Empire Resources Limited
Annual Report 2013

Plain-text annual report

EMPIRE RESOURCES LIMITED OPERATIONS REVIEW EMPIRE RESOURCES LIMITED ABN 32 092 471 513 Annual Report 30 June 2013 EMPIRE RESOURCES LIMITED Corporate Directory Directors Company Secretary Registered Office Auditor Share Registry : : : : : Thomas Revy David Sargeant Adrian Jessup Simon Storm Registered Office and Principal Place of Business 53 Canning Highway Victoria Park WA 6100 Telephone: (08) 9361 3100 Facsimile: (08) 9361 3184 Email info@resourcesempire.com.au Website www.resourcesempire.com.au HLB Mann Judd Level 4 130 Stirling Street Perth WA 6000 Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Telephone: (08) 9315 2333 Facsimile: (08) 9315 2233 Australian Securities Exchange Home Branch: Perth Code: ERL ABN : 32 092 471 513 EMPIRE RESOURCES LIMITED HIGHLIGHTS 2012 - 2013 YUINMERY Diamond drilling extends A Zone – this high grade copper-gold deposit remains open at depth. Re-interpretation of geophysical data indicates the Just Desserts and A Zone deposits, which lie just 1.3 km apart, lie on the same mineralised horizon which has been disrupted by faulting. New geophysical targets have been discovered on this horizon located between Just Desserts and A Zone. The discovery of mineralisation that may link the two deposits has potentially significant planning and feasibility consequences. Further high grade gold intersections confirm the underground potential of the project : PENNY’S FIND    8m @ 5.16g/t Au from 155m, including 4m @ 8.03g/t Au 3m @ 17.41g/t Au from 66m, including 2m @ 24.33g/t Au 3m @ 8.89g/t Au from 173m Current resource of 314,000 tonnes @ 5.18g/t Au defined to a vertical depth of 150m. POINT KIDMAN New 800 km discovered along a 2.5 km long zone where there has been no previous exploration. 2 gold project acquired in prolific Laverton gold belt with gold nuggets Comparable geology to the world class Granny Smith mine (4.3 M oz). Widespread, highly anomalous Rare Earth elements discovered in initial reconnaissance drilling. JOANNA A new project has been acquired in the Great Sandy Desert which is considered prospective for gold and base metals. SUBSEQUENT TO 30 JUNE 2013 A twelve month extension has been negotiated on the option of the La Mancha tenements at Yuinmery. After a review of exploration results from the Wynne base metal project in the Gascoyne region of Western Australia, the tenements were surrendered. 1 EMPIRE RESOURCES LIMITED CHAIRMAN’S REPORT Dear Shareholders Empire Resources, like many junior explorers in the market, has had a testing 12 months in the market, which at this stage looks like it may continue for the short term at least. Despite our flagship Yuinmery Project having enormous potential, the market has proved difficult in terms of raising additional equity. Your Board is forever cognisant of the need to balance the raising of funds to further develop the company’s projects with the enormous dilutionary impacts that shareholders would incur, bringing in new investors into the Company. Our strategic review of each of the Company’s projects has included the options of partial or full divestment, joint venturing on a suitable farm-in arrangement or sitting tight and waiting for market conditions to improve. This is an ongoing process that currently forms an integral part of each Board and senior management meeting. Our recent decision to commence working with an experienced corporate advisor is testament to the Company’s commitment to ensure that Empire is continuing to identify new opportunities as well as maximising its value on current projects. The Company has heavily incentivised the advisors to ensure that all parties remain focused on increasing shareholder value. Empire will continue to preferentially drive organic growth where possible by increasing the value of its current assets whilst looking for new opportunities both here in Australia and abroad, that will complement the Company’s current skill and experience base. While 2013 has proven to be a testing year, I would like to take the time to thank the Empire team for their efforts and on behalf of the Board, would like to take the opportunity to thank all our shareholders for their continued patience and support in the Company. ______________ Thomas Revy Chairman 2 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS CORPORATE OBJECTIVES Empire Resources Ltd has a long term objective to become a successful mining house built on the discovery and development of world class mineral deposits. In the short term, Empire Resources is committed to enhancing value for shareholders by obtaining cash flow from the Company’s existing copper and gold deposits. Empire’s options for realising value include delineating reserves and commencing mining operations; entering into significant farm-out or royalty arrangements or by acquiring new opportunities to provide an early cash flow. 3 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS REVIEW OF OPERATIONS Empire Resources Ltd listed on the Australian Stock Exchange in February 2007 with a focus on copper and gold exploration. The Company is managed by a team with extensive exploration and resource development experience. In its short six year history, Empire Resources has continuously shown an ability to locate new projects by reinterpreting existing data and securing tenements with unrealised potential. This ability of sourcing projects and then following through with solid drilling programs has seen the company rack up six mineral discoveries in the resource-rich state of Western Australia, with JORC compliant resources at two of these. Lateral thinking in a competitive market has resulted in Empire Resources securing a portfolio of projects with copper, gold, platinum and rare earth potential which will add real value to shareholders as the opportunities are developed. Yuinmery : Copper - Gold Project (100% interest and option to earn over 91.44% interest on adjoining tenements) The flagship project for Empire Resources is the 100 per cent owned Yuinmery project located 475 km northeast of Perth in Western Australia. The Yuinmery project sits in the base metal rich Youanmi greenstone belt with the principal target being volcanogenic massive sulphide (VMS) deposits. Elsewhere in the world, VMS deposits typically occur in clusters with individual prospects often mined to great depths. Similar VMS deposits are found at the Golden Grove mine to the west and Jaguar mine to the east underlining the potential of Yuinmery. The potential of Yuinmery arises from the calibre of drill intersections, with a string of high grade copper-gold results at two of the projects most advanced prospects – Just Desserts and A Zone. Interest in Yuinmery increased after excellent drilling results in 2007-2008 discovered high grade copper-gold zones at the Just Desserts prospect. Assay results included 23m @ 2.7% Cu, 1.3g/t Au; 14m @ 2.6% Cu, 1.9g/t Au; 13m @ 2.6% Cu, 1.7g/t Au; 6m @ 3.8% Cu, 12.9g/t Au and 10m @ 4.2% Cu, and 6.0g/t Au. Based on the above drilling an indicated and inferred JORC resource of 1.07 million tonnes @ 1.8% Cu, 0.8g/t Au was estimated for Just Desserts. This resource lies between 50 and 250 metres below surface. Further drilling is planned around and also within the currently defined resource itself to upgrade inferred resources to indicated. In September 2010 Empire Resources entered into an option agreement to purchase an interest in adjoining tenements managed by La Mancha Resources Ltd. This deal meant Empire’s tenement in this base metal rich province, giving the project significant scope as holding increased to 250 km it develops. 2 Of major interest to Empire Resources was an airborne electromagnetic (EM) survey completed by La Mancha over their tenements which revealed numerous untested conductive zones for base metal sulphides. This deal has paid dividends, with subsequent exploration on the La Mancha tenements leading to the discovery of significant copper-gold mineralisation at the A Zone prospect and large widths of low grade platinum – palladium mineralisation (PGM) at the Constantine prospect which included intersections of up to 80m @ 0.49 g/t Pt+Pd. 4 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS 5 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS During the past year Empire Resources completed five Induced Polarisation (IP) geophysical surveys, 6 holes totalling 1,200m of reverse circulation drilling and one diamond core hole at five different prospects on both Empire’s and La Mancha’s tenements. Yuinmery - A Zone Prospect The A Zone prospect is located 1.3 km north of Just Desserts, where drilling in 2012 confirmed the view that A Zone hosts a major copper-gold deposit. Previous intersections at A Zone include - 5m @ 4.4% Cu, 0.4g/t Au within 19m @ 1.8% Cu, 0.3g/t Au 4m @ 4.7% Cu, 0.5g/t Au within 7m @ 3.2% Cu, 0.3g/t Au 3m @ 8.2% Zn within 8m @ 4.0% Zn 7m @ 2.2% Cu, 0.6g/t Au within 12m @ 1.8% Cu, 0.5g/t Au 3m @ 4.0% Cu, 3.3g/t Au within 6m @ 3.0% Cu, 1.7g/t Au 5m @ 2.8% Cu, 1.2g/t Au within 10m @ 1.8% Cu, 0.9g/t Au The copper–gold and zinc mineralisation at A Zone occurs in two horizons which dip eastwards and plunge to the north. The Upper Horizon hosts the major mineralisation and remains open at depth. 6 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS During 2013 one diamond core hole (YRC12-02D) was completed to a depth of 379m testing the northwestern edge of the deposit. This intersected 3m @ 1.8% Cu, 1.1g/t Au from 303m downhole. One 270m deep RC pre-collar was also completed in preparation for diamond drilling beneath hole YRC11-42D. Ongoing drilling will allow Empire Resources to calculate a maiden resource at A Zone which will expand the total resource base of Yuinmery, lifting the economics of the total project. 