9/tonne from a very low pre-production capital costs of A$3.6 million. The updated JORC 2012 compliant Candonga Mineral Resource estimate now stands at 9.4 million tonnes (Mt) grading 43.7% Fe(1). The high grade component of the Resource is expected to produce a DSO product with a simple crush and screen process and has the potential to supply high grade lump and sinter feed products into the Brazilian domestic market. Important milestones in the permitting process were achieved during the year which included completing the approval process for the Trial Mining Licence (GUIA de Utilizacao-“GU”) which are required in order to develop a low-cost operation producing 300,000tpa2 of DSO. The Company also lodged, and received approval from the Brazilian Department of Mines (DNPM), the Final Exploration Report for the tenement that covers the project. The approval of the Final Exploration Report supports the quality of the exploration and project development work undertaken by Centaurus and provides a strong degree of confidence that the DNPM is satisfied with the viability of a future full-scale mining operation. The approval of the Final Exploration Report cleared the way for the Company to lodge the full Mining lease application known as the PAE on the 6 January 2015. 1 Refer to ASX announcement on 1 September 2014 for full details of the JORC 2012 Resource estimate. 2 Refer to ASX announcement on 30 September 2014 for full details of the Candonga Feasibility Study. Page 24 of 76 Annual Financial Report – 31 December 2014 Conquista DSO Project During the year Centaurus took the first step towards expanding its DSO business in south-east Brazil after securing an option to acquire a 100% interest in a portfolio of highly prospective tenements with extensive DSO mineralization located just 8km along well maintained gravel roads from the Candonga Project. The Company has completed initial surface exploration programs which have confirmed a substantial strike length of DSO mineralisation, providing an attractive exploration target for the Company for 2015 and laying the foundations for it to either expand or extend the mine life of its 300,000tpa Candonga DSO operation. Jambreiro Iron Ore Project During the year discussions for offtake and debt funding continued and progressed to an advanced stage, however, in June the Company announced, in light of the deterioration in market sentiment and conditions in the iron ore sector, it did not expect to be able to finalise a debt and equity funding package in time to meet its previously announced mid-2014 construction timeline. From ongoing discussions with potential financiers, it has become evident that debt funding for Jambreiro will remain conditional on securing off-take. The finalisation of a long-term off-take agreement has, in part, been awaiting the re-commencement of construction and the finalisation of development of the Sudeste port development in south-eastern Brazil. Construction activity on the port ramped up significantly in the latter half of the period. The new port is an important asset for many resource groups in the region and, in the case of Centaurus, provides the opportunity to establish long-term supply arrangements with potential off-takers for lower cost Jambreiro supply as a substitute for some of their existing integrated supply which is likely to be more profitably delivered into the export market. The commencement of export operations at Sudeste will be an important catalyst in promoting the completion of a suitable off-take arrangement for Jambreiro as existing domestic supply is diverted to the export market. During the year work on a re-interpretation of the Jambreiro geology was carried out which has resulted in the preparation of an updated JORC 2012 Mineral Resource estimate for the Jambreiro Project. The overall JORC Mineral Resource (combined Measured, Indicated and Inferred) reflected a minor increase in Fe grade from the July 2013 estimate of 128.0Mt grading 27.2%(3) Fe to 128.5Mt grading 28.0% Fe (4). Corporate In July 2014, following the decision to defer the development of Jambreiro, the Company made changes to its Board and senior management team, consistent with its focus on reducing costs and optimising its organisational structure. As a result Mr Peter Freund stepped down from an executive role but remains a non- executive director. Mr Steven Zaninovich and Mr Richard Hill stepped down from the Board as non-executive Directors. During the year the Company completed a $5.5m capital raising. The Annual General Meeting of Centaurus Metals Limited was held on Thursday 29 May 2014. All resolutions were passed on a show of hands. Competent Person’s Statement The information in this report that relates to Exploration Results and Mineral Resources is based on information compiled by Roger Fitzhardinge, a Competent Person who is a Member of the Australasia Institute of Mining and Metallurgy and Volodymyr Myadzel, a Competent Person who is a Member of the Australian Institute of Geoscientists. Roger Fitzhardinge is a permanent employee of Centaurus Metals Limited and Volodymyr Myadzel is the Senior Resource Geologist of BNA Consultoria e Sistemas Limited, independent resource consultants engaged by Centaurus Metals Limited. Roger Fitzhardinge and Volodymyr Myadzel have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Roger Fitzhardinge and Volodymyr Myadzel consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 3 Refer to ASX announcement on 29 July 2013 for full details of the Resource estimate. 4 Refer to ASX announcement on 30 July 2014 for full details of the JORC 2012 Resource estimate. Page 25 of 76 Annual Financial Report – 31 December 2014 Factors and Business Risks Affecting Future Business Performance The following factors and business risks could have a material impact on the Company’s success in delivering its strategy of becoming an iron ore producer: Access to Funding The Company’s ability to successfully develop future projects is contingent on the ability to fund those projects from operating cash flows or through affordable debt and equity raisings. The development of the Candonga Project is contingent on developing an appropriate funding solution. Iron Ore Commodity Prices The iron ore price fluctuates according to changes in demand and supply. The Company is exposed to changes in the iron ore price, which could affect the profitability of the Company’s projects. Significant adverse movements in the iron ore price could also affect the ability to raise debt and equity to fund the development of projects. Exchange Rates The Company will be exposed to changes in the US Dollar and the Brazilian Real. Sales of iron ore will be denominated in US Dollars. The Company’s CAPEX and OPEX costs will be primarily denominated in Brazilian Real. Project Implementation The implementation of new projects on time and on budget is critical to maximising shareholder returns. Operating Risks Once in operations, the Company will be exposed to a number of factors and business risks including mining, beneficiation of ore, health and safety and environmental issues. Iron Ore Product Sales The Company’s strategy is to sell iron ore products from its projects to domestic pig iron producers and integrated steel mills. Whilst the specifications of the products proposed to be produced by the Company are consistent with the purchasing specifications in the domestic market, there is no definitive certainty that the Company will be able to enter into suitable sales arrangements with domestic purchasers. Emphasis of Matter The audit opinion for the year ended 31 December 2014 contains an emphasis of matter in relation to potential uncertainty regarding continuation as a going concern. The Financial Statements have been prepared on the basis of going concern. The Group will require funding in order to continue its exploration activities and to fund development of the Candonga Iron Ore Project. Refer to Note 2 of the Financial Report for further details. Significant Changes in the State of Affairs In the opinion of directors, other than as outlined in this report, there were no significant changes in the state of affairs of the Group that occurred during the financial year under review. 7 Dividends No dividend was declared or paid by the Company during the current or previous year. 8 Events Subsequent to Reporting Date On 25 February 2015 The Company announced a $1.1M share placement at a price of $0.025 per share together with one free attaching option for every three shares, completed to professional and sophisticated investor clients of Canaccord Genuity Ltd and some of the Company’s major shareholders. Other than the matters discussed above there has not arisen in the interval between the end of the financial year and the date of this report no item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years, has arisen. Page 26 of 76 Annual Financial Report – 31 December 2014 9 Likely Developments Other than likely developments contained in the “Operating and Financial Review” and events subsequent, further information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group. 10 Environmental Regulation The Group is subject to environmental laws and regulations under Brazilian (State and Federal) legislation depending on the activities undertaken. Compliance with these laws and regulations is regarded as a minimum standard for the Group to achieve. There were no known significant breaches of these regulations during the year. 11 Directors’ Interests The relevant interest of each director in the shares and options over such shares issued by the companies within the Group and other related bodies corporate, as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows: Directors Mr D M Murcia Mr D P Gordon Mr P E Freund Mr M D Hancock Ordinary Shares Employee Options Employee Rights 1,733,405 6,889,791 65,000 153,333 125,000 250,000 - - - 400,000 - - 12 Share Options & Rights Options & Rights Granted to Directors and Executives of the Company During the year 1,000,000 options and 500,000 performance rights were issued to Mr John Westdorp. There have been no options or performance rights granted to directors of the Company. Unissued Share Options and Performance Rights At the date of this report unissued ordinary shares of the Company under option (issued under the ESOP & PSP) are: Expiry Date 31/03/2015 19/07/2015 30/11/2015 04/02/2016 31/08/2018 Exercise Price $0.64 $0.76 $0.88 $1.04 $0.125 Expiry Date 31/08/17 03/12/17 31/08/18 Exercise Price $0.00 $0.00 $0.00 Employee Options Vested Unvested - 12,500 125,000 37,500 750,000 925,000 250,000 75,000 - 150,000 2,250,000 2,725,000 Employee Rights Vested Unvested - - - - 855,000 400,000 1,700,000 2,955,000 Total Number Of Shares Under Option 250,000 87,500 125,000 187,500 3,000,000 3,650,000 Total Number Of Shares Under Rights 855,000 400,000 1,700,000 2,955,000 Page 27 of 76 Annual Financial Report – 31 December 2014 13 Indemnification and Insurance of Officers and Auditors During the period, the Company paid insurance premiums to insure the directors, executive officers and Company Secretary of the Group. The amount of premiums paid has not been disclosed due to confidentiality requirements under the contract of insurance. