Inca Minerals Limited
Annual Report 2014

Plain-text annual report

annual report 2014 porphyry exploration in PeruII INCA MINERALS ANNUAL REPORT 2014 Table of Contents Directors’ Review Operational Review Corporate Governance Statement Directors’ Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Auditor’s Independence Declaration Independent Auditor’s Report Shareholder Information List of Tenements Corporate Directory 3 4 17 25 33 34 35 36 37 66 67 68 70 72 77 Cover photo: House front in San Mateo, on the way to Chanape. INCA MINERALS ANNUAL REPORT 2014 1 Directors’ Review The Company commenced the year excited with its achievements in the previous financial year and mindful that many of its junior-explorer peers were contracting their exploration activities while facing considerable challenges in the capital raising market. Determined to differentiate itself, and rather than follow a similar path, the Company focussed on its efforts with careful exploration at increasing Chanape, and effective communication with important stakeholders namely shareholders, brokers, the Peruvian government and those Peruvian communities involved in the Company’s Chanape project and critical to Inca’s success. Early in the financial year Inca established a small but important operations office in Lima. The objective in doing so was to better coordinate Inca’s exploration, communication and promotional activities in Peru. This new operational capacity proved effective, allowing the Company to conduct three drilling campaigns, complete significant mapping and sampling programs and build on its relationship with Peruvian stakeholders. In turn, this delivered some outstanding exploration results including one of the strongest reported copper, gold and silver intersections by any junior throughout the year, active and substantive communication with shareholders and brokers, liquidity in the Company’s securities and valued support from shareholders and the broking community in the capital raisings conducted during 2014. Importantly the Company had built on its exploration reputation and the unsolicited approaches from international mining companies during the year confirmed Inca possesses what appears to be a project of significant scale and potential. These approaches have been welcomed by the Board. As the Company awaits granting of a drilling permit which encompasses the entire Chanape project area, the Board is carefully working with these potential strategic partners to deliver an outcome that is cognisant of the value- potential inherent in further drilling and discovery at Chanape yet equally mindful of commercial opportunities a strategic partner may facilitate. The Company’s Board and senior management has been stable throughout the year and, as it looks forward to the 2014/2015 financial year, will again focus on differentiating Inca from many of its peers as a results driven investment opportunity. While there can be no underestimating the likelihood of future hurdles and challenges, Inca is a strong and focussed company intent on further exploration success, prudent management of shareholder funds and effective communication with its stakeholders. In so doing the Company believes it can best realise the potential of its projects and reward shareholders for their continued and valued support. Mount Chanape INCA MINERALS ANNUAL REPORT 2014 3 Operational Review MANAGING DIRECTOR’S SUMMARy It would be difficult to improve on a year that included the discovery of a mineralised porphyry system. In the financial year of 2012-2013, in our very first hole at Chanape, we drilled through 100 metres of strong gold and silver mineralisation before entering a copper-molybdenum quartz monzonite porphyry. Without fear of contradiction the Company has indeed improved upon 2013 with the identification of porphyry and porphyry-related mineralisation at Chanape over a vertical distance of 1.3kms. A nexus has now been established between the upper epithermal mineralisation and the lower porphyry mineralisation, which importantly now includes broad zones of ore grade material identified in drilling this financial year. This years’ results have culminated in establishing a vast new upside for the project and have brought into sharp focus the economic potential of this porphyry system. Drilling completed this year has identified intersections that are among the best reported by any junior globally in the past twelve months – intersections that are indeed of economic interest. Such intersections include CH-DDH012: 55m at 2.3% copper (Cu), 0.6g/t gold (Au), 42.9g/t silver (Ag) with 0.015% molybdenum (Mo) over 10m within the same interval; and CH-DDH011: 284m at 0.32% Cu, 83ppm Mo and 6.73g/t Ag. That such intersections have attracted the attention of majors is testament to the significance of these intersections. Our latest holes are our best holes. It seems that as we get to know the porphyry system at Chanape – exploration results improve. The trend is exciting. At the time of writing ahead of the resumption of drilling, new drill targets are being added and existing targets are being better defined. The year also included the realisation of the nickel potential of our ancestral Dingo Range Nickel Project. Nestled in close juxtaposition with Rox Resources’ Mount Fisher nickel project, Dingo Range hosts folded komatiites – the same komatiites that are mineralised at Rox’s Camelwood and Musket nickel prospects. Serendipity plays a part in exploration and, certainly, juniors rely on good fortune from time to time. It is also true that fortune favours the brave. Defining 1.3km of vertical mineralisation at Chanape, drilling into 55m of 2.3% Cu in our very latest hole; holding 400km2 of prospective ground within a new nickel province are well-earned outcomes, achieved through good exploration and strategic management in difficult global markets. At Chanape, a handful of major mining houses are delving into the data-room. At Dingo Range, targets have been generated for future drill testing. On the back of these successes the Company successfully completed two capital raisings (one via a Share Purpose Plan [SPP] and another via a Placement) for total of $1.77M raised. At the time of writing our treasury is strong, there are majors visiting Chanape and we have a well advanced drill permit application that will greatly accelerate the evaluation of Chanape. Looking towards Breccia Pipe 8 from the summit of Mount Chanape 4 INCA MINERALS ANNUAL REPORT 2014 Operational Review CHANAPE EXPLORATION HIGHLIGHTS The discovery of economic grades of copper (Cu), molybdenum (Mo), gold (Au) and silver (Ag) close to the surface and at depth in association with porphyry and porphyry-related breccias at Chanape solidifies Chanape as a discovery of genuine significance. Mineralisation at Chanape is now known over a 1.3km vertical distance, from the summit of Chanape, where epithermal gold mineralisation has been identified, to open-ended mineralisation in the deepest hole drilled to date at Chanape. The vertical extent of mineralisation is matched by the horizontal extent of mineralisation, thanks to newly discovered gold-bearing rocks in the southern third of the project area. Figure 1: Schematic vertical section of Chanape, showing (LEFT TO RIGHT) relative height above sea level, relative project heights, solid geology interpretation of drilling/surface mapping, porphyry and porphyry-related mineralisation zones (epithermal, mesothermal, porphyry) and exploration results (rock chip sampling and drilling). Key points to note include: the extent of mineralisation above the height of the valley floor, the open-ended nature of mineralisation in drill results and the tremendous vertical spread of mineralisation. Exploration conducted at Chanape from July 2013 to June 2014 included 10 diamond core drill holes (CH-DDH003 to CH-DDH012) and a surface mapping and grid-sampling program (Phase 3) that covered the southern third of the project area. INCA MINERALS ANNUAL REPORT 2014 5 Operational Review The purpose of the drilling program was to follow-up on the porphyry discovery and to drill test epithermal gold targets within the drill permit area. Three deep holes targeting porphyry mineralisation were completed (CH- DDH008, CH-DDH011 and CH-DDH012) and seven shallow holes targeting rock-chip gold anomalies were completed (CH-DDH003, CH-DDH004, CH-DDH005, CH-DDH006, CH-DDH007, CH-DDH009 and CH-DDH010) (Table 1). Phase 3 mapping and sampling included 1:5,000 to 1:1,000 scale geological mapping, an extensive grid rock chip sampling program (over 300 samples) and multi-element analysis. This work provides the body of the highlights of this year’s operation, described below. Summary of holes drilled (total metres) between July 2013 and June 2014: Hole Number Depth (m) Target Type CH-DDH003 CH-DDH004 CH-DDH005 CH-DDH006 CH-DDH007 CH-DDH008 CH-DDH009 CH-DDH010 CH-DDH011 CH-DDH012 200 150 230 115 130 729 107 190 1049 660 3560 Epithermal Au, Ag Epithermal Au, Ag Epithermal Au, Ag Epithermal Au, Ag (Breccia Pipe 8) Epithermal Au, Ag (Breccia Pipe 8) Porphyry Epithermal Au, Ag Epithermal Au, Ag Porphyry Epithermal Au, Ag (Breccia Pipe 8) and porphyry total meters (2013-2014) Highlights of this year’s operations at Chanape include: Discovery of ore-grade Cu-Mo-Au-Ag mineralisation in the latest hole CH-DDH012. The Company’s very latest hole (CH-DDH012) intersected tourmaline breccias between surface and approximately 205m depth. The first of these was known (Breccia Pipe 8). The second was a genuine discovery. two The second breccia was intersected between 157.75m and 205.2m. Ore grade mineralisation includes a down-hole interval of 55 metres at 2.3% Cu, 0.6g/t Au, 42.9g/t Ag, and 48.1ppm Mo. This includes:  10m @ 5.35% Cu, 0.015% M0, 0.96g/t Au, 83.68g/t Ag from 186m, including:  4m @ 8.9% Cu, 0.025% Mo, 1.14g/t Au, 130.50g/t Ag from 188m. Figure 2: A section of core from CH-DDH012 from approx. 190m running 1.8% Cu, 0.8g/t Au, 123g/t Ag The upper breccia body intersected in CH-DDH012 occurs between 18.6m and 65.5m and has a down-hole width of 46.9m. Mineralisation associated with this breccia includes: 67m at 0.97g/t Au and 25.31g/t Ag from surface. This includes:  16m @ 1.86g/t Au, 58.96g/t Ag from 24m, and  8m @ 2.30g/t Au from 52m, and  13m @ 21.18g/t Ag from 52m, and  24m @ 0.52% Cu from 50m overlapping with the gold and silver mineralisation. 6 INCA MINERALS ANNUAL REPORT 2014 Operational Review It is not just the stand-out grade of the second breccia that is significant but the high levels of molybdenum. This is indicative of “hotter” mineralisation fluids suggesting porphyry “ore-forming” processes are much closer to the surface at Chanape than previously known. Figure 3: Drill hole and rock chip location plan (including all drill holes CH-DDH001 to CH-DDH012) and previous report period rock chip assay results. The summit area (discussed in more detail below) is also covered in this diagram. Notable assay results include at the summit include: 19.35g/t Au and 5.46g/t Au. INCA MINERALS ANNUAL REPORT 2014 7 Operational Review Discovery of ore-grade Cu-Mo-Ag mineralisation in porphyry: The Company’s penultimate hole drilled at Chanape (CH-DDH011) was the first to deliver high-grade mineralisation associated with the [deeper] porphyry part of the porphyry system. A down-hole interval of 284m at 0.32% Cu, 82.9ppm Mo, 6.73g/t Ag was identified. This includes:  97m @ 0.46% Cu, 9.48g/t Ag, 106ppm Mo from 770m including:  11m interval @ 1.39% Cu, 29.93g/t Ag, 263ppm Mo from 770m, including: • 7m interval @ 1.17% Cu, 24.47/t Ag from 809m, and • 8m interval @ 0.94% Cu, 0.029% Mo, 16.98g/t Ag from 837m  30m down-hole interval @ 0.93% Cu, 18.72/t Ag from 886m  24m down-hole interval @ 0.37% Cu, 6.5/t Ag from 970m  26m down-hole interval @ 0.5% Cu, 10.88/t Ag from 1,021m, including: • 6m down-hole interval @ 1.18% Cu, 25.37g/t Ag, from 1,040m Figure 4: Section of core from CH-DDH011 from approx. 812m Discovery of additional porphyry targets in southern half of project area: The Company completed its phase three mapping and sampling program covering the southern half of the project area this report period. The program was highly successful, identifying three new highly prospective areas all occurring within the broad porphyry target area (as defined by the 2.5km x 1.0km Spontaneous Potential [“SP”] anomaly). Highlight results include the identification of:  Numerous tourmaline breccia pipes at the summit area of Chanape – now defining the largest breccia zone on the property  The largest individual breccia pipe so far known at Chanape – approximately 200m x 200m  Several breccia veins recording +3g/t gold in rock chip sampling  Several intrusive rocks – same as those associated with known mineralised porphyry at Chanape Importantly, the newly prospective areas of the southern half of Chanape coincide with strong chargeability and SP anomalies. It is apparent that the same special circumstances that prevail in the drilled area (now known to host porphyry and porphyry-related mineralisation), also occur in this new undrilled area of Chanape. FuTuRE EXPLORATION The Company has submitted an application for a new drill permit - a Semi Detailed Environmental Impact Assessment (sdEIA), to replace its existing DIA drill permit. The sdEIA has an allowance of 22,500m drill metres and 61 platforms and will cover 100% of the project area (the previous DIA covered less than 10% of the project area). Once granted all existing and new drill targets will be accessible. At the time of writing existing geophysical data is being reprocessed and reviewed to refine our understanding of the metal sulphide occurrences at Chanape. Principal among the objectives is to model the 55m of 2.3% Cu occurrence (which occurs in +20% sulphide material) to design follow-up drilling and to identify like-geophysical signatures. Further mapping, rock chip and channel sampling is planned ahead of the resumption of drilling. The aim of channel- sampling is to provide a continuum of assay data across the many exposed tourmaline breccias that have recently been discovered in the summit and southern areas of Chanape. Among these is the largest breccia pipe so far discovered at Chanape. 8 INCA MINERALS ANNUAL REPORT 2014 Operational Review The principal aim of future drilling will be to obtain a maiden resource at Chanape. The sdEIA extends for two years and allows multiple rigs. Figure 5: Geology plan showing the relative location of the three new prospective areas in the southern half of the Chanape Project area. The insert diagram shows the SP anomaly in blue across the entire project. TENuRE The Chanape Project comprises a group of 20 mining concessions covering an area of 805 hectares (Figure 6). These concessions are the subject of the acquisition mining assignment agreement (described below). The mining assignment agreement is registered in the Public Registry, which is cross referenced on the INGEMMET internet titles data base (Peru equivalent of the WA Dept. Mines & Petroleum TENGRAPH). Inca also owns 10 mining concessions immediately SW of Chanape. They cover a large area of approximately 10,000 hectares. Although no field work has been carried out to date, their proximity to Chanape, occurrence of “remote- sensing” anomalies and the occurrence of satellite mineralisation (about the centrally located Chanape porphyry system), marks them as being prospective for porphyry and porphyry-related mineralisation. INCA MINERALS ANNUAL REPORT 2014 9 Operational Review LOCATION Chanape is located approximately 90km east of Lima, in the Miocene Porphyry Belt (Figure 6). Chinalco’s Toromocho 2.15Bt Cu-Ag-Mo porphyry mine development has now commenced production and is only 30km NE of Chanape. Nyrstar’s Coricancha Au-Ag-Zn-Pb mine is located 15km N of Chanape. There are numerous small-scale mines within the vicinity of Chanape. The Siberia, Germania, Millotingo and Pacococha mines are all located within 10km of Chanape. A small-scale mine was operated at Chanape in the 1930’s and 1980’s by Pacococha and Milpo. Figure 6: TOP: Location of Chanape, TOP LEFT: Chanape is located approximately 90km east of Lima; TOP RIGHT: The main Chanape Project comprises twenty concessions (outlined in blue); BOTTOM: The Miocene Porphyry Belt in long-section (north – left to south – right). Chanape is located SW of Toromocho and is part of this conveyor-belt of porphyry systems. 