Empire Resources Limited Annual Report 2010

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EMPIRE RESOURCES LIMITED AND CONTROL L ED ENT IT Y ABN 32 092 471 513

FOR THE YEAR ENDED 30 JUNE 20 1 0

Empire Resources Limited is a Perth
based copper and gold focused explorer
with deposits in Western Australia.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 1

ANNUAL REPORT
TA BLE OF CONTENTS

PAGE
1. Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC
2. Highlights of 2009-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Corporate Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8. Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10. Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11. Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12. Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13. Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
14. Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
15. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

1. COR POR ATE DIRECTOR Y

DIRECTORS
Tom Revy BAppSc – Chairman
David Sargeant BSc – Managing Director
Adrian Jessup BSc(Hons) – Executive Director

MANAGEMENT
David Ross BSc(Hons) MSc –
Exploration Manager

COMPANY SECRETARY
Simon Storm BCom, BCompt(Hons), CA, FCIS

REGISTERED and PRINCIPAL OFFICE
53 Canning Highway
Victoria Park 6100
Western Australia
Phone +61 (0)8 9361 3100
Facsimile +61 (0)8 9361 3184
Email info@resourcesempire.com.au
Website www.resourcesempire.com.au
ABN 32 092 471 513

SHARE REGISTRY
Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross 6153
Western Australia

AUDITOR
HLB Mann Judd
Level 4
130 Stirling Street
Perth 6000
Western Australia

STOCK EXCHANGE LISTING
The Company is listed on the
Australian Stock Exchange Limited.
Home Exchange Perth
ASX Code: Shares ERL

Page IFC
Page 2

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2009
EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

HIGHL IGHTS OF 2009-201 0:

> Two new zones of copper mineralisation discovered at the Trajan

prospect, Yuinmery: 7m @ 1.09% Cu and 5m @ 3.1% Cu

> Further copper intersections made at the Troy Creek project:

8m @ 1.47% Cu and 4m @ 3.04% Cu

> Yarlarweelor uranium project sold to FYI Resources Ltd with Empire
retaining a 32% interest in FYI. Drilling at the Kangaroo Ridge
prospect intersects wide zones of uranium mineralisation:
35m @ 503ppm U3O8 including 5m @ 1,069ppm U3O8

> Tenement holding increased at Penny’s Find in a joint venture with

Rubicon Resources Ltd

SUBS EQUE NT TO 30 J UNE 2010:

> Enters into $2 million sale agreement for the Penny’s Find gold

resource and associated tenements

> Enters into option agreement with La Mancha Resources to

acquire 75.82% interest in a 149km2 granted tenement holding
surrounding the Company’s Yuinmery copper-gold resource project

> Trebles land holding at Yuinmery copper-gold project gaining

numerous new geophysical targets ready for drilling

CORPOR ATE
OBJECTIVES

The Company’s long term
objective is to become a
successful mining house by
participation in the discovery
and development of one or more
world-class mineral deposits.

The short term objective is to
enhance value and obtain a
cash flow from the Company’s
existing tenements in Australia
which have potential for gold,
copper and PGM deposits.
This value may be realised
by delineating reserves and
commencing mining operations,
entering into significant farm-
out or royalty arrangements or
acquiring new opportunities to
provide an early cash flow.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 1

4. CHAIR MAN’S R EPO RT

Dear Shareholders

As your Chairman since January 2010, I have been, and continue to be, extremely encouraged by the opportunities that
lie in front of us for 2011 and beyond.

Globally, with few significant discoveries in recent times in key commodities, I believe the market is only just
beginning to realise the impact of the pending shortage in core commodities. The effect of fewer discoveries will be
further felt as a result of the 2008 economic crisis and the postponement or cancellation of hundreds of billions of
dollars of new mining projects and expansions. Pending other market influences, this should bode well for companies,
such as Empire Resources, focused on exploration in base metals, in highly-prospective low-sovereign risk areas.

Our objectives of near term cash flow and ultimately discovering and participating in the development of significant
mining operations remain on track, despite the lingering effects of the 2008 global financial crisis on small cap resource
companies worldwide.

Investment in exploration remains the focus of the Company’s strategy for growth. A major proportion of this
investment over the last year continued to be on programs designed to define additional resources within established
project targets.

Elsewhere, exploration programs and strategies designed to create a pipeline of new discoveries continue to be
developed however, each opportunity is rigorously assessed on an ongoing basis.

Since listing in February 2007, the Company has made three significant copper and gold discoveries in Western
Australia and announced JORC compliant resources for two of these discoveries.

During the year, the sale of the Yarlarweelor Uranium Project to FYI Resources Limited, was finalised as announced
to the ASX on the 1 April 2010. As part of the sale agreement, Empire Resources Ltd emerged with a direct 32%
stake in FYI Resources Ltd. This strategic divestment allows Empire to remain focused on its base metal assets while
maintaining an exposure for shareholders to a highly prospective uranium area. Given early exploration results by FYI,
we remain encouraged at what may lie ahead for this project over the next 12 to 18 months.

On other activities, Empire over the last 12 months has further proved the highly prospective nature of its base metal
rich but underexplored Yuinmery Copper Gold Project located in the Youanmi greenstone belt in Western Australia.
Drilling has confirmed VMS style mineralisation similar to a number of projects in the area. Drilling at Just Desserts
continued to return high grade copper and gold intercepts and confirmed depth continuity. New targets were also
identified in the project area with encouraging results from the Trajan and Augustus zones. Our focus on the near
term will be to increase the current resource at Yuinmery by identifying new targets and undertaking strategic drilling
campaigns on known areas.

Finally, I would like to conclude by recognising the tireless efforts of our management team and employees and
contractors who I believe have contributed significantly to the Company over the last 12 months. Similarly it would
be remiss of me not to acknowledge the efforts and contributions of Empire’s outgoing Chairman, Mr Adrian Griffin
one of the founding Board members of the Company. His knowledge and experience greatly assisted the Company on
where it is today.

We look forward to a challenging and rewarding year at Empire Resources and would like to thank shareholders for
their ongoing support.

Thomas Revy
Chairman

REGISTERED and PRINCIPAL OFFICE
53 Canning Highway, Victoria Park WA 6100 (cnr Taylor Street)
Phone +618 9361 3100 Fax +618 9361 3184

Page 2

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

REVIEW OF OP ERATIONS

Empire Resources Ltd is a gold and copper focused
exploration company.

Since listing in February 2007, the Company has made
three significant copper and/or gold discoveries in Western
Australia and announced JORC compliant resources for
two of these discoveries.

At the Penny’s Find project near Kalgoorlie, the Company
located a near surface high grade gold deposit which has a
JORC compliant resource estimated at 314,000 tonnes @
5.2g/t Au. It is likely further drilling at depth will upgrade
this resource.

Following exploration success during 2007 and 2008,
the Company announced a copper–gold resource for the
Just Desserts prospect at the Yuinmery project, 80km
southwest of Sandstone, WA. This initial resource has
been estimated at 1,070,000 tonnes @ 1.82% Cu and
0.78g/t Au at a 1% Cu cutoff. Continued drilling will
likely upgrade this resource and locate additional resources
at other nearby prospects.

In the latter part of 2008 a discovery of high grade copper
sulphide mineralisation was made at the large Troy Creek
project, 180km northeast of Wiluna in Western Australia.
The drill intersections consisted of 2m @ 4.65% Cu and
3m @ 1.97% Cu - forming part of a 36m intersection
grading 0.76% Cu.

Empire Resources Ltd has a 32% interest in FYI
Resources Ltd, who now owns the large Yarlarweelor
uranium project, 125km north of Meekatharra, WA which
shows potential to host large tonnages of primary uranium
mineralisation. Previous limited drilling within a 5km long
zone of anomalous uranium radioactivity returned up to
8m @ 708ppm U3O8.
The Wynne base metal project is located 260km northeast
of Carnarvon in Western Australia. Surface sampling
has identified highly anomalous base metal gossans
outcropping over a 4km strike length which represent
immediate drill targets.

Figure 1. Project location map

REGISTERED and PRINCIPAL OFFICE

53 Canning Highway, Victoria Park WA 6100 (cnr Taylor Street)

Phone +618 9361 3100 Fax +618 9361 3184

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 3

YUINMERY (WA): Copper - Gold Project
100% interest

The Yuinmery copper-gold project is situated 475km
northeast of Perth, WA. It lies within the Archaean
Youanmi greenstone belt and covers a synclinal
sequence of chloritised felsic tuffaceous rocks with
interbedded sulphide bearing chert horizons. Copper-
gold mineralisation, previously identified from a
number of prospects at Yuinmery, is of volcanogenic
massive sulphide (VMS) style similar in nature to
orebodies currently being mined at Golden Grove
and Jaguar in Western Australia. It occurs as massive
sulphides associated with chert exhalite horizons, as
matrix sulphides in lapilli tuff, and associated with
mafic and ultramafic intrusions.

At one of the Yuinmery prospects, Just Desserts,
drilling during 2007-2008 intersected high grade
copper-gold zones with assays such as 23m @ 2.68%
Cu, 1.28g/t Au; 14m @ 2.63% Cu, 1.91g/t Au; 13m @

2.55% Cu, 1.67g/t Au; 6m @ 3.79% Cu, 12.85g/t Au and

10m @ 4.23% Cu, and 6.01g/t Au.

Based on the above drilling an indicated + inferred
JORC resource of 1,070,000 tonnes @ 1.82% Cu,
0.78g/t Au was estimated for the Just Desserts prospect
and reported on in the March 2009 Quarterly. This
resource lies between 50 and 250 metres below surface
and is open at depth. Elsewhere in the world deposits
of this style of mineralisation commonly occur in
clusters and have been mined to great depths.

During the past year the Company has undertaken
RAB, RC and diamond drilling programs plus
downhole electromagnetic (EM) surveys at Yuinmery,
testing a number of different prospects. Sixteen holes,
3170m of RC drilling and five holes, 1771m of
diamond drilling were completed at the Just Desserts,
Trajan, Augustus, B zone and C zone prospects (see
Figure 3).

Diamond drilling has confirmed the Just Desserts
mineralisation continues at depth with an intersection
of 12.5m @ 0.7% Cu, including 1.9m @ 1.6% Cu, from a
vertical depth of 350m. This intersection is thought to
have intersected the bottom edge of the south-easterly
plunging copper-gold mineralisation (see Figure 4).
Further drilling is planned down plunge from the
currently defined resource.

RC drilling at Trajan immediately along strike to
the south of Just Desserts, intersected two zones of
copper mineralisation, 7m @ 1.09% Cu, 0.63g/t Au
from 110m downhole and 5m @ 3.1% Cu, 0.38g/t Au,
including 2m @ 6.1% Cu, from 136m. The mineralised
zones currently remain open down plunge and further
drilling is being planned (see Figure 4).

The Augustus prospect is located two kilometres to
the east of Just Desserts. One diamond hole, targeting
a strong EM anomaly, intersected a sequence of
chloritic felsic tuffs and rhyolitic breccias containing
zones of banded and disseminated sulphides, mainly
pyrrhotite and pyrite along with minor chalcopyrite.
Within a wide mineralised interval from 354m
downhole assaying 20.57m @ 0.32% Cu, were narrow,
higher grade sections assaying up to 3.4% Cu. Further
drilling is being planned.

RC and diamond drilling at the B and C zone
prospects intersected narrow zones of low grade
copper mineralisation associated with chloritised tuffs
and volcanogenic sediments.

A 33 hole, 963m reconnaissance RAB drilling
program was completed in the Fitz Bore area, 4 km
south of the Just Desserts prospect. This program,
designed to test soil gold anomalies, was successful
in locating three new areas of gold mineralisation
associated with quartz veining in gabbro. Intersections
of 8m @ 0.51g/t Au from surface, 4m @ 0.62g/t Au
from 24m and 7m @ 0.58g/t Au from 40m to EOH
warrant further work in this area.

Subsequent to the end of the reporting year, the
Company entered into an option agreement with La
Mancha Resources Ltd to purchase a 75.82% interest
in tenements surrounding the Just Desserts resource
(see Figures 5). This agreement trebles the Company’s
tenement position to 227km2. A recently completed
airborne EM survey by La Mancha identified up to
22 previously untested conductive zones considered
by Empire to be prospective for massive sulphide
mineralisation. A number of these anomalies are
considered to be priority drill targets (see Figures 6).

Page 4

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Figure 2.

Yuinmery project prospects.

Figure 3.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 5

Figure 4.

Figure 5.

Page 6

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Figure 6.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 7

PENNY’S FIND (WA): Gold Project
100% interest

The Penny’s Find project, situated in the Eastern
Goldfields of Western Australia, lies 50km northeast
of Kalgoorlie and 30km from the Kanowna Belle
Gold Mine. Within mining lease M27/156, gold
mineralisation is associated with quartz veining
developed at or near a sheared contact between basalt
and sediments.

