Delivering Growth ANNUAL REPORT ACN 130 955 725 A C N 1 3 0 9 5 5 7 2 5 A N N U A L R E P O R T 2 0 1 3 02 Chairman’s Letter 04 Projects Overview 06 Review of Operations 12 Productora Copper Project 22 Frontera Copper Project 24 Qualifying Statements 26 Tenement Schedule and Details 40 Corporate Governance Statement 43 Directors’ Report 49 Auditor’s Independence Declaration 50 Independent Auditor’s Report 52 Directors’ Declaration 53 Statement of Comprehensive Income 54 Statement of Financial Position 55 Statement of Changes in Equity 56 Statement of Cash Flows 57 Notes to the Financial Statements 78 Shareholder Information 82 Corporate Directory HOT CHILI ANNUAL REPORT 2013 Our vision is ambitious, our strategic positioning, strong funding support “ and dedication to move quickly, ensures that this vision is achievable.” HOT CHILI ANNUAL REPORT 2013 1 “ Our track record of delivery is something we are very proud of and our future growth milestones are now Hot Chili’s complete focus.” Chairman’s Letter Dear Shareholder, As chairman of the board of Hot Chili Limited (Hot Chili or Company), I am very proud to have presided over a period of such achievement by our Company. The year has seen the Company consolidate its position as one of the leading emerging copper companies on the Australian Securities Exchange (ASX). This is no simple task, given the discovery of our flagship Productora Copper Project in Chile is not yet three years old and we have achieved this against strong head winds in global equity markets. Despite these challenges, Hot Chili has delivered another year of strong growth from its Chilean project portfolio while laying solid foundations for the establishment of a new Australian mid- tier copper company on the world stage. This has been through sheer persistence and hard work from our Company’s talented team to rapidly grow a centre of new high quality copper assets along the Chilean coastal range. Our flagship project La Productora (The Producer), has lived up to its name and continues to produce strong growth for Hot Chili. Over the past year we near doubled our resources at Productora to just under one million tonnes of copper metal and 600,000 ounces of gold from surface. At the same time Hot Chili also gave the go-ahead to Pre-feasibility studies at Productora following the successful completion of a Scoping study, indicating the potential for a low-cost, long-life copper operation to be established within an infrastructure rich area of Chile’s coastal range. While delivering on our growth milestones this year, the Company’s dedication towards aggressive drilling continues to pay-off in outlining further growth at Productora. The central area of the Productora project has continued to return higher grade drilling intersections within areas likely to have big impacts on our ambitions to establish the project as our first copper production source in Chile. The Company’s aim to establish a copper production hub centred around Productora took a major step forward when the Company announced the discovery of its second major copper-gold project at Frontera, 70km directly south of Productora. While only early in our drilling assessment, Frontera is shaping to be a major growth project that may support Productora in delivering a future targeted annual production that would position Hot Chili as one of the largest potential future copper producers on the ASX. These achievements and those that are being targeted in the coming year have been made possible by our strong funding support, principally from Hot Chili’s largest strategic shareholders. Particularly pleasing has been the support and cooperation of Chilean resources major CAP S.A. towards advancing Productora towards development. The two companies are studying joint infrastructure and other potential operational synergies, that if successfully negotiated have the potential to leverage Hot Chili towards production in half the average time taken for the development of other large-scale copper projects in the world. I would like to thank the efforts of my fellow directors and our loyal and dedicated team who have worked tirelessly to ensure our shareholders are invested in one of the stand-out emerging copper companies in the mid-tier space. Murray Edward Black Non-Executive Chairman 2 HOT CHILI ANNUAL REPORT 2013 HOT CHILI ANNUAL REPORT 2013 3 “... building a large scale copper business...” Projects Overview Hot Chili has assembled a portfolio of four large copper projects in the world class iron-oxide-copper-gold (IOCG) belt of the Chilean coastal range. All of these projects lie to the north of Santiago, are close to existing coastal infrastructure and lie at low altitude (<1,000m elevation). A second major copper-gold project was secured at Frontera where first drilling undertaken by Hot Chili has confirmed a large copper-gold porphyry discovery from surface Hot Chili continues to develop and strengthen its relationships with key Chilean partners Compañía Minera del Pacífico S.A. (CMP – Chile’s largest iron ore producer) and CODELCO (the world’s largest copper producer). Importantly, Hot Chili and CMP have executed two non-binding letters of intent to negotiate a joint infrastructure and an iron exploitation option to assist in the development of the Productora Copper Project. Chilean resources major CAP S.A. (CAP) is CMP’s parent company and is also Hot Chili’s major shareholder and strategic project partner at Productora. The majority of Hot Chili’s activities were focussed towards the development of its flagship Productora Copper Project, one of Chile’s fastest emerging large-scale coastal copper projects. In addition the Company continued to advance its portfolio of coastal copper projects and add further to its project landholdings in Chile. In less than three years since listing the Company on the Australian Securities Exchange (ASX), Hot Chili has transitioned from explorer to project developer through the emergence of a large-scale copper discovery at Productora. The Company is now positioned as one of the leading emerging copper companies on the ASX. Hot Chili is fast-tracking the advancement of Productora as its principal development project while undertaking exploration work at its other projects. Hot Chili’s project pipeline and project advancement strategy is summarised in Table 1 below. Table 1. Hot Chili’s copper project development pipeline in Chile Construction/Production DFS PFS Scoping/Resource Production Hub Projects Large Growth Projects Productora Discovery/Resource Frontera Exploration Banderas Los Mantos 4 HOT CHILI ANNUAL REPORT 2013 Figure 1. Hot Chili’s coastal range project portfolio in the third and fourth region of Chile m k 0 0 4 SANTIAGO HOT CHILI ANNUAL REPORT 2013 5 “ The project benefits from its proximity to existing infrastructure including the Pan-American Highway, rail, grid power and port...” Review of Operations Productora Copper Project The Productora project is Hot Chili’s flagship project in Chile. The project is located 15km south of the town of Vallenar, at low altitude (less than 1,000m), in Chile’s Region III. The project benefits greatly from its proximity to existing high quality infrastructure including the Pan-American Highway, rail, grid power, and established port facilities (40km distance) as shown in Figure 2. Since drilling commenced in August 2010, the Company has completed over 180,000m of drilling and outlined a large-scale, bulk tonnage copper- gold-molybdenum deposit amenable to open pit mining. In February 2013, the Company announced a resource upgrade estimate that covers a 7.5 kilometre strike extent at the Productora project. The announcement represents a near-doubling of the Productora JORC compliant resource estimate to now stand at 165.2Mt grading 0.6% copper, 0.1g/t gold and 132ppm molybdenum (0.7% copper equivalent) for 920,000 tonnes of copper, 580,000 ounces of gold, 22,000 tonnes of molybdenum (1,230,000 tonnes of copper equivalent). The resource is enhanced by a growing component of higher grade, near-surface material now equating to 53Mt grading 0.8% copper and 0.2g/t gold. This material presents an opportunity for potential higher- grade early production at Productora. Exploration and extensional drilling has confirmed that a further 2km of strike extensions remain at Productora as well as a large zone of ore potential along the eastern flank of the central resource area. A 100,000 metre drilling programme commenced in early 2013 to achieve a second major resource upgrade by late in the year. Hot Chili has continued to release a series of strong drilling results throughout 2013 in advance of this next growth milestone. Copper-gold-molybdenum mineralisation at Productora is predominantly hosted in a structurally focused breccia and fracture network developed within a larger body of hydrothermal K-feldspar- tourmaline magnetite breccia. Structurally-focused mineralised breccia zones are evident trending broadly sub-parallel to the Productora fault zone. North plunging high-grade internal shoots are evident within a gently north-plunging mineralised envelope. Sulphides comprise pyrite, chalcopyrite, bornite and molybdenite developed as breccia, vein and cavity fill, as well as disseminations within the brecciated host rocks. This sulphide distribution creates centimetre to metre-scale higher-grade patches enclosed by moderate-grade disseminated sulphide minerals. Hot Chili continues to progress its strategy of project development and de-risking, in parallel with an on-going focus on resource growth for the Productora Copper Project. In early 2013, the Company announced the successful completion of a Scoping study into the development of a large mining operation at Productora. The Scoping study concluded that conventional open pit, blast and haul mining methods will be suitable for mining the Productora Copper Project. The planned central pit development contains a large continuous block of resources that is the focus for initial mine design to underpin a nominal processing throughput range of 8-12Mtpa. Metallurgical test work has demonstrated that conventional processing including crushing, grinding and flotation will be suitable for the recovery of copper, gold and potentially molybdenum minerals. Initial indications are that high copper and gold recoveries (>90%, ~80% respectively) may be achieved with a relatively coarse grind size of 180um. The study considered sea water processing to produce a high quality copper concentrate that would support a potential long-life, low cost copper operation at Productora. The company formally commenced a Pre-feasibility study over Productora immediately following the favourable findings of the Scoping Study. Leading engineering and project development group Ausenco, who successfully managed the Scoping study, have been commissioned to manage the Pre- feasibility study in conjunction with Hot Chili’s own development team. 6 HOT CHILI ANNUAL REPORT 2013 Huasco Port Infrastructure Major projects/mines Power substations Major town Port/Maritime Concession Fe Pellet Plant Rail Power Transmission lines Sealed Roads 0km 10km 20km Vallenar Productora Figure 2. Productora project location and associated coastal infrastructure position Frontera Copper Project NW Surface SE The Frontera project lies 70km directly south of Productora in Region IV of Chile and is located adjacent to the Pan-American Highway and existing power transmission corridor. Frontera is a relatively advanced exploration stage project with several historical drill holes and a small-scale, historical, copper-oxide open pit within the project. Drilling completed by Noranda in the 1990’s indicated the presence of a large copper-gold porphyry system, with a +2 kilometre footprint at surface. During the year, Hot Chili completed an extensive amount of detailed geological mapping and rock- chip sampling in preparation for a preliminary drilling assessment of the project. Drilling at Frontera commenced in early February of 2013, culminating in approximately 16,000m of drilling being complete by mid-2013. First results returned from Reverse Circulation (RC) drilling at the Frontera included 348m grading 0.4% copper and 0.3g/t gold, which included 162m grading 0.5% copper and 0.3g/t gold; and 256m grading 0.5% copper and 0.3gpt gold. The location of these drill results are displayed in cross section on Figure 3. +700m RL +650m RL +600m RL +550m RL +500m RL +450m RL +400m RL +350m RL +300m RL +250m RL +200m RL Fresh Rock Interface 26m @ 06%Cu 0.4g/t Au 111m @ 0.5%Cu 0.3g/t Au 188m @ 0.5%Cu 0.4g/t Au 73m @ 0.5%Cu 0.3g/t Au 256m @ 0.5%Cu 0.3g/t Au 122m @ 0.5%Cu 0.3g/t Au 72m @ 0.5%Cu 0.2g/t Au 112m @ 0.4%Cu 0.3g/t Au Plunge of mineralisation ? ? Note: FRP0008 was drilled oblique to section towards 260o, all other holes on this line were drilled either towards 120o or 300o. 348m @ 0.4%Cu 0.3g/t Au Significant Intercepts + 0.4% Cu (average) + 0.3% Cu (average) 100m Figure 3. Cross-section of Frontera Copper Project displaying significant drilling intersections The drilling results confirmed the discovery of second major copper-gold project for Hot Chili, immediately doubling the potential of the company. Frontera adds substantially to Hot Chili’s longer term objective of establishing a multi-project Chilean coastal copper production hub, leveraged to existing infrastructure. The company anticipates a resource estimate for Frontera to be released in the second half of 2013. “ The drilling results confirmed the discovery of second major copper-gold project for Hot Chili, immediately doubling the potential of the company.” HOT CHILI ANNUAL REPORT 2013 7 Review of Operations Banderas Copper Project The Banderas Copper Project is located at low altitude (<1,000m) approximately 50km north of Hot Chili’s Productora project, adjacent to the Pan American highway in Region III of Chile. The project is at an early exploration stage and has seen some historical, small-scale, copper mining within an extensive, large-scale alteration system. Extensive mapping and surface sampling programmes continued throughout the year and have now identified several high-priority targets within the core area of the project. These targets comprise historical high-grade copper underground workings, outcropping surface mineralisation and large surface geochemical anomalies which have not previously been drill tested. Further exploration assessment of the project is scheduled for the second half of 2013, prior to the planned commencement of a maiden campaign of drilling early in 2014. Geological mapping and sampling of the Banderas project has found the mapped area to be dominated by andesite volcanic and volcaniclastic rocks with a sedimentary sequence to the west. The dominant structural trend is a north-northeast to south- southwest trending foliation. This trend is cut by east- west to southwest-northeast trending brittle faults. Mineralisation is structurally hosted in narrow quartz, carbonate breccia veins. Copper is associated with bornite and chalcopyrite where observed. The work completed at Banderas Copper Project can be seen in Figure 4. First-pass drilling over Hot Chili’s original land position at Los Mantos produced several significant results. One of those drill results returned a wide, high-grade drilling intersection totalling 36m grading 1.4% copper and 0.2g/t gold from 49m down-hole, refer to Figure 5. Late in 2012 the Company significantly increased the size of its Los Mantos Copper Project under a joint venture earn-in agreement with a wholly owned subsidiary of CODELCO, the world’s largest copper producer. The agreement represents the early stages of Hot Chili’s strategy to significantly expand the size of its Los Mantos Copper Project and build a substantial exploration land position immediately adjacent to Teck’s large-scale Andacolla copper-gold operation. Figure 6 displays Hot Chili’s expanded landholding at the Los Mantos Copper Project. During early 2013, Hot Chili completed an airborne geophysical survey over the expanded Los Mantos project area to assist with geological assessment. The aeromagnetic and radiometric geophysical survey will be used in conjunction with surface mapping and geochemical sampling to define prospective target areas within the expanded project area. It is expected that drill targeting exercises for the Los Mantos project will occur in 2014 following completion of a regional soil geochemical programme. 354,000 356,000 Hot Chili intends to explore the potential at Banderas to discover and delineate higher grade copper resources as an additional supply source to a copper production hub centred around Productora. 0 0 0 , 4 8 8 , 6 Legend Lithology Crystic felsic rock Fault Zone Diorite Porphyritic Intermediate Intrusive Porphyritic Intermedaite volcanic Andesite Andesitic dyke Andesite (magnetite rich) Andesite megacrystic Intermediate volcaniclastic breccia Limestone Andesitic sediments Mineralisation ^_ Mines Los Mantos Copper Project The Los Mantos project is located in Region IV, Chile approximately 60km south of La Serena. The project is at an advanced exploration stage with an operating small-scale mine, and extensive historical underground and surface development. Hot Chili have delivered a series of positive drill results across a 1.5km strike extent, successfully intersecting multiple zones of shallow, moderate width, multi-commodity copper mineralisation. Drilling completed by the company in 2011 confirmed the potential of the Los Mantos project to host significant breccia-hosted bulk-tonnage copper- gold mineralisation, and highlights the strength of the company’s future project pipeline. The company intends to progress activities at Los Mantos to deliver another successful coastal range Chilean copper discovery and future development opportunity. 0 0 0 , 2 8 8 , 6 0 0 0 , 0 8 8 6 , ³ 0 0.25 0.5 1 Kilometers 354,000 356,000 Figure 4. Mapping and aeromagnetics at the Banderas copper project 0 0 0 , 4 8 8 , 6 0 0 0 , 2 8 8 , 6 0 0 0 , 0 8 8 6 , 8 HOT CHILI ANNUAL REPORT 2013 continued HOT CHILI ANNUAL REPORT 2013 9 Review of Operations Figure 5. Drilling has confirmed a large tourmaline breccia with significant copper mineralisation at Los Mantos Figure 6. Hot Chili’s Expanded Landholding at the Los Mantos copper project, Chile 10 HOT CHILI ANNUAL REPORT 2013 continued HOT CHILI ANNUAL REPORT 2013 11 “ ... a second, near-surface zone of high grade copper and gold as part of the first resource upgrade has continued to enhance the economic potential of the project.” Productora Copper Project First Resource Upgrade at Productora – Existing Resource Near Doubles in Size, February 2013 The initial Productora central resource estimate released in September 2011 (85.1Mt grading 0.6% copper, 0.1g/t gold and 146ppm molybdenum for 483,000 tonnes of copper, 290,000 ounces of gold and 12,418 tonnes of molybdenum), has now been substantially increased. The central resource was confined to the central lease area, equating to 1.4km of strike extent of the Productora Copper Project. The updated resource estimate extends the central area resource to the north and south, and accounts for the definition of at-surface copper resources over a strike extent of approximately 7.5km, as depicted in Figure 7. Further resource potential remains within the 7.5km of strike extent with several areas of the resource remaining open along strike, on the eastern and western flanks, and at depth. The mineral resource estimate for Productora now stands at 165.2Mt grading 0.6% copper, 0.1g/t gold and 132g/t molybdenum for 920,000 tonnes of copper, 590,000 ounces of gold and 22,000 tonnes of molybdenum. The mineral resource estimate was completed by independent consultants Coffey Mining Pty Ltd and is summarised in Table 2. The resource estimate includes all RC and DD drilling results returned from outside of the central resource area since August 2011. The resource has been estimated in accordance with the guidelines of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code 2004). The resource contains a larger proportion of Indicated material than the first resource estimate, with approximately 43% of the resource estimate now comprising Indicated material and 57% Inferred material. The majority of the Indicated resource lies within the first 250m from surface. 