10 INCA MINERALS ANNUAL REPORT 2014 Operational Review OWNERSHIP The Company is in its third year of a 5-year mining assignment agreement with the concession owner of Chanape. For the duration of the mining assignment agreement the concessions are registered at the Public Registry in the name of Inca. Inca has the right to acquire 100% of the project for expenditure commitment, cash/shares and royalty. The principal terms and conditions of the 5-year mining assignment agreement are as follows:  Payment of US$1,500,000 by US$25,000 per month for five years (±$900,000 paid to date)  Payment of US$3,000,000 at the expiry of the five years  The issue of US$500,000 of shares in Inca (one year after company listing) – completed  NSR of US$20 per oz Aueq  Drilling expense commitment of US$3,600,000 over five years (±$1,500,000 spent to date)  Inca has the right to purchase the project in full at any time  Inca has a right to withdraw at any time (no separation penalty) MOQUEGUA is BACKGROuND The Moquegua Project comprises three separate prospects called Jose Alonso, Agua Blanca and Oscar Alberto. Moquegua centred approximately 60km south east of Arequipa, within the Palaeocene Southern Peru Copper Porphyry Belt. The annual production from this Cu-belt is 16Mt (57% of Peru’s Cu production). The three prospects, defining area of approximately 40km x 15km, are in close proximity to several substantial operating mines, including Freeport McMoran’s +3Bt Cerro Verde Mine and Southern Copper Corporation’s and Cuajone Metminco’s Los Calatos Deposit (Figure 7). porphyry mine triangular a OWNERSHIP & TENuRE The Moquegua concessions have recently been transferred to Inca Minerales (a 100%-owned subsidiary of Inca Minerals) from the original concession title holder. As per agreement the original concession holder received 1.3M shares of Inca Minerals as consideration. Figure 7: Moquegua location plan of Aqua Blanca and Jose Alonso. Cu-Mo porphyry mines and developments are a common feature of this part of Peru. Notably Cuajone produces 162,000t of Cu metal annually INCA MINERALS ANNUAL REPORT 2014 11 Operational Review FuTuRE EXPLORATION Inca plans to commence exploration at Moquegua this year. The prospects are considered early stage exploration, but with known copper mineralisation and porphyry-style alteration, walk-up targets already exist. The Company intends exploring the known occurrences of mineralisation and to undertake a broad-based geophysics and geochemical sampling program over the priority areas. PORPHyRy DEPOSITS The term “porphyry deposit”, describes large, disseminated, low-grade mineral occurrences typically hosted in rocks of intermediate to acid mineral composition with porphyritic texture. A porphyritic rock, or “porphyry”, describes igneous rocks with conspicuous phenocrysts (crystals) in a fine- grained groundmass. Porphyry deposits may contain elevated levels of copper, gold, silver, molybdenum, tin and rare earth elements. Important by-product elements include rhenium, tungsten, indium, platinum, palladium and selenium. Porphyry deposits are the world’s most important source of copper, molybdenum and rare earth elements, accounting for 50% to 60% of the world’s supply of copper. Porphyry deposits are broadly recognised on the basis of the relative abundances of economically important metals. Principal among the types of porphyries are:  Porphyry Cu, Cu-Mo and Cu-Mo-Au deposits;  Porphyry Cu-Au deposits; and  Porphyry Au deposits. Except for the differences in the relative concentrations of Cu, Au and Mo (among other metal concentrations), porphyry deposits share similar geological, geochemical and geophysical characteristics. Most occur in Mesozoic and Tertiary orogenic belts and most frequently on the Pacific plate margin. They show concentric or quasi-concentric zones of mineralisation and rock alteration; and they tend to be of a certain size and depth (between three and eight kilometres horizontal and vertical extent). Porphyry deposits typically consist of disseminated (evenly spread and low grade) ore types and are most commonly mined as large scale, open cut operations. The ore typically contains grades of less than 1% copper and less than 1g/t gold. Some of the largest mines in the world are porphyry deposits, including:  The Escondida Cu porphyry mine in Chile, which is currently the largest copper mine in the world in terms of annual copper production;  The Grasberg Au porphyry mine in Indonesia, which is currently the largest gold mine in the world in terms of annual gold production; and  The Oyu Tolgoi Cu-Au porphyry deposit in Mongolia, which commenced production in 2013 and contains approximately 81 billion pounds of copper and 46 million ounces of gold in measured, indicated and inferred resources. Porphyry deposits tend to have a characteristic exploration signature, comprising broadly recognizable geological, geochemical and geophysical expressions. 12 INCA MINERALS ANNUAL REPORT 2014 Operational Review Porphyry deposits occurring in the Andes Mountains (Chile, Argentina, Peru, Ecuador) often have a distinctive surface expression, making their recognition less difficult than if they were occurring in an ancient or highly vegetated terrain. This is a consequence of the high erosion rates normally attributed to the Andes and the sparse vegetation cover due to altitude. It is not unusual for porphyry rock types, porphyry-style alteration minerals and mineralisation to be fresh at surface. Such circumstance often leads to the coincidence of distinct and discrete geochemical and geophysical anomalism. At the Company’s Chanape Cu-Mo-Au-Ag Porphyry Project, just such a circumstance prevails – a very clear and characteristic porphyry-like signature – that comprises porphyry rock types, porphyry-style alteration minerals and mineralisation, geochemistry and geophysics. PERU’S PORPHyRy BELT Peru’s Porphyry Belt extends along the entire length of Peru, paralleling the Pacific coast and roughly coinciding with the Andes Mountains (Figure 8). This important porphyry belt hosts dozens of operating mines and countless mineral deposits. The porphyry belt hosts many world-class mines with mineral resources well in excess of fifty billion tonnes of ore. Peru’s porphyry belt can be divided into northern, central and southern parts and comprises six informal metallogenic provinces. World-class mines located within the Miocene [Epithermal Au-Ag] Belt within the Peru Porphyry Belt include: Yanacocha (+700Mt @ 0.8g/t Au for +50Moz of Au), the world’s second largest gold mine, Lagunas Norte (+650Mt @ 0.71g/t Au, 3.5g/t Ag for +14Moz of Au, 24Moz Ag) and Pierina (+100Mt @ 2.0g/t Au for +9Moz of Au). Figure 8: Peru’s Porphyry Belt INCA MINERALS ANNUAL REPORT 2014 13 Operational Review WESTERN AUSTRALIA DINGO RANGE Located approximately 200kms east of Leinster, Dingo Range is a large project covering a significant portion of the Dingo Range Greenstone Belt (Figure 9). The project comprises eleven tenements covering an area of approximately 400km2. The tenements are held in the name of Inca and the Company owns all rights to the tenements. The Dingo Range Project is highly prospective for nickel and gold. It covers the southern third of the Dingo Range- Mt Fisher Greenstone Belt, an area which has risen to prominence in recent years through the progressive release of headline nickel exploration results by Rox Resources (at their Mount Fisher Nickel Project) and through increased news-flow from Cullen Resources (at their Eureka and Wanganoo projects). In late 2012 Rox Resources discovered nickel at their Mt Fisher Project, which is adjacent to Inca’s Dingo Range Nickel Project, and were subsequently rewarded with their maiden Ni resource of 34,600t Ni at the Camelwood Prospect (1.6Mt @ 2.2%Ni) (as announced by Rox 3 October 2013). On 10 January 2014, Rox Resources announced positive Ni assay results from two new discoveries, Musket and Cannonball Prospects which now adds to a project-wise maiden resource of 3.6Mt @ 2%Ni. Rox concluded that there is strong regional potential for nickel, a view equally shared by Inca. Nickel exploration in Western Australia has been heightened in recent years by two significant discoveries, the Sirius discovery at Nova and the Rox discovery at Camelwood recently reinforced by high nickel concentrate grades (14 – 17%) in metallurgical testing on samples from Camelwood reported in Rox’s ASX announcement 8 April 2014. While Inca’s principal focus remains the evaluation of its porphyry deposit at Chanape in Peru, the Company recognises the tremendous potential of Dingo Range for nickel mineralisation – a view with heightened expectancy in light of Rox’s discovery in the same area. Figure 9: Regional geology plan showing the location of the Company’s Dingo Range Nickel Project, Rox Resources’ Mt Fisher Nickel Project and Cullen’s Eureka Project. In December 2013, the Company commissioned Grant “Rocky” Osborne to undertake detailed literature research with the purpose of critically assessing past exploration conducted in the broader Dingo Range Project area. Rocky was instrumental in the discovery the Rocky’s Reward Ni deposit, located north of the Perseverance nickel mine. A number of high priority nickel targets have been generated (Figure 10) and further mapping and sampling has occurred subsequent to year end. The principal target, referred to as the Jackal Prospect, is approximately 10km long and corresponds to an outcropping ultramafic with coincident strong Ni-Cu-Zn ratios and a surficial sample peak Ni value of 3,033ppm (with modest Cu [41ppm] and very low Zn [28ppm]). 14 INCA MINERALS ANNUAL REPORT 2014 Operational Review The project occurs in an area of intense folding as seen in magnetic images (Figure 10a) which draws important analogies with other regional and global nickel occurrences (Figure 10b and 10c). The Jackal Prospect is located within a sequence of thick tholeiitic basalt flows and dolerites, interspersed by chlorite schists, talc schists, interflow sediments and minor komatiitic volcanics. This sequence is believed to be a chronostratigraphic equivalent [occurring at the same time within the geological sequence] of the Ni-bearing Windarra greenstone. The stratigraphic relationship of the komatiitic ultramafic overlying the sulphidic banded iron formation is known to host nickel sulphide mineralisation at Windarra, while exhalative sulphide bodies occur in the footwall to the nickel sulphide mineralisation at Leinster. The ultramafic at the Jackal Prospect has anomalous geochemistry (Ni, PGE, Au and S) and represents a strong target for nickel sulphide mineralisation that has hitherto been under-explored. Figure 10a): RTP Image of the southern tenements comprising Inca’s Dingo Range Nickel Project. High priority nickel targets have been recognised in association with folded ultramafic units that occur throughout the project area. Figure 10b): Plan-view of Rocky’s Reward nickel deposit, showing the folded Ni ore body which is repeated by virtue of complex multiple phase folding. Figure 10c): Cross section view of the Thompson nickel deposit (in Canada) showing a similarly complexly folded Ni ore body. The Thompson Nickel Deposit contains approximately 700Mt of Ni metal (25Mt @ 2.8% Ni). (Figures provided by G. Osborne). INCA MINERALS ANNUAL REPORT 2014 15 Operational Review The Company’s initial exploration program on the Dingo Range Ni targets includes low cost detailed geological mapping and rock-chip/soil sampling. Follow-up work would involve geophysics and drill testing and, whilst the Chanape Project remains the principal focus of Inca, the Company intends to unlock the tremendous potential of Ni sulphide at the Dingo Range Project. Competent Person Statements The information in this report that relates to epithermal and porphyry style mineralisation for the Chanape Project, located in Peru, is based on information compiled by Mr Ross Brown BSc (Hons), MAusIMM, SEG, MAICD Managing Director, Inca Minerals Limited, who is a Member of the Australian Institute of Mining and Metallurgy. He has sufficient experience, which is relevant to the style of mineralisation and types of deposits under consideration, and to the activity which has been undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Brown is a full time employee of Inca Minerals Limited and consents to the report being issued in the form and context in which it appears. Some of the information in this report may relate to previously released epithermal and porphyry style mineralisation for the Chanape Project, located in Peru, and subsequently prepared and first disclosed under the JORC Code 2004. It has not been updated to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported, and is based on the information compiled by Mr Ross Brown BSc (Hons), MAusIMM, SEG, MAICD Managing Director, Inca Minerals Limited, who is a Member of the Australian Institute of Mining and Metallurgy. He has sufficient experience, which is relevant to the style of mineralisation and types of deposits under consideration, and to the activity which has been undertaken, to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Brown is a full time employee of Inca Minerals Limited and consents to the report being issued in the form and context in which it appears. 16 INCA MINERALS ANNUAL REPORT 2014 Corporate Governance Statement The Board of Directors of Inca Minerals Limited (Inca) is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of Inca on behalf of the shareholders by whom they are elected and to whom they are accountable. The terms and conditions of the appointment and retirement of Directors will be set out in a letter of appointment which covers remuneration, expectations, terms, the procedures for dealing with conflicts of interest and the availability of independent professional advice. The following details the main corporate governance practices in force throughout the 2013/2014 financial year to ensure the Board is well equipped to discharge its responsibilities. COMPOSITION OF THE BOARD The composition of the Board shall be determined in accordance with the following principles and guidelines:  The Board will consist of at least 3 Directors with that number increasing if additional expertise is considered desirable.  