The Company has previously outlined a gold resource
at Penny’s Find of 314,000 tonnes @ 5.18g/t Au down
to a vertical depth of 150m below surface. The mineral
resource estimate is summarised in the following table:

PENNY’S FIND MINERAL RESOURCE

Category

Tonnes Grade* Grade* Grade*

Cu%

Au g/t

Ag g/t

1%Cu cutoff

Indicated

104,000 1.65

Inferred
TOTAL

966,000 1.84
1,070,000 1.82

1.5%Cu cutoff Indicated

46,000 2.11

Inferred

536,000 2.34

TOTAL

582,000 2.33

0.86

0.77
0.78

1.14

0.92

0.93

1.32

2.12
2.06

1.58

2.68

2.61

*High assays have been cut to 9%Cu, 20g/tAu and 10g/tAg.

Resource modelling consultants Datageo calculated a
JORC compliant in situ resource estimate, utilising all
drill hole information available on Prospecting Licence
P57/1215 up to the end of June 2008.

The resource grade was estimated using ordinary
kriging based on the drill hole data composited
down hole to 1m intervals within constraining shapes
representing the mineralisation. Assumed specific
gravity values used were: transitional 2.7t/m3; fresh
3.2t/m3.

Competent Persons Statement

The information is this report concerning the Mineral Resources
for the Penny’s Find Deposit and the Just Desserts Deposit at
Yuinmery have been estimated by Mr Peter Ball B.Sc who is a
director of DataGeo Geological Consultants and is a member of
the Australasian Institute of Mining and Metallurgy (AusIMM).
Mr Ball has sufficient experience which is relevant to the styles of
mineralisation and types of deposit under consideration and qualifies
as a Competent Person as defined in the 2004 Edition of the
“Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves”. Mr Ball consents to the inclusion in
the public release of the matters based on his information in the form
and context in which it appears.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 15

Page 16

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

E MPIRE RESOURCES LIMITED AND CONTROLL ED ENT IT Y ABN 32 092 471 513

FOR THE YEAR ENDED 30 JUNE 2 0 10

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 17

FINANCIAL STATEMENTS
DIRECTORS ’ REPOR T

Your directors submit their report on Empire Resources Limited and its controlled entity for the financial
year ended 30 June 2010.

DIRECTORS

The company’s directors in office during the financial period and until the date of this report are as
follows. Directors were in office for the entire period unless otherwise stated.

Tom Revy
Chairman (Non Executive)
BappSc. Grad Dip Bus.
(Appointed 8 January 2010)

Mr Revy is a mining professional with in excess of 27 years experience in the mining industry to date
including operations, process design and commissioning, technical and general management, business
development, project and company evaluation and corporate management. Countries where extensive
work has been undertaken include Australia, PNG, Southern and Central Africa, Central and South
America and China. He also holds the role of Director of the Australian Latin American Business Council
(ALABC).

David Sargeant
Managing Director
BSc. MAusIMM

Mr Sargeant – who holds a Bachelor of Science degree in economic geology from the University of
Sydney – has more than 35 years experience as a geologist, consultant and company director. As such,
he has been involved in numerous mineral exploration, ore deposit evaluation and mining development
projects and is a member of AusIMM and the Geological Society of Australia.

During his career, Mr Sargeant has held a range of senior positions, including that of senior geologist
with Newmont Pty Ltd and senior supervisory geologist with Esso Australia Ltd at the time of the
Harbour Lights Gold Mine discovery and development. Further, Mr Sargeant was the first chief geologist
at Telfer Gold Mine during exploration, development and production at that project. In addition, he
was exploration manager for the Adelaide Petroleum NL group of companies, manager of resources
development for Sabminco NL and a technical director of Western Reefs Limited during the period in
which that company became a successful producer at the Dalgaranga Gold Project.

Mr Sargeant has been a director of the following listed companies during the past three years.

Company

FYI Resources Ltd

Position

Appointed

Ceased

Non Executive Director

30/11/2009

–

Page 18

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Adrian Jessup
Executive Director
BSc. MAusIMM

Mr Jessup also holds a Bachelor of Science degree (with honours) in economic geology from the
University of Sydney and has more than 35 years continuous experience as a geologist, company director
and consultant involved in mineral exploration, ore deposit evaluation and mining. He is a member of
AusIMM, the Geological Society of Australia and the Australian Institute of Geoscientists.

For the last fifteen years, Mr Jessup has operated a geological consulting company. During that time, he
was a founding director of Sylvania Resources Limited and remained on the board for two years. Prior
to that, Mr Jessup was managing director of Giralia Resources NL for eight years, from the company’s
inception in 1987. Previously, he had worked for AMAX Exploration Inc., as a senior geologist and as
regional manager in charge of that company’s mineral exploration in Western Australia.

Mr Jessup has been a director of the following listed companies during the past three years.

Company

FYI Resources Ltd

Position

Executive Director

Appointed

30/11/2009

Ceased

–

Adrian Griffin
Chairman (Non Executive)
BSc. MAusIMM (Resigned 8 January 2010)

Mr Griffin graduated from the University of Melbourne in 1975 and is a member of the Australasian
Institute of Mining and Metallurgy (‘AusIMM’) and the Geological Society of Australia. He began his
professional career with exploration for base metals in Tasmania. He went on to develop mine planning,
grade control and exploration methods in iron ore with BHP.

In the 1980s, Mr Griffin was operations manager for a number of public companies involved in the
mining and production of gold and base metals throughout Australia and southeast Asia. In 1988, he
managed the commissioning of underground production at the Bellevue gold mine in Western Australia.

Mr Griffin began consulting to the mining industry in 1990 and has held board positions with a
number of public companies since then. His management experience is broad, encompassing as it does
exploration, financing, development, commissioning and the production of a wide range of mineral
commodities.

Mr Griffin was a director of the following listed companies during the past three years up to the date of
his resignation.

Company

Position

Washington Resources Limited

Managing Director

Northern Uranium Limited

Non Executive Director

Reedy Lagoon Corporation Limited

Non Executive Director

Dwyka Resources Limited

Hodges Resources Limited

Chief Executive Officer

Managing Director

17/08/2005

Appointed

1/9/2004

2/06/2006

9/05/2007

1/12/2005

Ceased

1/12/2008

–

27/11/2009

30/10/2007

1/12/2008

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 19

MANAGEMENT

Simon Storm
Company Secretary
BCom. BCompt(Hons). CA, FCIS

Mr Storm is a Chartered Accountant with over 26
years of Australian and international experience in the
accounting profession and commerce. He commenced
his career with Deloitte Haskins & Sells in Africa then
London before joining Price Waterhouse in Perth.

He has held various senior finance and/or company
secretarial roles with listed and unlisted entities in the
banking, resources, construction, telecommunications
and property development industries. In the last 8
years he has provided consulting services covering
accounting, financial and company secretarial matters
to various companies in these sectors.

David Ross
Exploration Manager
BSc(Hons). MSc. MAusIMM

Mr Ross holds a Bachelor of Science degree (with
honours) in geology from Aberdeen University,
Scotland and a Master of Science degree in economic
geology from McMaster University in Canada. He is
a member of the AusIMM, the Geological Society of
Australia and the Australian Institute of Geoscientists.

With over 20 years experience as an exploration
geologist in Western Australia his career has seen him
involved with numerous mineral exploration, ore
deposit evaluation and mine development projects
for both gold and base metals. He has held senior
geologist positions with Brunswick NL and Giralia
Resources and was geological superintendent for
Australian Resources at the Gidgee Gold Mine. Most
recently he held the position of chief geologist with
De Grey Mining Ltd where he was instrumental in
the discovery of the Orchard Well VMS deposits.

Principal Activities

During the period the principal activities of the
Company consisted of mineral exploration and
evaluation of properties in Australia. There has been
no significant change in these activities during the
financial period.

Dividends

No dividends have been paid during the period
and no dividends have been recommended by the
directors.

Result for the Financial Period

Loss from ordinary activities after income tax expense
was $522,353 (2009: $1,167,359)

Review of Operations

During the year, the Company continued exploration
activities at its Yuinmery copper – gold project
with the first high grade intersections made at the
Trajan prospect and encouraging copper intersections
being found at the Augustus prospect. In addition
the Company sold its Yarlarweelor uranium project
in WA to FYI Resources Limited and holds a 32%
shareholding in that company. In order to continue
funding its operations the Company raised $1,540,000
before costs through a series of share placements.

Significant changes in the state of affairs of the
Company during the financial year were as follows:

• Sale of Yarlarweelor uranium project to FYI

Resources Ltd.

In the opinion of the Directors there were no
other significant changes in the state of affairs of the
Company.

Page 20

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Remuneration Report (Audited)

This report details the amount and nature of
remuneration of each director of the Company and
the executives receiving the highest remuneration.

Remuneration Policy

The principles used to determine the nature and
amount of remuneration are applied through a
remuneration policy which ensures the remuneration
package properly reflects the person’s duties
and responsibilities and that the remuneration is
competitive in attracting, retaining and motivating
people of the highest quality.

The remuneration policy, setting the terms and
conditions for the executive directors has been
developed by the board after seeking professional
advice and taking into account market conditions and
comparable salary levels for companies of a similar size
and operating in similar sectors.

The remuneration policy is to provide a fixed
remuneration component. The board believes that this
remuneration policy is appropriate given the stage of
development of the Company and the activities which
it undertakes and is appropriate in aligning Directors’
objectives with shareholder and businesses objectives.

The remuneration framework has regard to
shareholders’ interests in the following ways:

• Focuses on sustained growth as well as focusing the
directors on key non-financial drivers of value, and

• Attracts and retains high calibre directors.

The remuneration framework has regard to directors’
interests in the following ways:

• Rewards capability and experience,

• Reflects competitive reward for contributions to

shareholder growth,

• Provides a clear structure for earning rewards, and

• Provides recognition for contribution.

Non Executive Directors
The board policy is to remunerate non executive
directors at market rates for comparable companies
for time, commitment and responsibilities. The
Board determines payments to the non executive
director and reviews their remuneration annually,
based on market practice, duties and accountability.
Independent external advice is sought when required.
The maximum aggregate amount of fees that can be
paid to directors is subject to approval by shareholders
at a General Meeting. Fees for non executive directors
are not linked to the performance of the economic
entity. However, to align directors’ interests with
shareholder interests, the directors are encouraged to
hold shares in the Company and may receive options.

The Directors have resolved that non executive
director’s fees will be $30,000 per annum for the
Chairman, inclusive of statutory superannuation
contributions. Shareholders have approved aggregate
remuneration for all non executive directors at an
amount of $100,000 per annum. Where applicable,
superannuation contributions of 9% are paid on these
fees as required by law.

Share-based compensation

To ensure that the Company has appropriate
mechanisms to continue to attract and retain the
services of Directors and Employees of a high calibre,
the Company has established the Empire Resources
Limited Share Plan (“SP”) and the Empire Resources
Option Plan.

The Directors consider the plans are an appropriate
method to:

a) reward Directors and Employees for their past
performance;
b) provide long-term incentives to participate in the
Company’s future growth;
c) motivate Directors and Employees and generate
loyalty in Employees; and
d) assist to retain the services of valuable Employees.

The value attributed to the share based compensation
for the year is as follows:

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 21

Year granted

Vested
%

Forfeited
%

Financial
years in
which
shares may
vest

Total
value of
grant
vested
$

Minimum
total value
of grant yet
to vest
$

Maximum
total value
of grant yet
to vest

2007

2010

2007

2010

2007

2010

2007

2010

72%

2008-11

2010-13

2008-11

2010-13

2008-11

2010-13

50,286

75,430

50,286

19,341

7,500

29,011

7,500

19,341

7,500

2008-11

2010-13

35,200

13,539

7,500

19,341

7,500

29,011

7,500

19,341

7,500

13,539

7,500

A
Remuneration
consisting of
shares

B
Value at
issue date
$

C
Value at
exercise date
$

D
Value at
lapse date
$

E
Total of
columns B-D
$

11%

69,627

104,441

69,627

48,739

69,627

104,441

69,627

48,739

Directors
Mr A Griffin 1
Mr T Revy 2
Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

1 Resigned 8 January 2010
2 Appointed 8 January 2010

Directors
Mr A Griffin 1
Mr T Revy 2
Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

1 Resigned 8 January 2010

2 Appointed 8 January 2010

A = The percentage of the value of remuneration

consisting of shares, based on the value of shares
expensed during the current year.

B = The value at issue date calculated in accordance
with AASB 2 Share-based Payment of shares
issued during the year as part of remuneration.