12 HOT CHILI ANNUAL REPORT 2013 ) M 1 x ( s e n n o T 500 450 400 350 300 250 200 150 100 50 0 474.3 0.77 0.60 0.67 0.48 216.3 0.56 165.2 0.30 135.1 tonnage grade Cu% 94.9 53.0 0.10 0.20 0.30 0.40 0.50 0.60 Cut-off Grade (Cu%) 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 ) % u C ( e d a r G Figure 7. Productora Grade Tonnage Curve Table 2. Productora Mineral Resource Statement Category Grade (>0.3% Cu) Contained Metal (>0.3% Cu) Tonnage Cu Au Mo Cu Eq* (Mt) Figure 7. Productora Grade Tonnage Curve % (g/t) Indicated 70.6 Inferred 94.6 Total 165.2 0.6 0.6 0.6 0.1 0.1 0.1 (g/t) 140 126 132 % 0.8 0.7 0.7 Cu (Kt) 420 500 920 Au (KOz) 260 310 580 Mo (Kt) 10 12 22 Cu Eq* (Kt) 560 670 1,230 Note: Figures in the above table are rounded and are reported to one significant figure in accordance with Australian JORC code 2004 guidance on mineral resource reporting. Refer to ASX announcement released on February 13 2013 HOT CHILI ANNUAL REPORT 2013 13 Productora Copper Project Figure 8. Productora Resource Upgrade 1 oblique long section displaying mineralisation over a 7.5 kilometre strike extent A nominal +0.3% copper grade shell model was utilised to constrain the block model resource estimation. The average depth of the resource estimate base is approximately 400m from surface. In addition, a low grade +0.1% copper grade shell model was also utilised to calculate the quantity of low-grade material that exists in the surrounding breccia hosting corridor. The company’s recently completed scoping study indicated a potential future marginal economic cut-off grade for Productora to be approximately +0.2% copper. It is important to note that the low grade material surrounding the resource may add further to the definition of additional potential in-pit tonnage at Productora. The resource is significantly enhanced by the presence of two substantial zones of high grade material located within the planned central pit development at Productora. This material now equates to approximately 53Mt grading 0.8% copper and 0.2g/t gold from surface. Mineralisation at Productora has remained consistently associated with a series of vertical lodes and some minor sub-horizontal lodes within a felsic volcanic country rock which has been extensively intruded by a tourmaline breccia along the main mineralised north-east trend. Sulphide ore mineralogy comprises pyrite, chalcopyrite, bornite and olybdenite developed as breccia, vein and cavity fill, as well as disseminations within the brecciated host rocks. Within the oxide zone copper is predominantly associated with malachite. The identification of a second, near-surface zone of high grade copper and gold as part of the first resource upgrade has continued to enhance the economic potential of the project. The new zone is located within the CCHEN South area and equates to 24.9Mt grading 0.8% copper and 0.2g/t gold from shallow depth as illustrated in Figure 9. This area has the potential to act as a starter-pit location that may allow access to higher revenue material at the beginning of potential future mining operations. The resource extends from surface with transitional and sulphide material dominant and accessible from near-surface owing to the limited distribution of surface oxide material over the deposit. Figure 10 displays a type-section of the resource in the CCHEN South area. Second Resource Upgrade Planned – Large Extensional Drilling Programme Underway Hot Chili has commenced a major extensional drilling programme at Productora for 2013, comprising 85,000m RC and 15,000m of DD drilling. The drilling will focus on the immediate extensions that have been confirmed along the eastern margin of the central area of the Productora resource for over 2km. The addition of any new resources along the eastern or western margins of the resource and located within the planned central pit development has the potential to rapidly add in-pit tonnes to the project from areas previously considered waste in the company Scoping study. A second major resource upgrade for the Productora Copper Project is planned after completion of the drilling program. 14 HOT CHILI ANNUAL REPORT 2013 continued HOT CHILI ANNUAL REPORT 2013 15 Productora Copper Project Figure 9. Oblique view of high grade, shallow material boosts inventory for starter pit options Figure 10. Cross Section displaying schematic geological and mineralisation interpretation In the CCHEN South area 16 HOT CHILI ANNUAL REPORT 2013 continued Figure 11. Productora project and scoping study development layout in relation to 2013 drilling programme focus Productora Copper Project Preliminary Pit Design & Extensional Drill Results Eastern Flank Significant Intersections 149m@ 0.7% Cu, 0.2g/t Au, 259ppm Mo Incl 51m@ 1.0% Cu, 0.2g/t Au, 381ppm Mo 36m@ 0.8% Cu, 0.1g/t Au, 61ppm Mo Incl 12m@ 1.2% Cu, 0.1g/t Au, 109ppm Mo 80m@ 0.8% Cu, 0.2g/t Au, 293ppm Mo Incl 29m@ 1.2% Cu, 0.2g/t Au, 252ppm Mo 72m@ 0.7% Cu, 36ppm Mo 64m@ 1.5% Cu, 0.4g/t Au, 147ppm Mo 22m@ 1.5% Cu, 0.4g/t Au, 328ppm Mo Incl 15m@ 2.0% Cu, 0.5g/t Au, 393ppm Mo 32m@ 1.2% Cu, 0.2g/t Au, 195ppm Mo Incl 7m@ 3.9% Cu, 0.3g/t Au, 395ppm Mo 10m@ 0.6% Cu, 0.1g/t Au, 128ppm Mo 102m@ 1.0% Cu, 0.3g/t Au, 108ppm Mo 17m@ 1.0% Cu, 0.2g/t Au, 8ppm Mo 11m@ 0.8% Cu, 0.1g/t Au, 95ppm Mo Incl 6m@ 1.0% Cu, 0.2g/t Au, 120ppm Mo 20m@ 0.6% Cu, 0.1g/t Au, 189ppm Mo Drill results from Hot Chili’s 2013 drilling campaign continue to deliver high-grade copper and gold results. Significant intersections have been received from shallow positions both in extensional areas and in-fill areas of the central resource area of Productora. Drill results returned from the eastern flank of Productora in have recorded some impressive intersections including 64m grading 1.5% copper and 0.4g/t gold from 124m down-hole. Recent results have continued to define the eastern flank of the central resource area as a very significant addition to Productora’s forthcoming resource upgrade. To date, extensions being defined along the eastern flank have consistently highlighted higher-grade copper and gold mineralisation. High grade drilling results have also been recorded from the southern area of the planned central pit development at Productora including 48m grading 1.2% copper and 0.2g/t gold from 42m down-hole and open to end of hole. The result was from a QA/QC drill hole that was completed to twin an earlier high-grade drilling intersection of 12m grading 1.7% copper and 0.2g/t gold recorded in 2012 from within the resource. The drill result confirmed the location of the high- grade material and in addition recorded twice the length of intersection with the new drill hole ending in 25m grading 1.9% copper and 0.2g/t gold. Central Pit 6 Figure 12. Plan displaying some of the significant intercepts recorded during the year, in relation to the planned central pit design at Productora HOT CHILI ANNUAL REPORT 2013 17 Productora Copper Project Productora Central Pit Area Section 6822215mN Preliminary Central Pit Design 49m@ 1.0% Cu, 0.1g/t Au, 207ppm Mo 72m@ 0.7% Cu, 36ppm Mo 100m@ 1.0% Cu, 0.3g/t Au, 108ppm Mo +0.3% Cu mineralisation +0.1% Cu mineralisation Figure 13. Productora cross section showing significant intersections recorded in a high grade zone discovered on the eastern flank of the planned central pit development Figure 14. Productora cross section showing eastern flank target area (yellow) and the parallel magnetite zone (green) in relation to the current block model resource at Productora 18 HOT CHILI ANNUAL REPORT 2013 continued Importantly, results from this year’s drilling campaign highlight that the component of shallow, high grade, copper and gold mineralisation at Productora is continuing to grow. Significant drill results are depicted in plan (Figure 12) and cross section (Figure 13). The location of the eastern and western flanks of the planned central pit area are displayed on Figure 14. The Central Lease also contains a large amount of the high grade, shallow component of the Productora resource. The decision by Hot Chili to exercise its purchase option over the Central Lease finalises the Company’s last major commitment at Productora. Iron Ore Resource Definition at Productora in 2013 Strategic Alignment of CMP and Hot Chili at Productora A drilling programme comprising approximately 20,000m of RC is also planned to assess two large zones of magnetite identified within the Productora landholding. The parallel magnetite zone lies immediately along the western flank of the Productora copper-gold-molybdenum resource with a component of the potential iron zone likely to be within the western waste-rock wall of the Company’s planned pit development as displayed in Figure 14. The Western magnetite zone is approximately 6km in strike extent within Hot Chili’s 100%-owned landholdings on the western extent of the project. Preliminary drilling undertaken by Hot Chili has confirmed the presence of a very large, shallowly dipping magnetite zone from surface. The definition of iron ore resources for the Productora project is a parallel stream of work aimed at facilitating further co- operation with Hot Chili’s major shareholder and strategic project partner Compañia de Aceros del Pacifico (CAP) and its operating subsidiary Compañía Minera del Pacífico S.A. (CMP). In July 2012, CMP and Hot Chili executed two non-binding Letters of Intent (LOI) to co-operate on technical studies and commence negotiation for a joint infrastructure and iron production option for the Productora Copper Project. Any such future development of an additional iron source in such close proximity to CMP’s existing iron processing and transport network (Figure 15) has the potential to add significantly to CMP’s current production expansion at its existing operations. It also has the potential to add another valuable revenue stream to Productora. Completion of Project Consolidation – Purchase of Central Lease at Productora In February 2013 Hot Chili exercised its purchase option over a major component of the recently expanded resource at the Company’s Productora Copper Project in Chile. Hot Chili now holds a 100% interest in the Central Lease (Productora 1/16) at Productora, containing over half of the projects established resources and lying within the Company’s planned central pit development. CAP is the parent company of Compañía Minera del Pacífico S.A. (“CMP”), Chile’s largest iron ore producer and integrated steel business. CMP produces concentrate and iron ore pellets, fines and lumps. Its mining properties and principal deposits, processing plants and projects are in the third and forth region of the country’s iron ore belt district in northern Chile. CAP also owns all the shares in Chile’s largest steel producer, located in the southern city of Talcahuano. Mitsubishi is a 19.3% shareholder of CAP and 25% shareholder of CMP as at December 31, 2012. Importantly, CMP is a major partner in Productora which lies in the heart of CMP’s existing coastal infrastructure, including rail, port, easement corridor, magnetite concentrator and iron pellet plant, which should facilitate project implementation. In July 2012, Hot Chili executed two non-binding Letters of Intent with CMP to negotiate a joint infrastructure and iron exploitation option for the development of Productora. Such negotiation could result in substantial operational synergies for the two companies. Negotiation of a joint infrastructure agreement would provide the Productora Copper Project with the potential to be established in a shorter timeframe and at a lower start-up capital cost than other comparable large-scale emerging copper projects. In addition, any future development of an additional iron source in such close proximity to CMP’s existing iron processing and transport network has the potential to add significantly to CMP’s current production expansion at its existing operations. The two companies are working towards finalising formal agreements on an infrastructure and iron exploitation option for the development of Productora. On 10 July 2013, Hot Chili announced an A$11.7 million capital raising, which was strongly supported by CAP. In association with the raising, the Company also announced the appointment of CAP executive Mr Roberto de Andraca Adriasola to the board of Hot Chili as a Non-Executive Director. The appointment of Mr Andraca Adriasola is a strong indication of the commitment by both companies, in co-operation, to advance the Productora Copper Project towards development. Hot Chili and CAP are currently investigating other potential avenues in which to co-operate in the development of Productora for the benefit of both companies. HOT CHILI ANNUAL REPORT 2013 19 Productora Copper Project 4. Metallurgical test work has demonstrated that conventional processing including crushing, grinding and floatation will be suitable for the recovery of copper, gold and potentially molybdenum minerals. Initial indications are that high copper and gold recoveries (>90%, ~80% respectively) may be achieved with a relatively coarse grind size of 180um. The ore is classified as hard, though this is somewhat offset by course liberation characteristics of the copper and gold minerals. Initial test work has demonstrated that concentrates containing in excess of >25% copper may be produced with two stages of cleaning. The following key infrastructure areas were reviewed during the Scoping study: . Power – an extensive high-voltage distribution network exists within the Vallenar region with the major sub-station (Maitencillo) to the central grid just 17km from Productora. Initial indications are that a 25km high-voltage line will be required to connect the site to the central grid. A number of options will be considered through the PFS process. . Water – Sea water processing has been assessed for Productora. It is anticipated that sea water will be delivered to site through a ~56km pipeline that will draw water from an intake facility located close to the Huasco port facility. . Accommodation – it is anticipated that construction and operational staff will be housed in the town of Vallenar which has a population of circa 50,000. . Port – several ports are within a reasonable trucking distance from the site, the closest being the Huasco port, which is 60km to the west and serviced by sealed roads. Hot Chili, in co-operation with CMP, is assessing the construction of a potential copper concentrate loading facility at Huasco port. . Road – the Pan American highway is located 5km to the east of the proposed project site. . Rail – existing CMP rail infrastructure runs parallel to the project immediately to the east and west of the resource. Development Studies During the year Hot Chili continued to progress its strategy of project development and de-risking, in parallel with an on-going focus on resource growth for the Productora Copper Project. In February 2013, the Company gave a go- ahead to the commencement of Pre-feasibility studies following the successful completion of a Scoping Study for Productora. The Productora Pre-feasibility study continues to assess the establishment of an open cut mining operation, a copper concentrator processing facility and other associated infrastructure. The study is managed by Ausenco, with the support from a number of specialised consultants both in Chile and Australia. Conventional open pit, blast and haul mining methods will be suitable for mining the Productora Copper Project. The planned central pit development contains a large continuous block of resources that will be the focus for mine design. The updated resource has highlighted near surface, high-grade material that presents an opportunity to “high- grade” the early production. The concept mining study indicated strip ratios in the range of 3.5-4.5:1. Initial indications are that both ore and waste are reasonably competent. Further work is expected to reduce strip ratios. This will include: 1. 2. 3. Further resource drilling to target mineralisation along the eastern flank of the resource currently classified as waste; Assessing the addition of a parallel zone of magnetite that looks likely to lie within the western waste-rock wall of the planned central pit development; Addition of further economic low-grade tonnes. Mining studies completed as part of the conceptual/ scoping studies indicated a preliminary marginal cut-off grade of 0.2% copper. A substantial amount of lower grade material surrounds the +0.3% mineral resource estimate within the planned future pit development; and 20 HOT CHILI ANNUAL REPORT 2013 continued Table 3. Scoping Study parameters, delivered in February 2013 Scoping Study Parameters Processing rate Strip ratio Metallurgical recovery Flowsheet Concentrate production Developmentcapex ~11Mt/a 3.5-4.5 : 1 (Target strip ratio of 4:1) >90% for copper ~80% for gold ~75% for molybdenum Recoveries achieved from coarse 180um grind size Conventional crush-grind-float for sulphide processing plant ~220kt/a grading approx. >25% Cu and 6g/t Au $500M-$700M (contingent on off balance sheet options for mining and certain infrastructure) Opex (C1 including gold credits) Molybdenum concentrate production US$1.20/lb – US$1.50/lb To be evaluated (grading 5,300ppm Mo) Magnetite mine gate sale Power requirement Power costs Infrastructure To be evaluated, potentially, from FY2018 onwards ~60MW consumption, ~80MW installed capacity 17-21c/kWhr until 2018 and 12-15c/kWhr 2018 and beyond Power cost exposure ~15-20% of opex Power – 17km from site Rail – 5km from site (CMP) Road – Pan American Highway 5km from site Accommodation – Town of Vallenar 15km from site Ports – Huasco, 56km from site (CMP) Water – Seawater, ~60km pipeline to be constructed along existing CMP easement corridor Figure 15. Productora infrastructure location plan HOT CHILI ANNUAL REPORT 2013 21 “ All results for the first-pass drilling programme have now been received and confirm the discovery of a large copper-gold porphyry deposit.” Frontera Copper Project Strong Drill Results Returned – Large Copper-Gold Porphyry Project Emerging The company is currently compiling and interpreting all drill results and anticipates a resource estimate to be completed late in 2013. The location of drilling completed and preliminary interpretation of copper-gold distribution is summarised in Figures 16, 17 and 18. Figure 16. Frontera geological mapping, rock chip sampling and drillhole locations In July 2013 the company completed its first pass drill assessment of the Frontera project. A total of 16,000m of reverse circulation (RC) and diamond (DD) drilling was designed to test an average of 300 metres vertical at the Frontera Copper Project. Broad zones of copper and gold mineralisation were intersected from surface in several of the drill holes completed by Hot Chili. Copper and gold grades recorded in the initial drill holes were higher than expected, confirming a potentially large future production source in the vicinity of the Company’s flagship Productora Copper Project. A series of outstanding drill results were reported including 256m at 0.5% copper and 0.3g/t gold, and 188m @ 0.5% Cu and 0.4g/t Au (from surface). Mineralisation at Frontera is hosted within an andesitic volcanic/volcaniclastic pile intruded by multiple phases of variably hornblende-rich dioritic porphyry intrusions. Best drilling results at Frontera have been returned from a potassic alteration zone characterised by intense veining and biotite- magnetite alteration. Copper is associated with finely disseminated chalcopyrite, vein-related chalcopyrite and bornite. Mineralisation at Frontera displays encouragingly high copper-gold ratios where bornite is locally present in higher grade zones within the deposit. Frontera exhibits classic copper-gold porphyry characteristics and is located within a linear trend of porphyry intrusions which include the Dos Amigos copper-gold mine (approximately 10km NNE of Frontera). All results for the first-pass drilling programme have now been received and confirm the discovery of a large copper-gold porphyry deposit. Given the location of Frontera in relation to Productora, the project may offer Hot Chili a potential second large ore source that would benefit significantly from existing infrastructure. 