At least 1/3rd of the Board members should be Non- Executive Directors.  Directors comprising the Board should possess a mix of qualifications, expertise and experience.  All available information in connection with items to be discussed at a meeting of the Board shall be provided to each Director prior to that meeting. The Board will review its composition on an annual basis to ensure an appropriate and desirable mix of expertise and experience. Where a vacancy exists for whatever reason, or where the Board will benefit from the services of a new Director with particular expertise, the Board will select appropriate candidates with relevant qualifications, skills and experience. External advisers may be used to assist in such a process. The Board will then appoint the most suitable candidate, who must stand for election at the next annual general meeting of shareholders. The primary responsibilities of the Board include:  The establishment of the long term goals of the Company and strategic plans to achieve those goals.  The review and adoption of annual budgets for the financial performance of the Company and monitoring those results on a quarterly basis. This includes the establishment and monitoring of key performance indicators (both financial and non- financial) for all significant business processes.  Ensuring the Company has implemented adequate systems of together with internal control appropriate monitoring of compliance activities.  The approval of the annual and half-year financial reports. The performance of all Directors will be reviewed by the Board each year. INDEPENDENT PROFESSIONAL ADvICE Each Director will have the right to seek independent professional advice on matters pertaining to the effective execution of their duty and obligation as a Director of Inca at the Company’s expense. The prior approval of the Board will be required, which will not be unreasonably withheld. REMuNERATION The Board will review the remuneration packages and policies applicable to the Directors and Senior Executives on an annual basis. Remuneration levels will be competitively set to attract the most qualified and experienced Directors and Senior Executives. Where necessary the Board will obtain independent advice on the appropriateness of remuneration packages. AuDIT COMMITTEE Inca does not maintain a separate Audit Committee – the Board in its entirety assumes full responsibility for those functions which might otherwise be performed by a separate Audit Committee. Those responsibilities include:  Monitoring compliance with regulatory requirements.  Improving the quality of the accounting function.  Reviewing external audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have been identified appropriate and prompt remedial action is taken by management.  Liaising with the external auditors and ensuring that the annual audit and half-year review are conducted in an effective manner.  Reviewing the performance of the external auditors on an annual basis. At the invitation of the Board, Board meetings may also be attended by the external auditors and particularly where it may give the Board additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining the matters for inclusion in the financial statements. Nomination of external auditors will be at the discretion of the Board. INCA MINERALS ANNUAL REPORT 2014 17 Corporate Governance Statement BuSINESS RISK The Board will monitor and receive advice on areas of operational and financial risk, and consider strategies for appropriate risk management arrangements. Specific areas of risk identified initially and regularly considered at Board Meetings include risks associated with business and investment, new and rapidly evolving markets, technological change, competition, strategic alliances, budget control, foreign exchange, asset protection, sovereign risk, government laws, community standards and expectations, safety and the environment and continuous disclosure obligations. ETHICAL STANDARDS The Board’s policy is for the Directors and Senior Management to conduct themselves with the highest ethical standards. All Directors and employees will be expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Company. TRADING IN INCA MINERALS LIMITED SECuRITIES The Company’s Directors and employees must obtain written clearance from the Company’s Board before trading in the Company’s securities to ensure that no transactions are made where the Director or employee is in possession of price sensitive information that has not been released to the market. AuTHORITy LIMITS The Board shall annually review the level of authority limits for the Managing Director and Senior Management. CONFIDENTIALITy The Board members are required to ensure that all Company business is kept confidential by all Directors and staff. DEALING WITH CONFLICTS OF INTEREST A potential or actual conflict of interest may arise from time to time and, in those cases, no Director or Officer shall act in a way which may cause others to question their loyalty to the Company. A conflict of interest may arise:  When private or other business interests of Directors and/or Officers conflict directly or indirectly with their obligations to the Company; or  When benefits (including gifts or entertainment) are received from a person doing business which could be seen by others as creating an obligation to someone other than the Company. If a conflict or potential conflict of interest arises at any time, full disclosure should be made to the Board as soon as the Director or Officer becomes aware of the conflict or potential conflict. 18 INCA MINERALS ANNUAL REPORT 2014 Corporate Governance Statement ASX PRINCIPLE STATuS REFERENCE/COMMENT Principle 1: Lay solid foundations for management and oversight. 1.1 Formalise and disclose the functions reserved to the Board and those delegated to management. A 1.2 Companies should disclose the process for evaluating the performance of senior executives. A 1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1. A The Company has formalised and disclosed the functions reserved to the Board and those delegated to management. The Company has a small Board consisting of three Directors. The full Board meets every 4-6 weeks. In addition, strategy meetings and any extraordinary meetings are held at such other times as may be necessary. The Board evaluates the performance of and the remuneration provided to senior executives on an annual basis. The evaluation process involves the Board determining and agreeing key performance outcomes (consistent with the Company’s strategic and operational objectives) with its senior executives against which the performance of those senior executives is then both monitored and measured. The Company provides the information indicated in the Guide to reporting on Principle 1 in its Annual Report and on the Company’s website. Principle 2: Structure the Board to add value 2.1 A majority of Board members should be independent directors. 2.2 2.3 The Chairperson should be an Independent Director. The roles of Chairperson and Chief Executive Officer should not be exercised by the same individual. 2.4 The Board should establish a nomination committee. 2.5 The Company should disclose the process for evaluating the performance of the Board and individual directors. 2.6 Provide the information indicated in Guide to A A Reporting on Principle 2. NA Two current Directors hold shares in Inca either directly or beneficially and a third Director is a part owner of the Company’s Corporate Advisor meaning they are not independent. However, the Directors’ interests should be directly aligned with the interests of all shareholders in the decisions and judgements the Directors make. NA The Company has operated without a Chairperson since 7 February 2013. A The Company has operated without a Chairperson since 7 February 2013. NA The Company has a small Board consisting of three Directors inclusive of the Managing Director. The Board considers it desirable to use the full complement of knowledge, expertise and experience of all its Directors in making decisions and performing the functions usually associated with a Nomination Committee. The performance of each Director will be reviewed by the other Directors on the Board each year. The skills and experience of Directors are set out in the Company’s Annual Report and on its website. Legend: A = Adopted NA = Not Adopted INCA MINERALS ANNUAL REPORT 2014 19 Corporate Governance Statement ASX PRINCIPLE STATuS REFERENCE/COMMENT Principle 3: Promote ethical and responsible decision making 3.1 A Establish a code of conduct and disclose the code or a summary of the code as to: 3.1.1 the practices necessary to maintain confidence in the company’s integrity. 3.1.2 the practices necessary to take into account their legal obligations and the reasonable expectations of their shareholders 3.1.2 the responsibility and accountability of individuals for reporting or investigating reports of unethical practices. The Company has a formal Code of Conduct (Code) and all Directors, employees and, where applicable contractors, are expected to comply with the Code. Under the Code, Directors, employees and contractors are expected to act with the utmost integrity and objectivity in their dealings with other parties, striving at all times to enhance the reputation and performance of the Company. The Board reviews the Code and existing procedures over time to ensure they are adequate and effective. 3.2 Establish a diversity policy and disclose the policy or a summary of that policy. The policy should include measurable objectives for achieving gender diversity and monitoring progress toward achieving those objectives through an annual assessment process. 3.3 Disclose in each annual report the measurable objectives for achieving gender diversity and the progress toward achieving them. 3.4 The Company should disclose in the annual report the proportion of women employed in the organisation, in senior roles and on the Board. 3.5 Provide the information indicated in Guide to reporting on Principle 3. Principle 4: Safeguard integrity in financial reporting A The Company has two male employees as at the date of this Report. The Board is committed to diversity of its employees as Inca grows in size and employment base. A A A The Company intends to take gender diversity into consideration as it grows in size and employment base. The Company has no female senior employees or female Directors at this stage. The information is provided in the Company’s Annual Report. 4.1 The Board should establish an Audit Committee. NA The Company has a small Board consisting of two Directors and the Managing Director. At this stage, the Company has not established an Audit Committee and the Board considers it desirable to use the full complement of knowledge, expertise and experience of all its Directors in making decisions and performing the functions normally attributed to an Audit Committee. 4.2 Structure the Audit Committee so that it consist of: NA Refer to 4.1 above. One of the three Directors is a • Only Non-Executive Directors. • A majority of Independent Directors. • An Independent Chairperson who is not the Chairperson of the Board. • At least three members. Non-Executive Director and none can be considered independent for reasons discussed at 2.1. All three Directors are financially literate. One of the Directors holds three tertiary qualifications in accounting/auditing including a PhD and is a Fellow of CPA Australia. This Director chairs the Company’s Board meetings and the Board’s deliberations on matters pertaining to functions which could be delegated to an Audit Committee. 4.3 The Audit Committee should have a formal charter. NA Refer to 4.1 above. The Board in its entirety assumes 4.4 Provide the information indicated in Guide to A Reporting on Principle 4. responsibility for the decisions and performing the functions normally attributed to an Audit Committee. The information is provided in the Company’s Annual Report. Legend: A = Adopted NA = Not Adopted 20 INCA MINERALS ANNUAL REPORT 2014 Corporate Governance Statement ASX PRINCIPLE STATuS REFERENCE/COMMENT Principle 5: Make timely and balanced disclosure 5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. A 5.2 Provide the information indicated in Guide to A Reporting on Principle 5. Principle 6: Respect the rights of shareholders 6.1 Design and disclose a communications policy A to promote effective communication with shareholders and encourage effective participation at general meetings. 6.2 Provide the information indicated in Guide to A Reporting on Principle 6. Principle 7: Recognise and manage risk 7.1 7.2 The Board or appropriate Board committee should establish policies on risk oversight and management of material business risks and disclose a summary of those policies. The Board should require management to design and implement the risk management and internal control system. The Board should disclose that management has reported to the Board on the effectiveness of managing the Company’s material risks. A A The Board is acutely aware of the Company’s continuous disclosure responsibilities and has formal procedures in place to ensure the Company fully meets its responsibilities. The Company has internal procedures designed to provide reasonable assurance as to the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with relevant laws and regulations. The Company publishes and releases the ASX quarterly reports on operations and cash flow as well as annual and half-yearly results. The Company has formal procedures in place to ensure full compliance with its continuous disclosure requirements and that all shareholders are kept informed of material developments affecting the Company. Shareholders are encouraged to attend all general meetings and participate in discussion on resolutions, exercise their right to vote or lodge their vote by proxy. The Company ensures regular, timely and effective communication with shareholders through the Company’s website, specific ASX Releases and Quarterly/ Half Yearly/ Annual Reports. The Board recognises its responsibility for identifying areas of significant business risk and ensures policies and procedures are in place to manage these risks. The Board has ensured management has designed and implemented a risk management control system and culture which is encouraged amongst employees and contractors. Additionally the Board regularly reviews risks and the control mechanisms in place at its Board meetings. Areas of risk which are regularly considered include: • Performance and funding of commercial activities. • Budget control, foreign exchange and asset protection. • Sovereign risk. • Compliance with government laws and regulations. • Compliance with community standards and expectations. • Safety and the environment. • Continuous disclosure responsibilities. Legend: A = Adopted NA = Not Adopted INCA MINERALS ANNUAL REPORT 2014 21 Corporate Governance Statement ASX PRINCIPLE STATuS REFERENCE/COMMENT Principle 7: Recognise and manage risk (cont’d) 7.3 The Board should disclose that it has received assurance from the CEO and CFO in accordance with section 295A of the Corporations Act 2001. 