C = The value at exercise date of shares that were

issued as part of remuneration and were exercised
during the year, being the intrinsic value of the
shares at that date.

D = The value at lapse date of shares that were issued
as part of remuneration and that lapsed during the
year. Lapsed shares refer to shares that vested but
expired due to the term of the loan expiring.

Page 22

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Share Options

At the date of this report unissued ordinary shares of
the Company under option are:
Date of
expiry

Number under
option

Exercise
price ($)

Grant
date

1-Feb-07

2-Jun-10

31-Dec-10

2-Jun-13

25-Jun-10

25-Jun-13

0.25

0.15

0.14

3,000,000

8,227,729

2,700,000

13,927,729

Directors’ Interest

The relevant interest of each director in the shares and
options over shares issued by the Company at the date
of this report is as follows:

Number of
Ordinary shares

Number of
Options

Director

Mr T Revy

Direct

Indirect

Direct

Indirect

350,000

- 500,000

Mr D Sargeant

- 6,100,000

Mr A Jessup

722,222 1,345,333

500,000

Company Performance

Comments on performance are set out in the review
of operations.

Significant Changes in the State of Affairs

There were no other significant changes in the state of
affairs of the Company other than those noted in the
review of operations.

Likely Developments and Expected Results

Disclosure of likely developments in the operations
of the Company and the expected results of those
operations in future financial years, and any further
information, has not been included in this report
because, in the reasonable opinion of the Directors
to do so would be likely to prejudice the business
activities of the Company.

Environmental Regulation

The Company’s operations were subject to
environmental regulations under both Commonwealth
and State legislation in relation to its exploration
activities.

The directors are not aware of any breaches during
the period covered by this report.

Executives
Executive Directors receive either a salary plus
superannuation guarantee contributions as required by
law, currently set at 9%, or provide their services via a
consultancy arrangement. Directors do not receive any
retirement benefits. Individuals may, however, choose
to sacrifice part of their salary to increase payments
towards superannuation. Options are not issued as part
of remuneration for long term incentives.

All remuneration paid to directors and executives is
valued at cost to the Company and expensed.

Compensation of Key Management Personnel for the year
ended 30 June 2010.

The following table discloses the remuneration of the
Key Management Personnel (Directors and executive
officers) of the Company. The information in this
table is audited.

Employment contracts

Mr D Sargeant

By agreement dated 24 October 2009, the Company
and Kirkdale Holdings Pty Ltd (ACN 009 096 388)
(‘Kirkdale’) agreed the terms and conditions under
which Kirkdale would provide the services of Mr
Sargeant as Managing Director of the Company.

The agreement has:
a) a term of three years;
b) requires the payment to Kirkdale of a fee of

$15,000 (GST excl) per month (increasing by 10%
each year) and reimbursement of expenses;

c) provisions requiring the payment of a termination
benefit of 50% of the amount due on termination
of the agreement.

Mr A Jessup

By agreement dated 24 October 2009, the Company
and Murilla Exploration Pty Ltd (ACN 068 277 190)
(‘Murilla’) agreed the terms and conditions under
which Murilla would provide the services of Mr
Jessup as an executive officer of the Company.

The agreement has:
a) a term of three years;
b) requires the payment to Murilla of a fee of $7,000
(GST excl) per month (increasing by 10% each
year) and reimbursement of expenses;

c) provisions requiring the payment of a termination
benefit of 50% of the amount due on termination
of the agreement.

Directors may be paid additional fees for special duties
or services outside the scope of the ordinary duties of
a Director. Directors will also be reimbursed for all
reasonable expenses incurred in the course of their
duties.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 23

Meetings of Directors

Events subsequent to reporting date

The following table sets out the number of meetings
of the Company’s directors held during the period
ended 30 June 2010 and the number of meetings
attended by each director.

Directors’ meetings

Director

Mr Adrian Griffin

Mr Thomas Revy

Mr David Sargeant

Mr Adrian Jessup

A = meetings attended

B = meetings held whilst a director

As at the date of this report the Company has not
formed any committees as the directors consider
that at present the size of the Company does not
warrant such. Audit, corporate governance, director
nomination and remuneration matters are all handled
by the full board.

Proceedings on Behalf of the Company
No person has applied to the Court under Section
237 of the Corporations Act 2001 for leave to
bring proceedings on behalf of the Company, or to
intervene in any proceedings to which the Company
is a party, for the purpose of taking responsibility
on behalf of the Company for all or part of the
proceedings.

No proceedings have been brought or intervened in
on behalf of the Company with leave of the Court
under Section 237 of the Corporations Act 2001.

Indemnification and Insurance of Directors and
Officers

Indemnification
The Company has agreed to indemnify current
directors and officers and past directors and officers
against all liabilities to another person (other than the
Company or a related body corporate), including legal
expenses that may arise from their position as directors
and officers of the Company and its controlled entity,
except where the liability arises out of conduct
involving a lack of good faith. The agreement
stipulates that the Company will meet the full amount
of any such liabilities, including costs and expenses.

Insurance
The directors have not included details of the amount
of the premium paid in respect of the directors’ and
officers’ liability insurance contracts, as such disclosure
is prohibited under the terms of the contract.

• Staged cash payments totalling $2 million for a
100% interest of the Penny’s Find project, or

• Stage cash payment totalling $0.5 million together
with exploration and development expenditure of
up to $3 million for an 80% interest in the Penny’s
Find project.

On 1 September 2010 the Company announced it
had entered into an option agreement to purchase
an interest in three granted exploration licences and
two granted prospecting licences held by La Mancha
Resources Australia surrounding the Company’s
advanced Yuinmery copper – gold resource project in
Western Australia.. The five tenements are the subject
of a joint venture between La Mancha Resources
Australia and Giralia Resources Limited in which La
Mancha currently holds an interest of approximately
75.82%. Under the terms of the option agreement,
Empire must spend a minimum of A$150,000 per
annum for up to three years while retaining an
option to purchase La Mancha’s interest for a cash
consideration of A$750,000. A 2% net smelter royalty
capped at A$5,000,000 will be payable by Empire
on any minerals produced from the La Mancha
tenements.

Other than this, no matter or circumstance has arisen,
since the end of the financial year, which significantly
affected, or may significantly affect, the operations of
the consolidated entity, the results of those operations,
or the state of affairs of the consolidated entity in
subsequent financial years.

Non-audit Services

The Company may decide to employ the auditor on
assignments additional to their statutory audit duties
where the auditor’s expertise and experience with
the Company and/or the Consolidated entity are
important.

Details of the amounts paid or payable to the auditor
(HLB Mann Judd and RSM Bird Cameron) for audit
and non-audit services provided during the year are set
out below.

Page 24

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

The Board of directors has considered the position
and is satisfied that the provision of the non-audit
services is compatible with the general standard
of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that
the provision of non-audit services by the auditor,
as set out below, did not compromise the auditor
independence requirements of the Corporations Act
2001 for the following reasons:

• all non-audit services have been reviewed by the

board to ensure they do not impact the impartiality
and objectivity of the auditor;

• none of the services undermine the general

principles relating to auditor independence as
set out in Professional Statement FI, including
reviewing or auditing the auditor’s own work,
acting in a management or a decision-making
capacity for the Company, acting as advocate for
the Company or jointly sharing economic risks and
rewards.

During the period, the following fees were paid or payable for services
provided by the auditors of the parent entity HLB Mann Judd and RSM
Bird Cameron:, its related practices and non-related audit firms:

Consolidated

Year ended
30 June 2010
$

Year ended
30 June 2009
$

Assurance Services
HLM Mann Judd (Current Auditor)

1. Audit services

Audit and review of financial
reports and other audit work
under the Corporations Act 2001

Total remuneration for
audit services

2. Other assurance services

Tax-related

Total remuneration for other
assurance services

Total remuneration for
assurance services

Assurance Services
RSM Bird Cameron (Former Auditor)

1. Audit services

Audit and review of financial
reports and other audit work
under the Corporations Act 2001

Total remuneration for
audit services

2. Other assurance services

Tax-related

Total remuneration for other
assurance services

Total remuneration for
assurance services

18,500 –

–

18,500

–

2,250

–

25,200

5,700

2,250

30,900

Auditors Independence Declaration

Section 307C of the Corporations Act 2001 requires
the company’s auditors, HLB Mann Judd, to provide
the directors with a written Independence Declaration
in relation to their audit of the financial report for
the year ended 30 June 2010. This written Auditor’s
Independence Declaration is attached to the Auditor’s
Independent Audit Report to the members and forms
part of this Director’s Report.

Signed in accordance with a resolution of Directors.

D Sargeant
Managing Director
Perth, Western Australia
24 September 2010

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 25

STAT EMEN T OF COMPR EHE NS IV E INCOM E FOR TH E YEA R E NDED 3 0 JU NE 2010

EMPIRE RESOURCES LI MI TED

Revenue from Continuing operations

Depreciation expense

Exploration expense

Employee benefits expense

Management fee expense

Directors Fees

Accounting expense

Consultancy expense

Share-based payment

ASX expense

Corporate Relations expense

Insurance expense

Other expenses

Share of loss of equity accounted investees

Loss before income tax

Income tax expense

Net loss for the year

Other comprehensive income

Income tax relating to components of other comprehensive income

Other comprehensive income for the year, net of tax

Total comprehensive loss for the year

Loss per share for loss from contiuing operations

attributable to the ordinary equity holders of the Company

Note

Consolidated Group
2009
$

2010
$

1,534,161

139,732

(23,577)

(1,147,416)

(20,032)

(254,772)

(30,000)

(48,265)

(6,658)

(24,601)

(647,618)

(20,149)

(260,103)

(30,000)

(42,855)

(200)

(113,909)

(113,724)

(15,415)

(27,134)

(15,482)

(110,695)

(243,159)

(24,938)

(23,315)

(16,107)

(103,481)

–

(522,353)

(1,167,359)

–

(522,353)

(1,167,359)

–

(522,353)

(1,167,359)

Basic and diluted loss per share (cents per share)

(0.61)

(1.62)

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Page 26

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

STATE MENT OF FINANCIA L PO SIT ION A S AT 30 J U NE 2 0 1 0

EMPIRE RESOURCES LI MI TED

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Trade and other receivables

Total Current Assets

NON-CURRENT ASSETS

Investments accounted for using the equity method

Plant & equipment

Total Non-Current Assets

TOTAL ASSETS

LIABILITIES

CURRENT LIABILITIES

Trade and other payables

Total Current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Accumulated losses

TOTAL EQUITY

Note

Consolidated Group
2009
$

2010
$

595,674

70,861

666,535

809,433

15,648

825,081

1,256,645

34,427

1,291,072

–

58,004

1,957,607

883,085

130,106

101,287

130,106

101,287

1,827,501

781,798

11,723,878

10,269,731

739,174

625,265

(10,635,551)

(10,113,198)

1,827,501

781,798

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 27

STAT EME NT OF CH AN GE S IN EQUITY FOR THE YEAR ENDED 30 JUNE 20 1 0

EMPIRE RESOURCES LIMITED

Balance at 1 July 2008
Shares issued during the year

Options issued during the year

Equity issue expenses

Total comprehensive loss for the year

Balance at 30 June 2009

Balance at 1 July 2009
Shares issued during the year

Options issued during the year

Equity issue expenses

Total comprehensive loss for the year
Balance at 30 June 2010

Consolidated group

Share capital

Accumulated

ordinary

Losses

Option

Reserve

9,420,471

(8,945,839)

511,541

850,000

–

(740)

–

(1,167,359)

–

113,724

–

Total

986,173

850,000

113,724

(740)

(1,167,359)

10,269,731

(10,113,198)

625,265

781,798

10,269,731

(10,113,198)

625,265

781,798

1,539,691

–

(85,544)

–

1,539,691

113,909

(85,544)

–

(522,353)

–

(522,353)

11,723,878

(10,635,551)

739,174

1,827,501

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes

Page 28

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

STATEM ENT OF CASH FLOWS FOR TH E YEA R ENDED 3 0 JU NE 2010

EMPIRE RESOURCES LIMITED

Cashflows from Operating Activities

Receipts from customers

Payments to suppliers and employees

Interest received

Consolidated Group
2009

2010

Note

11,000

(537,650)

24,357

74,526

(491,295)

65,206

Net cash used in operating activities

6(i)

(502,293)

(351,563)

Cash Flows from Investing Activities

Payment for renewal or purchase of prospects

Exploration and evaluation expenditure

–

(1,167,660)

(90,000)

(959,537)

Net cash used in investing activities

(1,167,660)

(1,049,537)

Cash Flows from Financing Activities

Proceeds from issue of equity securities

Equity securities issue costs

1,539,691

850,000

(83,497)

(740)

Net cash provided by financing activities

1,456,194

849,260

Net decrease in cash held

Cash at the beginning of the financial year

(213,759)

(551,840)

809,433

1,361,273

Cash at the end of the financial year

595,674

809,433

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 29

EMPIRE RESOURCES LIMITED

NOTES TO THE FINANCIAL ST ATEME NTS 30 J UNE 2 01 0

Statement of Significant Accounting Policies

The financial report covers the consolidated entity
of Empire Resources Limited (“Empire”) and its
controlled entity and Empire as an individual parent
entity. Empire is a listed public company limited by
shares, incorporated and domiciled in Australia.