22 HOT CHILI ANNUAL REPORT 2013 1200m RL 1050m RL 900m RL 750m RL Figure 17. Frontera oblique cross section 6, displaying drilling completed and copper isosurfaces 1200m RL 1050m RL 900m RL 750m RL 1200m RL 1050m RL 900m RL 750m RL Grade Cu% 0.4 0.3 0.2 0.12 0.05 0m 50m 100m 150m 1200m RL 1050m RL 900m RL 750m RL Grade Cu-Eq%* 1.0 0.5 0.4 0.3 0..2 0m 50m 100m 150m Figure 18. Frontera cross section displaying drilling completed and copper equivalent (Cu-Au) isosurfaces HOT CHILI ANNUAL REPORT 2013 23 “ Drilling results and resource inventory growth to underpin optimal PFS study.” Qualifying Statements * Copper Equivalent Calculation Copper Equivalent (also Cu Eq*) Calculation represents the total metal value for each metal, multiplied by the conversion factor, summed and expressed in equivalent copper percentage. These results are exploration results only and no allowance is made for recovery losses that may occur should mining eventually result. However it is the company’s opinion that elements considered here have a reasonable potential to be recovered as evidenced in similar multi-commodity natured mines elsewhere in the world. Copper equivalent conversion factors and long-term price assumptions used follow: . Copper Equivalent Formula= Cu % + Mo(ppm) x0.0009 + Au(ppm)x0.7808 . Price Assumptions= Cu (US$1.60/lb), Mo (US$15/lb), Au (US$850/oz) Competent Person’s Statement – Exploration Reporting Information in this announcement that relates to exploration results and mineralisation is based on information compiled by Mr Christian Easterday, a Director, who is a Member of The Australian Institute of Geoscientists. Mr Easterday has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity 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’ (the JORC Code). Mr Easterday consents to the inclusion in this presentation of the statements based on his information in the form and context in which they appear. Competent Person’s Statement – Resource Reporting The information in this report that relates to the Central Mineral Resource, Productora is based on information compiled by Alf Gillman, who is a fellow of the Australasian Institute of Mining and Metallurgy. Alf Gillman is a director of Odessa Resources Pty Ltd, and has sufficient experience in mineral resource estimation, which is relevant to the style of mineralisation and type of deposit under consideration. He is qualified as a Competent Person as defined in the 2004 edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Alf Gillman consents to the inclusion in the report of the matters based on their information in the form and context in which it appears. The information in this report that relates to Mineral Resource estimates outside of the Central Mineral Resource is based on information compiled by Aloysius Voortman and Fleur Muller. Aloysius Voortman is a Fellow of the Australasian Institute of Mining and Metallurgy, and Fleur Muller is a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. Aloysius Voortman is an employee of Coffey Mining, and Fleur Muller is an employee of Hot Chili Limited, and both have sufficient experience in mineral resource estimation, which is relevant to the style of mineralisation and type of deposit under consideration. Mr Voortman and Mrs Muller are qualified as a Competent Person as defined in the 2004 edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Both Mr Voortman and Mrs Muller consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 24 HOT CHILI ANNUAL REPORT 2013 Table 4. JORC Compliant Resource Statement – Reported 11 February 2013 Classification Resource Series Tonnage Cu Au Mo Cu Eq Cu Au Mo Cu Eq* Grade Contained Metal (>0.3% Cu) (+0.3% Cu) Res Upgrade 1 Indicated Central Resource Total Res Upgrade 1 Inferred Central Resource Total Res Upgrade 1 Total Central Resource (Mt) 39.4 31.2 70.6 40.6 54.0 94.6 80.0 85.2 Total 165.2 % 0.6 0.6 0.6 0.5 0.6 0.5 0.5 0.6 0.6 (g/t) (g/t) 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 124 159 140 110 138 126 117 146 132 % 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.8 0.7 (Kt) (KOz) (Kt) 230 190 150 110 5 5 420 260 10 200 300 130 180 500 310 440 480 290 290 920 580 4 8 12 9 13 22 (Kt) 310 250 560 270 400 670 580 650 1,230 Note: Figures in the above table are rounded to one significant figure in accordance with Australian JORC code 2004 guidance on mineral resource reporting HOT CHILI ANNUAL REPORT 2013 25 “ Hot Chili now holds a 100% interest in the Central Lease (Productora 1/16) at Productora...” Tenement Schedule and Details Productora Tenement Details Outside of the Company’s own landholding, Hot Chili has executed agreements with several private parties, government organisations and major miners. Importantly, these parties together with Hot Chili control 100% of the strike extent of defined mineralisation within this land position including the central mining lease of Productora which contains an operating underground copper mine. Importantly, in February 2013, Hot Chili exercised its right to purchase of the Central Lease (Productora 1/16). Hot Chili now holds a 100% interest in the Central Lease (Productora 1/16) at Productora, containing over half of the projects established resources and lying within the Company’s planned central pit development. The decision by Hot Chili to exercise its purchase option over the Central Lease finalises the Company’s last major purchase commitment at Productora. Purchase of the Central Lease followed the company’s decision to give the go-ahead for full Pre-feasibility studies. Hot Chili has also successfully acquired further tenements along the western and southern extension to the Productora project. The new tenements expand the area of the Productora project, providing further up-side to Hot Chili’s plans to delineate and develop significant copper-gold- molybdenum resources at the project. Hot Chili has established close working relationships with both government and private stakeholders, of particular note is the major local partnership with CMP (Chile’s largest iron ore producer). The details of the tenement holding for the Productora project are listed in Table 5. 26 HOT CHILI ANNUAL REPORT 2013 Table 5. Productora project tenement details Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) FRAN 1, 1-48 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 2, 1-20 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 3, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 4, 1-20 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 5, 1-20 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 6, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 7, 1-37 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 8, 1-30 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 12, 1-40 SMEAL 100% FRAN 13, 1-40 SMEAL 100% FRAN 14, 1-40 SMEAL 100% Exploitation concession Exploitation concession Exploitation concession 200 780,420 1,609.10 806,520 1,557 200 780,420 1,609.10 806,520 1,557 200 780,420 1,609.10 806,520 1,557 FRAN 15, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 18, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 21, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 FRAN 22 SMEAL 100% ALGA 7A, 1-32 SMEAL 100% ALGA VI, 5-24 SMEAL 100% MONTOSA 1-4 SMEAL 100% CHICA SMEAL 100% ESPERANZA 1-5 SMEAL 100% LEONA SEGUNDA 1-4 SMEAL 100% Exploration concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession 89 66 35 1 11 10 400 312,168 644 322,608 623 347,286.90 716 358,901 692.85 None 257,538.60 531 266,152.00 513.8 None 136,574 281.5 141,141 272.47 None 3,902 8.04 4,033 7.78 42,923.10 88.5 44,358.60 85.63 39,021 80.45 40,326 77.84 CARMEN I, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 CARMEN II, 1-60 SMEAL 100% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 None None None None None None None None None None None None None None None None None None None None None ZAPA 1, 1-10 SMEAL 100% ZAPA 3, 1-23 SMEAL 100% ZAPA 5A, 1-16 SMEAL 100% ZAPA 7, 1-24 SMEAL 100% CABRITO, CABRITO 1-9 SLM CABRITO 80% CUENCA A, 1-51 CMP 65% CUENCA B, 1-28 CMP 65% CUENCA C, 1-51 CMP 65% CUENCA D CMP 65% CUENCA E CMP 65% CHOAPA 1-10 CMP 65% ELQUI 1-14 CMP 65% LIMARÍ 1-15 CMP 65% LOA 1-6 CMP 65% MAIPO 1-10 CMP 65% TOLTÉN 1-4 CMP 65% Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession CACHIYUYITO 1, 1-60 CACHIYUYITO 2, 1-60 CACHIYUYITO 3, 1-60 LA PRODUCTORA 1-16 CMP 65% CMP 65% SMEAL 100% Exploitation concession Exploitation concession Exploitation concession 100 390,210 804.5 403,260 778.49 92 80 358,993.20 740.1 370,999.20 716.21 None 468,252 965.4 322,608 622.79 None 120 468,252 965.4 483,912 934.19 None 50 195,105 402.2 201,630 389.24 None 255 995,036 2,051.60 1,028,313 1,985.16 139 542,392 1,118 560,531 1,082 255 995,036 2,051.60 1,028,313 1,985.16 3 1 50 61 66 30 50 70 11,706.30 24.1 12,097.80 23.35 3,902 8.04 4,033 7.78 195,105 402.2 201,630 389.24 238,028.10 490.7 245,988.60 474.88 257,538.60 531 266,151.60 513.806 117,063 241 120,978 234 195,105 402.2 201,630 389.24 273,147 563.1 282,282 544.94 t n e m t i m m o C e r u t i d n e p x E n o i t a r o p x E l l a t o T , 0 0 0 , 0 5 7 $ S U 1 r Y ( s r a e y 5 r e v o 0 0 0 , 0 0 0 , 4 $ S U f o , 0 0 0 , 0 0 0 , 1 $ S U 4 r Y , 0 0 0 , 0 0 5 $ S U 3 r Y , 0 0 0 , 0 0 5 $ S U 2 r Y . d e fi s i t a s y d a e r l A . ) 0 0 0 , 0 5 2 , 1 $ S U 5 r Y 0 0 0 , 0 0 1 $ S U f o ) e c i r p ( t n e m y a P e s c r e x E i CMP 65% Mining Claim 300 1,170,630 2,414 1,209,780 2,335 Comments Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Constituted Constituted Constituted Being processed Being processed Being processed 06.02.2014 Constituted Constituted Constituted Constituted Constituted Constituted Constituted Being processed Being processed Constituted Constituted Constituted Constituted Constituted d e t u c e x e t n e m e e r g A n o i t p o n i - n r a E V J % 5 6 r a e Y 5 4 1 0 2 , 5 r e b o t c O e t a d n o i t a r i p x E 300 1,170,630 2,414 1,209,780 2,335 300 1,170,630 2,414 1,209,780 2,335 75 292,658 603.4 302,445 583.87 None Constituted HOT CHILI ANNUAL REPORT 2013 27 Tenement Schedule and Details continued Licence ID BUENA SUERTE 1-6 Holder (1) SLM BUENA SUERTE Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) Comments 100% Exploitation concession 30 117,063 241.3 120,978 234 PILAR 1-2 SLM PILAR 100% Exploitation concession 10 39,021 80.4 40,326 77.84 ORO INDIO I, 1-20 JGT 100% Exploitation concession 82 319,972.20 659.7 330,673.20 638.36 AURO HUASCO I, 1-8 JGT 100% Exploitation concession 35 136,574 281.5 141,141 272.47 r Y r e p 0 0 0 , 0 0 1 $ S U e s a h p n o i t a r o p x E l URANIO, 1-70 CCHEN 100% Exploitation concession 350 1,365,735 2,815.90 1,411,410 2,724.70 JULI 1 JULI 2 JULI 3 JULI 4 JULI 5 JULI 6 JULI 7 JULI 8 JULI 9 JULI 10 JULI 11 JULI 12 JULI 13 JULI 14 SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions 300 300 300 300 100 200 200 300 300 300 300 300 100 300 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 80,652 None None 161,304 None None 161,304 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 80,652 None None 241,956 467 467 467 467 156 311 311 467 467 467 467 467 156 467 28 HOT CHILI ANNUAL REPORT 2013 i i l n o i t a r o p x e m u m n m 0 0 0 , 0 0 0 , 6 $ S U s u p l l d e t e p m o c y d a e r l A . t n e m t i m m o c r Y r e p 0 0 0 , 0 5 2 $ S U e s a h p n o i t a t i o p x E l ; l d o g R S N % 4 ; l d o g t u b l l a R S N % 2 s u p l c i l l a t e m - n o n R S N % 5 None None None None None None None None None None None None None None . 0 0 0 0 0 0 , , 1 $ S U f o e c i r p l a t o T . 0 0 0 , 0 0 5 $ S U f o e c i r p l a t o T . e r u t a n g s i i n o p u d a p 0 0 0 0 2 $ S U , . e r u t a n g s i i n o p u d a p 0 0 0 , 0 0 1 $ S U , 2 , 1 r Y r o f a p 0 0 0 , 0 5 $ S U f o s t n e m y a P , 1 r Y r o f a p 0 0 0 , 0 8 $ S U f o s t n e m y a P t n e m y a p e s c r e x E i . 4 r Y r o f 0 0 0 0 5 , $ S U f o t n e m y a p e s c r e x E i . e n o d y d a e r l a 1 f o t n e m y a p r e h t r u f A . e n o d y d a e r l a 3 r Y r o f 0 0 0 , 0 8 $ S U f o t n e m y a P . 4 , 3 , 2 . 5 r Y f o d n e e h t t a 0 0 0 , 0 8 7 $ S U f o . 5 r Y f o d n e e h t t a 0 0 0 , 0 8 $ S U n o i t p o - e s a h c r u P % 0 0 1 r a e Y 5 n o i t p o - e s a h c r u P % 0 0 1 r a e Y 5 ) 0 3 o t l e b a w e n e r ( r a e y 5 d e t u c e x e t n e m e e r g A e t a d n o i t a r i p x E 4 1 0 2 , 8 1 r e b m e v o N d e t u c e x e t n e m e e r g A e t a d n o i t a r i p x E 7 1 0 2 , 3 1 y r a u r b e F t n e m e e r g a e s a e l e t a d n o i t a n m r e T i 2 4 0 2 , 2 2 t s u g u A Being processed 25.06.2015 Constituted 25.06.2015 Constituted 25.06.2015 Constituted Being processed Being processed 25.06.2015 Constituted 25.06.2015 Constituted 25.06.2015 Constituted Being processed Being processed 25.06.2015 Constituted 25.06.2015 Constituted Being processed Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) JULI 15 JULI 16 JULI 17 JULI 18 JULI 19 JULI 20 JULI 21 JULI 22 JULI 23 JULI 24 JULI 25 JULI 26 JULI 27 JULI 28 SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% SMEAL 100% JULIETA 1 SMEAL 100% JULIETA 2 SMEAL 100% JULIETA 3 SMEAL 100% JULIETA 4 SMEAL 100% JULIETA 5 SMEAL 100% JULIETA 6 SMEAL 100% JULIETA 7 SMEAL 100% JULIETA 8 SMEAL 100% JULIETA 9 SMEAL 100% JULIETA 10 SMEAL 100% JULIETA 11 SMEAL 100% JULIETA 12 SMEAL 100% JULIETA 13 SMEAL 100% JULIETA 14 SMEAL 100% JULIETA 15 SMEAL 100% JULIETA 16 SMEAL 100% JULIETA 17 SMEAL 100% JULIETA 18 SMEAL 100% JULIETA 19 SMEAL 100% Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions Mining Petitions 300 300 200 300 300 300 300 300 300 300 300 300 200 300 100 200 300 200 300 300 300 300 300 300 300 300 300 300 200 200 200 200 200 None None 241,956 None None 241,956 None None 161,304 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 161,304 None None 241,956 None None 80,652 None None 161,304 None None 241,956 None None 161,304 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 241,956 None None 161,304 None None 161,304 None None 161,304 None None 161,304 None None 161,304 467 467 311 467 467 467 467 467 467 467 467 467 311 467 156 311 467 311 467 467 467 467 467 467 467 467 467 467 311 311 311 311 311 None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None 30,186,646 62,244.43 31,034,890 59,911.35 Total Exercise Payment Commitments (or price) US$1,250,000 Total lease price next 4 Yrs. US$400,000 Comments Being processed 25.06.2015 Constituted 25.06.2015 Constituted 25.06.2015 Constituted Being processed Being processed 25.06.2015 Constituted 25.06.2015 Constituted 25.06.2015 Constituted Being processed Being processed 25.06.2015 Constituted 25.06.2015 Constituted 25.06.2015 Constituted Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Being processed Obs.: (1) CMP= Compañía Minera del Pacífico; SLM Productora= Sociedad Legal Minera La Productora 1 de la Sierra Coyigualles; SLM Buena Suerte= Sociedad Legal Minera Buena Suerte 1 de la Sierra Tamarico; SLM Pilar= Sociedad Legal Minera Pilar 1 de la Sierra Tamarindo; SLM Cabrito= Sociedad Legal Minera Cabrito de la Sierra Zapallo; JGT= Julio Godoy Torres; CCHEN= Comisión Chilena de Energía Nuclear. (2) In accordance with the December UTM, which amounts 39021 CL. (3) In accordance with an approximate dollar exchange rate (CH$485). (4) In accordance with the August 2013 UTM, which amounts 40326 CL. (5) In accordance with an approximate dollar exchange rate (CH$518). HOT CHILI ANNUAL REPORT 2013 29 Tenement Schedule and Details continued Frontera Tenement Details The Frontera project lies 70km directly south of Productora in Region IV of Chile. Frontera is an advanced exploration stage project with historical drilling and a small-scale, historical, copper-oxide open pit within the project. Hot Chili has also completed an extensive drill programme over the La Union 1-2 lease. Sociedad Minera El Aguila (SMEAL – Hot Chili’s wholly owned Chilean subsidiary)has entered into a 30 month, 100% purchase-option agreement with private Chilean company Compañía Minera Taruca SCM. The agreement has been executed with a US$600,000 payment. Future outstanding payments include US$300,000 due in 18 months and a final purchase price of US$5,000,000 due 12 months later. In addition, SMEAL has committed to complete 10,000m of drilling at the project within the first 24 month period. Table 6. Frontera project tenement details Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) Comments LA UNION 1-2 JOTA 1 MADRID 1 MADRID 2 Compañía Minera Taruca SCM Compañía Minera Taruca SCM Compañía Minera Taruca SCM Compañía Minera Taruca SCM 100% Exploitation Concession 10 39,021 80.4 40,326 77.84 100% Mining Claim 1 3,902 8.04 4,033 7.78 100% Mining Petition 100 78,042 160.9 80,652 156 100% Mining Petition 300 234,126 482.7 241,956 467 355,091 732.04 366,967 708.22 0 0 0 , 5 5 2 $ S U . 0 0 0 , 0 0 9 , 5 $ S U f o e c i r p l 0 0 0 , 4 4 3 $ S U . e r u t a n g s i e h t o t r o i r p d a p 0 0 0 , 0 0 3 $ S U . e r u t a n g s i e h t n o p u d a p i f o n o i t u c e x e e h t r e t f a h t n o m 8 1 e c n o f o t n e m y a p e s c r e x E i . t n e m e e r g a e h t . 0 3 h t n o m f o d n e e h t t a 0 0 0 , 0 0 0 , 5 $ S U i a t o T Total Exercise Payment Commitments (or price) due US$5,300,000 i g n e B 2 d i r d a M d n a 1 d i r d a M , 1 a t o J - e s a h c r u P % 0 0 1 – h t n o m 0 3 . d e s s e c o r p d e t u c e x e t n e m e e r g A n o i t p o e t a d n o i t a r i p x E 5 1 0 2 , 0 3 r e b m e v o N Obs.: (1) In accordance with the December UTM, which amounts 39021 CL. (2) In accordance with an approximate dollar exchange rate (CH$485). (3) In accordance with the August 2013 UTM, which amounts 40326 CL. (4) In accordance with an approximate dollar exchange rate (CH$518). 