7.4 Provide information indicated in Guide to Reporting on Principle 7. Principle 8: Remunerate fairly and responsibly 8.1 The Board should establish a Remuneration Committee. A A The Company has received assurance from the CEO and CFO in accordance with Sec 295A of the Corporations Act 2001 and this is disclosed in the Company’s Financial Report and its Annual Report. This information is provided on the Company website, ASX releases, management reports, Financial Report and Annual Report. NA The Company has a small Board consisting of two Directors and the Managing Director. At this stage, the Board considers it desirable to use the full complement of knowledge, expertise and experience of all its Directors in making decisions and performing the functions normally attributed to a remuneration committee. Where appropriate, the Board will engage external advisors to assist with the Board’s decisions on remuneration of both Directors and senior executives. Refer also to page 18 of this Annual Report on matters concerning conflicts of interest. 8.2 The Remuneration Committee should be NA Refer 8.1 above. One of the three Directors is a structured such that it: i) ii) iii) Has at least three members Contains majority of Independent Directors. Is chaired by an Independent Director. 8.3 Clearly distinguish the structure of Non-Executive A Directors’ remuneration from that of executive directors and senior executives. Non-Executive Director and none can be considered independent for reasons discussed at 2.1. The Company discloses remuneration related information in its Financial Report and its Annual Report to shareholders in accordance with the Corporations Act 2001. Remuneration levels are determined by the Board on an individual basis with the size of the company, comparison with independently assessed market benchmarks and, for senior executives, the achievement of key performance outcomes, forming the context in which remuneration levels are determined. The policy disclosed in the remuneration report (within the Financial Report and Annual Report) distinguishes between Non-Executive Directors and Executive Directors. 8.4 Provide information indicated in Guide to Reporting on Principle 8. A The information is provided in the Company’s Financial Report and Annual Report. Legend: A = Adopted NA = Not Adopted 22 INCA MINERALS ANNUAL REPORT 2014 Corporate Governance Statement COMMuNITy STANDARDS Inca Minerals Limited understands that the development of successful resource projects demands a proactive recognition of the breadth of stakeholder interest in these projects. The Company is committed to the protection of the environment and to ensure the safety and health of its employees, customers, contractors and communities where it operates and in all its business activities. The Company is dedicated to compliance with all applicable laws and regulations and to work with government, communities and other stakeholders in policy development and implementation. Community – Peru The Company has a number of projects in Peru where community involvement is prescribed in a regulatory and operational capacity. Right of access and right to conduct exploration and mining programs are provided by communities whose lands are affected. It is, in broad terms, no different to that of any other mining destination in the world. The Company’s approach to community relationships and programs is to be genuine, proactive and to treat the community as you would treat a valued partner. Inca recognises that we are a foreign company wishing to conduct exploration on lands owned by a community. The core business must be a partnership and both parties must benefit. The glue that bonds this partnership, that fortifies the purpose is the approach and effort all parties commit to the relationship. The overarching objective of Inca’s community relations plan in Peru is to facilitate mutual benefit and, in so doing, community approval of the Company’s exploration programs. This inherently includes the objectives of:  Obtaining access approval to community lands.  Obtaining approval for prescribed exploration activities.  Establishing Company/community rapport.  Establishing consensus as to community upliftment programs.  Establishing consensus as to community engagement programs. traditional owners – australian tenements Inca has a number of tenements in Western Australia. However, during the 2013/2014 financial year Inca’s focus and resources have been largely directed toward its Peruvian projects. Consequently, there has been little if any interaction or engagement necessitated with parties representing the traditional owners of the lands on which Inca has tenements. Inca has and continues to commit to communication and consultation with traditional owners in all areas where it operates. Where Inca’s activities on Australian tenements increase, it fully expects that an extensive Cultural Heritage Management Plan will be developed in consultation with the traditional owners as the Company’s various projects are developed toward production. LANDHOLDERS Inca has a commitment to work constructively and proactively with landholders. The Company’s aim is to minimise the impact on their livelihood and lifestyle. Inca will continue to conduct its operations with the intention of developing long and collaborative relationships with landholders. HEALTH AND SAFETy Inca undertakes its operations with the philosophy that occupational health and safety is paramount. The Company aims to continually improve its processes and performances. Promoting and ensuring a culture in which all employees and contractors fulfil their individual responsibilities in implementing the Health and Safety policy and meeting the regulatory standards remains a key focus. INCA MINERALS ANNUAL REPORT 2014 23 FINANCIAL REPORT Directors’ Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Auditor’s Independence Declaration Independent Auditor’s Report 25 33 34 35 36 37 66 67 68 24 INCA MINERALS ANNUAL REPORT 2014 Directors’ Report The Directors of Inca Minerals Limited (‘the Company’) present their financial report on the Company and its controlled entities for the year ended 30 June 2014. DIRECTORS The names of directors in office at any time during or since the end of the financial year are listed hereunder. Directors were in office since the start of the financial year to the date of this report unless otherwise stated.  Ross Brown, Managing Director  Justin Walawski, Director and Company Secretary  Gareth Lloyd, Director INFORMATION ON DIRECTORS ROSS BROWN B.Sc (Hons), M.Aus.IMM. Managing Director A geologist by profession, Mr Brown has had over 28 years’ experience in mineral exploration in Australia, Asia, Africa and South America and he has worked in a broad range of commodities, including gold, base metals, uranium, phosphate and diamonds. Mr Brown has a rare ability in recognising the commercial potential of exploration projects and geological process, and has a proven track record of bringing technical-based exploration concepts and projects to market. In 2009 Mr Brown co-founded the gold/copper exploration company, Mystic Sands Pty Ltd, which was established for the purposes of conducting exploration in Chile, South America. With the assistance of other technical management Mr Brown was responsible for the composition of the initial project portfolio. Mystic Sands was purchased by Australian-listed explorer White Star Minerals Ltd. As part of the transaction, Sandfire Resources NL became a shareholder of White Star Minerals Ltd. Mr Brown turned his attention to Peru in 2009 and through his network of Peruvian-based businessmen and geologists assessed the potential of more than a hundred projects. Mr Brown recognised the great potential of mineral discovery in that country and recognised the potential of Inca’s lead project, Chanape, from being a known polymetallic deposit to being that of a potentially large copper-molybdenum-silver-gold porphyry deposit. Mr Brown was the co-founder and Managing Director of Urcaguary Pty Ltd, the Company’s fully owned subsidiary (formerly called Inca Minerals Limited) and he became the Company’s Managing Director after its takeover of Urcaguary. As at 30 June 2014, and in addition to his position with the Company, Mr Brown remains a Director of Urcaguary and the Company’s other subsidiary companies. In the previous 3 years, Mr Brown has not been a director of any other ASX listed companies. Mr Brown has been a member of AusIMM since 1988, and is also a member of GSA, SEG and AICD. INCA MINERALS ANNUAL REPORT 2014 25 Directors’ Report JuSTIN WALAWSKI BBus.,P.Grad.Dip., PhD, FCPA, MAICD Director and Company Secretary As at 30 June 2014, in addition to his position with Inca, Mr Walawski was also a Director and Company Secretary of Inca’s subsidiary companies, Chairman of FAB Industries Pty Ltd (a private equity investment company) and Facilitator for the AICD’s Company Directors course in areas of financial literacy and financial strategy. Mr Walawski has previously held positions as Chairman, Deputy Chairman and Chief Executive of the North West Iron Ore Alliance, Chief Executive of the Association of Mining & Exploration Companies, Chairman of Special Olympics Australia (WA) and Director of CPA Australia (WA). He is a former member of the ASX’s Supervisory Liaison Committee, the Federal Australian Government’s Mineral Exploration Action Implementation Committee and the West Australian Government’s State Tax Reference Committee. In the previous 3 years Mr Walawski has been a director of one other ASX listed company being IFS Construction Services Limited (appointed 31 August 2012 to present). Mr Walawski is a Fellow of CPA Australia, a Member of the AICD and holds undergraduate, post-graduate and doctoral degrees in accounting/auditing. GARETH LLOyD B.Sc (Hons) Director As at 30 June 2014, in addition to his position with Inca, Mr Lloyd was also a Director of Inca’s subsidiary companies. Mr Lloyd has over 30 years’ experience with mining and exploration companies and brings considerable technical, commercial and capital raising expertise to the Company. A mining engineer by training, he has operating experience in gold, base metals and coal operations in Australia, South Africa and the United Kingdom. Mr Lloyd is a part owner of the Element group, a Perth-based boutique advisory and funds management group focused on the resources sector through which Mr Lloyd provides strategic advice and fund raising services to both listed and unlisted companies (predominantly mining and exploration companies) using both equity and mezzanine instruments. Prior to establishing Element (in 2008), Mr Lloyd was an Associate Director at the Rothschild Group where he helped establish the Golden Arrow Funds I and II, the latter fund becoming the ASX-listed LinQ Resources Fund. At the time of his departure from LinQ, the fund was one of Australia’s largest listed resource funds with funds under management of over $475m. He has held a number of senior positions at Australian resource-focused stockbroking firms including Research Director at Hartleys and Resources Analyst at Eyres Reed. In the previous 3 years, Mr Lloyd has not been a director of any other ASX listed companies. 26 INCA MINERALS ANNUAL REPORT 2014 Directors’ Report OPERATING AND FINANCIAL REVIEW PRINCIPAL ACTIvITIES The Company’s principal activities during the year were conducting exploration and evaluation work on existing tenements. Inca Minerals Limited is a Western Australian and Peruvian focused exploration company whose aims are to find, develop and/or demonstrate the potential of projects to others. Inca will continue to seek opportunities for acquiring or farming in to new tenements, and to divest or joint venture where there is benefit to shareholders. OPERATING RESuLTS The operating loss after income tax of the Company for the year ended 30 June 2014 was $2,952,310 (2013: loss of $3,526,901). REvIEW OF OPERATIONS The Company’s current exploration position and other activities appear in announcements released to the Australian Securities Exchange throughout the year ended 30 June 2014 (report period) and should be read in conjunction with this report. During the report period the Company continued to focus on the exploration and evaluation of its Peruvian projects and in particular, the Company’s flagship Chanape Project. This followed the discovery of a mineralised porphyry at Chanape in the Company’s maiden drill hole (as announced in the previous report period). Independent expert opinion, continued exploration conducted throughout the report period, and unsolicited interest from major diversified mining companies confirmed the importance of the initial discovery, delivered a number of standout exploration results (few better than a 55 metre down hole interval @ 2.3% copper, 0.60g/t gold and 42.90g/t silver from 155 metres) and reaffirmed that Chanape possesses strong potential as a dual-resource project hosting a near- surface copper, gold and silver resource as well as deeper porphyry and porphyry-related copper-molybdenum- silver±gold mineralisation. The Company’s exploration success underpinned its ability to raise capital throughout the report period with the completion of a Share Purchase Plan (refer ASX announcement 18 December 2013) raising $513,000 and a $1.25 million placement (refer ASX announcement 22 April 2014). FINANCIAL POSITION The net assets of the Group were $10,603,260 as at 30 June 2014 ($12,324,640 as at 30 June 2013). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS The Company raised $1,768,903 (before broker commissions) capital during the financial year and there were no other significant changes in the state of affairs of the Group during the financial year. DIvIDENDS PAID OR RECOMMENDED The directors do not recommend the payment of a dividend and no dividends have been paid or declared since the start of the financial year. SIGNIFICANT EvENTS AFTER REPORTING DATE The Company completed a capital raising on 6 August 2014 raising $3,200,000 (before broker commissions) through the issue of 139,130,432 fully paid ordinary shares. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company or the state of affairs of the Company in future financial years. INCA MINERALS ANNUAL REPORT 2014 27 Directors’ Report OPERATING AND FINANCIAL REVIEW (continued) LIKELy DEvELOPMENTS AND EXPECTED RESuLTS The Company expects to maintain the present status and level of operation and hence there are no likely unwarranted developments in the entity’s operations. ENvIRONMENTAL ISSuES The Company is subject to significant environmental regulation in respect of its exploration activities in Australia and Peru. The Company ensures the appropriate standard of environmental care is achieved and, in doing so, that it is aware of and is in compliance with all environmental legislation. The directors of the Company are not aware of any breach of environmental legislation for the year. PROCEEDINGS ON BEHALF OF THE COMPANy No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. INDEMNIFICATION OF OFFICERS AND INSuRANCE PREMIuMS The consolidated entity has paid premiums to insure the directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director of the consolidated entity, other than conduct involving a wilful breach of duty in relation to the consolidated entity. The premiums paid in respect of Directors’ and Officers’ insurance during the year amounted to $17,116 (2013: $17,261). OPTIONS At the date of this report, there were no unissued ordinary shares of Inca Minerals Limited under option. RISK MANAGEMENT The Board is responsible for ensuring that risks and opportunities are identified in a timely manner and that activities are aligned with the risks and opportunities identified by the Board. MEETINGS OF DIRECTORS During the financial year, 19 meetings of directors were held. Attendances by each director during the year were as follows:- Dr Justin Walawski Mr Ross Brown Mr Gareth Lloyd Board Meetings No. of meetings eligible to attend 19 18 18 Number attended 19 18 18 28 INCA MINERALS ANNUAL REPORT 2014 Directors’ Report REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for directors and executives of the Company. REMuNERATION POLICy The remuneration policy of Inca Minerals Limited aligns director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and, where the Board believes it appropriate, may also include specific long-term incentives based on key performance areas affecting the Company’s ability to attract and retain the best executives and directors to run and manage the Company. The remuneration policy setting out the terms and conditions for the executive directors and other senior executives was developed by the Board. All executives receive a base salary (which is based on factors such as ability and experience). The Board reviews executive packages annually by reference to the economic entity’s performance, executive performance, and comparable information from industry sectors and other listed companies in similar industries. The performance of the executive directors is measured against the objective of promoting growth in shareholder value. The Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives may, where the Board believes it appropriate, participate in employee share and option arrangements. The Board policy is to remunerate directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to directors and reviews their remuneration annually based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders in a general meeting (currently $240,000 per annum). PERFORMANCE BASED REMuNERATION Ross Brown earned a performance related cash bonus of $20,000 plus superannuation and a shares based bonus of $16,425 for the year ended 30 June 2014. The amounts remain unpaid and accrued as at balance date. A share based payments expense relating to the share based bonus of $16,425 has been booked in the accounts. The total number of shares to be issued is to be based upon the volume weighted average price of Inca’s shares for the 5 trading days immediately prior to the date or issue and is subject to shareholder approval at Inca’s next Annual General Meeting. INCA MINERALS ANNUAL REPORT 2014 29 Directors’ Report REMUNERATION REPORT (AUDITED) (continued) This performance based remuneration is included in the Key Management Personnel Remuneration table outlined below. KEy MANAGEMENT PERSONNEL SERvICE AGREEMENTS Details of the key conditions of service agreements for key management personnel are as follows: Commencement Date Notice Period Base Salary Base Salary Ross Brown 1 March 2012 6 months $220,000 per annum Gareth Lloyd 14 September 2012 Nil $50,000 per annum director fees. Justin Walawski 21 May 2012 3 months $5,400* per month for company secretary/consultancy fees plus $50,000 per annum director fees. Termination Payments Provided** None None None David Bent 16 September 2013 3 months $US170,000 per annum None *Mr Walawski has an agreement with the Company whereby he receives a minimum retainer of $5,400 per month (excluding GST) for consulting services provided up to, and including, 32 hours per month. Mr Walawski is then paid an additional hourly rate of $200 (excluding GST) in the event the Company requires his consulting services over and above 32 hours per month. **Other than statutory entitlements. There are no other agreements with key management personnel. KEy MANAGEMENT PERSONNEL REMuNERATION (a) Key management personnel compensation 2014 short-term benefits Post-employment benefits Cash salary and fees $ Perfor– mance Bonus $ Non– monetary benefits $ Super– annuation $ Retirement benefits $ Other $ Total $ Performance related compensation as % of total remuneration % Name Directors Ross Brown Gareth Lloyd Executives David Bent Totals Justin Walawski 249,741 216,812 38,325 50,000 144,669 661,222 38,325 – – – – – – – – 20,388 4,625 – – 25,013 – – – – – 3,600 279,125 13.7 – 54,625 – 249,741 – 144,669 – – – 3,600 728,160 5.2% 30 INCA MINERALS ANNUAL REPORT 2014 Directors’ Report REMUNERATION REPORT (AUDITED) (continued) Key management Personnel remuneration (Continued) 2013 short-term benefits Post-employment benefits Cash salary and fees $ Perfor- mance Bonus $ Non- monetary benefits $ Super- annuation $ Retirement benefits $ Other $ Total $ Performance Related compensation as % of total remuneration % Name Directors Ross Brown Gareth Lloyd Susan Thomas* 200,000 28,000 – Justin Walawski 220,900 Laurence Ziatas* 45,533 Executives David Bent Totals – 494,433 – – – – – – – – – – – 18,324 2,520 – – 1,168 10,470 – – 1,168 31,314 – – – – – – – 3,600 221,924 – – 30,520 – – 220,900 – – 57,171 – 3,600 530,515 – – – – – – – *Ceased to be key management personnel during the year. b) Options and rights granted as remuneration No options or rights were granted as remuneration during the year (2013: $nil). c) Share Based Payments Ross Brown earned a performance related share based bonus of $16,425 for the year ended 30 June 2014. A share based payments expense of $16,425 has been booked in the accounts. The total number of shares to be issued is to be based upon the volume weighted average price of Inca’s shares for the 5 trading days immediately prior to the date of issue and is subject to shareholder approval at Inca’s next Annual General Meeting. DIRECTORS’ RELEvANT INTERESTS The relevant interest of each director in the capital of the company at the date of this report is as follows: Director No of Ordinary Shares No of Options over Ordinary Shares Ross Brown Gareth Lloyd Justin Walawski 23,285,715 – 1,002,000 – – – END OF REMuNERATION REPORT INCA MINERALS ANNUAL REPORT 2014 31 Directors’ Report non-audit serviCes 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 Board of 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. No non-audit services were provided by the entity’s auditor, Stantons International, as shown at Note 15. AuDITOR’S INDEPENDENCE DECLARATION We have obtained an Auditor’s Independence Declaration. Please refer to “Auditor’s Independence Declaration” included on page 67 of this annual report. The Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Justin Walawski Director Dated at Perth this 26th day of September 2014 32 INCA MINERALS ANNUAL REPORT 2014 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2014 Revenue Management and directors’ fees Wages and salaries Administrative expenses Advertising and promotional costs Professional fees Listing and share registry expenses Depreciation Impairment of employee share loans Share based payments expense Foreign exchange gain/(loss) Carrying value of assets sold Exploration and evaluation expenditure written off Impairment of exploration and evaluation expenditure (Loss) before income tax Income tax benefit (Loss) after income tax Other comprehensive income items that will not be reclassified to profit or loss Note 2 2014 $ 2013 $ 54,482 49,388 (125,967) (70,946) (1,307,174) (30,287) (367,379) (64,878) (12,733) (1,400) (16,425) 8,029 (8,278) (102,195) (94,027) (936,522) (15,860) (533,581) (58,234) (24,363) (208,680) (104,000) (129,729) – (131,098) (1,956,454) (893,583) – (2,967,637) (4,114,257) 15,327 587,356 (2,952,310) (3,526,901) – – – – 5 10 7 7 3 items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations, net of tax (415,263) 72,527 Total comprehensive (loss) (3,367,573) (3,454,374) (Loss) for the year attributable to members of Inca Minerals Limited (2,952,310) (3,526,901) Total comprehensive (loss) attributable to members of Inca Minerals Limited (3,367,573) (3,454,374) Basic and diluted (loss) per share (cents) 12 (0.67) (1.20) The accompanying notes form an integral part of these financial statements. INCA MINERALS ANNUAL REPORT 2014 33 Consolidated Statement of Financial Position as at 30 June 2014 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Trade and other receivables Plant and equipment Exploration and evaluation expenditure Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQuITy Contributed equity Accumulated losses Foreign currency translation reserve Note 13(b) 5 5 6 7 8 2014 $ 2013 $ 580,880 349,916 930,796 3,468,841 152,356 3,621,197 – 51,362 9,973,665 10,025,027 9,553 24,494 8,829,955 8,864,002 10,955,823 12,485,199 352,563 352,563 160,559 160,559 352,563 160,559 10,603,260 12,324,640 9 22,093,289 20,447,096 (11,128,901) (8,176,591) (361,128) 54,135 TOTAL EQuITy 10,603,260 12,324,640 The accompanying notes form an integral part of these financial statements. 34 INCA MINERALS ANNUAL REPORT 2014 Consolidated Statement of Changes in Equity for the year ended 30 June 2014 2013 Balance at 1 July 2012 Total comprehensive loss for the year Shares issued during the year Cost of equity issue Contributed equity $ Accumulated Losses $ Foreign Currency Translation Reserve $ Total $ 14,241,787 – 6,596,589 (391,280) (4,649,690) (3,526,901) – – (18,392) 72,527 – – 9,573,705 (3,454,374) 6,596,589 (391,280) Balance at 30 June 2013 20,447,096 (8,176,591) 54,135 12,324,640 2014 Balance at 1 July 2013 Total comprehensive loss for the year Shares issued during the year Cost of equity issue 20,447,096 – 1,768,903 (122,710) (8,176,591) (2,952,310) 54,135 12,324,640 (415,263) (3,367,573) – – – – 1,768,903 (122,710) Balance at 30 June 2014 22,093,289 (11,128,901) (361,128) 10,603,260 The accompanying notes form an integral part of these financial statements. INCA MINERALS ANNUAL REPORT 2014 35 Consolidated Statement of Cash Flows for the year ended 30 June 2014 Cash flows from operating activities Payments to suppliers and employees ATO R&D income tax rebate received Interest received Note 2014 $ 2013 $ (890,156) (1,006,503) 15,327 24,482 587,356 49,388 Net cash (used) in operating activities 13 (a) (850,347) (369,759) Cash flows from investing activities Payments for exploration expenditures Payments for plant and equipment Proceeds from sale of plant and equipment Payments for security deposits Proceeds from sale of tenements Net cash (used) in investing activities Cash flows from financing activities Proceeds from issue of shares (net of share issue costs) Net cash provided by financing activities Net (decrease)/increase in cash held Cash and cash equivalents at the beginning of the financial year Effect of exchange rate changes on cash and cash equivalents (3,636,064) (2,345,439) (68,031) 20,000 (7,531) 10,000 (5,243) – (9,350) – (3,681,626) (2,360,032) 1,646,193 1,646,193 5,559,870 5,559,870 (2,885,780) 2,830,079 3,468,841 637,842 (2,181) 920 Cash and cash equivalents at the end of the financial year 13 (b) 580,880 3,468,841 The accompanying notes form an integral part of these financial statements. 36 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies The financial report covers the Company of Inca Minerals Limited, a listed public company incorporated and domiciled in Australia, and its controlled entities. The financial report was authorised for issue on 26 September 2014 by the Board of Directors. BASIS OF PREPARATION The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. In the year ended 30 June 2014, the company has reviewed all of the new and revised Australian Accounting Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. It has been determined by the company that there is no impact, material or otherwise, of the new Standards and Interpretations on its business and therefore, no changes are required to its accounting policies. Material accounting policies adopted in preparation of this financial report are presented below and have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. GOING CONCERN The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. For the year ended 30 June 2014, the consolidated entity incurred after tax losses of $2,952,310 (2013: loss of $3,526,901) and the consolidated entity had net cash outflows of $2,885,780 (2013: net cash inflows of $2,830,079). The Directors believe that it is reasonably foreseeable that the Company and consolidated entity will continue as going concerns and that it is appropriate to adopt the going concern basis in the preparation of the financial report after consideration of the following factors:  The consolidated entity has cash at bank at the reporting date of $580,880, net working capital of $578,234 and net assets of $10,603,260;  The Company completed a capital raising on 6 August 2014 raising $3,200,000 (before broker commissions) through the issue of 139,130,432 fully paid ordinary shares;  The ability of the Group to raise capital by the issue of additional shares under the Corporation Act 2001; and  The ability to curtail administration and operational cash out flows as required. INCA MINERALS ANNUAL REPORT 2014 37 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) ACCOuNTING POLICIES a) Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent, Inca Minerals Limited (“Inca” or “the Company”) and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 20. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non- controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. b) Revenue Recognition Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. Income Tax c) The income tax expense/(revenue) for the year comprises current income tax expense (income) and deferred tax expense/(income). Current income tax expense charged to the profit of loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of profit or loss when the tax related to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. 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 assets and liabilities are calculated at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. 38 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) c) Income Tax (continued) Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a largely enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities related to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. d) Mining Tenements and Exploration and Development Expenditure Mining tenements are carried at cost, less accumulated impairment losses. Exploration, evaluation and development 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 and/or sale of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit or loss 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 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. Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs are determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. e) Financial Instruments Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. INCA MINERALS ANNUAL REPORT 2014 39 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) e) Financial Instruments (continued) Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and their fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Classification and Subsequent Measurement i. Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designed as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise. ii. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. iii. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method. iv. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. v. Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method. Fair value The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. 40 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) e) Financial Instruments (continued) As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches:  Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities.  Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value.  Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. INCA MINERALS ANNUAL REPORT 2014 41 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) e) Financial Instruments (continued) Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or (ii) if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (ie transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. Impairment of Assets f) At each reporting date, the entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. 42 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) g) Plant and equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. 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 asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. 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 Company 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. Depreciation The depreciable amount of all fixed assets, is depreciated on a straight-line basis over the asset’s useful life to the Company 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 Motor vehicles IT equipment Depreciation rate 20–33% 20–33% 33% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 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 profit or loss. h) Cash and Cash equivalents Cash and cash equivalents include cash on hand and deposits held at call with banks. i) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. INCA MINERALS ANNUAL REPORT 2014 43 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) j) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. k) Earnings per Share (i) Basic earnings per share Basic earnings per share is calculated 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. (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. l) Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the economic entity, are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. m) employee Benefits Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. n) 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. o) Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. 44 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) p) Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. q) Foreign Currency transactions Balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. Group companies The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows:  assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;  income and expenses are translated at average exchange rates for the period; and  retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. These differences are recognised in profit or loss in the period in which the operation is disposed of. r) Critical Accounting Estimates and Other Accounting Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company is of the view that there are no critical accounting estimates and judgements in this financial report, other than accounting estimates and judgements in relation to the carrying value of mineral exploration expenditure. Key judgements Deferred exploration and evaluation expenditure Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. These costs are carried forward in respect of an area that has not at reporting date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, or alternatively, are expected to be sold. Refer to the accounting policy stated in Note 1(d). INCA MINERALS ANNUAL REPORT 2014 45 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) s) new standards and interpretations adopted in 2013/14 financial year The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2013.  AASB 10: Consolidated Financial Statements;  AASB 11: Joint Arrangements;  AASB 12: Disclosure of Interests in Other Entities;  AASB 13: Fair Value Measurement;  AASB 119: Employee Benefits; and  AASB 127: Separate Financial Statements Accounting Standard and Interpretation AASB 10 ‘Consolidated Financial Statements’ and AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards’ AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated financial statements and provides a revised definition of “control” such that an investor controls an investee when: a) it has power over an investee; b) it is exposed, or has rights, to variable returns from its involvement with the investee; and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. This may result in an entity having to consolidate an investee that was not previously consolidated and/or deconsolidate an investee that was consolidated under the previous accounting pronouncements. There have been no changes to the treatment of investees compared to prior year. AASB 11 ‘Joint Arrangements’ and AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements standards’ AASB 11 replaces AASB 131 ‘Interests in Joint Ventures’. AASB 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under AASB 11, there are only two types of joint arrangements – joint operations and joint ventures. The classification of joint arrangements under AASB 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. Application of this standard has not impacted on the financial statements of the Group. AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards’. AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of AASB 12 has resulted in more extensive disclosures in the consolidated financial statements. AASB 13 ‘Fair Value Measurement’ and AASB 2011-8 ‘Amendments to Australian Accounting Standards arising from AASB 13’. 46 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) s) new standards and interpretations adopted in 2013/14 financial year (continued) The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of AASB 13 is broad; the fair value measurement requirements of AASB 13 apply to both financial instrument items and non-financial instrument items for which other AASBs require or permit fair value measurements and disclosures about fair value measurements, except for share based payment transactions that are within the scope of AASB 2 ‘Share-based Payment’, leasing transactions that are within the scope of AASB 117 ‘Leases’, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes). AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’ AASB 119 (as revised in 2011) changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of AASB 119 and accelerate the recognition of past service costs. All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Application of AASB 119 Employee Benefits has not impacted on the financial statements for the year ended 30 June 2014. Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Inca Minerals Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 20. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non- controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. Interests in Joint Arrangements Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about relevant activities are required. INCA MINERALS ANNUAL REPORT 2014 47 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) s) new standards and interpretations adopted in 2013/14 financial year (continued) Separate joint venture entities providing joint venturers with an interest to net assets are classified as a “joint venture” and accounted for using the equity method. Joint venture operations represent arrangements whereby joint operators maintain direct interests in each asset and exposure to each liability of the arrangement. The Group’s interests in the assets, liabilities, revenue and expenses of joint operations are included in the respective line items of the consolidated financial statements. Gains and losses resulting from sales to a joint operation are recognised to the extent of the other parties’ interests. When the Group makes purchases from a joint operation, it does not recognise its share of the gains and losses from the joint arrangement until it resells those goods/assets to a third party. Fair value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. valuation techniques In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to measure the fair value of the asset or liability, The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: – Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. 48 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) s) new standards and interpretations adopted in 2013/14 financial year (continued) – Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. – Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group would change the categorisation within the fair value hierarchy only in the following circumstances: (i) if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or (ii) if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa. When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e. transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred. INCA MINERALS ANNUAL REPORT 2014 49 Notes to the Financial Statements for the year ended 30 June 2014 Note 1: Statement of Significant Accounting Policies (continued) t) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations issued by the AASB which are not yet mandatorily applicable to the Group have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.  AASB 9 Financial Instruments and associated Amending Standards (applicable for annual reporting period commencing 1 January 2017) AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. The 2010 revisions introduce additional changes relating to financial liabilities. The Standard will be applicable retrospectively (subject to the comment on hedge accounting below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. Key changes made to this standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change hedge policies in line with the new hedge accounting requirements of AASB 9, the application of such accounting would be largely prospective. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, including hedging activity, it is impractical at this stage to provide a reasonable estimate of such impact. Other standards not yet applicable These standards are not expected to have a material impact on the entity in the current or future reporting periods. Standard/Interpretation AASB 1031 ‘Materiality’ (2013) AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities’ AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets’ AASB 2013-4 ‘Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting AASB 2013-5 ‘Amendments to Australian Accounting Standards – Investment Entities AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’ effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2014 1 January 2014 30 June 2015 30 June 2015 1 January 2014 30 June 2015 1 January 2014 30 June 2015 1 January 2014 30 June 2015 1 January 2014 30 June 2015 u) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. 50 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 2 Revenue Interest received Sale of assets Sundry income Consolidated 2014 $ 2013 $ 24,482 20,000 10,000 54,482 49,388 – – 49,388 Note 3 Income tax (a) income tax recognised in profit No income tax is payable by the Company as it recorded losses for income tax purposes for the year. (b) Numerical reconciliation between income tax expense and the loss before income tax. Loss before income tax Income tax at 30% Tax effect of: Deferred tax asset not recognised ATO R&D income tax rebate received Income tax benefit (c) unrecognised deferred tax balances Tax losses available to the Company Potential tax benefit at 30% Consolidated 2014 $ 2013 $ (2,952,310) (4,114,257) 885,693 1,234,277 (885,693) (1,234,277) 15,327 15,327 587,356 587,356 11,436,550 9,137,745 3,430,965 2,741,323 A deferred tax asset attributable to income tax losses has not been recognised at reporting date as the probability criteria disclosed in Note 1(c) is not satisfied and such benefit will only be available if the conditions of deductibility, also disclosed in Note 1(c), are satisfied. Note 4 Dividends No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. INCA MINERALS ANNUAL REPORT 2014 51 Notes to the Financial Statements for the year ended 30 June 2014 Note 5 Trade and other receivables Current Other receivables GST and VAT Employee share loans (ii) Less: provision for impairment Non-current Employee share loans (ii) Less: provision for impairment Consolidated 2014 $ 2013 $ 97,636 222,880 239,480 (210,080) 349,916 – – – 66,433 64,676 165,202 (143,955) 152,356 74,278 (64,725) 9,553 Total trade and other receivables 349,916 161,909 (i) None of the trade and other receivables are past due date. (ii) Employee share loans consist of interest-free loans given to former senior executives in order to purchase shares in the Company. The loans have been measured at their discounted value based on market lending rates to fair value according to the loan term, and impaired for any decline in the company share price that is expected to impact the amount of the loan recoverable. For more information on the terms and conditions of the employee share loans refer to Note 11. Note 6 Plant and equipment Balance at 1 July 2012 Additions/(disposals) Depreciation Balance at 30 June 2013 At cost Accumulated depreciation Balance at 30 June 2013 Balance at 1 July 2013 Additions/(disposals) Depreciation/writeback on disposals Balance at 30 June 2014 At cost Accumulated depreciation Balance at 30 June 2014 Plant and equipment $ Motor vehicles $ it equipment $ Total $ 11,633 (1,168) (6,997) 3,468 17,734 (14,266) 3,468 3,468 45,888 (7,832) 41,524 57,673 (16,149) 41,524 24,668 – (13,343) 11,325 40,026 (28,701) 11,325 11,325 (29,270) 17,945 – 10,756 (10,756) – 8,481 5,243 (4,023) 9,701 15,402 (5,701) 9,701 9,701 6,358 (6,221) 9,838 21,760 (11,922) 9,838 44,782 4,075 (24,363) 24,494 73,162 (48,668) 24,494 24,494 22,976 3,892 51,362 90,189 (38,827) 51,362 52 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 7 Exploration and evaluation expenditure Costs carried forward in respect of areas of interest in the following phases: Exploration and evaluation phase – at cost Balance at 1 July Expenditure incurred (including exchange rate movements) Impairment of exploration and evaluation expenditure Expenditure written off Balance at 30 June Consolidated 2014 $ 2013 $ 8,829,955 2,168,391 (893,583) (131,098) 8,670,646 2,115,763 – (1,956,454) 9,973,665 8,829,955 The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining areas. Note 8 Payables (current) Trade and other creditors None of the payables are past due date. 352,563 160,559 INCA MINERALS ANNUAL REPORT 2014 53 Notes to the Financial Statements for the year ended 30 June 2014 Note 9 Contributed equity a) Paid up capital 504,917,138 ordinary shares (30 June 2013: 420,487,615 ordinary shares) 22,093,289 20,447,096 Consolidated 2014 $ 2013 $ b) Movements in shares on issue Balance at 30 June 2012 Issued 23 August 2012 Issued 5 October 2012 Issued 17 October 2012 Issued 24 December 2012 Issued 31 December 2012 Issued 12 March 2013 Issued 3 April 2013 Issued 4 April 2013 Issued 10 May 2013 Transaction costs from issue of shares Balance at 30 June 2013 Issued 19 December 2013 Issued 2 May 2014 Transaction costs from issue of shares No of shares Paid up capital $ 190,651,500 14,241,787 28,597,720 36,108,168 300,000 40,250,000 6,420,000 2,445,945 486,161 613,839 60,000 805,000 128,400 489,189 108,661,856 3,803,165 3,052,426 4,000,000 106,835 104,000 – (391,280) 420,487,615 20,447,096 14,657,190 69,772,333 513,001 1,255,902 – (122,710) 504,917,138 22,093,289 c) Movements in options on issue There were nil options issued and nil outstanding options over unissued ordinary shares during the year. d) Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up of 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. 