7 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS During the past year a re-interpretation of the geology and magnetics at Yuinmery has led to the conclusion the Just Desserts and A Zone deposits occur in the same mineralised horizon which has been disrupted and offset by faulting. Reprocessing of ground EM surveys has identified two new targets at the YC23 prospect located between the existing Just Desserts and A Zone deposits. These new targets, which represent an extension to the Just Desserts mineralization, lie in this same horizon but have been moved by faulting 350m to the east of Just Desserts. The anomaly closest to Just Desserts is the stronger and larger of the two and will be the priority drill target for the next round of RC drilling YC23 Prospect Drill Targets on Magnetics YC23 Prospect Drill Targets on Electromagnetics Empire holds the expansion of the Yuinmery resource as its central focus and is excited to be generating additional targets in between known mineral deposits. The area to be targeted has had no drilling or sampling carried out previously, so the discovery of further mineralisation in this area would have a significant impact on the size and economics of the Yuinmery project. Yuinmery – Other Prospects Reverse circulation drilling was also undertaken at the YC3A, YC10, YC16 and Constantine prospects testing IP or EM anomalies. At YC16, 3m @ 0.34% Cu, 3ppm Ag was intersected from 147m downhole associated with disseminated pyrite and chalcopyrite at the top of a coincident IP and EM anomaly. Downhole EM will be used to determine if any massive sulphide bodies are located beneath this hole. One RC hole was also completed 300 metres north of the Constantine prospect testing the same platinum group metals (PGM) bearing horizon. This hole intersected 4m @ 0.16% Ni and 0.51g/t Pt+Pd from 66 metres downhole. . 8 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Strong IP and EM anomalies were drill tested at the YC3A and YC10 prospects respectively. Although no significant sulphides were intersected in either hole, downhole EM is planned to determine if any massive sulphide bodies are located close by. In the coming year besides concentrating work on the A Zone deposit, exploration drilling will target a number of other geophysical and/or geochemical anomalies which show good potential for hosting base metal sulphide mineralisation. These include the YC23, YC24 and Maximus prospects. Penny’s Find : Gold Project - 60% interest The first discovery for the Company in 2007 was Penny’s Find, a near surface, high grade gold deposit situated in the Eastern Goldfields of Western Australia, within close proximity to the gold mining centres of Kalgoorlie and Kanowna Belle. Initial drilling at Penny’s Find outlined a JORC compliant resource of 314,000 tonnes at 5.2 g/t gold to 150 metres depth. 9 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS PENNY’S FIND MINERAL RESOURCE Category Tonnes Measured 79,000 Indicated Inferred TOTAL 132,000 103,000 314,000 Grade g/tAu 4.40 3.98 7.33 5.18 Ounces 11,120 16,880 24,313 52,313 Brimstone Resources Ltd, who currently hold a 40% interest in the project, completed further RC and diamond drilling of the deposit in August/September 2012. Although 22 holes, 2,464 metres of RC and 198 metres of diamond coring were completed, drilling problems resulted in many failed holes. Only six RC holes and two diamond holes successfully intersected the main lode but all eight holes returning significant gold mineralisation. This included: Hole ID PFRC12-14 PFRC12-15 PFRC12-18 PFRC12-27 From (m) 135 152 222 173 To (m) 137 154 224 176 Int (m) 2 2 2 3 Au g/t 3.07 4.41 8.75 8.89 PFRC12-28D 187.10 188.30 1.20 17.19 PFRC12-32 incls PFRC12-33 incls 66 66 155 158 69 68 163 162 3 2 8 4 17.41 24.33 5.16 8.03 PFRC12-36D 200.05 206.10 6.05 2.83 In the main lode, high grade, coarse gold mineralisation is hosted by quartz veins at the contact between shale and basalt. Metallurgical test work has shown both oxide and fresh mineralisation to be free milling with a high gravity recoverable gold component of >60% and a total gold recovery of >96%. The Penny’s Find resource is located on granted mining lease M27/156. Discussions are currently underway with Brimstone Resources to decide the optimum route forward for this rich gold deposit. 10 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS 11 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Point Kidman : Gold + REE Project – 80% interest In mid 2012 Empire Resources acquired an 80% interest in a new gold project at Point Kidman, 40 km to the east of Laverton in the Eastern Goldfields of WA. The Point Kidman project, located in the prolific Laverton gold region, comprises twelve exploration licences covering a total area of 800 km2. Recent metal detecting by prospectors discovered numerous gold nuggets spread along a 2.5 km long zone. The area of nuggets overlies extensive quartz vein swarms and stockworks hosted by leached and weathered granite with some veins showing limonite-goethite staining after sulphides. This new gold discovery is in an area where there are no historical gold workings or previous exploration drilling. In addition, extensive soil-auger sampling undertaken by the tenement holders around the area of the nugget discovery has outlined a number of other gold anomalies in the immediate vicinity. The association of gold mineralization with granite at Point Kidman shows strong similarities to the Granny Smith gold mine 50 km to the southwest and the Golden Cities mine located north of Kalgoorlie. Both these large gold deposits are either partially or wholly located within granite. The Laverton region is one of the best gold endowed areas within the Yilgarn Craton and is host to a number of world class gold deposits such as the Sunrise Dam, Granny Smith and Wallaby mines, all discovered and developed within the past 30 years. The total gold produced to date from the region is in excess of 28 million ounces. 12 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Point Kidman - Quartz vein stockwork in weathered granite 13 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS During the past year the Company purchased detailed aeromagnetics over the entire tenement holding to carry out a detailed structural analysis. On tenements requiring immediate expenditure, it also completed 52 holes, 1,126 metres of aircore drilling and 599 soil-auger holes. The aircore drilling targeted four discrete bullseye magnetic anomalies close to the margin of a large granite intrusion. Although no significant gold values were found, highly anomalous rare earth elements (REE) were intersected in a number of holes at each site. Better intersections included:  PKAC001 : 4m @ 0.21% REE from 36m to 40m, Prospect M1  PKAC027 : 3m @ 0.18% REE from 48m to EOH, Prospect M2  PKAC033 : 1m @ 0.30% REE from 8m to EOH, Prospect M3  PKAC051 : 4m @ 0.27% REE from 24m to 28m, Prospect M4 The REE are dominated by the light rare earths (LREE) Cerium, Lanthanum, Neodymium and Praseodymium which together comprise on average 94% of the total REE. Uranium, thorium and phosphorus values are low. The magnetic targets tested by aircore drilling lie on prominent linear structures which can be traced on regional magnetics extending for at least 20 km within the Company’s tenements. Along these structures far more prominent magnetic anomalies exist than those drilled to date. The significance of the anomalous REE discovered at four different prospects is at this stage unknown, but they are initially thought to be related to possible hydrothermal activity associated with regional shear zones. The world class Mt Weld carbonatite hosted REE deposit lies 50 km to the southwest of Point Kidman. Point Kidman Prospect Locations on Magnetics(RTP1VD) During the coming year the Company plans to fully drill test the area of the gold nugget discovery and to further investigate the significance of the rare earth occurrences. 14 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Damperwah : Copper Project – earning 70% interest Empire Resources added to its discovery portfolio in 2012 by identifying the Damperwah project which sits in an area of volcanogenic massive sulphide copper mineralisation in the Warriedar Fold Belt in Western Australia, 320 kilometres northeast of Perth and 60 kilometres southwest of the Golden Grove copper-zinc mine. Sampling by Empire uncovered three gossanous ironstone lenses in areas where only minimal previous exploration had been undertaken. The gossanous ironstones are geochemically anomalous in copper with rock chip values up to a maximum of 2,880 ppm Cu. The largest gossanous zone, the Sears prospect, has a strike length in excess of 250 metres and a width up to 15 metres. Gossan at Sears Prospect Initial drilling beneath the Sears gossan zone during 2012 intersected a 15 metre thick garnet bearing meta-sedimentary horizon carrying minor amounts of finely disseminated pyrite throughout. At the base of this horizon a three metre interval contained minor disseminated chalcopyrite (CuFeS2) mineralisation which assayed 2m @ 0.16% Cu. It is Empire’s intention to conduct both downhole and surface electromagnetic geophysical surveys to locate any accumulations of massive copper sulphide mineralisation in the vicinity of these encouraging initial intersections. Any significant anomalies detected will then be drill tested. 