30 HOT CHILI ANNUAL REPORT 2013 315,000 320,000 325,000 Tenement Details 100% SMEAL Ownership 100% Purchase Option 80% Purcahse Option 65% SMEAL, 35% CMP 30 YEAR LEASE (CCHEN) EXCISION FRAN 2 1/60 FRAN 3 1/60 FRAN 4 1/60 FRAN 5 1/60 FRAN 6 1/60 FRAN 7 1/60 FRAN 8 1/60 FRAN 1 1/60 PILAR 1/2 FRAN 14 1/20 BUENA SUERTE 1/6 FRAN 12 1/40 FRAN 13 1/40 FRAN 15 1/60 CACHIYUYITO 1 1/60 JULI 28 JULI 27 ZAPA 1 1/10 CACHIYUYITO 2 1/60 CUENCA B 1/28 ZAPA 3 1/23 CUENCA A 1/51 CUENCA C 1/51 JULI 24 JULI 25 ZAPA 5A 1/16 MONTOSA 1/4 PRODUCTORA 1/16 CUENCA D CUENCA E ZAPA 7 1/24 LOA 1/6 TOLTEN 1/14 CACHIYUYITO 3 1/60 URANIO 1/70 ELQUI 1/14 LIMARI 1/15 CHOAPA 1/10 MAIPO 1/10 JULI 20 JULI 23 FRAN 18 1/60 ORO INDIO 1 1-20 ALGA 7A 1-32 ESPERANZA 1-5 FRAN 21 1/60 CHICA LEONA 2 1/4 JULIETA 5 JULIETA 7 AURO HUASCO 1, 1-8 CARMEN I AURO HUASCO 1, 1-8 CARMEN II JULIETA 13 JULIETA 14 ALGA VI 5-24 CABRITO JULI 19 JULI 9 JULI 10 JULIETA 10 JULIETA 11 JULIETA 12 JULETA 15 JULETA 16 JULIETA 17 JULIETA 18 JULI 20 JULI 21 , 0 0 0 0 3 8 6 , , 0 0 0 5 2 8 , 6 0 0 0 , 0 2 8 , 6 , 0 0 0 5 1 8 6 , , 0 0 0 0 3 8 6 , , 0 0 0 5 2 8 , 6 0 0 0 , 0 2 8 , 6 , 0 0 0 5 1 8 6 , JULI 17 JULI 14 JULI 16 JULI 15 0 1 2 4 Kilometers 0 0 0 , 0 1 8 , 6 ³ 0 0 0 , 0 1 8 , 6 315,000 320,000 325,000 Figure 19. Productora project tenement location plan HOT CHILI ANNUAL REPORT 2013 31 Tenement Schedule and Details 310,000 311,000 Frontera Tenement Map Legend Frontera Tenements SMEAL 100% PURCHASE OPTION FLOOR OF PROTECTION MADRID 1 UNION 1-2 JOTA 1 MADRID 2 ³ 0 0.25 0.5 1 Kilometers 310,000 311,000 0 0 0 , 6 7 7 , 6 0 0 0 , 5 7 7 , 6 0 0 0 , 4 7 7 , 6 0 0 0 , 3 7 7 , 6 0 0 0 , 2 7 7 6 , 0 0 0 , 6 7 7 , 6 0 0 0 , 5 7 7 , 6 0 0 0 , 4 7 7 , 6 0 0 0 , 3 7 7 , 6 0 0 0 , 2 7 7 6 , Figure 20. Frontera project tenement plan 32 HOT CHILI ANNUAL REPORT 2013 Banderas Tenement Details The Banderas project is located at low altitude (<1,000m) approximately 50km north of Hot Chili’s Productora project, adjacent to the Pan American highway in Region III of Chile. The project is at an early exploration stage and has seen some historical, small-scale, copper mining within an extensive, large-scale alteration system. Sociedad Minera El Aguila (SMEAL – Hot Chili’s wholly owned Chilean subsidiary) has entered into several option agreements to purchase 65% and 100% interests in each of the mining exploitation and exploration concessions at the Banderas project owned by a number of private Chilean individuals. The option exercise period for each of the 65% purchase- option agreements is five years, while the exercise period for the 100% purchase-option agreement is four years. In addition, SMEAL has 100% ownership over some 1900ha of tenements in the area. Table 7. Banderas project tenement details Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) Comments COTOTO 1 COTOTO 2 COTOTO 3 COTOTO 4 COTOTO 5 PIMPOLLA 1 PIMPOLLA 2 PIMPOLLA 3 PIMPOLLA 4 COTOTO A1 COTOTO A2 COTOTO A3 COTOTO A4 COTOTO A5 COTOTO A6 COTOTO A7 COTOTO A8 PIMPOLLA A1 PIMPOLLA A2 PIMPOLLA A3 PIMPOLLA A4 PIMPOLLA A5 PIMPOLLA A6 PIMPOLLA A7 PIMPOLLA A8 IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession Exploration concession 200 156,084 321.8 161,304 200 156,084 321.8 161,304 200 156,084 321.8 161,304 200 156,084 321.8 161,304 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 300 234,126 482.7 241,956 311 311 311 311 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 467 . e r u t a n g s i i n o p u d a p 0 0 0 , 0 3 $ S U . 0 0 0 , 0 8 1 $ S U f o e c i r p l a t o T . d e fi s i t a s y d a e r l a 1 r Y r o f t n e m y a P . 4 , 3 , 2 , 1 r Y r o f a p 0 0 0 , 0 3 $ S U f o s t n e m y a P . 5 r Y f o d n e e h t t a 0 0 0 , 0 3 $ S U f o t n e m y a p e s c r e x E i 13.04.2014 31.01.2014 13.04.2014 31.01.2014 31.01.2014 31.04.2014 31.01.2014 27.04.2014 31.01.2014 20.12.2013 05.01.2014 05.01.2014 05.01.2014 06.01.2014 06.01.2014 10.01.2014 10.01.2014 10.01.2014 10.01.2014 10.01.2014 26.12.2013 26.12.2013 26.12.2013 26.12.2013 26.12.2013 d e t u c e x e t n e m e e r g A n o i t p o n i - n r a E V J % 5 6 r a e Y 5 7 1 0 2 , 3 2 l y u J e t a d n o i t a r i p x E TITIRUTA 2, 1-20 SMEAL 100% Mining claim 57 222,419.70 458.5 229,858.20 443.74 None Being proccesed RENACIMIENTO 1-10 JSR 65% Exploitation Concession 44 171,692.40 354 177,434.40 342.53 . 0 0 0 , 0 8 1 $ S U f o e c i r p l a t o T i . e r u t a n g s n o p u d a p 0 0 0 , 0 3 $ S U i . r Y r o f a p 0 0 0 , 0 3 $ S U f o s t n e m y a P $ S U f o t n e m y a p e s c r e x E i . 4 , 3 , 2 , 1 t n e m y a P . 5 r Y f o d n e e h t t a 0 0 0 , 0 3 . d e fi s i t a s y d a e r l a 1 r a e y r o f n i - n r a E V J % 5 6 - r a e Y 5 d e t u c e x e t n e m e e r g A n o i t p o e t a d n o i t a r i p x E 6 1 0 2 , h t 2 1 r e b m e c e D HOT CHILI ANNUAL REPORT 2013 33 Tenement Schedule and Details continued Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) . , 0 0 0 0 8 1 $ S U f o e c i r p l a t o T 0 0 0 , 2 4 $ S U . 0 0 0 , 0 8 4 $ S U f o e c i r p l a t o T ESCONDIDA 1-10 ADC 65% Exploitation Concession 50 195,105 402.2 201,630 389.24 BANDERITA 1-5 SLM BAN- DERITA 100% Exploitation Concession 5 19,511 40.2 20,163 38.92 RESGUARDO 1, 2, 3, 4, 5, 6, 7, 8, 12, 13, 14 y 20 SLM RES- GUARDO 100% Exploitation Concession 60 234,126 482.7 241,956 467.09 RESGUARDO 9, 10, 11, 15, 16, 17, 18 y 20 SLM RES- GUARDO 100% Exploitation Concession 40 156,084 321.8 161,304 311.39 CONEJA 1-10 SMEAL 100% Exploitation Concession 100 390,210 804.5 403,260 778.49 COTOTO 1, 1-60 COTOTO 2, 1-60 COTOTO 3, 1-60 COTOTO 4, 1-60 COTOTO 5, 1-60 COTOTO 6, 1-60 COTOTO 7, 1-60 COTOTO 8, 1-60 PIMPOLLA 1, 1-60 PIMPOLLA 2, 1-60 PIMPOLLA 3, 1-60 PIMPOLLA 4, 1-60 PIMPOLLA 5, 1-60 PIMPOLLA 6, 1-60 PIMPOLLA 7, 1-60 PIMPOLLA 8, 1-60 BLANCA 1 BLANCA 2 BLANCA 3 BLANCA 4 BLANCA 5 BLANCA 6 BLANCA 7 BLANCA 8 BLANCA 9 IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL IPL 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 100% Mining Claim 300 SMEAL 100% Mining Petition 200 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 SMEAL 100% Mining Petition 300 None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None None 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 1,209,780 2,335 161,304 241,956 241,956 241,956 241,956 241,956 241,956 241,956 241,956 311 467 467 467 467 467 467 467 467 i n o p u d a p 0 0 0 0 3 $ S U , f o s t n e m y a P . e r u t a n g s i n o p u d a p i f o s t n e m y a P . e r u t a n g s i t n e m y a P . 2 , 1 r Y r o f a p 0 0 0 , 2 4 $ S U $ S U f o t n e m y a p e s c r e x E i . 4 . 4 r Y f o d n e e h t t a 0 0 0 , 4 8 2 $ S U f o . 5 r Y f o d n e e h t t a 0 0 0 0 3 , . d e fi s i t a s y d a e r l a 1 r a e y r o f t n e m y a P , 3 , 2 , 1 r Y r o f a p 0 0 0 , 0 3 $ S U t n e m y a p e s c r e x E i . 3 r a e y a p 0 0 0 , 0 7 $ S U None None None None None None None None None None None None None None None None None None None None None None None None None None Comments n i - n r a E V J % 5 6 r a e Y 5 d e t u c e x e t n e m e e r g A n o i t p o e t a d n o i t a r i p x E 7 1 0 2 , 8 2 y r a u r b e F n o i t p o - e s a h c r u P % 0 0 1 r a e Y 4 d e t u c e x e t n e m e e r g A 5 1 0 2 , 9 2 r e b m e v o N e t a d n o i t a r i p x E Constituted Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed Being proccesed 6,930,130 14287.8 28,615,330 55,237 Total Exercise Payment Commitments due (or price) US$756,000 Obs.: (1) JIS= José Ignacio Silva; SMEAL= Sociedad Minera El Águila Ltda.; JSR= Julio Salomon Richards; ADC= Arnaldo Del Campo; SLM Banderita Uno de la Sierra Algarrobo; and, SLM Resguardo= Sociedad Legal Minera Resguardo Uno de la Sierra Algarrobo. (2) In accordance with the December UTM, which amounts 39021 CL. (3) In accordance with an approximate dollar exchange rate (CH$485). (4) In accordance with the August 2013 UTM, which amounts 40326 CL. (5) In accordance with an approximate dollar exchange rate (CH$518). 34 HOT CHILI ANNUAL REPORT 2013 350,000 Legend Tenement Details 100% SMEAL Ownership 100% purchase option agreement 65%-35% Joint Venture (ADC) 65%-35% Joint Venture (JIS) 65%-35% Joint Venture (JSR) No Preference 355,000 PIMPOLLA 6, 1-60 PIMPOLLA 7, 1-60 PIMPOLLA 5, 1-60 PIMPOLLA 1, 1-60 PIMPOLLA 3, 1-60 PIMPOLLA 2, 1-60 PIMPOLLA 4, 1-60 PIMPOLLA 8, 1-60 CONEJA 1-10 BLANCA 1 COTOTO A1 RESGUARDO 1-20A COTOTO 1, 1-60 COTOTO 2, 1-60 RESGUARDO 1-20B COTOTO A2 BLANCA 2 COTOTO A3 ESCONDIDA 1/10 COTOTO 4, 1-60 COTOTO A4 COTOTO 3, 1-60 BANDERITA 1/5 RESGUARDO 1-20A RENACIMIENTO 1-10 COTOTO 6, 1-60 TITIRUTA 2 1-20 COTOTO 5, 1-60 COTOTO A5 COTOTO 7, 1-60 COTOTO 8, 1-60 COTOTO A8 E BLANCA 8 BLANCA 9 BLANCA 8 BLANCA 9 BLANCA 3 BLANCA 4 BLANCA 5 BLANCA 6 BLANCA 7 ³ 0 0.5 1 2 Kilometers 0 0 0 , 5 8 8 , 6 0 0 0 , 0 8 8 6 , 0 0 0 , 5 7 8 , 6 0 0 0 , 5 8 8 , 6 0 0 0 , 0 8 8 6 , 0 0 0 , 5 7 8 , 6 350,000 355,000 Figure 21. Banderas project tenement plan HOT CHILI ANNUAL REPORT 2013 35 Tenement Schedule and Details Los Mantos Tenement Details Los Mantos is located, at low altitude (<1,000m elevation), in the coastal range of Region IV, Chile, 240km south of Hot Chili´s flagship project Productora and immediately adjacent to Teck’s large-scale Andacolla copper-gold operation. The Los Mantos project comprises 71 licences in total, and the landholding now covers an area of more than 10,000ha. Hot Chili, through its Chilean subsidiary company Sociedad Minera El Aguila (SMEAL), has entered into a five year option agreement for the 100% purchase of the Los Mantos project. The private purchase-option agreement with local Chilean landholder and mine operator Mr. Aldo Cordero Godoy was executed on 11 June 2009, with the payment of US$220,000. The right to purchase 100% of the Aldo Cordero concession is exercisable at any time within the five year option period following satisfaction of all remaining yearly option payments and an exercise payment of US$2,000,000. Late in 2012 Hot Chili significantly increased the size of its Los Mantos copper project in Chile under a farm-in agreement with Compañia Contractual Minera Los Andes (CCMLA), a subsidiary of the Chilean major CODELCO, the world’s largest copper producer. The agreement represents the start of Hot Chili’s efforts to significantly expand the size of its Los Mantos copper project and build a substantial exploration land position immediately adjacent to Teck’s large-scale Andacollo copper-gold operation. Under the agreement Hot Chili can earn up to 60% of an additional 10,000 hectares at Los Mantos over six years. Under the terms of the 60% earn-in Joint Venture (JV) between CCMLA, a subsidiary of CODELCO, and Hot Chili’s 100% operating subsidiary Sociedad Minera El Aguila (SMEAL), the Company made an upfront payment of US$ 50,000 upon execution. In addition, Hot Chili will be required to commit to a minimum expenditure of US$2 million during the first five years of the earn-in phase including US$150,000 in the first year. During the sixth year of the JV agreement, Hot Chili also commits to completing a definitive feasibility study, adopt a Decision to Construct and pay the additional sum of US$100,000 in order to exercise the JV. Since 2011, Hot Chili has pursued discussions with CODELCO (through its subsidiary) to expand the Company’s planned future exploration activities to include CODELCO’s large landholding in the area. In addition to this latest agreement, further consolidation of the Los Mantos project area is planned. Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) Comments None None None None 03.05.2014 12.06.2014 12.06.2014 12.06.2014 n o i t c e t o r P f o r o o F l l . y n o s e c n e c i l i g n e b y l t n e r r u C L A E M S o t d e r e f n a r t Table 8. Los Mantos project tenement details Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) FELIZ DIECIOCHO 1 FELIZ DIECIOCHO 2 FELIZ DIECIOCHO 3 FELIZ DIECIOCHO 4 ICS 100% Exploration 200 156,084 321.8 161,304 ICS 100% Exploration 200 156,084 321.8 161,304 ICS 100% Exploration 200 156,084 321.8 161,304 ICS 100% Exploration 200 156,084 321.8 161,304 US$ (5) 311 311 311 311 36 HOT CHILI ANNUAL REPORT 2013 continued Licence ID Holder (1) Interest (%) Licence Type Area (ha) Mining Patents 2013-2014 ($) (2) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) Comments n o i t p o - e s a h c r u P % 0 0 1 r a e Y 5 . d e t u c e x e t n e m e e r g A 4 1 0 2 4 y u J l e t a d n o i t a r i p x E d e t u c e x e t n e m e e r g A n o i t p O V J % 0 6 r a e Y 5 ANTONIO 1-29 ACG 100% Exploitation 139 542,392 1,118 560,531 1,082 ESPADA 1-12 ACG 100% Exploitation 36 140,476 290 145,173 280 ROSITA 1-6 ACG 100% Exploitation 30 117,063 241 120,978 234 ALINDERAMIENTO Y OTRAS ACG 100% Exploitation 9 25,119 72 36,293 70 ENSUEÑO 1-11 ACG 100% Exploitation 50 195,105 402.2 201,630 389.24 n o p u d a p 0 0 0 i , 0 2 2 $ S U . 0 0 0 , 0 7 4 , 2 $ S U f o l a t o T d n e e h t t a a p 0 0 0 0 5 $ S U , f o s t n e m y a P ; e r u t a n g s i 4 r Y n i 0 0 0 , 0 0 1 $ S U . e n o d y d a e r l a 3 , 2 1 , r Y f o 0 0 0 , , 0 0 0 2 $ S U f o t n e m y a P e s c r e x E i . e n o d y d a e r l a t n e m y a P e s i c r e x E l a t o T . 5 r Y f o d n e e h t t a 0 0 0 , 0 0 1 , 2 $ S U ) e c i r p r o ( e u d s t n e m t i m m o C 311 623 311 467 467 623 HAPI E1 HAPI E2 HAPI E3 HAPI E4 HAPI E5 HAPI E6 HAPI E7 HAPI E8 HAPI E9 MLA 60% Exploration 900 702,378 1,448.20 725,868 1,401.20 MLA 60% Exploration MLA MLA MLA 60% Exploration 60% Exploration 60% Exploration MLA 60% Exploration 900 300 300 200 600 702,378 1,448.20 None None 234,126 234,126 156,084 482.7 482.7 321.8 241,956 241,956 161,304 467 467 311 468,252 965.4 483,912 934.19 MLA 60% Exploration 200 156,084 321.8 161,304 MLA 60% Exploration 400 312,168 644 322,608 MLA 60% Exploration 200 156,084 321.8 161,304 HAPI E10 MLA 60% Exploration 300 234,126 482.7 241,956 HAPI E11 MLA 60% Exploration 300 234,126 482.7 241,956 HAPI E12 MLA 60% Exploration 400 312,168 644 322,608 HAPI E13 MLA 60% Exploration 600 468,252 965.4 483,912 934.19 HAPI E14 MLA 60% Exploration 200 156,084 321.8 161,304 JADABA D1 MLA 60% Exploration 200 156,084 321.8 161,304 JADABA D2 MLA 60% Exploration 200 156,084 321.8 161,304 JADABA D3 MLA 60% Exploration 300 234,126 482.7 241,956 JADABA D4 MLA 60% Exploration 200 156,084 321.8 161,304 JADABA D5 MLA 60% Exploration 400 312,168 644 322,608 311 311 311 467 311 623 JADABA D6 MLA 60% Exploration 600 468,252 965.4 483,912 934.19 JADABA D7 MLA 60% Exploration 300 234,126 482.7 241,956 JADABA D8 MLA 60% Exploration 400 312,168 644 322,608 467 623 JADABA D9 MLA 60% Exploration 1200 936,504 1,930.90 None None JADABA D10 MLA 60% Exploration 1200 936,504 1,930.90 None None JADABA D11 MLA 60% Exploration 800 624,336 1,287.20 645,216.00 1,245.59 JADABA D12 MLA 60% Exploration 600 468,252 965.4 None None JADABA D13 MLA 60% Exploration 800 624,336 1,287.20 645,216.00 1,245.59 JADABA D14 MLA 60% Exploration 300 234,126 482.7 None None JADABA D15 MLA 60% Exploration MONICA D1 LEONOR E7 LEONOR E8 LEONOR E9 MLA MLA MLA MLA 60% Exploration 60% Exploration 60% Exploration 60% Exploration HAPI C1, 1-30 MLA 60% Exploitation concession 200 200 200 200 400 156,084 321.8 None None 156,084 156,084 156,084 321.8 321.8 321.8 161,304 161,304 161,304 312,168 644 322,608 311 311 311 623 300 1,170,630 2,414 None None 23.06.2013 (Expired) 23.06.2013 (Expired) 23.11.2013 16.09.2013 23.11.2013 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 18.08.2013 (Expired) 18.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 24.08.2013 (Expired) 23.11.2013 09.04.2014 09.04.2014 09.04.2014 , 6 r e b m e v o N n e e w t e B ) i ( : s e s n e p x e n o i t a r o p x E l . I I . 0 0 0 , 0 0 0 , 2 $ S U e u a v l n o i t a r o p r o c n i i f o e s m o r P . I , 4 1 0 2 , 5 r e b m e v o N d n a , 3 1 0 2 , 6 r e b m e v o N n e e w t e B ) i i ( ; 0 0 0 , 0 5 1 $ S U 3 1 0 2 , 5 r e b m e v o N d n a , 2 1 0 2 , 5 1 0 2 , 6 r e b m e v o N n e e w t e B ) v i ( ; 0 0 0 , 0 0 3 $ S U , 5 1 0 2 , 5 r e b m e v o N d n a , 4 1 0 2 , 6 r e b m e v o N n e e w t e B ) i i i ( ; 0 0 0 , 0 0 3 $ S U . 0 0 0 , 0 5 7 $ S U , 7 1 0 2 , 5 r e b m e v o N d n a , 6 1 0 2 , 6 r e b m e v o N n e e w t e B ) v i ( ; 0 0 0 , 0 0 5 $ S U , 6 1 0 2 , 5 r e b m e v o N d n a HOT CHILI ANNUAL REPORT 2013 37 Tenement Schedule and Details continued Licence ID Holder (1) Interest (%) HAPI C3, 1-60 MLA 60% Licence Type Exploitation concession Mining Patents 2013-2014 ($) (2) Area (ha) US$ (3) Mining Patents 2014-2015 ($) (4) US$ (5) Exploration and Expenditure Commitment- Payments Expiration date of the concession (dd.mm.yyyy) Comments 300 1,170,630 2,414 1,209,780 2,335 HAPI C4, 1-30 HAPI C5, 1-30 MLA MLA 60% Mining claim 300 1,170,630 2,414 1,209,780 2,335 60% Mining claim 300 1,170,630 2,414 1,209,780 2,335 HAPI C14, 1-30 MLA 60% HAPI D1, 1-60 MLA 60% HAPI D2, 1-60 MLA 60% Exploitation concession Exploitation concession Exploitation concession 300 1,170,630 2,414 1,209,780 2,335 600 2,341,260 4,827.30 2,419,560 4,670.96 588 2,294,434.80 4,730.70 2,371,168.80 4,577.50 HAPI D5, 1-30 HAPI D7, 1-60 HAPI D8, 1-10 HAPI D9, 1-30 MLA MLA MLA MLA 60% Mining claim 300 1,170,630 2,414 1,209,780 2,335 60% Mining claim 60 234,126 60% Mining claim 100 390,210 482.7 804.5 241,956 467.09 403,260 778.49 60% Mining claim 244 952,112.40 1,963.10 983,954.40 1,899.50 JADABA B1, 1-20 MLA 60% Exploitation concession 200 780,420 1,609.10 806,520 1,557 JADABA B2, 1-30 MLA 60% Mining claim 292 1,139,413.20 2,349.30 1,177,519 2,273.20 JADABA B3, 1-20 MLA 60% JADABA B15, 1-10 MLA 60% JADABA C2, 1-20 MLA 60% JADABA C3, 1-60 MLA 60% JADABA C12, 1-80 MLA 60% JADABA C14, 11-20 MLA 60% JADABA C15, 1-10 MLA 60% Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession Exploitation concession 172 671,161.20 1,383.80 693,607.20 1,339 99 386,307.90 796.5 399,227.40 770.07 200 780,420 1,609.10 806,520 1,557 504 1,966,658.40 4,054.90 2,032,430.40 3,923.60 723 2,821,218.30 5,816.90 None None 100 390,210 804.5 403,260 778.49 100 390,210 804.5 403,260 778.49 LEONOR C9, 1-20 MLA 60% Mining claim 200 780,420 1,609.10 806,520 1,557 JADABA E12 (overlaps Jadaba D12) JADABA E13 (overlaps Jadaba C12, 1-80) JADABA E14 (overlaps Jadaba D14) JADABA D15 (overlaps Jadaba D15) JADABA D9, 1-60 (overlaps Jadaba D9) JADABA D10, 1-20 (overlaps Jadaba D10) HAPI F1 (overlaps Hapi C1, 1-30) HAPI F2 (overlaps Hapi E2) MLA 60% Mining petition 600 None None 483,912 934.19 MLA 60% Mining petition 723 None None 583,113.96 1,125.70 MLA 60% Mining petition 300 None None 241,956 467 MLA 60% Mining petition 200 None None 161,304 311 MLA 60% Mining claim 1200 None None 4,839,120 1,868.30 MLA 60% Mining claim 1200 None None 967,824 9,341.90 MLA 60% Mining petition 300 None None 241,956 467 MLA 60% Mining petition 900 None None 725,868 1,401.20 36,302,943 74,872 38,098,391 73,545 , 6 r e b m e v o N n e e w t e B ) i ( : s e s n e p x e n o i t a r o p x E l . I I . 0 0 0 , 0 0 0 , 2 $ S U e u a v l n o i t a r o p r o c n i i f o e s m o r P . I , 4 1 0 2 , 5 r e b m e v o N d n a , 3 1 0 2 , 6 r e b m e v o N n e e w t e B ) i i ( ; 0 0 0 , 0 5 1 $ S U 3 1 0 2 , 5 r e b m e v o N d n a , 2 1 0 2 , 5 1 0 2 , 6 r e b m e v o N n e e w t e B ) v i ( ; 0 0 0 , 0 0 3 $ S U , 5 1 0 2 , 5 r e b m e v o N d n a , 4 1 0 2 , 6 r e b m e v o N n e e w t e B ) i i i ( ; 0 0 0 , 0 0 3 $ S U . 0 0 0 , 0 5 7 $ S U , 7 1 0 2 , 5 r e b m e v o N d n a , 6 1 0 2 , 6 r e b m e v o N n e e w t e B ) v i ( ; 0 0 0 , 0 0 5 $ S U , 6 1 0 2 , 5 r e b m e v o N d n a Total Exploration Expenditure Commitment (5 Yrs) – US$2,100,000 Total Exercise Payment Commitment (or price) US$2,100,000 d e t u c e x e t n e m e e r g A n o i t p O V J % 0 6 r a e Y 5 Obs.: (1) ICS = Irwin Cordova Sepulveda; ACG = Aldo Cordero Godoy; MLA = Compañía Minera Los Andes. (2) In accordance with the December UTM, which amounts 39021 CL. (3) In accordance with an approximate dollar exchange rate (CH$485). (4) In accordance with the August 2013 UTM, which amounts 40326 CL. (5) In accordance with an approximate dollar exchange rate (CH$518). 38 HOT CHILI ANNUAL REPORT 2013 I N O S C X E I 0 1 - 1 , 5 1 B A B A D A J ) L A E M S o t d e r r e f s n a r t i g n e B - S C I ( S E S N E C L I I N O T C E T O R P ) G C A ( I N O T P O E S A H C R U P % 0 0 1 L A E M S O C L E D O C h t i w V J n i n r a e % 5 6 I P H S R E N W O L A E M S % 0 0 1 s t n e m e n e T s o t n a M s o L p a M t n e m e n e T s o t n a M s o L 0 0 0 , 5 9 2 0 0 0 , 0 9 2 0 0 0 , 5 8 2 0 0 0 , 0 8 2 6,645,000 6,640,000 6,635,000 0 1 E A B A D A J 9 E A B A D A J 0 1 - 1 , 5 1 C A B A D A J I 4 O H C O C E D Z I L E F I 9 E A B A D A J 5 E A B A D A J 0 3 - 1 , 2 B A B A D A J 0 3 - 1 , 9 D I P A H 8 E A B A D A J 0 2 - 1 , 2 C A B A D A J 0 3 - 1 , 1 C I P A H 0 6 - 1 , 1 D I P A H 0 2 - 1 , 1 E A B A D A J 0 6 - 1 , 3 C A B A D A J 0 3 - 1 , 5 D I P A H 0 3 - 1 , 3 C I P A H 0 3 - 1 , 4 C I P A H 0 3 - 1 , 4 1 C I P A H 0 6 - 1 , 2 D I P A H I 3 O H C O C E D Z I L E F I 2 1 D A B A D A J 0 8 - 1 , 2 1 C A B A D A J 4 1 E A B A D A J 1 D A C N O M I 5 1 E A B A D A J I 1 O H C O C E D Z I L E F I 0 2 - 1 , 7 D I P A H 5 F I P A H 5 E I P A H 4 F I P A H 9 E R O N O E L s r e t e m o l i K 5 5 . 