54 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 10 Interests of key management personnel a) Key management personnel compensation Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid to each member of the Company’s key management personnel for the year ended 30 June 2014. The totals of remuneration paid to key management personnel of the Company during the year are as follows: Short-term employee benefits (i) Performance bonus (ii) Other payments (iii) Post-employment benefits (iv) Consolidated 2014 $ 2013 $ 661,222 38,325 3,600 25,013 728,160 495,601 – 3,600 31,314 530,515 (i) Includes payments for salaries, director fees and consulting fees. (ii) Ross Brown earned a performance related cash bonus of $20,000 plus superannuation and a performance related share based bonus of $16,425 for the year ended 30 June 2014. The amounts remain unpaid and accrued as at balance date. A share based payments expense relating to the share based bonus of $16,425 has been booked in the accounts. The total number of shares to be issued is to be based upon the volume weighted average price of Inca’s shares for the 5 trading days immediately prior to the date of issue and is subject to shareholder approval at Inca’s next Annual General Meeting. (iii) Includes allowances. (iv) Includes superannuation contributions. b) Key management personnel shareholdings The number of ordinary shares in Inca Minerals Limited held by each key management personnel of the Company during the financial year is as follows: 2014 Directors Ross Brown Gareth Lloyd Justin Walawski Executives David Bent Totals At Appointment (if after 1 July 2013) acquired/ Disposed At Resignation Balance 30 June 2014 – – – – – 285,715 (6,900,000)* 250,000 – (6,364,285) – – – – – 23,285,715 – 1,002,000 – 24,287,715 Balance 1 July 2013 23,000,000 6,900,000 752,000 – 30,652,000 * Mr Lloyd ceased to hold a relevant interest in the entity that held these shares. Mr Lloyd did not directly dispose of these shares. INCA MINERALS ANNUAL REPORT 2014 55 Notes to the Financial Statements for the year ended 30 June 2014 Note 10 Interests of key management personnel (continued) b) Key management personnel shareholdings (continued) 2013 Directors Ross Brown Gareth Lloyd Susan Thomas* Justin Walawski Laurence Ziatas* Executives Totals At Appointment (if after 1 July 2013) acquired/ Disposed At Resignation Balance 30 June 2013 – 6,900,000 – – – – 23,000,000 6,900,000 40,347,720 (13,584,422) (26,763,298) – – – – 525,000 – 752,000 – – (23,000,000) – – – Balance 1 July 2012 23,000,000 – – 227,000 23,000,000 – 46,227,000 47,247,720 (13,059,422) (49,763,298) 30,652,000 * Ceased to be key management personnel during the year. Shareholding is as at date of resignation. Note 11 Related party transactions Other transactions and balances with directors and other key management personnel Corporate Advisory During the financial year, $44,000 was paid to Element Capital Pty Ltd, a company related to Mr Gareth Lloyd, for the provision of corporate advisory services. During the financial year, $58,560 was paid to Element Capital Pty Ltd, a company related to Mr Gareth Lloyd, for the provision of management and placement fees in relation to capital raising services. Employee Share Loans During the 2011 financial year the Company issued two unsecured interest-free non-recourse loans to two former executives in order to fund a purchase of the Company’s shares on behalf of these executives (Employee Shares). These executives are no longer employees of the Company. The Company has obtained the Powers of Attorney over these shares held by the former executives. The Company may place the Employee Shares in escrow at any time and, subject to the Company’s agreement, 50% of the Employee Shares may be sold two years after the loan start date and the other 50% of the Employee Shares may be sold three years after the loan start date. The loan agreements (Agreement) for Employee Shares contain the following repayment provisions: Repayment of the Principal Sum (or any part of the Principal Sum that remains outstanding) (Outstanding Balance) must occur on the earlier of: (a) The sale or transfer of any or all of the Employee Shares in accordance with the Agreement; (b) 30 days after the Employee ceasing to employed by Carrick Gold Limited (now KalNorth Gold Mines Limited) or any of its subsidiaries; and (c) The date which is three (3) years and one (1) month after the date of the Agreement, (each being a Repayment Event). 56 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 11 Related party transactions (continued) In respect of the Repayment Event specified in (a) above, the Employee must repay the Outstanding Balance to Inca Minerals Limited (or its nominee) to the extent of the proceeds from the sale of the Employee Shares. Upon the occurrence of a Repayment Event specified in (b) or (c) above, the Employee must repay Inca Minerals Limited (or its nominee) the Outstanding Balance or Inca Minerals Limited may sell the Employee Shares to recover proceeds up to an amount equal to the Outstanding Balance. On 2 August 2013 Mr McKinstry ceased to be employed by Carrick Gold Limited (now KalNorth Gold Mines Limited) and a Repayment Event subsequently occurred on 1 September 2013. The Company intends to sell the 1,000,000 (one million) Employee Shares at the prevailing share price and recover proceeds up to an amount equal to or less than the Outstanding Balance. On 8 May 2014, a Repayment Event occurred with Mr Johnson. Per the Agreement, a period of three years and one month had passed since the Agreement had been entered into. The Company intends to sell the 400,000 (four hundred thousand) Employee Shares at the prevailing share price and recover proceeds up to an amount equal to or less than the Outstanding Balance. As at 30 June 2014, a provision for impairment of the employee loans amounting to $210,080 in total was made relating to the Employee Share Loans. Note 12 Loss per share Consolidated 2014 $ 2013 $ (a) Basic Earnings Per Share Loss used in calculating basic earnings per share (2,952,310) (3,526,901) Weighted average number of ordinary shares on issue during the year used as the denominator in calculating basic loss per share 439,516,123 293,877,687 Basic loss per share (cents) (0.67) (1.20) (b) Diluted loss per share (cents) Diluted loss per share is the same as basic loss per share as there are no potential ordinary shares that are dilutive. INCA MINERALS ANNUAL REPORT 2014 57 Notes to the Financial Statements for the year ended 30 June 2014 Note 13 Cash flow information (a) reconciliation of the net loss after income tax to the net cash flows from operating activities Net loss for the year Depreciation Impairment of employee share loans receivable Share based payments expense Foreign exchange (gains)/losses Exploration and evaluation expenditure written off Exploration and evaluation expenditure impaired Inca Minerales S.A.C. capitalised exploration expenditure Carrying value of fixed assets sold Changes in assets and liabilities (Increase)/decrease in trade and other receivables Increase/(decrease ) in trade and other creditors Net cash outflow from operating activities (b) reconciliation of cash and cash equivalents Cash balance comprises: – cash assets (c) non-cash financing activities There were no non cash financing activities during the year ended 30 June 2014. Consolidated 2014 $ 2013 $ (2,952,310) (3,526,901) 12,733 1,400 16,425 (8,029) 131,098 893,583 1,042,478 8,278 (188,007) 192,004 (850,347) 24,363 208,680 104,000 129,729 1,956,454 – 514,831 – 225,493 (6,408) (369,759) 2014 $ 2013 $ 580,880 3,468,841 58 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 14 Expenditure commitments The Company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets in which it has an interest. Outstanding exploration commitments for not later than one year and for between one and five years are as follows: Not later than one year Between one and five years* Consolidated 2014 $ 1,800,818 7,311,149 9,111,967 2013 $ 1,758,049 11,216,683 12,974,732 * Commitments between one and five years totalling $7,311,149 include commitments of $5,969,189 pertaining to the Chanape project which are payable solely at the Company’s discretion and dependent upon the Company acquiring exclusive rights to the Chanape project mining concessions. Further information on the Chanape project and the Company’s Moquegua project is provided as follows: The Group has entered into two separate agreements for the acquisition of interests in mining concessions with two separate parties. As of 30 June 2014, the Group has met all of its obligations in respect of the two agreements. The details of the two agreements are as follows: 1. Mining option and assignment agreements dated 24 June 2011 granting the Group the exclusive option to acquire Minera Altas Cumbres SAC’s (MAC) interest in 20 mining concessions over land totalling 805.346 hectares referred to as the Chanape Project. The key terms of the agreements are set out below: Option consideration US$1,500,000 consisting of 60 payments of $25,000 plus the applicable VAT commencing one month after signing date, i.e. 24 July 2011. (Term: 5 years) * Purchase price US$3,000,000. Additional purchase consideration Shares in the Company to the Vendor’s major shareholder (Mr Gino Venturi) to the value of USD$500,000 at an issue price of no less than AUD$0.20 cents per share twelve months after the Company lists. * Exclusive option & assignment fees US$100,000 Mining assignment period 5 years from the date of signing of the agreement, i.e. 5 years from 24 June 2011. Exploration expenditure committed A minimum of US$3,600,000 plus applicable VAT on drilling as follows: • 1 March 2012 to 31 December 2012 – US$350,000*; • 1 January 2013 to 31 December 2013 – US$500,000*; • 1 January 2014 to 31 December 2014 – US$750,000; • 1 January 2015 to 31 December 2015 – US$1,000,000; • 1 January 2016 to 31 December 2016 – US$1,000,000 NSR Royalty Cancellability Upon the beginning of commercial production a US$20 per ounce of gold equivalent net smelter royalty to be calculated in accordance with the terms and conditions. The Group has the right to terminate at any time during the option period. Any unpaid amounts are not payable to the vendor. * The Company has met all of its applicable commitments under the agreements with MAC. 2. Mining option, mining assignment and option of a future asset agreement dated 23 June 2011 granting the Group the exclusive right to acquire Daniel Oscar Chavez Ticona’s (Chavez) interest in 10 mining concessions over land totalling 7,000 hectares referred to as the Moquegua Regional Project. This agreement is comprised of three parts. INCA MINERALS ANNUAL REPORT 2014 59 Notes to the Financial Statements for the year ended 30 June 2014 Note 14 Expenditure commitments (continued) Part 1 This part relates to two concessions comprising the Virgen De Chapi project and two western concessions comprising part of the Oscar Alberto project. The Group has the exclusive right at any stage to withdraw from the agreement and not proceed. The key terms of Part 1 are: 1. The Group spends US$3 million on exploration in the first 3 years to obtain 50% interest. 2. The Group and Chavez then incorporate a joint venture company (JVCO) and contribute their respective 50% interest in the Virgen De Chapi project and the two western concessions comprising part of the Oscar Alberto project into the JVCO. 3. The Group can then exercise an option to acquire the 50% in JVCO from Chavez as follows: a. US$3m cash; or b. Issuing shares to the value of US$3m in the Company to Chavez; or c. Combination of cash and shares at the Group’s discretion; or d. Continuing with exploration and development within the JV structure with Chavez. Subsequent to the end of the reporting period the Company elected not to proceed with Part 1 and no commitments under this part of the Moquegua mining option, mining assignment and option of a future asset agreement became or remain payable. Part 2 The amount payable for this part is 1,300,000 shares to be issued at $AUD0.10 for the purchase of two eastern concessions comprising the Oscar Alberto project, two concessions comprising the Jose Alonso project and two concessions comprising the Agua Blanca project. Subsequent to the end of the reporting period the Company met this commitment and issued 1,300,000 fully paid ordinary shares at A$0.10 per share and acquired the six concessions which are the subject of Part 2 of the Moquegua mining option, mining assignment and option of a future asset agreement. Part 3 The Group has agreed to employ Chavez as a consultant for a period of 38 months with effect from 15 July 2011. The amounts paid, and those amounts still payable, are as follows: 1 August 2011 – 30 June 2013 1 July 2012 – 30 June 2014 1 July 2013 – 31 October 2014 $58,600 $48,000 $16,000 OPERATING COMMITMENTS The Company has certain operating lease commitments. Non-cancellable operating leases contracted for but not recognised in the financial statements: Not later than one year Between one and five years 2014 $ 66,170 – 66,170 2013 $ 115,830 79,059 194,889 60 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 15 Auditor’s remuneration Statutory audit by auditor of the parent company Audit and review of financial statements of parent entity Audit and review of financial statements of subsidiary entity Statutory audit by auditor of Inca Minerales SAC 2014 $ 2013 $ 28,093 950 29,043 6,744 28,536 – 28,536 – Note 16 Segment information The Company 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 Company operates in the segments of mineral exploration within Peru and Australia. The Company 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 (2013 – Nil) are derived from a single external party. All the assets are located in Peru and Australia. Segment assets are allocated to countries based on where the assets are located. Reportable segments: Segment revenue 2014 2013 Segment result 2014 2013 Segment assets 2014 2013 Segment liabilities 2014 2013 Depreciation and amortisation expense 2014 2013 Australia $ Peru $ Consolidated $ 54,482 49,388 – – 54,482 49,388 (1,937,941) (1,014,369) (2,952,310) (2,744,989) (781,912) (3,526,901) 1,472,345 3,876,604 9,483,478 8,608,595 10,955,823 12,485,199 (194,044) (99,606) (158,519) (60,953) (352,563) (160,559) (12,733) (24,363) – – (12,733) (24,363) INCA MINERALS ANNUAL REPORT 2014 61 Notes to the Financial Statements for the year ended 30 June 2014 Note 17 Financial risk management objectives and policies (a) Interest rate risk The Company’s exposure to interest rate risk which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out below: Weighted average interest rate (%) Floating interest rate $ Fixed interest maturing 1 year or less $ Fixed interest maturing 1 to 5 years $ 30 June 2014 Cash and cash equivalents 1.67 560,880 20,000 30 June 2013 Cash and cash equivalents 1.35 3,447,885 20,956 – – Total $ 580,880 3,468,841 Interest rate sensitivity analysis At 30 June 2014, if interest rates had changed by 25 basis points during the entire year with all other variables held constant, profit for the year and equity would have been $5,062 higher/lower (2013: $10,267), mainly as a result of higher/lower interest income from cash and cash equivalents. A 25 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. (b) Credit risk The maximum exposure to credit risk at reporting date on financial assets of the Company is the carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. (c) Commodity price risk The Company is not exposed to commodity price risk as the operations of the Company are not yet at the production stage. 