15 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS 16 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Troy Creek – Copper, Gold, Platinum Group Metals Project – 45% interest The Troy Creek project is made up of tenements covering 260 km2 located 180 kilometres northeast of Wiluna in Western Australia. In 2008 the Company made a discovery of high grade copper sulphide mineralisation in black shales. Several prominent geochemical and magnetic targets have been identified in sedimentary rocks within the Troy Creek tenements. These include a large zone of multi-element anomalous geochemistry in sedimentary rocks which extend along strike for a distance of more than 20 kilometres. This zone, defined by rock chip sampling, soil geochemistry and limited drilling, is anomalous in copper, gold, platinum group metals, arsenic, silver and antimony. Reverse circulation drilling during 2008 and 2009 at the Main Gossan prospect, which lies within this zone, intersected high grade copper sulphide mineralisation. Drill intersections have included 36m @ 0.76% Cu including 2m @ 4.65% Cu and 3m @ 1.97% Cu; 8m @ 1.47% Cu and 4m @ 3.04% Cu. The copper mineralisation consists of fine grained stratiform copper and iron sulphides in graphitic and calcareous shale and shows some similarities to “Kupferscheifer Style” mineralisation which forms world class copper deposits in Germany and southwest Poland. The similarities include stratiform mineralisation over large areas, the presence of adjacent haematitic oxidized rocks and comparable geochemistry - anomalous copper, silver, arsenic, and zinc, with adjacent but discrete platinum group metals mineralisation, for example 7m @ 0.59g/t Pt + Pd. 17 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Zodiac Resources Pty Ltd, who are currently earning an interest in the project, commenced exploration activity in 2012 on the Troy Creek tenements with a 17 hole reverse circulation drill program at the Main Gossan prospect. The program was designed to extend the zone of copper sulphide mineralisation intersected previously by Empire near the northwest end of a 1 kilometre long gossan-chert unit hosted by pyritic black shale. The drill intercepts, up to 6m @ 1.8% Cu within 21m @ 0.6% Cu, basically replicated those obtained previously by Empire Resources but did not significantly extend the mineralisation along strike. A review of previous exploration data by Zodiac Resources has revealed the Main Gossan prospect area is part of a regionally extensive zone of pyritic black shale and gossan-chert outcrops containing anomalous copper and gold in surface rock chip samples and shallow drill holes. Several zones more highly anomalous than the Main Gossan outcrop are evident and require further definition followed by drill testing. Yarlarweelor : Uranium Project – 24.2% indirect interest The Yarlarweelor uranium project is located 125 km north of Meekatharra in Western Australia. Empire Resources Ltd holds an indirect 24.2% interest in the project through its shareholding in ASX listed FYI Resources Ltd. FYI Resources is targeting significant uranium mineralization (in the form of uraninite) present within the Archaean Despair Granite where it is associated with foliated granitic rocks and biotite schists in shear zones. Previous mineralized drill intersections include the following at the Kangaroo Ridge prospect: 18 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS   35m @ 503ppm U3O8 from 125.1m, including 5m @ 1,069ppm U3O8; and 7.8m @ 588ppm U3O8 from 47.8m, including 1m @ 1,873ppm U3O8 Results from detailed airborne radiometrics and geological mapping indicate shear zones prospective for uranium mineralization have a combined strike length in excess of 25 kilometres within the Company’s tenements. This project shows potential to host large tonnages of primary uranium mineralisation. FYI Resources was granted two new exploration licences during the past year covering extensions to uranium radiometric anomalies previously outlined within its existing exploration licence, E52/2095. One diamond drill hole (199m) was also completed during the year testing prominent zones of biotite schist in ‘hot’ granite located 2 km northwest of Kangaroo Ridge. Although biotite schist zones were intersected in the drilling, uranium grades were of low tenor. The coming year will see exploration efforts concentrate on drill testing three strong surface uranium anomalies (1, 13 and 22) located to the north of Kangaroo Ridge. 19 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Joanna : Gold Project – 80% interest The Company has an 80% interest in a 277 km2 exploration licence application located in the Great Sandy Desert, 270 km southeast of Broome, WA. The tenement lies adjacent to the Admiral Bay Fault and is considered prospective for gold and base metal mineralization. Along strike to the northwest, the Admiral Bay Fault is associated with substantial lead – zinc mineralization. Initial prospecting activities are planned to commence on the property during the winter of 2014. ____________________ David Sargeant Managing Director COMPETENT PERSONS STATEMENT The information in this report that relates to Exploration Results has been compiled by Mr David Ross B.Sc(Hons), M.Sc, who is an employee of the Company. He is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. He has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity to which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. David Ross consents to the inclusion in the public release of the matters based on his information in the form and context in which it appears. MINERAL RESOURCE ESTIMATES 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 mineralization 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. Notes on the Penny’s Find Resource An updated resource estimate for the Penny’s Find gold mineralization was completed and announced to the market on 8 August 2007 and 12 October 2007. There has been no change to the resource since that time. The mineral resource by category is 314,000 tonnes averaging 5.2 g/t gold down to a vertical depth of 150m below surface. The mineral resource above 0.5 g/t gold is summarised in the following table. Penny’s Find - Classified mineral resources – August 2007 Category Tonnes Grade* Ounces Measured 79,000 Indicated Inferred 132,000 103,000 TOTAL 314,000 4.40 3.98 7.33 5.18 11,177 16,893 24,276 52,316 *grades are based on a minimum cut-off of 0.5g/tAu and high assays cut to 25g/tAu 20 EMPIRE RESOURCES LIMITED REVIEW OF OPERATIONS Resource modelling consultants Datageo calculated a JORC compliant in situ resource estimate, utilising all drill hole information available on mining lease M27/156 up to the end of June 2007. The resource grade was estimated using ordinary kriging based on the drill hole data composited downhole to 1m intervals within constraining shapes representing the mineralization. Assumed specific gravity values used were:- oxide 2.0t/m3; transitional 2.2t/m3; fresh 2.5t/ m3. Notes on the Yuinmery Resource A resource estimate for the Just Desserts prospect at Yuinmery was completed and announced to the market on 9 April 2009. There has been no change in the resource since that time. The mineral resource by category to a depth of 250m below surface is reported below. The resource comprises no oxide mineralization, only transitional and fresh. Just Desserts Classified Mineral Resources – March 2009 Category Grade* g/t 0.5%Cu cutoff 0.8 1.7 1.6 1%Cu cutoff 1.3 Tonnes Grade* Grade* Cu% Au g/t Ag Indicated 184,000 1.11 0.54 Inferred 2,159,000 1.24 0.54 TOTAL 2,343,000 1.23 0.54 Indicated 104,000 1.65 0.86 Inferred 966,000 1.84 0.77 2.1 TOTAL 1,070,000 2.1 1.82 0.78 46,000 Indicated 1.5%Cu cutoff 1.6 Inferred 2.7 TOTAL 2.6 *High assays have been cut to 9%Cu, 20g/tAu and 10g/tAg. 536,000 582,000 2.11 2.34 2.33 1.14 0.92 0.93 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 mineralization. Assumed specific gravity values used were:- transitional 2.7t/m3; fresh 3.2t/m3. 21 Empire Resources Limited Directors' Report Directors’ Report Your directors submit their report on Empire Resources Limited (the “Company”) and its controlled entity (the “Group”) for the financial year ended 30 June 2013. Directors The company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Thomas Revy - Chairman (Non-Executive) – BAppSc. Grad Dip Bus. Mr Revy is a mining professional with in excess of 29 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. Mr Revy has been a director of the following listed companies during the past three years. Company Position Appointed Coppermoly Ltd Non-executive Chairman 20/05/2013 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 40 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 Position Appointed FYI Resources Ltd Non-executive Director 30/11/2009 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 40 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 16 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 Position Appointed FYI Resources Ltd Non-executive Director 30/11/2009 22 Empire Resources Limited Directors' Report Management Simon Storm - Company Secretary – BCom. BCompt(Hons). CA, FCIS Mr Storm is a Chartered Accountant with over 29 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 10 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 26 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 provision for income tax was $1,582,177 (2012: $3,027,693). Review of results and operations The operations and results of the Company for the financial year are reviewed below. This review includes information on the financial position of the Company, and its business strategies and prospects for future financial years. Revenue Revenue comprised interest received, down 86% on prior year as a consequence of lower cash balances. Expenses During the year, the Company continued exploration activities at its various exploration projects with expenditure on exploration decreasing 56% to $925,988 (2012: $2,089,807). The reduced expenditure has occurred as a consequence of availability of cash, with total expenditure reducing from $3,231,836 to $2,090,931. Tax benefit A tax benefit of $498,632 (2012: $131,344) was received as an R&D tax offset payment Cash and cash equivalents at 30 June 2013 decreased by 66% to $217,857 (2012: $640,807). Operating cash flows Cash flow from operating activities decreased by 47% to $282,203 (2012: $536,774). This amount decreased mainly because of the receipt of a R&D tax offset in 2013 for the 2013 and 2012 financial years of $498,632 and $131,344 respectively. Investing cash flows Cash outflow for investing activities decreased by $1,169,430 due to decrease in exploration related expenditure. Financing cash flows Cash flow from financing activities decreased by $706,611 mainly due to a reduction in the proceeds from the issue of shares. 