2 5 2 . 1 0 0 0 0 , 5 9 2 0 0 0 , 0 9 2 0 0 0 , 5 8 2 0 0 0 , 0 8 2 6 E A B A D A J I 9 2 / 1 O N O T N A S A R T O Y O T N E M A R E D N I L A I 0 2 - 1 1 , 4 1 C A B A D A J 0 2 - 1 , 3 B A B A D A J 6 / 1 A T S O R I 0 1 - 1 , 8 D I P A H 8 1 - 1 , 7 1 I P A H 8 E R O N O E L I 2 O H C O C E D Z I L E F I 2 1 / 1 A D A P S E 1 1 / 1 O N E U S N E 0 3 - 1 , 5 C I P A H 0 2 - 1 , 9 C R O N O E L 6,645,000 6,640,000 6,635,000 ³ Figure 22. Los Mantos project tenement plan HOT CHILI ANNUAL REPORT 2013 39 Corporate Governance Statement Corporate Governance Procedures and Policies The Board The Board is responsible for the overall corporate governance of the Company, and it recognises the need for the highest standards of ethical behaviour and accountability. The Board is committed to administering its corporate governance structures to promote integrity and responsible decision making. Board charter The Board has adopted a board charter. Under the board charter, the Board is responsible for the overall operation and stewardship of the Company and its subsidiaries and, in particular, is responsible for: a) setting the strategic direction of the Company, establishing goals to ensure that these strategic objectives are met and monitoring the performance of management against these goals and objectives; b) ensuring there are adequate resources available to meet the Company’s objectives; c) appointing the managing director and company secretary and chief financial officer of the Company; d) evaluating the performance and determining the remuneration of senior executives, and ensuring that appropriate policies and procedures are in place for recruitment, training, remuneration and succession planning; e) approving and monitoring financial reporting and capital management; f) approving and monitoring the progress of business objectives; g) ensuring that any necessary statutory licences are held and compliance measures are maintained to ensure compliance with the law and licences; h) ensuring that adequate risk management procedures exist and are being used; i) ensuring that the Company has appropriate corporate governance structures in place, including standards of ethical behaviour and a culture of corporate and social responsibility; j) ensuring that the Board is and remains appropriately skilled to meet the changing needs of the Company; and k) ensuring procedures are in place for ensuring the Company’s compliance with the law. Conflicts of interest In accordance with the Corporations Act and the Constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes a significant conflict exists, the Director concerned will not receive the relevant papers and will not be present at the Board meeting whilst the matter is being considered. Independent professional advice In fulfilling their duties, each Director dealing with corporate governance matters may obtain independent professional advice at the Company’s expense, subject to prior approval of the Chairman, whose approval will not be unreasonably withheld. Corporate governance policies The Board has adopted the corporate governance policies described below. Copies of the policies are available on the Company’s website at: www.hotchili.net.au. As the Company’s activities develop in size, nature and scope, the implementation of additional orporate governance policies will be given further consideration. Code of conduct The Board believes that the success of the Company has been and will continue to be enhanced by a strong ethical culture within the organisation. The Company has established a corporate code of conduct (Code) which aims to develop a consistent understanding of, and approach to, the desired standards of conduct and behaviour with which the Directors, officers, managers, employees and consultants of the Company are expected to comply. 40 HOT CHILI ANNUAL REPORT 2013 The Code sets out the Company’s policies on various matters, including the following: a) conflicts; b) fair dealing; c) company assets and property; d) computer, email and internet use; e) health, safety and environment; f) employment practices; and g) gifts and entertainment. In addition to their obligations under the Corporations Act in relation to inside information, all Directors, employees and consultants have a duty of confidentiality to the Company in relation to confidential information they possess. The Code also outlines the procedure for reporting any breaches of the Code and the possible disciplinary action the Company may take in respect of any breaches. Continuous disclosure policy The Company is a “disclosing entity” pursuant to Section 111AR of the Corporations Act and, as such, complies with the continuous disclosure requirements of Chapter 3 of the ASX Listing Rules and Section 674 of the Corporations Act. Subject to the exceptions contained in the ASX Listing Rules, the Company is required to disclose to ASX any information concerning the Company which is not generally available and which a reasonable person would expect to have a material effect on the price or value of the Shares. The Company is committed to observing its disclosure obligations under the Corporations Act and its obligations under the ASX Listing Rules. All relevant information provided to ASX will be posted on the Company’s website. The Company has adopted a continuous disclosure policy, the purpose of which is to: a) ensure that the Company, as a minimum, complies with its continuous disclosure obligations under the Corporations Act and the ASX Listing Rules and, as much as possible, seeks to achieve and exceed best practice; b) provide Shareholders and the market with timely, direct and equal access to information issued by the Company; and c) promote investor confidence in the integrity of the Company and its securities. Directors and Senior Executives of the Company may not deal in the Company’s securities without first notifying the Managing Director and the Company Secretary of the intention to trade. There is a blackout period of two weeks before the periodic reports are lodged with the ASX and twenty four hours after the reports are lodged, during which trading is prohibited. The Managing Director may not deal in the Company’s securities without prior approval of the Chairman, and notifying the Company Secretary of the intention to trade. The Company Secretary must be subsequently notified of any trade that has occurred. Shareholder communication policy The Company has adopted a shareholder communication policy which outlines the processes through which the Company will endeavour to ensure timely and accurate information is provided equally to all Shareholders and the broader market. The Company supports Shareholder participation in general meetings. Mechanisms for enabling Shareholder participation will be reviewed regularly to encourage the highest level of Shareholder participation. Risk management policy The Company has established a risk management policy, the purpose of which is to: a) provide a framework for identifying, assessing, monitoring and managing risk; b) communicate the roles and accountabilities of participants in the risk management system; and c) highlight the status of risks to which the Company is exposed, including any material changes to the Company’s risk profile. The Board is responsible for: a) risk management and oversight of internal controls; b) establishing procedures which provide assurance that business risks are identified, consistently assessed and adequately addressed; and c) for the overseeing of such procedures. The Board will review assessments of the effectiveness of risk management and internal compliance and control on an annual basis. Corporate governance – exceptions to ASX recommendations Securities dealing policy The Company has in place a securities dealing policy which sets out the requirements for all Directors, Executives, employees, contractors, consultants and advisers of the Company dealing in the Company’s securities. The Company sets out below its “if not why not” report in relation to those matters of corporate governance where the Company’s practice departs from the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (second edition) (Recommendations) to the extent that they are currently applicable to the Company. HOT CHILI ANNUAL REPORT 2013 41 Corporate Governance Statement Corporate Governance Procedures and Policies (continued) Recommendations 1.2 and 2.5 (process for evaluation) The Company does not have in place a formal process for evaluation of the Board, its committees, individual Directors and key executives. The small size of the Board and the nature of the Company’s activities make the establishment of a formal performance evaluation strategy unnecessary. Performance evaluation is a discretionary matter for consideration by the entire Board and in the normal course of events the Board will review performance of the management, Directors and the Board as a whole. Recommendation 2.1 (independent directors) At present, the Board does not comprise a majority of “independent directors”. There is one Director who satisfies the criteria for independence as outlined in Recommendation 2.1. Dr Allan Trench holds a small number of shares in the company and is not involved in the day-to-day management of the company. However, given the size and scope of the Company’s operations, the Board considers that it has the relevant experience in the exploration and mining industry and is appropriately structured to discharge its duties in a manner that is in the best interests of the Company and its Shareholders from both a long-term strategic and operational perspective. The Board intends to appoint further independent Non-Executive Directors as suitably qualified candidates are identified, and the size and scale of the Company’s operations determine. Recommendation 2.2 (independent chairman) The Chairman of the Company, Mr Murray Black, is not an independent director in accordance with the criteria for independence as outlined in Recommendation 2.1. However, given the size and scope of the Company’s operations, the Board considers that Mr Black has the relevant experience in the exploration and mining industry and his appointment as Chairman is in the best interests of the Company and its Shareholders. Recommendation 2.4 (nomination committee) The Board considers that, given the current size and scope of the Company’s operations, no efficiencies or other benefits would be gained by establishing a separate nomination committee. The Board intends to reconsider the requirement for, and benefits of, a separate nomination committee as the Company’s operations grow and evolve. Recommendation 3.4 (gender diversity) The Company has a policy to employ the best available person for the position. Appointments are made on ability and availability, not necessarily on gender. However, the policy has enabled the Company to employ a Corporate Projects Manager, a Resource Development Manager, one Senior Geologist, one Junior Geologist and four administration staff and an engineer, who are women and comprise approximately 35% of all the staff and almost 50% of the technical staff. The Directors are aware of their responsibility to the community, the staff and the Company. Recommendations 4.1, 4.2, 4.3 and 4.4 (audit committee) There is no audit committee. The role of the audit committee is undertaken by the full Board, which comprises three (3) Non-Executive Directors and one (1) Executive Director. The Board considers that, given the current size and scope of the Company’s operations and that only one (1) Director holds an executive position in the Company, no efficiencies or other benefits would be gained by establishing a separate audit committee at present. As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming a separate audit committee. Recommendation 8.1 (remuneration committee) The Company has not established a separate remuneration committee and does not have a formal remuneration policy in place. The role of the remuneration committee is undertaken by the full Board. The Board considers that, given its current size and that only one (1) Director holds an executive position in the Company, no efficiencies or other benefits would be gained by establishing a separate remuneration committee. There is no nomination committee. The full Board, which comprises four (4) Non-Executive Directors and one (1) Executive Director, considers the matters and issues that would fall to the nomination committee. As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of forming a separate remuneration committee. 42 HOT CHILI ANNUAL REPORT 2013 continued Directors’ Report Directors’ Report Your Directors have pleasure in presenting their report together with the financial statements for the year ended 30 June 2013 and the auditor’s report thereon. Directors The names of the Directors of Hot Chili Limited during the financial year and to the date of this report are: Murray E Black (Chairman) Christian E Easterday (Executive Director) Dr Michael Anderson (Non-Executive Director) Dr Allan Trench (Non-Executive Director) Geoff Laing (Executive Director, appointed 21 January 2013; resigned 1 August 2013) Roberto de Andraca Adriasola (Non-Executive Director, appointed 1 August 2013) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Directors’ Information Murray Edward Black, Non-Executive Chairman Mr Black has over 38 years’ experience in the mineral exploration and mining industry and has served as an executive director and chairman for several listed Australian exploration and mining companies. He part-owns and manages a substantial private Australian drilling business, has interests in several commercial developments and has significant experience in capital financing. Christian Ervin Easterday, Managing Director Mr Easterday is a geologist with over 15 years’ experience in the mineral exploration and mining industry. He holds an Honours Degree in Geology from the University of Western Australia, a Masters degree in Mineral Economics from Curtin University of Technology and a Masters Degree in Business Administration from Curtin’s Graduate School of Business. Mr Easterday has held several senior positions and exploration management roles with top- tier gold companies including Placer Dome, Hill 50 Gold and Harmony Gold, specialising in structural geology, resource development and mineral economic valuation. For the past five years, Mr Easterday has been involved in various aspects of project negotiation drawing together his commercial, financial and project valuation skills. This work has involved negotiations and valuations covering gold, copper, uranium, iron ore, nickel, and tantalum resource projects in Australia and overseas. Mr Easterday is a Member of The Australian Institute of Geoscientists. Dr Allan Trench, Non-Executive Director Dr Allan Trench is a geologist/geophysicist and business management consultant with over 23 years experience across a broad range of commodities. His minerals sector experience spans strategy formulation, exploration, project development and mining operations. Dr Trench holds degrees in geology, a doctorate in geophysics, a Masters degree in Mineral Economics and a Masters degree in Business Administration. He currently acts or acted as independent director to Venturex Resources Ltd, commenced 12 November 2008, resigned April 2013. Pioneer Resources Ltd, commenced 5 September 2008, Navigator Resources Ltd, commenced 14 November 2005, Kimberley Rare Earths Ltd. commenced 2 December 2010, resigned February 2013. Enterprise Metals Ltd, commenced 3 April 2012, Trafford Resources Ltd, commenced 7 May 2012. Dr Trench has previously worked with McKinsey & Company as a management consultant, with Woodside Petroleum in strategy development and with WMC both as a geophysicist and exploration manager. He is an Associate Consultant with international metals and mining advisory firm CRU Group and has contributed to the development of that company’s uranium practice, having previously managed the CRU Group global copper research team. Dr Trench maintains academic links as an Adjunct Professor to the Western Australian School of Mines, Curtin University of Technology. Dr Allan Trench’s appointment adds considerable experience and expertise to Hot Chili’s board. Dr Michael Anderson, Non-Executive Director Dr Anderson has more than 21 years’ industry experience, largely in southern Africa and Australia. His career commenced as a geologist with Anglo American, followed by roles in the metallurgical and engineering industries with Mintek, Bateman and Kellogg Brown & Root. Dr Anderson subsequently held senior management positions including Corporate Development Manager at Gallery Gold Limited and, most recently, as Managing Director at Exco Resources Limited where he oversaw the successful development of the White Dam Gold Project and the sale of the Company’s Cloncurry Copper Project to Xstrata. He had joined the Board in April 2006 and resigned on 5 August 2011. Dr Anderson joined specialist resource investor Taurus Funds Management Pty Limited as a Director in August 2011. He was appointed as a Non-Executive Director of Base Resources Ltd on 28 November 2011 and also as a Non-Executive Director of Ampella Mining Ltd on 18 June 2012 and PMI Gold Corporation on 15 May 2013. HOT CHILI ANNUAL REPORT 2013 43 Directors’ Report Geoff Laing, Executive Director (Appointed 21 January 2013, resigned 1 August 2013) Mr Laing is an engineer with more than 20 years’ experience in the mining business. Over the past five years, Mr Laing was involved in the successful development and operation of Exco Resources Ltd as both Managing Director and General Manager of Corporate and Business Development. Most recently, Mr Laing oversaw the successful conversion of a hostile bid for Exco Resources to an agreed takeover of the company. Prior to that, Mr Laing was involved in the development of a number of major projects including the Tenke Fungurume project in the DRC and Norilsk Nickel Refining Projects. Mr Laing has operational experience in base and precious metals in both Africa and Australia. Roberto de Andraca Adriasola, Non-Executive Director (Appointed 1 August 2013) Mr de Andraca is a business manager with 20 years’ experience in the financial and mining business. Over the last four years he has been working in the main Iron Ore and Steel Producer in Chile, CAP S A and is currently the Vice President of Business Development overseeing infrastructure development and new business related to non core assets. He is also overseeing the construction of the first desalination plant dedicated 100% to producing water for mining companies in the north of Chile. Mr de Andraca has finance experience working at Chase Manhattan Bank, ABN Amro and Citigroup, working both in Chile and in New York and holds an MBA from the Adolfo Ibanez Business School of Chile. He is currently a director of Puerto Los Losas, a port in the Atacama Region of Chile. Corporate Information Hot Chili Limited is a Company limited by shares and is domiciled in Australia. Principal Activities During the year, the consolidated entity was involved in mineral exploration. Results of Operations The results of the consolidated entity for the year ended 30 June 2013 was a loss of $4,367,746 (2012: loss $2,894,482). Dividends No dividends were paid or declared since the end of the previous year. The Directors do not recommend the payment of a dividend. Review of Operations Refer to Operations Report on pages 6 to 10. Significant Changes in the State of Affairs There were no significant changes to the state of affairs, subsequent to the end of the reporting period, other than what has been reported in other parts of this report. Matters Subsequent to the End of the Financial Year After the reporting date, the company raised $11.7m through private placement of 26,130,000 shares at $0.45 per share. At the date of this report there are no other matters or circumstances which have arisen since 30 June 2013 that has significantly affected or may significantly affect: i) the operations of the consolidated entity; ii) the results of its operations; or iii) the state of affairs of the consolidated entity subsequent to 30 June 2013. Likely Developments and Expected Results of Operations Further information on the likely developments in the operations of the consolidated entity and the expected results of operations have been included in the review of operations. 