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Consolidated Entity, 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 wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Group 14 Non- Audit Services During the period KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Board, is satisfied that the provision of those non-audit services during the year by the auditor, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor; and the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non- audit services provided during the year are set out below. Audit Services Auditors of the Company Audit and review of financial reports KPMG Services other than statutory audit Taxation compliance services KPMG 31 December 2014 $ 31 December 2013 $ 139,240 129,932 24,775 42,988 15 Lead Auditor’s Independence Declaration The lead auditor’s independence declaration is set out on page 29 and forms part of the directors’ report for the period ended 31 December 2014. This report is signed in accordance with a resolution of the directors. D P Gordon Managing Director Perth 25 March 2015 Page 28 of 76 ABCD Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To: the directors of Centaurus Metals Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 December 2014 there have been: (i) (ii) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit and no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Graham Hogg Partner Perth 25 March 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. Annual Financial Report – 31 December 2014 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2014 Note 31 December 2014 $ 31 December 2013 $ 7 19 8 11 9 10 12 Profit or Loss Other income Exploration expenditure Impairment of available for sale investments Impairment of exploration and evaluation Net reversal of impairment on receivables Employee benefits expense Share based payments (expense)/ reversal Occupancy expenses Listing and share registry fees Professional fees Depreciation Other expenses Results from operating activities Finance income Finance expenses Net finance income Loss before income tax Income tax benefit Loss for the period Other Comprehensive Income Items that may be reclassified subsequently to profit or loss Net change in fair value of available-for-sale financial assets Exchange differences arising on translation of foreign operations Other comprehensive income (loss) for the period Total comprehensive loss for the period 318,180 (5,136,663) (302,272) (1,397,191) 109,672 (2,190,911) (84,972) (360,114) (63,918) (704,756) (178,663) (718,131) (10,709,739) 252,806 (3,366) 249,440 494 (12,240,270) (497,678) (18,690,780) - (2,913,442) 80,413 (443,483) (56,150) (453,246) (153,942) (1,266,390) (36,634,474) 716,096 (2,914) 713,182 (10,460,299) - (10,460,299) (35,921,292) 3,206,305 (32,714,987) (33,368) (42,048) (361,446) 499,733 (394,814) (10,855,113) 457,685 (32,257,302) Earnings per Share Basic loss per share Diluted loss per share 14 14 Cents Cents (5.03) (5.03) (16.71) (16.71) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. Page 30 of 76 Annual Financial Report – 31 December 2014 Consolidated Statement of Financial Position As at 31 December 2014 Current assets Cash and cash equivalents Other receivables and prepayments Total current assets Non-current assets Other receivables and prepayments Other investments including derivatives Property, plant and equipment Exploration and evaluation assets Total non-current assets Total assets Current liabilities Trade and other payables Employee benefits Provisions Total current liabilities Non-current liabilities Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity Note 15(a) 16 16 17 18 19 20 21 22 22 12 (c) 2014 $ 2013 $ 891,990 763,631 1,655,621 1,484,123 243,089 1,070,606 3,073,386 5,871,204 7,526,825 250,821 314,224 63,866 628,911 386,688 3,704 390,392 1,019,303 6,507,522 4,843,508 722,336 5,565,844 1,607,353 578,730 1,413,551 4,523,348 8,122,982 13,688,826 1,207,301 469,385 - 1,676,686 - 3,872 3,872 1,680,558 12,008,268 104,035,437 (386,544) (97,141,371) 6,507,522 98,766,042 (76,702) (86,681,072) 12,008,268 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. Page 31 of 76 Annual Financial Report – 31 December 2014 Consolidated Statement of Changes in Equity For the year ended 31 December 2014 Balance at 1 January 2014 Loss for the period Net change in fair value of available-for-sale financial assets Foreign currency translation difference for foreign operation Total comprehensive loss for the period Share-based payment/ (reversal) transactions Issues of ordinary shares Share issue costs Total transactions with owners Balance at 31 December 2014 Issued Capital $ Option Reserve $ Share-Based Payments Reserve $ Fair Value Reserve $ Foreign Currency Translation $ Accumulated Losses $ Total Equity $ 98,766,042 - 2,966,597 - 2,711,201 - 68,924 - (5,823,424) - (86,681,072) (10,460,299) 12,008,268 (10,460,299) - - - 5,530,000 (260,605) 5,269,395 - - - - - - - - 84,972 - - 84,972 (33,368) - - (361,446) - - (33,368) (361,446) (33,368) (361,446) (10,460,299) (10,855,113) - - - - - - - - - - - - 84,972 5,530,000 (260,605) 5,354,367 104,035,437 2,966,597 2,796,173 35,556 (6,184,870) (97,141,371) 6,507,522 The amounts recognised directly in equity are disclosed net of tax. The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Page 32 of 76 Annual Financial Report – 31 December 2014 Balance at 1 January 2013 Loss for the period Net change in fair value of available-for-sale financial assets Foreign currency translation difference for foreign operation Total comprehensive loss for the period Share-based payment/ (reversal) transactions Total transactions with owners Balance at 31 December 2013 Issued Capital $ 98,766,042 Option Reserve $ 2,966,597 Share-Based Payments Reserve $ 2,791,614 - - - - - - - - - - - - Fair Value Reserve $ 110,972 - (42,048) Foreign Currency Translation $ (6,323,157) - - - 499,733 Accumulated Losses $ (53,966,085) Total Equity $ 44,345,983 (32,714,987) (32,714,987) - - (42,048) 499,733 (42,048) 499,733 (32,714,987) (32,257,302) - - 98,766,042 - - 2,966,597 (80,413) (80,413) 2,711,201 - - 68,924 - - (5,823,424) - - (86,681,072) (80,413) (80,413) 12,008,268 The amounts recognised directly in equity are disclosed net of tax The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Page 33 of 76 Annual Financial Report – 31 December 2014 Consolidated Statement of Cash Flows For the year ended 31 December 2014 Note 12 Months 31 December 2014 $ 12 Months 31 December 2013 $ Cash flows from operating activities Exploration and evaluation expenditure Payments to suppliers and employees (inclusive of goods and services tax) Proceeds from court settlement Interest received (5,717,946) (12,510,697) (4,009,970) (5,228,180) 512,270 173,707 - 850,500 Net cash used in operating activities 15(b) (9,041,939) (16,888,377) Cash flows from investing activities Payments for plant & equipment Acquisition of exploration assets Proceeds from sale of plant & equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of equity securities Capital Raising Costs Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 31 December 15(a) (63,220) (137,040) 60,396 (139,864) (784,974) (961,467) 43,834 (1,702,607) 5,530,000 (260,605) 5,269,395 (3,912,408) 4,843,508 (39,110) 891,990 - - - (18,590,984) 23,402,755 31,737 4,843,508 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. Page 34 of 76 Annual Financial Report – 31 December 2014 Notes to the Consolidated Financial Statements For the year ended 31 December 2014 Note 1. Reporting Entity Centaurus Metals Limited (“the Company”) is a company domiciled in Australia. The Company’s registered office is at Level 3, 10 Outram Street, West Perth WA 6005. The consolidated financial statements of the Company as at and for the year ended 31 December 2014 comprise the Company and its subsidiaries (collectively the “Group” and individually “Group entities”). The Group is a for-profit entity and primarily is involved in exploration for and development of iron ore resources. Note 2. Basis of Preparation Statement of Compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on 25 March 2015. Basis of Measurement The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position: Derivative financial instruments are measured at fair value; Available-for-sale financial assets are measured at fair value; and Share based payments are measured at fair value. Going Concern The financial statements for the year ended 31 December 2014 have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. During the year, the Group incurred a loss after tax of $10,460,299 with net cash outflows of $3,912,407. The Group has a working capital surplus of $1,026,710. During the year the company restructured its workforce in Brazil and Australia in order to achieve cost savings. The Group’s strategy is to develop its iron ore projects in south-eastern Brazil and is currently focused on the development of its Candonga Iron Ore Project for which it recently received approval for a trial mining license from the Brazilian Department of Mines (DNPM). The Group plans to continue exploration work on its other iron ore projects during 2015 to the extent that funding is available. The Group has the ability to accelerate its work programs or to reduce or defer expenditure. The Group will require further funding in order to continue its exploration activities and fund development of the Candonga Iron Ore Project. The Group intends to fund the development with a combination of debt and equity or via the establishment of a joint venture. In the event the project does not proceed as planned, the Group intends to raise funds via equity issues. Additionally, if necessary should such funding not be achieved, interests in the Group’s projects can be sold or farmed out as required in order to maintain sufficient cash reserves to enable the continuation of activities. The Directors believe that the Group will be able to secure funding sufficient to meet requirements to continue as a going concern due to the following: The Group has successfully raised equity capital in the past; The Company is conducting a rights issue pursuant to a prospectus dated 6 March 2015 to raise up to $3,500,000. In the event that rights are not taken up by eligible shareholders, the Directors have 3 months in which to place any shortfall. The Group is engaged in discussions with a debt provider regarding the funding of its planned development; and Page 35 of 76 Annual Financial Report – 31 December 2014 The Group is engaged in discussions with a potential joint venture partner for the project and has the ability to undertake similar discussions with other parties. The form, value and timing of such transactions is yet to be determined and will depend amongst other things, on capital markets, iron ore prices and the outcome of planned exploration and evaluation activities. Should the Group not secure additional funding, there is material uncertainty as to whether the Group will be able to continue as a going concern and realise its assets and extinguish its liabilities in the normal course of business at the amounts stated in the financial report. The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern. Note 3. Functional and Presentation Currency These consolidated financial statements are presented in Australian Dollars, which is the Company’s functional currency. The functional currency of the Brazilian subsidiaries is the Brazilian Real. Note 4. Use of Judgements and Estimates In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. (a) Judgements Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included below and also in the following notes: Note 16 - Other Receivables and Prepayments; Note 19 - Exploration and Evaluation Assets. The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement to determine whether future economic benefits are likely, from either future exploitation or sale, or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves.; and Note 25- Financial Instruments – Fair Values & Risk Management. (b) Assumptions and Estimation Uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2014 is included in Note 19 – Exploration and Evaluation assets. In addition to applying judgement to determine whether future economic benefits are likely to arise from the Group’s Exploration and Evaluation assets or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves, the Group has to apply a number of estimates and assumptions. The Group is required to make estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. Critical to this assessment are estimates and assumptions as to ore reserves, the timing of expected cash flows, exchange rates, commodity prices and future capital requirements. Changes in these estimates and assumptions as new information about the recoverability of ore reserves becomes available, may impact the assessment of the recoverable amount of exploration and evaluation assets. If, after the expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the relevant capitalised amount is written off to profit or loss in the period when that information becomes available. (c) Measurement of Fair Values A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Page 36 of 76 Annual Financial Report – 31 December 2014 Fair values have been determined for measurement and/or disclosure purposes based on the methods described below. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. When measuring the fair value of an asset or a liability, the Group uses market observable data where possible and relevant. Fair values are categorised into difference levels in a fair value hierarchy based on the inputs used in the value techniques as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. (i) Investments in Equity Securities The fair value of available-for-sale financial assets is determined by reference to their quoted closing bid price at the reporting date. (ii) Derivatives The fair value of listed options is determined by reference to their quoted closing bid price at the reporting date. The fair value of unlisted options is determined using a valuation model. (iii) Trade and Other Receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. (iv) Share-based Payment Transactions The fair value of the employee share options are estimated using the applicable valuation methodology. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and performance conditions attached to vesting are not taken into account in determining fair value. The fair value of employee performance rights is measured using the 5 day weighted average share price prior to grant date. Where the service period commences prior to grant date the fair value is provisionally calculated and subsequently revised upon grant date. Note 5. Significant Accounting Policies Except for the changes explained in Note 5(q), the Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Group entities. (a) Basis of Consolidation (i) Business Combinations The Group accounts for business combinations using the acquisition method as at the acquisition date, which is the date control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Transaction costs such as legal fees, due diligence fees and other professional and consulting fees, are expensed as incurred, except if related to the issue of debt or equity securities. Page 37 of 76 Annual Financial Report – 31 December 2014 The consideration transferred does not relationships. Such amounts are generally recognised in profit or loss. include amounts related to the settlement of pre-existing Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service. For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of the other combining entities or businesses. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. (ii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with policies adopted by the Group. (iii) Transactions Eliminated on Consolidation Inter-Group balances and transactions and any unrealised income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. (b) Foreign Currency (i) Foreign Currency Transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the foreign exchange rate at the reporting date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognised in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Page 38 of 76 Annual Financial Report – 31 December 2014 (ii) Foreign Operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Australian dollars at exchange rates at reporting date. The income and expenses of foreign operations are translated to Australian dollars at average exchange rates for the period. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve (translation reserve, or FCTR) within equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss as part of the profit or loss on disposal. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and are presented within equity in the FCTR. (c) Financial Instruments The Group classifies non-derivative financial assets into the following categories at fair value through profit and loss, held-to-maturity financials assets, loans and receivables and available-for-sale financial assets. The Group classifies non-derivative financial liabilities into the other financial liabilities category. (i) Non- derivative Financial Assets and Financial Liabilities – Recognition and Derecognition The Group initially recognises loans, receivables and deposits on the date when they are originated. All other financial assets and financial liabilities are recognised initially on the trade date. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The Group has the following non-derivative financial assets: receivables, cash and cash equivalents and available-for-sale financial assets. Receivables Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method, less any impairment losses. Cash and Cash Equivalents Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Available-for-sale Financial Assets These assets are recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (refer Note 5(g)) and foreign currency differences on available-for-sale equity instruments (see Note 5(b)(i)), are recognised in other comprehensive income and accumulated in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in equity is reclassified to profit or loss. The Group’s investments in equity securities are classified as available-for-sale financial assets. Page 39 of 76 Annual Financial Report – 31 December 2014 (ii) Non derivative Financial Liabilities – Measurement Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. (iii) Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares or share options are recognised as a deduction from equity, net of any tax effect. (iv) Derivative Financial Instruments Derivatives are recognised initially at fair value any directly attributable transactions costs are recognised in profit and loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are recognised immediately in profit or loss. (d) Property, Plant and Equipment (i) Recognition and Measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gains or loss on disposal of an item of property, plant and equipment are recognised in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings. (ii) Subsequent Expenditure Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit and loss as incurred. (iii) Depreciation Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives of property, plant and equipment are as follows: Plant & equipment Motor Vehicles Furniture, fittings and equipment Software Leasehold improvements 10-15 years 3-5 years 3-8 years 1-3 years 5 years Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Page 40 of 76 Annual Financial Report – 31 December 2014 (e) Exploration and Evaluation Expenditure Exploration and evaluation costs are expensed in the year they are incurred. Acquisition costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where exploration and evaluation activities in the area of interest have not reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Where an area of interest is abandoned, or the directors decide that it is not commercial, any accumulated acquisition costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future. Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. Exploration and evaluation assets are transferred to Development Assets once technical feasibility and commercial viability of an area of interest is demonstrable. Exploration and evaluation assets are assessed for impairment and any impairment loss is recognised prior to being reclassified. The carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective area of interest. Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist: The term of exploration license in the specific area of interest has expired during the reporting period or will expire in the near future and is not expected to be renewed; Substantive expenditures on further exploration for and evaluation of mineral resources in the specific area are not budgeted nor planned; Exploration for and evaluation of mineral resources in the specific area has not led to the discovery of commercially viable quantities of mineral resources and the decision was made to discontinue such activities in the specified area; or Sufficient data exists to indicate that although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. Where a potential impairment is indicated, an assessment is performed for each cash-generating unit which is no larger than the area of interest. The Group performs impairment testing in accordance with Accounting Policy 5(g)(ii). Farm-out Arrangements Arrangements whereby an external party earns an ownership interest in an exploration or development property via the sole-funding of a specified exploration, evaluation or development programme or by injection of funds to be utilised for such a programme will be accounted so that the Group recognises its share of assets, liabilities and equity associated with the property. Any gain or loss upon initial recognition of these items will be recognised in the statement of comprehensive income. (f) Leases (i) Determining Whether an Arrangement Contains a Lease At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. (ii) Leased Assets Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Page 41 of 76 Annual Financial Report – 31 December 2014 Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of financial position. (iii) Lease Payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. (g) Impairment (i) Non- derivative Financial Assets Financial assets not classified at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence of impairment. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired can include: Default or delinquency by a debtor; Restructuring of an amount due to the Group on terms that the Group would not consider otherwise; Indications that a debtor or issuer will enter bankruptcy; Adverse changes in the payment status of borrowers or issuers; The disappearance of an active market for a security; or Observable data indicating that there is measurable decrease in expected cash flows from a group of financial assets. In addition, for an investment in an equity security, objective evidence of impairment includes a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. The Group considers a decline of 20% to be significant and a period of 9 months to be prolonged. For Financial Assets measured at amortised cost the Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics. In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve to profit or loss. The amount reclassified is the difference between the acquisition cost (net of any principal repayment and amortization) and the current fair value, less any impairment loss previously recognized in profit or loss. If the fair value of an impaired available-for-sale debt security subsequently increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed through profit or loss; otherwise, it is reversed through other comprehensive income. Page 42 of 76 Annual Financial Report – 31 December 2014 (ii) Non- financial Assets The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. The group of assets is referred to as the Cash Generating Unit or CGU. The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (h) Non-current Assets Held For Sale Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property and biological assets, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. (i) Employee Benefits (i) Defined Contribution Plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. (ii) Other Long-term Employee Benefits The Group’s net obligation in respect of long-term employee benefits other than defined benefit plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on AA credit-rated or government bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognised in profit or loss in the period in which they arise. Page 43 of 76 Annual Financial Report – 31 December 2014 (iii) Termination Benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value. (iv) Short-term Benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (v) Share-based Payment Transactions The fair value of share-based payment awards granted to employees is recognised as an expense at grant date with a corresponding increase in equity, over the period that employees become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-market conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group. When the Company grants options over its shares to employees of subsidiaries, the fair value at grant date is recognised as an increase in the investments in subsidiaries, with a corresponding increase in equity over the vesting period of the grant. (j) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. (k) Revenue Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade allowances and duties and taxes paid. Interest revenue is recognised using the effective interest method. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. (l) Finance Income and Finance Costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. Page 44 of 76 Annual Financial Report – 31 December 2014 Finance costs comprise interest expense on borrowings, changes in the fair value of financial assets at fair value through profit or loss and losses on hedging instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis. (m) Income Tax Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purpose Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss and differences relating to investments in subsidiaries and associates and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (n) Goods and Services Tax and Equivalent Indirect Taxes Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST) and equivalent indirect taxes, except where the amount of tax incurred is not recoverable from the taxation authority. In these circumstances, the tax is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of tax included. The net amount of tax recoverable from, or payable to, the taxation authority is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The tax components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the tax authority are classified as operating cash flows. (o) Earnings per Share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for shares held by the Company’s sponsored employee share plan trust. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. Page 45 of 76 Annual Financial Report – 31 December 2014 (p) Segment Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group’s Managing Director (‘MD’) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the MD include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise minimal, not material corporate assets (primarily the Group’s headquarters), head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. (q) Changes in accounting policies The Group has adopted the following amendment to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2014. AASB 2013-3 Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets. The adoption of this amendment has had no material impact on the Group’s financial statements. (r) New Standards and Interpretations Not Yet Adopted The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They may be available for early adoption at 31 December 2014, but have not been applied in preparing this financial report. AASB 9 Financial Instruments published in July 2014, replaces the existing guidance in AASB 139 Financials Instruments: Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from AASB 139. AASB 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of AASB 9. AASB 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance includes AASB 118 Revenue, AASB 111 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. AASB 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of AASB 15. Note 6. Operating Segments The Group operates in the iron ore exploration industry. For management purposes the Group is organised into one main operating segment which involves the exploration of minerals. All of the Group’s activities are interrelated and financial information is reported to the Managing Director (Chief Operating Decision Maker) as a single segment. Accordingly, all significant operating decisions are based upon an analysis on the Group as one segment. The financial results and financial position from this segment are largely equivalent to the financial statements of the Group as a whole. Geographical Segment Information Brazil Australia Total 2014 Non-current Assets $ 5,565,106 306,098 5,871,204 2013 Non-current Assets $ 7,467,332 655,650 8,122,982 Page 46 of 76 Annual Financial Report – 31 December 2014 Note 7. Other Income Gain on court settlement Profit/ (loss) on sale of property plant and equipment Other Total 31 December 2014 $ 330,652 (12,472) - 318,180 31 December 2013 $ - - 494 494 Gain on court settlement relates to award of damages against Mineração Marsil Ltda a former Joint Venture partner in the Liberdade Iron Ore Project. Centaurus was awarded damages which were adjusted for interest and inflation components. Note 8. Employee Benefits Expense Salaries, fees and other benefits Superannuation Recognised in exploration expenditure expense Total Note 9. Depreciation Depreciation Recognised in exploration expenditure expense Total Note 10. Finance Income and Expense Finance income Interest income on bank deposits Net foreign exchange gain Finance expense Net foreign exchange loss Change in fair value of derivatives Interest expense Net finance income recognised in profit or loss 31 December 2014 $ 5,209,477 341,190 (3,359,756) 2,190,911 31 December 2013 $ 6,997,755 211,121 (4,295,434) 2,913,442 31 December 2014 $ 236,704 (58,041) 178,663 31 December 2013 $ 341,680 (187,738) 153,942 31 December 2014 $ 31 December 2013 $ 252,806 - 252,806 (3,270) - (96) (3,366) 249,440 693,518 22,578 716,096 - (2,222) (692) (2,914) 713,182 Page 47 of 76 Annual Financial Report – 31 December 2014 Note 11. Share-based Payments Employee Share Option Plan The Employee Share Option Plan (“ESOP”) was approved by shareholders at the 2013 annual general meeting. All employees (including directors) are eligible to participate in the ESOP. Options granted carry no dividend or voting rights. When exercisable, each option is converted into one ordinary share of the Company with full dividend and voting rights. There were 3,000,000 new options granted during the year (2013 nil). Reconciliation of Outstanding Share Options The number and weighted average exercise prices of share options issued under the employee share option plan and issued to consultants are as follows: Outstanding at start of period Forfeited during the period Expired during the period Issued during the period Outstanding at balance date Exercisable at balance date Weighted Average Exercise Price 2014 $0.809 $0.797 $0.811 $0.125 $0.248 $0.273 Number of Options 2014 6,950,000 (1,212,500) (5,087,500) 3,000,000 3,650,000 925,000 Weighted Average Exercise Price 2013 $0.807 $1.040 $0.731 - $0.809 $0.813 Number of Options 2013 7,356,250 (37,500) (368,750) - 6,950,000 5,587,500 The options outstanding at 31 December 2014 have an exercise price in the range of $0.125 to $1.04 (2013: $0.40 to $1.80) and the weighted average remaining contractual life is 3.13 years (2013: 1.01 years). There were no ESOP options exercised during the year (2013 nil.) Details of the ESOP options issued during the year ended 31 December 2014 are as follows: Grant Date Number of Options Vesting Conditions Option Term Key Management Personnel 25/08/14 25/08/14 25/08/14 25/08/14 25/08/14 25/08/14 Sub total Employees Sub total Total 250,000 250,000 500,000 1,000,000 500,000 500,000 1,000,000 2,000,000 3,000,000 - See note 1 See note 2 - See note 1 See note 2 48 months 48 months 48 months 48 months 48 months 48 months Note 1: Options vest 18 months from the date of issue subject to continued employment. Note 2: Options vest 36 months from the date of issue subject to continued employment. Inputs for Measurement of Grant Date Fair Values The model inputs for 2014 include: Grant Date Expiry Date Exercise Price Life of option Share price at grant date 25/08/14 31/08/18 $0.125 4.00 years $0.07 Expected share price volatility 103% Risk-free interest rate Fair Value at grant date 2.97% $0.0445 Page 48 of 76 Annual Financial Report – 31 December 2014 Performance Share Plan A Performance Share Plan (PSP) was adopted by the Board of Directors on 23 July 2012 and was approved by shareholders on 31 August 2012. Under the PSP, the Board may from time to time in its absolute discretion grant performance rights to eligible persons including executives and employees, in the form and subject to terms and conditions determined by the Board. Performance rights are, in effect, options to acquire unissued shares in the Company, the exercise of which is subject to certain performance milestones and remaining in employment during the vesting period. Performance rights are granted under the PSP for no consideration and are granted for a period not exceeding 5 years. The fair value at grant date is measured using the 5 day weighted average share price. The number of performance rights on issue are as follows: Reconciliation of Outstanding Performance Rights Outstanding at start of period Issued during the period Forfeited during the period Expired during the period Balance at 31 December Number of Performance Rights 2014 2,080,000 1,700,000 (525,000) (300,000) 2,955,000 Number of Performance Rights 2013 3,700,000 - (250,000) (1,370,000) 2,080,000 Details of performance rights granted during the year ended 31 December 2014 are as follows (2013 nil): Grant Date Number of Rights Vesting Conditions Term Key Management Personnel Total Employees 25/08/14 25/08/14 25/08/14 25/08/14 300,000 200,000 500,000 900,000 300,000 1,200,000 See note 1 See note 2 60 months 60 months See note 1 See note 2 60 months 60 months Total Note 1: Rights vest on first sale of iron ore from any of the Company’s projects by 30 April 2015 Note 2: Rights vest on the decision to mine in respect the Jambreiro project by 30 June 2015. 