23 Empire Resources Limited Directors' Report Statement of financial position Current assets Current assets decreased by 64% to $296,949 (2012: $834,609) mainly due to cash and cash equivalents decreasing 66% to $217,857 (2012: $640,807). Trade and other receivables decreased by 59% to $79,092 (2012: $193,802). . Non-current assets Non-current assets decreased by 34% to $465,799 (2012: $710,288) due to the increased share of the loss of the equity accounted investment in FYI Resources Ltd. Current liabilities Current liabilities decreased by 35% to $154,109 (2012: $237,477), being a reduction in trade and other payables due to the decrease in operational activities. Debt position The Company has no debt. Review of Operations YUINMERY - the Just Desserts JORC Resource and A Zone deposits are now understood to be part of the same mineralised horizon, with new targets discovered on this horizon, located between the existing Just Desserts JORC Resource and the A Zone deposits. The Company has targeted mineralisation that may link the two deposits, with potentially significant feasibility and planning consequences. The Company has moved towards a maiden JORC Resource at A Zone, with diamond drilling extending the A Zone during the year. The Company obtained a 12 month extension to 7 August 2014 for an option on surrounding tenements from of La Mancha, with the settlement cost for the acquisition interest increasing from $750,000 to $1 million. POINT KIDMAN - new gold project acquired in Laverton gold belt, where Gold nuggets were discovered along a 2.5km long zone, which had not been previously explored. The tenement holding doubled to 800 km2 around this nugget zone, with magnetics acquired for a detailed structural study. Drilling commenced in the March 2013 quarter with anomalous Rare Earths discovered in reconnaissance drilling, and magnetics indicating larger targets for Rare Earth mineralization. PENNY’S FIND - the Company entered into a staged sale agreement in 2012 with Brimstone Resources Ltd for the latter to bring Penny’s Find into production. To date Brimstone has undertaken limited RC and diamond drilling in an effort to expand and upgrade the existing resource. JOANNA - a new gold project acquired in the Canning Basin. YARLARWEELOR - the Company has a 24% indirect interest through FYI Resources Ltd. Two new exploration licence applications cover extensions to uranium anomalies, with three diamond holes commenced in July 2013 to test strong surface uranium anomalies. CORPORATE - ongoing management of the Company's cash remained critical throughout the year. Cash resources were boosted following a share placement in November 2012 of 20 million shares raising $900,000 before costs. In addition, the Company received an R&D tax offset payment totalling $498,632, for test work used to evaluate and advance the high grade A Zone deposit at Yuinmery. A corporate advisory firm has been appointed to increase shareholder value with their fees for service being incentive driven and linked to share price improvement. Significant Changes in State of Affairs In the opinion of the Directors there were no other significant changes in the state of affairs of the Company. Remuneration Report (Audited) This report details the amount and nature of remuneration of each director of the Company and other key management personnel. 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. 24 Empire Resources Limited Directors' Report 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 Group. 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. There were no options issued as share-based compensation to key management personnel during the current financial year (2012: 2,000,000). No shares were issued during the year upon the exercise of options. 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. 25 Empire Resources Limited Directors' Report Compensation of Key Management Personnel for the year ended 30 June 2013. 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) (b) (c) a term of three years; requires the payment to Kirkdale of a fee of $15,000 (GST excl) per month (increasing by 10% each year) and reimbursement of expenses; 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. 26 Directors FeesConsulting FeesShort-term BenefitsPost-employment benefitsShare-based paymentsValue of shares & optionsTotalTotal$$$$$$DirectorsNon-ExecutiveMr T Revy 201330,000- 30,000- - 30,000201230,000- 30,000- 16,00746,007ExecutiveMr D Sargeant2013- 217,800217,800- - 217,8002012- 211,200211,200- 16,007227,207Mr A Jessup2013- 217,800217,800- - 217,8002012- 211,200211,200- 16,007227,207Total Directors201330,000435,600465,600- - 465,600201230,000422,400452,400- 48,021500,421ExecutivesMr S Storm 2013- 42,36042,360- - 42,3602012- 40,98040,980- 12,50753,487Total Executives2013- 42,36042,360- - 42,3602012- 40,98040,980- 12,50753,487 Empire Resources Limited Directors' Report The agreement has: (a) (b) (c) a term of three years; requires the payment to Murilla of a fee of $15,000 (GST excl) per month (increasing by 10% each year) and reimbursement of expenses; provisions requiring the payment of a termination benefit of 50% of the amount due on termination of the agreement. In November 2012, the Chairman agreed to continue with these employment contracts until further notice. 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. End of Remuneration Report. Share Options At the date of this report unissued ordinary shares of the Company under option are: 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: 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. 27 Grant DateDate of ExpiryExercise Price $Number under Option9-Aug-119-Aug-140.09 1,500,000 28-Nov-1128-Nov-140.10 1,500,000 27-Jun-1331-Aug-160.04 10,000,000 28-Jun-1331-Aug-160.05 10,000,000 29-Jun-1331-Aug-160.06 10,000,000 33,000,000 DirectorDirectIndirectDirectIndirectMr T Revy350,000360,000500,000- Mr D Sargeant- 6,400,000- 500,000Mr A Jessup922,2221,645,333500,000- Number of Ordinary SharesNumber of Options Empire Resources Limited Directors' Report Meetings of Directors The following table sets out the number of meetings of the Company’s directors held during the period ended 30 June 2013 and the number of meetings attended by each 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. Events subsequent to reporting date In September 2013, the Company raised $200,000 by issuing 10,000,000 ordinary shares at 2 cents. 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 Group, the results of those operations, or the state of affairs of the Group 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 Group are important. 28 DirectorABMr Thomas Revy77Mr David Sargeant77Mr Adrian Jessup77A - meetings attendedDirectors’ MeetingsB - meetings held whilst a director Empire Resources Limited Directors' Report Details of the amounts paid or payable to the auditor (HLB Mann Judd) for audit and non-audit services provided during the year are set out below. During the period, the following fees were paid or payable for services provided by the auditors of the parent entity HLB Mann Judd, its related practices and non-related audit firms: Consolidated Year ended 30 June 2013 $ Year ended 30 June 2012 $ Assurance Services HLB 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 Auditors Independence Declaration 21,425 21,425 20,650 20,650 - - - - 21,425 20,650 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 2013. 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. _________________ Adrian Jessup Director Perth, Western Australia 26 September 2013 29 EMPIRE RESOURCES LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2013 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 30 Note20132012$$Revenue from continuing operations210,12272,799Depreciation expense3(4,205)(17,798)Exploration expense3(925,988)(2,089,807)Employee benefits expense(46,941)(59,991)Management fee expense(435,600)(422,400)Directors fees(30,000)(30,000)Accounting expense(59,160)(61,962)Consultancy expense(65,445)(17,599)Share-based payment- (84,037)ASX expense(23,556)(27,126)Corporate relations expense(104,577)(87,879)Insurance expense(18,206)(17,956)Other expenses (132,297)(156,449)Share of loss of equity accounted investees8(244,956)(158,832)Loss before income tax(2,080,809)(3,159,037)Income tax benefit4498,632 131,344 Net loss for the year(1,582,177)(3,027,693)Other comprehensive income- - Total comprehensive loss for the year(1,582,177)(3,027,693)Basic and diluted loss per share (cents per share)5(0.96)(2.13)Consolidated EMPIRE RESOURCES LIMITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 31 Note20132012ASSETS$$CURRENT ASSETSCash and cash equivalents6217,857 640,807 Trade and other receivables779,092 193,802 Total Current Assets296,949 834,609 NON-CURRENT ASSETSInvestments accounted for using the equity method8459,439 704,395 Plant and equipment96,360 5,893 Total Non-Current Assets465,799 710,288 TOTAL ASSETS762,748 1,544,897 LIABILITIESCURRENT LIABILITIESTrade and other payables10154,109 237,477 Total Current Liabilities154,109 237,477 TOTAL LIABILITIES154,109 237,477 NET ASSETS608,639 1,307,420 EQUITYIssued capital1116,970,103 16,086,707 Reserves12904,259 931,481 Accumulated losses(17,265,723)(15,710,768)TOTAL EQUITY608,639 1,307,420 Consolidated EMPIRE RESOURCES LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2013 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes 32 Issued Capital Accumulated LossesOption ReservesTotal$$$$Balance at 1 July 201114,516,700 (12,683,075)847,444 2,681,069 Shares issued during the year1,647,500 - - 1,647,500 Options issued during the year- - 84,037 84,037 Equity issue expenses(77,493)- - (77,493)Loss for the year- (3,027,693)- (3,027,693)Balance at 30 June 201216,086,707 (15,710,768)931,481 1,307,420 Balance at 1 July 201216,086,707 (15,710,768)931,481 1,307,420 Shares issued during the year950,000 - - 950,000 Options not