44 HOT CHILI ANNUAL REPORT 2013 continued Security Holding Interests of Directors Directors Murray E Black Christian E Easterday Dr Allan Trench Dr Michael Anderson Geoff Laing (Appointed 21 January; resigned 1 August 2013) Roberto de Andraca Adriasola (Appointed 1 August 2013) Ordinary Shares Options Over Ordinary Shares Direct Interest Indirect Interest - 13,250,000 200,000 13,250,000 31,400 - - - - - - - Direct Interest - 100,000 - - - - Indirect Interest 3,500,000 3,500,000 10,000 - - - Shares Under Option Company Secretary – John Sendziuk There were, 68,394,097 ordinary shares under option at 30 June 2013. Shares Issued on the Exercise of Options John Sendziuk is a Chartered Accountant. He has 26 years’ experience in providing corporate secretarial, taxation and business advice to a diverse group of business clients and public companies. There were 18,277,778 ordinary shares of Hot Chili Limited issued during the year ended 30 June 2013 from the exercise of options. Indemnification and Insurance of Directors and Officers Directors Benefits Since 30 June 2013, no Director of the consolidated entity has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors shown in the financial statements) by reason of a contract made by the consolidated entity with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. Directors’ Meetings During the financial year, the consolidated entity maintained an insurance policy which indemnifies the Directors and Officers of Hot Chili Limited in respect of any liability incurred in connection with the performance of their duties as Directors or Officers of the consolidated entity. The consolidated entity’s insurers have prohibited disclosure of the amount of the premium payable and the level of indemnification under the insurance contract. The number of directors’ meetings attended and number of written resolutions signed by each of the Directors of the Company during the year were: Director Murray E Black Dr Michael Anderson (Appointed 12 December 2011) Christian E Easterday Dr Allan Trench Geoff Laing (Appointed 21 January; resigned 1 August 2013) Roberto de Andraca Adriasola (Appointed 1 August 2013) No. of Meetings while in office No. of Meetings attended 22 22 22 22 5 - 22 22 21 21 5 - HOT CHILI ANNUAL REPORT 2013 45 Directors’ Report Environmental Issues Non-Audit Services The consolidated entity’s exploration and mining operations are subject to environment regulation under the law of Chile. The consolidated entity holds exploration/mining tenements in Chile thus is subject to the Mining Acts of that country each with specific conditions relating to environmental management. In some jurisdictions Cash Bonds must be lodged with the relevant Department until conditions are fulfilled. There are no bonds currently in place in respect of the consolidated entity’s tenement holdings. The Directors advise that during the year ended 30 June 2013 no claim has been made by any competent authority that any environmental issues, condition of license or notice of intent has been breached, and no claim has been made for increase of bond. The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. For the measurement period, 1 July 2012 to 30 June 2013, the Directors have assessed that there are no current reporting requirements but may be required to do so in the future. Shares under Option At the date of this report, there were 59,926,407 unissued ordinary shares under options. The Board of Directors is satisfied that the provision of non- audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: . all non-audit services are reviewed and approved by the directors prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and . the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. Non audit services that have been provided by the entity’s auditor, RSM Bird Cameron Partners, have been disclosed in Note 14. Auditors Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2013 has been received and is included within this annual report. Options Lapsed During the Year 10,338,558 options lapsed during the year. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity or intervene in any proceedings to which the consolidated entity is a party for the purpose of taking responsibility on behalf of the consolidated entity for all or any part of those proceedings. The consolidated entity was not a party to any such proceedings during the year. 46 HOT CHILI ANNUAL REPORT 2013 continued Remuneration Report (Audited) The information provided in this remuneration report has been audited. Principles used to determine amount and nature of remuneration The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The Board ensures that executive reward satisfies the following key criteria for good reward governance practises: . competitiveness and reasonableness . acceptability to shareholders . transparency The current base remuneration for Directors was last reviewed with effect from 1 July 2012. All director fees are periodically recommended for approval by shareholders. The consolidated entity’s policy regarding executives remuneration is that the executives are paid a commercial salary and benefits based on the market rate and experience. Details of Remuneration of Key Management Personnel of the consolidated entity and Remuneration of Directors Details of the nature and amount of each element of remuneration of each Director of the consolidated entity for the financial year are as follows: Short-term Post Employment Share-based Payments Consulting Fees Related Parties $ Salary $ Directors’ Fee $ Other Benefits $ Super- annuation $ Options $ Total $ - 57,825 - - 78,000 - - 159,294 - - - 57,825 371,250 - 530,544 - 46,000 124,000 - 40,088 - - 40,088 - - 78,000 - 285,000 - 285,000 - 46,000 124,000 8,164 - 8,164 - - - - - - - - 9,360 - 19,115 44,550 5,520 78,545 9,360 - 34,200 5,520 49,080 - - - - - - - - - - - 87,360 57,825 178,409 415,800 51,520 790,914 87,360 40,088 327,364 51,520 506,332 Name 2013 Murray E Black Dr Michael Anderson Geoff Laing (Appointed 21 January 2013) Christian E Easterday Dr Allan Trench 2012 Murray E Black Dr Michael Anderson (Appointed 12 December 2011) Christian E Easterday Dr Allan Trench Remuneration of Key Management Personnel Name 2013 Rodrigo Diaz (Manager Chile) John Sendziuk (Company Secretary) Melanie Leighton (Corporate Projects Manager) 2012 Rodrigo Diaz (Manager Chile) John Sendziuk (Company Secretary) Short-term Post Employment Share-based Payments Consulting Fees Related Parties $ Salary $ Other Benefits $ Super- annuation $ Options $ Total $ - - - - - - - 223,471 58,200 167,982 449,653 212,684 20,000 232,684 - - - - - - - - 25,800 47,294 28,377 270,765 112,377 18,868 28,377 215,227 44,668 104,048 598,369 - 40,000 40,000 106,767 45,757 152,524 319,451 105,757 425,208 HOT CHILI ANNUAL REPORT 2013 47 Directors’ Report Remuneration Report (Audited) (continued) The employee options issued to the key management personnel have a strike price of 90 cents and are exercisable by 19 July 2014. Fair value of options issued The fair value at issue date was determined using a Black- Scholes option pricing model that takes into account the exercise price, the share price at issue date and expected price volatility of the underlying share and the risk free interest rate for the term of the loan. The model inputs for options granted during the year ended 30 June 2013 included: a) options are granted for no consideration b) exercise price – $0.90 c) issue date – 20 July 2011 d) expiry date – 19 July 2014 After the initial term, the agreement will continue until either Mr Easterday terminates by giving the Company 6 months’ notice or the Company terminates by giving Mr Easterday 6 months’ notice or payment in lieu of notice up to an amount equivalent to 6 months’ remuneration. The Company may terminate the agreement summarily for any serious incidents or wrongdoing by Mr Easterday. Termination entitlements Upon termination of the agreement, Mr Easterday will be entitled to termination benefits in accordance with Part 2D.2 of the Corporations Act. The termination benefits (including any amount of payment in lieu of notice) must not exceed the amount equal to one times the executive’s average annual base salary in the last 3 years’ of service with the Company, unless the benefit has first been approved by Shareholders in a general meeting. e) expected price volatility of the Company’s shares – 80% Post termination restraints f) risk-free interest rate – 5.25% g) spot price at date of valuation – $0.58. There were no termination benefits paid during the year to any director or key management personnel. There were no key management personnel employed by the Company during the year for which disclosure of remuneration is required, apart from the remuneration details disclosed above. At the date of this report, the Company had no employees that fulfilled the role of key management personnel, other than those disclosed above. Service Contracts a) The Company has entered into an executive service agreement with Mr Christian Easterday, as Managing Director of the Company. Remuneration Under the agreement, Mr Easterday will receive an annual salary of $400,000, plus superannuation at the rate of 12% and other entitlements. Mr Easterday’s remuneration is subject to annual review. Term and termination Mr Easterday is employed for an initial term of 3 years, commencing on 5 April 2010. At least 6 months’ before the End Date, either party may give notice that the agreement will terminate on the End date. Mr Easterday is subject to post termination non- competition restraints up to a maximum of 12 months from the date of termination. b) The Company has entered into an executive service agreement with Mr Geoffrey Laing, as Technical Executive Director of the Company. Remuneration The Company had entered into an executive service agreement with Mr Geoffrey Laing, as Technical Executive Director of the Company, commencing on 21 January 2013. Under the agreement, Mr Laing would receive an annual salary of $350,000, plus superannuation at the rate of 12% and other entitlements. Mr Laing resigned on 1 August 2013. [End of Remuneration Report] Dated this 23rd day of September 2013 in accordance with a resolution of the Directors and signed for on behalf of the Board by: Christian E Easterday Managing Director 48 HOT CHILI ANNUAL REPORT 2013 continued Auditor’s Independence Declaration RSM Bird Cameron Partners RSM Bird Cameron Partners 8 St George’s Terrace Perth WA 6000 8 St George’s Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9101 T +61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au www.rsmi.com.au AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Hot Chili Limited for the year ended 30 June 2013, I declare As lead auditor for the audit of the financial report of Hot Chili Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of: that, to the best of my knowledge and belief, there have been no contraventions of: (i) (i) (ii) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. any applicable code of professional conduct in relation to the audit. RSM BIRD CAMERON PARTNERS RSM BIRD CAMERON PARTNERS Perth, WA Perth, WA Dated: 23 September 2013 Dated: 19 September 2012 TUTU PHONG TUTU PHONG Partner Partner Liability limited by a Liability limited by a scheme approved scheme approved under Professional under Professional Standards Legislation Standards Legislation Major Offices in: Major Offices in: Perth, Sydney, Melbourne, Perth, Sydney, Melbourne, Adelaide and Canberra Adelaide and Canberra ABN 36 965 185 036 ABN 36 965 185 036 RSM Bird Cameron Partners is a member of the RSM network. Each member RSM Bird Cameron Partners is a member of the RSM network. Each member of the RSM network is an independent accounting and advisory firm which of the RSM network is an independent accounting and advisory firm which practises in its own right. The RSM network is not itself a separate legal entity practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. in any jurisdiction. Quality ISO 9001 HOT CHILI ANNUAL REPORT 2013 49 Independent Auditor’s Report RSM Bird Cameron Partners RSM Bird Cameron Partners 8 St George’s Terrace Perth WA 6000 8 St George’s Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 GPO Box R1253 Perth WA 6844 T +61 8 9261 9100 F +61 8 9261 9101 T +61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au www.rsmi.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HOT CHILI LIMITED INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HOT CHILI LIMITED Report on the Financial Report Report on the Financial Report We have audited the accompanying financial report of Hot Chili Limited, which comprises the statement of We have audited the accompanying financial report of Hot Chili Limited, which comprises the consolidated financial position as at 30 June 2013, statement of comprehensive income, statement of changes in equity and statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, company and the entities it controlled at the year’s end or from time to time during the financial year. notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s Directors’ Responsibility for the Financial Report end or from time to time during the financial year. The directors of the company are responsible for the preparation of the financial report that gives a true and fair Directors’ Responsibility for the Financial Report 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 The directors of the company are responsible for the preparation of the financial report that gives a true and fair material misstatement, whether due to fraud or error. In Note 1(a), the directors also state, in accordance with view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with control as the directors determine is necessary to enable the preparation of the financial report that is free from International Financial Reporting Standards. 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 statements comply with Auditor’s Responsibility International Financial Reporting Standards. Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in Auditor’s Responsibility accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in assurance about whether the financial report is free from material misstatement. accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the assurance about whether the financial report is free from material misstatement. 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 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates financial report in order to design audit procedures that are appropriate in the circumstances, but not for the made by the directors, as well as evaluating the overall presentation of the financial report. purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit made by the directors, as well as evaluating the overall presentation of the financial report. opinions. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Liability limited by a scheme approved under Professional Liability limited by a Standards Legislation scheme approved under Professional Standards Legislation Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra Major Offices in: ABN 36 965 185 036 Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036 RSM Bird Cameron Partners is a member of the RSM network. Each member of the RSM network is an independent accounting and advisory firm which practises in its own right. The RSM network is not itself a separate legal entity RSM Bird Cameron Partners is a member of the RSM network. Each member in any jurisdiction. of the RSM network is an independent accounting and advisory firm which practises in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. Quality ISO 9001 50 HOT CHILI ANNUAL REPORT 2013 Independence Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Hot Chili Limited, would be in the same terms if given to the directors as at the time of this auditor's directors of Hot Chili Limited, would be in the same terms if given to the directors as at the time of this auditor's report. report. Opinion Opinion In our opinion: In our opinion: (a) the financial report of Hot Chili Limited is in accordance with the Corporations Act 2001, including: (a) the financial report of Hot Chili 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 2012 and of its (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 performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; 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). (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a). Report on the Remuneration Report Report on the Remuneration Report We have audited the Remuneration Report contained within the directors’ report for the year ended 30 June 2012. We have audited the Remuneration Report contained within 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 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 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. Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion Opinion In our opinion the Remuneration Report of Hot Chili Limited for the year ended 30 June 2013 complies with In our opinion the Remuneration Report of Hot Chili Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001. section 300A of the Corporations Act 2001. RSM BIRD CAMERON PARTNERS RSM BIRD CAMERON PARTNERS Perth, WA Perth, WA Dated: 23 September 2013 Dated: 19 September 2012 TUTU PHONG Partner TUTU PHONG Partner HOT CHILI ANNUAL REPORT 2013 51 Directors’ Declaration The Directors of the Company declare that: 1. the financial statements and notes are in accordance with the Corporations Act 2001 and: a) comply with Australian Accounting Standards, which, as stated in accounting policy Note 1(a) to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards; and b) give 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; 2. the Chief Executive Officer and Chief Finance Officer have each declared that: a) the financial records of the consolidated entity for the financial year have been properly maintained in accordance with Section 286 of the Corporations Act 2001; b) the financial statements and notes for the financial year comply with Australian Accounting Standards; and c) the financial statements and notes for the financial year give a true and fair view; and 3. in the Directors’ opinion there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Christian E Easterday Managing Director Dated this 23rd day of September 2013 52 HOT CHILI ANNUAL REPORT 2013 Statement of Comprehensive Income For the year ended 30 June 2013 Interest income Other income Depreciation Consulting fees Exploration expenses Corporate fees Legal and professional Employee benefits expense Administration expenses Accounting fees Travel costs Other expenses Foreign exchange loss Share based payments Loss before income tax Income tax expense Loss after income tax Other comprehensive income Note 2 3 Consolidated Entity 2013 $ 208,525 - 2012 $ 57,295 762,772 208,525 820,067 (90,647) (147,341) - (142,133) (186,939) (1,755,722) (651,356) (67,751) (485,974) (300,486) (436,269) (311,653) (8,520) (147,248) (464,300) (141,890) (178,146) (938,038) (409,667) (76,122) (400,606) (333,257) - (616,755) (4,367,746) (2,894,482) 5 - - (4,367,746) (2,894,482) - - Total comprehensive income attributable to members of Hot Chili Limited (4,367,746) (2,894,482) Basic earnings per share (cents) Diluted earnings per share (cents) 13 13 (1.68) (1.68) (1.64) (1.64) The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. HOT CHILI ANNUAL REPORT 2013 53 Statement of Financial Position As at 30 June 2013 Current assets Cash and cash equivalents Other current assets Total current assets Non-current assets Plant and equipment Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Total current liabilities Total liabilities Net assets Equity Contributed equity Option reserve Foreign currency translation reserve Accumulated losses Total equity Consolidated Entity 2013 $ 2012 $ Note 6 7 8 9 10 11,144,722 16,861,320 27,121 15,807 11,171,843 16,877,127 502,540 324,844 63,056,905 15,821,745 63,559,445 16,146,589 74,731,288 33,023,716 3,989,936 3,989,936 3,989,936 435,712 435,712 435,712 70,741,352 32,588,004 11 12(b) 12(c) 12(a) 90,775,673 48,566,232 1,051,304 1,222 739,651 1,222 (21,086,847) (16,719,101) 70,741,352 32,588,004 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 54 HOT CHILI ANNUAL REPORT 2013 Statement of Changes in Equity As at 30 June 2013 Consolidated Entity Contributed Equity Option Reserve Foreign Currency Translation Reserve Accumulated Losses $ $ $ $ Total Equity $ Balance at 1 July 2012 48,566,232 739,651 1,222 (16,719,101) 32,588,004 Loss for the year Total comprehensive income for the year Shares issued Share issue costs Options issued - - 44,524,930 (2,315,489) - - - - - 311,653 - - - - - (4,367,746) (4,367,746) (4,367,746) (4,367,746) - - - 44,524,930 (2,315,489) 311,653 Balance at 30 June 2013 90,775,673 1,051,304 1,222 (21,086,847) 70,741,352 Balance at 1 July 2011 19,239,321 72,308 1,222 (13,824,619) 5,488,232 Loss for the year Total comprehensive income for the year Shares issued Share issue costs Options issued - - 30,299,401 (972,490) - Balance at 30 June 2011 48,566,232 - - - - 667,343 739,651 - - - - - (2,894,482) (2,894,482) (2,894,482) (2,894,482) - - - 30,299,401 (972,490) 667,343 1,222 (16,719,101) 32,588,004 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. HOT CHILI ANNUAL REPORT 2013 55 Statement of Cash Flows For the year ended 30 June 2013 Cash flows from operating activities Payments to suppliers and employees Interest received Consolidated Entity 2013 $ 2012 $ Note (3,564,130) (2,390,582) 208,525 57,295 Net cash (used in) operating activities 16(b) (3,355,605) (2,333,287) Cash flows from investing activities Payments for plant and equipment Payments for exploration and evaluation Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares Share issue costs Net cash provided by financing activities Net (decrease)/increase in cash held (268,343) (228,108) (43,865,822) (14,887,628) (44,134,165) (15,115,736) 44,524,930 30,299,401 (2,315,489) (972,490) 42,209,441 29,326,911 (5,280,329) 11,877,888 Cash and cash equivalents at the beginning of the financial year Effects of exchange rates on cash holdings in foreign currencies 16,861,320 4,220,660 436,269 762,772 Cash and cash equivalents at the end of the financial year 16(a) 11,144,722 16,861,320 The above Statement of Cash Flows should be read on conjunction with the accompanying notes. 56 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statements 1 Summary of Significant Accounting Policies The following is a summary of the material accounting policies adopted by the consolidated entity in the preparation of the financial statements. a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. The financial report was authorised for issue on 23 September 2013 by the Board of Directors. The functional and presentation currency of Hot Chili Limited is Australian Dollars. Compliance with IFRSs Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the financial statements of Hot Chili Limited comply with International Financial Reporting Standards. New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2013. The consolidated entity’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. Reference Title Summary AASB 10 Consolidated Financial Statements AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirement This standard is applicable to annual reporting periods beginning on or after 1 January 2013. The standard has a new definition of ‘control’. Control exists when the reporting entity is exposed, or has the rights, to variable returns from its involvement with another entity and has the ability to affect those returns through its ‘power’ over that other entity. A reporting entity has power when it has rights that give it the current ability to direct the activities that significantly affect the investee’s returns. The consolidated entity will not only have to consider its holdings and rights but also the holdings and rights of other shareholders in order to determine whether it has the necessary power for consolidation purposes. The adoption of this standard from 1 July 2013 may have an impact where the consolidated entity has a holding of less than 50% in an entity, has de facto control, and is not currently consolidating that entity. These amendments are applicable to annual reporting periods beginning on or after 1 July 2013, with early adoption not permitted. They amend AASB 124 ‘Related Party Disclosures’ by removing the disclosure requirements for individual key management personnel (‘KMP’). The adoption of these amendments from 1 July 2014 will remove the duplication of information relating to individual KMP in the notes to the financial statements and the directors report. As the aggregate disclosures are still required by AASB 124 and during the transitional period the requirements may be included in the Corporations Act or other legislation, it is expected that the amendments will not have a material impact on the consolidated entity. HOT CHILI ANNUAL REPORT 2013 57 1 Summary of Significant Accounting Policies (continued) a) Basis of preparation (continued) Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets. Critical accounting estimates The preparation of financial statements in conformity of AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the notes to the financial statements. b) Principles of consolidation The consolidated financial statements comprise the financial statements of Hot Chili Limited and its controlled entities. Control exists where the consolidated entity has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with the consolidated entity to achieve the objectives of the consolidated entity. All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits and losses have been eliminated on consolidation. Non-controlling interests in the results and equity of the consolidated entities are shown separately in the consolidated statement of comprehensive income and consolidated statement of financial position respectively. Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of comprehensive income from the date on which control commences. Where control ceases, de-consolidation occurs from that date. Investments in associates are accounted for in the consolidated financial statements using the equity method. Under this method, the consolidated entity’s share of the post-acquisition profits or losses of associates is recognised in the consolidated statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are those entities over which the consolidated entity exercises significant influence, but not control. Investments in subsidiaries are recognised at cost less impairment losses. 58 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued c) Income tax The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit adjusted for any non-assessable or disallowed items. Deferred tax is accounted for using the statement of balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the statement of comprehensive income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Hot Chili Limited and its wholly-owned Chilean subsidiaries have not formed an income tax consolidated group under the Tax Consolidation Regime. d) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for major business activities as follows: i) Interest Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. ii) Other Services Other debtors are recognised at the amount receivable and are due for settlement within 30 days from the end of the month in which services were provided. e) Exploration and evaluation expenditure Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which the decision to abandon the area is made. When production commences the accumulated costs for the relevant area of interest are amortised over the life of the project area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. HOT CHILI ANNUAL REPORT 2013 59 1 Summary of Significant Accounting Policies (continued) f) Plant and equipment Plant and equipment Plant and equipment are measured on the cost basis less depreciation and impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Depreciation The depreciable amount of all plant and equipment is depreciated on a diminishing value over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Plant and Equipment Depreciation Rate 10-33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. g) Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid, together with assets ordered before the end of the financial year. The amounts are unsecured and are usually paid within 30 days of recognition. h) Equity-based payments Equity-based compensation benefits can be provided to Directors and Executives. The fair value of options granted to directors and executives is recognised as an employee benefit expense with a corresponding increase in contributed equity. The fair value is measured at grant date and recognised over the period during which the directors and/or executives becomes unconditionally entitled to the options. The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option. 60 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued i) Earnings per share i) Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. j) 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. k) Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). l) Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. m) Provisions Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. n) GST Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated as inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. HOT CHILI ANNUAL REPORT 2013 61 2 Interest Income Interest income 3 Other Income Foreign exchange gain Consolidated Entity 2013 $ 208,525 208,525 2012 $ 57,295 57,295 Consolidated Entity 2013 $ - - 2012 $ 762,772 762,772 4 Segment Information The consolidated entity has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The consolidated entity operates as a single segment which is mineral exploration. The consolidated entity is domiciled in Australia. All revenue from external parties is generated from Australia only. Segment revenues are allocated based on the country in which the party is located. Operating revenues of approximately Nil (2012 – Nil) are derived from a single external party. All the assets relate to mineral exploration. Segment assets are allocated to segments based on the purpose for which they are used. Geographical Non-current assets 2013 $ 2012 $ 141,918 70,932 63,417,527 16,075,657 63,559,445 16,146,589 Australia Chile 62 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued 5 Income Tax Expense a) Reconciliation of income tax expense to prima facie tax payable Loss before income tax Prima facie income tax at 30% (2012: 30%) Tax-effect of amounts not assessable in calculating taxable income Tax-effect of amounts not deductible in calculating taxable income Tax loss not recognised Income tax expense b) Tax losses Consolidated Entity 2013 $ 2012 $ (4,367,746) (2,894,482) (1,310,324) - 604,756 (705,568) - (868,345) (240,573) 573,563 (535,354) - Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at 30% 6,718,618 4,205,296 2,015,585 1,261,589 c) The directors estimate that the potential deferred tax asset at 30 June 2013 in respect of tax losses not brought to account is $2,015,585 (2012: $1,261,589). In addition, Chilean subsidiaries of Hot Chili Limited also have tax losses that are a potential deferred tax asset of $2,856,420 (2012: $2,652,062). The companies will be taxed independently in Chile. d) The benefit for tax losses will only be obtained if: i) The consolidated entity and the subsidiaries derive income, sufficient to absorb tax losses. ii) There is no change to legislation to adversely affect the consolidated entity and its subsidiaries in realising the benefit from the deduction of the losses. HOT CHILI ANNUAL REPORT 2013 63 6 Cash and Cash Equivalents Cash at bank 7 Other Current Assets Prepayment Other assets 8 Plant and Equipment Plant and equipment at cost Less provision for depreciation Reconciliations: Plant and equipment Carrying amount at the beginning of the year Additions Disposals Depreciation Consolidated Entity 2013 $ 2012 $ 11,144,722 16,861,320 11,144,722 16,861,320 26,725 396 27,121 - - - 702,891 (200,351) 434,912 (110,068) 502,540 324,844 324,844 268,903 (560) (90,647) 243,984 145,324 - (64,464) Carrying amount at the end of the year 502,540 324,844 9 Exploration and Evaluation Expenditure Mining tenements at cost Capitalised mineral exploration and evaluation Tenements Carrying amount at the beginning of the year Purchase of mineral tenements Exploration costs written off Capitalised mineral exploration and evaluation Carrying amount at the end of the year 10,891,988 3,300,184 52,164,917 12,521,561 63,056,905 15,821,745 15,821,745 520,410 2,342,138 1,420,346 - (462,300) 47,183,120 12,521,561 63,056,905 15,821,745 The future realisation of these non-current assets is dependent on further exploration and funding necessary to commercialise the resources or realisation through sale. 64 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued 10 Trade and Other Payables Trade payables Other payables 11 Contributed Equity Consolidated Entity 2013 $ 3,989,936 - 2012 $ 342,601 93,111 3,989,936 435,712 No. Shares No. Shares Consolidated Entity 2013 2012 2013 $ 2012 $ a) Share capital At the beginning of the financial year 199,676,224 149,043,888 48,566,232 19,239,321 Shares issued during the year 97,785,972 50,632,336 44,524,930 30,299,402 Less cost of issue - - (2,315,489) (972,491) At the end of the financial year 297,462,196 199,676,224 90,775,673 48,566,232 b) Terms and condition of contributed equity Ordinary Shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. c) Movement in unlisted options Balance at beginning of year Issued during the year Options exercised during the year Options lapsed during the year Balance at end of year Listed options 2013 Options 2012 Options 56,756,336 40,590,000 500,000 16,366,336 (18,277,778) (200,000) (10,338,558) - 28,640,000 56,756,336 There are 39,754,097 listed options over ordinary shares in the company at 30 June 2013 (2012: Nil). HOT CHILI ANNUAL REPORT 2013 65 11 Contributed Equity (continued) d) Capital risk management The consolidated entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may issue new shares, pay dividends or return capital to shareholders. Capital is calculated as ‘equity’ as shown in the statement of financial position, and is monitored on the basis of funding exploration activities. 12 Reserves and Accumulated Losses a) Accumulated losses Accumulated losses at the beginning of the year Net loss for the year Accumulated losses at the end of the year b) Reserves Options reserve The options reserve is used to recognise the fair value of options issued. As at 30 June 2013, no options to which the reserve relates have been exercised. Balance at the beginning of the year Movement during the year Balance at the end of the year c) Foreign transaction reserve Balance at the beginning of the year Additions during the year Balance at the end of the year Consolidated Entity 2013 $ 2012 $ (16,719,101) (13,824,619) (4,367,746) (2,894,482) (21,086,847) (16,719,101) 739,651 311,653 72,308 667,343 1,051,304 739,651 1,222 - 1,222 1,222 - 1,222 Total reserves and accumulated losses (20,034,321) (15,978,228) 66 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued 13 Loss Per Share Consolidated Entity 2013 $ 2012 $ Loss after tax attributable to members of Hot Chili Limited (4,367,746) (2,894,482) Basic loss per share (cents) Diluted loss per share (cents) Unexercised options are not dilutive. (1.68) (1.68) (1.64) (1.64) The weighted average number of ordinary shares on issue used in the calculation of basic loss per share Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted loss per share 259,129,505 176,957,302 259,129,505 176,957,302 14 Remuneration of Auditors Remuneration of the auditor for: Auditing and reviewing of financial reports 41,500 41,500 43,000 43,000 HOT CHILI ANNUAL REPORT 2013 67 Note 15 Key Management Personnel Disclosures a) Directors The following persons were Directors of Hot Chili Limited during the financial year and up to the date of this report: Murray E Black Christian E Easterday Dr Michael Anderson Dr Allan Trench Geoff Laing Roberto de Andraca Adriasola (Chairman) (Executive Director) (Non-Executive Director) (Non-Executive Director) (Executive Director, appointed 21 January 2013; resigned 1 August 2013) (Non-Executive Director, appointed 1 August 2013) b) Company Secretary John Sendziuk c) Country Manager Rodrigo Diaz Borquez d) Corporate Projects Manager Melanie Leighton Details of Remuneration of Key Management Personnel for the year ended 30 June 2013: Consolidated Entity 2013 $ 712,369 78,545 - 2012 $ 457,252 49,080 - 790,914 506,332 449,653 44,668 104,048 598,369 1,389,283 232,684 40,000 152,524 425,208 931,540 Directors Short-term benefits Post-employment benefits Share based payment Key Management Personnel Short-term benefits Post-employment benefits Share based payment Total 68 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued e) Key management personnel interests in the shares and options of the company Shares The number of shares in the company held during the financial year, and up 30 June 2013, by each Key Management Personnel of Hot Chili Limited, including their personally related parties, are set out below. There were no shares granted as compensation during the year. 2013 Directors Murray E Black Christian E Easterday Dr Allan Trench Dr Michael Anderson ** Geoff Laing ** Key Management Personnel John Sendziuk Rodrigo Diaz Melanie Leighton Total Balance at the start of the year 10,000,000 10,200,000 - - - 20,200,000 1,090,000 31,511 - 1,121,511 21,321,511 Granted as compensation Other changes during the year Balance at the end of the year - - - - - - - - - - - 3,250,000 13,250,000 3,250,000 13,450,000 31,400 31,400 - - - - 6,531,400 26,731,400 (35,000) 1,055,000 - 40,000 5,000 31,511 40,000 1,126,611 6,536,400 27,857,911 ** There are no shares held during the financial year and up to 30 June 2013 by the Director. 