1,700,000 Inputs for Measurement of Grant Date Fair Values 31 December 2014 1,200,000 500,000 Valuation Date 25/08/14 25/08/14 Expiry Date Exercise Price Vesting Days Fair Value 31/08/19 31/08/19 Nil Nil 248 309 $0.0768 $0.0768 Expenses Arising From Share based Payment Transactions Share options Performance rights Total expense recognised as share based payment 2014 $ (8,899) 93,871 84,972 2013 $ (137,054) 56,641 (80,413) During the year a number of options and performance rights were forfeited due to failure to meet vesting conditions. Share based payment expenses in relation to these were reversed during the period. Page 49 of 76 Annual Financial Report – 31 December 2014 Note 12. Income Tax (a) Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable Loss from continuing operations before income tax expense Tax at the Australian tax rate of 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Overseas project generation and review costs Share-based payments Sundry items Effect of tax rates in foreign jurisdictions Under provision from prior year Deferred tax assets not recognised Income tax benefit, being deferred tax (b) Tax Losses Tax losses Capital losses Potential tax benefit (between 30-34%) 2014 $ 2013 $ (10,460,299) (3,138,090) (35,921,292) (10,776,387) 458,701 25,492 17,603 (2,636,294) (42,407) 84,725 2,593,976 - 2014 $ 48,535,699 2,473,264 51,008,963 16,083,990 611,414 (24,124) 23,668 (10,165,429) (316,128) - 7,275,252 3,206,305 2013 $ 46,094,215 2,473,264 48,567,479 15,341,391 The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefit. (c) Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following: Receivables Available-for-sale financial assets Exploration Accrued expenses/provisions Transaction costs relating to issue of capital Tax losses carried forward Set off of tax Assets Liabilities Net 2014 $ 2013 $ 2014 $ - 765,636 65 802,729 (673) - 2013 $ (3,790) - 2014 $ (673) 765,636 2013 $ (3,725) 802,729 12,210,508 975,750 11,091,472 65,041 (3,704) - (3,872) - 12,206,804 975,750 11,087,600 65,041 217,635 361,961 - - 217,635 361,961 16,083,990 (673) 30,252,846 15,341,391 (3,790) 27,658,869 - 673 (3,704) - 3,790 (3,872) 16,083,990 - 30,249,142 15,341,391 - 27,654,997 Less DTA not recognised (30,252,846) (27,658,869) - - (30,252,846) (27,658,869) Net tax asset/(liabilities) - - (3,704) (3,872) (3,704) (3,872) Page 50 of 76 Annual Financial Report – 31 December 2014 The deferred tax liability relates to Brazil exploration assets acquired through a business combination. During the year ended 31 December 2013 an impairment charge was raised resulting in the reversal of a recognised deferred tax liability of $3,206,305 offset by foreign currency movements of $126,082. Potential deferred tax assets of the same amount in Brazil have not been recognised on the basis that the ability to utilise these losses has not yet been determined probable. (d) Income Tax Recognised Directly in Equity Recovery of net tax assets is not considered probable. Accordingly, net deferred tax credited directly to other comprehensive income for changes in the fair value of available-for-sale financial assets is nil: (2013: $nil). Note 13. Dividends There were no dividends paid or declared during the period (2013: nil). Note 14. Earnings / (Loss) Per Share Basic Loss per Share The calculation of basic and diluted earnings per share at 31 December 2014 was based on the loss attributable to ordinary shareholders of $10,460,299 (2013: $32,714,987) and a weighted average number of ordinary shares outstanding of 207,963,481 (2013: 195,747,919), calculated as follows: Loss Attributable to Ordinary Shareholders Loss attributable to the shareholders Weighted Average Number of Ordinary Shares Issued ordinary shares at beginning of the period Effect of shares issued related to share placement Weighted average number of ordinary shares at the end of the period Diluted Earnings per Share 2014 $ 2013 $ (10,460,299) (32,714,987) 2014 Number 195,747,919 12,215,562 207,963,481 2013 Number 195,747,919 - 195,747,919 Potential ordinary shares were not considered to be dilutive as the Group made a loss for the year ended 31 December 2014 and the exercise of potential shares would not increase that loss. Note 15 (a). Cash and Cash Equivalents Cash at bank and on hand Deposits - short term Deposits 2014 $ 68,843 823,147 891,990 2013 $ 321,672 4,521,836 4,843,508 The deposits are bearing floating and fixed interest rates between 2.5% and 11.47% (31 December 2013: between 1.18% and 6.48%). Page 51 of 76 Annual Financial Report – 31 December 2014 Note 15 (b). Reconciliation of Cash Flows from Operating Activities Loss for the period Adjustments for: Depreciation Non-cash employee benefits expense/(reversal) – share based payments Impairment losses Exploration and evaluation assets Available-for-sale financial assets Other receivables Change in fair value derivative instruments (Profit)/loss on sale of plant and equipment Income tax expense/(benefit) Operating loss before changes in working capital and provisions Change in other receivables Change in trade creditors and provisions Net cash used in operating activities Note 16. Other Receivables and Prepayments Current Receivable from court settlement Provision for impairment Other Receivables Security deposits Prepayments Non – Current Prepayments Other Receivables Provision for impairment 2014 $ 2013 $ (10,460,299) (32,714,987) 236,704 341,680 84,972 (80,413) 1,397,191 302,272 (109,672) - 12,472 - (8,536,360) 65,198 (570,777) (9,041,939) 18,690,780 497,678 - 2,222 (8,504) (3,206,305) (16,447,849) (80,364) (330,164) (16,888,377) 2014 $ 2013 $ - - 648,371 30,133 85,127 763,631 328,333 1,227,391 (71,601) 1,484,123 185,986 (182,009) 576,247 43,796 98,316 722,336 398,148 1,209,205 - 1,607,353 Non-current other receivables includes Brazilian federal VAT (“PIS-Cofins”) levied on the Groups purchases. Recoverability of PIS-Cofins assets is dependent upon the Group generating a federal company tax liability, which may be offset against the Groups PIS-Cofins assets if the Group elects to do so. As at balance date its taxable profits are not considered probable in the next 12 months. Information about the Group’s exposure to credit and market risk, and impairment losses for other receivables is included in Note 25 (c). Page 52 of 76 Annual Financial Report – 31 December 2014 Note 17. Other Investments, Including Derivatives Available-for-sale financial assets (1) Derivative instruments (2) 2014 $ 203,792 39,297 243,089 2013 $ 483,924 94,806 578,730 During the year ended 31 December 2014 an impairment of $302,272 (2013: $497,678) was recognised. (1) (2) Consists of listed ordinary shares in ASX listed entities. The available-for sale financial assets have been revalued to the market price at 31 December 2014. Further movement in share prices after 31 December 2014 have not been taken into account. Consists of unlisted options in ASX listed entities. The fair value of the unlisted options is determined using Black-Scholes methodology taking into account the terms and conditions upon which the instruments were granted. Page 53 of 76 Annual Financial Report – 31 December 2014 Note 18. Property, Plant and Equipment Cost Balance at 1 January 2014 Additions Disposals Effect of movements in exchange rates Balance at 31 December 2014 Balance at 1 January 2013 Additions Disposals Effect of movements in exchange rates Balance at 31 December 2013 Software $ Plant & Equipment $ Motor Vehicles $ Furniture & Fixtures $ Leasehold Improvements $ Land $ Total $ 330,089 26,559 - (8,677) 347,971 260,386 68,465 - 1,238 330,089 458,023 38,356 (24,869) (12,736) 458,774 337,973 119,594 (434) 890 458,023 489,336 - (77,674) (18,786) 392,876 346,843 265,699 (126,248) 3,042 489,336 184,686 443 (2,081) (7,747) 175,301 171,639 10,926 - 2,121 184,686 445,791 - (223,594) (9,510) 212,687 416,752 26,775 - 2,264 445,791 382,368 - (45,094) (15,173) 322,101 58,813 320,430 - 3,125 382,368 2,290,293 65,358 (373,312) (72,629) 1,909,710 1,592,406 811,889 (126,682) 12,680 2,290,293 Page 54 of 76 Annual Financial Report – 31 December 2014 Note 18. Property, Plant and Equipment (continued) Depreciation Balance at 1 January 2014 Depreciation for the year Disposals Effect of movements in exchange rates Balance at 31 December 2014 Balance at 1 January 2013 Depreciation for the year Disposals Effect of movements in exchange rates Balance at 31 December 2013 Carrying amounts At 1 January 2014 At 31 December 2014 At 1 January 2013 At 31 December 2013 Software $ Plant & Equipment $ Motor Vehicles $ Furniture & Fixtures $ Leasehold Improvements $ Land $ Total $ 234,957 55,122 (14) (3,094) 286,971 149,066 85,674 - 217 234,957 95,132 61,000 111,320 95,132 212,638 74,697 (22,860) (4,910) 259,565 139,882 72,697 (165) 224 212,638 245,385 199,209 198,091 245,385 181,989 36,044 (32,148) (8,049) 177,836 176,449 96,548 (91,518) 510 181,989 307,347 215,040 170,394 307,347 39,119 18,809 (1,621) (2,093) 54,214 20,400 18,688 - 31 39,119 145,567 121,087 151,239 145,567 208,039 52,031 (197,208) (2,344) 60,518 141,020 66,985 - 34 208,039 237,752 152,169 275,732 237,752 - - - - - - - - - 876,742 236,703 (253,851) (20,490) 839,104 626,817 340,592 (91,683) 1,016 876,742 382,368 322,101 58,813 382,368 1,413,551 1,070,606 965,589 1,413,551 Page 55 of 76 Annual Financial Report – 31 December 2014 Note 19. Exploration and Evaluation Assets Net book value as at 1 July Additions Impairment of capitalised exploration expenditure Effect of movements in exchange rate 2014 $ 4,523,348 137,040 (1,397,191) (189,811) 3,073,386 2013 $ 22,446,311 - (18,690,780) 767,817 4,523,348 During the year ended 31 December 2014 the Group recognised an impairment loss on the carrying value of its Passabém Iron Ore Project. The project was assessed for impairment as a result of the decline in market conditions and due to the Group’s intent to focus on the Candonga project. In assessing the recoverable amount of Passabem the Group considered that in the current market and with the Group’s intent to focus on its other projects that the assets value was nil. During the year ended 31 December 2013 the Group recognised an impairment loss on the carrying values of two of its Iron Ore Projects, Itambe and Passabem. The projects were assessed for impairment as a result of the Group’s intent to focus on the Jambreiro project. The Group engaged the services of valuation experts both in Brazil and Australia to assist in the calculation of the recoverable amount of these underlying assets. The method applied to calculate the recoverable amount (being the fair value less cost to sell) was the Enterprise Value method. This method incorporates the entity’s current market value and allocates the value on a reasonable basis to the underlying assets. This resulted in the recognition of an impairment loss as follows: Project Passabém Itambé Total 31 December 2013 Recoverable Amount Impairment Charge Carrying Amount 12,330,973 1,570,000 10,760,973 8,409,807 480,000 7,929,807 20,740,780 2,050,000 18,690,780 The impairment charge resulted in a reversal of a recognised deferred tax liability of $3,206,305 resulting in a net impact on the Consolidated Statement of Profit or Loss of $15,484,475. These assets form part of the Brazil geographical reporting segment. The ultimate recoupment of exploration and evaluation expenditure carried forward is dependent on successful development and commercial exploitation or, alternatively, sale of the respective project areas. Note 20. Trade and Other Payables Trade and other creditors Accrued expenses Note 21. Employee Benefits Liability for annual leave 2014 $ 213,869 36,952 250,821 2013 $ 998,728 208,573 1,207,301 2014 $ 314,224 2013 $ 469,385 Page 56 of 76 Annual Financial Report – 31 December 2014 Note 