vested- 27,222 (27,222)- Equity issue expenses(66,604)- - (66,604)Loss for the year- (1,582,177)- (1,582,177)Balance at 30 June 201316,970,103 (17,265,723)904,259 608,639 Consolidated EMPIRE RESOURCES LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2013 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 33 20132012Note$$Cashflows from Operating ActivitiesPayments to suppliers and employees(923,441)(839,289)Interest received11,262 98,493 Other - R&D tax offset629,976 204,022 Net cash used in operating activities6(i)(282,203)(536,774)Cash Flows from Investing ActivitiesPurchase of plant and equipment(2,854)- Exploration and evaluation expenditure(971,289)(2,143,573)Net cash used in investing activities(974,143)(2,143,573)Cash Flows from Financing ActivitiesProceeds from issue of equity securities900,000 1,617,500 Equity securities issue costs(66,604)(77,493)Net cash provided by financing activities833,396 1,540,007 Net (decrease) in cash held(422,950)(1,140,340)Cash at the beginning of the financial year640,807 1,781,147 Cash at the end of the financial year6217,857 640,807 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies The financial report covers the consolidated entity of Empire Resources Limited and its controlled entity (“Group”) and Empire as an individual parent entity (“Empire”). Empire is a listed public company limited by shares, incorporated and domiciled in Australia. The following is a summary of the material accounting policies adopted by the Group 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 30 June 2012 financial report. (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 has been prepared on the historical cost basis. 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 26 September 2013. (b) Going Concern As disclosed in the Statement of Comprehensive Income, the Group recorded operating losses of $1,582,177 (2012: $3,027,693) and as disclosed in the Statement of Cash Flows, the Group recorded cash outflows from operating activities of $282,203 (2012: $536,774), investing activities of $974,143 (2012: $2,143,573) and a cash inflow from financing activities of $833,396 (2012: $1,540,007). 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 Group:    The Group has successfully completed capital raisings during the year as disclosed in Note 11(a) and has 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; The Group has net current assets of $142,840 (2012: $597,132) at balance date and expenditure commitments for the next 12 months of $616,669 (2012: $403,921 ), as disclosed in Note 14 (ii), and retains the ability to scale down its operations to conserve cash, in the event that the capital raisings are delayed or partial; and The Company and Group 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. Subsequent to year end the Group raised $200,000 of equity capital via an issue of ordinary shares at $0.02. The funds raised will be used to meet the ongoing working capital requirements of the Group. The directors also anticipate that a further equity raising will be required and will be completed in 2013. Should this equity raising not be completed, there is a material uncertainty that may cast significant doubt as to whether the Company will be able to realise its assets and extinguish its liabilities in the normal course of business. (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. Details of the controlled entity are contained in Note 8(b) to the financial statements. The controlled entity has a June financial year end. 34 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies (continued) 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. 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. (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. Significant influence is the power to participate in the financial and operating decisions of the investee but is not control or joint control over those policies. 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. Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with AASB 139. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate. When a Group entity transacts with its associate, profits and losses resulting from those transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group. (e) Plant and Equipment Plant and equipment is measured on the cost basis less depreciation and impairment losses. 35 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies (continued) 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. 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. 36 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies (continued) 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. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (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. 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 classified as loans and receivables, held to maturity investments or fair value through profit or loss. 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. 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 37 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies (continued) 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 expensed in the year they are incurred. Development costs are capitalised. Where commercial production in an area of interest has commenced, the associated costs in respect of the area of interest in the development phase, together with any forecast future capital expenditure necessary to develop proved and probable reserves are amortised over the estimated life of the mine on a units of production basis. (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). 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 loss per share (see Note 5). 38 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies (continued) The Group expenses equity-settled share-based payments such as share and option issues after ascribing a fair value to the shares and/or options issued. The fair value of option and share plan issues of option and share plan shares are recognised as an expense together with a corresponding increase in the share based payments reserve or the share option reserve in equity over the vesting period. The proceeds received net of any directly attributable transaction costs are credited to share capital when options are exercised. The value of shares issued to employees financed by way of a non recourse loan under the employee Share Plan is recognised with a corresponding increase in equity when the company receives funds from either the employees repaying the loan or upon the loan termination, pursuant to the rules of the share plan. All shares issued under the plan with non recourse loans are considered, for accounting purposes, to be options. (m) Trade and other 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 and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. (o) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (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. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. 39 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. Statement of Significant Accounting Policies (continued) Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (s) Critical accounting estimates and judgements 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 using the 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 2013, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group’s operations and effective for the current annual reporting period. It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group’s business and, therefore, no change is necessary to Group accounting policies. The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2013. 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 the Group’s business and, therefore, no change necessary to Group accounting policies. (u) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors 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. 40 Empire Resources Limited Notes to the Financial Statements 30 June 2013 1. (v) Statement of Significant Accounting Policies (continued) Loss per share Basic loss 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 loss per share is calculated as net 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.  (w) Parent Entity Financial Information The financial information for the parent entity, Empire Resources Limited disclosed in Note 22 has been prepared on the same basis as the Group. 2. Revenue 3. Loss from ordinary activities 4. 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. 41 20132012$$RevenueInterest received10,122 72,799 10,122 72,799 Consolidated20132012$$Loss before income taxThe loss from ordinary activities before income tax has been determined after:(a) ExpensesDepreciation4,205 17,798 Exploration costs expensed925,988 2,089,807 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 4. Income tax (continued) 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. 5. Loss per share 42 20132012$$Loss before tax(2,080,809)(3,159,037)Income tax benefit at 30% (2012:30%)624,243 947,711 Tax effect of:- deductible capital raising expenditure24,871 20,875 - non deductible expenditure(74,154)(48,648)- deductible temporary differences(5,442)(3,809)- share based payment- (25,211)Deferred tax asset not recognised(569,518)(890,918)R&D tax offset payment from prior year498,632 131,344 Income tax benefit attributable to loss from ordinary activities before tax498,632 131,344 Consolidated(c) Unrecognised deferred tax balancesTaxlossesattributabletomembersofthegroup - revenue12,375,433 11,614,456 Potential tax benefit at 30%3,712,630 3,484,337 Deferred tax asset asset not bookedAmounts recognised in statement of comprehensive income-employee provisions10,811 7,769 -other6,750 4,350 Amounts recognised in equity- share issue costs57,252 62,142 Net unrecognised deferred tax asset at 30%3,787,443 3,558,598 20132012CentsCentsBasicanddilutedlosspershare(centspershare)(0.96)(2.13)Loss used in the calculation of basic EPS(1,582,177)(3,027,693)Weighted average number of shares outstanding during the year used in calculations of basic loss per share164,437,702 141,968,113 Diluted loss per share has not been disclosed as it is not materially different from basic loss per shareConsolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 6. Cash and cash equivalents Cash balances not available for use – there is a $20,000 NAB Bank Guarantee in the name of Linton Nominees Pty Ltd and is in relation to the lease over 53 Canning Highway, Victoria Park. (i) Reconciliation of cash flow from operations with loss after income tax 7. Trade and other Receivables Provision for impairment of receivables Current trade receivables are non-interest bearing and generally on 30 day terms. A provision for impairment is recognised when there is objective evidence that an individual trade receivable is impaired. 