2012 Directors Murray E Black Christian E Easterday Dr Allan Trench Dr Michael Anderson Key Management Personnel John Sendziuk Rodrigo Diaz Total Balance at the start of the year 10,000,000 10,200,000 - - 20,200,000 1,000,000 - 1,000,000 21,200,000 Granted as compensation Other changes during the year - - - - - - - - - Balance at the end of the year 10,000,000 10,200,000 - - 20,200,000 - - - - - 90,000 31,511 1,090,000 31,511 121,511 121,511 121,511 21,321,511 HOT CHILI ANNUAL REPORT 2013 69 15 Key Management Personnel Disclosures (continued) e) Key Management Personnel Interests in the Shares and Options of the Company (continued) Options The number of options over ordinary shares in the company held during the financial year, and up to 30 June 2013, by each Key Management Personnel of Hot Chili Limited including their personally related parties are set out below: Balance at start of the year Acquired during the year Exercised during the year Forfeited during the year Balance at the end of the year Vested and exercisable at the end of the year 2013 Directors Murray E Black Christian E Easterday Dr Allan Trench Dr Michael Anderson ** Geoff Laing ** Key Management Personnel John Sendziuk Rodrigo Diaz Melanie Leighton 6,750,000 6,850,000 - - 3,250,000 3,250,000 - - - 10,000 - - - - - 13,600,000 10,000 6,500,000 - 350,000 - 650,000 350,000 335,000 350,000 1,335,000 - - - - - - - - - - - - - 3,500,000 3,500,000 3,600,000 3,600,000 10,000 10,000 - - - - 7,110,000 7,110,000 650,000 700,000 335,000 500,000 350,000 185,000 1,685,000 1,035,000 8,795,000 8,145,000 Total 13,950,000 1,345,000 6,500,000 ** There are no options over ordinary shares held during the financial year, and up to 30 June 2013 by the Director. Balance at start of the year Acquired during the year Exercised during the year Forfeited during the year Balance at the end of the year Vested and exercisable at the end of the year - - - - - - - - - - - - - - - - 6,750,000 6,750,000 6,850,000 6,850,000 - - 13,600,000 13,600,000 650,000 700,000 350,000 - 1,350,000 350,000 14,950,000 13,950,000 2012 Directors Murray E Black Christian E Easterday Dr Allan Trench Key Management Personnel John Sendziuk Rodrigo Diaz 6,750,000 6,850,000 - 13,600,000 - - - - 350,000 - 300,000 700,000 350,000 1,000,000 Total 13,950,000 1,000,000 70 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued 16 Notes to Statement of Cash Flows a) Reconciliation of cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Consolidated Entity 2013 $ 2012 $ 11,144,722 16,861,320 11,144,722 16,861,320 (4,367,746) (2,894,482) 90,647 436,269 - 311,653 147,248 (762,772) 464,300 616,755 (3,529,177) (2,428,951) (11,314) 184,886 (6,656) 102,320 3,355,605 (2,333,287) Cash and short-term deposits b) Reconciliation of net cash used in operating activities to operating loss after income tax Loss for the year Depreciation Effect of exchange rates on holdings in foreign currencies Write off of mining lease option payments Share based payments Net cash flows from operating activities before change in assets and liabilities Change in assets and liabilities during the financial year: Other current assets Payables Net cash outflow from operating activities c) Non cash investing and financing activities There were no non cash investing and financing activities during the year. 17 Finance Facilities No credit standby facility arrangement or loan facilities existed at 30 June 2013. HOT CHILI ANNUAL REPORT 2013 71 18 Commitments for Expenditure Consolidated Entity 2013 $ 2012 $ a) Exploration commitments In order to maintain current rights of tenure to exploration and mining tenements, the consolidated entity has the following discretionary exploration expenditure requirements up until expiry of leases. These obligations are not provided for in the financial statements and are payable: Within one year Later than one year but not later than five years b) Operating leases 3,174,344 9,471,720 12,646,064 483,682 16,127,956 16,611,638 The consolidated entity leases office premises in Applecross (5 Years) and Santiago (3 Years) under operating leases. The leases have various terms and renewal rights and commenced on 1 March 2012 and 1 October 2011 respectively. Commitments for minimum lease payments in relation to operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 203,717 360,445 - 564,162 192,887 538,733 - 731,620 19 Events Occurring after Reporting Date After the reporting date, the company raised $11.7m through private placement of 26,130,000 shares at $0.45 per share. There are no other matters or circumstances that have arisen since 30 June 2013 that have significantly affected or may significantly affect the operations, the results of those operations, or the state of affairs of the consolidated entity. 20 Related Parties . Blue Spec Mining, a business in which Mr Black is a Director, was paid $60,000 for administration and bookkeeping. . MRA Consulting Pty Ltd, a company associated with Dr Anderson, a Director, was paid $57,825 in Directors and consulting fees. . Blue Spec Sondajes Chile Limitada, a company in which Mr Black is a Director, was paid $18,292,308 for drilling services. . All payments were made at recognised commercial rates. 21 Contingent Liabilities There are no contingent liabilities at reporting date (2012: Nil). 22 Investment in Controlled Entities Name of Entity Sociedad Minera El Corazon Limitada Sociedad Minera El Aguila Limitada Sociedad Minera El Huerto Limitada 72 HOT CHILI ANNUAL REPORT 2013 Equity Holding Country of Incorporation Chile Chile Chile Class of Shares Ordinary Ordinary Ordinary 2013 % 100 100 100 2012 % 100 100 100 Notes to the Financial Statementscontinued 23 Financial Risk Management The consolidated entity’s principal financial instruments comprise receivables, payables cash and short-term deposits. The consolidated entity manages its exposure to key financial risks in accordance with the consolidated entity’s financial risk management policy. The objective of the policy is to support the delivery of the consolidated entity’s financial targets while protecting future financial security. The main risks arising from the consolidated entity’s financial instruments are interest rate risk, credit risk and liquidity risk. The consolidated entity uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rates and assessments of market forecasts for interest rates. Ageing analysis of and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts. The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections. Risk Exposures and Responses a) Interest rate risk exposure The consolidated entity’s exposure to market interest rates relates primarily to the consolidated entity’s cash balances and short-term deposits. The consolidated entity constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and variable interest rates. The consolidated entity’s cash balance is available at call and is held at a floating interest rate, all creditors and debtors are non-interest bearing and are payable and receivable on commercial terms. The consolidated entity has considered the sensitivity relating to its exposure to interest rate risk at reporting date. This analysis considers the effect on current year results and equity which could result in a change in this risk. Management have considered the potential impact on the profit and equity and considered that it would not be a material amount. b) Credit risk exposure Credit risk arises from the financial assets of the consolidated entity, which comprise deposits with banks and trade and other receivables. The consolidated entity’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to the carrying amount of these instruments. The carrying amount of financial assets included in the statement of financial position represents the consolidated entity’s maximum exposure to credit risk in relation to those assets. The consolidated entity does not hold any credit derivatives to offset its credit exposure. The consolidated entity trades only with recognised, credit worthy third parties and as such collateral is not requested nor is it the Company’s policy to securities it trades and other receivables. Receivable balances are monitored on an ongoing basis with the result that the consolidated entity does not have a significant exposure to bad debts. There are no significant concentrations of credit risk within the consolidated entity. HOT CHILI ANNUAL REPORT 2013 73 23 Financial Risk Management (continued) Risk Exposures and Responses (continued) c) Liquidity risk Liquidity risk arises from the financial liabilities of the consolidated entity and the consolidated entity’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and, the availability of funding through the ability to raise further equity or through related party entities. Due to the dynamic nature of the underlying businesses, the Board aims at maintaining flexibility in funding through management of its cash resources. The consolidated entity has no financial liabilities at the year-end other than normal trade and other payables incurred in the general course of business. d) Fair values The fair values of the consolidated entity’s financial assets and liabilities are summarised in the table below: 2013 Cash and cash equivalents Trade and other receivables Trade and other payables 2012 Cash and cash equivalents Trade and other receivables Trade and other payables e) Foreign exchange risk Consolidated Entity Carrying amount $ Fair value $ 11,144,722 11,144,722 27,121 27,121 3,989,936 3,989,936 16,861,320 16,861,320 - - 435,712 435,712 The consolidated entity has considered the sensitivity relating to its exposure to foreign currency risk at reporting date. This sensitivity analysis considers the effect on current year results and equity which could result in a change in the USD/AUD rate. The consolidated entity is exposed to foreign exchange risk through its USD cash holdings at reporting date. The table below summarises the impact of +/– 10% strengthening/weakening of the AUD against the USD on the consolidated entities post tax profit for the year and equity. The analysis is based on a 10% strengthening/weakening of the AUD against the USD at reporting date with all other factors remaining equal. 2013 AUD/USD + 10% AUD/USD – 10% 2012 AUD/USD + 10% AUD/USD – 10% 74 HOT CHILI ANNUAL REPORT 2013 Consolidated Entity Post tax profit $ 560,466 (560,466) Equity $ 560,466 (560,466) 1,662,178 1,662,178 (1,662,178) (1,662,178) Notes to the Financial Statementscontinued 24 Critical Accounting Estimates and Judgements Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Recoverability of exploration expenditure The directors’ test annually whether the exploration and evaluation expenditure incurred in identifiable areas of interest is expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of reserves and further work is expected to be performed. All expenditure that does not meet these criteria is expensed to the statement of comprehensive income. 25 Parent Entity Disclosures Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Reserves Accumulated losses Total equity Financial performance Loss for the year Other comprehensive income Total comprehensive income 2013 $ 2012 $ 11,099,560 16,774,286 59,873,675 15,980,830 70,973,235 32,755,116 246,006 246,006 167,112 167,112 90,775,673 48,566,232 1,051,304 739,651 (21,099,748) (16,717,879) 70,727,229 32,588,004 (4,381,869) (2,894,482) - - (4,381,869) (2,894,482) HOT CHILI ANNUAL REPORT 2013 75 25 Parent Entity Disclosures (continued) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2013 or 30 June 2012. Contractual commitments for the acquisition of property, plant or equipment As at 30 June 2013 (30 June 2012 – $Nil), the parent entity did not have any contractual commitments for the acquisition of property, plant or equipment. 26 Share Based Payments Below are details of share based payments made during the current year and prior financial years. a) Options issued The Company issued options to employees and consultants pursuant to the Company’s Share Option Plan. Set out below is a summary of options on issue as at 30 June 2013: Issue date 01/05/2009 10/01/2010 29/04/2010 20/07/2011 30/01/2012 27/09/2012 Expiry date 29/10/2014 29/10/2014 29/10/2014 19/07/2014 29/01/2015 22/09/2015 Balance at start of year 200,000 140,000 400,000 - - - Number issued during year Number expired during year - - - - - 500,000 - - - - - - Balance at end of year 200,000 140,000 400,000 Number exercisable at end of year 200,000 140,000 400,000 3,500,000 1,750,000 500,000 500,000 - - b) Fair value of options issued (Employee – 29 January 2012): The fair value at issue date was determined using a Black-Scholes option pricing model that takes into account the exercise price, the share price at issue date and expected price volatility of the underlying share, and the risk free interest rate for the term of the loan. The model inputs for options granted during the year ended 30 June 2012 included: i) options are granted for no consideration ii) exercise price – $1.00 iii) issue date – 30 January 2012 iv) expiry date – 29 January 2015 v) expected price volatility of the Company’s shares: 67% vi) risk-free interest rate: 4.50% vii) spot price at date of valuation: $0.625. 76 HOT CHILI ANNUAL REPORT 2013 Notes to the Financial Statementscontinued c) Fair value of options issued (Consultants and Employees – 27 September 2012): The fair value at issue date was determined using a Black-Scholes option pricing model that takes into account the exercise price, the share price at issue date and expected price volatility of the underlying share, and the risk free interest rate for the term of the loan. The model inputs for options granted during the year ended 30 June 2013 included: i) options are granted for no consideration ii) exercise price – $1.00 iii) issue date – 27 September 2012 iv) expiry date – 26 September 2015 v) expected price volatility of the Company’s shares: 54% vi) risk-free interest rate: 3.25% vii) spot price at date of valuation: $0.53. d) Expenses arising from share-based payment transactions Total transactions arising from share-based payment transactions recognised during the year were as follows: Expense recognised related to options issued to employees and consultants Capitalised mineral exploration costs 2013 $ 311,653 - 2012 $ 616,755 50,588 311,653 667,343 HOT CHILI ANNUAL REPORT 2013 77 Shareholder Information Information Required by the Australian Stock Exchange Limited Shareholder Information as at 19 August 2013 Shareholders Units 124 407 265 774 196 61,869 1,213,536 2,203,695 28,680,256 277,770,530 1,766 309,929,886 15,250,000 15,250,000 15,250,000 15,450,000 41,406,675 31,850,035 27,228,213 18,770,898 10,185,000 9,435,240 Held by Companies in which Directors have a beneficial interest Shares Held Directly - 15,250,000 200,000 15,250,000 - - - 31,400 - - a) Spread of holdings 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 & Over b) Substantial shareholders Kalgoorlie Auto Service Pty Ltd Westralian Diamond Drillers Pty Ltd R Leighton C Easterday J P Morgan Nominees Australia Ltd Citicorp Nominees Pty Ltd Merrill Lynch Australia Nominees Pty Ltd Port Finance Ltd NV Peter Moore Fenice Investments Inc c) Directors’ shareholdings Murray E Black Christian E Easterday Dr Allan Trench Dr Michael Anderson Roberto de Andraca Adriasola 78 HOT CHILI ANNUAL REPORT 2013 d) The names of the twenty largest shareholders as at 19 August 2013, who between them held 73.31% of the issued capital are listed below: 1 Kalgoorlie Auto Service Pty Ltd 2 J P Morgan Nominees Australia Ltd 3 Citicorp Nominees Pty Ltd 4 Merrill Lynch Australia Nominees Pty Ltd 5 Port Finance Ltd NV 6 Peter Moore 7 Fenice Investments Inc 8 M & H Investments WA Pty Ltd 9 Fitel Nominees Ltd 10 Catholic Church Insurance Ltd 11 Graham John Woolford 12 Port Finance Ltd NV 13 Campara Holdings Pty Ltd 14 Bell Potter Nominees Ltd 15 BO & EJ Stephens 16 National Nominees Ltd 17 UBS Nominees Pty Ltd 18 Ajava Holdings Pty Ltd 19 Lim Lian Choo 20 Stephens Group Pty Ltd Number of Ordinary Shares 61,000,000 41,406,675 31,850,035 27,228,213 16,385,388 10,185,000 9,435,240 4,378,467 3,789,750 3,125,000 2,477,000 2,385,510 2,230,000 1,845,381 1,820,000 1,789,867 1,690,000 1,600,000 1,300,000 1,204,000 % 19.68 13.36 10.28 8.79 5.29 3.29 3.04 1.41 1.22 1.01 0.80 0.77 0.72 0.60 0.59 0.58 0.55 0.52 0.42 0.39 227,125,526 73.31 HOT CHILI ANNUAL REPORT 2013 79 Shareholder Information Listed Optionholder Information as at 19 August 2013 (Expiring 30 November 2014) e) The names of the twenty largest option holders as at 19 August 2013, who between them held 87.47% of the issued capital are listed below: Number of Options 10,079,450 7,020,000 6,407,530 4,254,097 1,000,000 1,000,000 887,625 506,024 450,000 375,000 355,524 300,000 300,000 292,000 285,000 280,574 256,024 250,000 249,000 230,000 % 25.35 17.66 16.12 10.70 2.52 2.52 2.23 1.27 1.13 0.94 0.89 0.75 0.75 0.73 0.72 0.71 0.64 0.63 0.63 0.58 34,777,847 87.47 1 Merrill Lynch Australia Nominees Pty Ltd 2 J P Morgan Nominees Australia Ltd 3 Citicorp Nominees Pty Ltd 4 Port Finance Ltd NV 5 BO & EJ Stephens 6 James Broomhead 7 Feldkirchen Pty Ltd 8 Bell Potter Nominees Ltd 9 Cathlic Church Insurance Ltd 10 UBS Nominees Pty Ltd 11 Baroy Industries Pty Ltd 12 Yarandi Investments Pty Ltd 13 Botsky Pty Ltd 14 Stephens Group Pty Ltd 15 Fabrite Australia Pty Ltd 16 National Nominees Ltd 17 Martin Gregory Paul 18 Kimberley Jason Charles 19 Fenice Investment Inc 20 Marford Group Pty Ltd 80 HOT CHILI ANNUAL REPORT 2013 continued Unlisted Optionholder Information as at 19 August 2013 (Expiring 3 November 2013) f) The names of the twenty largest option holders as at 19 August 2013, who between them held 93.75% of the issued capitals are listed below: 1 Kalgoorlie Auto Service Pty Ltd 2 Peralillo Fondo D P 3 BO & EJ Stephens 4 Campari Holdings Pty Ltd 5 Miro & Helen Cecich 6 Romulus Pty Ltd 7 Jacqueline Tracey Hunter 8 Gary Dene Gale 9 L & TE King Russell 10 Oregonwood Pty Ltd 11 Talltree Holdings Pty Ltd 12 Douglas James Coote 13 Oakstream Pty Ltd 14 Ian William Dorrington 15 Rowan Radford 16 Lisa Ersilia Reilly 17 Milwal Pty Ltd 18 AK Herath and KH Soysa 19 F & CA Short James 20 Lim Lian Choo Number of Options 6,000,000 3,000,000 800,000 500,000 500,000 350,000 300,000 250,000 250,000 250,000 250,000 250,000 230,000 230,000 227,810 200,000 200,000 200,000 200,000 200,000 % 39.10 19.55 5.21 3.26 3.26 2.28 1.961 1.63 1.63 1.63 1.63 1.63 1.50 1.50 1.48 1.30 1.30 1.30 1.30 1.30 14,387,810 93.75 HOT CHILI ANNUAL REPORT 2013 81 “ Our vision is ambitious, our strategic positioning, strong funding support and dedication to move quickly, ensures that this vision is achievable.” Corporate Directory Directors Murray E Black (Non-Executive Chairman) Christian E Easterday (Managing Director) Dr Allan Trench (Independent Non-Executive Director) Dr Michael Anderson (Non-Executive Director) Geoff Laing (Executive Director, appointed 21 January 2013; resigned 1 August 2013) Roberto de Andraca Adriasola (Non-Executive Director, appointed 1 August 2013) Company Secretary John E Sendziuk Principal Place of Business Corner Federal Road and Wilson Street KALGOORLIE WA 6430 Telephone: +61 8 9021 3033 Facsimile: +61 8 9021 6995 Email: ally@hotchili.net.au Web: www.hotchili.net.au Registered Office Level 1, 768 Canning Highway APPLECROSS WA 6153 Telephone: +61 8 9315 9009 Facsimile: +61 8 9315 5004 Solicitors Jackson McDonald 140 St George’s Terrace PERTH WA 6000 Share Registry Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153 Telephone: +61 8 9315 0933 Facsimile: +61 8 9315 2233 Auditors RSM Bird Cameron Partners 8 St George’s Terrace PERTH WA 6000 Principal Banker Westpac Banking Corporation Hannan Street KALGOORLIE WA 6430 82 HOT CHILI ANNUAL REPORT 2013 A C N 1 3 0 9 5 5 7 2 5 A N N U A L R E P O R T 2 0 1 3 www.hotchili.net.au