22. Provisions Balance at beginning of the period Provisions made during the year Balance at end of the period Current Non Current 2014 $ - 450,554 450,554 63,866 386,688 450,554 2013 $ - - - - - - A provision has been raised for tax obligations, the timing and amount of which are uncertain. Note 23. Capital and Reserves On issue at beginning of period Issue of ordinary shares for share placement at $0.125 per share On issue at the end of the period – Fully paid Ordinary Shares 2014 Number of Shares 195,747,919 44,240,000 239,987,919 2013 Number of Shares 195,747,919 - 195,747,919 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Employee Share Options and Performance Rights Information relating to the Employee Share Option Plan and Performance Share Plan, including details of options and rights issued, exercised, lapsed during the financial year and outstanding at the end of the financial year are set out in Note 11. Option Reserve The option reserve is used to recognise the fair value of options issued in the year ended 30 June 2010 in exchange of the Centaurus existing Bid and Replacement Options. Share-based Payments Reserve The share-based payments reserve is used to recognise the fair value of options and performance rights issued but not exercised. Available-for-sale Investments Revaluation Reserve Changes in the fair value of investments, such as equities, classified as available-for-sale financial assets, are taken to the available-for-sale investments revaluation reserve as described above. Amounts are recognised in profit and loss when the associated assets are sold or impaired. Translation Reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as from the translation of liabilities that hedge the Group’s net investment in a foreign subsidiary. Options During the year ended 31 December 2014 in addition to the unissued shares under options and performance rights disclosed in Note 11, the Company had the following options on issue. Number options 3,750,000 Expiry Expiring 31 August 2014 Exercise Price exercisable at $1.20 Page 57 of 76 Annual Financial Report – 31 December 2014 No share options were exercised during the year. Note 24. Related Parties (a) Key Management Personnel (i) Key management personnel compensation is comprised of the following: Short term employee-benefits Redundancy benefits Long term employee benefits Post – employment benefits Share-based payments expense/ (reversals) 31 December 2014 $ 1,277,953 182,649 53,260 78,717 108,289 1,700,868 31 December 2013 $ 1,418,281 - - 80,233 (84,340) 1,414,174 Individual Directors and Executives Compensation Disclosures Information regarding individual directors’ and executives’ compensation and equity instruments disclosures as required by Corporations Regulation 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report. Key Management Personnel and Director Transactions A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis. The aggregate value of transactions and outstanding balances relating to key management personnel and entities over which they have control or significant influence were as follows: Key Management Person Mr D M Murcia(1) Total and current liabilities Transaction Legal fees Transaction Value 2014 2013 $ $ 25,335 28,691 Balance Outstanding As At 2014 $ 2013 $ - - - - (1) Payable to MPH Lawyers, a firm in which Mr D Murcia is a partner (b) Transactions With Related Parties Transactions between the parent company and its subsidiaries which are related parties of that company are eliminated on consolidation and are not disclosed in this note. Page 58 of 76 Annual Financial Report – 31 December 2014 Note 25. Financial Instruments – Fair Values and Risk Management (a) Accounting Classifications and Fair Values The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Carrying amount Fair Value 31 December 2014 Financial assets measured at fair value Equity securities Derivative instruments (i) Financial assets not measured at fair value Trade and other receivables (ii) Cash and cash equivalents Financial liabilities not measured at fair value Trade and other payables Note Held for Trading Loans and Receivables Available- for-sale Other Financial Liabilities Total Level 1 Level 2 Level 3 Total - 39,297 39,297 - - - 203,792 - 203,792 - - - - - 2,247,754 891,990 3,139,744 - - - - - - - - - - - - - 203,792 39,297 243,089 203,792 - 203,792 - 39,297 39,297 - - 203,792 39,297 243,089 2,247,754 891,990 3,139,744 - 2,138,696 - - - 2,138,696 - 2,138,696 - - - 2,138,696 250,821 250,821 250,821 250,821 There have been no transfers of assets from Levels during the year ended 31 December 2014 (i) (ii) Valuation technique used in measuring Level 2 fair values is Black Scholes Options Price Model. Fair value relates to non current receivables which have been discounted at a rate of 11% for all other receivables the carrying amount is deemed to approximate fair value. Page 59 of 76 Annual Financial Report – 31 December 2014 31 December 2013 Financial assets measured at fair value Equity securities Derivative instruments (i) Financial assets not measured at fair value Trade and other receivables (ii) Cash and cash equivalents Financial liabilities not measured at fair value Trade and other payables Carrying amount Fair Value Note Held for Trading Loans and Receivables Available- for-sale Other Financial Liabilities Total Level 1 Level 2 Level 3 Total - 94,806 94,806 - - - 483,924 - 483,924 - - - - - 2,329,689 4,843,508 7,173,197 - - - - - - - - - - - - - 483,924 94,806 578,730 483,924 - 483,924 - 94,806 94,806 2,329,689 4,843,508 7,173,197 - - - 2,209,858 - 2,209,858 - - - - - - 483,924 94,806 578,730 2,209,858 - 2,209,858 1,207,301 1,207,301 1,207,301 1,207,301 There have been no transfers of assets from Levels during the period ended 31 December 2013. (i) (ii) Valuation technique used in measuring Level 2 fair values is Black Scholes Options Price Model. Fair value relates to non current receivables which have been discounted at a rate of 11% for all other receivables the carrying amount is deemed to approximate fair value Page 60 of 76 Annual Financial Report – 31 December 2014 (b) Measurement of Fair Values The following table shows the valuation technique used in measuring Level 2 fair values as well as significant unobservable inputs used. Type Valuation Technique Significant Unobservable Inputs Derivative instruments Black-Scholes Volatility Inter-relationship Between Significant Unobservable Inputs and Fair Value Measurement The estimated fair value would increase (decrease) if there was an increase (decrease) in the volatility rate used, as well as movements in the underlying security price. (c) Financial Risk Management The Group has exposure to the following risks arising from the use of financial instruments: Credit Risk (see (c)(ii)) Liquidity Risk (see (c)(iii)) Market Risk (see (c)(iv)). This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and their management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. (i) Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their role and obligations. (ii) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s other receivables and investment securities. Other Receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each counterparty. However, management also considers the default risk of the industry and country in which counterparties operate, as these factors may have an influence on credit risk. The other receivables consist of mainly refundable deposits and tax credits which include Brazilian federal VAT (“PIS-Cofins”). The recoverability of PIS-Cofins assets is dependent upon the Group generating a federal company tax liability, which may be offset against the Groups PIS-Cofins assets. An allowance for impairment has been recognised as at 31 December 2014. Investments The Group limits its exposure to credit risk by investing predominantly in liquid securities listed on the Australian Securities Exchange. Page 61 of 76 Annual Financial Report – 31 December 2014 Exposure to Credit Risk The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: Cash and cash equivalents (i) Other receivables 2014 $ 891,990 1,692,693 2,584,683 2013 $ 4,843,508 1,833,225 6,676,733 (i) The cash and cash equivalents are held with bank and financial institution counterparties, which are rated BBB to AA based on rating agency Standard and Poor’s rating. The Group’s maximum exposure to credit risk for other receivables at the reporting date by geographic region was: Australia Brazil Carrying Amount 2014 $ 32,375 1,660,318 1,692,693 2013 $ 56,643 1,776,582 1,833,225 These balances are net of provision for impairment (refer to Note 16). Provision for Impairment The movement in the provision in respect of other receivables during the year was as follows. Opening balance Reversal of provision for impairment Provision for impairment Provision used Foreign currency exchange 2014 $ 182,009 (181,618) 71,946 - (736) 71,601 2013 $ 541,898 - - (362,332) 2,443 182,009 During the year ended 31 December 2014 proceeds of $512,270 were received from the Liberdade Court Settlement which resulted in the reversal of a provision for impairment of $181,618 resulting in a net gain of $330,652 recorded in other income. During the year $71,946 was provided for in relation to indirect tax credits which was not considered to be recoverable. None of the Company’s other receivables are past due (31 December 2013: nil). The Group believes that no impairment allowance is necessary in respect of the other receivables not past due. (iii) Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with the financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. As at 31 December 2014, the Group has current trade and other payables of $250,821 (31 December 2013: $1,207,301). The Group believes it will have sufficient cash resources to meet its financial liabilities when due. Refer Note 2 Going Concern. The following table shows the contractual maturities of financial liabilities, excluding the impact of netting agreements. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. Page 62 of 76 Annual Financial Report – 31 December 2014 Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-2 years 2-5 year More than 5 years 31 December 2014 Non- derivative financial liabilities Trade and other payables 31 December 2013 Non- derivative financial liabilities Trade and other payables Market Risk 250,821 (250,821) (250,821) 1,207,301 (1,207,301) (1,207,301) Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risks exposures within acceptable parameters, while optimising the return. Currency Risk The Group is exposed to currency risk on purchases that are denominated in currency other than the respective functional currencies of the Group entities, primarily the Australian dollar (AUD) and Brazilian Real (BRL). The currencies in which these transactions primarily are denominated are AUD and BRL. The Group investment in its Brazilian subsidiary is denominated in AUD and is not hedged as those currency positions are considered to be long term in nature. Interest Rate Risk Profile At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: Variable rate instruments Financial assets On issue at the end of the period 2014 $ 2013 $ 891,990 891,990 4,843,508 4,843,508 Cash Flow Sensitivity Analysis For Variable Rate Instruments A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2012. 