43 20132012$$Cash at bank and in hand217,857 640,807 217,857 640,807 Consolidated20132012$$Loss after income tax(1,582,177)(3,027,693)Depreciation 4,205 17,798 Share based payments expense- 84,037 Exploration expenditure not capitalised925,988 2,089,807 Income tax benefit- (131,344)Share of loss of equity accounted investees244,956 158,832 (407,028)(808,563)Changes in assets and liabilities, net of the effects of purchase of subsidiaries:(Increase)/decrease in trade and other 133,029 228,819 (Decrease)/increase in trade and other (18,704)23,810 (Decrease)/increase in employee benefits10,500 19,160 Net cash outflow from operating activities (282,203)(536,774)Consolidated20132012$$CurrentTrade receivables55,080 15,927 Other receivables24,012 177,875 79,092 193,802 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 8. Investments (a) Investments accounted for using the Equity Method The Group has reviewed the carrying value of its investment in FYI Resources Ltd and considers that it is not stated in excess of its recoverable amount in the accounts. The carrying value is supported by the initial independent valuations of Yarlarweelor, the net assets of FYI Resources Ltd and there is ongoing expenditure on the tenements by FYI Resources. 44 20132012$$Reconciliation of movements in investments accounted for using the equity method:Balance at 1 July704,395 863,227 Share of loss(244,956)(158,832)Balance at 30 June 459,439 704,395 Consolidated2013201220132012Name of entityPrincipal activityCountry of incorporation%%$$Associated entityFYI Resources LtdMineral explorationAustralia24%28%641,490 516,569 Ownership interestMarket Value20132012$$Summarised financial information of associates:Financial positionTotal assets2,495,418 3,113,199 Total liabilities170,430 117,368 Net assets2,324,988 2,995,831 Group’s share of associates’ net assets562,696 838,833 Financial performanceTotal revenue18,015 25,191 Total loss for the year(959,850)(570,706)Group’s share of associate’s profit/(loss)(244,956)(158,832)Group’sshareofassociate’scompehensiveloss- - Capitalcommitmentsandcontingentliabilitiesof associate:Shareofcapitalcommitmentsincurredjointlywith other investors299,765 491,102 Shareofcontingentliabilitiesincurredjointlywith other investors- - Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 8. Investments (continued) (b) Investments in subsidiary 9. Plant & equipment 45 Country of incorporationPercentage OwnedPercentage Owned20132012Controlled entity%%Parent Entity:Empire Resources LimitedAustralia- - Subsidiary of Empire Resources Limited:Torrens Resources Pty LtdAustralia100 100 20132012$$Plant and Equipment Cost41,825 37,153 Accumulated depreciation(35,465)(31,260)6,360 5,893 Motor Vehicles Cost90,217 90,217 Accumulated depreciation(90,217)(90,217)- - Total Plant and Equipment6,360 5,893 20132012$$Plant and EquipmentBalance at the beginning of year5,893 9,535 Additions4,672 - Depreciation expense(4,205)(3,642)Carrying amount at the end of the year6,360 5,893 Motor VehiclesBalance at the beginning of year- 14,156 Depreciation expense- (14,156)Carrying amount at the end of the year- - ConsolidatedConsolidatedMovements in the carrying amounts of each class of property, plant & equipment at the beginning and end of the current financial period is as set out below: Empire Resources Limited Notes to the Financial Statements 30 June 2013 10. Trade and other payables 11. Issued capital (a) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares. On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. 46 20132012$$Trade payables and accruals110,425 204,293 Employee benefits43,684 33,184 154,109 237,477 Consolidated20132012$$171,645,921 (2012: 150,645,921) fully paid ordinary shares16,970,10316,086,70720132012(i) Ordinary shares - numberNo.No.At 1 July150,645,921 127,295,921 Shareplacement-15,000,000on23September 2011 at $0.082- 15,000,000 SharesissuedERLsharePlan-7,750,000on14 February 2012 at $0.05- 7,750,000 SharesissuedpursuanttoaFarm-inandJVAgreement-600,000on20February2012at$0.05- 600,000 Shareplacement-20,000,000on2November2012 at $0.04520,000,000 - SharesissuedpursuanttoaFarm-inandJVAgreement-400,000on8November2012at$0.05400,000 - SharesissuedpursuanttoaFarm-inandJVAgreement-600,000on8November2012at$0.05600,000 - Balance at 30 June171,645,921 150,645,921 ConsolidatedConsolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 11. Issued capital (continued) (b) Options As at 30 June 2013 (30 June 2012: 13,927,729) the Company had the following options on issue over ordinary shares:- During the year, 30,000,000 options were issued and 10,927,729 expired unexercised. 47 20132012(ii) Ordinary shares – value$$At 1 July 16,086,707 14,516,700 Shareplacement-15,000,000on23September 2011 at $0.082- 1,230,000 SharesissuedERLsharePlan-7,750,000on14 February 2012 at $0.05- 387,500 SharesissuedpursuanttoaFarm-inandJVAgreement-600,000on20February2012at$0.05- 30,000 Shareplacement-20,000,000on2November2012 at $0.045900,000 - SharesissuedpursuanttoaFarm-inandJVAgreement-400,000on8November2012at$0.0520,000 - SharesissuedpursuanttoaFarm-inandJVAgreement-600,000on8November2012at$0.0530,000 - Less share issue costs(66,604)(77,493)Balance at 30 June16,970,103 16,086,707 ConsolidatedGrant DateDate of ExpiryExercise Price $Number under Option9-Aug-119-Aug-140.09 1,500,000 28-Nov-1128-Nov-140.10 1,500,000 27-Jun-1331-Aug-160.04 10,000,000 28-Jun-1331-Aug-160.05 10,000,000 29-Jun-1331-Aug-160.06 10,000,000 33,000,000 Empire Resources Limited Notes to the Financial Statements 30 June 2013 12. Reserves 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 Group’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 Group’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 Group. 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 Group hold the following financial instruments: 48 20132012$$Reserves904,259 931,481 Reserves comprise the following:Options reserveBalance as at start of financial year931,481 847,444 Share-based payment- 84,037 Options not vested(27,222)- Balance as at end of the financial year904,259 931,481 Consolidated20132012$$Financial assetsCash and cash equivalents217,857 640,807 Trade and other receivables79,092 193,802 296,949 834,609 Financial liabilitiesTrade and other payables154,109 237,477 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 13. Financial risk management (continued) (a) Market risk Cash flow and fair value interest rate risk The Group’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 Group to cash flow interest rate risk. Deposits at fixed rates expose the Group to fair value interest rate risk. During 2013 and 2012, the Group’s deposits at variable rates were denominated in Australian Dollars. As at the reporting date, the Group had the following variable rate deposits and there were no interest rate swap contracts outstanding: The Group 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 2013, 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 Group 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 Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group 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 have no borrowing facilities. 49 Weighted average interest rateBalanceWeighted average interest rateBalance%$%$Deposit20,000 20,000 Other cash available197,857 620,807 Net exposure to cash flow interest rate risk2.6%217,857 4.7%640,807 20132012 Empire Resources Limited Notes to the Financial Statements 30 June 2013 13. Financial risk management (continued) Maturities of financial assets and liabilities The note above analyses the Consolidated and parent entity's financial liabilities. The 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 50 30 June 2013Weighted Average Effective Interest RateFloating Interest RateFixed Interest Rate Maturing Within YearNon-interest bearingTotal$$$$Financial Assets:Cash and cash equivalents2.6%197,857 20,000 - 217,857 Trade and other receivables- - 79,092 79,092 Total Financial Assets197,857 20,000 79,092 296,949 Financial Liabilities:Trade and other payables- - 154,109 154,109 Total financial liabilities- - 154,109 154,109 30 June 2012Weighted Average Effective Interest RateFloating Interest RateFixed Interest Rate Maturing Within YearNon-interest bearingTotal$$$$Financial Assets:Cash and cash equivalents4.7%620,807 20,000 - 640,807 Trade and other receivables- - 193,802 193,802 Total Financial Assets620,807 20,000 193,802 834,609 Financial Liabilities:Trade and other payables- - 237,477 237,477 Total financial liabilities- - 237,477 237,477 Year ended 30 June 2013<6 months6-12 months1-5 years>5 yearsTotalConsolidatedFinancial assetsCash & cash equivalents217,857 - - - 217,857 Trade & other receivables79,092 - - - 79,092 296,949 - - - 296,949 Financial liabilitiesTrade & other payables154,109 - - - 154,109 Net maturity142,840 - - - 142,840 Empire Resources Limited Notes to the Financial Statements 30 June 2013 13. Financial risk management (continued) (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments that are not traded in an active market (for example, investments in unlisted subsidiaries) is determined using valuation techniques or cost (impaired if appropriate). The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. 