(a)

Basis of Preparation

This general purpose financial report has been
prepared in accordance with Australian Accounting
Standards, Australian Accounting Interpretations,
other authoritative pronouncements of the Australian
Accounting Standards Board (AASB) and the
Corporations Act 2001. It is prepared on the basis of
historical costs. The financial report is presented in
Australian dollars.

The financial report complies with Australian
Accounting Standards, which include Australian
equivalents to International Financial Reporting
Standards (AIFRS). Compliance with AIFRS ensures
that the consolidated financial report, comprising
the financial statements and notes thereto, complies
with the International Financial Reporting Standards
(IFRS).

The financial report was authorised for issue by the
Board on 24 September 2010.

The following is a summary of the material accounting
policies adopted by the consolidated entity in the
preparation of the financial report. The accounting
policies have been consistently applied by the
controlled entity and are consistent with those in the
June 2009 financial report.

The group has applied the revised AASB 101
Presentation of Financial Statements which became
effective on 1 January 2009. The revised standard
requires the separate presentation of a statement of
comprehensive income and a statement of changes in
equity. All non-owner changes in equity must now be
presented in the statement of comprehensive income.
As a consequence, the group had to change the
presentation of its financial statements. Comparative
information has been re-presented so that it is also in
conformity with the revised standard.

(b)

Going Concern

As disclosed in the Statement of Comprehensive
Income, the consolidated entity recorded operating
losses of $522,353 (2009:$1,167,359) and as disclosed
in the Statement of Cash Flows, the consolidated
entity recorded cash outflows from operating
activities of $502,293 (2009: $351,563) and investing
activities of $1,167,660 (2009:$1,049,537) and a
cash inflow from financing activities of $1,456,194
(2008:$849,260). Cash flows from financing activities

arose from capital raisings that are disclosed in Note
11(a). After consideration of these financial conditions,
the Directors have assessed the following matters in
relation to the adoption of the going concern basis of
accounting by the consolidated entity:

• The consolidated entity has successfully completed
a capital raising during the year as disclosed in
Note 11(a) and have the ability to continue doing
so on a timely basis, pursuant to the Corporations
Act 2001, as is budgeted to occur in the twelve
month period from the date of this financial report;

• Subsequent to year end and disclosed in Note 20,
Empire has entered into a sale agreement for the
Penny’s Find Project;

• The consolidated entity has net current assets of
$536,429 (2009: $723,794) at balance date and
expenditure commitments for the next 12 months
of $752,054 (2009:$685,458), as disclosed in
Note 14, and retain the ability to scale down their
operations to conserve cash, in the event that the
capital raisings are delayed or partial; and

• The company and consolidated entity have

the ability, if required, to undertake mergers,
acquisitions or restructuring activity or to
wholly or in part, dispose of interests in mineral
exploration and development assets.

Due to the above matters, the Directors believe that
it is reasonably foreseeable that the company and
consolidated entity will continue as going concerns
and that it is appropriate that this basis of accounting
be adopted in the preparation of the financial
statements.

(c)

Basis of Consolidation

A controlled entity is any entity that Empire
Resources Limited has the power to control the
financial and operating policies of the entity so as to
obtain benefits from its activities.

A list of the controlled entity is contained in Note 8
to the financial statements. The controlled entity has a
June financial year end.

All inter-company balances and transactions between
entities in the consolidated group, including any
unrealised profits or losses, have been eliminated on
consolidation. Accounting policies of subsidiaries have
been changed where necessary to ensure consistencies
with those policies applied by the parent entity.

Where a controlled entity enters or leaves the
consolidated group during the year, their operating
results are included/excluded from the date control
was obtained or until the date control ceased.

Page 30

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

Business Combinations
Business combinations occur where control over
another business is obtained and results in the
consolidation of its assets and liabilities. All business
combinations, including those involving entities
under common control, are accounted for by
applying the purchase method. The purchase method
requires an acquirer of the business to be identified
and for the cost of the acquisition and fair values of
identifiable assets, liabilities and contingent liabilities
to be determined as at acquisition date, being the
date that control is obtained. Cost is determined as
the aggregate of fair values of assets given, equity
issued and liabilities assumed in exchange for control
together with costs directly attributable to the business
combination. Any deferred consideration payable
is discounted to present value using the entity’s
incremental borrowing rate.

Changes in accounting policy
The group has changed its accounting policy for
transactions with non-controlling interests and
the accounting for loss of control, joint control or
significant influence from 1 July 2009 when a revised
AASB 127 Consolidated and Separate Financial
Statements became operative.

Previously transactions with non-controlling interests
were treated as transactions with parties external
to the group. Disposals therefore resulted in gains
and losses in profit and loss and purchases resulted
in the recognition of goodwill. On disposal or
partial disposal, a proportionate interest in reserves
attributable to the subsidiary was reclassified to profit
or loss or directly to retained earnings.

Previously when the group ceased to have control,
joint control or significant influence over an entity,
the carrying amount of the investment at the date
control, joint control or significant influence ceased
became its cost for the purposes of subsequently
accounting for the retained interests in associates,
jointly controlled entity or financial assets.

The group has applied the new policy prospectively
to transactions occurring on or after 1 July 2009. As
a consequence, no adjustments were necessary to any
of the amounts previously recognised in the financial
statements.

(d)

Investment in associated entities

The Group’s investment in its associate is accounted
for using the equity method of accounting in the
consolidated financial statements, after initially being
recognised at cost. The associate is an entity in which
the Group has significant influence and which is
neither a subsidiary nor a joint venture.

Under the equity method, the investment in the
associate is carried in the consolidated statement of
financial position at cost plus post-acquisition changes
in the Group’s share of net assets of the associate.

Goodwill relating to an associate is included in
the carrying amount of the investment and is not
amortised. After application of the equity method,
the Group determines whether it is necessary to
recognise any additional impairment loss with respect
to the Group’s net investment in the associate.
Goodwill included in the carrying amount of the
investment in associate is not tested separately, rather
the entire carrying amount of the investment is tested
for impairment as a single asset. If an impairment
is recognised, the amount is not allocated to the
goodwill of the associate.

The consolidated statement of comprehensive income
reflects the Group’s share of the results of operations
of the associate, and its share of post-acquisition
movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted
against the carrying amount of the investment.
Dividends receivable from associates are recognised
in comprehensive income as a component of other
income.

When the Group’s share of losses in an associate
equals or exceeds its interest in the associate, including
any unsecured long-term receivable and loans, the
Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of
the associate.

The balance dates of the associate and the Group
are identical and the associate’s accounting policies
conform to those used by the Group for like
transactions and events in similar circumstances.

(e)

Plant & Equipment

Plant and equipment is measured on the cost basis less
depreciation and impairment losses.

The carrying amount of plant & equipment is
reviewed annually by directors to ensure it is not in
excess of the recoverable amount from those assets.
Recoverable amount is assessed on the basis of the
expected net cash flows which will be received from
the asset’s employment and subsequent disposal. The
expected net cash flows have been discounted to their
present values in determining recoverable amounts.

Depreciation is calculated on the straight line basis and
is brought to account over the estimated useful lives of
all plant and equipment from the time the asset is held
ready for use. The depreciation rates used are:

Office furniture

Office computer equipment

Motor vehicles

15-33%

33%

20%

The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at each balance
date.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 31

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

An asset’s carrying amount is written down
immediately to its recoverable amount if the
assets carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposal are
determined by comparing proceeds with the carrying
amount. These gains and losses are included in the
statement of comprehensive income. When revalued
assets are sold, amounts included in the revaluation
reserve relating to the assets are then transferred to
accumulated losses.

(f)

Income Tax

The income tax expense or benefit for the period is
the tax payable on the current period’s taxable income
based on the applicable income tax rate for each
jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary difference and
to unused tax losses.

The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where
the company’s subsidiaries and associates operate and
generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be
paid to the tax authorities.

Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to
be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the
amount are those that are enacted or substantively
enacted by the balance date.
Deferred income tax is provided on all temporary
differences at the balance date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes.

Deferred income tax liabilities are recognised for all
taxable temporary differences except:

• when the deferred income tax liability arises
from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a
business combination and that, at the time of the
transaction, affects neither the accounting profit
nor taxable profit or loss; or

• when the taxable temporary difference is associated

with investments in subsidiaries, associates or
interests in joint ventures, and the timing of
the reversal of the temporary difference can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable
future.

Deferred income tax assets are recognised for all
deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent
that it is probable that taxable profit will be available
against which the deductible temporary differences and
the carry-forward of unused tax credits and unused tax
losses can be utilised, except:

• when the deferred income tax asset relating to
the deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or

• when the deductible temporary difference is
associated with investments in subsidiaries,
associates or interests in joint ventures, in which
case a deferred tax asset is only recognised to
the extent that it is probable that the temporary
difference will reverse in the foreseeable future and
taxable profit will be available against which the
temporary difference can be utilised.

The carrying amount of deferred income tax assets
is reviewed at each balance date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed
at each balance date and are recognised to the extent
that it has become probable that future taxable profit
will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in
equity are recognised in equity and not in profit or
loss.

Deferred tax assets and deferred tax liabilities are
offset only if a legally enforceable right exists to set
off current tax assets against current tax liabilities and
the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.

(g)

Cash & Cash Equivalents

Cash and cash equivalents include cash on hand,
deposits held at call with banks, other short-term
highly liquid investments with original maturities
of three months or less, and bank overdrafts. Bank
overdrafts are shown within short-term borrowings
in current liabilities on the Statement of Financial
Position.

Page 32

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

(h)

Acquisition of Assets

The purchase method of accounting is used for all
acquisitions of assets regardless of whether shares or
other assets are acquired. Cost is determined as the
fair value of the assets given up at the date of the
acquisition plus costs incidental to the acquisition.

Transaction costs arising on the issue of equity
instruments are recognised directly in equity.

(i)

Impairment of assets

At each reporting date, the Group reviews the
carrying values of its tangible and intangible assets to
determine whether there is any indication that those
assets have been impaired. If such an indication exists,
the recoverable amount of the asset, being the higher
of the asset’s fair value less costs to sell and value in
use, is compared to the asset’s carrying value. Any
excess of the asset’s carrying value over its recoverable
amount is expensed to the statement of comprehensive
income.

Impairment testing is performed annually for goodwill
and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit to
which the asset belongs.

(j)

Financial Instruments

Recognition
Financial instruments are initially measured at cost
on trade date, which includes transaction costs, when
the related contractual rights or obligations exist.
Subsequent to initial recognition these instruments are
measured as set out below.

Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not
quoted in an active market and are stated at amortised
cost using the effective interest rate method.

Available-for-sale financial assets
Available for sale financial assets include any financial
assets not included in the above categories. Available-
for-sale financial assets are reflected at fair value.
Unrealised gains and losses arising from changes in fair
value are taken directly to equity.

Financial liabilities
Non-derivative financial liabilities are recognised at
amortised cost, comprising original debt less principal
payments and amortisation.

Fair value
Fair value is determined based on current bid prices
for all quoted investments. Valuation techniques are
applied to determine the fair value for all unlisted
securities, including recent arm’s length transactions,
reference to similar instruments and option pricing
models.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Impairment
At each reporting date, the Company assesses whether
there is objective evidence that a financial instrument
has been impaired. In the case of available-for sale
financial instruments, a prolonged decline in the value
of the instrument is considered to determine whether
an impairment has arisen. Impairment losses are
recognised in the statement of comprehensive income.

(k)

Exploration and Development Expenditure

Exploration, evaluation and acquisition costs
are written off in the year they are incurred.
Development costs are capitalised. Amortisation is not
charged on costs carried forward in respect of areas of
interest in the development phase until production.

(l)

Employee Entitlements

Salaries, wages and annual leave
Liabilities for wages and salaries, including non-
monetary benefits, annual leave and accumulating sick
leave expected to be settled within twelve months of
the reporting date are recognised in other creditors
in respect to employees’ services up to the reporting
date and are measured at the amounts expected to be
paid when the liabilities are settled. Liabilities for non-
accumulating sick leave are recognised when the leave
is taken and measured at the rates paid or payable.