31 December 2014 Variable rate instruments Cash flow sensitivity (net) 31 December 2013 Variable rate instruments Cash flow sensitivity (net) Commodity Risk Profit or Loss Equity 100bp Increase 100bp Decrease 100bp Increase 100bp Decrease 8,910 8,910 (8,910) (8,910) 48,430 48,430 (48,430) (48,430) - - The Group is exposed to commodity price risk. The risk arises from its activities directed at exploration and development of mineral commodities, primarily iron ore. If commodity prices fall, the market for companies exploring for these commodities is affected. Page 63 of 76 Annual Financial Report – 31 December 2014 Other Market Price Risk Equity price risk arises from available-for-sale equity securities held. These financial assets were acquired as a result of the sale of tenements to Clancy Exploration Limited, Southern Crown Resources Limited, Antipa Minerals Limited and Orinoco Gold Ltd. Capital Management The objectives for managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. Centaurus Metals Limited is an exploration company and it is dependent from time to time on its ability to raise capital from the issue of new shares and its ability to realise value from its exploration and evaluation assets. The Board is responsible for capital management. This involves the use of cash flow forecasts to determine future capital management requirements. Capital management is undertaken to ensure a secure, cost-effective and flexible supply of funds is available to meet the Group’s operating and capital expenditure requirements. There were no changes in the Group’s approach to capital management during the period. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Note 26. Contingent Liabilities Guarantees Guarantees given in respect of bank security bonds amounting to $30,133 (2013: $43,377), secured by cash deposits lodged as security with the bank. No material losses are anticipated in respect of any of the above contingent liabilities. There are no other contingent liabilities that require disclosure. Note 27. Operating Leases Leases as Lessee The Group leases a number of offices and apartments under operating lease. The leases run for a period of one to four years, with an option to renew the lease after that date. The office leases were combined leases of land and buildings. Since the land title does not pass, the rent paid to the landlord of the building is increased to market rent at regular intervals, and the Group does not participate in the residual value of the building, it was determined that substantially all the risks and rewards of the building are with the landlord. As such, the Group determined that the leases are operating leases. (i) Future Minimum Lease Payments Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and five years More than Five years Note 28. Capital Commitments The Group had the following capital commitments: Contract for but not provided and payable Less than one year Between one and five years More than Five years 2014 $ 2013 $ 308,179 72,866 - 381,045 309,679 152,407 - 462,086 2014 $ 2013 $ 526,820 - - 526,820 - - - - The agreement to which the commitment relates can be terminated without financial consequence. Page 64 of 76 Annual Financial Report – 31 December 2014 Note 29. Group Entities Parent Entity Centaurus Metals Limited Subsidiaries Centaurus Resources Pty Ltd San Greal Resources Pty Ltd Centaurus Brasil Mineração Ltda Glengarry Sabah Pty Ltd Mineração Passo das Pedras Ltda Centaurus Pesquisa Mineral Ltda Centaurus Gerenciamento Ltda Note 30. Subsequent Events Country of Incorporation Ownership interest 2013 2014 Australia Australia Brazil Australia Brazil Brazil Brazil 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% On 25 February 2015, the Company announced a $1.1M share placement at a price of $0.025 per share together with one free attaching option for every three shares, completed to professional and sophisticated investor clients of Canaccord Genity Ltd and some of the Companys major shareholders. Other than the matters discussed above there has not arisen in the interval between the end of the financial year and the date of this report no item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years, has arisen. Note 31. Remuneration of Auditors Audit Services Audit and review of the Company – KPMG Other Services Auditors of the Company KPMG Taxation services Note 32. Parent Entity Disclosures 31 December 2014 $ 31 December 2013 $ 139,240 129,932 24,775 42,988 As at, and throughout, the financial year ended 31 December 2014 the parent entity of the Group was Centaurus Metals Limited. Results of the Parent Entity Loss for the period (1) Other comprehensive income Total comprehensive income for the period Company 31 December 2014 $ 31 December 2013 $ (26,863,098) (33,368) (26,896,466) (54,558,442) (42,048) (54,600,490) (1) During the year the parent entity provided for an impairment of $18,100,000 (2013:$50,497,498) relating to loans to subsidiaries based on an assessment of recoverability. Page 65 of 76 Annual Financial Report – 31 December 2014 Financial Position of the Parent Entity at Year End Current assets Non-current assets(1) Total assets Current liabilities Total liabilities Net assets Share capital Reserves Accumulated losses Total equity 2014 $ 2013 $ 768,809 6,065,814 6,834,623 332,262 332,262 6,502,361 4,049,445 24,531,420 28,580,865 545,293 545,293 28,035,572 104,035,436 5,776,104 (103,309,179) 6,502,361 98,766,042 5,256,981 (75,987,451) 28,035,572 (1) Included within non-current assets are investments in and loans to subsidiaries net of provision for is dependent on successful development and commercial impairment. Ultimate recoupment exploitation or, alternatively, sale of the respective project areas. Parent Entity Contingencies The parent entity had no contingent liabilities as at 31 December 2014 (2013: nil). Parent Entity Capital Commitments The parent entity had no capital commitments at 31 December 2014 (2013: nil) Parent Entity Lease Commitments The parent entity has the following lease commitments: Leases as Lessee Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and five years More than Five years 2014 $ 2013 $ 70,981 56,899 - 127,880 130,914 - - 130,914 Page 66 of 76 Annual Financial Report – 31 December 2014 Directors’ Declaration 1. In the opinion of the directors of Centaurus Metals Limited (the “Company”): (a) The consolidated financial statements and notes, and the Remuneration Report in the Directors’ Report are in accordance with the Corporations Act 2001, including: (i) (ii) Giving a true and fair view of the Group’s financial position as at 31 December 2014 and of its performance, for the financial year ended on that date; and Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and 2. 3. The directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Managing Director and the Chief Financial Officer for the financial year ended 31 December 2014. The financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Signed in accordance with a resolution of the directors. D P Gordon Managing Director Perth 25 March 2015 Page 67 of 76 ABCD Independent auditor’s report to the members of Centaurus Metals Limited Report on the financial report We have audited the accompanying financial report of Centaurus Metals Limited (the company), which comprises the consolidated statement of financial position as at 31 December 2014, and consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 32 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 2, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. ABCD Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 31 December 2014 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2. Material uncertainty regarding continuation as a going concern Without modifying our opinion above, we draw attention to note 2 of the financial report. The matters set forth in note 2 indicate the existence of material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report. Report on the remuneration report We have audited the Remuneration Report included in section 4.3 of the directors’ report for the year ended 31 December 2014. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards. Auditor’s opinion In our opinion, the remuneration report of Centaurus Metals Limited for the year ended 31 December 2014, complies with Section 300A of the Corporations Act 2001. KPMG Graham Hogg Partner Perth 25 March 2015 Shareholder Information The shareholder information set out below was applicable as at 31 March 2015. Substantial Shareholders The names of substantial shareholders are: Atlas Iron Limited (1) – 60,320,264 shares Liberty Metals & Mining Holdings, LLC – 34,000,000 shares (1) On 27 July 2011, the Company announced it had entered into a strategic alliance with Atlas Iron Limited (“Atlas”) pursuant to which Atlas agreed to take a strategic 19.9% stake in the Company, and for Atlas to provide technical, development and product marketing support as the Company develops its export and domestic iron ore businesses in Brazil. Centaurus and Atlas entered into a subscription agreement with respect to the strategic alliance. Pursuant to the strategic alliance, and subject to meeting various conditions including Atlas continuing to hold a 5% interest in the share capital in the Company, ASX Limited have granted Centaurus a waiver from the listing rules to permit Atlas to have a right to maintain its equity interest in the Company in the event that further equity issues are undertaken for future funding requirements or as a means of securing further assets (other than by a takeover bid or scheme of arrangement). Atlas will be given the opportunity to participate in these future equity issues of the Company on the same terms as those being offered to third parties. Class of Shares and Voting Rights There were 3,791 holders of ordinary shares in the Company. The voting rights attaching to the ordinary shares, set out in Clause 41 of the Company’s Constitution, are: (a) (b) On a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and On a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares, shall have a fraction of a vote for each partly paid share. The fraction shall be equivalent to the proportion which the amount paid is of the total amounts paid and payable, excluding amounts credited, provided that the amounts paid in advance of a call are ignored when calculating a true portion. There were 4 holders of options over 3,400,000 unissued ordinary shares. There are no voting rights attached to the unissued ordinary shares. Voting rights will be attached to the unissued ordinary shares when the options have been exercised. There were 7 holders of performance rights over 2,955,000 unissued ordinary shares. There are no voting rights attached to the unissued ordinary shares. Voting rights will be attached to the unissued ordinary shares when the performance rights have been exercised. Page 70 of 76 Shareholder Information Distribution of Equity Securities The distribution of numbers of equity security holders by size of holding is shown in the table below. There were 2,957 holders of less than a marketable parcel of ordinary shares. 