14. Capital and Leasing Commitments These commitments are based on the Group holding the tenements for the next 5 years. 51 20132012$$(i) Operating Lease Commitments Non-cancellableoperatingleasescontractedforbutnotcapitalisedinthefinancialstatements Payable - minimum lease payments - not later than 12 months57,000 55,881 - between 12 months and 5 years4,750 - - greater than 5 years- - 61,750 55,881 Thecompanyenteredintoanoperatingleaseon1August2007forofficespaceitoccupiesinVictoriaPark.Thesecondtermoftheleasewas3yearsandexpiredon31July2013.Theleasehasbeenrenewedforafurtheryearto31July 2014.Consolidated(ii) Expenditure commitments contracted for:20132012$$Exploration TenementsInordertomaintaincurrentrightsoftenuretoexplorationtenements,theCompanyisrequiredtooutlayrentalsandtomeettheminimumexpenditurerequirements.Theseobligationsarenotprovidedforinthefinancialstatements and are payable:- not later than 12 months616,669 403,921 - between 12 months and 5 years2,466,676 1,615,685 - greater than 5 years- - 3,083,345 2,019,606 Consolidated Empire Resources Limited Notes to the Financial Statements 30 June 2013 15. Directors and other key management personnel (i) Details of Key Management Personnel Chairman – non-executive Mr T Revy (from 8 January 2010) Managing Director Mr D Sargeant (from 13 April 2000) Executive director Mr A Jessup (from 15 August 2003) Company Secretary Mr S Storm (from 30 April 2007) (ii) Compensation of Key Management Personnel The company has taken advantage of the relief provided by AASB 2008-4 Amendments to Australian Accounting Standard – Key Management Personnel Disclosures by Disclosing Entities, and has transferred the detailed remuneration disclosures to the directors’ report. The relevant information can be found in the Remuneration Report on pages 3 to 6. (iii) Equity instrument disclosures relating to directors and other key management personnel Shareholdings The number of ordinary shares in the Company held during the year by each director and other key management personnel, including their personally related entities or associates, are set out below. 52 20132012$$Short-term employee benefits507,960 493,380 Post-employment benefits- - Share-based payments- 60,527 507,960 553,907 ConsolidatedDirectorsBalance at the start of the periodIssued under share planOn exercise of optionsShares acquiredBalance at the end of the periodMr T Revy 710,000 - - - 710,000 Mr D Sargeant6,400,000 - - - 6,400,000 Mr A Jessup2,567,555 - - - 2,567,555 9,677,555 - - - 9,677,555 Specified ExecutivesMr S Storm183,000 - - - 183,000 183,000 - - - 183,000 2013 Shareholdings of Key Management Personnel Empire Resources Limited Notes to the Financial Statements 30 June 2013 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. 53 DirectorsBalance at the start of the periodIssued under share planOn exercise of optionsShares acquiredBalance at the end of the periodMr T Revy 710,000 - - - 710,000 Mr D Sargeant6,100,000 - - 300,000 6,400,000 Mr A Jessup2,067,555 - - 500,000 2,567,555 8,877,555 - - 800,000 9,677,555 Specified ExecutivesMr S Storm183,000 - - - 183,000 183,000 - - - 183,000 2012 Shareholdings of Key Management Personnel2013 Option holdings of Key Management PersonnelDirectorsBalance at the start of the periodIssuedExpiredBalance at the end of the periodVested and exercisable at 30 June 2013Mr T Revy1,000,000 - (500,000)500,000 - Mr D Sargeant1,000,000 - (500,000)500,000 - Mr A Jessup1,000,000 - (500,000)500,000 - 3,000,000 - (1,500,000)1,500,000 - Specified ExecutivesMr S Storm1,000,000 - (500,000)500,000 - 1,000,000 - (500,000)500,000 - 2012 Option holdings of Key Management PersonnelDirectorsBalance at the start of the periodIssuedExpiredBalance at the end of the periodVested and exercisable at 30 June 2012Mr T Revy500,000 500,000 - 1,000,000 - Mr D Sargeant500,000 500,000 - 1,000,000 - Mr A Jessup500,000 500,000 - 1,000,000 - 1,500,000 1,500,000 - 3,000,000 - Specified ExecutivesMr S Storm500,000 500,000 - 1,000,000 - 500,000 500,000 - 1,000,000 - Empire Resources Limited Notes to the Financial Statements 30 June 2013 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: 54 20132012$$Amounts paid to companies associated with certain Directors for management servicesKirkdale Holdings Pty Ltd - Mr D Sargeant217,800 211,200 Murilla Exploration Pty Ltd - Mr A Jessup217,800 211,200 Mr T Revy22,500 7,500 Total458,100 429,900 Amounts payable to Directors for Directors FeesMr T Revy7,500 22,500 7,500 22,500 ConsolidatedRelated partyRevenue from Related PartiesReimbursement of Expenditure Related PartiesAmounts owed by Related Parties as at 30 JuneAmounts Owed to Related parties as at 30 June$$$$ConsolidatedAssociate:FYI Resources Ltd2013- 94,070 55,080 - 2012- 42,880 15,927 - AssociateThe Group has a 24% interest in FYI Resources Limited (2012: 28%).The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year: Empire Resources Limited Notes to the Financial Statements 30 June 2013 17. Remuneration of auditors The auditor of Empire Resources Ltd is HLB Mann Judd. 18. Share Based Payments (a) Option plan The Company has established an option share plan, which is also available to directors, employees and some consultants, known as the 2010 Empire Resources Option Plan and was approved by shareholders on 25 June 2010. The following table illustrates the number and weighted average exercise prices of and movements in share options issued during the year: 1 These options were granted to a corporate advisory firm who has been appointed to increase shareholder value. 2 These options did not meet the vesting requirements and expired on 25 June 2013. The fair value of the equity-settled share options is estimated as at the date of grant using the Black and Scholes model taking into account the terms and conditions upon which the options were granted. 55 20132012$$AmountsreceivedordueandreceivablebyHLB Mann Judd for:Audit or review of the financial reports of the Company21,425 20,650 AmountsreceivedordueandreceivablebyHLB Mann Judd audit firms:Other services- - 21,425 20,650 ConsolidatedNumberWeighted average exercise priceNumberWeighted average exercise price2013201320122012Outstanding at the beginning of the year5,700,000 $0.112,700,000 $0.14Granted during the year130,000,000 $0.053,000,000 $0.09Expired during the year2(2,700,000)$0.14- - Outstanding at the end of the year33,000,000 $0.095,700,000 $0.11Exercisable at the end of the year- - Empire Resources Limited Notes to the Financial Statements 30 June 2013 18. Share Based Payments (continued) The following table lists the inputs to the model used for the year ended 30 June 2013: (b) 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: 19. Segment Information Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker 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. 56 20132012$$$$Options issued- 84,037 ConsolidatedGrant DateExpiry dateExercise priceVesting PeriodFair value at grant date of optionsExpected VolatilityOption lifeDividend yieldRisk-free interest rateGrant date share priceKey Management Personnel options25-Jun-1025-Jun-13$0.1425-Jun-13$0.02107%3 years0%4.57%$0.04Key Management Personnel options09-Aug-1109-Aug-14$0.0909-Aug-14$0.03106%3 years0%4.75%$0.05Key Management Personnel options20-Nov-1120-Nov-14$0.1020-Nov-14$0.04106%3 years0%4.51%$0.07Employee options25-Jun-1025-Jun-13$0.1425-Jun-13$0.02107%3 years0%4.57%$0.04Employee options09-Aug-1109-Aug-14$0.0909-Aug-14$0.03106%3 years0%4.75%$0.05Consultant options25-Jun-1025-Jun-13$0.1425-Jun-13$0.02107%3 years0%4.57%$0.04Consultant options09-Aug-1109-Aug-14$0.0909-Aug-14$0.03106%3 years0%4.75%$0.05Consultant options27-Jun-1331-Aug-16$0.0431-Aug-16$0.01150%3.2 years0%3.00%$0.02Consultant options27-Jun-1331-Aug-16$0.0531-Aug-16$0.01150%3.2 years0%3.00%$0.02Consultant options27-Jun-1331-Aug-16$0.0631-Aug-16$0.01150%3.2 years0%3.00%$0.02 Empire Resources Limited Notes to the Financial Statements 30 June 2013 20. Contingent assets Penny's Find The Company entered into a new staged sale agreement in February 2012 for the Penny’s Find gold project with Brimstone Resources Limited (Brimstone). At the election of Brimstone, the sale consideration comprises either:  Staged cash payments totalling $2.5 million for a 100% interest of the Penny’s Find project. A royalty will also be payable on gold produced in excess of the current JORC resource of 52,500 ozs gold.  Staged cash payments totalling $0.5 million together with exploration and development expenditure of up to $3 million for an 75% interest in the Penny’s Find project. Any additional development costs associated with the Company's residual 25% interest will carried by Brimstone and repayable from the proceeds of future gold production. An initial $500,000 (GST inclusive) payment had been made by Brimstone during the previous year to earn a 40% interest in the project. Brimstone must then continue funding exploration and development work by expending up to $3 million by 31st December 2013 to earn an 75% interest in the project. After expending $1.5 million by December 2012, Brimstone can elect to purchase 100% of the project for $2.5 million plus a 2% gross royalty on gold produced in excess of the current JORC resource of 52,500 ozs gold. The royalty would only apply when the gold price is above A$700/oz and would not exceed A$50 per ounce of gold recovered. Troy Creek During the March 2011 quarter, the Company finalised an agreement with unlisted Sydney based company, Zodiac Resources Ltd, whereby Zodiac may earn a 55% interest by spending $3 million on exploration within three years and earn a 75% interest by spending an additional $4 million on exploration and development within 5 years. Zodiac will have the option to acquire a 100% interest in the Troy Creek project within five years of commencement of the joint venture for a purchase price of $5 million – this amount being separate to the joint venture commitments. 