Equity settled transactions
The Group provides benefits to employees (including
senior executives) of the Group in the form of share-
based payments, whereby employees render services
in exchange for shares or rights over shares (equity-
settled transactions).

There are currently two plans in place to provide
these benefits:

•

the Employee Share Option Plan (ESOP), which
provides benefits to directors and senior executives;
and

the Employee Share Loan Plan (ESLP), which
provides benefits to all employees, excluding senior
executives and directors.

The cost of these equity-settled transactions with
employees is measured by reference to the fair value
of the equity instruments at the date at which they are
granted. The fair value is determined by an external
valuer using a Black-Scholes model, further details of
which are given in Note 18.

In valuing equity-settled transactions, no account
is taken of any performance conditions, other than
conditions linked to the price of the shares of Empire
Resources Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over
the period in which the performance and/or service
conditions are fulfilled, ending on the date on which
the relevant employees become fully entitled to the
award (the vesting period).

Page 33

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

The cumulative expense recognised for equity-settled
transactions at each balance date until vesting date
reflects (i) the extent to which the vesting period
has expired and (ii) the Group’s best estimate of the
number of equity instruments that will ultimately
vest. No adjustment is made for the likelihood of
market performance conditions being met as the effect
of these conditions is included in the determination
of fair value at grant date. The profit or loss charge
or credit for a period represents the movement in
cumulative expense recognised as at the beginning and
end of that period.

No expense is recognised for awards that do not
ultimately vest, except for awards where vesting is
only conditional upon a market condition.

If the terms of an equity-settled award are modified,
as a minimum an expense is recognised as if the terms
had not been modified. In addition, an expense is
recognised for any modification that increases the total
fair value of the share-based payment arrangement, or
is otherwise beneficial to the employee, as measured at
the date of modification.

If an equity-settled award is cancelled, it is treated
as if it had vested on the date of cancellation, and
any expense not yet recognised for the award is
recognised immediately. However, if a new award is
substituted for the cancelled award and designated as
a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a
modification of the original award, as described in the
previous paragraph.

The dilutive effect, if any, of outstanding options
is reflected as additional share dilution in the
computation of earnings per share (see Note 5).

(m)

Trade Receivables

All trade receivables are recognised at the amounts
receivable as they are due for settlement no more than
30 days from the date of recognition.

Collectability of trade receivables is reviewed on
an ongoing basis. Debts which are known to be
uncollectible are written off. An allowance for
doubtful debts is raised where some doubt as to
collection exists.

(n)

Trade creditors

These amounts represent liabilities for goods and
services provided to the Company prior to the end
of the financial period and which are unpaid. The
amounts are unsecured and are usually paid within 30
days of recognition.

(o)

Recoverable Amount of Non-current Assets

The recoverable amount of an asset is the net amount
expected to be recovered through the cash inflows and
outflows arising from its continued use and subsequent
disposal.

Where the carrying amount of a non-current asset is
greater than its recoverable amount, the asset is written
down to its recoverable amount. Where net cash
inflows are derived from a group of assets working
together, recoverable amount is determined on the
basis of the relevant group of assets. The decrement
in the carrying amount is recognised as an expense in
net profit or loss in the reporting period in which the
recoverable amount write-down occurs.

The expected net cash flows used in determining
recoverable amount are not discounted to their present
value.

(p)

Leases

A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to
ownership of leased non-current assets, and operating
leases under which the lessor effectively retains
substantially all such risks and benefits

Operating lease payments are charged as expenses
in the periods in which they are incurred, as this
represents the pattern of benefits derived from the
leased assets.

(q)

Revenue Recognition

Amounts disclosed as revenue are net of duties and
taxes paid. Revenue is recognised as follows:

(i)

Interest

Interest earned is recognised as and when it is
receivable, including interest which is accrued and is
readily convertible to cash within two working days.
Accrued interest is recorded as part of other debtors.

(ii)

Sundry income

Sundry income is recognised as and when it is
receivable. Income receivable, but not received at
balance date, is recorded as part of other debtors.

(r)

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of
the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian
Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset
or as part of an item of the expense. Receivables and
payables in the Statement of Financial Position are
shown inclusive of GST.

Page 34

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

(s)

Critical accounting estimates and judgements

• Segment reporting – new AASB 8 Operating

The directors evaluate estimates and judgments
incorporated into the financial report based on
historical knowledge and best available current
information. Estimates assume a reasonable expectation
of future events and are based on current trends and
economic data, obtained both externally and within
the group.

Key Estimates — Impairment

The group assesses impairment at each reporting date
by evaluating conditions specific to the group that may
lead to impairment of assets. Where an impairment
trigger exists, the recoverable amount of the asset is
determined. Value-in-use calculations performed in
assessing recoverable amounts incorporate a number of
key estimates.

Share-based payment transactions

The Group measures the cost of equity-settled
transactions with employees by reference to the fair
value of the equity instruments at the date at which
they are granted. The fair value is determined by an
external valuer using a Black and Scholes model, using
the assumptions detailed in Note 18.
The Group measures the cost of cash-settled share-
based payments at fair value at the grant date using
the Black and Scholes formula taking into account
the terms and conditions upon which the instruments
were granted, as discussed in Note 18.

This fair value is expensed over the period until
vesting with recognition of a corresponding liability.
The liability is re-measured to fair value at each
balance date up to and including the settlement date
with changes in fair value recognised in profit or loss.

(t)

Adoption of new and revised standards

Changes in accounting policies on initial application of
Accounting Standards

In the year ended 30 June 2010, the Group has
reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant
to its operations and effective for the current annual
reporting period.

During the year, certain accounting policies have
changed as a result of new or revised accounting
standards which became operative for the annual
reporting period commencing on 1 July 2009.

The affected policies and standards are:

• Principles of consolidation – revised AASB 127
Consolidated and Separate Financial Statements
and changes made by AASB 2008-7 Amendments
to Australian Accounting Standards – Cost of an
Investment in a Subsidiary, Jointly Controlled
Entity and Associate

Segments

• Financial Instruments – revised AASB 7 Financial

Instruments: Disclosures

The Group has also reviewed all new Standards and
Interpretations that have been issued but are not
yet effective for the year ended 30 June 2010. As a
result of this review the Directors have determined
that there is no impact, material or otherwise, of the
new and revised Standards and Interpretations on its
business and, therefore, no change necessary to Group
accounting policies.

(u)

Segment Reporting

The Group has applied AASB 8 Operating Segments
from 1 July 2009. AASB 8 requires a “management
approach” under which segment information is
presented on the same basis as that used for internal
reporting purposes.

Operating segments are now reported in a manner
that is consistent with the internal reporting provided
to the chief operating decision maker. The chief
operating decision maker has been identified as the
Board of Empire Resources Ltd.

The Group operates only in one business and
geographical segment being predominantly in the
area of mineral exploration in Western Australia. The
Group considers its business operations in mineral
exploration to be its primary reporting function.

(v)

Earnings per share

Basic earnings per share is calculated as net profit or
loss attributable to members of the parent, adjusted
to exclude any costs of servicing equity (other than
dividends) and preference share dividends, divided
by the weighted average number of ordinary shares,
adjusted for any bonus element.

Diluted earnings per share is calculated as net profit
or loss attributable to members of the parent, adjusted
for:
• costs of servicing equity (other than dividends) and

preference share dividends;

•

the after tax effect of dividends and interest
associated with dilutive potential ordinary shares
that have been recognised as expenses; and

• other non-discretionary changes in revenues or

expenses during the period that would result from
the dilution of potential ordinary shares; divided
by the weighted average number of ordinary shares
and dilutive potential ordinary shares, adjusted for
any bonus element.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 35

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

Revenue

Interest received

Sale of tenement

Other income

Loss from ordinary activities

Loss before income tax

The loss from ordinary activities before income

tax has been determined after:

(a) Expenses

Depreciation

Consolidated Group
2009

2010

24,357

65,206

1,499,804

–

10,000

74,526

1,534,161

139,732

Consolidated Group
2009

2010

23,577

24,601

Exploration costs written off

1,147,416

647,618

Income tax

(a)

Income tax recognised in loss

No income tax is payable by the parent or consolidated group as they both recorded losses for income tax purposes for
the year.

(b)

Numerical reconciliation between income tax expense and the loss before income tax.

Loss before tax

Income tax benefit at 30% (2009:30%)

Tax effect of:
– deductible capital raising expenditure

– non deductible expenditure

– deductible temporary differences

– share based payment

Deferred tax asset not recognised

Income tax benefit attributable to loss from

ordinary activities before tax

Consolidated Group
2009

2010

(522,353)

(1,167,359)

(156,706)

(350,208)

(34,111)

73,076

3,095

34,173

80,473

(29,451)

–

34,117

345,542

–

Page 36

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

Income Tax (continued)

Consolidated Group
2009

2010

(c)

Unrecognised deferred tax balances

Tax losses attributable to members of the group - revenue

8,409,486

8,126,678

Potential tax benefit at 30%
Deferred tax asset asset not booked
Amounts recognised in Statement of comprehensive income

- employee provisions

- other

Amounts recognised in equity

- share issue costs

2,522,846

2,438,003

4,061

7,725

346

(1,425)

166,711

(9,503)

Net unrecognised deferred tax asset at 30%

2,701,343

2,427,421

A deferred tax asset attributable to income tax losses has not been recognised at balance date as the probability criteria
disclosed in Note 1(f) is not satisfied and such benefit will only be available if the conditions of deductibility also
disclosed in Note 1(f) are satisfied.

Loss per share

Consolidated Group
2009

2010

Cents

Basic and diluted loss per share (cents per share)

(0.61)

(1.62)

Loss used in the calculation of basic EPS

(522,353)

(1,167,359)

Weighted average number of shares outstanding during

the year used in calculations of basic loss per share

85,856,572

71,877,096

Diluted loss per share has not been disclosed as it is not materially

different from basic loss per share

Cash and cash equivalents

Cash at bank

Consolidated Group
2009

2010

595,674

809,433

595,674

809,433

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 37

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

(i)

Cash and cash equivalents (continued)

Reconciliation of cash flow from operations with loss after income tax

Loss after income tax

Sale of tenement

Depreciation

Share based payments expense

Exploration expenditure written off

Share of loss of equity accounted investees

Changes in assets and liabilities, net of the effects of purchase of subsidiaries:

(Increase)/decrease in trade and other receivables

(Decrease)/Increase in trade and other payables

(Decrease)/Increase in employee benefits

Consolidated Group
2009

2010

(522,353)

(1,167,359)

(1,499,804)

23,577

113,909

1,167,660

243,159

(473,852)

(53,904)

24,422

1,041

–

24,601

113,724

959,537

–

(69,497)

52,251

(336,758)

2,441

Net cash outflow from operating activities

(502,293)

(351,563)

Trade and other Receivables

Current

Trade receivables

Other receivables

Consolidated Group
2009

2010

36,090

34,771

–

15,648

70,861

15,648

Provision for Impairment of Receivables

Current trade receivables are non-interest bearing and generally on 30 day terms. A provision for impairment is
recognised when there is objective evidence that an individual trade receivable is impaired.

Page 38

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

Investments

(a)

Investments accounted for using the Equity Method

Reconciliation of movements in investments

accounted for using the equity method:

Balance at 1 July

Acquisitions

Share of loss since acquistion

Balance at 30 June

Consolidated Group
2009

2010

–

1,499,804

(243,159)

1,256,645 –

–

Name of entity

Associated entities

FYI Resources Ltd

Principal
activity

Country of
incorporation

Mineral exploration

Australia

32%

–

1,353,559

–

Ownership interest
2009
2010

Published fair value
2009

2010

Summarised financial information of associates:

Financial position

Total assets

Total liabilities

Net assets

Group’s share of associates’ net assets

Financial performance

Total revenue

Total loss for the year

Group’s share of associate’s profit/(loss)

Capital commitments and contingent liabilities of associate:

Share of capital commitments incurred jointly with other investors

Share of contingent liabilities incurred jointly with other investors

Consolidated Group
2009
$

2010
$

4,678,120

450,124

4,227,996

1,353,559

29,645

(1,223,518)

(243,159)

406,534

– –

–

(b)

Investments in subsidiaries

Controlled Entities

Parent Entity:
Empire Resources Limited

Subsidiaries of Empire Resources Limited:

Torrens Resources Pty Ltd

Country of
incorporation

Australia

Percentage Owned

2010
%

2009
%

–

100

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 39

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

Plant & equipment

Plant and Equipment

Cost

Accumulated depreciation

Motor Vehicles

Cost

Accumulated depreciation

Consolidated Group
2009
$

2010
$

27,198

(25,069)

2,129

90,217

(57,919)

32,298

27,198

(19,635)

7,563

90,217

(39,776)

50,441

Total Plant and Equipment

34,427

58,004

Movements in the carrying amounts of each class of property, plant & equipment at

the beginning and end of the current financial period is as set out below:

Plant and Equipment

Balance at the beginning of year

Additions

Depreciation expense

Carrying amount at the end of the year

Motor Vehicles

Balance at the beginning of year

Additions

Depreciation expense

Carrying amount at the end of the year

10.