1 1,001 5,001 10,001 100,001 1,000 - 5,000 - - 10,000 - 100,000 and over Equity Security Holders Ordinary Shares 596 1,288 558 1,112 237 3,791 Class of Equity Security Options - - - - 4 4 Performance Rights - - - 1 6 7 The names of the twenty largest holders of each class of quoted equity security are listed below: Ordinary Shares Name J P Morgan Nominees Australia Limited 1 Atlas Iron Limited 2 Liberty Metals & Mining Holdings, LLC 3 4 Lujeta Pty Ltd 5 Citicorp Nominees Pty Ltd 6 Mr Darren Gordon 7 Lion Selection Group Limited 8 Bridgelane Capital Pty Ltd 9 National Nominees Limited 10 Lomacott Pty Ltd 11 Mr Ianaki Semerdziev 12 Prof Anthony Craig Watson 13 Mr Kevin Press 14 BNP Paribas Noms (NZ) Ltd 15 HSBC Custody Nominees (Aust) Limited 16 Mr Behnam Fatahi & Mrs Fezeh Lotfi 17 Mr Antonio Aceti 18 Matzo Consulting Pty Ltd 19 Mr Bradley Bolin 20 Merrill Lynch (Australia) Nominees Pty Ltd Total Top 20 Shareholders Other Shareholders Total Number of Issued Shares Restricted Securities The Company currently has no restricted securities. On-market Buy Back There is no current on-market buy back. Number Held 60,320,264 34,000,000 11,527,296 10,500,000 9,114,387 6,889,791 6,545,455 5,576,375 4,893,341 4,804,039 3,166,000 2,800,000 2,700,000 1,993,665 1,681,358 1,484,956 1,474,407 1,309,130 1,300,000 1,292,049 173,372,513 102,415,406 275,787,919 Percentage of Issued Shares (%) 21.87 12.33 4.18 3.81 3.30 2.50 2.37 2.02 1.77 1.74 1.15 1.02 0.98 0.72 0.61 0.54 0.53 0.47 0.47 0.47 62.85 37.15 100.00 Page 71 of 76 Tenement Information Brazilian Tenements Tenement 831.638/2004 831.639/2004 831.629/2004 832.183/2014 832.776/2006 833.185/2006 833.624/2006 846.113/2009 846.114/2009 846.115/2009 846.232/2009 846.233/2009 846.234/2009 833.998/2008 833.999/2008 834.000/2008 834.001/2008 834.002/2008 834.003/2008 834.004/2008 832.316/2005 831.649/2004 833.409/2007 834.106/2010 831.645/2006 830.588/2008 870.028/2014 832.589/2008 832.590/2008 832.690/2009 832.190/2013 832.249/2006 832.792/2010 832.841/2011 832.902/2012 833.410/2007 Project Name Canavial Canavial Candonga Conquista Conquista Conquista Conquista Curral Velho Curral Velho Curral Velho Curral Velho Curral Velho Curral Velho G100 G100 G100 G100 G100 G100 G100 Itambé Jambreiro (Mining Lease) Jambreiro (Mining Lease) Jambreiro (Mining Lease) Passabém Passabém Pitu Ponte de Pedra Ponte de Pedra Ponte de Pedra Regional Guanhães Regional Guanhães Regional Guanhães Regional Guanhães Regional Guanhães Regional Guanhães Location Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Paraíba Paraíba Paraíba Paraíba Paraíba Paraíba Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Bahia Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Minas Gerais Interest 100% 100% 100% 100% 100%(1) 100%(1) 100%(1) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%(1) 100% (1) These tenements were acquired under an option agreement requiring future payments to maintain the Group’s interest. Australian Tenements Tenement EPM14233 Project Name Mt Guide Location Queensland Interest 10%(2) (2) Subject to a Farm-Out and Joint Venture Exploration Agreement with Summit Resources (Aust) Pty Ltd. Summit has earned a 90% interest in the Project. Aeon Metals Limited has earnt 80% of Summit’s interest in the Project. Page 72 of 76 Mineral Resources & Ore Reserves Information Total Mineral Resource Inventory Following a revised Resource estimate for the Jambreiro and Candonga Projects during the year, the Company’s total resource base at the end of the reporting period is shown in the table below. Project Jambreiro* Candonga* Canavial* Guanhães Region Passabém** Itambé*** TOTAL Million Tonnes 128.5 9.4 27.6 165.5 39.0 10.0 214.5 Fe % SiO2 % Al2O3 % 28.0 43.7 30.5 29.3 31.0 36.6 30.0 51.3 28.5 37.0 47.6 53.6 39.1 48.3 3.7 3.7 6.0 4.1 0.8 4.0 3.5 P 0.05 0.07 0.07 0.05 0.07 0.05 0.05 LOI 1.5 2.9 6.4 2.4 0.1 2.4 2.0 * 20% Fe cut-off grade applied; ** 27% Fe cut-off grade applied; *** 25%Fe cut-off grade applied Mineral Resources & Ore Reserves Statement The Company’s Ore Reserves and Mineral Resource holdings are shown in the following tables. Ore Reserves Ore Reserves as at 31 December 2014 Ore Reserves as at 31 December 2013 Project Million Tonnes Fe % SiO2 % Al2O3 % P % LOI % Million Tonnes Fe % SiO2 % Al2O 3 % P % LOI % Jambreiro Project * Proved 35.4 Probable TOTAL 28.5 27.2 49.6 49.0 13.1 48.5 28.1 49.4 4.3 5.3 4.6 0.04 0.04 0.04 35.4 13.1 28.5 27.2 49.6 49.0 48.5 28.1 49.4 4.3 5.3 4.6 0.04 0.04 0.04 1.7 2.4 1.9 Candonga Project** Proved Probable 0.8 0.4 59.9 61.5 10.5 9.1 1.9 1.4 0.03 0.03 - - - - - - - - - - 1.2 60.5 TOTAL TOTAL COMBINED *Cut-off 20% Fe ; Mine Dilution - 2% ; Mine Recovery - 98%; **45.0% Fe cut-off grade applied; Mine Dilution - 3% ; Mine Recovery - 98% 0.03 28.1 48.5 0.04 49.4 0.04 28.9 49.7 10.0 48.5 0.6 1.7 4.5 4.6 1.8 - - - - - - - - 1.9 1.7 2.4 1.9 0.7 0.4 Page 73 of 76 Mineral Resources & Ore Reserves Information Mineral Resources Mineral Resources as at 31 December 2014 Mineral Resources as at 31 December 2013 LOI Million % Tonnes Million Tonnes Al2O3 % Al2O3 % SiO2 % SiO2 % LOI % Fe % Fe % P % P % Project Jambreiro Project* Measured 45.3 29.2 50.3 Indicated Inferred TOTAL 37.7 27.5 51.0 45.5 27.3 52.6 128.5 28.0 51.3 Candonga Project* Measured Indicated Inferred TOTAL 0.8 3.1 5.5 9.4 60.4 10.1 43.8 29.0 41.3 30.9 43.7 28.5 Canavial Project* Indicated Inferred TOTAL 6.5 33.6 33.6 21.1 29.6 38.0 27.6 30.5 37.0 Passabém Project** Indicated Inferred TOTAL 2.8 33.0 48.8 36.2 30.9 54.0 39.0 31.0 53.6 Itambé Project*** 3.9 3.7 3.4 3.7 1.7 3.5 4.1 3.7 7.1 5.7 6.0 1.9 0.7 0.8 0.04 0.04 0.05 0.05 0.03 0.08 0.08 0.07 0.10 0.07 0.07 0.03 0.07 0.07 Indicated Inferred 4.7 5.3 37.1 37.0 36.2 40.9 4.5 3.5 0.06 0.04 1.5 1.7 1.3 1.5 0.6 2.7 3.3 2.9 7.9 5.9 6.4 0.6 0.1 0.1 2.7 2.1 45.7 28.7 50.7 38.2 27.0 51.0 44.1 25.9 52.0 128.0 27.2 51.2 - 3.7 8.2 - - 45.5 26.2 41.8 30.2 11.9 43.0 29.0 6.5 33.6 33.6 21.1 29.6 38.0 27.6 30.5 37.0 2.8 33.0 48.8 36.2 30.9 54.0 39.0 31.0 53.6 4.1 3.9 4.0 4.0 - 3.8 4.4 4.2 7.1 5.7 6.0 1.9 0.7 0.8 0.04 0.05 0.05 0.05 - 0.08 0.08 0.08 0.10 0.07 0.07 0.03 0.07 0.07 4.7 5.3 37.1 37.0 36.2 40.9 4.5 3.5 0.06 0.04 36.6 10.0 TOTAL TOTAL COMBINED * 20% Fe cut-off grade applied; ** 27% Fe cut-off grade applied; *** 25%Fe cut-off grade applied 216.5 214.5 46.2 29.6 0.05 0.05 36.6 10.0 39.1 48.3 30.0 39.1 3.7 2.0 2.4 4.0 3.5 4.0 0.05 0.06 1.6 1.7 1.4 1.5 - 2.7 3.1 3.0 7.9 5.9 6.4 0.6 0.1 0.1 2.7 2.1 2.4 2.0 (a) (b) Mineral Resources are reported inclusive of Ore Reserves. Rounding may generate differences in last decimal place. Mineral Resources and Ore Reserves Annual Statement and Review The Company carries out an annual review of its Mineral Resources and Ore Reserves as required by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) 2012 edition and the ASX Listing Rules. The review was carried out as at 31 December 2014. The Jambreiro and Candonga Resources and the Candonga Reserve estimates have been reported in accordance with the JORC Code 2012 edition and the ASX Listing Rules. The remaining Ore Reserve and Mineral Resource estimates were prepared and disclosed under the JORC Code 2004 edition. The information prepared for the Jambreiro Reserve and Canavial, Itambé and Passabém Resource estimates have not been updated to comply with the JORC Code 2012 edition on the basis that the information has not materially changed since it was last reported. The adjustment in the Jambreiro Mineral Resource estimate was due to re-interpretation of the Jambreiro drilling and geology carried out during the year. There was no additional drilling data used in the Mineral Resource update. The work resulted in the preparation of an updated Mineral Resource estimate compliant with the JORC Code 2012. Page 74 of 76 Mineral Resources & Ore Reserves Information The Jambreiro Ore Reserve was completed in November 2012 using highly conservative iron ore price and exchange rate assumptions to determine the mine gate price. As of 31 December 2014 the mine gate price remained appropriate. There were no further changes to the modifying factors for the Jambreiro Ore Reserve. Given there was no material change in the Mineral Resource estimate or to the modifying factors for the Ore Reserve, the Ore Reserve has not been updated to comply with the JORC Code 2012 edition. The adjustment in the Candonga Mineral Resource estimate is due to the drilling results and subsequent Mineral Resource estimate update completed during the year in compliance with the JORC Code 2012 edition. Based on the Mineral Resource estimate a maiden Ore Reserve Estimate was completed. There has been no additional work or change to the Canavial, Itambé and Passabém Mineral Resource estimates during the year. Information prepared and disclosed under the JORC Code 2004 Edition and which has not materially changed since last reported has not been updated. The Company is not aware of any new information or data that materially affects the information included in this Annual Statement and confirms that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Estimation Governance Statement The Company ensures that all Mineral Resource and Ore Reserve calculations are subject to appropriate levels of governance and internal controls. Exploration Results are collected and managed by competent qualified staff geologists and overseen by the Exploration General Manager. All data collection activities are conducted to industry standards based on a framework of quality assurance and quality control protocols covering all aspects of sample collection, topographical and geophysical surveys, drilling, sample preparation, physical and chemical analysis and data and sample management. Mineral Resource and Ore Reserve estimates are prepared by qualified independent Competent Persons and further verified by the Company’s technical staff. If there is a material change in the estimate of a Mineral Resource, the modifying factors for the preparation of Ore Reserves, or reporting an inaugural Mineral Resource or Ore Reserve, the estimate and supporting documentation in question is reviewed by a suitably qualified independent Competent Person. Approval of Mineral Resources and Ore Reserve Statement The Company reports its Mineral Resources and Ore Reserves on an annual basis in accordance with the JORC Code 2012 Edition. The Ore Reserves and Mineral Resources Statement is based on and fairly represents information and supporting documentation prepared by competent and qualified independent external professionals and reviewed by the Company’s technical staff. The Ore Reserves and Mineral Resources Statement has been approved by Roger Fitzhardinge, a Competent Person who is a Member of the Australasia Institute of Mining and Metallurgy. Roger Fitzhardinge is a permanent employee of Centaurus Metals Limited. Mr Fitzhardinge has consented to the inclusion of the Statement in the form and context in which it appears in this Annual Report. Competent Person’s Statement The information in this Annual Report that relates to Exploration Results and Mineral Resources is based on information compiled by Roger Fitzhardinge, a Competent Person who is a Member of the Australasia Institute of Mining and Metallurgy and Volodymyr Myadzel, a Competent Person who is a Member of Australian Institute of Geoscientists. Roger Fitzhardinge is a permanent employee of Centaurus Metals Limited and Volodymyr Myadzel is the Senior Resource Geologist of Micromine BNA Consultoria e Sistemas Limited, independent resource consultants engaged by Centaurus Metals. Roger Fitzhardinge and Volodymyr Myadzel have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Roger Fitzhardinge and Volodymyr Myadzel consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. Page 75 of 76 Mineral Resources & Ore Reserves Information The information in this Annual Report that relates to Ore Reserves is based on information compiled by Beck Nader, a Competent Person who is a professional Mining Engineer and a Member of Australian Institute of Geoscientists. Beck Nader is the Managing Director of Micromine BNA Consultoria e Sistemas Ltda and is a consultant to Centaurus. Beck Nader has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Beck Nader consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Page 76 of 76
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