21. Events after the Balance Date In September 2013, the Company raised $200,000 by issuing 10,000,000 ordinary shares at 2 cents. Other than this, 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. 57 Empire Resources Limited Notes to the Financial Statements 30 June 2013 22. Parent Entity Financial Information The individual financial statements for the parent entity show the following aggregate amounts: 58 20132012ASSETS$$CURRENT ASSETSCash and cash equivalents217,857 640,807 Trade and other receivables79,092 193,802 Total Current Assets296,949 834,609 NON-CURRENT ASSETSTrade and other receivables470 240 Financial assets459,439 704,395 Plant and equipment6,360 5,893 Total Non-Current Assets466,269 710,528 TOTAL ASSETS763,218 1,545,137 LIABILITIESCURRENT LIABILITIESTrade and other payables154,109 237,477 Total Current Liabilities154,109 237,477 TOTAL LIABILITIES154,109 237,477 NET ASSETS609,109 1,307,660 EQUITYIssued capital16,970,103 16,086,707 Reserves904,259 931,481 Accumulated losses(17,265,253)(15,710,528)TOTAL EQUITY609,109 1,307,660 Loss before income tax expense(2,080,579)(3,158,810)Income tax benefit498,632 131,344 Other comprehensive loss for the year, net of tax- - Total comprehensive loss for the year(1,581,947)(3,027,466)Parent Entity DIRECTORS’ DECLARATION 1. In the directors’ opinion: (a) the financial statements and notes set out on pages 30 to 58 are in accordance with the Corporations Act 2001 including: (i) (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements; and giving a true and fair view of the Group’s financial position as at 30 June 2013 and of its performance for the financial year ended on that date. (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. (c) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued 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 2013. This declaration is made in accordance with a resolution of the directors. ___________________ Adrian Jessup Director Perth, Western Australia 26 September 2013 59 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 consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration for the Group. The Group 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 of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance 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 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 opinion Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. 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. 60 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 2013 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a). Emphasis of Matter Without qualifying our opinion, we draw attention to Note 1 (b) in the financial report which indicates that the directors anticipate that a further equity raising will be required and will be completed in the year to meet the ongoing working capital requirements of the Group. Should this equity raising not be completed, there is a material uncertainty that may cast significant doubt as to whether the Group will be able to realise its assets and extinguish its liabilities in the normal course of business. Report on the Remuneration Report We have audited the remuneration report included in the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the 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 2013 complies with section 300A of the Corporations Act 2001. HLB Mann Judd Chartered Accountants Perth, Western Australia 26 September 2013 N G Neill Partner 61 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Empire Resources Limited for the year ended 30 June 2013, 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 and the entities it controlled during the year. Perth, Western Australia 26 September 2013 N G Neill Partner 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. 62 CORPORATE GOVERNANCE CORPORATE GOVERNANCE PRINCIPLES 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 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. 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 3.4 3.5 4.1 √ √ √ X √ √ X √ √ √ X X √ X X Refer (a) below Refer (a) below Refer (a) below Refer (b) below Refer (b) below Refer (b) below Refer (c) below Refer (d) below Refer (e) below Refer (f) below Refer (g) below Refer (g) below Refer (h) below Refer (g) below Refer (c) below 4.2 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 8.4 n/a n/a n/a √ √ √ √ √ √ √ n/a X n/a √ n/a n/a n/a n/a Refer (i) below Refer (i) below Refer (j) below Refer (j) below Refer (k) below Refer (k) below Refer (l) below n/a Refer (m) below n/a Refer (n) below n/a (a) Principle 1 Recommendation 1.1, 1.2 and 1.3 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 63 CORPORATE GOVERNANCE 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. (b) Principle 2 Recommendations 2.1, 2.2 and 2.3 Recommendation 2.1 recommends that a majority of the board should be independent directors. 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 and 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 and adheres to their respective Charters. 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. (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. 64 CORPORATE GOVERNANCE 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 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, 3.3 and 3.5 Companies should establish a policy concerning diversity, the measurable objectives for achieving gender diversity, and provide the information listed in Box 3.2 of the Principles & Recommendations for the content of a diversity policy. Notification of Departure A Diversity policy has not been established. 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 a diversity policy is justified at this time. (h) Principle 3 Recommendation 3.4 Companies should disclose the proportion of woman employees and those in executive and on the board. Disclosure: Empire Resources has 2 employees, of which none are women. There are no women in senior executive positions or on the board. (i) Principle 5 Recommendation 5.1 and, 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. 65 CORPORATE GOVERNANCE (j) Principle 6 Recommendation 6.1 and 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. (k) Principle 7 Recommendation 7.1 and 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. (l) 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. (m) 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. 66 CORPORATE GOVERNANCE (n) Principle 8 Recommendations 8.3 Companies should distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. Disclosure: The policies adopted by the Company are set out in the audited Remuneration report in the Directors’ Report. 67 ASX ADDITIONAL INFORMATION 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 2013. (a) Distribution of shares The numbers of shareholders, by size of holding are: The number of shareholdings held in less than marketable parcels is 237. (b) Twenty largest shareholders The names of the twenty largest holders of quoted shares are: (c) Substantial Shareholder 68 NumberCategory (size of holding)of Holders1 - 1,00025 1,001 - 5,00070 5,001 - 10,000126 10,001 - 100,000370 100,001 - and over217 808SHAREHOLDERSNumber of shares held% Holding1 FITALL GROUP LTD 20,000,00011.01%2 BLAMNCO TRADING PTY LTD 9,000,0004.95%3 TRONES INVESTMENTS PTY LTD 5,915,0003.26%4 DETROIT EQUITIES INC 5,000,0002.75%5 RBJ NOMINEES PTY LTD 5,000,0002.75%6 KIRKDALE HOLDINGS PTY LTD 3,300,0001.82%7 AGENS PTY LTD 3,275,8061.80%8 MEEKAL PTY LTD 3,098,3331.71%9 ANKAA SPRINGS PTY LTD 3,056,1601.68%10 A N SUPERANNUATION PTY LTD 3,000,0001.65%11 WESTORIA RESOURCE INVESTMENTS 2,700,0001.49%12 MRS SUKHON SUHARITDUMRONG 2,268,5001.25%13 SECOND NAREMI PTY LTD 2,110,2451.16%14 ARMCO BARRIERS PTY LTD 2,000,0001.10%15 CANARY PTY LTD 2,000,0001.10%16 ALLUA HOLDINGS PTY LTD 2,000,0001.10%17 PURITAN STYLE PTY LTD 2,000,0001.10%18 MR BRIAN MCCUBBING 1,900,0001.05%19 MR KENNETH JOSEPH HALL 1,900,0001.05%20 RESOURCE ASSETS PTY LTD 1,800,0000.99%81,324,04444.77%ShareholderNumber of sharesFITALL GROUP LTD 20,000,000 ASX ADDITIONAL INFORMATION (d) 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. Quoted shares on ASX and total issued share capital 150,645,921 (e) Voting rights All shares carry one vote per unit without restriction. (f) Unlisted options Unlisted options (Ex Price 9 cents; Exp 9 August 2014) 1,500,000 Unlisted options (Ex Price 9.8 cents; Exp 28 November 2014) 1,500,000 Options issued to William Buck Financial Services (WA) Pty Ltd:- Tranche 1 - 10 Million options with an exercise price of 4 cents each, when the share price maintains a 30 day VWAP of 4 cents or more-expiring 31 Aug 2016 10,000,000 Tranche 2 - 10 Million options with an exercise price of 5 cents each, when the share price maintains a 30 day VWAP of 5 cents or more-expiring 31 Aug 2016 10,000,000 Tranche 3 - 10 Million options at an exercise price of 6 cents each, when the share price maintains a 30 day VWAP of 6 cents or more-expiring 31 Aug 2016 10,000,000 69 ASX ADDITIONAL INFORMATION INTERESTS IN MINING AND EXPLORATION TENEMENTS AT 24 SEPTEMBER 2013 PROJECT TENEMENT INTEREST REMARKS TROY CREEK PENNY'S FIND YUINMERY E69/1729 E69/2357 E69/2358 E69/2869 E69/2870 E69/2904 E69/2905 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 P27/1923 P27/1962 P27/2007 P27/2008 M57/265 P57/1214 P57/1215 P57/1216 P57/1217 E57/766 E57/840 45% 45% 45% 45% 45% 45% 45% 45% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 100% 100% 100% 100% 100% 100% 100% 70 ASX ADDITIONAL INFORMATION PROJECT YUINMERY OPTION POINT KIDMAN PIROMAN TENEMENT INTEREST REMARKS E57/514 Option for 91.4% Interest Option for 91.4% Interest Option for 91.4% Interest Option for 91.4% Interest 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% E57/681 P57/1130 P57/1131 E38/2508 E38/2510 E38/2582 E38/2639 E38/2640 E38/2641 E38/2785 E38/2786 E38/2787 E38/2788 E38/2137 E38/2701 DAMPERWAH E59/1323 Earning 70% JOANNA E45/4113 80% Application not yet granted 71 

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