Trade and other payables

Trade payables and accruals

Employee benefits

Consolidated Group
2009
$

2010
$

7,563

–

(5,434)

2,129

14,022

–

(6,459)

7,563

50,441

68,583

–

(18,143)

32,298

–

(18,142)

50,441

Consolidated Group
2009
$

2010
$

106,869

23,237
130,106

79,091

22,196
101,287

Page 40

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

11.

Issued capital

(a)

Ordinary shares

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.

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.

97,195,921 (2009: 71,918,192) fully paid ordinary shares

11,723,878

10,269,731

Consolidated Group
2009

2010

(i) Ordinary shares - number

At 1 July 2009

Shares issued - 5,000,000 on 3 July 2008

at $0.17 Apex Minerals NL
Shares issued - 10,750,000 on 14 August 2009

at $0.05 Sophisticated investors

Shares issued - 1,850,000 on 24 November 2009

at $0.05 Sophisticated investors

Shares placement - 4,450,000 on 23 December 2009 at $0.075

Shares placement - 8,227,729 on 12 May 2010 at $0.07

Consolidated Group
2009
No.

2010
No.

71,918,192

66,918,192

–

5,000,000

10,750,000

1,850,000

4,450,000

8,227,729

–

Balance at 30 June 2010

97,195,921

71,918,192

(ii) Ordinary shares – value

At 1 July 2009

Shares issued - 5,000,000 on 3 July 2008

at $0.17 Apex Minerals NL

Shares issued - 10,750,000 on 14 August 2009

at $0.05 Sophisticated investors

Shares issued - 1,850,000 on 24 November 2009

at $0.05 Sophisticated investors

Shares placement - 4,450,000 on 23 December 2009 at $0.075

Shares placement - 8,227,729 on 12 May 2010 at $0.07

Less share issue costs

Balance at 30 June 2010

(b)

Options

Consolidated Group
2009
$

2010
$

10,269,731

9,420,471

–

850,000

537,500

92,500

333,750

575,941

(85,544)

–

(740)

11,723,878

10,269,731

As at 30 June 2010 (30 June 2009: 3,000,000) the Company had the following options on issue over ordinary shares:

Grant date

Date of expiry

Exercise price ($) Number under option

1-Feb-07

2-Jun-10

25-Jun-10

31-Dec-10

2-Jun-13

25-Jun-13

0.25

0.15

0.14

3,000,000

8,227,729

2,700,000

13,927,729

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 41

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

12.

Reserves

Reserves comprise the following:

Options reserve

Balance as at start of financial year

Share-based payment

Consolidated Group
2009
$

2010
$

739,174

625,265

113,909

511,541

113,724

Balance as at end of the financial year

739,174

625,265

Details of certain components of the option reserve arising as a consequence of equity based payments are included in
Note 18.

13.

Financial risk management

The Consolidated entity’s financial situation is not complex. It’s activities may expose it to a variety of financial risks
in the future: market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk and cash
flow interest rate risk. At that stage the Consolidated entity’s overall risk management program will focus on the
unpredictability of the financial markets and seek to minimise potential adverse effects on the financial performance of
the Consolidated entity.

Risk management is carried out under an approved framework covering a risk management policy and internal
compliance and control by management. The Board identifies, evaluates and approves measures to address financial
risks.

The Consolidated entity hold the following financial instruments:

Financial assets

Cash and cash equivalents

Trade and other receivables

Financial liabilities

Trade and other payables

Consolidated Group
2009
$

2010
$

595,674

70,861

809,433

15,648

666,535

825,081

130,106

101,287

Page 42

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

13.

Financial risk management (continued)

(a)

Market risk

Cash flow and fair value interest rate risk

The Consolidated entity’s main interest rate risk arises from cash deposits to be applied to exploration and development
of areas of interest. Deposits at variable rates expose the Consolidated entity to cash flow interest rate risk. Deposits
at fixed rates expose the Consolidated entity to fair value interest rate risk. During 2010 and 2009, the Consolidated
entity’s deposits at variable rates were denominated in Australian Dollars.

As at the reporting date, the Consolidated entity had the following variable rate deposits and there were no interest rate
swap contracts outstanding:

Deposit

Other cash available

Net exposure to cash flow
interest rate risk

2010
Weighted
average
interest rate
%

2009
Weighted
average
interest rate
%

Balance
$

537,828

57,846

Balance
$

763,168

46,265

3.0%

595,674

4.9%

809,433

The Consolidated entity analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking
into the renewal of existing positions.

Sensitivity – Consolidated and Parent entity

During 2010, if interest rates had been 1% higher or lower than the prevailing rates realised, with all other variables
held constant, there would be an immaterial change in post-tax profit for the year. Equity would not have been
impacted.

(b)

Credit risk

The Consolidated entity has no significant concentrations of credit risk. Cash transactions are limited to high credit
quality financial institutions.

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures on outstanding receivables and committed transactions. In relation to other
credit risk areas management assesses the credit quality of the customer, taking into account its financial position, past
experience and other factors.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised
at the beginning of this note.

(c)

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate
amount of committed credit facilities and the ability to close-out market positions. The Consolidated entity manages
liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities. The Consolidated entity will aim at maintaining flexibility in funding by accessing appropriate
committed credit lines available from different counterparties where appropriate and possible. Surplus funds when
available are generally only invested in high credit quality financial institutions in highly liquid markets.

Financing arrangements

The Consolidated and parent entity has no borrowing facilities.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 43

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

13.

Financial risk management (continued)

Fixed interest rate maturing

Weighted
average
effective

Floating
interest
rate

Within year 1 to 5 years Over 5 years

Non–interest
bearing

interest rate

Total

30 June 2010

Financial Assets:

Cash and cash equivalents

3.0%

575,674

20,000

Trade and other receivables

Total Financial Assets

–

575,674

20,000

Financial Liabilities:

Trade and other payables

Short-term borrowings

Total financial liabilities

–

595,674

70,861

666,535

130,106

–

130,106

Fixed interest rate maturing

Weighted
average
effective

Floating
interest
rate

Within year 1 to 5 years Over 5 years

Non–interest
bearing

interest rate

Total

30 June 2009

Financial Assets:

Cash and cash equivalents

4.9%

789,433

20,000

Trade and other receivables

Total Financial Assets

–

789,433

20,000

Financial Liabilities:

Trade and other payables

Short-term borrowings

Total financial liabilities

–

15,648

808,433

15,648

825,081

101,287

–

101,287

Maturities of financial assets and liabilities

The note above analyses the Consolidated and parent entity’s financial liabilities. These liabilities comprise trade and
other payables, are non interest bearing and will mature within 12 months. The amounts disclosed are the contractual
undiscounted cash flows. There are no derivatives.

Maturity analysis of financial assets and liability based on management’s expectation

Year ended 30 June 2010

<6 months

6-12 months

1-5 years

>5 years

Total

Consolidated

Financial assets

Cash & cash equivalents

Trade & other receivables

Financial liabilities

Trade & other payables

Net maturity

595,674

70,861

666,535

130,106

536,429

–

595,674

70,861

666,535

130,106

536,429

Page 44

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

13.

Financial risk management (continued)

(d)

Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.

The fair value of financial instruments that are not traded in an active market (for example, investments in unlisted
subsidiaries) is determined using valuation techniques or cost (impaired if appropriate). The Consolidated entity uses
a variety of methods and makes assumptions that are based on market conditions existing at each balance date.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair
values due to their short-term nature.

14.

Capital and Leasing Commitments

(i) Operating Lease Commitments

Non-cancellable operating leases contracted for but not capitalised

in the financial statements Payable - minimum lease payments

– not later than 12 months

– between 12 months and 5 years

– greater than 5 years

The company entered into an operating lease on 1 August 2007

for office space it occupies in Victoria Park. The term of the lease

is 3 years and expired on 1 August 2010. The lease was renewed

for a further 3 years to 31 July 2013

(ii) Expenditure commitments contracted for:

Exploration Tenements

In order to maintain current rights of tenure to exploration

tenements, the Company is required to outlay rentals and to meet

the minimum expenditure requirements. These obligations are not

provided for in the financial statements and are payable:
– not later than 12 months

– between 12 months and 5 years

– greater than 5 years

Consolidated Group
2009
$

2010
$

48,493

102,136

–

34,272

36,137

–

150,629

70,409

Consolidated Group
2009
$

2010
$

752,054

685,458

3,008,216

2,741,832

–

3,760,270

3,427,290

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 45

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

15. Directors and other key management personnel

(i)

Details of Key Management Personnel

Chairman – non executive
Mr T Revy (from 8 January 2010)

Managing Director
Mr D Sargeant (from 13 April 2000)

Executive director
Mr A Jessup (from 15 August 2003)

Company Secretary
Mr S Storm (from 30 April 2007)

(ii)

Compensation of Key Management Personnel

Short-term employee benefits

Post-employment benefits

Share-based payments

Consolidated Group
2009

2010

336,800

325,200

–

97,614

434,414

–

97,478

422,678

The company has taken advantage of the relief provided by AASB 2008-4 Amendments to Australian Accounting
Standard – Key Management Personnel Disclosures by Disclosing Entities, and has transferred the detailed
remuneration disclosures to the directors’ report. The relevant information can be found in the Remuneration Report
on pages 21 to 23.

(iii)

Equity instrument disclosures relating to directors and other key management personnel

Shareholdings
The number of ordinary shares in the Company held during the year by each director and other key management
personnel, including their personally related entities or associates, are set out below.

Page 46

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

15. Directors and other key management personnel (continued)

2010 Shareholdings of Key Management Personnel

Balance at

the start

Issued under

On exercise

Net change

the end

of the period

share plan

of options

other

of the period

500,000

–

6,100,000

2,067,555

8,667,555

350,000

–

350,000

–

500,000

350,000

6,100,000

2,067,555

350,000

9,017,555

–

350,000

Directors
Mr A Griffin 1
Mr T Revy 2
Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

1 Resigned 8 January 2010

2 Appointed 8 January 2010

2009 Shareholdings of Key Management Personnel
Balance at

Balance at

the start

Issued under

On exercise

Net change

the end

of the period

share plan

of options

other

of the period

Directors

Mr A Griffin

Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

500,000

5,850,000

1,967,555

8,317,555

350,000

–

250,000

100,000

500,000

6,100,000

2,067,555

350,000

8,667,555

–

350,000

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 47

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

15. Directors and other key management personnel (continued)

All equity transactions with key management personnel, which relate to the Company’s listed ordinary shares, have
been entered into on an arms length basis.

Option holdings

Details of shares issued as remuneration can be found in the remuneration report.

The number of options over ordinary shares in the Company held during the reporting period by each director and key
management personnel, including their personally related entities, are set out below.

2010 Option holdings of Key Management Personnel

Balance at

the start

Balance at

Vested and

Net change

the end of

exercisable at

of the period

Issued

Expired

other

the period

30 June 2010

Directors
Mr A Griffin 1
Mr T Revy 2
Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

1 Resigned 8 January 2010
2 Appointed 8 January 2010

–

500,000

1,500,000

500,000

–

500,000

1,500,000

500,000

–

2009 Option holdings of Key Management Personnel

Balance at

the start

Balance at

Vested and

Net change

the end of

exercisable at

of the period

Issued

Expired

other

the period

30 June 2009

Directors

Mr A Griffin

Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

300,000

2,849,999

1,183,777

4,333,776

200,000

–

(300,000)

(2,849,999)

(1,183,777)

(4,333,776)

(200,000)

–

Page 48

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

16.

Related Parties

Directors and specified executives

Disclosures relating to the remuneration and shareholdings of directors and specified executives are set out in the
Directors’ Report and Note 15 respectively.

Other transactions with directors, their associates and director related entities are as follows:

Amounts paid to companies associated with certain

Directors for management services

Kirkdale Holdings Pty Ltd - Mr D Sargeant

Murilla Exploration Pty Ltd - Mr A Jessup

Total

Amounts payable to Directors for Directors Fees

Mr T Revy

Mr A Griffin

Consolidated Group
2009
$

2010
$

164,000

108,000

272,000

132,000

264,000

15,000

30,000

–

30,000

The following table provides the total amount of transactions that were

entered into with related parties for the relevant financial year:

Reimbursement

Amounts
owed by

Amounts
owed to

Related party

Consolidated

Associate:

FYI Resources Ltd

Associate

Revenue from of Expenditure Related parties Related parties
as at 30 June
Related Parties Related Parties as at 30 June
$
$

2010

2009

1,509,804

172,538

36,090

–

The Group has a 32% interest in FYI Resources Limited (2009: 0%).