62 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 17 Financial risk management objectives and policies (continued) (d) liquidity risk The Company manages liquidity risk by monitoring forecast cash flows. The table below analyses the entity’s financial liabilities into relevant maturity groupings based on the remaining period from the statement of financial position date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, these balances will not necessarily agree with the amounts disclosed in the statement of financial position. Less than 6 months $ 6 months to 1 year $ 1 to 5 years $ Total $ 30 June 2014 Financial liabilities due for payment Trade and other payables Financial assets – cash flows realisable Cash assets Trade and other receivable (352,563) (352,563) 580,880 349,916 930,796 net (outflow)/inflow on financial instruments 578,233 30 June 2013 Financial liabilities due for payment Trade and other payables Financial assets – cash flows realisable Cash assets Trade and other receivable (160,559) (160,559) 3,468,841 152,356 3,621,197 net (outflow)/inflow on financial instruments 3,460,638 There were no Level 2 or Level 3 financial instruments. – – – – – – – – – – – – – – – – – – – – – 9,553 9,553 (352,563) (352,563) 580,880 349,916 930,796 578,233 (160,559) (160,559) 3,468,841 161,909 3,630,750 9,553 3,470,191 (e) Foreign exchange risk The Company is exposed to foreign exchange risk as certain transactions are denominated in United States Dollars and Peruvian Nuevos Soles as a result of operating in Peru. (f) net fair value of financial assets and liabilities The carrying amounts of financial instruments included in the statement of financial position approximate their fair values due to their short terms of maturity. INCA MINERALS ANNUAL REPORT 2014 63 Notes to the Financial Statements for the year ended 30 June 2014 Note 18 Events subsequent to reporting date The Company completed a capital raising on 6 August 2014 raising $3,200,000 (before broker commissions) through the issue of 139,130,432 fully paid ordinary shares. There were no other events of significance subsequent to 30 June 2014. On 22 August 2014 the Company issued 1,300,000 fully paid ordinary shares at A$0.10 per share and acquired the six concessions which are the subject of Part 2 of the Moquegua mining option, mining assignment and option of a future asset agreement. Refer to Note 14 Expenditure Commitments for further details on the Moquegua mining option. Note 19 Contingent liabilities There are no contingent liabilities at reporting date. Note 20 Controlled entities Subsidiaries of Inca Minerals Limited: Urcaguary Pty Ltd Inca Minerales S.A.C. Hydra Minerals Ltd Dingo Minerals Pty Ltd Country of Incorporation Percentage Controlled (%) 2014 2013 Australia Peru Australia Australia 100 100 100 100 100 100 100 100 64 INCA MINERALS ANNUAL REPORT 2014 Notes to the Financial Statements for the year ended 30 June 2014 Note 21 Parent Information Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated Losses total equity Financial performance (Loss) for the year Other comprehensive income Total comprehensive income 2014 $ 2013 $ 470,593 10,326,711 10,797,304 2,150,579 11,197,834 13,348,413 194,044 – 194,044 82,820 – 82,820 10,603,260 13,265,593 22,093,289 20,447,096 (11,490,029) (7,181,503) 10,603,260 13,265,593 (4,308,526) (2,513,421) – – (4,308,526) (2,513,421) There are no guarantees entered into by the parent entity in relation to the debts of its subsidiaries. There are no contingent liabilities of the parent entity as at the reporting date. There are no contractual commitments by the parent entity for the acquisition of property, plant and equipment as at the reporting date. Note 22 Company details The principal place of business of the Company is: Inca Minerals Limited 1030 Wellington Street West Perth, WA, 6005 Australia INCA MINERALS ANNUAL REPORT 2014 65 Directors’ Declaration The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 33 to 65 (of this Annual Report), are in accordance with the Corporations Act 2001 and: a. comply with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b. give a true and fair view of the financial position as at 30 June 2014 and of the performance for the year ended on that date of the consolidated entity; 2. the directors have been given the declarations required by s295A of the Corporations Act 2001 that: a. the financial records of the company for the financial year have been properly maintained in accordance with s 286 of the Corporations Act 2001; b. the financial statements and notes for the financial year comply with 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 company 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. On behalf of the Directors: Justin Walawski Director Dated at Perth this 26th day of September 2014 66 INCA MINERALS ANNUAL REPORT 2014 PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants 26 September 2014 The Directors Inca Minerals Limited 1030 Wellington Street, West Perth, WA 6005 Dear Sirs RE: INCA MINERALS LIMITED In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Inca Minerals Limited. As Audit Director for the audit of the financial statements of Inca Minerals Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully, STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Martin Michalik Director Liability limited by a scheme approved under Professional Standards Legislation 46 Stantons International Audit and Consulting Pty Ltd trading as Chartered Accountants and Consultants PO Box 1908 West Perth WA 6872 Australia Level 2, 1 Walker Avenue West Perth WA 6005 Australia Tel: +61 8 9481 3188 Fax: +61 8 9321 1204 ABN: 84 144 581 519 www.stantons.com.au INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INCA MINERALS LIMITED Report on the Financial Report We have audited the accompanying financial report of Inca Minerals Limited, which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Liability limited by a scheme approved under Professional Standards Legislation 47 Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Opinion In our opinion: (a) the financial report of Inca Minerals Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in note 1. Report on the Remuneration Report We have audited the remuneration report included in pages 6 to 8 of the directors’ report for the year ended 30 June 2014. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards Opinion In our opinion the remuneration report of Inca Minerals Limited for the year ended 30 June 2014 complies with section 300A of the Corporations Act 2001. STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company) Martin Michalik Director West Perth, Western Australia 26 September 2014 48 Shareholder Information Shareholder Information The shareholder information set out below is applicable as at 1 October 2014. Capital Structure The Company currently has issued capital of 645,347,570 fully paid ordinary shares. The Company currently has no other class of security or options on issue. Voting Rights The Company’s Constitution provides that at a meeting of shareholders and on a show of hands, each shareholder present in person and each other person present as a proxy, attorney or representative of a shareholder has one vote. On a poll, each shareholder present in person has one vote for each fully paid ordinary share held by the shareholder and each person as a proxy, attorney or representative of a shareholder has one vote for each fully paid ordinary share held by the shareholder that person represents. Twenty Largest Shareholders The names and details of the twenty largest quoted shareholdings are as follows: Rank Shareholder Number of Shares % Total Issued Capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Zoric & Co Pty Ltd Ross Brown* Susan Carr Russell Creagh Chihong International Mining Ltd Taif 85 Pty Ltd Stephen & Margaret Chewter Darryl White Nicholas & Melinda Draper Minotaur Nominees Pty Ltd David, Kerry & Toby Foreman Fiori Pty Ltd Marek Kozlowski Amalgamated Dairies Ltd 1215 Capital Pty Ltd Terence & Dawn Risby John & Susan Loosemore Swancave Pty Ltd Robert & Gina Shirley 20 Leet Investments Pty Ltd Total * Company Director. 70 INCA MINERALS ANNUAL REPORT 2014 30,000,000 23,285,715 12,800,000 10,552,247 9,747,209 9,100,000 9,040,000 8,505,591 8,300,000 7,600,000 6,400,000 5,884,180 5,230,000 5,000,000 4,932,472 4,500,000 4,347,826 4,000,000 4,000,000 4,000,000 4.649 3.608 1.983 1.635 1.510 1.410 1.401 1.318 1.286 1.178 0.992 0.912 0.810 0.775 0.764 0.697 0.674 0.620 0.620 0.620 177,225,240 27.462% Shareholder Information Distribution of Equity Securities Analysis of number of equity holders by size of holding: Spread of Holdings Number of Holders Number of Shares % Total Issued Capital 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 > 100,000 Total 156 100 125 761 809 1,951 62,600 317,411 1,121,280 37,892,692 605,953,587 645,347,570 0.010% 0.049% 0.174% 5.872% 93.896% 100.00% Based on $0.018 per share as the market price at the close of business on 1 October 2014 there were 622 shareholders holding less than a marketable parcel of shares (a total of 5,960,746 shares). Substantial Shareholders As at 1 October 2014 the Company has not received a Notice of Initial Substantial Shareholder (ASIC Form 603) since the Company’s previous Annual Report. Securities Subject to Escrow The names of shareholders and details of securities subject to voluntary escrow are as follows: Shareholder McKinstry Pty Ltd Jennifer Johnson Number of Ordinary Shares Date Escrow Ends 1,000,000 400,000 Company’s Discretion Company’s Discretion INCA MINERALS ANNUAL REPORT 2014 71 List of Tenements List of Tenements Country/ State Project Prospect Mining Concession Name Code Mining Public Registry tenement identification Ownership Titleholder Peru Chanape Chanape Chanape 010215606 12011933 Earning 100%1 Inca Minerales S.A.C. Chanape 1 010216806 12012043 Earning 100%1 Inca Minerales S.A.C. San Antonio 1 010416806 12037302 Earning 100%1 Inca Minerales S.A.C. San Antonio 2 De Chanape San Antonio 3 De Chanape San Antonio 4 San Antonio 5 San Antonio 6 San Antonio 7 San Antonio 8 San Antonio 9 010416906 12037302 Earning 100%1 Inca Minerales S.A.C. 010417006 12048712 Earning 100%1 Inca Minerales S.A.C. 010417106 12048714 Earning 100%1 Inca Minerales S.A.C. 010417906 12011970 Earning 100%1 Inca Minerales S.A.C. 010418006 12037197 Earning 100%1 Inca Minerales S.A.C. 010418406 12037311 Earning 100%1 Inca Minerales S.A.C. 01048106 12012123 Earning 100%1 Inca Minerales S.A.C. 010417206 12012100 Earning 100%1 Inca Minerales S.A.C. San Antonio 10 010417306 12011962 Earning 100%1 Inca Minerales S.A.C. San Antonio De Chanape 010418306 12012097 Earning 100%1 Inca Minerales S.A.C. Violeta De Chanape 010417406 12012091 Earning 100%1 Inca Minerales S.A.C. Chanape SW Violeta 1 De Chanape Violeta 2 Violeta 3 Violeta 4 Violeta 5 10 De Julio De Chanape INCA M1 INCA M2 INCA M3 INCA M4 INCA M5 INCA M6 INCA M7 INCA M8 INCA M9 010433806 12048716 Earning 100%1 Inca Minerales S.A.C. 010417506 12012150 Earning 100%1 Inca Minerales S.A.C. 010417706 12012150 Earning 100%1 Inca Minerales S.A.C. 010433906 12005564 Earning 100%1 Inca Minerales S.A.C. 010417606 12011888 Earning 100%1 Inca Minerales S.A.C. 010418206 12012091 Earning 100%1 Inca Minerales S.A.C. 010509211 12866246 100% Inca Minerales S.A.C. 010509111 12867483 010509011 12866294 010508911 12867121 010508811 12914428 010508711 12914453 010508611 12866014 010508511 12865832 010508411 12865701 100% 100% 100% 100% 100% 100% 100% 100% 100% Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. Inca Minerales S.A.C. INCA M10 010508311 12865724 Moquegua Oscar Alberto Ana Melva Cobresur II Ana Melva Cobresur III 050011410 11204479 100%2 Inca Minerales S.A.C. 680002211 11219342 100%2 Inca Minerales S.A.C. 72 INCA MINERALS ANNUAL REPORT 2014 List of Tenements Country/ State Project Prospect Mining Concession Name Code Mining Public Registry tenement identification Ownership Titleholder Agua Blanca Jose Alonso Cobresur III 680002911 11260770 100%2 Inca Minerales S.A.C. Jose Alonso Cobresur IV Jose Alonso Cobresur 14 Jose Alonso Cobresur 13 Jose Alonso Cobresur 11 Jose Alonso Cobresur 19 Jose Alonso Jose Alonso Cobresur 8 Jose Alonso Cobresur V 680002811 11219348 100%2 Inca Minerales S.A.C. 680008111 11219339 100% Inca Minerales S.A.C. 680008211 11260769 100% Inca Minerales S.A.C. 680007811 11260742 100% Inca Minerales S.A.C. 010252513 11266565 100% Inca Minerales S.A.C. 68000711 11261124 100%2 Inca Minerales S.A.C. 680003311 11219355 100%2 Inca Minerales S.A.C. Tenement Number (WA) EL37/975 EL37/1124 EL53/1352 EL53/1377 EL53/1380 EL53/1407 PL53/1573 PL53/1574 EL53/1663 EL53/1421 EL53/1447 tenement identification Mining Concession Name Code Mining Public Registry N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Ownership Titleholder 100% Inca Minerals Ltd 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Inca Minerals Ltd Country/ State Project WA Dingo Range Note 1: Inca Minerales S.A.C. is a wholly owned subsidiary of Inca Minerals Limited. Inca Minerales S.A.C. has a right to earn 100% of the concession under a Mining Option Agreement (refer to Note 14 to the Financial Statements). Note 2: Inca Minerales S.A.C. has a right to acquire 100% of the concession under a Mining Option, Mining Assignment and Option of a Future Asset Agreement (refer to Note 14(2) Part 2 of the Financial Statements) – Subsequent to the end of the reporting period the Company has acquired 100% of the concessions subject of this note. INCA MINERALS ANNUAL REPORT 2014 73 Notes 74 INCA MINERALS ANNUAL REPORT 2014 Notes INCA MINERALS ANNUAL REPORT 2014 75 Notes 76 INCA MINERALS ANNUAL REPORT 2014 Managing Director Director Director Directors Company Secretary Registered Office Corporate Office Mailing Address Share Registry Auditor Mr Ross Brown Dr Justin Walawski Mr Gareth Lloyd Dr Justin Walawski 1030 Wellington Street West Perth, WA, 6005 1030 Wellington Street West Perth, WA, 6005 PO Box 38 West Perth WA 6872 Advanced Share Registry Services 110 Stirling Highway Perth WA 6009 Stantons International Level 2, 1 Walker Avenue West Perth WA 6005 INCA MINERALS ANNUAL REPORT 2014 77 porphyry exploration in Peru

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