17.

Remuneration of auditors

The auditor of Empire Resources Ltd is HLB Mann Judd. Previously the auditor was RSM Bird Cameron.

Amounts received or due and receivable by HLB Mann Judd for:

Audit or review of the financial reports of the Company

Other services

Amounts received or due and receivable by non HLB Mann Judd audit firms:

Audit or review of the financial reports of the Company

Other services

Consolidated Group
2009
$

2010
$

18,500

–

2,250

–

25,200

5,700

20,750

30,900

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 49

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

18.

Share Based Payments

(a)

Employee share plan

The Company has established an employee share plan, which is also available to Directors, known as the 2008 Empire
Resources Limited Employee Share Plan and was approved by shareholders on 28 November 2007.

The issue price for Shares offered under the Plan is at the discretion of the Board, provided that the issue price is not
less than 1% below the weighted average sale price of Shares sold through ASX during the one week period up to and
including the offer date.

A Director or Employee who is invited to subscribe for Shares under the Plan may also be invited to apply for a loan
up to the amount payable in respect of the Shares accepted, on the following terms:

a) Loans must be made solely to the Participant or their nominee and in the name of either the Participant or their

nominee as the case may be.

b) The principal amount outstanding under a Loan will be interest free.

c) Any loan made available to a Participant shall be applied by the Company directly toward payment of the issue price

of the Shares to be acquired under the Plan.

d) the term of the loan shall be three (3) years from the date of issue of the Shares

e) The Company retains a lien over each share acquired pursuant to the loan until such time as the loan is repaid.

Set out below is a summary of shares issued to Directors and employees under the Empire Resources Employee Share
Plan:

Consolidated entity – 30 June 2010

Issue date

12 May 2008

Expiry date

Balance
at start
of period
Number

Issued
during year
Number

Loan repaid
during year
Number

Expired
during year
Number

Balance
at end
of year
Number

Exercisable
at end
of year
Number

12 May 2011 2,450,000

–

2,450,000

–

Weighted average exercise price

$0.188

(b)

Option plan

The Company has established an option share plan, which is also available to directors, employees and some consultants,
known as the 2010 Empire Resources Option Plan and was approved by shareholders on 25 June 2010.

Page 50

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

18.

Share Based Payments (continued)

The following table illustrates the number and weighted average exercise prices of and movements in share options
issued during the year:

Outstanding at the beginning of the year

Granted during the year

Forfeited during the year

Exercised during the year

Expired during the year

2010

Number

–

2,700,000

–

2010
Weighted
average
exercise
price

–

$0.14

–

Outstanding at the end of the year

2,700,000

$0.14

Exercisable at the end of the year

–

2009

Number

2009
Weighted
average
exercise
price

–

A corporate goal must be met before the options may be exercised: The corporate goal that has been set is the
Company’s market capitalisation reaching $10.77 million (which was the market capitalisation of the Company at 1
December 2009 plus 50%) and remaining at that level for 50 ASX Business Days.

The fair value of the equity-settled share options is estimated as at the date of grant using the Black and Scholes model
taking into account the terms and conditions upon which the options were granted.

The following table lists the inputs to the model used for the years ended 30 June 2010:

Grant
date

Expiry
date

Exercise
price

Vesting date of Expected Option Dividend
Period options Volatility

yield

life

Fair value
at grant

Risk-free
interest
rate

Grant
date
share
price

Key Management
Personnel options 25-Jun-10

25-Jun-13

$0.14

25-Jun-13 $0.02

Employee options

25-Jun-10

25-Jun-13

$0.14

25-Jun-13 $0.02

Consultant options 25-Jun-10

25-Jun-13

$0.14

25-Jun-13 $0.02

107%

3 years

4.57%

$0.04

(c)

Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were as follows:

Shares issued under employee share plan

Options issued

Consolidated Group
2009
$

2010
$

113,724

185

–

113,909

113,724

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 51

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

19.

Segment Information

The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a “management approach”
under which segment information is presented on the same basis as that used for internal reporting purposes.

Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker has been identified as the Board of Empire Resources
Ltd.

Consistent with prior year, the Group operates only in one business and geographical segment being predominantly in
the area of mining and exploration in Australia. The Group considers its business operations in mineral exploration to
be its primary reporting function.

20.

Events after the Balance Date

On 15 September 2010, Empire Resources Ltd entered into a staged sale agreement for its Penny’s Find gold project
with unlisted company Brimstone Resources Ltd. At the election of Brimstone Resources Ltd, the sale consideration
comprises either:
- Staged cash payments totalling $2 million for a 100% interest of the Penny’s Find project, or
- Stage cash payment totalling $0.5 million together with exploration and development expenditure of up to $3 million

for an 80% interest in the Penny’s Find project.

On 1 September 2010 the Company announced it had entered into an option agreement to purchase an interest
in three granted exploration licences and two granted prospecting licences held by La Mancha Resources Australia
surrounding the Company’s advanced Yuinmery copper – gold resource project in Western Australia.. The five
tenements are the subject of a joint venture between La Mancha Resources Australia and Giralia Resources Limited
in which La Mancha currently holds an interest of approximately 75.82%. Under the terms of the option agreement,
Empire must spend a minimum of A$150,000 per annum for up to three years while retaining an option to purchase
La Mancha’s interest for a cash consideration of A$750,000. A 2% net smelter royalty capped at A$5,000,000 will be
payable by Empire on any minerals produced from the La Mancha tenements.

Other than this, since 30 June 2010 there has not been any matter or circumstance not otherwise dealt with in the
financial report that has significantly affected or may significantly affect the Company.

Page 52

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

EMPIRE RESOURCES LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2010

21.

Parent Entity Financial Information

The individual financial statements for the parent entity show the following aggregate amounts:

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Trade and other receivables

Total Current Assets

NON-CURRENT ASSETS

Financial assets

Plant & equipment

Total Non-Current Assets

TOTAL ASSETS

LIABILITIES
CURRENT LIABILITIES

Trade and other payables

Total Current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Accumulated losses

TOTAL EQUITY

Loss before income tax expense

Income tax expense

Loss after tax and total comprehensive income

Parent entity

2010

2009

595,674

70,861

666,535

809,433

15,648

825,081

1,256,645

34,427

1,291,072

–

58,004

1,957,607

883,085

130,106

101,287

130,106

101,287

1,827,501

781,798

11,723,878

10,269,731

739,174

625,265

(10,635,551)

(10,113,198)

1,827,501

781,798

(522,353)

(1,168,149)

–

(522,353)

(1,168,149)

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 53

DIRECTORS’ DECLARA TION

1. In the directors’ opinion:

(a) the financial statements and notes set out on pages 26 to 53 are in accordance with the Corporations Act 2001

including:

(i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the

Corporations Regulations 2001; and

(ii) giving a true and fair view of the Company’s and Consolidated entity’s financial position as at 30 June 2010 and

of their performance for the financial year ended on that date; and

(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

by the International Accounting Standards Board.

2. The directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required

by section 295A of the Corporations Act 2001 for the financial year ended 30 June 2010.

This declaration is made in accordance with a resolution of the directors.

David Sargeant
Managing Director

Perth, Western Australia
24 September 2010

Page 54

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
To the members of
EMPIRE RESOURCES LIMITED
To the members of
EMPIRE RESOURCES LIMITED

IND EP EN DENT AUDITO R’S R EPOR T
TO THE M EMBE RS OF EMPIRE R ESO UR CES L IMI TED

26 to 54.

Report on the Financial Report
We have audited the accompanying financial report of Empire Resources Limited (“the company”),
Report on the Financial Report
which comprises the statement of financial position as at 30 June 2010, the statement of
We have audited the accompanying financial report of Empire Resources Limited (“the company”),
comprehensive income, statement of changes in equity and statement of cash flows for the year
which comprises the statement of financial position as at 30 June 2010, the statement of
ended on that date, a summary of significant accounting policies, other explanatory notes and the
comprehensive income, statement of changes in equity and statement of cash flows for the year
directors’ declaration for the consolidated entity as set out on pages 11 to 47. The consolidated entity
ended on that date, a summary of significant accounting policies, other explanatory notes and the
comprises the company and the entities it controlled at the year’s end or from time to time during the
directors’ declaration for the consolidated entity as set out on pages 11 to 47. The consolidated entity
financial year.
comprises 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 and fair presentation of the financial
Directors’ Responsibility for the Financial Report
report in accordance with Australian Accounting Standards (including the Australian Accounting
The directors of the company are responsible for the preparation and fair presentation of the financial
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
report in accordance with Australian Accounting Standards (including the Australian Accounting
maintaining internal controls relevant to the preparation and fair presentation of the financial report
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
that is free from material misstatement, whether due to fraud or error; selecting and applying
maintaining internal controls relevant to the preparation and fair presentation of the financial report
appropriate accounting policies; and making accounting estimates that are reasonable in the
that is free from material misstatement, whether due to fraud or error; selecting and applying
circumstances.
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101:
Presentation of Financial Statements, that the consolidated financial statements of the Empire
In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101:
Resources Limited group and the separate financial statements Empire Resources Limited comply
Presentation of Financial Statements, that the consolidated financial statements of the Empire
with International Financial Reporting Standards.
Resources Limited group and the separate financial statements Empire Resources Limited 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
Auditor’s Responsibility
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
we comply with relevant ethical requirements relating to audit engagements and plan and perform the
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that
audit to obtain reasonable assurance whether the financial report is free from material misstatement.
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
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
in the financial report. The procedures selected depend on the auditor’s judgement, including the
In making those risk assessments, the auditor considers internal control relevant to the company’s
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
preparation and fair presentation of the financial report in order to design audit procedures that are
In making those risk assessments, the auditor considers internal control relevant to the company’s
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
preparation and fair presentation of the financial report in order to design audit procedures that are
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
well as evaluating the overall presentation of the financial report.
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.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Liability limited by a scheme approved under Professional Standards Legislation
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

48
48

HLB Mann Judd (WA Partnership) is a member of
EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

International, a worldwide organisation of accounting firms and business advisers.

Page 55

48 HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. INDEPENDENT AUDITOR’S REPORT To the members of EMPIRE RESOURCES LIMITED Report on the Financial Report We have audited the accompanying financial report of Empire Resources Limited (“the company”), which comprises the statement of financial position as at 30 June 2010, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for the consolidated entity as set out on pages 11 to 47. The consolidated entity comprises 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 and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the consolidated financial statements of the Empire Resources Limited group and the separate financial statements Empire Resources Limited 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 company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

21 to 23

Page 56

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

49 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 Empire Resources Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of it’s performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1(a). Report on the Remuneration Report We have audited the Remuneration Report included in pages 3 to 7 of the directors’ report for the year ended 30 June 2010.The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the Remuneration Report of Empire Resources Limited for the year ended 30 June 2010 complies with section 300A of the Corporations Act 2001. HLB MANN JUDD Chartered Accountants Perth, Western Australia 24 September 2010 N G NEILL Partner
AUDITOR’S INDEPENDENCE DEC LA RA TI ON

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 57

50 HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Empire Resources Limited for the year ended 30 June 2010, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. This declaration is in respect of Empire Resources Limited Perth, Western Australia 24 September 2010 N G NEILL Partner, HLB Mann Judd 50 HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Empire Resources Limited for the year ended 30 June 2010, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. This declaration is in respect of Empire Resources Limited Perth, Western Australia 24 September 2010 N G NEILL Partner, HLB Mann Judd
CORPORATE GOV ER NANCE PR INCI PL ES

Introduction

Empire Resources Limited (“Company”) has
made it a priority to adopt systems of control and
accountability as the basis for the administration of
corporate governance. Some of these policies and
procedures are summarised in this statement. To
the extent that they are applicable, and given its
circumstances, the Company adopts the Eight Essential
Corporate Governance Principles and Best Practice
Recommendations (‘Recommendations’) published by
the Corporate Governance Council of the ASX.

Where the Company’s corporate governance practices
follow a recommendation, the Board has made
appropriate statements reporting on the adoption of
the recommendation. Where, after due consideration,
the Company’s corporate governance practices depart
from a recommendation, the Board has offered full
disclosure and reason for the adoption of its own
practice, in compliance with the “if not, why not”
regime.

As the Company’s activities develop in size,
nature and scope, the size of the Board and the
implementation of additional corporate governance
structures will be afforded further consideration.

DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES

Summary Statement

Recommendation

ASX Principles and

Recommendations

If not, why not

Recommendation

ASX Principles and

Recommendations

If not, why not

1.1

1.2

1.3

2.1

2.2

2.3

2.4

2.5

2.6

3.1

3.2

3.3

4.1

4.2

√

Refer (a) below

Refer (b) below

Refer (c) below

Refer (d) below

Refer (e) below

Refer (f) below

Refer (g) below

Refer (f) below

Refer (c) below

4.3

4.4³

5.1

5.2

6.1

6.2

7.1

7.2

7.3

7.4

8.1

8.2

8.3

n/a

√

n/a

Refer (h) below

n/a

Refer (i) below

n/a

Refer (j) below

n/a

Refer (k) below

n/a

Refer (l) below

n/a

Page 58

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

(a)

Principle 1 Recommendation 1.1, 1.2 and 1.3

(b)

Principle 2 Recommendations 2.1, 2.2, 2.3

Notification of Departure
Empire has not formally disclosed the functions
reserved to the Board and those delegated to senior
executives. The appointment of non executive
directors to the Board is not formalised in writing by
way of a letter or other agreement.

Explanation for Departure:
The Board recognises the importance of distinguishing
between the respective roles and responsibilities of the
Board and management. The Board has established
an informal framework for the management of the
Company and the roles and responsibilities of the
Board and management. Due to the small size of
the Board and of the Company, the Board do not
think that it is necessary to formally document the
roles of Board and management as it believes that
these roles are being carried out in practice and are
clearly understood by all members of the Board and
management. The Board is responsible for the strategic
direction of the Company, establishing goals for
management and monitoring the achievement of these
goals, monitoring the overall corporate governance of
the Company and ensuring that Shareholder value is
increased. The Company has two executives, being
the Managing Director and an executive Director.
The Managing Director is responsible for ensuring
that the Company achieves the goals established by the
Board.

The appointments of non executive directors
are formalised in accordance with the regulatory
requirements and the Company’s constitution.

Notification of departure
The Company does not have a majority of
independent directors, with only one of the 3 Board
members being independent.

Explanation for departure
The Board considers that the current composition of
the Board is adequate for the Company’s current size
and operations and includes an appropriate mix of
skills and expertise relevant to the Company’s business.
The current Board structure presently consists of the
independent non executive chairman, Mr Thomas
Revy, the managing director (Mr David Sargeant) and
one executive director (Mr Adrian Jessup), both of
whom are not independent. The Company considers
that each of the directors possess skills and experience
suitable for building the Company. It is the Board’s
intention to appoint another independent director as
and when the size and complexity of its operations
changes and a suitable candidate is identified.

(c)

Principle 2 Recommendation 2.4 and Principle 4
Recommendations 4.1, 4.2, 4.3, 4.4

Notification of Departure
Separate nomination and audit committees have not
been formed.

Explanation for Departure
The Board considers that the Company is not
currently of a size, or its affairs of such complexity,
that the formation of separate or special committees
is justified at this time. The Board as a whole is able
to address the governance aspects of the full scope of
the Company’s activities and ensure that it adheres to
appropriate ethical standards.

In particular, the Board as a whole considers those
matters that would usually be the responsibility of an
audit committee and a nomination committee. The
Board considers that, at this stage, no efficiencies
or other benefits would be gained by establishing a
separate audit committee or a separate nomination
committee.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 59

(d)

Principle 2 Recommendation 2.5

Notification of Departure
Empire does not have in place a formal process for
evaluation of the Board, its committees, individual
directors and key executives.

Explanation for Departure
Evaluation of the Board is carried out on a continuing
and informal basis. The Company will put a formal
process in place as and when the level of operations of
the Company justifies this.

(e)

Principle 2 Recommendation 2.6

Companies should provide the information indicated
in the Guide to Reporting on Principle 2.

Disclosure:

Skills, Experience, Expertise and term of office of each
Director
A profile of each director containing their skills,
experience, expertise and term of office is set out in
the Directors’ Report.

Identification of Independent Directors
The independent director of the Company during the
Reporting Period is disclosed in (b) above.

Independence is measured having regard to the
relationships listed in Box 2.1 of the Principles &
Recommendations.

Statement concerning availability of Independent
Professional Advice
To assist directors with independent judgement, it
is the Board’s policy that if a director considers it
necessary to obtain independent professional advice
to properly discharge the responsibility of their office
as a director then, provided the director first obtains
approval for incurring such expense from the Chair,
the Company will pay the reasonable expenses
associated with obtaining such advice.

Nomination Matters
The full Board sits in its capacity as a Nomination
Committee.

Performance Evaluation
During the Reporting Period the performance
evaluations for the Board and individual directors
did occur in accordance with the disclosed process in
Recommendation 2.5.

Selection and Reappointment of Directors
The Board considers the balance of independent
directors on the Board as well as the skills and
qualifications of potential candidates that will best
enhance the Board’s effectiveness.

Each director other than the managing director must
retire from office no later than the longer of the third
annual general meeting of the company or 3 years
following that director’s last election or appointment.
At each annual general meeting a minimum of one
director or a third of the total number of directors
must resign. A director who retires at an annual
general meeting is eligible for re-election at that
meeting. Reappointment of directors is not automatic.

(f)

Principle 3 Recommendation 3.1, 3.3

Notification of Departure
Empire has not established a formal code of conduct.
Explanation for Departure:
The Board considers that its business practices, as
determined by the Board and key executives, are the
equivalent of a code of conduct.

(g)

Principle 3 Recommendation 3.2

Companies should establish a policy concerning
trading in company securities by directors, senior
executives and employees, and disclose the policy or a
summary of that policy.

Disclosure:
The board has adopted a policy which prohibits
dealing the Company’s securities by directors, officers
and employees when those persons possess inside
information. The policy prohibits short term or
speculative trading of the Company’s securities. The
policy provides that permission be obtained from the
Chairman prior to trading.

(h)

Principle 5 Recommendation 5.1, 5.2

Notification of Departure
Empire has not established written policies and
procedures designed to ensure compliance with
ASX Listing Rule disclosure requirements and
accountability for compliance.

Explanation for Departure
The Directors have a long history of involvement
with public listed companies and are familiar with the
disclosure requirements of the ASX listing rules.

The Company has in place informal procedures that
it believes are sufficient for ensuring compliance
with ASX Listing Rule disclosure requirements
and accountability for compliance. The Board has
nominated the Managing Director and the Company
Secretary as being responsible for all matters relating to
disclosure.

Page 60

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Principle 6 Recommendation 6.1, 6.2

Notification of Departure
Empire has not established a formal Shareholder
communication strategy.

Explanation for Departure
While the Company has not established a formal
Shareholder communication strategy, it actively
communicates with its Shareholders in order to
identify their expectations and actively promotes
Shareholder involvement in the Company. It achieves
this by posting on its website copies of all information
lodged with the ASX. Shareholders with internet
access are encouraged to provide their email addresses
in order to receive electronic copies of information
distributed by the Company. Alternatively, hard
copies of information distributed by the Company are
available on request.

(i)

Principle 7 Recommendation 7.1, 7.2

Notification of Departure
Empire has an informal risk oversight and management
policy and internal compliance and control system.

Explanation for Departure
The Board does not currently have formal procedures
in place but is aware of the various risks that affect
the Company and its particular business. Section 8
of the prospectus dated 7 November 2006 provides
a summary of the relevant risk factors that may affect
the Company. As the Company develops, the Board
will develop appropriate procedures to deal with risk
oversight and management and internal compliance,
taking into account the size of the Company and the
stage of development of its projects.

(j)

Principle 7 Recommendation 7.3

The Board should disclose whether it has received
assurance from the Chief Executive Officer (or
equivalent) and the Chief Financial Officer (or
equivalent) that the declaration provided in accordance
with section 295A of the Corporations Act is founded
on a 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.

Disclosure:
The Chief Executive Officer (or equivalent) and the
Chief Financial Officer (or equivalent) have provided
a declaration to the Board in accordance with section
295A of the Corporations Act and have assured the
Board that such declaration 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 risk.

(k)

Principle 8 Recommendations 8.1

Notification of departure
Empire does not have a formal remuneration policy
and has not established a separate remuneration
committee. Directors and management may receive
options or shares.

Explanation for Departure
The current remuneration of the Directors is disclosed
in the Directors’ Report. Non executive Directors
receive a fixed fee for their services and may also
receive options or shares. The issue of options
or shares to non executive Directors may be an
appropriate method of providing sufficient incentive
and reward while maintaining cash reserves.

Due to the Company’s early stage of development
and small size, it does not consider that a separate
remuneration committee would add any efficiency to
the process of determining the levels of remuneration
for the Directors and key executives. The Board
believes it is more appropriate to set aside time at
specified Board meetings each year to specifically
address matters that would ordinarily fall to a
remuneration committee. In addition, all matters of
remuneration will continue to be in accordance with
regulatory requirements, especially in respect of related
party transactions; that is, none of the Directors will
participate in any deliberations regarding their own
remuneration or related issues.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 61

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 24 September 2010.

ADDIT IONAL INFOR MATIO N

(a) Distribution of shares

The numbers of shareholders, by size of holding are:

Category (size of holding)

Number of holders

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

145

391

169

789

The number of shareholdings held in less than marketable parcels is 126.

(b)

Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:

SHAREHOLDERS

APEX MINERALS NL

KIRKDALE HOLDINGS PTY LTD

TRISTESSE PTY LTD

MEEKAL PTY LTD

SUHARITDUMRONG SUKHON

HAZARDOUS INV PTY LTD

RUBYSTAR NOM PTY LTD

D W SARGEANT PTY LTD

RBJ NOM PTY LTD

ARMCO BARRIERS PTY LTD

AGENS PTY LTD

BLAMNCO TRADING PTY LTD

COLTRANGE PTY LTD

LACHLAN RESOURCE INV LTD

HSBC CUSTODY NOM AUST LTD

BIRKNER ARTUR

KSLCORP PTY LTD

GIFFARD SVCS PTY LTD

JORDAN GRAHAM FRANCIS

RICHMOND RES PTY LTD

Number of shares held

Holding (%)

5,000,000

3,300,000

3,195,899

3,098,333

2,268,500

2,172,437

2,133,333

2,000,000

1,860,000

1,600,000

1,500,000

1,497,677

1,428,571

1,323,791

1,188,500

1,184,000

1,000,000

958,333

5.14%

3.40%

3.29%

3.19%

2.33%

2.24%

2.19%

2.06%

1.91%

1.65%

1.54%

1.47%

1.36%

1.22%

1.03%

0.99%

Stock Exchange Listing – Listing has been granted for all the ordinary shares of the company on all Member Exchanges
of the Australian Stock Exchange Limited except for the following which are not quoted by virtue of restriction
agreements.

39,709,374

40.86%

Page 62

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Quoted shares on ASX

Unquoted

Shares issued under ERL Share Plan

Total issued share capital

97,745,921

2,450,000

97,195,921

(c)

Substantial shareholders

The names of substantial shareholders are:

Shareholder

Apex Minerals NL

David Sargeant

(d)

Voting rights

Number of shares

5,000,000

6,100,000

All shares carry one vote per unit without restriction.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 63

INTERESTS IN MINING AND EXPLORATION TENEMENTS as 24 September 2010

PROJECT

TROY CREEK

PENNY’S FIND

MT MCLEAY

YUINMERY

YUINMERY OPTION

WYNNE

Page 64

TENEMENT

E69/1486
E69/1728
E69/1729
E69/2357
E69/2358
E69/2485
P69/40
P69/41
P69/42
P69/43
P69/44
P69/45
E27/410
E27/420
M27/156
P27/1713
P27/1714
P27/1715
P27/1716
P27/1717
P27/1718
P27/1719
P27/1720
P27/1721
P27/1722
P27/1723
P27/1724
P27/1725
P27/1726
P27/1727
P27/1728
P27/1729
P27/1730
P27/1731
P27/1814
P27/1922
P27/1993
P27/1962
P27/2007
P27/2008
P27/1711
P27/1748
P27/1749
P27/1954
P27/1979
P27/1990
P27/2006
M57/265
P57/1214
P57/1215
P57/1216
P57/1217
E57/735
E57/766
E57/783
E57/840
E57/514
E57/524
E57/681
P57/1130
P57/1131
E08/1979

INTEREST

REMARKS

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%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%

100%
100%
100%
100%
100%
100%
100%

100%

Application not yet granted

Earning up to 51%
Ditto
Ditto
Ditto
Ditto
Ditto
Ditto

Application no yet granted
Application not yet granted
Option for 75.9% interest
Ditto
Ditto
Ditto
Ditto

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

R
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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

Page 65

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2010

E
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